Something every business encounters is the decision on when and if to raise their rates. Maybe you are considering it as we are going into the new year?
Here are some important things to consider when you are thinking of raising your rates.
Get Clear on Why You Are Raising Your Rates
The first consideration is - why are you raising your rates? There are 3 common causes.
1. Your current rates are too low and you underpriced your offers. Whether you did this unintentionally or as a marketing strategy to acquire new customers, if your prices are too low, that is a good reason to raise your rates.
Not sure if your prices are too low? Consider if you are getting a good enough return on investment and driving enough profitability from the offer. Another indicator is usually your current clients. When you start hearing things like "I can't believe this is all you charge," you know your rates are too low.
The perfect price is one where people feel they are getting a tremendous amount of value for their investment but they don't feel like they paid too little. I recently had a client tell me she felt bad that she was only paying me a certain amount to coach with me and that it should be at least twice that. I was already planning to raise my rates but that confirmed what I already knew - it was time to make the change.
2. You have added more value to your products or services but haven't increased the price to reflect that value. This typically results in less profitability for the business, which is the opposite of what you want. Over time you want to increase profitability, not decrease profitability so if that happens, it is a good reason to raise your rates.
In the case of my client who told me I should be charging twice as much, I had more than doubled the value of what I included in my coaching package but hadn't changed the price. At one time, my packages had been appropriately priced, but over time they became underpriced when I kept adding in more value.
Have you done the same? Consider what you included when you established your price vs. what you include now. If there is a big difference, your prices need to go up accordingly.
3. Higher rates better align with your next level of business growth. How you price your offers has a lot to do with positioning. Although not always accurate, things that are priced higher typically have a higher perceived value and will drive a more serious client.
Throughout the life of your business, you tend to continuously uplevel both your business and the clients you work with. Early on, you say yes to a lot people who aren't a good fit in order to find the ones who are a great fit as you refine who your ideal target market is. But as you move on to grow and scale your business, you should continue to uplevel your target market.
For example, my target market is established coaches, consultants, and entrepreneurs. While I can help anyone at any stage of business, when taking on private coaching clients, I choose to invest my time and expertise in only those with established businesses who are looking for accelerated results and who are as serious and fully committed to their success as I am. When I started down this journey 20+ years ago, I worked with anyone. Today, I am selective about the coaches, consultants and entrepreneurs I work with privately and I price my offers accordingly to align with and attract only my ideal client.
As you consider the next level of your business growth and the ideal clients you want to work with, which may be different from your current clients, evaluate if your current pricing aligns with and would attract them or if it is too low and they would think what you offer isn't right for them.
A pattern I see very often with my own coaching clients is that their pricing is too low to attract their ideal clients so they remain stuck working with clients who drain them instead of fuel them.
Avoid This Mistake When Thinking of Raising Your Rates
One thing to be careful of is arbitrarily raising your rates. I often see people do this in reaction to advice given to them directly or via emails and social media posts they are bombarded with saying "you need to raise your rates".
Like all things in business, the decision to raise your rates should be a strategic one.
If your pricing matches the value your clients receive and you aren't underpriced... if you've added nothing new to your offers that increases the value... if you are already serving your ideal target market and your offers already align with your next level of business growth... then there is no reason to raise your rates. No matter what your well-intentioned business bestie or that newsletter in your inbox told you.
If this is your scenario but you want to raise your prices and increase profitability, then be sure to look at how you can provide and communicate additional value in direct proportion to the increase.
If you can help your clients get better or faster results, or save them time or money by adding something they really want, most markets will happily invest more for these things.
Determine How and When You Will Implement Rate Increases
Once you have decided to raise your rates, there are a few decisions you will need to make.
1. You will need to determine when to raise your rates. A lot of people will tie this to a specific time - such as the beginning of a year or quarter. Others will tie it to a specific event - such as the next launch of your offer. The reality is that there is no right or wrong time to increase your prices, there is only the time that makes the most sense for your business and that fits in best with your marketing and launch calendar.
2. You will need to determine your plan for raising your rates. A lot of business owners fear that raising their rates will negatively impact their business and their profitability, but I find it is usually the opposite when implemented strategically.
A very effective strategy is to give clients a last chance to join your program, sign up for your service, or apply to work with you at the existing pricing. A price increase can be a very effective strategy to get those on the fence of working with you to take action.
You should plan for your price increase in the same way you plan for a launch. A combination of teaser content letting people know it's coming, some emails and videos (or whatever strategy you currently leverage with your audience) to communicate the price increase and how to lock in current pricing, and a last chance to join at the current rates sequence.
3. You will need to determine what to do about current clients paying your current rates. Although it isn't necessary, it is a good practice to grandfather in existing clients at their current rates when you increase prices. You will need to determine how long they are grandfathered in. It could be for as long as they remain an active member, or it could be for a specified period of time, as short as 30 days or as long as 1 year.
You will have some attrition when the specific period of time is up, but that's not a bad thing. It helps you to create space for new higher paying and more aligned clients. This is especially helpful if you have clients that you have been wanting to drop but weren't sure how.
Ready to Increase Your Rates?
As a final tip, leverage the price increase as an opportunity to re-highlight all of the benefits your offer provides and how it helps your ideal client to achieve the result / transformation they want. Also be sure to highlight any additional value you have added.
Have questions? Share them in the comments below and be sure to join me every Thursday for Lean Coffee in our private Facebook Group where I do a free mini-training plus answer your burning business questions live. See you on Thursday!
by Crista Grasso
Known as the "Business Optimizer", Crista has the ability to quickly cut through the noise and focus on optimizing the core things that will make the biggest impact RIGHT NOW to grow and scale your business. As a lean business consultant, she specializes in helping businesses gain clarity and focus through strategy, planning, and lean practices. She is the creator of the Lean Out Method and the 90-Day Lean Out Planner, and is also the founder of the global accessories brand Criscara Jewelry.