Navigating price increases can be the bane of so many business owners’ lives. How do you pull it off successfully without losing all of your clients? How much should you increase prices by? And how will you ensure that clients actually pay?
Well for any business owners reading this blog, fear no more – we’re here to help you to find confidence in raising your prices; all in time for the New Year!
Why Should I Raise My Prices?
There are a few really good reasons for introducing a fee increase, including addressing cash flow issues, facilitating growth in the business, or even simply just to reflect the growing value of your team’s work. Raising prices can ensure a healthier cash flow, putting you in a better position to make important decisions over the organisation’s future, all the while helping your team to feel like their time is truly valued and being put to good use. Unfortunately, having good reasons doesn’t always negate the doubt.
Reality Vs. Expectation
The expectation weighing down on an agency owner’s mind is that current clients – especially those who have been with the business since the beginning or through particularly tough times – may react badly to being asked to pay more for what they see as the same services.
Although you may encounter some resistance, the reality is that it often works in your favour. As time has gone on and your agency’s successes have mounted higher and higher, the value of your work has also increased – easily justifying clients ‘paying more for the same’. Clients who do leave as a result are opening up your team’s availability for clients and projects which provide more value for their time and which they’ll be more invested in, so don’t dwell on a negative reaction.
Of course, the success of all this depends on you choosing a price which accurately reflects the quality of your service and the current market; an unjustifiable price climb of 1000% won’t serve you well! That’s why preparation is key – and knowledge is power.
Arm Yourself with Knowledge
Aside from taking a look at the books and how much you need to increase to grow your business, you’ll need to ask yourself two very simple questions before introducing a price increase:
How Much Are You Worth?
To figure this out might take a bit of soul searching, but it’s the key to charging a price that’s fair on you and your team. Start by looking at how much your business is currently charging and factor in current overheads and how much you’ll need to successfully expand. Then, consider how much your team’s time is worth, taking into account their experience, efficiency and successes. This is trickier than it sounds because you must remain objective throughout, but don’t undersell your services and at the same time be realistic to what your target demographic can actually afford.
How Much Are Competitors Charging?
It also helps to investigate how much your rivals and peers are charging their clients to get an idea of what people are willing to pay for similar services. There may be some temptation to wildly undercut your competitors, but you’re only doing your own business a disservice in the long run.
How to Go About Raising Fees
Once you’ve thought about your answers to the above questions and found an ideal set of figures, it’s time to announce the price increase to your clients – something which can be a challenge in itself. Just keep the following in mind and you’ll sail through the process in no time.
- Pick Your Timing
This doesn’t necessarily mean choosing a timing that’s good for clients – although January can be a hard sell depending on how successful your clients’ industries are at the beginning of the year. It primarily means not choosing a time when it’s essential for your business that clients say yes; leaving it to the point where your cash flow will seriously suffer if no one agrees isn’t a smart move. Also be sure to consider logical timing as well – upping your fees will work much better when factored into the next invoicing month for a client, and getting that timing to line up amongst clients will save you a lot of trouble.
- Pick Your Wording
When letting clients know that they will need to start paying more, it’s important to be polite and justify the price increase – whether the justification is the increased value of your services, to accommodate growing demand or simply to facilitate the business’ evolution. Clients are also much more likely to be responsive if you pick up the phone or personally let them know that changes are coming.
- Update Your Paperwork
There’s no point in raising prices and having clients agree to pay these new fees if you forget to update their repeating invoices, or don’t have them sign an updated contract. Get the agreements sorted, the invoices updated, and the direct debit up to date for a much smoother transition.
Once you’ve introduced your price increase, it won’t be long before you’ll see a noticeable increase in cash flow. Although some clients may not have stuck around to experience the higher fees, that’s not necessarily a bad thing – it’s often a sign that they were using up more time and resources than they were worth to the company. Now you’re in a better position to market to clients you want to work with, charging a price which is fair to you, your clients, and your team – and you survived one of the most persistent challenges business owners face!
Make growing your business your New Year’s resolution for 2017 – get in touch with My Accountancy Place to find out how we can help your digital creative agency to grow over the next twelve months!