“It’s almost New Years, I think I’ll raise my rates on Jan. 1.”
“I’m looking forward to the New Year. We raise our rates on January 1 every third year.”
“We’ll raise our rates by 20% starting in January. Sent a letter to all our clients last week.”
These are word-for-word quotes from a Managing Partner, a CEO, and a senior associate. All tied increasing their rates to the calendar.
Whether every year, occasionally, or every 3 years, I always wonder “Why New Years?”
Culturally we use the New Year as an excuse to make promises and start new things.
Why New Years?
Really, what does the calendar have to do with changing the fees your firm charges?
Perhaps oddly, I think it’s connected to the premise that charging for time spent working is rational.
I don’t agree that hourly billing or time based billing is rational, so I also don’t agree that choosing a calendar date to raise those rates is rational.
What is rational and boosts firm revenue?
The answer is a pricing model that ties the fees you charge to the outcomes you deliver to your clients.
In other words, IMPACT Based Pricing.
Which means you never have to wait for the turning of the year or any part of the calendar to increase your fees.
When you increase the IMPACT of the life changing differences you deliver you price accordingly.
If that’s next week, you increase next week.
Is it in a month, then increase in a month.
If that’s not till next year—why the heck are you taking so long????
Let’s take a closer look at how poorly the firm is served that increases its rates once every three years.
The firm in question is a knowledge services firm. The executives and associates work in a dynamic, fast changing field. And the value to their clients is that they keep up with these changes every single week.
No client ever gets caught falling behind the required changes.
The acquisition of knowledge of these changes happens daily or weekly. Applying the changes to the right clients at the right time relies on being on top of every situation every week.
These experts deliver huge life changing impacts to their clients every week.
An increase in their hourly rates once every three years means they are serving the clients at a higher and higher level and not getting paid for it!
This costs this firm hundreds, if not millions, of dollars.
This is a self-imposed crippling of the firm.
Valuing the unparalleled advantages of knowledge firms
Knowledge services firms have advantages that product companies can only drool over!
- There are no costs of goods sold.
- Every day you get smarter and more capable of solving increasingly intricate or difficult problems.
- This ongoing growth in capability allows you to deliver new solutions and more meaningful differences for clients every single day!
When you bill by the hour and “raise your rates” because of the calendar, you are refusing to capitalize on the extraordinary opportunities you have as a knowledge services firm.
Here are three simple steps to take to increase your fees at any time.
- Reframe your thinking about your work. Instead of talking about what you do—the tasks, the inputs, the time—talk about what you deliver to clients.
- We deliver confidence, peace of mind, increases/decreases in critical elements, the next generation of trained leaders, faster and most accurate e-commerce sites, and so on.
- Label what you deliver as IMPACTs. Don’t be shy or reticent. You are responsible for ensuring your clients know what they get from your firm and using clear, unambiguous language is the way to do that.
- (Safety regulations consultant) We make sure that every person working in a high risk environment goes home healthy at the end of each day.
- IMPACT Based Pricing makes sure that you’re no longer working crazy hours for peanuts!
- Start using the language of IMPACTs everywhere, at all times. Refuse to talk about what you do.
- What do you do? We deliver profit increases to restaurants.
- How do you help your clients? We deliver great relationships in place of conflicts so they can achieve their revenue goals.
- What services do you provide? We deliver e-commerce websites that retain customers for years.
IMPACT Based pricing does not start with numbers, it starts with language. If you don’t have the language, the numbers will fail.
In the next newsletter I’ll show you how to use your current fees as a starting point for IMPACT Based Pricing.
Which leads me to remind you that our 60 Minute Pricing Makeover Mini Course is all about the language of:
- mission statements
- value propositions
- client engagements
- and of client conversations.
Get your copy right now. This link will take you there and in just a few minutes you’ll be on your way to experiencing the life changing differences of IMPACT Base Pricing.
Questions, comments? Text me at 703-801-0345.