5 Vital Items to Consider When Raising Your Hourly Rate
Have you ever wanted to raise your rates but were unsure as to the best approach? Maybe you were worried that clients would leave or didn’t know if the time was right. Continuing on the path from last month’s article about properly setting your hourly rates, I recently had a discussion with colleagues Belldon Colme, Tim Giebelhaus, Roz Bennetts and Andrew Rudin and summarized our chat into the following five points to consider when raising your rates.
Make sure there is a good reason to raise rates.
Don’t raise rates just because you feel like it. This approach will leave clients upset and your business methods scrutinized. Instead, raise rates when the timing is right and it makes sense for your company. Good reasons include:
- Improved service and/or skills
- Testing your rate to see what the market bears and where you stand
- Too much demand for your supply
- You want to reposition yourself
- You wish to work less hours
Show value but don't divulge too much.
Make a positive out of a negative by showing value. Instead of allowing the raise in prices to upset your clientele, use this as an opportunity to remind them why you are so valuable. Be careful not to divulge too many of the details or mention why at all as it may give your clients a reason to object.
Communicate the message directly and give time to plan.
Don’t beat around the bush when communicating your price increase. The last thing you want is the client to not clearly understand the message. Additionally, it is important to give clients enough time to plan for increased costs and adjust their budgets accordingly. If you have some key clients you may consider communicating the increase in person.
You’re not doing anything wrong, so don’t apologize. If you do it will make it seem like you are doing something wrong when in fact you are not.
There is much to prepare for before and after you have communicated your message. Here are a few things to be mindful of:
- Do the math and see how much you stand to gain from the rate hike and make a list of potential clients who may leave.
- Be prepared to lose some clients and make sure it makes sense if you do lose them. Usually though, the ones who do leave are part of that 20% you don’t want anyway.
- Be prepared to answer questions and speak with your client about the rate raise. Be firm and stand your ground if they try to negotiate out of it.
- Did you raise your rates too high and get a very negative response? Have a Plan B in place in case things do go wrong.
Generally speaking, most businesses are afraid to raise their rates at first, but later wonder why they didn’t do it sooner. From personal experience, we have retained 99% of clients after price increases and even doubled our rates at one point. Don’t be afraid to pull the trigger if the timing makes sense for your company.
What other advice can you offer from experience? Please comment below and add to the discussion.