Congratulate yourself on reaching this freelancing milestone: you’ve created a thriving business but don’t know how to negotiate a raise.

how to negotiate raise

You’ve built a company from scratch, attracted plenty of clients, and maintained excellent long-term business relationships.

But, how do you ask for more money from your existing freelance clients?

If you’re wondering how to ask for a raise, remember freelancers offer different types of value than regular employees.

Don’t be afraid to ask for more than you think you’re worth. Self-employed freelancers deserve fair compensation for the tax, cost savings, and adaptability they provide to their clients!

1) Learn to Negotiate a Raises as a Freelancer, not an Employee

Regular employees can follow traditional workplace rituals for requesting pay increases.

Freelancers, on the other hand, must balance a different set of risk/reward factors. The work-for-hire lifestyle offers many perks and trade-offs.

However, by following the road-less-traveled, you must adopt a new pay raise negotiation model. In short, learning how to negotiate a raise as a freelancer is a different game than typical corporate politics.

Working hard to impress the boss and towing the line to maximize your yearly pay increases might have worked in your old job.

However, as a freelancer, you must learn how to negotiate a raise in a completely different way. Take a minute to consider the complete value of the work, flexibility, and cost savings you offer your clients.

Don’t undersell yourself – freelancers provide companies with massive benefits that must be compensated fully and fairly.

2) Understand Your Leverage as a Freelancer

Unlike other types of employees, freelancers offer an astounding array of advantages to clients. Make sure to highlight all of these points in your negotiations:

Negotiation Experience – As a freelancer, you probably work with a large number of clients. Over the months/years, you’ll conduct many more negotiations than an average employee. Learn from your mistakes – every time you step up to the table and ask for more, you’ll gain confidence and skills.

Multiple Income Streams – Your willingness to walk away from a job determines the amount of power you have in a pay raise negotiation. Employees who invest all their work hours in one client may fear to lose their jobs. Freelancers, who typically work with multiple clients, have other jobs on which to rely. Remember, let your clients know you have other good-paying (and better-paying) customers on your roster.

Client Cost Savings – Always remember you save companies a huge amount of money, simply by working as a freelancer. They don’t have to make space for you in their facilities and provide you with a work phone/computer. They don’t have to pay benefits, such as insurance. They don’t have to include you in paid staff training sessions. By bringing your own equipment, expertise, and overhead to the table, you offer a huge amount of value. Remind your clients of the many ways you save them money when figuring out how to negotiate a raise.

Temporary Work Status – Companies can let go of freelancers, put them on hold, or reduce work hours much more easily than they can with regular employees. As a service provider, you enjoy fewer protections than regular staff. Your clients know they need to compensate you for the flexibility you provide by paying substantially more than they do their other workers.

Remember, every freelance job/contract has unique advantages for both parties. In addition to the above points, you may have other types of leverage.

Take a moment to brainstorm all the ways your clients benefit from working with you and justify the hourly rates you really deserve.

3) Leverage Your Freelancer Tax Situation

Because you pay your own income and payroll taxes, you can ask more from your clients. Remind them your billable hours include Social Security, Medicare, and a host of other costs in your negotiations.

Remember, the person who hires you probably isn’t a freelancer; they may not understand why your hourly wage needs to be as much or more than theirs.

Help your clients understand the reality of your situation and the many tax responsibilities of freelancers and small business owners. Head off any misunderstandings and resentments about our greater levels of pay (as compared to regular staff members).

The next time you sit down at the negotiation table or write a salary negotiation email, remind people you pay your own taxes. Not only that, you do your own accounting, pay your own health care costs, and save for retirement without any 401k matching. It’s only fair for clients to pay you what you’re really worth.

Remember, you must track your mileage to get the most back on your Federal and State tax returns. Use Toggl’s simple mileage software to quickly log your hours and miles (and keep track of any other freelancers on your team.

4) Understand Your Clients’ Budget Timeframes

If you’re wondering how to negotiate a raise, you must understand your audience (in this case, your clients). You stand a better chance of getting people to agree to rate hikes by presenting your offers in the fourth quarter.

Companies typically create budgets for the new year at the end of the current one. Don’t wait until January to make your case for increased rates; give your clients time to work you into their budgets before EOY (End of Year).

For example, companies that do business with the United States government typically use a different definition of a fiscal year. The U.S. federal fiscal year begins on October 1st, three months earlier than you might expect.

If you work as a freelancer with companies that contract directly with government agencies, take care to propose rate hikes in the third quarter.

Remember, even ancillary companies like equipment manufacturers and software developers may use an early financial year calendar to stay in sync with their governmental agency customers.

5) Realize Your Worth Compared to New Hires

Working with a company over the long-term means integrating into their systems and working seamlessly with their teams.

When asking yourself how to negotiate a raise, remember all the hard work (and even unpaid time) you’ve invested in your clients.

You deserve a pay increase for your efforts because it would take them a lot to replace a trusted freelancer like you. Remember, your client has worked just as hard as you have to help you understand their workflows, systems, and expectations.

They don’t want to train someone new; they want you to stay on their team. Don’t be afraid to risk an “ask” with existing, long-term clients.

Yes, a particular company may make up a significant portion of your monthly income; however, they’re just as invested in you as you are in them!

6) Play the Emotional and Gender Game of Pay Raises

Some people (especially women) don’t ask for high enough pay increases and don’t know how to negotiate a raise. You may need to confront some emotional issues to ask for large raises on a regular basis. Women typically negotiate 30% lower raises than men.

Negotiation is not the time to worry about what people think about you; instead of people-pleasing, take your career prospects into account and step up with confidence.

If you’re a female freelancer, drop your fears and doubt. Take this opportunity to set your insecurities aside – for good. Recognize the true value of your work and don’t be afraid to set a high initial target; you can always meet the client in the middle after some negotiation.

Don’t compromise ahead of time out of fear of losing the client. If you feel afraid to ask for what you really want, realize this is a sign of your worth.

If you think you have to be careful to ruffle your clients’ feathers, you’re exactly the kind of person who should ask for more!

7) Increase your Leverage with Multiple Offers

You can easily face your “how to negotiate a raise” fears by getting higher-paying offers from other clients. No matter how successful you are as a freelancer, you should always seek out better and better paying clients.

When you have a big waiting list and a glut of orders, take time to seek out even more work. No matter how good your current situation, you should always make an effort to keep climbing.

Those clients with even deeper pockets are out there – just keep looking!

When you negotiate, let your long-term clients know your new clients pay you substantially more. When this sinks in, they will realize just how badly they want to keep you around.

Take the high ground in freelance negotiations by laying out specific examples of clients who pay great wages. Just take care not to share any protected/proprietary information.

For example, if you’re a freelance writer, you could tell a long-term client about a new company that pays you almost twice your old rates. Let them know you love working with them but you can make a lot more with other companies – and see how they respond.

8) Carefully Accommodate Your Existing Customers

Let your long-term clients know you’re making more with new customers, but don’t beat them over the head with this information. It’s just like relationships; if you tell your partner you could get better treatment from that attractive person you just met, they probably won’t respond well.

When cultivating business relationships, don’t come off as a person who’s ready to jump ship when something better comes along.

Instead, remind your dedicated clients how much you value their support over the months/years. Let them know that even though you make less with them than others, you still want to make things work.

Suggest a compromise between your old/new rates that suits both parties. If your clients know they’re paying more to keep you—but not as much as those shiny new clients—they’ll feel rewarded for their loyalty.

9) Make Rate Increases Part of Your Everyday Business Model

By maintaining a healthy margin between long-term and brand-new clients, you can keep everyone happy. Reward your favorite clients by letting them give you raises that approximate your best new offers. Apply your new, higher rates to prospective customers and always stay one step ahead of the game.

Be proactive; as you establish and maintain good client relationships, use this confidence to your advantage. It feels safe and easy to ask for higher rates when your existing clients provide a reliable volume of work.

Stand on the shoulders of every good client to ask for more from the next. With each step, you’ll learn more about how to negotiate a raise. Make sure to leverage your confidence and ask for more each time.

Always reach for your dream jobs, clients, and rates. Don’t put all your eggs in one basket; instead, set aside a few paid and unpaid work hours to seek out new and better situations. As a freelancer, you’re your own marketing department.

No matter how busy you get, give yourself the gift of reaching for the brass ring. If you contact a few new prospects each week and ask for top pay, you’ll eventually get that next conversion. Leverage your current security into better and better pay and perks as you climb the freelance ladder!

Track Your Freelance Work Hours and Justify Higher Rates

More than anything else, freelancing means adaptability. This work style brings you an unrivaled freedom lifestyle once you know how to negotiate a raise.

However, you must adjust to new workflows, projects, and pay structures with each new client. Use Toggl to easily track (and separate) billable and non-billable time. With our Project Dashboard, it’s easy to calculate default and custom rates and track your real-time expenses. With Toggl’s free and premium software, you can track your time and easily manage the other freelancers on your team.

Raise negotiations can be successful, simple, and painless when you know how to negotiate a raise and present the right information. Use Toggl’s simple and straightforward report-creation tools to provide your clients with the information they need to make good decisions.

Show them the bulk of hours you dedicate to their projects each year. Demonstrate your worth to your clients by showing how much they rely on you. It’s time to leverage your hard work into higher hourly/project rates by providing the data that demonstrate your worth!