Should I raise my rates right now?

With costs rising at a near unprecedented level over the past year, keeping your self-employed business profitable and robust against future uncertainty can be tough. Considerations must be given to your clients, what’s happening in the market that you operate in, as well as current and future macroeconomic conditions.

Below, we outline the current trends in the freelance market, review the likely impact of future macroeconomic factors and present the case for why you probably should raise your rates right now (as freelancers notoriously sell themselves short!).

Current trends in the freelance market

As part of IPSE’s research into the self-employed sector, we run a quarterly survey of freelancers that tracks their overall economic and business confidence as well as the average day rates charged for each three-month period.

Over the past year, freelancer day rates have remained remarkably stable despite inflationary pressures pushing up business and personal costs. In fact, the average day rate charged by freelancers in Q1 2023 (£516) was identical to our findings from the previous year Q1 2022 (£516).

In addition, our research has revealed that the majority of freelancers (55%) are now anticipating an increase in their business costs over the next 12 months, forecasting an expected annual increase of 9.2 per cent.

Interestingly, when looking at all UK business, the Office for National Statistics’ fortnightly business survey has revealed that fewer than one in six (15%) trading businesses expect to raise the prices of the goods or services they sell in August 2023.

With fellow freelancers anticipating an increase in their business costs, it could well be time to review whether an increase in your own business costs justifies an increase to your day rate. The fact that other businesses have so far seemed reluctant to increase their day rates should not prevent you from increasing your own rate.

Instead, consider your level of expertise and experience, as well as the uniqueness of your offering within the market you serve.

Macroeconomic factors to consider

With inflation reaching 11.1 per cent in October 2022 – a 41-year high – before easing to 7.9 per cent in June 2023, it’s important to consider that your self-employed earnings do not go as far as they once did. But is now the right time to pass on the higher cost of living to clients?

The fact that inflation has eased is only slightly encouraging, with the prices of goods and services still continuing to rise but at a slower rate. Concerns of a recession still persist, with the UK’s manufacturing sector recording its worst month of the year in July, which is typically an indicator of a worsening financial predicament.

However, a worsening macroeconomic picture is not all doom and gloom for the self-employed. We know that self-employment experienced a real boom in the aftermath of the financial crisis of 2007, with clients keen to utilise short-term freelance talent to drive growth.

When reviewing your day rate, it would be wise to do some research on your clients and the sector they operate in – for instance, is there a downward trend in demand for their services or goods?

Communicating a price increase to clients

Freelancers are notorious for underpricing their services. Often, we hear that freelancers are worried about how their clients will react to a raise in their rates. But, a clear and well-pitched communication to current or prospective clients about a rate increase can soften the impact.

It’s important to make any communication personal. It should be clear to the client by how much your day rate will increase by, when this increase will take effect and why you’re now raising your rate. It’s better to recognise that economic conditions are challenging for all right now, but you have no alternative but to increase your rate.

It’s then important that you provide contact information for any queries from clients on the price change.

For more information on how to raise your rates, we’ve put together an in-depth advice page here. Alternatively, if you’re not yet ready to increase your rates, take a look at our advice guide on how to find more clients here or IPSE members can access our guide to setting rates in 2023 here.