Should we fix our rates as a dollar goes up or down?

Question

Right now, the dollar is very close to the euro, almost 1:1. I did not drop my hourly rate as I did not expect that a dollar will remain high for so long. But it's been months now and it is still growing steadily. Consequently, I am earning more for the same amount of work.

Should I change my hourly rate as dollar grows or falls? I don't mean to change it every week, but let's say every 3 months.

I know that non-US clients see this difference as they are charged in the own currency. Does the dollar growth affect US clients as well or no matter of the dollar-euro ration, US clients always pay the same amount of dollars?

Answer 1

Your cost of living and expenses are fixed to your location. As the power of the dollar rises and falls, does it cost you more/less to live? Your rates should be set to the market in your location.

If your overseas clients are complaining that it's costing them "too much" now that the dollar is doing well against the euro, you can offer them a temporary discount if you want, but I think it's a bad precedent to set.

I live in one of the most expensive areas in the country and my rates reflect that because that's what people doing the work I do in this are are getting. People living 100 miles south of me are offered significantly less per hour than what is offered here because the cost of living is lower. Should I lower my rates to work for someone 2 counties over?

If you are freelancing in an international marketplace, you are competing against people who can feed a family of 4 for a month on $150USD. Should you lower your rates to be competitive with them? People hire you because you are worth what you are charging - you provide value to them that is commensurate with your rates.

You are not a "commodity". Don't bill yourself out like one.

Answer 2

Can you tell if you are losing projects due to your price?

If you are getting as much work now as you were when the dollar was weaker, then I would not lower your rates.

However, if you are losing projects to competitors who are about $20 an hour cheaper than you, it may be a sign that you are too expensive and I would lower your rates to see if business picks up.

Personally, I would never feel "guilty" for charging more! You are taking all the risk to be in business for yourself and those who purchase your services get the benefit of your talent without having to support you as an employee. People won't pay more than they think something is worth.

The people who hire you can decide what they are willing to pay based on their budget, your value to them, and whether or not they can get something as good as they need for less money.

There is a concept called "marginal rate of return" -- As you raise prices, at some point the sales will drop. But since each sale is worth more, your income increases (more money for less work) - up to a point. As you lower prices, the number of sales will increase, but each sale is worth less so you may make more that way - up to a point.

The goal is to find that sweet spot where you are getting the most money for the least amount of work (or an amount of work you can handle).

I think you will also find when freelancing, the clients who pay more are actually less needy, better educated on what they want, easier to satisfy, and pay faster.