How to raise your rates and keep your existing clients happy
Another year has started and now is a great time to look at how your business has performed and what you want to achieve in the next 12 months.
Traditionally, the year-end is the time when companies look to adjust their prices and your contractor or consultancy business should be no different. Realigning your rates with your experience, value and the market is crucial to ensure you don’t over or undervalue the service you provide to your clients; but it can strike unease into the hearts of even the most seasoned negotiators.
Here are the top three myths and fears on raising rates
My clients will walk.
Yes, you might lose a client or two but if you have done your homework and are confident in your pricing strategy then the clients you lose will make way for new clients that are a better fit with your long-term goals.
One price fits all.
If you work direct with clients, you can flex your rate depending on many factors. With an agency, your rate needs to reflect the type of contract and the role you are filling. Be clear on what you want and flex the rate accordingly.
There’s never a good time to raise prices.
Rate increases are best timed in advance of budgets being set. By giving you clients notice of increases they can adjust budgets and give due consideration to your proposed increase. Whether it is pre-contract renewal or an annual increase, timing is everything.
How to increase your rates and make your business stronger
Raising your rates for the first time can be a daunting task. Whilst it is easy to increase your rate for new business, addressing the disparity in rates between new and existing clients needn’t be as hard as you may think.
A lot of it had to do with your mind set, there is nothing personal about raining your rate. You are a business and businesses increase their prices regularly. Clients and agencies expect it and it is just a simple part of being in business. In fact, keeping your rates static can be harmful to your business – pitching your rate too low or not keeping up with the market can make you look inexperienced and unable to win work.
To successfully raise your rates while keeping clients satisfied is a valuable skill and by following a few simple steps you can negotiate with confidence and keep your rates in line with the market and demand.
- Do your homework. It’s important to understand what the market rates are and where you fall within the marketplace. Find out the market average and adjust your rate in line with your experience, skills and seniority. Retain the sources of the figures to refer to and quote to clients that need to see statistics.
- Set your minimum hourly and daily rate based on your research – all clients must reach this rate. Also work out the goal rate – this can be applied to new clients first to test the waters and be reached incrementally for key existing clients.
- Hone your USP list – increasing rates without justification can meet with resistance. Look at what you provide to the client or the agency – think about your skills, experience, flexibility, your ability to go the extra mile, the value you add over and above the contracted deliverables. All this adds up to the need for a rate increase over and above inflation and the market average.
- Get your timing right. Year end is a good time to talk about rate increases if you talk to clients direct. It’s expected and it’s in line with the financial year-end budgeting. When looking at raising your rates for specific contracts, ensure you give time to consider the increase and budget accordingly; 4 – 6 weeks prior to renewal is the norm. Last minute rises are not tolerated well as they won’t be budgeted for and don’t allow time for discussion or consideration.
- Ask with humility and professionalism. Raising rates is a business discussion and you should never bring personal reasons into the discussion. By explaining the factors determining the rate you ensure that the client understands the need to move your business forward. A degree of flexibility will go a long way in smoothing increases and retaining the relationship. Not all clients are the same and the more valuable clients to your business deserve added incentive for their loyalty and professionalism. Some businesses use a simple email and revised terms, others may wish to discuss the rate increase face to face with clients or agents depending on the price sensitivity exhibited.
- Consider incremental rate increases for existing clients – this enables you to move your rate whilst softening the increase by spreading it across the year.
Next steps
Don’t put rate increases off, waiting only increases the need for a larger increase later. Do your research on the rates you should be charging and then put an action plan in place as to how you go about implementing it with your clients and agencies.
If you display your rates anywhere, alter these first, then move onto working through your existing clients. Be clear on how and when the rates will increase and tailor the rates and or messaging to suit the value of the client to your business.