As a freelancer, the journey from securing your first clients to building a sustainable business can be challenging. One of the most critical decisions you’ll make is how and when to raise your prices. Many freelancers fear that increasing rates will scare away potential clients, but the reality is far more nuanced.
Key Takeaways from this Episode:
– Incrementally raising prices helps you find your market’s true value threshold
– Closing 100% of your deals might indicate you’re undercharging
– Pricing should reflect the value you provide, not just your time
The Psychology of Pricing
When you’re just starting out, the primary goal is to gain experience and build a portfolio. This often means taking on clients at lower rates to prove your worth. However, as you develop your skills and build a track record, your pricing should evolve.
Experienced entrepreneurs like Preston and AJ Cassata suggest a strategic approach to pricing. The key is not to fear price increases, but to view them as a natural part of business growth. Here are some crucial insights:
1. Incremental Price Testing
Don’t be afraid to experiment with your rates. Start by gradually increasing prices with each new client. The goal is to find the sweet spot where you’re getting some pushback, but still closing deals. If you’re closing 80-100% of your proposals, it’s a clear sign you’re leaving money on the table.
2. The Math of Pricing
Consider this: If you double your rates and your close rate drops from 80% to 60%, you’re still potentially making more money while working less. For instance, closing two clients at double your previous rate is equivalent to closing five clients at your original price point.
3. Value-Based Pricing
The most important factor is not your hourly rate, but the value you provide to clients. Ask yourself: Are you helping clients generate significantly more revenue than what they’re paying you? If the answer is yes, you have room to increase your prices.
4. Planning for Growth
When considering price increases, think about your future business goals. If you’re planning to hire team members or expand your services, start building those potential costs into your pricing now. This approach helps you transition from a freelancer to a founder more smoothly.
Overcoming Pricing Fears
Many freelancers worry about losing clients when raising prices. However, higher prices often attract a different caliber of client who values quality over cost. Even if you do overshoot, you can always adjust. There’s no permanent damage in testing your market’s tolerance for higher rates.
Final Thoughts
Pricing is an art, not an exact science. Be confident in the value you provide. Track your metrics, be willing to experiment, and remember that your prices should reflect your growing expertise and the tangible results you deliver to clients.
If you’re feeling uncertain, start small. Raise your rates incrementally, track the results, and adjust accordingly. Your future business depends on valuing your work appropriately.
