“We have a policy to raise our prices every three years.”
“We can’t charge more, no one else in our industry is doing that.”
“Our clients will complain if we raise our prices.”
I wish I had a magic wand to wave over all the worried Owners and CEOs who believe these things about their prices.
Pouf! They’d fly away and your company would instantly add 10% to the bottom line.
Since I don’t have the magic wand, I’ll do the next best thing: urge you to raise your prices by 10% immediately. (There are some exceptions but much fewer than you think.}
The time is NOW
The CEO who pointed to their company policy about increases every three years couldn’t remember why that was. It was instituted years before she took over. It probably didn’t make sense then, but it makes no sense today.
Here’s why: your knowledge and expertise increase daily. That improves your ability to increase the IMPACTs to the next clients. Since you’re getting paid to change people’s lives, it stands to reason that the more significant the changes the greater the fees. Immediately!
No one else is doing It
I think of every parent’s challenge to a kid who says, “Johnny gets to do that!” Parent replies, “so if Johnny jumps off a tall building, will you do that too?”
If no one else, or everyone else, raises prices, is that why you would or would not do it?
Your business is not like any other. The only considerations are internal: your profit goals, your net profit margin target, your costs, and your long term financial health.
In addition to getting better at delivering life changing differences, which by definition entitles you to higher fees, is that your finances and your operations are your number one responsibility as the chief executive. Meet that responsibility with confidence and raise your fees.
My clients will complain
Let’s say that some of them do. Is that so scary that you will jeopardize your financial health? Reduce your net profit margin? Fall behind in upgrades, market share, or building the value of your company?
The typical professional or business services firm loses a small percentage of clients every year for a variety of reasons. The loss from a price increase is just part of doing business. If you lose 2 out of 100, how bad is that really? Get some perspective and focus on the majority who simply will pay the new price.
Some firms lock in prices per year, such as bookkeeping and accounting. The company offers, and the clients accept, an annual contract, payable by the month. These companies will not be able to raise prices immediately. They must, however, plan for increases every single year, and not let their fears stop them.
This is justified, as I’ve often said, by the fact that they accumulate knowledge and expertise which redounds to their clients again and again.
What do I say?
Everyone worries about how to tell their clients that their fees or prices are going up.
If you offer an annual contract for a fixed fee, payable monthly, in November write to your clients.
“We are so appreciative that you trust us to deliver (The IMPACTs you deliver here). We’re looking forward to serving you in the coming year.
We continuously increase our knowledge and expertise to meet your expectations.
Beginning January 1, 202X the fee for your current package of services will be $XXXX.XX.
We have other options as well. Please let us know if you’d like to talk about which would be helpful to meet the needs of your own growing company.”
Customize this to reflect your personal voice.
Also make a note of what is NOT here.
It doesn’t indicate a price increase either by percentage or by dollars. It simply states the price for the coming year.
Case by case
If your work is customized in any way and offered on an as-needed basis, then you can increase your fees with each new offer. Design three options, using my Choice Framework, with the fees higher for each new client. A 10% increase will make a difference to your bottom line.
Fixed or Flat fee options
Do you have some fixed or flat fee options? These are not customized and require little in the way of direct input from your associates. Perhaps it is a self-study course, an eBook, or an assessment.
I recommend increasing these prices right now by 10-15%. No announcement, just do it. Change the prices on your website and anywhere you have them published.
Continue to increase these prices every couple of months.
With the tap of a few keys you can immediately increase your fees and prices by 10%.
Because you are not changing anything else, such as associate involvement, larger scope, or higher internal costs, the 10% additional revenue goes straight to your bottom line.
The bottom line is your profit. All 10% of the new money is pure profit.
How magical is that?