For many entrepreneurs, raising rates on existing clients can be difficult.
If you’re a freelancer or consultant, for example, you might only work with 1-5 clients. Keeping up with inflation is important otherwise you’ll find yourself making the same while expenses increase.
Even if you’re a small business with multiple clients it can be frustrating to decide whether to raise the price for your service or product. You don’t want to scare away clients.
Here are a few tips to help with the situation…
1. Do It Consistently
People don’t like to be surprised. We like certainty. You can provide your clients with that certainty by thinking ahead about your price increase schedule.
Obviously that’s not always easy, but implement time each year or even twice a year to review your pricing. If it’s looking like you need to increase, see if you can do it on or around the same time each year.
Many companies, especially freelancers, do this every January. Some years they may not do an increase. Other years they may do one and some years maybe a little higher percentage than others.
It’s what most companies do with employees and raises. It comes at the same time of year. Everybody knows when to expect it. It’s easy to accept.
This is a better approach than doing no increase for 3-4 years and then all of a sudden doing a big increase to make up the difference one year.
2. Give Early Notice
Clients are always going to be against an increase. Nobody likes paying more for something. You can lessen the blow by doing it consistently, but also by giving them notice.
Say you’ve done the math and you need to do an increase this January. Reach out to the client in October or November and let them know that the increase is coming.
This gives the client enough time to process the change. They should have enough time to adjust their budgets and anything money-wise and when the increase actually hits their bank account they’ll have moved on.
3. Verify Against The Market
Make sure you look at what is going on in the market. With your competition. With new software. Even outside alternatives to the product or service you provide.
You want to make sure you’re keeping up with the market while also staying competitive. Figure out if your brand fits in the bottom, middle or top of the market price range.
Always try to understand yourself and where you fit in the market. This helps you know what price to charge and also helps you justify increases with your clients.
4. Announce It With Just Enough Details
Prepare more details, but only share those if the clients ask.
You’ll often be surprised when you tell your clients about an increase and their response is:
That’s it. They’re fine with it. They’re happy with what you’re doing and as long as you’re not doing anything crazy with the rates they’ll continue to happily pay.
I heard a great tip about sales many years ago:
When the sale is made, stop selling…
If the client is happy and accepting, you don’t need to keep selling them on why you’re increasing your rates. They trust that you have your reasons.
But if the client does ask for a few details, make sure you have a few prepared so you can justify the increase.
5. Always Look For New Clients
And give them an increased rate. Then you have a little leverage when raising rates for existing clients. Not that you want to apply too much pressure and sour the relationship. Just be honest with the situation.
Some businesses will only give higher rates to new clients. And they’ll keep existing clients at the current rate forever. That’s an option.
But the saying goes that the best time to look for sales or new clients or even a new job is when you don’t need it.
Keep your options open. It always helps with negotiations. But be careful with burning bridges. Think long-term.
Bonus: Can You Lower Your Rates?
Just one thought on this topic…
The longer you’re in business the more efficient you’ll probably get. You typically always want to be looking for ways to make your expenses less. That’s not always possibly, but generally most industries go through the same lifecycle.
New things are inefficient and expensive. Then competition sees the opportunity and comes in. Then there are good profit margins. Some sellers raise rates. Then the industry steadies and finds all kinds of efficiencies. Prices then start to go down as sellers fight for sales. Then competition stops coming in and things are pretty steady for a long time.
Think about where your industry is in the lifecycle. Consider if you could add a new product or service to the mix and keep your price the same. Or maybe you can increase rates, while also offering a new product that doesn’t really cost you more to provide.
You’re always in competition and people are almost always looking for the best value.
Raising rates can be stressful. But in my experience, most clients will gladly accept an increase. They know that you need to run a good business. And if you do it consistently, they’ll be ready for it when it happens.
Do a little research on your situation. Come up with a long-term outlook. Then approach your clients using the tips here to help.