You’re smart; you know that increasing prices will improve your margin. The real question is why do more firms not put up their fees as a way of making more money? If you’ve ever asked yourself how to increase prices, or should I increase my fees, stop thinking about it, make a note of your first actions and implement….
Price increases – why?
You can probably do the maths better than me, but let’s check this makes sense. If you put your fees up by 5% and even if you were to lose a small percentage of clients, you would still make more on the bottom line. The fear is often one of losing money, the reality doesn’t normally come close. I’m not claiming increasing your fees is the answer to all ills, but if you haven’t for a long time……
Why don’t you just put your fees up?
How many of the following have you heard yourself say, when you’ve thought about increasing your fees? I don’t…:
- want to lose clients
- feel able to put up fees
- want to have difficult conversations with clients
- want to be more expensive than a local rival
- give good enough service or value
- really know what I should be charging
- know how to go about the conversation with clients
- have the time to go about it properly, so didn’t do it
Pricing for profit
Let’s quickly nail this one quickly. You run your firm to make a profit. The level of profit is one you choose to achieve. You either do things to achieve the target you chose, or you chose a profit level because it is what you allow to happen.
How to increase prices
The reasons for getting stuck and not implementing the price increase fall into one of three categories. Where is your main problem and what’s your answer to “how to increase prices”?
- Confidence: Not wanting to handle the conversations, or fears about clients leaving. Think through some of the ‘what happens if‘ scenarios helps; when most people list then down there’s a realisation they’re not likely to occur; and even if they do occur you can prepare a response in advance. Is it me, or does it seem to be the price sensitive clients that are also the ones who are most demanding and least profitable?
- Time: Yes, some people really do report they don’t have the time to increase their prices. Yet these same people will spend hours each week networking, or on social media for less benefit. What do you really need to do before increasing fees? Perhaps a quick analysis of who pays what and the related profits, or just a list of the ones you know you need to start with. So plan of who you will speak to and when. You could start next week with the first few conversations/ emails. You don’t need to do them all at once, get started and then do a few at a time.
- Poor service: Improving service levels is important, but are you going round in circles? Can’t improve service as not profitable, don’t want to increase fees due to poor service? The short answer could be to start increasing fees for new clients, happy clients and low profit clients.
Your fee increase
- Increasing your prices rarely, if ever, causes enough client losses to mean you are worse off. Even if you lose a couple of price sensitive clients, you will be better off.
- You don’t need to do it all at once, getting started with the first conversations is critical. Think about a simple explanation now (or email me and we can talk through some)
- Think about what you will temporarily stop doing, while you really work on your profitability.
- Think about a reward you will give yourself once you’ve completed the exercise.
When are you starting to increase your fees, rather than ask yourself ‘how to increase prices’?