When starting out, it’s hard to know exactly how much to charge. And that's totally fine. You learn more from every project and get better and better.
But as your business grows, you will often want to raise your prices. Knowing how to raise your prices is important, as you want to make sure your clients (or at least the ones you want to keep!), don’t feel like you are taking them for granted.
Price increases and client education 📖
As your client services business grows, your costs will likely change, for example
- Realigning salaries to market rate (you may pay yourself too little at the start)
- Investing more in sales and marketing
- Hiring more staff
- Economic inflation
And specifically as a client services business in the technology industry
- Developers cost more as they move from junior to mid-level, to senior
- Devs in certain technologies demand higher wages as popularity grows (e.g. React)
- Staying up to date with technology can involve more professional development time
So it should never come as a shock to your clients that you will eventually raise your prices. But if you never mention your prices will change, then your clients won’t think about it.
Make this clear right from the start.
Let them know you update your prices yearly, and make this a normal part of the conversation.
Talking about money can be awkward - but it’s business, and money cannot be ignored.
If you are doing a fixed-price project, the pricing will obviously not change.
However, they need to understand that just because you charge $X per hour on this project - you won’t charge that forever.
In your proposals, list your pricing as your “current pricing” which reinforces the expectation of future cost changes. Plus it also means a client cannot come back in 6 or 12 months and say “let’s start”, and expect the same pricing that was quoted back then.
For any ongoing contract you work out with your client, ensure you mention your hourly rate is subject to change over time. Don’t make the mistake of being locked into a specific price for many years (unless this is intentional of course).
Letting clients know about a price increase 💬
Say your price is going up $15 per hour. For some clients, this might be annoying, but not a showstopper. However, for other clients, this may be a huge problem. Often you don’t know how a client will react until you tell them - so give them an advanced warning
I would let my clients know 3 months in advance that my agency's prices were going up, and I would only let active clients know. I wouldn’t bother telling clients I haven’t worked with for 12 months, they can find out when (and if) they need more work.
Communicate your price change in an email, and include a small description of why you are increasing your prices.
Don’t just mention “To keep up with staff salary costs”. Describe the benefit to them, for example, “to keep offering competitive staff salaries, and ensure the high-quality standards you are used to”.
Don’t expect you can simply raise your prices, earn more money, and everything turns out perfect - you should be prepared that you might lose some clients.
Raise prices, but keep your clients 💪
If you think there are specific clients that may not respond well to your higher pricing, there are a few things you can do to make the transition easier for them.
- Offer a gradual price increase
- Offer a reduced rate to go on a monthly retainer
- Grandfather clients on your previous price
Offering gradual price increases allow you to increase pricing for long-term or loyal clients gradually over a set period of time (e.g. 6 months). For example, if you are raising your prices by $15 dollars per hour, you could offer them a gradual raise of $5 every 2 months, over 6 months.
This works well with regular ongoing clients who are money conscious, and also encourages them to front-load their work with you, as the more that can get done sooner, the cheaper the rate.
It’s also a great time to get your clients onto an ongoing retainer.
Having clients on a retainer is gold - I am always happy to give them a small discount if they lock in for 12 months or more.
Retainers provide better visibility of your future schedule, guaranteed monthly income, and create more of an ongoing partner relationship over the transaction project-based work.
It’s also totally fine to “grandfather” client pricing, meaning you keep older clients on older prices, and only raise your prices for new clients.
When I first started my agency, I hated the idea of clients at different prices.
It just seemed messy, and I feared it would add a lot of admin overhead.
Whilst everyone dreams of a productised service business that sells a cookie-cutter solution and basically runs itself, humans are different. Your relationships with these humans are also different, so do what feels right for you.