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
Your skills or service have improved. If you can provide more value, raising your rates to reflect that is reasonable.
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.
You’re testing a new rate to gain information. Just be sure you have a plan if the higher fees don’t pan out.
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
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.
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.
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.
Changing too frequently. Your clients can’t plan your services into their budget if you’re always changing your rates around.
How to IncreaseYour Rates
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.
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.
Get testimonials. Anytime a client is obviously happy, ask for a testimonial. Put those testimonials on your marketing materials.
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!
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:
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.
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.
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.
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.
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.
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.
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.
Your amazing business idea may need funds to be successful. However, it’s not easy to finance a startup in a sea of competitors.
Consider many sources for your startup funds:
Use your own finances. Instead of getting a loan or borrowing from others, see if you can finance your startup with funds you save or gather.
Do you have savings that can be used to fund your new business?
Do you have items or services you can sell to raise money? This may take awhile, but you might feel more comfortable delaying the launch of your company a bit while you earn the money to get it started.
Ask friends and family to help. Do your family and friends think that the startup idea is a good investment that will bring high returns? If you have support from these sources, they might be interested in loaning you the startup funds or investing in your new business.
Your friends or family members can become lenders, partners, or investors in the startup.
They can contribute to the financial side, but they may also want to be involved in other areas. It’s important to negotiate an arrangement that you feel comfortable with.
Use crowdfunding. There are multiple online crowdfunding platforms, such as Peerbackers, Kickstarter, Indiegogo, RocketHub, and others, that can help you raise money. These websites let you share your startup idea with the public. Then, the public can donate money in return for items, services, or a share in the company,
One key to success on a crowdfunding platform is to have a unique story.
You can raise money for your startup and introduce your product or service at the same time.
Keep in mind that these platforms are filled with competitors, and it’s not easy to get all the funding you need. A successful campaign on these platforms usually includes social media and marketing efforts.
Enter startup contests. Big brands and investors sometimes have contests for startups. These contests put you in front of big names who are interested in investing.
They help you get recognition while you learn from other startups. You also have the chance to fine-tune your ideas to make them more appealing to investors.
Seek angel investors. Angel investors want to help new companies and make a profit in the long term. They have large sources of money, so your startup may be able to get all of its funding in one area.
Angel investors tend to ask for a portion of your company or shares. They may ask to be partners or have control over startup decisions.
Because of their financial commitment, they have a vested interest in your success and want to ensure that your new business brings in high returns.
Consider financial institution loans. Banks, credit unions, and other sources may offer you a business or personal loan to fund your idea. They may require collateral and ask detailed financial records and other information about the startup.
Small business loans are a popular choice among startups.
Before you get a loan, consider the fees and interest on the loan.
What if your business doesn’t bring in enough profit to repay the loan? How will you repay it? It’s important to have a Plan B.
Launching a startup is an exciting time! Follow a profitable business plan and keep your eye on the profits so your new business can repay the startup funds as soon as possible and move on to providing you the returns you deserve.