Raise Rates, Increase Profits and Retain Clients
As a business coach who works with service business owners in late startup, I’m often asked the question: “How do I raise rates with my clients?” There are several strategies that work effectively when planning to raise your rates. Let’s explore the three rules of raising rates and nine strategies to help you retain your clients during the process.
It’s typical in the startup phase of business to offer your services at rock bottom rates. During startup, new business owners are often in a frenzied state of beginner’s fever… they’re willing to ‘do whatever it takes’ to launch their business. This fever comes with a high degree of motivation and drive to get experience and client testimonials. So as a result, they’ll often launch with lower-than-average rates for their services. Whether they’re struggling with valuing themselves and their talents, resetting their money mindset, or Impostor’s Syndrome, low rates are often re-considered when the real costs of time and money become clearer down the road.
While the need to raise prices is usually good news for your growing business, it’s not always what your loyal clients want to hear. Those early advocates who helped get your company off the ground often demonstrate a kind of squatter’s rights. Past clients sometimes feel justified in keeping costs as they are, so they can be tricky to navigate. Here are some strategies that will help you when it comes time to raise your rates.
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1. Before Raising Rates, Review Business Costs
Before raising rates, it’s always a good idea to check in with yourself and review your actual COSTS of providing your services the way you do. Especially if you’re struggling with the idea of raising your rates, a cost analysis can reinforce your convictions and help you face potential difficult conversations with existing clients.
At minimum, look at your previous year’s tax return. It will show you what you spent on hard-costs. Consider your investment in all the back-end systems you have in place to keep the metaphorical lights on. These costs may include things like your web site and hosting, server space and software. Don’t forget the costs of your shopping cart, merchant account fees, and banking fees. You also could include social media costs, rent, overhead, crm systems, and other utility costs to run your business.
2. Enhance Rate Confidence By Estimating Future Investments
Once you’ve accomplished the year in review, it’s a good idea to lay out your cost estimate for the coming six months to two years. To do this, as yourself:
- Short Term: What are you investing in in the coming months?
- Two-Year Horizon: What future costs are on the horizon for your business?
- Improvements: What improvements will you want to make on behalf of your business?
- Systems & Support: What systems or support will help make things easier for you?
As I was preparing to launch the Time & Space Style Inventory, I nearly quadrupled my costs of doing business. In order to launch a product of this nature, I was faced with needing to invest in more intelligent systems and in helping resources to engineer and build the marketing campaigns and communication systems. I also knew that some of the costs were due to start-up, but others would be ongoing to help me manage the back end of the business and market the TSSI assessment.
Once you have completed the first two steps above, and considered your realistic short term future costs of doing business, you’ll have a good estimate of where you’ve been and where you’re going in terms of costs. And, these two critical analyses, will provide the data you need to build your cost-basis confidence. After costs are reviewed and considered, it will help you create more appropriate rates that not only cover your costs, but begin making you more income!
3. Nine Strategies Help You Raise Rates with Confidence and Retain Clients
It is important to remember the rules for good communication when it comes to sharing your new rates to your clients. Below there are several strategies that will help you communicate your new rates with ease and success.
First of all, don’t try to hide it.
Explain upfront why you’re raising rates. You can share the discoveries you’ve made in your analysis, communicate that you’re moving with the market or your level of expertise. Providing a straightforward reason and directly communicating are keys to success when raising rates for your existing clients.
Consider offering a grace period.
A grace period allows existing clients some time to respond. You may want to offer some form of bulk discount so they can save more and take advantage of current rates.
Thank your clients.
Be sure to sincerely thank your clients when raising your rates. Express appreciation for their trust and confidence in you and your services. This is also a good time to request that they stay with you during this next phase of business.
Add features or benefits.
Whenever you add a feature or new benefit there is an opportunity for you to raise rates. Offering enhanced features and additional benefits helps you increase rates with clients. Early customers will understand that they joined you at the beginning stages. When you focus on added features and benefits you give the ‘impression of increase’. This is a common marketing term that helps people see your growing feature set as a result of your overall improvement. This will enhance the apparent value of your services making enhanced rates more logical. Better products cost more.
Companies that over-deliver always give the impression that they provide more value than the investment. The payoff of doing business with you should more than outweigh the investment. When it does, raising your rates does not tend to pose a problem.
Provide a lower price option.
While you’re building your value and raising your rates, a good retention strategy for existing clients is to provide them a second, lesser-priced option with fewer features. In fact, it is especially helpful if the lower priced option is a little less expensive than what the customer currently pays.
Explain But Don’t Apologize
As your business develops, your product should be worth more. Briefly explain how the higher price is going to allow you to better serve them. Then move on. If you’ve proven your worth, then they won’t walk away.
Offer a premium, VIP, or limited time offer to existing clients
When it comes to raising your rates, be sure you give your existing clients a chance to buy a higher-tier plan before officially raising your rates to the public. If done this way, you’ll be able to increase revenue from these early upgrades and retain those awesome folks who’ve stuck with you through your early phases of growth.
Stay in touch and continue to serve.
Most of all, stay in touch and nurture your clients. The ripple effect is huge when it comes to running your business. You just never know when someone will be ready to do business with you or invest in themselves via your services. That’s why it’s critical to keep people on your list and continue to communicate. Regular communication with clients serves to build trust, motivate and keep your business top of mind. Even if they don’t invest right away, communicate the raised rates, then request them to stay with you during this next phase of development. Continue to regularly provide value via newsletters, communications, social media and offers. You never know when someone will be ready to say yes.
Your Sanity Assignment
Is it time for you to raise your rates with clients? If so, which of these strategies will you employ? Which strategies have helped you think? Do you have other strategies we’ve missed that you’d like to share? If so, please add them in the comments below.
If you’re struggling with your business and would like to chat about how I might help, please schedule a complimentary Discovery Call today. During this private session, we’ll discuss what’s happening for you in your business and see if my programs are options to help you reach your business goals. I’d love to learn more about you and see if I might be able to help.