Service-based businesses – accounting firms, insurance brokers, legal practices, and other companies that delivery a service (not a product) – often low-ball the price of an initial engagement with a new client just to land the client and keep that client as part of an expanding client base.

Maybe you started at a low price, but now you’ve worked with the client through a few successful projects, the client seeks you out for advice, and you have a comfortable professional relationship.

Excellent. But you can’t continue to deliver services at discount prices and still grow your business. So, how do you raise your rates with established clients without sending those clients ping-ponging around the Internet looking for your replacement at a lower price?

Low-balling rates isn’t always a bad thing. You get paid to learn the needs of the new client, your new client likes those low rates, and cash moves through the company. However, after a while, rates have to go up just to keep up with inflation, so how do you raise rates without losing clients?

Know Your Value. When discussing rate increases, tie these increases directly to specific benefits you’ve delivered, and be sure to mention your consistent growth strategy. Maybe the client has seen a dramatic increase in sales. The client has seen online buying quadruple in 12 months. The client should recognize your contribution to their growing business success.

Smart businesspeople recognize value. You just have to remind them when talking about rate increases. Do more than the client expected. Maybe you were hired to conduct market research, but you include suggestions on how the client can improve their web presence. You’ve delivered valuable information above and beyond what was paid for.

Define payment terms that suit both parties. You can’t wait a year to get paid. The new client can’t afford to put you on monthly retainer. You both need each other, so develop a list of payment milestones that works for the client and for those bills that keep showing up at your office.

Explain rate increases. They aren’t arbitrary, and you’re not eyeballing a new Jaguar. Your costs have increased, so explain why you need to raise your rates. If you’re improving their company operations, the business owner is more likely to accept rate increases.

Get more, give more. At the same time you raise your rates, offer a new service as part of your new business relationship. Also, expanding a new job is a good reason to re-open the discussion on rates.

Old rates, new rates. Your company will earn more if you charge a higher rate to new customers and keep the low rate for long-term regular clients who provide the ballast for your business by always being there. New clients, higher rates. Established clients, lower rates.

No surprises. Raise rates incrementally, and provide notice well in advance of the actual increase. Clients don’t like surprises – especially rate increases – so be open, 100% transparent, and honest.

Try tiered pricing. Not every client needs every service your company offers. Bundle popular services into different pricing tiers. The Bronze Tier (just the basics), the Silver Tier (basics plus), Gold Tier (you do everything but mow the client’s lawn). Let the client choose how much he or she needs and wants to pay for your services.

Offer a lower-priced option at the same time you raise your rates. It’s not about increasing margins, or taking home a bigger paycheck. It’s about servicing a stable client base, proving the value of your services, and requesting incremental increases in payment for services rendered.

Your favorite clients probably won’t have a problem with paying more to get more of your team’s service offerings. Just demonstrate your value.

 


The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of Zions Bancorporation, N.A. Member FDIC