Self Employed? How to Effectively Increase Your Hourly Rate

If you work for yourself, your income naturally depends on your hourly rate. Of course, you’d love to make a better hourly wage. But how do you know if you’re being fairly paid?

Here are some tips on when you should (and shouldn’t!) raise your rate.

When You Should Raise Your Rates

  1. Your skills or service have improved. If you can provide more value, raising your rates to reflect that is reasonable.
  2. Supply and demand have changed for your service. If you’re booking yourself solid and turning away new clients, then you’re in an excellent position to charge more. Simply raise your rate until you’re getting the number of clients you want without having to decline new business.
  3. You’re testing a new rate to gain information. Just be sure you have a plan if the higher fees don’t pan out.
  4. If you want to reposition yourself. There’s nothing wrong with positioning yourself as a high-end consultant, but be sure you can deliver that type of service. You won’t last long if the quality of your work doesn’t match the prices you’re charging.

When Not to Raise Your Rates

There should always be a legitimate business reason for raising your rates. You might just want to earn more money, but that’s usually not justification for charging your clients more. Before making any rate changes, always look at your skills as well as supply and demand.

Frequently Made Mistakes

  1. Never raising your rates. If you never raise your rates, then you’ll eventually be undercharging. Over time, that’s a lot of money that’s not making its way into your pocket.

  2. Not testing. New clients are the best place to try out new rates. Keep your old clients at the old rates while you’re testing; you can always bump them up later. If the new hourly charge doesn’t work out, you’ll still have your old clients to fall back on.

  3. Raising rates beyond what’s reasonable. If you’re just starting out, you can’t expect to charge the same as an expert. You’ll generally be more effective if you start at the lower end with your price until your client base is sufficient. Then you can start testing higher rates.

  4. Changing too frequently. Your clients can’t plan your services into their budget if you’re always changing your rates around.

How to Increase Your Rates

  1. Improve your services. You should constantly be trying to add value without significantly increasing your costs. The better your service, the more you should be able to charge.

  2. Always over-deliver. Not only do you get great word-of-mouth advertising, you’ll have a much easier time raising your rates when the time comes.

  3. Get testimonials. Anytime a client is obviously happy, ask for a testimonial. Put those testimonials on your marketing materials.

  4. Truly care about your clients. When your clients can tell how much you care, you’re much more likely to keep their business and get referrals. Their referrals can bring plenty of new clients to test out your new rates.

Ultimately, rates are determined by the marketplace. Your job is to position yourself appropriately within that marketplace and then test higher rates when the time is right.

However, within what the marketplace will bear, the sky is the limit when setting your own rates. This is one of the best parts about working for yourself. Use these tips to raise your income as your expertise becomes more valuable. You deserve it!

7 Strategies to Increase Cash Flow in Your Small Business

Would your small business benefit from a higher rate of cash flow? It’s possible to increase it through several business strategies.

Try these strategies to increase your cash flow:

  1. Reduce your spending. Decreasing your spending is one way to increase your small business cash flow.
  • The first step to implementing this strategy is to carefully analyze all of your business spending. How much do your office supplies and electrical bills cost every month? How much do you pay for insurance, employee salaries, and other bills?
  • After analyzing your spending, look for areas that can be reduced. However, it’s important to approach spending cuts carefully because pay cuts can drive away employees. In addition, if you try new services to save money, the quality may not be the same.

  1. Extend discounts for fast payments. If you’re trying to encourage your customers to pay faster to increase your cash flow, then discounts for fast payments may help.
  • The discount doesn’t have to be large, but customers may appreciate a small amount of savings. Try several payment plans with different discount levels to reach more clients.

  1. Watch your inventory. Are you investing a large portion of your cash into inventory?
  • Inventory may be the lifeline of your small business, but you don’t want it to destroy your cash flow. The boxes of shirts, candles, or other items you sell shouldn’t sit in warehouses for decades.
  • Find a balance between having enough inventory to satisfy customer needs and having too much.

  1. Raise your prices. Are you keeping up with inflation? You might be able to raise prices on your products and services to keep up with the market.
  • Higher prices can lead to more cash flow, but they may also scare away customers. Find a balance that works for your business and your customers.

  1. Consider collection agencies. Do you have a large number of customers who haven’t paid their bills?  
  • Collection agencies can help you recover a portion of the unpaid bills. They charge a fee and take a percentage of the money. However, you may not have the time to pursue the customers who haven’t paid.

  1. Consider court. For larger amounts, you may have to get a lawyer and take your customers to court for unpaid bills. This is one way to make your cash flow higher because it can force them to pay their overdue bills.
  1. Offer prepayment rewards. You can offer a variety of rewards ranging from discounts to extra products. You can make a special rewards program with gift cards or other items.
  • Customers who prepay for large packages, services, or multiple items could receive extra rewards. These rewards can encourage them to stay and keep buying your products or services.

Your small business may benefit from more cash flow. Creating a customer rewards program with sales, discounts, and other special rewards is always a good idea to expand your customer base and gain loyalty to your business. Incorporate several of these strategies into your business operations to discover what works best for you.