Change is an inevitable part of life and business, but there are some changes that require more planning and preparation to execute. At the very top of that list is a service provider’s decision to raise rates.
Ever since I shared how to raise rates the right way, the nagging question remains: When should a service provider increase prices?
In some ways it’s much easier for product-based companies that can calculate the hard costs of materials, labor, shipping and overhead to determine pricing. Putting a fair value on your knowledge and time is much harder.
Related: 3 tips for adopting new business procedures
Related:Are Your Business Systems Innovative?
Clients don’t want to pay more “just because” or to enrich a business owner’s personal life. In a competitive market, excuses like “I deserve more” simply do not fly. Here are four great reasons to raise your rates in 2018:
Additional Services Added
If you’ve expanded your business to add more services, then the overall value of your business increases, even if a client doesn’t use all of those services. By offering more to your client base you’ve presumably learned new skills, hired more staff, created new packages, and can deliver more value to meet growing client needs.
Whether you’re a personal trainer offering new classes or a gardener who offers tree trimming, increasing your rates reflects the value your business provides.
New Certifications or Expertise
Quick question: If Oprah Winfrey coached you on your business for one hour, would you find her time more valuable in 1998 or 2018? Clearly, her advice would be more valuable today — she’s had more experience in new ventures, industries and learned a lot in the last two decades.
If your service is primarily knowledge-based, then your time is also more valuable with added experience, official trainings completed or certifications earned. When you’re selling your time, whether you’re a lawyer, accountant or life coach, at the same rate over many years, then you’re discounting the experience you’ve gained.
New clients benefit from the mistakes you’ve made in the past. With lessons learned and even higher prices you’re saving them time, money and energy bringing all that experience to the table.
If it was time to sell your house and, in the past 10 years, you’ve remodeled the kitchen, built on a deck and re-roofed, would you ever imagine selling it for the purchase price? Probably not.
When you’ve invested in your business location, you should increase your rates accordingly — if you add a potted plant don’t increase as if you’ve added a pool. The value of upgrading your office or facilities isn’t just in the cost of tiles or fresh paint. Improving your location is also about creating a better experience for your clients and customers.
It’s reasonable to see an increase in rates when a physical therapist adds new workout machines or when the local coffee shop adds comfy lounge chairs and a coffee roaster.
New Team Members
You should raise your rates when you increase the size of your team. Each time you give attention to the team that helps you serve your clients, you are improving the overall experience. These changes could be a dedicated receptionist to answer questions and make your clients feel welcome, or another service tech so you can take appointments on Saturdays, so long as each person brings value.
I even include team members who are behind-the-scenes or whose work may be invisible. The staff that cleans your gym so it sparkles add value, as will the accountant who helps you keep the lights on and balances the books.
Hiring more team members can also mean you’re able to devote more time to your clients and their challenges so you can deliver a higher caliber service.
You may already realize you’ve taken several of these steps to improve your business since last raising your rates. However, if you find your revenue is stagnant, then I leave you with the advice my business coach gave me a decade ago: Increase the amount of work you’re willing to do, and increase your skills and value, or decrease your lifestyle expectations.