Strategies & Tactics

When to Raise Your Rates

April 1, 2019

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[mojo]

One of the more challenging decisions independents need to make when starting out is how to set rates. Many factors go into such decisions, and the same dynamics that apply to one independent may not apply to another.

These same dynamics come to play when it comes time to consider raising your rates as well, but it may not be so straightforward.

Let’s start by examining how you set your rates in the beginning. Chances are you looked around your geographic marketplace or in your service niche. If your focus was on providing social media strategies and services to clients, you found out what other independents were charging.

You also had to look at the type of client you planned to serve. And you had to do some self-examination to determine how much value that you could deliver.

After collecting that information and arriving at what you thought was your value, you had to review operating costs to determine if you could cover those expenses and generate the profit needed to achieve your business goals.

Now it’s been a few years and you have a better idea of what you should be charging. You also have a better understanding of the current competitive and economic climate. The ebb and flow of business cycles have allowed you to see what an up market has done to your bottom line, and how a down market has impacted it.

If you’re like most independents, then chances are you’ve gone long periods without raising your rates. You’ve been putting it off, but you know the day is coming soon when you will have to revisit your rate schedule.

Introducing a new rate

Once you’ve determined what your new rates will be, you will need to determine how you will apply them to your new and existing client relationships.

For most independents, they start by immediately introducing the new rates to new clients. Just base your proposals, estimates and budgets on that new rate.

Next, take a look at clients who hire you for periodic projects. When you talk with them about a new project, just let them know at the outset that since you last worked together you have adjusted your rates.

Since you have an existing relationship with these clients, it’s best to verbalize it in a conversation or phone call, rather than surprise them in writing as part of a formal proposal or estimate.

For other active clients, you may have to look at each on a case-by-case basis.

Maintaining your control

As an independent, you have control over when and how you apply your new rates. You aren’t held captive to corporate process and procedure. You left all of that when you decided to be your own boss.

For some clients, you may need to grandfather your rates because you know that’s what they can afford and you want to keep working with them, or perhaps you simply value that relationship. On the other hand, you know that you can’t afford to work for all clients at your former rates.

In most cases, it’s considered customary to give clients a 60- to 90-day notice of the rate change. Do it verbally and then follow up by putting it in writing. 
 

The main thing is to remind your clients that you continue to value their business, and in an effort to continue to best serve their needs, you must periodically revisit your own business model to ensure that you maintain the resources needed to serve them.

Tim O'Brien, APR

Tim O’Brien, APR, owns O’Brien Communications, an independent corporate communications practice in Pittsburgh, and hosts the “Shaping Opinion” podcast.
 

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