About the Author

Allan is the cofounder of LessAccounting, loves his family more than breathing and builds weird lamps for fun.

Price Increases - How to Raise Your Rates to Clients

Written by on Jul 1
front-end design conference

Attempting a price increase on your hourly rate is a tricky situation.

My dad, a long-time car wash owner, says, “Price is your throttle on the amount of customers you have. If you have more customers than you can handle, do a price increase.”

So if you have too many customers, congrats, business is probably good. This is a good problem to have, let’s be sure to celebrate the stress of “too much work.”

Price Increase: Three Examples.

Consider a price increase under these circumstances:

  • When you have too much work (previously mentioned).
  • When you have a client you want to get rid of. (Raise their rates.)
  • When you want to work less, raise your rate by 20% and lose 10% of your business, freeing up time for marketing or other tasks to grow your business.

There are two options for a price increase:

  • Raising Rates On New Customers.
  • Raising Rates On Existing Customers.

Price Increase on New Customers

This is easy; try a price increase of 20% on the next call with a potential lead. If you’re not losing 25% of your sales leads because of your price, then you’re too cheap. Increase your rates until you’re losing sales.

Price Increase On Existing Customers

This is the tougher one. Often times clients expect a discount because they’re bringing you “more business.” And they have a point, so the first thing you do have to ask yourself is, “Do I really need to raise my rates, and is it a good idea?”

Most businesses live on repeat business, so you don’t want to alienate those customers. So why and when should you execute a price increase? Read on.

Ilise of Marketing Mentor and author of “The Creative Professional’s Guide to Money,” says, “Never tell a client by email you’re raising your rates. This conversation requires that you speak with them in real time, on the phone or in person, so you can be there for their reaction and respond accordingly. Also, be sure to give them a reason for the price increase.”

Perhaps you have too many clients to meet with. Maybe you have hundreds of customers and email is the only feasible way to communicate.

Daniel, of will-harris.com, gives an example email template to use.

Notice that Daniel gives them a clear reason for the price increase. He’s open to a phone call to discuss this as well. He also notes to the customer that he has past experience with their projects. He acknowledges that changing to a new vendor would be difficult.

To attempt a price increase you must be okay with losing potential customers or even missing out on the return business from a long-time customer.

Before you take action, ask yourself if you have too many customers, or a problem customer, or if you want fewer customers. Then make your decision and stick with it.

Side Note: Amy Hoy has a killer article about this topic… “A Simple Rule for Pricing Newbs Who Got The Fear”

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