Another Freelancer Told Me I'm Undercharging. Should I Raise My Prices?
This blog post comes off the back of a question I was asked recently by one of my mentees. She was told by another freelancer in her field that some of her packages were priced too low, and she asked me if she should raise her rates as a result.
Being told by other freelancers that we’re undercharging can be upsetting. No one wants to feel as though they’re getting their prices wrong. And especially when we work in a field we care about, we don’t want to feel potentially responsible for damaging the industry.
It’s only natural that situations like these can make you question your pricing. My mentee was left wondering whether or not she should increase her rates and if she ought to change her approach to package creation.
In this blog post, I wanted to share my response so that you know what to do if you find yourself in a similar situation. I’ve broken my answer down into 5 points for you to consider the next time someone tells you you’re undercharging.
1) How much do you need to be charging?
When it comes to your prices, you should always start by asking yourself how much you need to be charging.
The method I teach in Charge with Confidence looks at how much you need to be earning to cover both your business and personal expenses. We consider your unique circumstances and individual outgoings before breaking the totals down into the number of hours you want to work. From there, we reach the minimum hourly rate you need to be charging in order to make sure you’re earning enough to comfortably cover your costs without having to worry about making ends meet.
I would argue that if you’ve done your pricing calculations and you’re earning enough per hour to cover both your business and personal expenses, you aren’t necessarily undercharging just because you’re charging less than average industry rates. It simply means you could be charging more!
2) Industry rates only matter to a certain extent
When it comes to industry rates, in my experience, they can be helpful but only to a certain extent. First of all, industry rates can vary widely. There is often a marked difference between minimum and maximum rates, meaning that they only really give you a very rough idea of ‘standard’ pricing.
But no matter what average rates are in your field, as far as I’m concerned, you should never let industry standards determine how much you charge.
In the past, I’ve spoken about how to charge more if you need to be earning above industry averages. I’ve also spoken about how industry rates can be helpful when setting your prices if you don’t depend financially on your freelance income.
Industry rates can act as a useful guide, but they’re not the be all and end all. What matters is that you’re earning enough money for your individual circumstances. You need to be making enough to cover your living costs and invest in your business while ensuring you also have a plan for retirement. Since the amounts necessary vary from person to person depending on where you live and what you want your life to look like, you should be calculating your rates based on figures that are relevant to you, not someone else.
In this blog post, I talk about why you should never set your rates based on what someone else in your industry is charging.
3) Don’t be too concerned with what you think your clients can pay
You should always bear your client’s budget in mind when putting together a quote. But in terms of your rates, you shouldn’t be too concerned with what you *think* your clients can pay.
Of course, depending on the type of clients you work with, you might be able to command higher or lower rates in general. For example, a large multinational company is likely to have more disposable income than a private individual.
Having said that, as a freelancer, you might not need too many anchor clients, and I can assure you there are customers out there at every budget level. No matter what type of client you tend to work with, you only need a handful who are willing to pay your rates on a regular basis.
4) Is there plenty of demand at your current prices?
If you are wondering if your prices are too low, it might be worth asking yourself if there’s plenty of demand for your services at your current rates.
If there is, this is a clear indication that you could be charging more. In these instances, you could look at raising your rates over time. Start charging more gradually as you onboard new customers, then increase your prices with current clients too.
On the other hand, if there isn’t a lot of demand at your current prices and you’re already charging what you need to earn a decent living, you might prefer to stick with your rates as they are.
5) Is the project worthwhile for you?
This is the key question and is what truly determines whether or not you’re undercharging.
When I ask if the project is worthwhile for you, I mean this from both a financial and non-financial point of view. If you’ve done your pricing calculations and you’re earning at least your minimum hourly rate, you’re not undercharging. That is, unless you find the client particularly stressful and you need to be making more per hour to make the stress worth your while.
Having said that, I would always encourage you to look for customers you enjoy working with to replace any stressful ones. It’s always better to work with clients who give you something more than just income, and this can also determine whether a project is worthwhile. For example, you might be happy to earn your minimum hourly rate if you have a great relationship with the customer and you find their work really interesting. At the same time, you might not feel satisfied earning the same amount from a client who isn’t particularly friendly and whose work you find unfulfilling.
At the end of the day, it all comes down to how happy you are with the project and the price you’re charging for it. If you’re earning enough to cover all your expenses and you enjoy working with the customer, you’re not undercharging!
I hope these thoughts will help you decide what to do the next time you’re questioning whether or not you’re undercharging.
In any case, you should never feel any shame around your rates. Everyone’s circumstances are different, and we should never judge one another based on what we’re charging. Similarly, don’t ever feel you have to raise your prices just because another freelancer says you should. The important thing is that your prices are right for you (no one else!).
If you’re unsure whether your prices are right for you and you don’t know how much you need to be making to cover all your expenses, you might want to consider Charge with Confidence. During the programme, I’ll show you how to break your personal and business expenses down into a minimum hourly rate you need to be earning on each project.
Hi, I’m Susie
I mentor freelancers on pricing and business finances so you can earn a decent living doing what you love.
I’m a translator, editor, chocoholic, crochet addict, animal lover, and budding gardener (get it?) who loves empowering others to achieve their goals.
