Seven Signs it’s Time to Raise Your Rates
Updated August 2023
How to know when it’s time to raise your rates? One of the things I do with my 1:1 clients to fully understand their pricing is to review their financials, their market, their processes, and their team. Because I work exclusively with designers, I see pricing across the US, Canada, and a few other countries and know what businesses are charging, what their markups are, what their team structure is, how streamlined their processes are, and more.
And just about 100% of the time, interior designers are undercharging. So far in the last five+ years, I’ve only had one client who I felt was overcharging, based on their hourly rate. Sure, I’ve had clients who I felt were adding unnecessary steps to the process (and therefore increasing the billings to the client) but if I’m just considering the hourly rate, there has only been ONE.
So, before jumping into this post, I’m going to guess you have a feeling your pricing is off, which is why you’re here. And I’m also making an assumption that you are taking excellent care of your clients, providing them with fabulous results, and have received client testimonials confirming these facts.
Here are some clues it might be time to raise your rates.
01 | You Haven’t Raised Your Prices in the Last Year.
Hi. The inflation rate since the beginning of 2022 is up almost 10%. This means everything costs 10% more than it did last year. At a MINIMUM you should increase your fee by 10% to cover this jump.
02 | You’ve Invested in Professional Development and Your Company.
If you’re like 100% of my clients, you’ve invested in your business in the last year to become more efficient, proactive, and knowledgeable. Maybe it was in education and training, systems, branding, website, processes, hiring, photography…all of these investments improve your business, your ability to serve your clients efficiently, and your client’s experience throughout the process.
03 | You’re On a Waitlist and People are Still Hiring You.
If you’re completely booked out and people are signing contracts, paying installments, and waiting to start, it’s a good time to raise your rates. This is basic economics. Supply + demand. So, be sure to raise your rate so you aren’t locking people in for next year at this year’s rate (which is likely already too low — just sayin’).
04 | You Have a High Close Rate.
If you’re booking 100% of the prospects you get on a discovery call with or do a consult with, you need to raise your rates. I would say if you’re booking 75% or more, it’s time to raise your rate.
05 | You’re Working Nonstop Yet Aren’t Profitable.
This one is pretty self-explanatory. If you’re working all the time (you should track your hours to see where you spend your time) and are not profitable (you should review your financials after every project and monthly), then something is off.
If you aren’t able to compensate yourself fairly for the hours worked it’s because either your processes stink (sorry!) or your rate is off. Or both. If your business isn’t profitable, it’s a hobby, not a livelihood. (Learn more about making your projects more profitable here.)
And if after you pay your taxes, you realize you made $1/hour, it’s time to raise your rates.
Be sure to read one of my favorite books: Profit First.
06 | You’re Resentful and Burning Out.
You know you should be so grateful to do the work you do, yet with every project, you feel resentful toward the client and mad at yourself. With every task you add to your list, every yes you hear yourself saying, every distracted conversation you have with your kids, you fill with bitterness and guilt and question what you’re even doing.
Tasks begin to take longer. You have to bribe yourself to get any client work done. Your brain feels foggy. You feel anxious.
Oftentimes, if you’re feeling this way, there is MUCH more going on than just incorrect pricing. Ask yourself: “If I were making $X,XXX- XX,XXX more on this project, would I be more excited about it?”. If not, then something else is going on. Or, it could be because you’ve been taking on projects at a low price for too long and it’s causing burnout — so now, no matter how much money you might bring in, it doesn’t even matter because you simply need a break.
07 | You’re Attracting the Wrong Clients.
Pricing is marketing. If you’re comparing website designers and one charges $700 for a 5-page site and one charges $7,000 for a 5-page site, who do you instantly think is going to provide you with a better product, better service, and better value?
Ding-ding-ding! The $7,000 web designer, 100%.
Don’t speak about the discount or the financial savings you bring to your clients. Speak to the value, the time savings, the quality, the convenience, the experience, and the comprehensive process.
If you keep getting clients who are asking for discounts, negotiating your price, and having trouble following your process, I’d say a rate increase is overdue (as well as a serious review of your marketing, more on that here).
How to Raise Your Prices When You Realize You’ve Been Undercharging
If you’re nodding your head yes to all of the above, here are a few tips to raise your prices.
Give clients advance notice and let them know the value you’re adding to their project.
Make sure you have a term in your contract that allows for a rate increase (ours does).
Prepare new contracts for clients who are moving to your new rate.
Update the pricing on your website, your contact form, and your investment guide.
Look at your previous data (hours worked, fees charged, close rates) to determine what you should be charging.
Take advantage of other changes or seasons in your business to notify clients (new hire, new service, year-end, etc.) of the new rate.
I’ll say it again: you are likely undercharging for your services. Who is the biggest culprit? I think hourly designers.
Need more help? Here are some additional resources created specifically for interior designers that you might enjoy:
Our Pricing & Proposals Workshop for Interior Designers
The workshop dives into:
setting your base rate
fee ranges across the US for hourly, flat fee, and PPSF
how to factor in product markup
how to set minimums and communicate them with clients
how to align your pricing to attract dream clients
mistakes to avoid when pricing and putting together proposals/contracts
when to collect fees throughout the process
how to build a paid waitlist
…and more!
The Designed to Scale® Business Blueprint
The processes, resources, and templates you need for streamlining the behind-the-scenes of your interior design business. This done-for-you resource includes:
20 comprehensive step-by-step processes (also known as standard operating procedures or SOPs)
12 customizable resources and templates to use throughout your process
Best practices for each customer-facing process to elevate your client experience and your brand
Design fee pricing calculator
Financial forecasting template (coming 10/9)
Bonus training videos for incorporating your new processes into your business
…and more!
Looking for more? Keep reading:
