How To Tell When Your Rates Are Too Low

credit: stuartpilbrow on Flickr

A few months ago, I needed a designer to team up with on a project. I decided to work with a friend of a friend who had just graduated from art school and was desperately looking for work. She emailed me her rate and I about lost my mind.

She wanted $13 an hour — more than she’d ever earned at a job in her life — but she was willing to take less if I thought it was too high.

I’ve heard this story repeated time and time again, even from freelancers who have been in the game for a while. Most freelancers don’t have rates that painfully low, but odds are pretty good your rates are too low.

Signs Your Rates Are Too Low

There are plenty of situations that will tell you that your rates are too low. The best response to any of these situations is to raise your rates.

• Your clients accept your rates with no complaints whatsoever. If a client hasn’t at least said, ‘that’s a little higher than I was accepting’ when you send her an estimate, you’re in trouble. Most clients will want to at least try to negotiate downwards, no matter the price point, unless they find a freelancer who they think is a real steal.
• You haven’t raised your rates in over a year: Between the experience you’ve gotten and any increases in cost of living, it’s reasonable to raise your rates (at least for new clients) every year.
• Your rates aren’t in line with what other freelancers are charging. When I first started freelancing, I heard about another local freelancer who was charging triple what I was (I’m not going to give you the dollar amounts because I’m a little ashamed of what my starting rate was). She wasn’t particularly experienced or skilled compared to me, but she was getting what she asked for. You better believe I raised my rates immediately.
• Your budget is perfectly balanced: A perfectly balanced budget isn’t a good thing, at least for a freelancer. If just one missed payment from a client would throw your budget off entirely, you’re not bringing in enough money. A perfectly balanced budget (even if you’ve budgeted for savings and retirement) means that you still have room to stretch.
• You’re charging less than double what you could make hourly working for an employer: In most places, freelancers ought to be aiming for at least double what an employer would pay because that’s the real amount an employer earmarks for salary, taxes, benefits and generally the cost of having an employee.

There are, of course, more obvious signs — like you’re eating ramen for the third week in a row — but it’s the subtle signs that I particularly worry about. If you’re in a tough spot financially, raising your rates is probably an obvious move. But if you are getting by or you’re even comfortable, you might not think of raising your rates. But if your work, between skills and experience and general ability, is worth a higher rate, you should be getting it.

There’s Nothing Wrong With Charging More

I thought very hard about the title of this article — I considered ‘How to Tell if Your Rates Are Too Low’, but the fact is that there is a time in every freelancer’s career when your rates really are too low. Maybe you started out low because you weren’t confident in your skills, or maybe you didn’t raise your rates to keep up with demand. But we’ve all been at a point where we were effectively leaving money on the table.

It’s okay to have rates that make your clients have to decide if you’re worth it. More often than not — they will. While you may think that you’d never pay as much for your skills as you’re asking, you have a prejudiced point of view. For you, designing a website or writing an article or doing whatever other type of work you do is a simple matter. You’ve done it often enough to get it down to a science. But someone else, who doesn’t have your experience or your skills, would require triple or quadruple the amount of time to handle such a project (even assuming that they wouldn’t need to buy the right software or training). Be confident in your rates.

Photo credit: stuartpilbrow/Flickr