How to raise prices without losing your customers

You can raise prices without losing customers if you get three things right. Raise in one clear step, announce it early and personally, and start with new clients. Most customers stay. And the few who leave cost you less than you'd think.

I see it all the time. An owner who knows the price has to go up, puts it off for a year, and meanwhile works harder for thinner margins. Sound familiar? Keep reading.

Why do you keep putting it off?

Fear. Not of the price increase itself, but of that one conversation with that one client who's been with you for years. What if he gets upset? What if he walks?

That fear makes sense. It's also expensive. Every month you wait, you pay the difference. Your client doesn't notice. You do.

I've been an entrepreneur since 2002 and have worked in sales, marketing and business development. What I keep seeing: clients think about your price a lot less than you do. What they care about is whether you deliver what you promised.

How many customers can you afford to lose?

Do this math first. It takes the fear out, because the answer is almost always: more than you thought.

Here's an example. Say you charge $100 an hour and bill 1,200 hours a year. That's $120,000 in revenue. You move to $112 an hour. To hit the same $120,000, you now need only about 1,071 hours.

So you could lose more than 10 percent of your hours and earn exactly the same. With about 129 hours a year freed up. If everyone stays, you're $14,400 ahead. That's the number you need to know before you send a single email.

Sell products rather than hours? Same logic, only with your margin. The thinner your margin, the more a few percent on price shows up in your profit.

How much should you raise prices?

I'd rather see one clear step than a little bit every year. Two percent here, three percent there means the same hassle every time, and you're always playing catch-up.

Look at three things: what your costs have done over the past few years, what comparable providers charge, and how much work you're turning down or pushing back. Got a waiting list? You're too cheap. Nobody ever pushes back on your price? Same.

If nobody ever mentions your price, you're probably too cheap.

How do you announce a price increase?

This is where it usually goes wrong. Not the increase itself, but how it lands. Here's the order I'd follow:

• Start with new clients. New proposals go out at the new price starting tomorrow. No conversation needed.
• Check your contracts and terms to see what you agreed with existing clients about price changes.
• Give existing clients plenty of notice. I'd allow at least a month or two.
• Call your most important clients yourself before the email goes out. Nobody wants to find this out from a newsletter.
• State the new rate and the start date. Explain why in two sentences. No apologies, no long story.

A line that works: "Starting January 1, my rate goes to $112 an hour. My costs have gone up and I want to keep delivering the quality you're used to." That's it. The more you explain, the more it sounds like you're not sure.

Stuck on what price fits or how to break the news? That's exactly the kind of question I help with in a Strategy Call.

What do you say when a client pushes back?

First, listen. Sometimes there's something else going on, like a budget that's locked until the new year. You can solve that without dropping your price.

Don't jump to a discount. It teaches your client that haggling pays, and next year you're back at the table. Offer something else instead: a smaller package, fewer hours, a later start date for that one client. Your price stays where it is.

And if someone really does leave? That's a shame. But look back at your math. Often those were the clients who took the most time and brought in the least.

What not to do

• Quietly put the new price on the invoice. That costs you more trust than the increase ever would.
• Apologize. A price increase isn't a mistake you need to make up for.
• Change everything at once: price, package and terms. One thing at a time.
• Wait for a better moment. It won't come.

Where I'd start

Today: run the math for your own business. How much revenue are you leaving on the table each year, and how many clients could you afford to lose? Then put your new price on your next proposal. It's the easiest first step, because that client has never seen your old price.

Want to work through your pricing together and decide how to bring it to your existing clients? In a 60-minute Strategy Call ($595) we put it on paper. Want to see if we click first? Book a free intro call.