[MENTAL MODEL] 3 Ways To Increase Your Rates With Existing Clients By Harnessing 1 Superpower
I get asked this a lot: “how do I raise my rates with existing clients”?
If you haven’t already, I write extensively on how to strategically increase your profit margins here. (Highly recommend you focus on your REAL promise to the marketplace and how to elevate your positioning)
In this post, I share a few different ways to go about this, especially if you want to raise rates with CURRENT clients.
WARNING: This is advice that you have to take into consideration and use your wise judgment to apply.
You’ll have to:
1) Be ok with the possibility of losing a client
2) Understand your true goals: why raise rates beyond making more money? What’s the money FOR?
3) Ensure you maintain a solid professional relationship with your client regardless of what happens
The 1 superpower you need to master and be able to leverage is crafting PERCEPTION.
Your client has to see your rate lower in relation to the value you deliver.
They need to justify this rate by emotional and logical benefits of the value you deliver.
This is not wordsmithing or manipulation, this is:
a) forcing you to deliver more value to the marketplace (those that do will be rewarded)
b) present your offering in a compelling way
So to go from $200 to $500/hr(or from $5,500/mo to $7,500 per month), for example, what does that mean to the client?
1. They don’t care that you want to charge more and earn more
2. You also don’t want to enter into a price war where you increase your fee, and the client says, "I’ll just find someone who can do it cheaper"
I won’t boast how much I’ve charged (think over $1,000/hr), but that’s only because I positioned my solution as a bleeding neck solution (and I also didn’t bill by the hour - more on that later).
To change the perception of a client who has been with you for over a year, you have to maneuver the conversation with the following:
You want them to feel (emotion) that:
they are getting a deal
feel they are taken care of (that you actually care and are dependable to deliver results)
And tangibly KNOW and SEE they are truly getting more value from you (you gotta deliver, if not, stop reading this now)
How do you do this?
Since I know nothing of what you do and what benefit you create for your clients, I suggest focusing on the 2 levers:
- helping clients make more $
- helping clients save $
Regardless of the economy, everyone wants to make more $ or save $.
Questions to consider for yourself:
What is it that you do that provides value to help clients make more $ or save $?
What is it that you do that you are underappreciating yet drive dramatic cost savings or cost earning?
What can you quantify in the work you do? I.e What if you found out that your work saves or makes the client an extra $30,000 per month?
Understanding this will allow you to craft a better picture of the value of the work you deliver.
A quick note on hourly pricing:
I’m never a fan of hourly pricing.
The best way to position yourself out of hourly is to provide and sell an outcome/result, NOT your time.
Let’s say you’re a coffee consultant selling to coffee roasters,here are real options to offer:
OPTION A: "I'll do your coffee tasting and research for $60/hr and give you my feedback”
OPTION B: “I’ll review your coffee, do market research and provide consulting from my X years in the industry to help your next blend sells a minimum of $300,000 this year alone.”
Which one would you buy?
Which one would you offer?
Remember: if you bill by the hour, you will always be time-poor.
3 Scenarios To Increase Your Rates
SCENARIO 1 - HIGH RISK - HIGH REWARD
1 - Increase your rate
2 - Tell your client of the rate increase, and additional value adds (ensure they see the value as noted above)
3 - See if the client agrees or doesn’t agree
SCENARIO 2 - MEDIUM RISK - MEDIUM REWARD
1 - Increase your rate
2 - Tell your client that you are taking on new clients at this higher rate (***must be true***) and that in order for you to manage your time better, you have to have a min set of hours from the client
3 - Work with the client to agree on min set of hours with your higher rate
4 - With a higher rate and lower/set hours, work to fill in your remaining hours at this higher rate
SCENARIO 3 - LOW RISK - MEDIUM REWARD (Asymmetrical Risk Reward)
1 - Don’t change your rate; move to a flat fee monthly model to deliver the same results regardless of time it takes you (ideally, you systemize your process to lower your time to get the result - that way, you save time i.e what you’d bill for 3 hours, you complete in 2)
2 - Work with your client on set expectations of this deliverable and what’s included with this flat monthly fee
3 - Lock in months in advance with an agreement to work for 3/6/12 months and provide favorable payment options to the client if they choose longer-term commitments (this will help you create predictability and a base of cashflow)
The last option is to do nothing. But we aren’t here to settle for less ;)
As always, it’s an honor to be a small part of your journey.
Do Good Work,
Digital Growth Ops