10 signs that it's time to raise your rates
Have you been thinking about increasing client fees? Whether you have or not, your accountancy practice may be ready even if you aren’t. There are a lot of factors that can impact the decision of whether to raise your prices so I have outlined 10 signs to look out for that tell you it is the right time for both you and your practice.
You should be increasing client fees if…
You have more work than you can handle
While more work equals more money and a thriving business (in the short term), it’s not always sustainable growth. In not much time at all, your clients and your business will suffer from being overscheduled and overworked, trying to constantly get through a backlog of orders that don’t ever seem to diminish.
This will start to affect the quality of work that you can provide. Increasing client fees will lighten your load while still being able to make a profit. If you don’t wish to lighten your load, increasing fees will mean you now you have the money to support hiring staff or to outsource the lesser tasksto deal with the demand.
Your cost of doing business is increasing
As your practice grows so do your business expenses, so your prices should always reflect these increases to ensure that you remain profitable. Don’t let your business costs eat into your bottom line.
Raising rateswill enable you to pass these costs on to clients, so always track your ongoing budget and expenses and calculate a fair price increase to factor this in.
You have underpriced yourself in the market
You might have more clients, but your competitor down the road has big clients who pay 3x more than you charge. While we always say to not base your prices entirely on your competitors, being aware of what they charge can actually help you ensure that your practice remains competitive.
If there is a big rate gap between you and local competitors, you need to be increasing client fees. No practice wants the reputation of being the cheapest; you want to be known for the value that you bring. Clients pay for value so don’t undercharge yourself. (Discover 3 ways to successfully increase your fees)
You are offering a higher quality of service
Have your skills improved so that you can now offer a higher quality of service? Perhaps you’re the only practice in your whole area that provides this service? Your rates should reflect the quality of your service and if it is unique to your practice; clients actually expect to pay a more premium price.
Having a unique selling point is incredibly valuable to a practice, but if you don’t have one, you should still increase your fees as your level of expertise and skills improves over time.
You have tested higher rates and made a sale
A sign that you are ready to increase your client fees is if you quote a new client at a higher price point than you’re currently charging and they accept it no problem.
In no time, you can secure multiple new clients at your higher rates whilst also slowly increasing them for existing clients and helping them transition to the change.
You want to grow your business
If a certain aspect of your practice is doing really well, it’s not uncommon for your business goals to shift and for you to want to grow in a different direction.
This may or may not need more revenue to play with but if it does, increasing client fees can be a great way to bump up your cash flow to start. That’s if you haven’t raised your prices for a while and you can justify the increase!
You want to target your ideal client
While you may have taken on any kind of work and client when you first started your practice, you may have reached a point now where you can afford to weed out the low-paying clients and target the types of clients that you want.
If you want to provide a bespoke service or win bigger and better clientswho operate at a higher price point, increasing client fees and changing the way you structure services is a necessary first step.
You want to change your pricing structure
When your practice is doing well and you’re completing client work faster, you need to make the move away from time-based pricing. Put simply, you will start to lose money if you invoice based on an hourly rate.
This is a sign that you should be increasing client fees. By upping your rates, you can switch to a pricing structure that better reflects the value that you provide clients rather than the time spent on their work.
You have had the same rates for over a year
If it has been a year or longer since you last increased your rates, you really should evaluate the health of your practice and where it stands in the market and in comparison to your competition.
Every year, your business grows, running costs increase, and technology develops, so it’s standard practice for business owners to raise their rates once per year to accommodate this.
You want a better work-life balance
You opted to run your own practice for the benefits of working for yourself but it can be very easy to get caught up in the running of the business. Many business owners are stressed and overworked and they start to resent their work, but there’s no need for this!
By simply increasing client fees, you can benefit from the immediate positive impact that this will have on your stress levels. Not only that, but the extra cash flow will allow you to delegate tasksto give you more time.
Is it time for you to raise your rates?
If you can relate to one or more of these 10 points, you might want to think about increasing client fees. Just remember, when you announce a fee increase to your clients, you need to do it in a way that strengthens your relationships and encourages loyalty.
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Heather Townsend is Founder and Author of ‘The Accountants Millionaires’ Club’. In 2015 the ICAEW decided she was the number one online influencer for the accountancy profession. She is the author of 5 books, including The Go-To...