It’s a fact of life for any business that the time comes when current fee structures no longer provide the target revenue generation or profit margin. In accounting practices, this issue can be addressed at least in part by a move to value billing, but even in these cases, you might find yourself needing to charge a client more this year for the exact service you provided last year.
It’s not a fun or easy conversation to have.
Accounting firms and businesses of all kinds raise their fees all the time. Surprisingly, a large number of them make some major blunders when doing so. If you need to raise your fees, a discussion of some kind is warranted. Here are five things to avoid when you do:
Saying you’re sorry implies acknowledgement that you did something harmful or erroneous. This isn’t an error, and NOT raising your rates will hurt your business. An apology might seem like a good way to acknowledge the increased burden on your client, but it will often come across as disingenuous.
The bottom line is that you’re in business to make money — and no business apologizes for that.
If you know you need to raise fees, do it NOW. If you wait, you might find you need to raise them even more. Before you know it, you have a major fee increase that will be difficult to explain and justify. It’s best to raise fees as soon as you need to do so, to keep the impact as minimal as possible.
You might be tempted, especially if there is some grousing about rate increases, to allow some clients to remain on the old fee schedule for fear of losing their business. In some very limited cases, this might be a wise move. But speaking generally, a client who is ready to up and go just because you need to keep up with costs doesn’t appreciate the value you’re bringing anyway. They might not be the kind of client you want to keep around.
When a client questions your fee increase — and especially if they do so with an attitude — it can be hard to avoid feeling and sounding defensive. After all, if you could reach your goals on the current rates, you’d be happy to leave them alone, right? Growth requires change, and pricing will always be one of the things that must change over time. Don’t make statements that sound like an ultimatum, and avoid language that indicates you’re irritated. Starting sentences with “Look,” for example, can inflame the discussion by showing your hand that you’re annoyed.
When your firm principals are discussing rate increases, someone will inevitably suggest you “rip off the bandage” and raise them enough to cover the next X number of years beyond your projected needs. It can be tempting, because it means more time between rate increases, which clients will like, yes?
Not if the current increase can’t be justified with your services.
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