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As permanent staff enjoy annual wage rises, so must freelancers.
However, the annual rate increase chat – when you announce to your clients that they’ll need to pay more for the same service from now on – is one of the trickiest parts of freelancing.
How do you justify your increase? How much should your prices go up (check out our day rate calculator for a ballpark figure)? What if your client ditches you?!
Ever the creative bunch, some freelancers have avoided these awkward discussions entirely by changing the way they work and are paid. The cash economy is so 2013 – lets find something better, shall we?
Philadelphia web designer Adrian Hoppel decided to eschew cash payments after 11 years and move to a Gift Economy model. The premise is remarkably simple – Hoppel completes his work to a standard he’s happy with, and gives it to his client as a gift. The client must then decide how much Hoppel’s work is worth to them and give a gift of appropriate value in return.
The decision to work this way, as Hoppel describes, was one borne out of frustration with the normal deposit-work-invoice method.
“[The old method] is composed of two totally opposing forces: the seller attempting to take as much money as possible while giving as little of the product as possible, and the buyer attempting to take as much of the product as possible while giving as little money as possible.”
Hoppel reports that, although the dynamics of the Gift Economy are different, the outcome isn’t a huge departure from the norm. Most of his clients “gift” him money in return, usually more than he would have charged. This increase is, Hoppel believes, because his new way of working is based on “mutual respect and fairness”.
Similar to the Gift Economy model, but only dealing in cash, this method is again about trust between client and freelancer. Walt Konia, writing for The Freelancery, describes a job using this method:
“I said, “Let me just concentrate on getting this done for you, and we’ll settle up later. I trust you to be fair.” She agreed.
“I did the work as it came in over a couple of weeks, revising, re-writing, re-building the content. We came up with a neat and tight format, a solid voice, sharp messaging. Everybody loved it. I then told the client to let me know what she felt was a reasonable fee for the project. It was entirely her call.
“Meanwhile, I went back and parsed out the work based purely on hours spent. Had I been pricing conventionally, it would have come to 3800 to 4200 bucks, depending on how I counted. Next day, I get an email from the client. She says “I’m thinking $9,500. How does that sound?”
“I wrote her back and said “Fine. Sold.””
Konia warns, however, this method only works if you have a good, long-term relationship with the client.
There’s precedent for this pricing model elsewhere, too – Radiohead released a successful album with a “pay what you like” pricetag, and many mobile apps are launched for free, with the option to donate to the developer if you like their work.
You won’t have been able to avoid the furore surrounding Bitcoin and other cryptocurrencies over the last year, and with the skyrocketing amount of press has come skyrocketing valuations. A year ago one Bitcoin cost $135, which has now increased to around $500 – and along the way hit a high of over $1,100.
Using a service like Bitpay you can have your clients pay you in Bitcoin instead of traditional currencies, and potentially reap huge rewards. Bitcoin’s Chief Scientist Gavin Andresen has been paid in the pseudo-currency since he began work on the project and estimates he’s made “about $800 per penny I invested.”
“It’s insane,” he sagely observed.
There are significant risks involved in digital currencies, however. Due to wild fluctuations in valuation, Bitcoin was actually a terrible investment in the first quarter of Q1.
As you progress in your freelance career, it’s natural for your rates to go up over time. This means new clients will usually be paying more than those you’ve been working with for a few years, even if you’ve increased your rates with them.
If you find yourself fully booked, consider ditching your lowest paying client if a better paying opportunity comes along. By getting rid of your stingiest client and replacing them with a new, higher-paying gig, you could increase your monthly take-home significantly. An example:
Client #1 – £200 per day
Client #2 – £250 per day
Client #3 – £300 per day
Client #4 – £350 per day
Average day rate – £275
Income for 28 billable days – £7,700
If we ditch Client #1 at £200 per day, and replace them with a new Client #5, paying £400 per day, your average day rate suddenly shoots up.
New average day rate – £325
New income for 28 billable days – £9,100
Congrats – you’ve just upped your monthly revenue by £1,400 per month by ditching your lowest-paying client!
Of course, the FIFO method is a very hard-nosed approach to cashflow management and, depending on your relationship with the client up for the chop, may not be appropriate.
Do you have any strange, little known or downright baffling methods of raising your rates? Let us know in the comments!
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