“I feel like I’m barely scraping by.”
So many of us as freelancers have experienced that. Freelancing and running your own business is fantastic in some aspects, but terrifying and difficult in others, especially when it comes to finances.
Figuring out how much to charge for your services is painful. How much is enough that you can survive but not drive away the clients that will actually hire you? Walking that fine line is something that we all struggle with – you’re not alone! There are some ways to find that balance, though. Let’s dive into some things that can help you increase your freelance income!
How much income do you need as a freelancer?
I’m not just talking about covering your business expenses here. Even if you’re not a full-time freelancer, you need to know your goals. For the purposes of this exploration, we’re going to operate on the idea that you’re supporting yourself on your freelance income or that this is your goal. To get there, here are a few questions you need to ask yourself:
1 | What is your actual net income?
Just in case you’re not familiar with the term “net income,” it essentially just means your income after taxes, business expenses, etc. If you were working for a regular employer, this would be your take-home pay, after taxes and any shared-cost benefits like health care or a retirement fund. If you’re freelancing, you have to shoulder those costs 100% rather than splitting them with an employer, so your net income is going to be lower compared with the same gross income (income before taxes and expenses) at a regular job. Knowing this number is crucial!
2 | How much do you personally spend each month?
This isn’t business expenses; we’re talking about the things you need to pay for in your everyday life. Your rent or mortgage, utilities, food, car maintenance, dog food, that sort of thing. As a freelancer, you probably have at least somewhat variable income, so since you don’t always know how much you’ll be making month-to-month, you need to have a REALLY good handle on your personal finances! Without this, you can easily end up in debt that isn’t necessary.
3 | What’s the difference between those two numbers?
It’s time for some math: take your average net income from the past six months and subtract your average personal spending from the past six months. So if your average net income was $2000 and your average personal spending was $1700, congratulations – you had $300 in profit! But if those numbers were reversed, then you’d have spent $300 more than you made. That’s where many freelancers get in trouble.
If your number is positive, then good work! You deserve a pat on the back and a high five. Even if you sometimes have months where you spend more than you make, if your overall finances are positive, then you’re in a good place moving forward. And if you want to make that number bigger, then hop to the next section!
If your number is negative, it’s time to do some re-evaluation. There may be places that you’re spending more money than you need to be, either in your business or your personal expenses. Take a good hard look at everywhere that money is going out of your bank accounts and see where you can plug the leaks before we move into making more money. If you don’t plug those leaks in your budget FIRST, you’ll probably just leak more money rather than fixing the problem.
What kind of clients do you work with?
Okay, here’s where we start getting into the nitty-gritty of it. Your clientele can make or break your freelance business. You may think that you’re tapped out on how much you can charge or on the types of clients that you can attract, but that may not be the case. It may be more to blame on poor marketing or targeting the wrong audience. So riddle me this:
1 | What kind of clients are you attracting?
Pennypinchers? Pains in the butt? People who don’t really know what they want?
If you’re only attracting the kind of clients that are horrible to work with, why is that? If you’re accepting referrals from these types of clients, STOP. Seriously. I know that money is what keeps food on your table and a roof over your head, but these types of clients will mostly be referring other awful clients. So what do you do instead?
Look back and find those clients that you actually ENJOYED working with and make a list. Contact them and let them know that you’re running a special referral bonus for X amount of time. (You set it based on how long you’re comfortable with running it. I’d recommend at least one month, though.) If that person refers someone else that they think would be a good fit and their referral signs a contract with you during your bonus period, your original client gets a reward. It could be something as simple as a $25 Starbucks gift card or it could be a percentage of the sale or a flat rate or whatever you want!
Make sure they understand that it has to be a good fit for both you and their referral. If they liked working with you, though, they’ll probably send more people like themselves your way and your client quality will improve before you know it! You can even continue the referral bonus indefinitely for people who consistently send you quality leads and you could open it up to more people who you enjoy working with as time goes on.
2 | Do your clients undervalue you?
If so, then they aren’t the right clients for where you are right now. Maybe you started out offering low-budget solutions and now your skillset has improved but you’re still working with those budget clients. Ironically, the people who pay the least often demand the most from you. You’re a freelancer, though, not a gumball machine! You don’t spit out goodies just because the client turns a crank (unless they put plenty of quarters in, anyways, right?).
If your clients are demanding more and more for the same price, then you can be assured: they don’t see your value. Or maybe they just don’t understand how goods and services work. Either way, you may want to start increasing your prices and phasing out these demanding clients to make room for bigger, better clients!
3 | Look for people who aren’t just focused on money, but on results and the future
Speaking of those bigger, better clients, you may need to shift your client focus. When speaking with leads, find a way to ask about the results they want to get from your work and how that work will impact their future. If the lead can answer these types of questions, then they’ll probably be less focused on wringing what they perceive as every penny’s worth of work out of you and more focused on receiving those results. This is the kind of client you want to work with AND the kind of client who is more likely to pay you what your work is worth!
Increasing your freelance income
Okay, so now I hear you asking how you actually increase your freelancing income and how you determine what that new rate should be. There are a lot of different answers to this and it can vary depending on the situation, so here are a few guidelines.
1 | How much ROI does your work generate for your clients?
Going back to those clients who are focused on how your work will impact their future… how much of a return on investment do they expect to see? If they’re expecting that your work will help them earn an additional $3000 per month, if you charge them $100, they may question the quality of your work! Charging too little for something that will yield a high ROI can actually be detrimental to you as a freelancer.
Finding the balance here may take some experimentation, but you can base your pricing on their stated ROI. So if they say they think they could earn that extra $3000 per month because of your work, maybe start at 10% if you work on retainer or 50% if it’s a one-time project. Now, don’t just run out there and quote this, but take it into consideration as you formulate your new freelance rate strategy. Different industries will have different pricing strategies, so that needs to be calculated in as well.
2 | Change your clientele if necessary
This goes back to the previous section where we talked about what kind of clients you work with. If they aren’t the right clients, then start thinking about who you do want to work with and where you can find them. If you’re increasing your rates but still want to serve lower-budget clients (the non-suck-you-dry kind), you could focus on attracting higher-budget clients while still leaving a few spots open each month for low budget clients. You could offer applications to work with you for reduced rates, especially if they’re a non-profit, and you can then hand-pick the right low-budget clients to work with rather than taking everyone who comes to you.
3 | Raise your rates slowly if needed
Make sure to inform any existing clients of rate increases. There’s nothing worse than a ticked-off client to make you look bad! You might even offer to let your favorite clients lock in their current rate for a set number of months or projects, depending on your business model. This gives you some up-front cash flow and gives you a financial buffer while you ditch the low-quality clients and find higher-quality clientele. This method can also clear out those penny-pinchers and other undesirables, so win-win!
4 | Find other income streams
I know that everyone these days is offering courses and info products. You don’t have to do that if it’s not your jam. There are so many other ways to find additional income streams as a freelancer. Maybe there are additional services that clients have been inquiring about that you just haven’t had the mental energy to start offering. Or maybe you do want to teach a course! It could even be a course on how to get the most out of their experience with a freelancer like you or something like that; it’s not all about teaching the skills you’re selling to clients. Get creative with this!
5 | Keep an eye out for red flags to increase client quality
This will help you make the most of your time by not working with crappy clients. You can beef up your intake forms or pre-project interviews. Go back and review your experiences with your least-favorite clients and see what red flags there may have been that you ignored. (It’s surprising how many of these there can be!) Make a list of all the consistent red flags you find and stop taking clients who exhibit those signs. Your sanity will thank you later!
If you’re ready to make more money as a freelancer, you first need to make sure you’re not leaking money in your personal or business budget. Then you can take a look at the types of clients you’re attracting and find ways to change that. After you’re targeting or you’re ready to target the right clientele, it’s time to increase your income!
Leave a comment with your thoughts on increasing your freelance income! Here are some ideas:
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