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Old 04-30-2012, 01:21 AM
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Question Raising Rates

Hi there,
Been busy working in my business rather than on it. We're going through a growth period which is odd when you read the news in the US...
Anywhoo, I'm looking to raise rates because of costs related to fuel, shipping, etc. Seems everything has gone up, my bottom line is tight to begin with, and I haven't raised rates since either 03 or 02.

Has anyone done this recently? Do you send out an e-mail?

My thought was to send out a blast to all responsible parties that we were raising rates, and that in order to maintain original rates, we would accept block time. (A retainer if you will) of 10 hours or more which could be replenished on an as-needed basis. Figure that would handle the complaints.

I always hesitate to do this, mostly because I suffer from bleeding heart syndrome, but I have come across competitors who charge an easy $100 per hour more and who are nearly dangerous. (We lost a client during a change of Office Managers. She brought in "her guy" from a previous employer. He botched everything up, then they called us back in 6 weeks later." We don't have a lot of churn (12 years or more is our average client relationship. Just feel like we may be underselling, and an additional $20 per hour would help things a bit on the back end.

We're also going MSP and my other thought would be to just push more and more on the MSP side and try to command a high amount that way.

As always, I really appreciate any help and advice anyone would be willing to share.

Thanks so much,
Scott
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Old 04-30-2012, 01:48 AM
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I would use Survey Monkey or something like that to send out a survey to all of your current customers. Use the questions to get a feel for what your customers think of your service. Among the questions, ask something like "Do you feel that our prices are (more reasonable, less reasonable) than other computer repair options in the area?"

A survey like that will give you some sort of heads-up on how well-received a price-increase will be. If the results don't look good, then take a look at how you can increase the perceived value of your services without incurring additional cost. When perceived value is greater than actual cost, customers will think they received a good deal pretty much regardless of the actual cost.

Last edited by jdpetrov; 04-30-2012 at 11:27 AM.
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Old 04-30-2012, 01:50 AM
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Do you have mostly residential or business clients? For residential, I wouldn't even worry until they call. For business clients, we have done this twice since we opened. Here is what I did.

I sent out a letter to all of our business clients. I let them know about the change. I told all of our MSP accounts that their rates wouldn't change, of course. For the clients that I wanted to keep, I let them know that a managed services agreement might be a better option for them, even if they had looked at it in the past. So I essentially had three separate letters with mostly the same content. Who got what letter depended upon their relationship with us. I never heard a negative word about either rate increase. I may have had one or two clients who either cut back or stopped doing business with us, but those were all businesses that I wasn't sad to lose. Long story short, profits increased about 40% over the next twelve months while billable hours fell. Made me wish I had done it sooner. When MSP agreements came up for renewal, the new hourly rate was reflected for any work outside the scope of their agreement.

The key is to remember that, if you are doing your job, you and your techs have improved their skills. I justified it in my mind that, because of improvements in procedures, I could complete most jobs in anywhere from 20% to 50% less time. Less money for me even though I was doing the same job better.

By the way, we were already the highest priced in our area before the rate increase. And yes, it made our Managed services agreements look better by comparison. I haven't had anyone bat an eye at our hourly rates. But, if I did, I would work to make sure I was communicating our value.
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Old 04-30-2012, 01:52 AM
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Interesting Joshua, never thought of sending out a survey. I have the ability to do so from within my PSA, so that might be an option. I worry about testing the waters with a survey, who in their right mind would say "Yeah, I know I'm paying too little..." :-)

I am sending out a marketing e-mail this week, might just attach a little survey to the end of it... Thanks for the idea.
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Old 04-30-2012, 01:53 AM
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Forgot to mention one thing. I try to raise my rates at least every two years. Costs go up, we improve, etc. Obviously you reach a ceiling at some point, and I doubt I can do that too many more years. But it is a helpful guide if you have been very low for several years. It allows you to bring up your value over time without causing sticker shock.

And I have to disagree with Joshua. Don't do a survey. If you haven't raised your rates for over 10 years and you have those long client relationships, it should not be an issue. No client wants to see prices to go up, and very few have any idea of market prices.
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Old 04-30-2012, 01:57 AM
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Quote:
Originally Posted by Parkwaytech View Post
Do you have mostly residential or business clients?

... but those were all businesses that I wasn't sad to lose. Long story short, profits increased about 40% over the next twelve months while billable hours fell. Made me wish I had done it sooner. When MSP agreements came up for renewal, the new hourly rate was reflected for any work outside the scope of their agreement.

The key is to remember that, if you are doing your job, you and your techs have improved their skills. I justified it in my mind that, because of improvements in procedures, I could complete most jobs in anywhere from 20% to 50% less time. Less money for me even though I was doing the same job better.

By the way, we were already the highest priced in our area before the rate increase. And yes, it made our Managed services agreements look better by comparison. I haven't had anyone bat an eye at our hourly rates. But, if I did, I would work to make sure I was communicating our value.
Thanks for the reply,
We're Business, actually Healthcare Vertical and we routinely get excellent remarks from service close surveys. I'm thinking that your findings are what we're going to find, I just always worry that I'll shoot myself in the foot!
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Old 04-30-2012, 02:00 AM
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Been there! I was so nervous about my first rate increase. I was working with a business coach at the time who suggested it and reviewed my letter. He told me to suck it up and get it over with. I was amazed that not one customer said anything about it. Just paid their invoices like always. Some did contact me about getting on a maintenance agreement though.
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Old 04-30-2012, 02:02 AM
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Quote:
Originally Posted by Parkwaytech View Post
Been there! I was so nervous about my first rate increase. I was working with a business coach at the time who suggested it and reviewed my letter. He told me to suck it up and get it over with. I was amazed that not one customer said anything about it. Just paid their invoices like always. Some did contact me about getting on a maintenance agreement though.
YOu know this might be the push some need to get on with MSP. I have basically been giving away MSP by being really proactive and monitoring backups and servers just for my own piece of mind (easier to schedule instead of put out fires!)...

Okay, I'm sold! Going to draft up some stuff this week. I've got something like 10 internal projects all cooking' now... Was just at a partner summit and have so many business dev ideas swimming around in my head, I'm psyched...

Rock and Roll!


Thanks again for taking the time for me.
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Old 04-30-2012, 05:48 AM
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Quote:
Originally Posted by stsanford View Post
YOu know this might be the push some need to get on with MSP. I have basically been giving away MSP by being really proactive and monitoring backups and servers just for my own piece of mind (easier to schedule instead of put out fires!)...

Okay, I'm sold! Going to draft up some stuff this week. I've got something like 10 internal projects all cooking' now... Was just at a partner summit and have so many business dev ideas swimming around in my head, I'm psyched...

Rock and Roll!


Thanks again for taking the time for me.
Nooooo! Don't give it out for free!

Service plans aren't exactly the bread and butter of my income, but giving away free services have bit me in the butt before.

My first laptop repair, I took an hour off of the billable time because I thought it took too long and I didn't want to upset the customer.

Instead, the customer started to expect to see "*% Discount" on every invoice, and huffed when it wasn't there.

For this reason, the only way I'll give out free services is to compensate during a complaint, which has never happened yet.
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Old 04-30-2012, 11:32 AM
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Quote:
Originally Posted by Parkwaytech View Post
And I have to disagree with Joshua. Don't do a survey. If you haven't raised your rates for over 10 years and you have those long client relationships, it should not be an issue. No client wants to see prices to go up, and very few have any idea of market prices.
Interesting way to look at it. I agree that if customers aren't aware of pricing other than your own, they'd have a tough time answering related questions.

And long-term clients shouldn't switch just due to a price increase.

I just tend to over-complicate situations like running survey's instead of just raising prices
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