Raising Your Fees During Economic Uncertainty There are four stacks of quarters that increase in heigh from left to right.

Raising Your Fees During Economic Uncertainty

Raising fees is a normal part of doing business, and yet, many people feel discomfort and demonstrate awkwardness when doing so.

During a time when inflation is causing the cost of doing business to rise, it’s easy to think the solution is to raise your fees to offset those costs, but there is a risk to doing that.

Depending on your client base, when and how you raise fees can cause your customers to look elsewhere. They could potentially stop doing business with you or pull back on the volume of business to balance their budgetary needs.

Years ago, I held a false belief that you should grandfather fees. I thought this was the best way to honor clients who had been with you a long time, but I was wrong.

Keeping your fees the same indefinitely while costs all around you go up is the perfect recipe to put your business out of business.

Raise your fees, but do so with skill and consideration for your buyer.

Here are 8 things you should consider:

 

1. Transactional vs. Relational

If you’re in a service-based business, it’s not the same as being Starbucks. You can’t just raise your fees without considering how that impacts others. If you choose to raise them without any communication with your buyers about how the increased fee is going to provide them with new value, there is a high likelihood you will lose business.

2. Context Matters

If you decide to raise a fee on an existing service and nothing changes except the fee, be prepared to provide context. Why are you changing the fee? How does it benefit your client?

Recently, a freelancer advised me that their hourly rate was going up by 25% with less than 30 days’ notice. While I respect their choice to raise fees, their services are built into long-term contracts I have with clients where I cannot go and adjust those fees.  This meant needing to cut costs somewhere else to end up whole and balance my own profitability.

3. Freelancer Partnerships

Many freelancers behave like employees and raise fees because they want to be paid more, but do they deserve it? A good freelancer takes time to consider the impact of this decision and works with you on the right timing.

I’ve had 3 very different experiences with freelancers on my team this year.

One person let me know their fees were increasing and reassured me that any existing client projects they were working on would not change.

Another let me know their fee was going up by 25% in less than a month and didn’t offer to make any adjustments when I explained we have contracts for existing clients built around their current fee. In this case, I would have appreciated the fee being grandfathered until the end of the year when the contract is up.

The third person offered to take on some additional scope, and when I offered to pay them more declined to take more money and said, “I recognize costs are going up everywhere right now, and I want to be remembered as someone who worked with you during a time like this, not someone who tried to get more from you.”

Now, which of these freelancers is behaving like I am their customer versus like they are an employee?

Freelancers need to see the big picture and be aware of how they communicate and make changes like this.

4. Your Customer’s Budget

Raising fees and expecting to gain additional scope without adding value is a great way to reduce scope or lose a customer. If you’re looking to increase your scope with a customer, the time to ask them for more business is not the same moment you are communicating a fee increase.  Be mindful of the timing of conversations like this.

5. New Offerings

The best way to increase fees is to introduce a new offer, grandfather an old one, and let folks pick what’s best for them. The first option can be to have a reduced scope for the same fee if you convey the scope differently from what you are currently doing.  You need to be creative in how you do this with your existing customers.

6. Give Notice

Don’t surprise people with a major price increase. Give them some notice so they can make a decision, too. You get to decide what you charge, and they get to decide who they buy from.

7. Provide Options

Don’t leave them hanging if the client is no longer a good fee fit. See if there is a way to refer them to someone else. In some cases, you will have clients who cannot or do not want to support a fee hike. In situations like this, they will greatly appreciate you referring them to another service provider.

8. Manage Expectations

Let your customers know you adjust fees annually or review fees every x number of months. Set timelines on the services you provide so you don’t surprise people. I recommend an annual review of services and fees to avoid scope creep, scope seep, and/or changes that have taken place over time that were not part of the original agreement.

 

Raising fees is part of doing business.  It is important to existing customers to consider customer loyalty, communicate clearly, be flexible in your offers, and give people ample notice when making these changes. When it comes to service-based businesses, you’re in the relationship business.

Now, if you own and operate a retail business, that’s a whole other story. You can be like Starbucks and raise your prices anytime.

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Lisa Larter Bio Image of Lisa x400

Lisa Larter

Founder and CEO of the Lisa Larter Group, master strategist, author, speaker, podcast host, social media expert, consultant, and business coach. Lisa inspires entrepreneurs and business owners to see the possibilities for their organizations when it comes to strategy. She uncomplicates modern marketing and creates (and implements) strategies for businesses that are guaranteed to increase visibility, inbound leads, and revenue.

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