It's a tough market out there, especially with today's economic climate – so the thought of increasing your rates to existing clients is likely to bring you out in a cold sweat.
It's naturally one of the scariest dilemmas to face – increasing your fees, even if it's just by a minimal amount. However, you always have to consider rates of inflation, any investments or rising business costs in the years ahead. You also have to consider how valuable you've become, as every year you gain more skills and experience.
But how do you raise rates without losing clients? After all, this is probably the biggest fear that stops you from increasing your prices. You'll be worried that people will find alternative suppliers if you become too expensive. Here are some top tips to help you overcome your fear and tackle the issue successfully.
Create a pricing strategy
First and foremost, develop a solid pricing strategy that you can use with all new clients. It's something that logically helps you to decide your fees and allows you to stick to a plan that applies to new business.
Write down your minimum hourly rate and day rate and create packaged services at different prices, for example – business marketing MOT could be £500, or a website check-up could be £1,000.
Next, create a chart to include all of your existing clients and write down the current rates you're charging them. These may vary, so jot them down and keep them on file for future reference.
Now you've got a firm idea of your new hourly rate and day rate, and you're fully aware of how much you're charging existing clients – you can begin to plan how you're going to tackle any price increases over the coming years.
Inform clients of your new pricing strategy
When you tell new or existing clients about your new pricing structure, you don't have to share all the details. You present your fees clearly, giving clients various options.
You must then make it very clear that your rates are not static and they may increase based on your pricing strategy. You should then explain what your procedure involves. For example, annual rate increases on the 1st January at 2.5% increase, or even bi-annual increases on 1st June and 1st January.
If you set things out clearly from the off, there will be no opportunity for anyone to contest things in future.
Create a letter
It's easy to inform new clients of your new pricing strategy, but how do you tell existing ones? One of the best ways is to send out a formal letter, detailing why you will be raising your prices. You have to give good reasons as to why you're doing so.
Do you add real value, and can you justify the increase? Prove it! Can they afford to leave you? Have you done any extra training, boosted your skills or made investments in your business? Can you demonstrate over-servicing – is it unsustainable? Can you come up with new ideas to get them excited so they can imagine a future working with you? Clients won't want to pay more for the same service; you have to justify the rate increase.
When you have completed your letter, send it out at least a month in advance of your rate rise and ensure you include a sentence explaining that you will be carrying out annual or bi-annual rate reviews in future.
Spread the risk
If you're nervous about informing all existing clients of your new pricing structure, then why not test the water and send out a letter to just one? That way, you can lessen your risk and see how the client reacts before you inform others of your decision.
We're not talking about increasing rates by 50% – we're talking about small rises that grow as your business grows. Even so, it's better to be safe than sorry, so test the water first.
Keeping existing clients happy and retaining them is far easier than winning new clients, so to sweeten the deal show them loyalty by offering incentives. For example, if you're a graphic designer – offer to overhaul their logo for free. Or if you're a copywriter, provide some free time to refresh their website copy.
It means you'll thank clients for their ongoing business while offering further value and even potentially introducing them to new services.
If they walk away?
If clients decide to leave once you've raised your rates, then it's probably a good indication that you're not offering value for your new pricing structure. In which case, it's best to review your services and see how you can make yourself invaluable to clients, so they'll never go elsewhere.
However, if you feel you are providing value and within your rights to increase prices, then perhaps it isn't such a bad thing to lose some clients. Those who have walked away might not appreciate the value you provide and could be the most difficult to contend with, taking up all your time and causing lots of stress. So it's only a bonus that you've weeded out unwanted clients to make room for better-paying ones.
Ditch the fear
Last but not least, stop worrying about increasing rates. It's a pretty standard business procedure and one that most clients will accept as part of the territory. Remember, every year you're in business you're boosting your skills and experience – which means you're becoming more valuable and therefore deserve to charge a rate that reflects your current expertise.
If you follow our advice, you'll be well on your way to successfully growing your business.