Want to make more money? Of course! The easiest way to do it? Raise your rates. Or is it? When and how do you charge more for your services? How do you raise your price without losing clients?
Develop a Pricing Strategy
First decide where you are personally comfortable. Do you want to be at the high end of the price spectrum attracting higher end clients? Or would you prefer to compete on price and be at the lower end?
If your pricing strategy is to be a low priced provider you need to fully understand your margins and have the ability to offer higher volumes. High volumes may be easier to build fast if you’re looking to resell the business. A loss-leader strategy can be profitable in the long run for those looking to steal market share or with plans to upsell.
If you’d rather service fewer, select clients and give them high-touch service your business may be easier to build and will require less overhead.
To appeal to a wider audience you may offer products at multiple price points. A low cost training tool (book, webinar) may entice more people than your higher priced consults or seminars.
How to Set Your Price
Most service providers price by the hour or by the day. The biggest con is that it’s easy to price shop and your clients control your time. Many service providers set initial pricing according to competition’s current rates.
Many of the freelancers design or write as a hobby. They don’t charge much because it’s not their job. Don’t make this mistake. If you’re a full-time professional you should charge like one.
How to Raise Your Rates
Does the thought of raising your rates make you nervous? It did me. The first time I raised my rates I called my dad. When it comes to serious business or financial decisions I have to admit – he knows his stuff. Having been a successful serial entrepreneur, he’s one person whose opinion I trust in this matter.
Dad said if every potential client buys from me and/or if I’m insanely busy – those alone are good reasons to raise rates. He also recommended not making minor incremental increases. Raise your rates higher, but less often. And watch out for price associations that people make. Dad said with his chimney cleaning business he often went up by $10. He went from $79 to $89 but he didn’t go to $99, he jumped to $119 because $99 sounds too much like $100 and $119 doesn’t sound like much more than $100.
Inform your regular clients before you raise rates. Highlight your training, qualifications, and investments, but always demonstrate your added value. If you feel the need to, send a letter. Mention that inflation, the cost of doing business (did you buy new equipment or software), and your skill-level have gone up. Let new clients know that your rates go up annually. Will you raise 5% every January or whenever you add to your qualifications and skills?
Importantly, stand your ground. Decide what your minimum rate is and refuse to work for less than you’re worth!
If you’ve raised your rates let us know how it went in the comments below.