Raising Rates is Painful but Necessary
As a small business owner, increasing prices is really tough to do. Reaching out to existing customers about rate increases is sometimes more painful than being on the other side of that equation. Yes, you read that right: it’s often more uncomfortable to raise your own rates than to be subjected to a rate increase. At least that gives us hope that our clients may take the increase with a poised sensibility.
If you need to raise your rates, and can justify the need internally, then do it. Sure, your customers will balk, and you may even lose a few accounts, but it’d be better to quickly scramble now than to be slowly squeezed to bankruptcy over time. Your clients may resort to utilizing a greatest hits of theatrical tactics to beg for–or demand–an enforcement of the status quo, but would you respect them if they didn’t try anything necessary to preserve their own capital?
Everyone knows that the cost of anything will, unless commoditized, continue to increase over time. You have a choice to make when increases become necessary: commoditize your offerings to sell on margin, or raise your rates.
The trouble of raising rates is on my mind because I share this very necessity. My corporate training rate was dictated by an external party almost a decade ago, and nothing has changed since. The client that dictated was, and is, a non-profit entity in the education industry. That made rates extremely low to begin with, but since the client represented a bulk of my work, their rates were used to calculate all of my other training rates. On a whim, I sat down with a calculator and compared my corporate training daily rates to my “regular” earnings from my full-time job. The results were astounding and jaw dropping! I was netting less in a day of corporate training than in a day of regular employment. Did you go into business to make less than your day job? I didn’t either.
I’m not trying to make any announcements, but this is the first that I’ve publicly stated anything to this effect, but… my rates for certain services are rising immediately (actually after a one-month notice, I’m not a monster, after all).
Will this be painful for me and my clients? Yes. It is scary. Some of my clients may kick and scream. Others may outright refuse. Still, others will understand and simply approve the change without question. Still, there isn’t much to debate or consider in this situation. All calculations indicate that the rate needs to be increase, and it will be better for my small business to have to struggle a bit now with backlash than to continue to operate at a pace that will slowly bankrupt the business and drive my stress levels so high that my earning potential is cut off due to stress related illness or death.
Now, for those of you dragging your feed on those long past due rate increase, I understand why. Many of us start as the undercutting champions of our industries. It hurts to grow up and not be able to undercut, but as just described, this can be a literal life and death matter for you (stress) and your business (bankruptcy).