Solopreneurs, Founders, Entrepreneurs:
Like trying to remove your stubbornly stuck handsaw in the tree you are pruning, raising rates is a challenge and not a savory one.
Whenever I am working with clients and the topic of rate increase comes up, I see and feel an uncomfortable squirm surge through their faces. I believe this is a very common feeling and experience, one worth investigating. In this short series we will examine:
Part One. When and why to raise rates
Part Two. Why it is so difficult to do it
Part Three How to go about it
Part One follows.
In business, that time will come. When we realize the inevitable, it is time to raise the rates we charge our clients, it can fill us with so many feelings. I wonder, if you, like me, and my clients, have felt something like this: dread, indignation, fear, or self-doubt?
Raising rates can throw us into a very uncomfortable place that can even paralyze our next steps. This warrants some examination and straight forward consideration.
Let’s take a step back and examine this more closely.
First, why, and when do we need to raise rates?
The answer to this question is unique to every business, however, there are some times when it is probable and on some occasions, necessary:
1) The cost of doing business has increased. (i.e., raw materials costs have increased or are harder to come by, there is a workforce shortage, forcing pay increases, etc.)
2) Profitability dives. We are unable to cover our expenses. We are losing money.
3) We are priced much lower than our competition
4) Our services, or products have been changed/upgraded
5) We have invested in our business and our clients will benefit from the investment
6) We have never increased our rates
7) Our level of experience and service warrants a rate increase
8) The market has changed regarding our products or services
This is surely not an exhaustive list, however, it suffices the most common times. As always, recognition is the first step. Recognizing there is a need or the time has come and the why the time has come sets us up for the next steps.
And it goes without saying, even though one or more of these reasons may be true for our business, we still struggle when it comes time to raise rates.
The next post will cover Part Two: Why is it so difficult to raise rates?