How To Raise Your Rates Without Losing Clients
Do you break into a sweat at the thought of raising your rates and having to tell loyal clients that you're going to have to start charging them more?
Is your biggest fear that all your clients will walk away if you add even a tiny increase to your current fees?
As the new year is approaching, it's a key time to get your business in order, focus on your strategy and ensure your business will not only be here this time next year, it will be thriving. Of course, earning the money you deserve for the value you add to your clients is a big part of that and many freelancers often don't charge nearly enough.
One of the most common questions I get asked when coaching clients is "How can I raise my rates without losing any clients?"
So far, none of my clients have lost any of theirs once they've broached the subject of their increased fees and many, much to their pleasant surprise, have been met with the same response – "I'm surprised you haven't done this sooner".
If the fear of losing clients is holding you back from raising your rates, here are some pointers to help you broach the thorny subject of asking for more…
Create a pricing strategy
This is the first and most important point and very often one of the key things missing from a freelancing business. Before you even consider raising your rates, make sure you have thought out your overall pricing strategy.
A pricing strategy is basically a well-thought out plan for how you decide on the fees you charge for the range of products and services you offer. It's not simply a 'finger in the air' guesstimate of how much you fancy charging from one month to the next but a coherent calculation based on a logical structure for your pricing.
- Do you calculate your services on an hourly rate?
- Do you charge for your work on a set project basis?
- Do you use performance- or results-related pay?
- Are the incremental price increases between each level of your service/product well thought out?
An Example Pricing Strategy
Your pricing strategy can be a simple excel table of the different services you offer and how you've calculated that fee. For example, if you offer consulting or coaching services, your pricing strategy may be as simple as:
- Minimum hourly rate = $100 per hour
- Average hourly rate = $125 per hour
- Premium hourly rate = $150 per hour
And the options you offer prospects and clients are:
- 1-5 hours at $150 per hour
- 5-10 hours at $125 per hour
- 10+ hours at $100 per hour
Or if you package up (aka productise) your service, you may end up with something that looks like this:
- Get Started Program at $300 (costed at 2 hours x $150)
- Boost Your Progress Program at $625 (costed at 5 hours x $125)
- Premium Results Program at $1,000 (costed at 10 hours x $100)
Once you've got your basic pricing structure sorted out, you can then start to plan out how your rates will increase over the course of the next 1, 2 or even 5 years.
When you are planning your rate increases, you might want to ensure you've covered aspects like rates of inflation, planned investments or any increasing costs faced by your business over the next few years.
Share the key client-impacting elements of your pricing strategy
I'm not recommending that you share the ins and outs of how you calculate your rates but I would definitely consider explaining your pricing policy up front or in your contract to new clients (and existing ones if this is the first time you're implementing this).
If you are working with a client for the first time, try this:
- Present your fees in a logical, structured manner that makes it easy for them to understand and select the option that is best for them.
- Introduce them to the concept that your rates are not static and will be raised according to a strategic plan.
- Explain what that plan is – for example, annual rate increases on the 1st of January and/or a 5% increase to all your fees every time you add to your qualifications and skills.
Sharing this kind of information with new clients at the beginning of your relationship sets this expectation upfront, enabling you to initiate the conversation more easily in the future. An added benefit of doing this is that you're demonstrating to clients that you do indeed have a strategic pricing strategy and won't just be raising your rates and asking them to stump up more cash whenever you feel like it.
If you would like to raise your rates for existing clients, then just be honest. Explain that you have been working on a new pricing structure recently and if necessary, share some of the details of this with them. Initiating this conversation with existing clients may feel uncomfortable at first, but it is an effective and inclusive way of communicating something to clients that is ultimately going to impact them.
Do it with confidence
If you are 100% confident in the service and value you offer your clients, then you have absolutely nothing to fear from raising your rates.
As long as you are following your planned pricing structure and not just implementing an increase in an ad hoc manner, you are fully justified in raising your fees; if you've implemented point 2, your clients should even be expecting it.
The benefit of raising your rates according to a strategic plan means that you have clear reasons and justifications for doing so.
If a client questions your actions, then try this:
- Explain the reasons behind the increase in a confident, non-defensive tone.
- Highlight any additional training, qualifications or investments you've made in the business which justifies the increase.
- Find a way to demonstrate the added value you can now provide to justify the increase
And don't forget, in your explanation often just using the word "because" has been shown to induce a more accepting state in people.
As far as timing goes, don't drop the bombshell on your clients a day before you expect them to pay your increased fees. Consider giving them at least 1 months' notice and be sure to tell them when your new pricing structure will be implemented.
Sweeten the deal
I'm sure you've heard it before but it's worth repeating… client retention is much easier and cheaper than client acquisition. So what does that actually mean to your business? It means that focusing on keeping your existing clients happy whilst you're on the hunt for new clients is a smarter strategy than focusing all your energies on constantly generating new business to the detriment of existing ones.
That being said, this is not a reason not to raise your rates! Your existing, loyal clients are probably loyal because of the service you give them, not the rates you give them - the one exception being that your business USP (unique selling point – the thing that sets you apart from your competitors) is a low cost strategy.
If your loyal clients' feathers get a little ruffled when you raise your rates, then consider offering them a value-added service to smooth over the ripples.
- If you're a web designer, offer to give your best clients a complimentary review of one of their sites.
- If you're a graphic designer, offer to make some tweaks to one of their existing designs or freshen up their logo.
- If you're a coach or consultant, offer them, a colleague, relative or associate of theirs a complimentary session.
Not only is this a great way of thanking them for their continued business, it's also a way to demonstrate the additional value you can add to their lives and perhaps introduce them to some of the other services in your range.
Once you have implemented your pricing increase, ensure you continue to deliver your highest quality service or products to clients. Continuing to demonstrate your ability to solve their problems and deliver what they ask should help to smooth over the initial impact of your increased rates.
If the worst happens, ask yourself "why?"
If clients walk when you raise your fees, it's usually got something to do with the perception of value - they don't feel they're getting good value for what you're charging or what you plan to charge.
If you suspect that's the reason, then take an unbiased, honest look at the services you offer to ensure you are happy with the value that you provide.
On the other hand, if you're more than confident with the value you provide, then perhaps the lost clients are not the greatest loss in the world. The clients who've walked are often the least desirable clients who never appreciate the value you provide; they may be difficult to work with and often end up costing your business more than they bring in, in terms of the additional time you spend keeping them happy.
If that's the case, don't sweat the loss and simply move onwards and upwards.
The fear of losing clients when you raise your rates is often nothing more than an irrational fear. Every year that you're in business, you offer one more year of experience to your clients; one more year of learning; one more year of expertise. Doesn't that in itself justify at least an annual increase in your rates? Follow the advice above and your clients won't need to ask why, they'll simply know it's a standard part of your business policies.
The one thing that most people say to me once they've broached the subject of raising their fees is this: "I can't believe I didn't do it sooner". I'm sure it will be the same for you.