The easiest time to raise your rate is on the cusp of something new — a new year, a new project, a new client. With the new year just a few weeks away, now might be the time. This article offers ideas of how to do this, as well as some sample language to use when notifying your clients.
How to determine your new rate
Unfortunately, there’s no one-size-fits-all formula. Instead, I suggest triangulating on a rate that seems fair. Look at several different numbers and then decide. Here are four suggestions.
First, make a ballpark guess of what you think your new rate should be. For example, if your rate is now $150 an hour, what do you think is a logical next step? $175? $165? Jot it down.
Second, calculate a percentage increase. The amount might be 3% or 5% annually. Or maybe you need to make up for two or three years without a rate increase, and a 10% or 15% increase seems appropriate. Do the math a few different ways and see how these numbers play out. In my example of $150 hourly, a 5% annual increase works out to $157.50 for year one, $165 for year two, and $172.50 for year three.
Third, do some market-rate benchmarking to learn what other consultants are charging, or what clients are paying. Try doing a quick survey of similar consultants you know (maybe ask them to select from list of price ranges). Or search the internet: for example, “typical consultant rate for organizational design in San Francisco.” Alternatively, if you worked through an agency you can guess what the client paid for your services by adding 30% to 40% to whatever rate you were paid.
Last, compare to other related services. As a consultant and solopreneur, how does your rate measure up against other professional services like executive coaching or accounting? (I recently talked to my acupuncturist about raising his rates and mentioned that he charges less per hour than a massage therapist even though he’s much more effective.)
Once you have the numbers, it’s easier to raise your rate with conviction because your new rate is based on research and not just pulled out of thin air.
Who will be affected?
Do you want to raise your rate for all clients or just new clients? The latter option is easier because no explanation is required; just start quoting your new rate. (My blog post, “Quote Your Consulting Rate with Confidence” can help with this.)
On the other hand, if you tend to do a lot of repeat business with a handful of existing clients, raising your rates only for new clients won’t create much additional income.
If you’re uncomfortable raising rates for existing clients, consider taking a longer-term hybrid approach in which you quote the higher rate for new clients. Later, tell existing clients that you’ve been steadily raising your rate on new projects but were hesitant to charge them more because you appreciate working with them so much; however, now you run the risk of subconsciously favoring the higher-paying clients.
Or another idea is to offer them an alternative. For example, for larger or longer-term projects (say, at least six months or over a certain dollar amount) your current rate will still apply.
I think it’s probably easier to just do it all at once, starting with your next new contract. (Don’t try to renegotiate your rate during an existing project.)
When to do it and how
You should probably do it now. You’ve read this far so I’m guessing on some level you want to go for it. Here are my suggestions.
Subject: New rate policy for 2019
As 2018 comes to a close, I’ve been reviewing the books and clarifying my business goals for next year. As a result, in 2019 my consulting rate for new projects will be increasing to $175/hour. This rate will only apply to new projects, so our existing contract won’t be affected, but I want to give you a heads-up now.
Of course, rate increases are inevitable, particularly in this healthy economy. I value the relationship we’ve developed over the last two years, and certainly want to continue being of service. Please let me know if you have any questions or concerns.
Clearly, raising your rate doesn’t need to be awkward or intimidating. It’s just takes some planning. If you want to grow your business or meet your financial goals, charge what you’re worth!