How to raise your rates without ticking off your clients

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Raising rates can be done in two ways:

  1. Rip off the band-aid. Say, “To hell with it!” and raise them now, without warning (or with warning), and let the pieces fall where they may.
  2. 2) With the method outlined in this post (recommended if you like financial stability).

But I’d like to dig a bit deeper in this article and go back to the “why” of changing prices, because it frames the whole thing differently depending on your answer.

So, let’s begin!

Step 1: Why?

Why are you raising your prices? And why now? (Need help with pricing? Check out this ebook.)

Sidenote: Once you finish, read how 4 freelancers built recurring revenue models that changed their business. You'll love it.

These questions are important to answer because step 1 of raising your prices without ruffling (too many) feathers is having a good reason for it.

Here are good reasons to raise your rates:

  • You recently added value to what you offer
  • You’ve always priced yourself well below the value you provide, and it’s time to even things out

Here are not-good reasons to raise your rates:

  • You just think you can get more for it
  • Other people charge more than you

Think long and hard about why you’re raising rates, and why now. And make sure, at your new rates, the value you deliver still far exceeds your compensation. You always want clients walking away feeling like they got a steal for what you delivered, no matter how much you charge.

You'll also enjoy this episode of our new podcast...

Step 2: Test the waters

Next, you want to make sure people will pay your new rates – and that your sales process will support them too. Run your marketing and client-getting processes and try to get sales at your new price point.

You may find that:

  • A) People happily pay your new rates. If so, you can likely increase them a bit and try again.
  • B) It’s a struggle for people to accept them.
  • C) You’re flat out rejected.

If you face B or C, it doesn’t necessarily mean you’ve priced yourself too high. It means your sales process needs to be updated, or perhaps you need to update your brand to reflect higher quality and higher prices. When you charge more, you have to communicate your value better too.

(Millo is riddled with posts to help you there, including this one and this one I wrote a couple months back).

However, if you make improvements to your process and branding and still get rejected – it doesn’t necessarily mean your prices are too high. It might be the quality of leads you’re attracting, which means the targeting of your marketing needs refinement. But if you’re sure your leads are high caliber, and your sales process is on point, and you’re still facing B or C, then you’ve likely aimed a bit too high.

At least for now.

These things have to happen in phases, and you might be jumping ahead to phase 5 when you’re really only ready for phase 3.

Lower your new prices a bit to find your “sweet spot” and work on raising your value even more (by enhancing your skills, adding add-ons, etc.) so that next year you really can be ready for phase 5.

Step 3: Build a “new” business

At this phase your current clients are still oblivious to your new prices. And they should be. They’re your “bread and butter” and you don’t want to go throwing that away.

You want to almost build an entirely “new” business at your new prices. Make sure you can pay the bills with new clients before communicating higher prices to your old clients.

Because, though it’s unlikely, you might lose them all.

But that’s okay. Snakes shed skin and insects molt. It’s the circle of life.

Step 4: Rip the band-aid off. Or don’t.

At this point you now have enough new business at your new prices where keeping your old clients at your old prices is a luxury you can, if you have to, live without.

Now you have two choices:

  1. As old clients contact you for new gigs, inform them of your new prices – and make sure you tell them why those prices are higher too (refer back to Step 1).
  2. Tell them nothing. Let them stay at their current prices until the end of time.

I know successful businesses that have taken both approaches.

With the former, you inevitably lose business, but you might not care.

This is the approach we take.

When we raise prices, it tends to be by a lot, and doing work at the old prices just doesn’t feel right. When we raise prices, we also tend to make many other dramatic changes to our sales / customer / deliverable processes as well as our branding (to attract higher-paying clients), too, so it just doesn’t make sense. The old prices aren’t enough to sustain the added value we bring to the table.

With the latter, you don’t mind doing work for these clients for below your value, and it does help the bottom line, so you just keep them at their current prices.

If you have the time / manpower for this, I’d recommend it. Why say no to extra income if you don’t have a problem with it? You can generate good will and referrals this way too if you inform your clients that your prices have gone up, but you’ve kept them at your old rates in appreciation of their loyalty.

It’s all about you and how you feel though.

The ball’s in your court.

Step 5: Start with this script to inform your clients of price hikes (without ticking them off)

The thing that causes customer frustration and anger in price hikes is when they’re not explained – or when there’s a bad reason for it.

It’s always an uncomfortable conversation to have, but being armed with a good “reason why” is your best bet at walking away unscathed.

These scripts (intended to be emails – but work great on the phone, too) give a very understandable “reason why”. They also have some other psychological “tactics” incorporated that make it very easy to agree to the price hike, or at least not get so angry at it.

But if nothing else – the relationship will end on good terms, and those clients can still refer people your way (when you end on a high note, I’ve found that people often still do!).

Here they are…

If you added a lot of value:

Hey [NAME]!

I’d love to help you with your project. I want to let you know ahead of time though that my prices are not quite the same as they were last time!

I’ve recently added tremendous value to our websites. In fact, here are some of the improvements:

[LIST OUT IMPROVEMENTS HERE, i.e. Responsive integration, new tactics for higher conversion rates, etc.]

This is great because you get a better product – but it also comes with a price increase of $X.

Please let me know if this is okay! I’ve really enjoyed our relationship so I hope we can continue to do business together.

Sincerely,

 

If you raised your prices to match your value (you were under-pricing from the start):

Hey [NAME]!

I’d love to help you with your project. I want to let you know ahead of time though that my prices are not quite the same as they were last time! 

At the start of my freelancing business, I was extremely inexpensive for the value and level of work I provide. However, I’m getting to a point now where my prices need to come closer to the value I bring to the table so I can afford to keep putting as much care and attention into my work as I have been.

That’s why, for this upcoming project, the price will be $X more making the total $Y. That’s still an amazing deal for the level of work and service you’ll receive, but I felt I should tell you ahead of time!

Please let me know if this is okay! I’ve really enjoyed our relationship so I hope we can continue to do business together.

Sincerely,

If your reason was not covered:

I’m sure you can work with the scripts above and make the adjustments you need 😉

Comments?

Got words of wisdom or tales of misery? We’d love to hear ’em…leave them here.

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About David Tendrich

David Tendrich is the co-head of creative agency Unexpected Ways, as well as the co-founder of Reliable PSD: the first-ever PSD to HTML & PSD to Wordpress service run by designers, for designers. He co-runs his companies from Portland, Oregon with his lovely wife and biz partner, Lou Levit.

 

More about David’s business: David is co-founder of Reliable PSD – what happened when a group of designers got fed up with PSD to Code companies… and created their own. Check them out, and see why freelancers & agencies are head over heels for this amazing new service.

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