How to give yourself a pay rise (when you're self-employed)

It's time to start putting yourself first financially

I’m keeping Out Of Office newsletters free, because I think every self-employed woman deserves as much support as possible. Want to say thanks? I bloody love a flat white…

Morning, Colleague

I hope you had a wonderful week and reached out to friends old and new. I have felt absolutely wiped out this month, and have needed to heed my own advice around taking a break - I am almost proud to admit I’ve spent two working days in bed watching Come Dine With Me. (I very much need to talk to someone about the bulldog-themed night I just saw…)

Last week’s loneliness issue seemed to strike a nerve - it’s a relief to know it’s not just me who sometimes craves inane office chat (possibly a motivator for my CDWM binge?)

This week, however, it’s on to more positive things: Wonga. Moolah. Coinage. Greenbacks. Gravy. That sweet, sweet bread…

Fine - money.

How to give yourself a pay rise

It’s easy to feel that pay rises (along with sick pay and holidays) are a bit of a joke when you work for yourself. Being self-employed – we’re led to believe – means a life of self-sacrifice. Or does it?

If you’re fed up of scraping by and keen to have more money at the end of the month there are a few methods for giving yourself a bit of a pay rise. (And let’s be clear, I mean for something fun and ridiculous, like this Hercules sweater I just bought, not for reinvesting in your business.)

“People are generally uncomfortable talking about money, and self-employed women in particular often have a series of in-built voices and objections to things like putting your prices up,” says Mahmood Reza, a management accounts and tax specialist from ProActive Resolutions.

But we’ve actually already got the skills. “Statistically, while we’d obviously like things to be more equal, very few men run the household, so most women already have quite a deep-rooted financial discipline.”

In other words, when it comes to money – you’ve got this. It’s just a matter of understanding a bit more about how your business currently functions, where you want it to go, and having confidence.

The main things to consider are: how to raise your existing prices; how to add extra, low-effort, ways of making money; and how to treat yourself as an employee as well as a boss. Here’s how to do it.

How to raise your prices…

The most obvious way of increasing your take-home pay, as well as expanding your business, is to adjust your rates. While that might seem a logical step if your business is sales-based, it can also make sense if you provide a service – you just need to be prepared to have the conversation with prospective (and existing) clients.

…in a direct sales business

If you’ve decided to put up your prices, the main thing is being honest (or close to honest!)

“Let your customers know what’s happening and don’t be apologetic about it, although you can express a degree of reluctance,” says Mahmood. “You can go into a degree of detail about your overheads going up if you want to, and share a bit of your journey. Ultimately, don’t forget that customers are in a business relationship with you and they expect to pay for your products or services.”

That said, customers don’t like too much volatility in prices, so try to fix a new rate that you’re happy with keeping (assuming nothing dramatic happens) for a minimum of six months to a year.

Another consideration is whether you need high numbers of sales or not. For example, if you sell membership to a group, downloadable resources or video tutorials, you make money for each sale without any extra effort on your part. In this instance, you might be happy to keep prices relatively low and go for high numbers.

But if you make a physical product and your time is limited, it might make sense to raise the prices by a fair amount, even if that means targeting a new type of customer. If that’s the case, it might be worth doing some targeted ads and making sure your branding (logo, website, social media) all have a bit of a luxury makeover at some point too.

It doesn’t mean leaving existing customers behind altogether - as you’ll see in ‘the Harrods effect’, below...

…in a service-based business or as a freelancer

“People often have a sense of fear around the possibility of losing clients, but it’s important to develop a confident mind-set for talking about money,” says Mahmood.

“That said, don’t go into the details of money too quickly. Find out more about what they’re asking before setting a rate, so you don’t undersell yourself.

“This means that they can find out more about your process, as often with certain types of business, for example copywriting, people see the end product but not the amount of work that goes into it.”

With existing clients, make sure to give them plenty of warning so a price rise doesn’t come as a terrible shock (and of course check any contracts you’ve signed beforehand to check you’re not breaching them).

Again, it’s not about being apologetic, but you can stress that you’ve loved working with them and hope to continue. You can also let them know about your lower price options (see below for the ‘Harrods effect’ to work out yours!)

Don’t forget – you will always have a percentage of prospective clients who don’t end up hiring you, whatever your costs (Mahmood calls them ‘tyre kickers’!) Not all enquiries end up in commissioned work.

Some people won’t understand your methods, like your rates, will find someone they want more, or the work will end up cancelled for one reason or other. It’s not necessarily a sign you’re doing anything wrong, so don’t freak out if this happens after a price hike.

Equally, don’t be afraid about walking away from jobs yourself – especially if the client doesn’t recognise your value. I have done this a handful of times and it feels bloody fantastic tbh.

Setting your rates for the first time? Don’t forget that as well as the obvious costs (your time, any materials, tax, etc) there are also associated costs you might not have thought about. For example, for a day’s work, you’ll also have the costs of running your office (electricity, water and rent) for that day, as well as the cost of your actual labour.

The Harrods effect

No matter what type of business you run, it’s smart to create a range of different products/offers that work for different budgets.

Mahmood uses Harrods as a metaphor: “People love to visit, but not everyone can afford something expensive. For those people, there are gift items – they might buy a tote bag or a box of chocolates. They might be so happy with that, that they end up coming back and spending more later.”

Work out your ‘tote bag equivalent’.

If you sell something handmade, perhaps you could create a ‘make your own’ kit to sell at a lower rate. Could you sell smaller items or branded merchandise? If you’re an illustrator, can you have a run of A5 prints as well as bespoke designs? As a copywriter, perhaps you can offer social media posts instead of lengthy web copy. If you have a marketable skill, could you run a short pre-recorded webinar to teach others about it?

Get your creative juices flowing and see whether there’s a lower cost, lower value item or service up your sleeve. (This is a topic I’ll be covering in LOTS of detail in a future post).

Promote your best employee (Hint: it’s you)

Finally, it can be helpful to separate in your mind two versions of yourself: the boss and the employee. (My husband frequently reminds me that I need time off because Boss Lizzy is being unreasonable, and asking too much of Employee Lizzy.)

“It sounds silly, but write a contact between the business and yourself, agreeing things like holiday days, sick pay, and annual pay reviews,” says Mahmood. “Self employment is, of course, not often confined within the 9 – 5, but that doesn’t mean you can neglect yourself and your needs.”

If you have a business account, you’ve been working hard and finances allow it, perhaps once a year you could consider giving yourself pay rise or bonus – money that you can take and spend on something frivolous that feels like a true reward. Of course that’s not an option for many of us, but it’s something to work towards as you consider your pricing structure – next year it might be time to crack out the Champagne!

• This week I wrote a piece for Grazia about how introverts can make working from home their secret weapon.

• Freed up some cash? It could be time to think about off-loading the jobs you hate the most…

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