How to Increase Prices Without Losing Customers
As a self-employed service provider, figuring out when to raise your prices can be complicated. You may feel like you’ve been overdelivering and undercharging, or maybe you simply feel like you’ve advanced enough that it would be a good idea to increase your prices.
Whatever the reason, raising your rates doesn’t have to be as complicated as it sounds.
When should I raise my prices?
Throughout your career, you will come to find that there are times when raising your prices is the way to go. But how do you know when that time is?
You added new services: The more you provide, the more work you have to put in. Firstly, you’ve spent a significant chunk of your time learning and applying those new skills. Secondly, the more you offer your clients, the more work you have on your plate. It should go without saying that your time should be rewarded; you should reap what you sow.
The market has evolved: As a business owner, you are responsible for always keeping an eye on the competition, what they charge for what they offer, compared to what you charge for your services. You can read our full article about how to charge clients. You might come to find that you are charging significantly less than other similar businesses. By not raising costs, you might not only lose money but undervalue your hard work.
You’re putting in too many hours: Do you often find yourself working till late at night or at all hours of the day? Are you putting in too many hours on the weekend, or find yourself not having the time to relax because of all the work? If so, it’s time to raise your costs and consider working a bit less. By doing so, you would have some time for yourself while also reaping the benefits of a steady, reasonable income. After all, your clients don’t deserve all of your time. Self-care is still essential.
By working with fewer clients at higher rates, you will provide more personal care to each client while also making sure that you are reaching your financial goals.
How should I raise my prices?
1. Review your timesheets: A good first step would be to review your timesheets and add up the time, money, and resources spent on a single project. Then compare those with how much you are currently charging. It’s essential to evaluate whether or not your prices are directly proportionate to your work.
Set a target rate. Are you charging enough for any given project to reach that target? If the answer is no, then it might be time to raise your prices. Make sure the new prices are high enough to satisfy your needs and reward your hard work, but also low enough that they appeal to current and prospective clients. For example, you may consider a 3% increase in price for your projects.
2. Charge by the project: This strategy will help you reap the benefits of your work, regardless of the hours you put into it. After all, the more experience you gain in this field, the less time you’re likely to spend on a project.
This is not to say that the project is not well done. On the contrary, the experience gained over time has helped you perform the same duties faster and better than before. In this case, the quality of the project trumps the quantity of time spent working on it, which is why charging by the hour may not be the way to go about charging for your services.
This also applies if you have employees. If you charge by the hour, your more experienced workers will end up getting paid less for what would likely be a better job than those less skilled, who may take longer for the same type of project.
3. Start with new clients: Start off by taking on new clients at the updated rates. Afterward, gradually implement this increase in costs to your existing clients. Some are likely to be unsatisfied with this change, and some might even leave. This is your chance to gauge the market’s reaction to your new rates. Compare how your new clients respond to the higher prices to how your existing clients feel about the price increase.
If new clients are coming in and business is going well, you’re on the right path. Otherwise, you may have to revise your numbers. That’s not to say that you shouldn’t increase your rates, but maybe consider raising them at a smaller percentage. After all, you can always go back, revise your numbers again and raise your prices yet again. Increasing your fees gradually may be the way to go about it.
4. Be confident and communicate with your clients:
It’s essential to be confident in the value of your work. You need to be ready to back up the reasoning behind those price increases and adequately communicate them with your clients. Let them know what this increase involves, when it goes into effect and why you chose to do it.
Keep in mind that clients will want a proper justification for that increase. If you’re offering more services, make that known from the get-go.
However, since not everyone will understand your reasoning for making those changes, you might lose a couple of clients in the process. And that’s ok. You can evaluate the relationships with your clients to see if there is anything better you could have done. But at the end of the day, try not to stress it too much. To reach success, you sometimes need to make changes. And if that means losing a few clients in the process, then so be it. The Earth keeps spinning, and you keep providing excellent services to all the rest of your clients.
5. Include the new services that clients asked for:
Before raising your prices, do your homework. Talk to your clients, ask them what they think of your current services, and if there is anything new they’d like you to add. Clients are more likely to be on board with the increase in your prices if they feel listened to. After all, clients expect an added bonus to complement the price increase.
Make it known that these changes are not only well deserved for all your hard work but also needed to keep serving them as best as you can. For example, a 3% increase can help you rent out a property that’s bigger and more suitable for your work.
It can also help you acquire more tools and materials for your work and provide clients with new services. You should highlight that the new prices come with the added bonus of new and improved services. After all, your clients want to understand how that increase in your costs can benefit them.
6. Reward client loyalty: Clients who have been with you for a while are not likely to respond too positively to this increase in costs. After all, one of the reasons they may have picked your business was the lower cost for those services. They were content with your prices and got used to how things worked so far. Needless to say, not all of your clients will be satisfied with these changes.
This is where a loyalty program comes in. Consider offering them a complimentary service to sway those clients who are not on board with the increase in prices. By implementing a loyalty program, you can appeal to those clients and feel appreciated.
7. Provide alternative options.
As mentioned above, not all clients will be on board with the change in your rates. And that’s ok. There are multiple reasons why a client will choose to no longer work with you after increasing your prices. Support them in their decision, and help them as much as you can going forward. After all, they trusted you enough to give you their business in the past.
And even though they are not your clients anymore, it doesn’t mean you can’t end your business relationship on good terms. Pay it forward, and help them find another provider whose services match their budget. If you know other providers in your field, refer your former clients to them or introduce them directly.
This is a win-win-win situation, even though it may not feel like you are getting too much out of it. By referring former clients to other providers, you are bringing business to that provider, helping that client find something that fits their budget, and helping yourself by developing and strengthening a network.
As any self-employed service provider will tell you, running a successful business comes with significant challenges. You are responsible for providing the best care to your clients while also dealing with the nitty-gritty of the business side. Collecting payments, filing for taxes, setting meetings with clients, and managing expenses are all on you. But what if they don’t have to be? What if there’s an easier way to take care of those tasks while focusing your time and attention on providing clients the best service possible?
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