12 Signs It’s Time to Raise Your Rates
Nobody likes to see prices increase. Businesses and consumers usually operate on a set budget, restricting the amount they can pay each month for products and services. But for a business to continue to grow, occasional price hikes are necessary. The key is to make sure price increases are rare and well timed, occurring at strategic points during a business’s growth. Here are 12 signs it might be time for you to increase the price you charge for your services.
Demand Is High
You usually know when your talents are in high demand. Perhaps you’re a logo designer and you’re getting more requests for your talent than you can accept. Or maybe you’re a technical writer and you’ve learned businesses can’t find reliable, talented writers with your experience. Whatever the reason, when you see an increased demand for your offerings, you should take advantage of the opportunity to up your prices.
You don’t have to increase prices on your existing clients immediately. You can grandfather them in at the old prices for a set period of time, quoting your increased prices to new clients. This will ensure you have plenty of clients in place at the new price if any of your existing clients choose to leave when you break the news about your rate increase.
You’ve Reached Your Limit
Every business reaches a point where it must grow or remain stagnant. If you’re a one-man operation and want to stay that way, you still should consider increasing your prices in order to bring in more income for yourself and your family. However, if you’re running a business, eventually you’ll have a need to add more staff or move into swankier office space.
When you find yourself turning down opportunities for new work because you simply have reached capacity, it’s time to up your prices. The additional income will allow you to hire someone to help, whether that means turning over mundane administrative activities to a virtual assistant or hiring an additional permanent team member.
It’s Been a While
When was the last time you raised your prices? If the answer is “never,” it’s time to take an inventory. Before raising your prices, research the going rates for the work you’re doing. Determine how much competitors are charging and find a way to remain affordable without giving your work away.
It might be a good business practice to reconsider your pricing scheme every year at a specific time. The end of the year is an ideal time to do this, since January 1st brings the opportunity for a fresh start. You probably won’t raise your rates every single year but at least this will prompt you to do an audit of your pricing at least once a year.
You’re Upgrading Your Offerings
If you’re adding value, you have a great opportunity to up your prices, as well. Customers will see that they’re getting something extra for that money and won’t mind as much as if you were simply implementing a price increase on existing services.
Upgrades can extend to your decision to add more staff. You can explain that the extra revenue will allow you to hire more employees, resulting in faster turnaround times and better customer service. Deliver on those promises and your customers will be happy.
Your Resentment Is Mounting
At one time, you had a passion for what you were doing. These days, however, it’s beginning to feel as though none of your clients appreciates you. Making matters worse, you’re well aware that others in your line of work are making significantly more money. This attitude could impact your customer service.
If you’re certain you’re underpaid for the work you’re doing, conduct research before upping your prices. Determine exactly what you should be making and elevate your rates to match. You’ll be a much less disgruntled worker, which will benefit both you and your clients.
Expenses Are Growing
At one time, the money that came in each month was sufficient to pay all your bills. But as your small business has grown, you seem to be paying more each month for expenses. There’s the cost of Wi-Fi access at your place of business, which never remains stagnant for long, as well as the cost of any supplies or labor involved in getting services to your clients.
When your own vendors keep raising prices, you have no choice but to pass those costs on to your own clients. Be honest as you break the news, letting them know your own costs have gone up and you have no choice. People are often much more understanding when they know the reason behind the cost increase.
You Never Take Time Off
If you’re working seven days a week with no time for a vacation, you’re working too hard. Those hours are understandable when you’re building and growing your business, but as years pass, you have to eventually wean yourself down to a more reasonable schedule. Instead of working eighty-hour weeks, set a goal of working sixty-hour weeks or at least taking time off each night to have dinner with your family.
It’s difficult to accomplish this without raising your rates, especially if you’re a one-person shop. By raising your prices, you’ll be able to bring in enough money to cover the fact that you’re working fewer hours. You may even be able to afford to pay someone to take some of the work off your hands, allowing you to accomplish the same amount of work in a fraction of the time.
Do you dread the thought of working each day? Do you tend to put off certain jobs because they seem to suck the life out of you? Instead of allowing yourself to continue to exist this way, reevaluate the work you do and determine the specific jobs causing this dread. You could try raising your rates for that type of work initially, since you probably won’t mind if those clients take the jobs elsewhere.
If everything you do brings that same level of boredom, consider a sweeping rate hike. Being paid more won’t take away your lack of passion for your work, but if you can bring in more money each day, you may be able to cut back on the mundane work and pursue something you do enjoy.
Your Qualifications Have Improved
Many professionals continue learning throughout their careers. If you’ve attended courses or workshops that have improved your knowledge, you’re bringing something more to the work you’re doing. Your rates were likely set long before you achieved that level of education, so there’s no question that you should raise them to match your new skill level.
This is especially true if you’ve achieved tangible accreditation for your educational efforts. If you’ve obtained your master’s degree or certification in your field, you now have that additional credential. You should announce that to your clients in the months before your rate hike so that the change is understandable.
Clients Are Demanding More
Over time, you may notice that you’re expected to do more without compensation. Perhaps you’re asked to conduct research or perform marketing tasks in addition to the work you were hired to do. Don’t be shy about charging separately for these items, especially if they aren’t within the initial scope of your work agreement.
If you’ve noticed you’re surrounded by extra-demanding clients, a rate hike could be exactly what you need to eliminate the clutter. If you’re like many business owners, you’ll notice a small percentage of your clients take up the vast majority of your time. Instead of an across-the-board rate hike, first tell your time-consuming clients you’re raising your rates and they’ll either walk or they’ll pay more for the time they’re taking from your busy schedule.
The Cost of Living Has Increased
Over time, the cost of almost everything gradually increases. If you keep your rates at the same level for years, you’ll actually start losing money. Your clients will understand that due to inflation, you’ll have to raise your rates occasionally just to be able to pay your bills.
When inflation drives a rate increase, the best course of action is to point out the last time your rates went up. Mention that the cost of living is higher and in order to meet your financial obligations, you must keep your prices in line with the current market.
You’ve Reached a Crossroads
Most entrepreneurs have an inborn drive to continue to grow and improve. This means occasionally, every business owner will reach a point where he must make major changes in order to grow. This point is a crossroads and it’s a natural part of building a successful enterprise.
When you reach such a crossroads, don’t make changes all at once. You’ll need your foundation in place as you pursue new opportunities. If you’re short on time, scale back on the work you’re doing at your existing rates as you grow your new work.
Rate increases are a natural part of doing business. It’s important to occasionally review the rates you’re charging and compare them to industry standards. If you can do so, you’ll create a growing enterprise that not only keeps up with the cost of living but also helps you grow financially.