How to Raise Your Consulting Rates
Charging what you’re worth is important for business growth.
Raising your rates is appropriate if you have the right experience, produce high-quality work, and provide in-demand services.
Research the services you provide to determine what the going market rate is and what peers in your industry are charging.
Raising your consulting rates is not as scary as it sounds. If you are at a point in your career where you have years of experience, produce high-quality work that is backed by client recommendations, and provide services that are in-demand, it might be time to consider increasing what you charge.
Clients are looking for a trustworthy, knowledgeable, and reliable independent professional who can help them achieve their goals. They will pay for what it takes so long as they know it’s worth it. If you’re ready to raise your rates, be sure to do so at the right time, find the right amount to charge, and outline a plan to communicate the change to your existing clients. Here’s how.
1. Research Industry Rates
Knowing when to raise your rates takes research and time. There are several factors that you’ll need to consider, but don’t shy away from the idea if you truly feel that your performance warrants it. Have confidence in your work and know that the effort you put in justifies you charging more.
Start by looking at competitors who have similar years of experience and service offerings. Are they charging more than you? If they can secure projects at higher rates, there is no reason you can’t do so as well. Clients aren’t always as scared of the numbers as you think they are; often, they are more nervous about whether you’ll be a worthwhile investment.
2. Consider Market Demands
Supply and demand are constantly in flux. As an independent contractor, you have the unique ability to adjust your rates accordingly. Some services have become popular to outsource while other roles have been slowly taken over by automation. If you have a skill set that is in high demand, you may find that the rate for these services has increased. Keeping a pulse on the market for your industry will help give you a good idea of what you should—and can—be charging.
3. Talk to Your Peers
As you spend time researching, be sure to reach out to your industry peers. Get a feeling for aa range of what they charge, when they chose to raise their rates, and how they communicated these changes to their clients. Investigate the experts in your industry who work with the largest companies. Ask how much they charge and if they have any advice they can share. Gathering advice and options from others may be the most useful information you gain throughout this process.
4. Consider the Value You Provide
What you charge your clients goes beyond simply fulfilling a contract. What else do you bring to the table that is of added value? Value might be particular to a specific client and their goals, or something unique that you provide that others don’t. Here are four ways to create long-term value for clients.
5. Set a New Bill Rate
Once you have an idea of what others in your industry are charging, take some time to think about the adjustments you’d like to make to your own rates. If it’s been a while since you’ve changed your rates, remember that your fee should be based on several factors including your own level of experience, the amount of time you devote to projects, and other incidental costs such as travel or additional supplies. MBO’s Bill Rate Calculator is a useful tool that allows you to calculate a bill rate by plugging in your own numbers.
6. Conduct a Test Run
This is an optional step, but if you’re nervous about raising your rates, consider testing out your updated rates on new clients first. Gauge their reaction and adjust as needed. Another strategy is to gradually raise your rates year after year. If you don’t feel comfortable changing your rates because the way you’ve been charging clients has kept them around and has helped build a mutual relationship, consider approaching it in another manner. Offer extra services that you don’t usually provide, charge additional fees for them, and bring in additional profit that way.
As an independent professional, you’re aware of the fact that the success of your business relies solely on you. Always keep an eye on your top competition, see what they are charging, and make sure that potential clients don’t assume you’re charging less because the quality of your work doesn’t stand up.
7. Communicate Your New Rate
Once you’ve decided to raise your rates, it’s important to have a plan in place to notify existing clients. While you may feel awkward having these conversations, keep in mind that rate adjustment year over year is a common business practice that clients are likely to partake in themselves. If they value your services and if you’ve established a good working relationship with them, they will understand the need to increase your fees.
Timing can be an important consideration here as well. Wait until the end of the financial year, or the end of the calendar month before talking to clients about a rate increase. These are times when they will be figuring out their own budget and planning for the months ahead, so they will be better able to accommodate the change. If possible, notify existing clients via video conference or over the phone. Explain the rate changes you are making, provide a brief, logical explanation as to why you’ve chosen to do so, and let them know that you are willing to answer any questions they have.
If you receive pushback, remain firm in your decision and walk the client through your reasoning in more detail. If a client honestly cannot afford your rate increase but you want to continue working with them, try and negotiate a revised fee that is somewhere between your old rate and your new rate. Be sure to give existing clients at least one month’s notice before increasing fees.
For help setting your new bill rate, check out MBO’s Bill Rate Calculator.
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