Raise your rates and keep your clients (but lose a couple)

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Raise Rates & Keep Clients - Dashable

One of the hardest things you will ever have to do for your business development is raise your agency rates. Whether you’re an initial freelancer who is building onto his or her team, or you’re an already established agency, at one point you are going to be adjusting your rates. It’s scary, even big firms are reluctant to do it. Once clients get used to paying a certain amount for your services, it is really hard to convince them to pay more for it.

Many of them will insist on knowing, “What extra services I am getting for the extra cost?”

At this point, you will have an uphill fight to take on, and you will have to fight it with you clients very, very carefully whether it be with flattery, compromise, or giving them something a little extra.

Let us start by pointing out the deadly mistake you should never make. 

At no circumstance should you ever bill your client $300/hour for a service you have already delivered, and they are expecting you to do it for $175/hour.  That is far too much an “adjustment.” And have you really done your research with comparing to other agencies and their pricing? One of the best ways to lose clients in any business is to raise your fees and not tell them about it beforehand. It is bad business, and it will make you appear sleazy and untrustworthy. Whenever you decide to increase your agency rates, you should tell your client before billing it. Period!

So…

… Which is the best way to inform your clients of the new rates?

First, never mail your clients a notice with their January invoice. Chances are that most of them will not even read it, and when they receive your Feb invoice at the higher rates, they will be at your neck. Further, even if they do go through it, a written notice is very impersonal; regardless of how creatively you draft it. Most of them will see it as take it or leave it ultimatum, and most of your clients will feel offended that you did not put much of an effort to inform them of the new rates.

Instead, make a list of your agency clients and call your point of contact to inform them verbally of your fee increase. You can then write a follow up e-mail “confirming your telephone call earlier in the day,” so that your clients have something in record to remind them later on. If you have TONS of clients you could also send an email blast and automate it to everyone, but make sure you make it as personal as you can with merge fields.

In your conversation, explain the reasons you are raising your rates. In particular, keep underscoring the fact that your rates are, for example, at least 10-25 percent cheaper than what your competitors are offering and your quality is far beyond what a cheaper price will get you. It would also pay to tell them casually, “Kindly call me if you hear of anyone offering a better deal. I would be happy to offer a better deal to a valuable client like you.” 

Is there a client you actually want to get rid of? It’s rare, but it happens to ALL of us, and you know exactly the client I’m talking about right now. Raise your rates, and ditch that client. Tell them about it. If they do happen to pay, well then you’re getting paid a little extra to keep the client around.

Take note of the following:

  • If you do include your rates in your website and marketing nurturing materials, ensure they are updated immediately to reflect the new prices. Nothing puts off a new client than hearing you offer a higher rate than they saw on your site. 
  • Consider making your client feel special by offering an artificial discount. For instance say, “You should know my standard rates are usually $350/hour, but because you have done business with us for long, I would be willing to offer you a rate of $225. 
  • The best time to increase your prices is when your clients are happy with your services. In the months before your planned price increase, be particularly diligent in proving your worth for the new rates – remember you out perform your services compared to your competitors.

More questions you should consider?

  • Are there clients to drop and clients to keep? If you have particular clients who are already stingy with your pricing, you already know they won’t be here for the long run, especially when raising your rates. They are preventing you from growing and opportunities by dedicated design and development hours to them. Drop those clients as they will only keep you where you are.
  • By what percentage have you increased your hourly rates? A random 100% price appreciation is a total shock. If you have taken this approach, do not be surprised if your clients shift to your competitors. The optimal rate by which you should raise your agency rates is very particular to each web agency, but the rate of more than 20% may sound like too much. Also keep in mind that you need to increase your prices by a significant margin so that you will not have to raise it anytime soon. We love Amy Hoy’s example of DOUBLING your rates and it can be pretty significant for growing your business. No client will be happy to be paying for a service that prices seem to increase month on month. In fact, if you do it, you will lose a lot of your agency customers. So, what if you take on a job at a low rate and you think you will need to increase prices significantly? The secret is to agree with the clients on regular rate reviews and utilize these.
  • Are your clients getting something extra? Agency clients are more likely to welcome new rates happily if there is something additional in the bargain. Consider something you can pack together with your higher rates that will cost you nothing or little, but has a higher perceived value to the clients. For example, maybe offering branding hours for free or giving copywriting services in addition to

How do you convince your agency clients to accept your higher rates?

Successful individuals do not give up the very first time they hear a “NO!” If you do so, it can send a message that you do not value your services or you don’t have confidence in your abilities or skills. Remember what I said before, flatter, compromise, and give extra.

Regardless of which approach you take, you will most likely lose a client or two, because some client’s will just decide to punish you for your proposed price rise. And believe me, that’s a GOOD thing and there is absolutely nothing you can do about it. Just give them time, and they will probably come calling.

When was the last time you raised your company rates? By how much did you raise them?

Talk to me.

Shoot me an email to kate@dashable.com

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Author: @keswanberg