In my post last week on growing pains and strageties, my colleague Julia Lilly of 360 Admin asked a great question. I thought it was good information and decided to share it as a post in case anyone missed the comments.
JULIA LILLY:
This poses a great question… how do you present a raised rate to your customers without creating ill will? Do you give them six months notice or a gradual increase to the desired rate? I have only had my clients for 6-8 months, and I don’t want them to think it is part of my “strategy” to raise rates once I have them dependent on me. But, due to lack of experience, I did not set my rate properly in the beginning. Advice in that narrowed down area?
DANIELLE:
That’s a great question, Julia!
Here’s what I do… I always give current clients a couple month’s notice and at the same time bring any and all new clients in at the new rates/fees. I tend to do fee increases at the beginning of the year so letters would go out to clients in November letting them know ahead of time what to expect.
I don’t know how many clients you have, and even though I really, really vehemently discourage fear-based decision-making, if you only have one at the moment that you are very much dependent upon, you might decide to make just a modest increase if you’re really worried about losing them.
It will at least get them used to the idea that you are a business, and a professional, and fees are occasionally going to be raised for various reasons. On the other hand, you might want to sit tight with that client and work to bring new clients on board at the new higher fees/rates.
Once you aren’t so dependent on the first one, you can then bring them up to speed at the same rates as the rest so that you aren’t managing a bunch of different policies (too much administration will slow your practice down considerably–you don’t want that).
Here’s a rough template of what I use in my own practice as far as verbiage for your rate increase letter goes:
Dear [CLIENT],
The fee for your monthly support plan will increase to $X per month effective [DATE]. It is such a pleasure working with you, and I really love watching you grow and move forward in your business through our work together. [HERE, INCLUDE 2 OR 3 MAJOR ACCOMPLISHMENTS YOU’VE HELPED THE CLIENT ACHIEVE. USE FACTS AND FIGURES, ESPECIALLY DOLLAR AMOUNTS AND/OR PERCENTAGE INCREASES, WHENEVER POSSIBLE.] I look forward to continuing our wonderful relationship and helping you achieve your goals and dreams.
Signed,
YOU
Don’t be overly concerned with “ill will.” The clients who feel they are getting value are not going to be concerned with that. Truly, it’s usually ourselves who have the most problem raising rates due to self-confidence issues, not clients. You’d be surprised at how often they will say something to the effect of It’s about time. What took you so long? Honestly!
And the clients who don’t want to pay more, really don’t want to pay in the first place. In business, there has to be an equitable exchange of interests. You can’t work just to suit clients and their interests or otherwise operate fearing their “ill will.”
Anyone who asks you to not charge for your value is asking you to deprive yourself of the ability to make a living, keep yourself healthy and take care of your family. Would they ask themselves to do that? I think not. So you don’t need any client who has been taking advantage or otherwise doesn’t want to pay for your value. Let them exclude themselves. It will help clear your practice out of ill-fitting clients and pave the way for the ideal ones to come in.
And saying that, do be prepared whenever you raise rates to lose a few people. The ones you lose are mainly going to be the ones who were only there to get something for nothing in the first place.
Great post, very true. This was one of the things I struggled with after becoming a VA many years ago. With a regular job, you just automatically get pay increases on a regular basis, whether that be 2x/yr or 1x/yr (whatever the company’s policy is). But, when running your own business, you have to implement your pay increases, or stay at the same rate for the rest of your life!
The first rate increase is generally the hardest, once you get past that, it’s easier to do. No one just sits at the same pay forever, VAs can’t either. We ARE a business. Wish I could say that no one ever raised prices on me – grocery stores, gas, services, etc. but that’s not reality.
For every client that doesn’t want to pay, there will be a new one who will pay for your experience, expertise and support.
I’ve had numerous clients pass me up because of my rates, they want something for nothing, but those that roll with me are glad they did and I’m glad too! It leaves me with my ideal clients and them with their ideal support!
Wow! Not only did you answer my question (and some I didn’t know I had), but you also gave me the boost I needed to feel confident of my value instead of apologizing for it. I now have a plan of action and that alone is a great relief. Thank you so much…You Rock!
Ever Grateful,
Julia
I tend to raise my rates at the beginning of the year. I give a 60 day notice before the rate increase. I notify them in a separate email, in addition to a note on their monthly invoice from me. That way that can’t say they didn’t get the notice – if they paid my invoice, they got the notice.
I also have it stated in my contract that I have the right to raise rates once a year. This puts it up front, that rates will increase, but also allows the client some security that I won’t pass through 2 or 3 increases in the same year. The client does not need to do anything to “accept” the new rate. The contract states that assigning further projects after receiving the notice is considered acceptance of the new rate.
This year, given the economy, I have decided not to raise any rates. I made sure my clients knew this by sending an email to them all. At the same time, I reduced my “office hours” to better accomodate my family’s schedule. It was a bit of give and take this year. My clients have thanked me for making the committment not to raise rates this year and also understand that I may not be quite as available as I had been in the past. Next year, if the economy looks up, I increase rates in January.
Oh this is a major issue of mine. I am not a VA per se but a website designer/maintainer that has my narrow niche on a monthly service fee. Everyone in my industry keeps the same prices or even lowers them.
I haven’t raised my rates in years. I have reduced what I \include\ in each of my 5+ level but my current and oldest clients are so used to when I would \do it all\ that they are not keen to paying more. Even though my skills have increased so dramatically and am the top one for innovational ideas (That my competitors then use, grrrr!).
I still would like to raise my rates though but am really uncomfortable doing it…
Any advice?
Project pricing and strategy is much different from that of the ongoing kind of work that administrative support is. Getting clear about that will help you become more conscious, which in turn helps you know how to go about setting and increasing rates accordingly.
That said, we have a free automated Income & Pricing Calculator that will help you determine a profitable baseline.
Here are some other posts of mine that talk about pricing and increasing rates:
Dear Danielle: How Do I Price My Service?
Dear Danielle: Where Can I Get Geographic Rates?