Happy New Year! I hope all your dreams will be actualized in 2019! My question relates to raising rates with current clients and if there a formula to follow. In the past I have used the script you provided in your blog post Raising Your Rates, and I must say it has worked like a charm. I love all the advice you provide on the blog in this category, especially about not letting fear get the best of you when you offer high quality service. Over the last couple of years, I have restructured my administrative consulting business. I offer a core service in two niche markets. During this time, I have retained five clients and have had great success. With each new client,I have incrementally raised my rates. This gets me to my question: The first client I retained almost two years ago is THRILLED with my service. Not only did I meet the contractual obligations, but went above and beyond. I really hit the ball out of the park with this client. They are often singing the praises about my administrative consulting firm. Since their two-year anniversary is approaching, I was planning on raising their rates. Is there standard protocol to follow (like tipping a server at a restaurant)? I thought I would raise my rates (REMOVED)%. This is a number I picked because when I see a vendor, utility, or dental plan increase by this amount, I think, “that’s fair,” but any higher, I feel like I am being taken advantage of. Next, I looked up the cost of living increase on Google. It is 3% each year for 2017 and 2018. That makes me wonder, would I be undercutting myself with a (REMOVED)% raise and should I increase to (REMOVED) %? Vacillating to the other end of the spectrum, I am obsessed with client satisfaction. I don’t want to raise the rate so high they feel taken advantage of. We have a dynamic relationship. Would seeing the numbers help? The client’s current retainer is $(REMOVED)/month. As I solicit new clients, they will pay $(REMOVED)/month for this service. However, I am not ready to lose this client. I truly value your guidance in this situation. Thanks again for all you do for our community! —Name Withheld for Privacy
Thank you, and happy new year to you as well! And thanks for the great question which I’ve been chomping at the bit to answer for you.
First, congratulations on your well-earned growth and success. That is absolutely wonderful to hear!
I also want to let you know that I am keeping your name anonymous and removed certain info from your question for reasons I will explain below.
The short, quick answer is that there is no formula for raising your fees. I know people love to be given formulas, but it’s not that simple.
It’s also highly illegal for members of a profession/industry to discuss rates or setting standards or minimums or formulas when it comes to pricing as these things violate antitrust laws. Those kind of conversations constitute what is termed “collusion.”
The state and federal agencies that oversee these laws take violations very seriously so we never want to run afoul of them.
It doesn’t matter how big or small a business is, whether they are sole proprietors or big corporations, or how much money they make, we are all subject to these laws.
As they will tell you: ignorance is not a defense. This means you can be prosecuted for violations whether you were aware or not.
This is why I am always trying to educate our industry on this topic. Read this post for a bit more in-depth info: Dear Danielle: Why Can’t You Just Give Us a Ballpark Figure When It Comes to Pricing?
So for all the other colleagues out there, the bottom-line is this: STOP asking others what you should charge!
Not only are you putting yourself in danger, you are putting others as well as our entire industry in jeopardy. Your pricing is for you and you alone to determine.
The good news is that we don’t have to discuss specific numbers to help each other learn and grow in our business smarts and profitability.
Here are the things I would want you to give some thought to:
Don’t compare what you do to a utility. You are not a commodity; you are a professional service provider.
Your value is relative to how you improve the life and business of each of your clients, not how much they pay for a box of cereal on a shelf.
Here are a couple of posts to help people better understand and remember what their real value is to clients (hint: it’s not how much/little clients pay or how much money you save them):
How has your work helped them advance, grow and improve in their business? What goals has it helped them achieve or get closer to? How much more time and freedom do they have since working with you?
When it’s time to raise your rates, be thinking along these lines and taking note of them, not just how much your workload may have increased, although that is certainly relevant as well.
People know that when they get more, they pay more. The benefit of connecting what they have gained by working with you, however, is that it helps keep them in a positive mindset toward fee increases, particularly when they are increased for more abstract reasons (such as cost of living) and not necessarily increased workload.
How you determine your fee increases and how much to increase them by is entirely up to you. There is no right or wrong way to do it.
I’m concerned that you have one-price-for-all.
If you are providing administrative support, you are providing a variety of tasks, functions, and roles for each client, each of whom is unique and whose support areas, needs, levels, and objectives are all going to be different from the next client.
When you are providing a value-based service, there shouldn’t be anything cookie-cutter about your pricing. Each client’s needs and support plan should be evaluated and determined on an individual basis. This is something I show people how to do in my Value-Based Pricing Guide.
It doesn’t tell you what to charge or give you a formula. It will show you what factors to take into account, how to identify/categorize support plan areas and set parameters and boundaries, and give you as systematic an approach as you can get for determining your pricing around your support plans that is fair and profitable for both you and your clients.
Capture their “before” picture at the start of every new client relationship.
When you consult with potential clients and onboard new ones, be sure to include a step where you obtain as complete a picture as you can of their current challenges, difficulties, pain points, and obstacles, as well as their desired objectives and outcomes BEFORE you start working together.
(If anyone reading this doesn’t have a consultation process in place, you NEED one now! Get my Consultation Guide for an easy, step-by-step plan that shows you exactly what to do before, during and after.)
Not only does this help you create case studies/stories for your website, it’s also incredibly useful insight to have when it’s time to raise your fees.
By better identifying what each client actually values and what they’re trying to accomplish through your work together, you can use that information to set benchmarks and emphasize those accomplishments.
They also inspire clients by helping them remember what life was like before they had your support and how far they have come and what a smart decision they made in choosing you.
Survey clients for their feedback and suggestions on a regular, consistent basis.
This is something else that is useful when presenting fee increases as it can help you connect the dots from your work directly to what the client’s values, goals and objectives are.
I recommend getting client feedback at least every year for established clients, and more frequently (e.g., every three to six months) for new clients.
One caution, though: Don’t raise fees at the same time of year that you survey clients for their feedback and suggestions. Do these two things at different times of the year.
Similarly, if you have my Value-Based Pricing Guide, you know that I also recommend reviewing every client’s support plan at regular intervals.
For new clients, you are going to do this more frequently because there is a lot of ramping up and getting to know the work and each other and fine-tuning of things in that first year of working together.
For them, I suggest reviewing their support plan internally every two to three months initially in that first year.
You want to make sure you are honoring the parameters you both agreed to and identifying any scope creep that you have not have taken in account and then adjusting accordingly at the next fee increase.
With established clients, you may decide that an annual support plan review is sufficient for your purposes.
Keep clients informed upfront all along the way with plenty of notice.
Let new clients know that there may be a period of adjustment in the first months/year of working together and that you will be reviewing their support plan every so many weeks or months.
If there are areas that have been or need to be added on or increased (or been eliminated or significantly decreased, for that matter), let them know that the fee they pay may be affected.
And let established clients know that their support plans are reviewed regularly as well (e.g., annually or every six months).
The key is to inform all clients upfront that their support plans are reviewed at specific intervals and that there will be periodic fee increases as you deem necessary or appropriate
You want them to understand that what they pay is relative to the support areas and parameters you have agreed to, and as those change and evolve or increase, you will be examining them and adjusting pricing accordingly.
At a very basic level, all I can say is this: You know your clients. You know what you do for them. You know when you feel like you are doing more than what you are charging for. You know how they are benefiting from your work. And you know when it’s time for raise fees for the profitability of your business and in keeping with the value you are providing.
When you start to feel those nigglings, that is always the correct time to review and adjust.
Always be reviewing and evaluating internally, and then on whatever regular schedule that you determine, implement your fee increases.
Let’s say you like to go through your annual feedback process with clients around May or June when business generally tends to slow down somewhat for everyone and they have more time to reflect.
You could then time your annual fee increases for January.
Whenever you time these events, I suggest you always give clients 30-60 days’ notice of any support plan adjustments/fee increases.
This gets them used to the idea, gives them time to ask any questions they have, and ensures no one is surprised or caught off guard. That’s the only thing that would really create ill will.
By giving courteous notice, it’s only going to help you adjust things in the best way possible for both you and each of your clients.
The bottom-line: Never surprise clients with things coming out of left field.
Everyone appreciates a heads-up so they can plan and budget accordingly, and your fee increases will be far more well-received.