How To Realistically Set Your Fees - Part 5
How To Raise Your Fees
There comes a time when it is inevitable that you must raise
your fees in order to maintain both your profit margin and
income level. You will find that the greatest resistance to this
comes from your oldest clients.
There appears to be a direct correlation between the length of
time a client is with you and the amount of outrage they show to
your rate increase. This article will discuss the types of
clients and how they usually react.
Keep in mind, no matter how you raise fees, how you approach
telling clients or amount of lead time you give them, you will
lose some clients. This is a given. I have found over the years
that a very high percentage of clients lost are those that I'm
not crazy about working with anyway. It's worked out, for me
anyway, that these former clients who complained the most about
your fee increase, were responsible for 85-90% of the
aggravation I encountered.
Clients are attracted to you for a variety of reasons. We would
all like to think that it is because of our brilliant
promotional pieces, our award winning designs, outstanding
service, etc. The reality is that many clients are using your
services strictly because of price. I refer to these clients as
price loyal. They are loyal to whomever has the lowest price.
This type of client is not particularly sensitive to quality of
work or level of service you provide. They go strictly with the
lowest price and if you have the opportunity to examine how they
run their business, your see it operates on this principle. For
me anyway, this type of client is no loss.
There is a second type of price conscious client that is
concerned with the quality and type of service being provided to
them. You may lose this type of client with a price increase,
but you'll find that they will be very apologetic about it.
These clients truly can not afford the higher rates. They are
usually a dream to work with, and I hate to lose them. In this
situation, I will try a number of ways to keep them.
Your newer clients usually react in a more neutral manner to a
rate increase. They haven't been with you long enough to get a
true baseline on your fee structures. You stand a very good
chance of keeping these clients if the reasons for the rate
increase are explained to them and not just dropped on them.
I find that I lose about 5-6% of my clients when I raise my
fees. Usually, I suffer no income loss because my higher rates
absorb their loss. Remember, the bottom line is you are selling
your time, you must make the most efficient and profitable use
of it. If your rates stay around market level, you should have
little or no trouble finding new clients.
Copyright 2000, DeFiore Enterprises.