Everything costs more these days. So however uncomfortable it may be to raise your consulting fees for longstanding clients, it may be time to take the leap.
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Q: My accountant suggested I should raise my rates this year. I’m afraid if I do, I will lose the clients I’ve worked hard to gain. What should I do?
ACE advises: If your accountant suggests bumping up your rates, take the advice seriously. It may be uncomfortable to raise rates for longstanding clients. However, unprofitability is far more uncomfortable. Here’s the lowdown.
First, check to see if your current rates cover your costs, including costs of expansion. Team up with your accountant to crunch numbers on material costs, labor (including salaries and benefits), and overhead costs like taxes, rent, insurance, marketing, and transportation.
Ideally you should aim for a healthy profit as compared to others in your industry. If you are scaling, aim somewhat higher so that you can reinvest in your business while keeping your cash flow healthy. If you’re not hitting those targets, it might be time to raise your rates.
Second, consider the value each client brings to your business. Some are gold mines, bringing in referrals, being easy to work with or paying up fast. These gems have earned a lower rate. On the flip side, if you’re struggling to cover costs, dealing with late payments, or having constant hassles with a tricky client, a rate hike might balance things out.
Third, do some digging. Check out what customers are paying for services like yours and determine whether your rates are competitive. If your proposals are usually accepted, you might be able to raise prices without breaking a sweat.
While the fear of losing clients is real, a well-thought-out rate increase can align revenue with expense and keep you in the game.
Former ACE President Priscilla Hansen Mahoney is the founder of South Portland-based Blazing Trails Coaching LLC. Blazing Trails helps clients create systems and strategies enabling clients to scale their businesses through planning and preparation while maintaining profitability. Reach Priscilla at priscilla@blazingtrailscoaching.com.