If you are a specialist, expert, leader, or consultant who has the ability to set their own rates, you may struggle with how to price your services. As if that isn’t difficult enough, what about when it’s time to raise your prices? How do you know how much to charge? How much to increase? Does the rate increase apply to everyone?
I am a huge proponent of experts realizing their value and charging what they’re worth. But, if you don’t value your time and skills, there is no way you can expect others to do it for you.
Some Indicators It’s Time To Raise Your Prices
Sometimes we don’t know when to raise our rates. Some solid indicators include:
- When you’re in high demand … really high. Thanks to Economics 101, we know the theory of supply and demand. When you are booking out clients weeks, months, or years ahead – congratulations! But it may mean you are not charging enough.
- Annually. One of my long-standing clients would raise their rates about once a year. They would easily justify the rate increase because of the cost of living: employees cost more per hour, paid time off was mandated by their home state, product costs were increasing, competitors were raising their prices. Occasionally someone would complain, but, more often than not, no one noticed.
- You continually expand your knowledge. To be considered an expert, I’d argue that you need to be continually learning, experimenting, attending courses or training sessions (not just presenting at them – go out and learn!), or exploring new concepts entirely. With this intentional advancement, you will better your skills and serve your clients better. This enhanced education is something you should be compensated for.
- To test the waters. A few years ago, I completed a course for freelancers who struggle with pricing themselves appropriately. One argument was made to simply double your rate to see what would happen. So I did. Within a year, I “lost” 20% of my clients – they happened to be the ones requiring most of my time and contributing the least to my bottom line. The others? Barely a mention. They continued to pay quickly and respect the value I brought to the table.
How to Raise Your Price … or not
I wish there was a simple, easy to duplicate way to raise your rates correctly. Unfortunately, I don’t think it exists. It depends entirely on your relationship with your clients, your industry, and your personality.
- Don’t make it a big deal. Heck, don’t even mention it. When was the last time you went into Starbucks and saw the “We’re Raising Our Prices” announcement? You don’t. You just pay the barista and go on about your day. If you order the same thing every day, you’ll notice the amount is different. Otherwise, there is no mention of it.
- Lay the groundwork ahead of time. If you book out ahead of time, and it is possible the next time you see a particular client, your rates will have increased, let them know. “As of January 1st, I’m adjusting some of my prices.”
- Know why you’re doing it. Have a script of why you are raising your rates, that way, when she asks, you’ll have a well-thought out, less awkward response for your client.
- Ignore the nuts and bolts. When you’re crafting your script, I encourage you to think about what you’re saying from the client’s perspective. They don’t care that rent and expenses are going up, nor do they care that it costs you money to fly around and attend conferences to further your skill – they don’t want to be aware that they are paying for it. Be authentic and honest, but emphasize how they benefit from your continuing education or high demand level.
- If possible, avoid charging by the hour. Some industries are stuck in an hourly-service charge. If possible, stay away from this. Charge for the solution. Your client has a need or a problem, they are paying you to fix it. Charge based on the value of that solution.
- Avoid comparisons. You are not your competitor. If you think you are, you will be tied to your rate and in a constant race to the bottom of the pricing scale. The problem with this? There are no winners in the race. The first one to $0 just goes out of business faster. To avoid comparisons, differentiate yourself from the competition. You may both cut hair or paint houses, but who solves the client’s problem the best? This is where your continuing education and learning comes in. I think of these as moats of protection around your business. Make a list of moats that differentiate you from the next guy.
- Don’t apologize. This speaks for itself. If you are apologizing for your fee, you don’t believe you’re worth it. If you don’t believe it, why would anyone else?
- Use discounts strategically. Discounts can be good and bad. A bad example is the cell phone or cable company that attract new customers with discounts, while denying the same price to existing customers. A good example of a discount is to reward a customer for spending more than they would normally spend. This is a highly dynamic calculation. If I come into your shop and regularly spend $200, reward me when you entice me to spend $300. Don’t give me a discount for spending $200. This discount could be different amounts, on different services, to different clients.
- Reward long-term clients. When I raised my prices, I made the decision that some clients would not be subject to the new rate. However, if I never mentioned it, they would never know. To address this, I communicated that my rates were increasing, however, to thank them for their loyalty, I would automatically apply a certain percentage discount on all their invoices for the services they regularly ordered. This showed the value of what they were getting and built continued loyalty and trust because, with every invoice, they saw they were paying a lower-than-market rate.
Most of us struggle with believing we’re worth what people will pay for. It is up to you to charge what you’re worth.
Thanks for letting me riff.