Increase Your Rates Without Losing Clients (+ 2 Free Templates)
Guest: Loren Fogleman, Owner of Business Success Solutions
If you’ll move your accounting firm from just staying afloat to thriving, then you’ll need to increase your rates from time to time. But do you have a tested method to successfully do it without losing high-value clients?
Loren shares the exact steps she uses to help accountants get paid their worth, like the firm founder who was able to move one of his legacy clients from $7,200/yr to $67,000/yr (a whooping 10x!). How? By using Loren’s Raise Your Rates Calculator, bundling his services, and communicating his price change effectively. All steps Loren expands on in this episode of Firm Founders Live.
Watch the full episode below or continue reading.
Three Key Things Firm Owners Need to Know
How to communicate your value and have the right words to attract quality clients
You might have started out your business accepting any and every client that comes your way but as you grow your firm, you need to understand who a quality client is and how to attract them to your firm.
How to enrol clients into working with you when you don’t want to be salesy
Most people hate pitches. They know that the end result of a pitch is to make them part with money. What they want to see instead is what value you can bring to the table and how your services can help make their lives better. That way, they won’t see your service rate as just “parting with money” but making “a worthwhile investment”.
How to price your services
The way you price your services on your website can position you as a technician, making prospects see you as a cost, as opposed to an investment. So instead of having a long list of services, bundling your services will make it easier for prospective clients to choose the best bundle that meets their needs.
Why Rate Increases Are Hard To Execute
The truth is, increasing your rates is probably one of the most difficult decisions you’ll make in your firm. And that is something that is across the board, whether you’re a solo firm owner or you work with one of the big four. It requires courage, not confidence.
Increasing your rates requires courage, not confidence. Confidence comes as people begin to say yes to your new rates. – Loren Fogelman
Oftentimes, it’s easier to introduce new rates to new clients because they don’t have a history with you and won’t push back as much as legacy clients.
But you can’t sustain your business like that. You should increase your rates with both legacy clients and new clients when the need arises.
Potential Ways to Increase Your Revenue
There are three major options to increase profits and revenue for your accounting or bookkeeping firm:
Take on more clients, a.k.a. the factory style
This involves taking on any and every client to hit your revenue needs. But that means that you may need to sacrifice personal and family time in order to meet deadlines.
You can also choose to cut your costs, downsize, and be better at budgeting or spending so you can have more profits.
Raise your rates
If you go with the first two options of either taking on more clients or cutting costs, you might be able to increase your profit margin but they also have costs attached to them.
However, this third option is almost pure profit without sacrificing family time, risking poor health, or doing all the work by yourself.
The Most Important Things To Know About Increasing Your Rates
- You have to connect with your value before you can expect your clients to recognize the value that you offer.
- You have to recognize that everybody is not a great fit for your firm and if you’re able to make the transition to charging more, those A, B and most likely C class clients will stay with you. The ones that you secretly wished would go away or who give you anxiety every time you get a communication from them will probably leave. These types of clients want to pay as little as possible and get as much as possible.
I did some research preparing for this and found that 82% of your clients will stay with you when you increase their prices because they know you and already trust you. They have a relationship with you. And that’s something to think about. Work the numbers — If you retain 82%, then it’s most likely the clients who give you headaches that will be moving on.
– Loren Fogelman
More resources for you:
Loren’s Good, Better, Best Pricing Method
The good, better, best pricing helps you to start moving in the direction of value pricing
– Loren Fogelman
Basically, you want to move into value-based pricing where you connect your rates to the value you bring to your clients (a.k.a what they consider valuable) and not just based on hours.
Using Loren’s Raise Your Rates Calculator, here’s how it works —
- Tier 1 (Good rate): You’re going to have new clients come to you and what you’re going to do is to take your original fixed fee and multiply it by 1.5. That will be your new good rate. You should enrol at least three people at your new good rate. This gives you evidence that people aren’t as price sensitive as you think they are.
- Tier 2 (Better rate): So once again, prospects are coming to you, and what you’ll do is to multiply your original fixed fee by 2 (2X!). This means that you’re now earning double with no additional time spent working. And by doing this, you’re getting more comfortable with having that initial conversation with them during the free consultations. After you enrol three people at your new, better rate, we go to tier three, which is the best rate.
- Tier 3 (Best rate): Once again, people come to you, you calculate that original fixed fee and multiply it by 3 (3X!). Multiplying that original rate by three takes courage, not confidence. But as you’re doing this, you realize that you don’t need as many clients in order to meet your revenue needs. And you’re working with higher quality clients that respect and value you.
So that is how you go through the good, better, best pricing in order to start separating your fees. And at some point you’re going to realize that even your best rate needs to be changed. All you need to do is to go through the whole process again using your current rate.
How To Communicate a Rate Increase To Legacy Clients
The first step is to come up with some type of communication, most likely an email.
You want to make the email about them and how you’re making some changes in your firm to improve the quality of services for them.
You don’t want to go on and on about how you’ve had increased costs because they’ve most likely had too — at home, grocery stores, etcetera. Instead, focus on making it about them and how it will help you provide more value to them.
We created a Price Increase Letter Template with 3 email samples you can customize and send to clients to inform them about your price increase.
The second step is reaching out and scheduling a conversation with them.
Pro Tip: Think about what objections they may come up with and prepare how you would respond to them.
The third step is having that value conversation.
You don’t want to pitch them or try to sell them into paying higher prices without them seeing the value of working with you. So this is where you want to ask questions about what matters to them. Find out what they want to achieve in about 12 months from now. Why does that matter to them? What are some of the metrics that might help them to make better decisions as they’re moving forward? Do they have any reservations or concerns that they might not reach their goals? And if they do reach them, how would things be different for them or their business? So those are some of the things that you want to ask.
And after you do that, you want to offer them different ways they can work with you. Using the Raise Rates Formula and bundling your services, you can offer them three options.
You want to come from the place of being an advisor, helping them choose the package that’s the best fit for them instead of one that’s going to be to your benefit, but not necessarily in their best interest.
With Financial Cents’ email integration, you can easily send emails to clients, keep an audit trail of all conversations and make notes from every meeting so everyone on your team is on the same page.
The final step is to talk about the investment and this is the ideal time to get pre-paid for your services and make that switch.
More resources for you:
How To Bundle Your Services
You want to have three bundle packages.
- The first package, a.k.a silver is for smaller-sized firms or clients that require just bare essentials.
- The second package is going to be the gold package which is where you want the majority of your clients to be. Clients that choose this package want more than the essentials. Maybe they are in a growth phase where they need insights, and want more access to you for advisory purposes.
- The third package is your premium package. It could be CFO-level services for enterprise businesses. Maybe they have several businesses and want valuable insights on them. These clients recognize the value of your insights as they’re moving forward and continuing to grow and be operational.
Tying It All Together
We’ll leave you with a story Loren shared about one of her clients who followed all the steps above and was able to 10X his rates.
Just yesterday, I talked to a client who has been working with this one company for about six years and never raised their rates. They were paying $600 a month. And when he finally did raise his rates to $650 five years ago, they totally pushed back. Since then, he didn’t increase their rates again even though they’ve grown so much as a company.
And so we came up with the silver, gold and diamond packages. And with a lot of handholding, mental shift and resources, he was able to move this legacy client from $7,200/yr to $67,000/yr because they chose the CFO package.”
So it’s possible! Remember that all you need to get started is courage.
Loren Fogelman is a keynote speaker and one of America’s top ranked business coaches. From 2018 to 2022, Loren has steadily been recognized by HubSpot in its annual list of the world’s top 22 business coaches.
Loren is an expert in pricing strategy and sales for accounting professionals. She coaches them to shift away from the “dollars-per-hour” pricing trap to a value-based pricing model. This allows her clients to reduce workload by as much as 50% while doubling revenues.