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What\u2019s your ideal hourly rate? I bet it\u2019s higher that you\u2019re charging today, right? You should start charging that ideal future rate today. <\/p>\nWhat\u2019s your ideal hourly rate? I bet it\u2019s higher that you\u2019re charging today, right? You should start charging that ideal future rate today. <\/p>\n
Before I explain why and how first let me say that I strongly advise my clients against charging by the hour at all. For a variety of reasons, this is a self-defeating practice. (Engage me in the comments if you\u2019re interested in why.) But whether you charge by the hour or just use an hourly rate as a benchmark for quoting your projects (as you should), you might want to consider starting the process of increasing your rates today.
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Now you\u2019re probably thinking something like, \u201cI can\u2019t do that, my clients would object,\u201d or \u201cI\u2019d price myself out of my market,\u201d or \u201cI\u2019d lose opportunities.\u201d And you\u2019re probably right. Increasing your rate will require change and adjustment\u2014it will take time. And that\u2019s exactly why you should start this today. If you wait until it\u2019s absolutely necessary to change your rates, you will no longer have the luxury of time\u2013and changing your rates suddenly will create some serious stress.<\/p>\n
In order for your design practice to grow you need to maintain a healthy profit margin. And for freelancers and small firms this margin will come largely, if not entirely, from your hourly rate. Growing your firm will always add costs and increase overhead. And so your rates will have to go up. But increasing your rates will upset the pricing precedents you\u2019ve established with your existing clients, and with your referral network. Significant changes to your rate may trigger exiting clients to start looking elsewhere and prospects to be surprised by your fees.<\/p>\n
Nevertheless, increasing your rates is a necessary part of growing a professional design practice. And part of this progression will always include the acquisition of new (hopefully better) clients, and moving on from the old.<\/p>\n
The Paralyzing Fear of Disappointing Clients<\/strong> At a personal level this is hard for a designer, because it\u2019s not just business, it\u2019s not just about necessary rate increases\u2014it\u2019s knowing that your client Jane, with the twins, trying to run her gift shop, or Joe the semi-retired granddad managing a non-profit\u2014that they will be negatively affected by your increase. And those are the hardest transitions. But of course you also probably have clients who can afford higher rates, but knowing a bargain when they see it, they keep you busy with lots of work\u2014so long as they keep benefiting from your low rate. I hate to put it this way, but these kinds of barriers to building a successful design practice come from the reality that most designers are just too nice.<\/p>\n The solution, or course, is not to be mean, or hard-nosed, but to simply become more professional. Professionals can be very personable and nice. And if you can become more professional (which requires being profitable), then you can continue to help the entrepreneurial mom, or the altruistic granddad. If you are genuinely profitable then you can afford to willingly cut your profit margin for clients like these. But you need to be a profitable first in order to have the time and money to give away (or discount). You can\u2019t keep giving away what you don\u2019t have\u2014working at unprofitable rates will eventually catch up with you. When it does, these clients will be equally disappointed\u2014when you go out of business. If you\u2019re going to remain in business you\u2019ll need to increase your rates.<\/p>\n
\nTransitioning clients is hard for emerging design firms. Designers build close relationships with their clients. In fact, many small design firm websites make this a selling point: direct communication, personal attention, no middle-man. These are often touted as advantages in hiring them as a freelancer or small firm. But eventually your costs will go up, and rates will have to increase, and clients will transition.<\/p>\n