Freelancing in a High-Inflation Economy: How To Price Yourself Right
Written by
Jordan Rosenfeld
Edited by
Zuri Anderson
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
High inflation is tough for anyone, no matter whether you’re employed or self-employed, but it poses an extra burden for freelancers. How do you decide to set or change your prices when you know that people are already dealing with higher costs of living?
Experts explain considerations for freelancers and how to adapt to economic changes in ways that benefit your bottom line.
How To Know If You’re Underpricing
One way to know that you’re underpriced is if clients never push back on price or you rarely lose a deal for being “too expensive,” according to James Wilton, managing partner and founder at Monevate.
Another way is “if you believe your work is more valuable than competitors’ but you match them in price, you’re also likely pricing too low,” he added.
Raising Rates Is a Necessity
You may struggle with raising rates, but If you’re not doing so, with inflation, you’re effectively taking a pay cut, Wilton said.
To put it more plainly, your income is how you make a living, so there’s not only no shame in earning more. You should take a clear inventory of how much you need to earn in order to live well, according to Sherry Boykin, founder of Faith and Tales.
“If you know you need to earn $7,000 per month… that knowledge alone will either guide freelancers to opportunities that make good sense or cause them to create a ‘product,’ experience or opportunity for their clients/customers to glean more than they may have from what those clients/customers initially asked for,” Boykin said.
Build in Price Escalators
Wilton recommended that freelancers build “annual price escalators” into their contracts so they’re not playing catch-up in high-inflation years. They can use the Consumer Price Index at the Bureau of Labor Statistics, which charts the inflation rate, as a guide.
“As long as these increases are reasonable, most clients expect them and won’t push back,” he noted. “When inflation was 2% to 3%, Monevate research found that 80% of B2B buyers considered a 4% annual price increase to be lower than expected.”
Consider How You Charge
Pricing isn’t just about what you charge — it’s about how you charge, Wilton said. He recommended several strategies to make your pricing work better for you:
- Tier your offerings. Create a lower-priced version with reduced value. Price-focused clients will opt for it, while those who prioritize value will likely stick with your full offering. Giving them a choice makes the increase more acceptable.
- Stop charging per hour (if you are). Pricing time instead of outcomes disconnects price from value. Charging for deliverables or results makes price increases easier and discourages price comparisons with competitors.
- Know and communicate your value differentiation. Pricing power, that is the ability to raise prices without losing customers, comes from providing unique value. If you’re not differentiating yourself, work on ways to stand out. Clients pay more when they can’t get the same value elsewhere.
Review Market Data
To stay competitive, be sure you’re gathering industry benchmarks for different levels of value, Wilton urged, which is often reflected in experience, quality, and specialization.
He recommended platforms like Upwork and Catalant as great sources of information along with industry reports.
“Set your prices based on the level of value you provide,” Wilton said.
Don’t Lower Your Prices
No matter what, never lower your list prices, Wilton insisted, because this signals a decline in quality or value.
“Instead, use discounting strategically. Don’t preemptively offer a discount before the client asks. Don’t negotiate against yourself,” he said. Boykin agreed, adding, “Remember there is a customer at every price point.”
While there might be an adjustment period when you raise your prices, eventually it will more than even out when you build a new level of client.
Your rates are too low, Boykin said, if you can’t survive on your freelancing alone, or you’re reconsidering the viability of freelancing every month or so.
Be Gradual and Communicate Well
Raising rates doesn’t have to mean losing clients, according to Milos Eric, co-founder and general manager of job platform OysterLink.
“The easiest way to do it is gradually — new clients at a higher rate first, existing ones phased in,” he said.
Communication about it is important, however.
“Be transparent, give clients a heads-up, and frame it as a natural step in the evolution of your services,” Eric said. “If a client refuses to budge, they might not be the right fit long-term,”
More From GOBankingRates
