Time moves on. Costs go up. The almighty dollar buys less and less. You learn new things and refine your processes and get better results for your clients. You start to ask yourself – am I being paid enough for what I do?
If you were an employee, you could go to the boss and make a case for a pay rise. When you’re the boss you can choose to raise your rates at any time, but you’ve got to sell that increased price to your clients.
That’s a scary thought, and it’s a thought that traps many business owners into sticking with their current rate sheet and pricing model for much longer than they should. If you want to grow your business or meet your own personal financial goals, you need to take a hard look at your numbers. You can’t keep doing more for less. Price increases are a normal part of doing business, and there are ways to introduce a rates rise without scaring away all your clients.
In this article we look at why, when, and how to raise your rates and set a fair price for the work you do.
The decision to raise rates is personal to each business, and can be sparked by many factors. According to Alyssa Gregory of The Balance, you should be constantly reviewing your rates, services, and competition to decide if your business will benefit from a rates rise.
One of the key reasons professional service firms choose to change rates is because they’re trying to move away from time-based pricing. As you improve your skills, you can complete client work faster. If you operate with an hourly rate, this actually means you lose money as you take less time to complete a task. Your pricing values speed over quality, which is not the way you want clients to think of you. In this case, you won’t just be raising your rates, but moving to a different pricing model that isn’t tied to timing.
Reasons why you might decide to raise your rates include:
You’ve decided it’s time you got paid more for the work you do – congratulations! The next step is figuring out exactly what your increase will be and what your new pricing structure will look like.
You may opt to simply increase prices by 10%, or you may choose to redesign your pricing structure, create new packages, or move to a monthly subscription model. Here are some tips to help you make these decisions:
Now that you’ve figured out your new service offerings and how you’re going to structure your new rates, you have to break the news to your clients.
This can be scary, especially if you’re a small business. You picture clients deserting en masse, leaving you without the funds to keep the lights on. The truth is, that’s rarely what happens. Most clients will accept price increases as part of being in business. Some of them may even admonish you for keeping them low for so long!
If you’re worried, you can stagger your notifications in order to minimise any potential fallout. Start by notifying a small subset of clients. Once you’ve moved those over to the new.
Many firms also introduce updated pricing initially only to new clients, then slowly roll it out to previous clients as their yearly packages expire. This won’t result in a sudden influx of available cash, but it will enable to you slowly introduce the change and manage any resulting gaps in your roster.
Reach out initially to clients via email to let them know about coming changes. Keep your email professional and positive. Emphasize the great results you’ve achieved and resist the urge to apologise. Remember, you are a business owner, and are not required to justify changes in your business. But you want clients to during the process.
Dear Client,
I’m so pleased to hear how happy you were with last month’s figures. We’re getting some great results on the PPC campaigns and it looks to be driving growth. [opening sentence personal and speaks to specific positive client experience/results.]
We proud to be achieving such great results for our clients. In order to ensure we can continue to provide exceptional service, we’ll be increasing the rates on all our packages effective 1 June. Some of our packages will also be tweaked to reflect the services our clients most need.
You can see the new packages and pricing here [link]. We’ll be rolling this out to new clients from June 1, however, we wanted to give you the first month on your new package at the current rate [offer for longstanding clients] as a thank you for being such an amazing client!
This increase will enable us to continue to provide the quality and breadth of service you love. If you have any questions about the price increase or our new packages, don’t hesitate to let me know.
Yours Sincerely,
Finally-getting-paid-what-I’m-worth-Felicity.
This happens much less frequently than you’d expect. The truth is that moving between service providers is a huge hassle and if a client is happy with your work they will deal with price increases because it’s easier than choosing and migrating to another firm.
Sometimes you will find a client who simply can’t afford the new rates, or who may be using the increase as a jumping-point for finding a new provider who might better meet their needs.
That’s perfectly okay. In fact, it’s good to get rid of clients who aren’t a good fit. If at all possible, try to part on good terms. You may life to refer your client to another firm who could meet their needs, or offer to extend their current pricing until the end of the business year. Provide assistance to help them transfer files and records over to their new supplier.
See, increasing your rates isn’t so scary, after all. Just remember, even though it will make a huge difference to your bottom line, your clients may barely even notice the increase as long as you continue to provide value. Go on, take a leap, and start charging what you’re really worth!
Have you increased your prices? How did you introduce the increase to your clients, and how did they react?