You’ve thought about it. You’ve thought about it some more. And then you’ve thought about it some more. And now you’re finally ready to raise your service rate!
Ummmmmm- now what?
You probably have an idea of what you want to raise your service rate to and you’re probably feeling excited and nervous and a little scared but mostly ready.
But wait! Before you start notifying clients there are 12 essential things to do.
Why are these things so essential? Because when you raise your rate you want to be absolutely sure that your new rate is going to support you financially AND reflect your value. You also want to be sure that 6 months from now, you’re not raising your rate again because you missed something.When you raise your rate be sure that your new rate supports you financially & reflects your valueClick To Tweet
So hold those rate increasing horses for just a little bit longer and do these things before you raise your service rate:
Research service rates in your industry
Before you raise your service rate, it’s important that you research other service rates in your industry. This isn’t just about charging what everyone else is charging, it’s also about understanding your industry’s pay scale and growth potential.
When researching service rates in your industry be sure to pay attention to:
What other’s are charging
What services they’re offering
Where they live
What overhead costs they have (like office space)
What type of clients they serve
Use this information to determine your industry’s pay range. Ask yourself:
Where do I want to be in this range right now?
Where do I want to be in three years?
Make a list of your services
List every single service you provide and how you package your services together. Don’t forget to include the small things that you do for your clients.
For example, if you’re a dog walker and pick up dogs from home- that’s a service. If you’re a massage therapist and teach your clients stretches at the end of their sessions- that’s a service.
The point of this list isn’t to figure out what to advertise about yourself- it’s to understand all the ways you bring value to your clients. Understanding your unique value will help you set your service rate and feel more confident charging it.
Review your short-term and long term financial goals
Do not- I repeat- do not raise your service rate without looking at your financial goals first. Why? Because you deserve to reach your goals and raising your service rate is one tool to get you there!
Start by looking at your short term (less than 1 year from now) goals. Consider:
What do you want to be earning in 1 year?
What you are saving for?
Will there be any life style changes that may impact your spending?
For example, two goals I had before raising my service rate were to save for taxes and join the gym. Both of these goals impacted my rate raise.
Next, look at your long term goals (3-5 years from now):
What do you want to be earning 5 years from now?
Where do you want to be living?
Will you have kids? A dog?
What major shifts will impact you financially?
Calculate your business expenses
Just like it’s important to consult your financial goals before you raising your service rate, it’s also important to consult your business expenses to ensure that your new service rate will increase the profitability of your business.
If you’re using an accounting program, then running a Profit & Loss report will show you a list of your business expenses. If you don’t have a digital tracking system, go through 3 months of your business statements and take the average of your expenses.
What’s important here is that you KNOW what your business expenses are. Knowing isn’t having a vague, general idea. It’s being clear on how much it costs you to run your business.
Calculate how your rate increase will affect your income
Spend some time doing math (ewwww math- I know). Choose three possible rates and apply them to your business right now. See how your income shifts with each service rate.
Be sure to take note of how each service rate affects your financial goals and business expenses. Which service rate best meets your needs AND the needs of your clients? Which service rate feels like a healthy balance of both?
Practice saying your new rate out loud
Yes, this sounds like you’re standing in front of a mirror rehearsing for the school play, but let me tell you about that time I raised my rate and then failed to actually tell new clients about it.
You see, doing the math, figuring out the rate, and writing an email was the easy part. Saying it out loud to a real live person was a whole other story. Why hello self-doubt.
Get comfortable saying your new service rate out loud and with confidence. Practice your service pitch and rate over and over until it’s automatic and slides out of your mouth.
Decide when you will raise your service rate
Deciding to raise your service rate is not the same as actually raising it. Pick a date that your new rate goes into effect and apply it to everyone.
Avoid picking and choosing different dates for different clients. It will complicate and confuse your billing and you will be more prone to errors (which means you lose money).
Aim to give your clients 2-3 months notice of your service rate increase. You def don’t want to blindside them by telling them 3 days before you bill them that your rate has gone up.
Decide how you will notify your clients
Will you call them to discuss your new service rate? Send them a notification letter? Have an in-person meeting?
How you notify your clients will depend on several factors:
What’s your main form of communication with your clients?
How much are you increasing your rate?
How will your increase impact your client’s finances?
Are your services and policies changing as well?
The higher the rate increase or more drastic the change, the more likely it is that you should notify them verbally.
Make sure you tend to your own emotions. If telling someone verbally that your service rate is going up totally freaks you out and you know you will never do it- then email them.
You want to find the balance of what you will actually do and what is fair for your clients.
Draft a service rate increase letter or phone script
Take a time to draft a thoughtful service rate increase letter or phone script. Your letter or script should include:
Appreciation for them as clients
Your new service rate and when it will go into effect
A brief note (not an explanation or apology!) about how you arrived at your rate (this is where #1 and #2 of this list come in handy)
A note about your gratitude for their referrals
An invitation to contact you if they have questions or concerns
Your increase letter or script is NOT a justification for why you raised you rate or an apology monologue. Keep your letter concise yet authentic. Be the you that stands in front of the mirror and confidently recites your rate. (psssst- you can download my rate increase letter template here)
Get comfortable with the idea of losing clients
Let’s not pretend here- if you raise your service rate you might lose clients. This is a real possibility. Before you notify your clients of your increase, get comfortable with the idea of losing clients.
When I raised my service rate, I prepared myself to lose 2-3 clients (which was 20% of my income). But, when I did the math, I realized that even if I lost 2 clients, with my rate increase, I would be earning the same amount of money.
Losing clients also meant I would have room in my practice for 2-3 higher paying clients. Even if I lost clients, I still expanded my earning potential through my rate increase.
Once I was able to see the benefit of losing clients, I became comfortable with their potential loss. And if you’re wondering- I didn’t lose any clients when I did a major rate increase. (you can read about my clients’ response to my rate increase here)
Notify your clients
Send your service rate increase letter (as a PDF so they can file it), set up a time to meet, or schedule a phone call. If you’re telling your clients in person, you should still give them copy of your rate increase letter for their records (and in case of a dispute).
If you’re emailing your clients, ask them to write you back and confirm they have received your notification. If you don’t hear from them in a week, follow up.
You want to be absolutely sure your clients are aware of your new service rate and agree to be billed at that rate.
Update your website and email autoresponders
Here’s another thing I totally forgot to do, which cost me money. Be sure you update your rate anywhere it appears publicly. Also, if you use email responders or canned responses (that’s what got me!)- update them!
Be sure all your information is consistent with your new rate and be sure you do this BEFORE you notify your clients so they’re not wondering why you are charging them more than your listed rate.
Are you SO much more ready to raise your service rate? I hope so because you totally deserve to have your income fully in alignment with your value.
Got questions? Ready to raise your rate? Had a major rate increase WIN? Tell me in the comments!
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