Rate Increase...How Do you Do it?

[PorterComp]

Hi All,
We are debating raising our rates...more a debate on how much. How do you do it? We haven't raised our rates in three years, however it's time. We are going to raise business clients by the hour rate, and our home user clients leave the same...for now.

How do you decide on how much to raise your rates? What has been your experiences when you have raised them?

 

[RichmondTech]

I sent this to my newsletter list in December for new rates starting Jan. Hope this helps.

<< Test First Name >>

I wanted to thank you for your continued support of our business this year. 2011 has been an exciting year, and we look forward to all of the great things that 2012 has to offer. I wanted to let you know that as of January 1, 2012 there will be some adjustments for our onsite computer repair and consulting work:
• Onsite computer repair services for residential and commercial locations will be at a new $X per hour price point.
• All onsite visits will be charged for at least one hour of labor.

Our company prides itself on customer service and service delivery to resolve any technology challenges you come across. Over the course of the last few years our company has experienced increased costs in ensuring that we continue to provide the quality that you as our customer have come to expect of us. We understand that increases in prices may impact your business or personal budget, but we hope that our relationship that we’ve established means more to both of us than this cost increase.

In order to serve our community better we will be providing more than just onsite services. In addition to our onsite services we will be offering the following in the months to come:
• Our first shop location near Chippenham Pwky and Hull St allows us to accept your computer when an onsite service call isn’t convenient as well as have an expanded inventory selection to make it more convenient to get great technology deals.
• Continued notifications through social media sites like Facebook and newsletter emails to help you stay up to date with relevant news in what’s happening in the world of technology.
• Continued support of local charities like Toys for Tots and the Central Virginia Food Bank. We believe that Trixit has been successful because of the support of the community. We feel that it’s only right that we give something back to support the community.

For any of our customers that would like to keep our 2011 onsite rates, we are offering an easy two-step option to prepay hours of time.
1. Simply let us know before January 1, 2012 how many hours you’d like to prepay. Prepay as many hours as you’d like; there is no expiration.
2. Pay for your prepaid hours by January 31, 2012.

Once again, we thank you for your continued support. It’s your support that allows local small businesses like ours to continue growing and create a positive impact on the local community. We hope you and your family have a happy holiday and a big positive start to 2012!

 

[PorterComp]

That's a great letter! But how did you decide on what to raise your prices too? Did you just add a dollar amount? Maybe a percentage of your current rate? Rates of other local companies?

 

[RichmondTech]

That's a great letter! But how did you decide on what to raise your prices too? Did you just add a dollar amount? Maybe a percentage of your current rate? Rates of other local companies?

There's no science to it or anything. I just added a dollar amount that would raise my average sale without rocking the boat. Never be afraid to increase your rates for services. People can go buy widgets anywhere, but with service trades (computer repair, plumber, etc) people build relationships. It's harder to fire a service provider because it would take too long to find a replacement and build a relationship again. If some people choose not to work with my anymore that means we didn't have a great relationship which also means they didn't spend much to begin with.

I also gave my customers the opportunity to prepay hours at my old rate in case they felt like the new rate was too much. I did have a few customers take me up on that offer (including my biggest customer who wrote me a nice fat check). Nothing like having the money already in the bank!

 

[callthatgirl]

I figure it's time to raise your rates, once you've earned it. And I don't feel you need to really announce it to your clients, just tell them when they come in or book the appointment. Most don't tire kick, they appreciate you're faster and better now.

 

[NeutronTech]

Just do it. Its our responsibility to inform clients of the current price as we take each job. My prices change so frequently due to specials, and what not, that none of my clients assume anything when they drop their pc off. Just make sure they are getting their moneys worth and it wont be an issue.

 

[Appleby]

I just raised my rates for the first time in few years. I made a mistake (in retrospect) of raising my rates on business and not residential last time. I just felt I couldn't charge quite as much for residential at the time and I was under charging businesses. So I went up $10/hr on business. From day 1 I hated this different pricing structure. I got into the issue of working on a residential customer's pc and then having them ask me to come to their business....now what? Charge them more? And justify it how? Or the opposite, a business customer would ask me to work on his home pc and now do I charge him less when at his house? I manged to work through it the best I could for a few years.

I finally raised my rates by $10/hr in January on residential to have them meet my business hourly rate. I've handled it very simply....if a past customer calls me out for an on-site visit, I tell them on the phone, "Oh by the way I've raised my price to $XX/hr." Every one of them so far has said, "Ok", sorta like "who cares?" Granted, we are talking $10/hr but still, no one has cared.

For in office work it doesn't really matter at all. I give an estimate when they drop off the pc or I will call them with one if it's something I have to diagnose. They have the option when given the estimate to take it or leave it. They don't care what I charge per hour because I'm giving them a price, not telling them "It will be 2 hours of labor."

So my advice is to go up to a reasonable rate that you think the market can stand and so it puts you in line with the competition. If you don't know what they comp. charges, have a friend or relative call and ask. I've never had to do this because it's a small town with only a couple shops and they post their prices online for the most part.

 

[NeutronTech]

Most people dont need justification for the difference in residential and business. It has become so commonplace it is just accepted, even assumed without question. I used to give things like this a lot of thought, now my life is so much less stressful since i stopped overthinking every decision I make. I just quote each job what i think its worth up front, regardless of who hires me. My posted rates are mearly a guideline, and a filter.

 

[Xander]

I emailed my customers a couple of months ago. I rarely do newsletters but I wanted to remind them all about the fake MS call scam that was going on; invite them to a play I was in; pitch my maintenance program and, lastly, tell them rates were going up at the new year.

While I'm onsite, I use the phrase "Finally gave myself a slight raise".

 

[mraikes]

I figure it's time to raise your rates, once you've earned it. And I don't feel you need to really announce it to your clients, just tell them when they come in or book the appointment. Most don't tire kick, they appreciate you're faster and better now.

^^ This.

I've increased my rates several times. I don't announce it or make a big deal about it. It's never been a problem.

However, I don't increase rates for any customer that I've had for less than one year. It's just a personal decision that I won't charge a new customer one rate this month and then spring a higher rate on the same customer next month.

And since I prefer to increase my rates effective January 1, that means I often have a rolling-group of new-ish customers from the previous year that get the old rate until their anniversary date passes.

In a nutshell, I unofficially guarantee my rates for every customer for 12 months. After 12 months they pay my current rate.

Re-reading this I see it might sound more complicated than it is. But I maintain a detailed database of every customer and every job. Every time I enter a new job/booking I can click a history tab and see a list of every job I've done for that customer, whether it's one job or 100. Was the first one more than a year ago? Current rate. First job less than a year ago? Last year's rate. It's quick & easy.

 

[NeutronTech]

^^ This.

I've increased my rates several times. I don't announce it or make a big deal about it. It's never been a problem.

However, I don't increase rates for any customer that I've had for less than one year. It's just a personal decision that I won't charge a new customer one rate this month and then spring a higher rate on the same customer next month.

And since I prefer to increase my rates effective January 1, that means I often have a rolling-group of new-ish customers from the previous year that get the old rate until their anniversary date passes.

In a nutshell, I unofficially guarantee my rates for every customer for 12 months. After 12 months they pay my current rate.

Re-reading this I see it might sound more complicated than it is. But I maintain a detailed database of every customer and every job. Every time I enter a new job/booking I can click a history tab and see a list of every job I've done for that customer, whether it's one job or 100. Was the first one more than a year ago? Current rate. First job less than a year ago? Last year's rate. It's quick & easy.

I always pull up the account history when quoting a job. Client history heavily influences their quote. Current rates are really just for new customers. Existing customers almost always have a cheaper rate. I prefer to reward loyalty instead of lowering rates to attract business.

 

[Appleby]

As for notifying customers of a rate increase that seems so unnecessary. The only time I am ever notified of a rate increase is by my bank or maybe my insurance company...and that is just because I'm being auto-billed/charged for whatever rates they are going up on and the law requires it.

My mechanic, plumber, cleaner, car wash, doctor, dentist, favorite restaurant....none of them have ever called, emailed, snail mailed or even told me to my face "We've raised our price." I just see it on the bill when they are done or when I have the opportunity to view their estimate before hand. I might even be turned off if my mechanic sent me a letter saying he'd raised his rates, it might be just the tipping point for me to say to myself, "Well I wonder what the mechanic down the street is like?"

I'm not saying to keep it a secret that you are raising your rates, I just don't see the need to mass notify everyone you've ever done business with and the general public. As I said before, when a past customer calls to schedule me to come out for an on-site call I just tell them, "oh by the way, my new rate is $xx/hr", just as a courtesy because they know what my old rate has always been.

 

[mraikes]

I always pull up the account history when quoting a job. Client history heavily influences their quote. Current rates are really just for new customers. Existing customers almost always have a cheaper rate. I prefer to reward loyalty instead of lowering rates to attract business.

Not sure if this was just a general comment, or actually responding to mine.

I don't lower rates to attract customers. And the policy I outlined isn't advertised or explained to any customer. It simply keeps relatively new customers from feeling "bait & switched" when I decide to raise rates.

 

[PorterComp]

All good points...but how do you decide on How Much to raise them? When you have two partners disagreeing on by how much it makes it difficult to decide on what to raise it by?

 

[Appleby]

All good points...but how do you decide on How Much to raise them? When you have two partners disagreeing on by how much it makes it difficult to decide on what to raise it by?

For me, the first thing it comes down to is if I am making a good living or if I need to make more money. I need to make more money. Plain and simple. As I've already stated, when it comes to pricing, see what the competition is doing. Don't try to be the cheapest in town. I think you will find most people agree that being the cheapest doesn't usually attract the best type of customers and you are forced to do more volume just to make as much money as the competition.

If you are really struggling this much with not knowing what to charge, again as I said before, have a friend or relative call around to the other shops and see what they charge, or get on their website and see if they quote prices. Every business has to have some ballpark on what the going rate for their service is. A quick lube oil change shop can't charge $100 for an oil change and stay in business if everyone else charges $24.99. At the same time, if everyone else charges $24.99, they don't want to do it for $10. They will likely go out of business because they are charging too little and they are leaving money on the table.

As for partners disagreeing....well that's between y'all. That's why I don't want a partner.