Raising your rates…let’s talk about it.
I know that many business owners (myself included sometimes) don’t really want to talk about money. Especially when it comes to asking clients for MORE money. Yeeesh.
Money in our culture is kind of a taboo topic. You’re not supposed to share what you make with your coworkers at a corporate job. Telling your friends your salary might get you a side eye.
It’s no wonder that we, as business owners, feel so dang awkward talking about it, too!
And when you take into consideration the amount of times we get into our heads about whether or not our value does indeed equal our cost (we all do it!), it’s enough to make your head spin.
I totally get you, and I’ve been there too. Raising your prices can be a scary conversation to have with your clients, but when you back it up with logic and reasoning, it’s much easier to defend yourself and feel confident in that price.
So go brew yourself some coffee and have a sit — today, we’re talking about how to raise your rates.
In January, I went through a hiring spree. Content copywriter, YouTube editor, VA, OBM, and two new assistant bookkeepers. Wowza! Needless to say, my expenses shot through the roof. But thankfully, my revenue was still covering all of my expenses.
Back in December, I started making plans to raise my prices in the new year (which is part of the reason I hired so many people).
I was super excited, and a little nervous, because I hadn’t raised my prices the entire three years I’d been in business. I knew that the demand, quality of work, and experience I had under my belt finally called for an increase.
So, I gave my clients a “stepladder” timeline — three months grandfathered in at the current price, three months at a new price, and then the new price would kick in. Sounds simple, right?
However, everything DID NOT go to plan.
Seven clients left. And I cried after each one. I was super discouraged. But I still had these new overhead expenses. I started to wonder if I had made a bad call.
It was not a great feeling, but ultimately, I knew in my gut that I was doing the right thing. And that the right people would need me and find me if I kept marketing ethically and consistently.
I’m glad I stuck to my convictions because eventually, it all worked out. And that’s exactly why I’m telling you this little story. Because yes, it’s scary to raise your prices. And it WILL change things in your business. But sometimes, that’s for the better.
(Side note: I made an offer to those clients that left. It wasn’t their fault I raised my prices, and I felt a sense of loyalty to them since they were OG clients. So know that there are options for clients you DO want to work with. Price increases don’t have to mean goodbye.)
Now, then…let’s get to it! If you’re wanting to take a more logical approach than just going with your gut feeling (which I totally recommend), here are the things you need to take into consideration before increasing your prices.
Even if you offer a per-project price, it still comes down to how much you make per hour. Time is money, especially in business.
So figure out what that magic number is for you. And start tracking your hours to see if the time spent on projects is worth the payout.
A $1,000 lump sum for a simple project may sound nice, but when you get down to the nitty-gritty, it’s very possible that you only make $10 per hour from it. Which is totally NOT sustainable.
Whether you’re working with a retainer client or on a project-only basis, you do need to consider what costs are associated with that project.
For example, I have two assistant bookkeepers to help me with client projects. I still have to review their work, but for the most part, it’s pretty hands-off. However, what clients pay me isn’t going directly into my pocket. It’s also going to pay my assistants.
And it’s the same thing if you’re hiring help with projects, or subscribing to software to get it done (like Adobe). Whatever direct costs are involved with making that project happen, take it into consideration.
In addition to my assistant bookkeepers, I also have a VA, OBM, and content/copywriting team to help me keep my business running.
Now, why is this not classified as a direct cost? Because each of these isn’t exactly needed to make the project happen, but to make my business happen. If you’re outsourcing help, renting out a studio, or paying for something like Dubsado, those are overhead costs that need to be considered.
A girl’s gotta eat, right?! Make sure you’re also taking home some sort of income. It’s just not sustainable if you don’t pay yourself.
What’s that number look like for you? It goes back to that hourly price, but also think about what you want your “salary” to be. Make sure that what you’re bringing in is enough to pay for all your business expenses, PLUS your paycheck.
Look to the right. Now look to the left. What is everyone else charging for the same kind of services you offer? What are “competitors” (in niche, services, and experience) charging? That can be a good indicator if you’re on the right track.
But keep in mind that you SHOULD NOT make decisions purely off of what other people are doing. It’s YOUR business, and you need to do things in a way that works for you. That includes factoring in things like experience, the level of care you provide to your clients, and how efficient your systems are. The whole enchilada!
Ultimately, industry standards are just a guide, not a rule.
What’s the demand for your services? And do you have an established sense of trust and authority with your clients? This goes for within your business and within your industry.
It’s basic econ — if there’s a higher demand, with a limited supply, the price goes up. Where is the demand for your services and is there an abundance of supply (competitors)? You can’t expect people to pay out the wazoo for things they don’t really want or need.
I know talking about money can be a tough conversation to have, but the more we do it, the easier it gets. Like knitting or riding a bike.
Okay so maybe you don’t knit and you already know how to ride a bike. That’s fair! But hopefully, you get the idea.
In this economy, it’s crucial that we’re making smart decisions with our money, including pricing in our businesses, as people are holding onto their own dollars a little bit tighter right now.
But my friend, you got this, and I’m cheering you on!
And if you need a little bit of help getting started on your price eval…
Be sure to grab my FREE workbook, How to Know if Your Biz is Profitable! This is a printable guide you can work on by hand or on the computer, whatever you fancy, to help you gain insight into your business finances! Learn how to understand your numbers so you can increase your profitability.
Sound good? Grab the guide here!