04 Mar Making the Price Leap
The first big leap is transitioning from corporate employee into full-time self-employed business owner, solopreneur, or freelancer. But what about the next big leap… How do you go from surviving in the business to thriving? How do you raise your rates?
✔️ If you Google “how to raise your prices,” you’re gonna get a lot of bad advice, IMO. If you don’t believe me, try it out and see what comes up.
✔️ You are not a defendant in a courtroom. You should not approach a price increase by justifying yourself, the increase, inflation, etc. You also should not apologize and act like it’s the end of the world.
✔️ If being direct with customers scares you, practice in the mirror or with a friend/family member/coach until you can feel the fear and do it anyway.
✔️ You have to understand your own value first. You cannot expect your clients or prospects to understand it for you.
✔️ Weigh and measure your own motivation. How badly do you want more disposable income? To retire someday? To take the kids to Disney World? To get a new car?
Need more? Email me: https://causeyconsultingllc.com/contact-causey/
Transcription by Otter.ai. Please forgive any typos!
Hello, hello and welcome to today’s episode of the Causey Consulting podcast. I’m your host, Sara Causey and I’m also the owner of Causey Consulting, which you can find online anytime at Causey Consulting llc.com. Today, I want to talk about making the leap. Now, I’m not talking about the first big leap of entrepreneurship, where you say goodbye to your corporate job and you step full time into your business, small business or self employment, that first big leap of going from the corporate job into working for yourself. No, the leap I’m talking about comes after that. And it’s not discussed often enough. And when it is discussed, it’s not treated properly. The leap that I’m talking about is when you’re ready to go from surviving in your business to thriving in your business. So you’ve reached the point where consistently your business is paying your bills, and it’s covering your basics. There’s food on the table clothes on your back, you’re paying the rent on your apartment, or the mortgage on your house, there’s gasoline in your car, everything’s taken care of, you’re not behind on any of your bills. But you’re not able to get ahead either you’re at that point where you’re ready to put a rainy day fund together and savings, maybe you want to have some PTO for yourself, take a couple of weeks off in the summer, maybe you want to have a slush fund set aside so that if God forbid, two or three months were to go by that were tough, and you weren’t able to find projects that you enjoyed, or some of your best clients dried up and blew away, you’d be able to front yourself some money and it would not present a financial hardship at all. Maybe you want to open an IRA and start planning for retirement, or you want to have some petty cash set aside to do some day trading and try your hand at investing. You want to make that leap from getting by and knowing that your business is sustainable enough that you’re not going to starve or be out on the street to a point where you’re thriving. You have money that you can put aside for a rainy day or do with it whatever you want. How do you make the leap from that point to the next peak on the mountain top. And some of you may already know that in my coaching practice, I’m very particular very exclusive about who I take on as a client and how many clients I’ll take on at any given time. I only work with people who are already established in their business, they’ve already had some success, maybe they’ve hit a plateau, and they want to catch it before it turns into a full on sales slump. Instead of standing still, they want to make sure that they go forward again, so they don’t slide backwards. Or maybe things are going really well overall in their business. But they’ve just got one area that feels like an Achilles heel, they want to try to improve it and get everything functioning properly. But I don’t work with people that are pre revenue are their wanna printers, they’re dreaming about having a business someday, or people whose business is in the toilet. You know, maybe at some point they were successful. But now it’s all gone to hell and they need someone to sift through the ashes with them and rebuild your maybe they had a great idea and they took the plunge but they’ve never made any money at all. And they want someone to help them go from the basement to the penthouse suite. Some coaches out there are good at that and they’re willing to saddle up and take that journey. I’m not the correct person for that. I like to help people who are already winning to win more, I’d like to help that person that’s on the 25th floor, but they want to go to the 32nd floor where the penthouse is. So they’re close enough that we can put together a cogent game plan to get them there. So if you’re listening to this episode today, and you’re thinking, well, that’s me, my business is paying my bills, it’s consistent, things are flowing well, but I would like to have an emergency fund or I’d like to have more play money. Maybe you want to do some remodeling to your house or you want to buy a new car or when the pandemic breaks a little bit and we’re all able to travel more freely. Maybe you want to load up the kids and go to Disney World and just have like a big blowout vacation. This is the episode that you need to tune into. Now, I want you to do an exercise with me if you can open up another browser tab in Google or pause this episode and open up a tab on your phone whatever device or means that you’re using to listen to this episode. I want you to open up a new window and go to Google. I want you to Google the phrase, how to raise your prices. Now what comes up when you do that? That is a plethora of information on the front page about raising your prices without making your customers mad, raising your prices without losing customers. What are you say to customers who object to your raising prices? That is typically how this topic is approached. It’s like expect an angry mob, expect your customers to be mad, expect them to rebel. And in my opinion, when you go into a situation, expecting a rebellion, expecting your customers to get mad and have smart, eloquent remarks, that’s exactly what you’re going to get what you focus on expands. And so if you are approaching this topic from the idea of, oh, my god, there’s going to be a mutiny. My current clients are not going to pay me more, I’m scared to find new clients and raise my rates with them. You’re you’re setting yourself up for failure, you’re expecting negativity, you’re expecting objections that haven’t even popped up yet. And it puts you at such a disadvantage. There’s an interesting article on inc.com, that talks about Netflix pricing increases, and it discusses how in 2017, they raised their price by $1. Like each package that they offer went up by $1. There wasn’t much fanfare about it, there wasn’t much complaint, and their stock went up 3%. But there’s a juxtaposition there as to when they raise the rates in 2011. By 60%, a lot of people complained all hell broke loose, and their stock fell 88% in four months. So what’s going on here, what what lesson is there to be learned from this example, I’m not a subscriber myself anymore. But I think in October of last year, there was another $1 price increase. And yet, most people are more than happy to pay for that extra dollar a month in order to keep their streaming service and have the shows and access to movies and things that they want. So we can’t neglect the obvious point that staring us in the face. It is a product or a service that people want, they’re willing to deal with a price increase, because they want the product or service if you have a product or service that you’re offering, and nobody’s really interested or they’re interested if they can pick it up on the cheap. But the idea of really paying a premium or platinum level price for it is turning everybody off. That’s something that you need to take back to the drawing board, you need to figure out what’s going on in your business that’s causing people to bulk. Or if you have brought a lot of cheapskates into your practice, then you definitely need to look at why you’re attracting those people what’s going on that you’re bringing those people into the fold and agreeing to do business with them. cheapskate people are massive headaches, they want something for nothing. They nitpick you. And so often it feels like you’re jumping through hoops to try to please them, nothing is ever enough. And by the time you look at the low rate that you’ve charged, the amount of man hours that you’ve put into the job, and the percentage that you’re going to have to shave off to pay the tax man, you typically make very little money, if any money at all, I have heard freelancers talk about taking on clients that were such a massive headache, and they were so cheap to deal with that they actually lost money on the account, rather than making money and friends. That is totally unacceptable. You’re not in business to lose money just to please a bunch of cheapskate people. No, no, no. And yet, how can we really be surprised by that? Because in the exercise that I had you do a minute ago going to Google and simply googling how to raise your prices and seeing you know, entry after entry about how to do it without taking your customers off, how to do it without losing your customers how to respond to angry customers. That is what so many freelancers and small business owners are told if you raise your prices, people are going to rebel people are going to be mad. They’re going to come after you with torches and pitchforks. Even if it’s a small increase. They’re going to want you to stand there like a defendant in a courtroom and defend why you on Earth would want to raise your prices you stand accused you greedy person, give me a break. If you start clicking on some of those entries that come up, a lot of them will put you into yet again this defendant in the courtroom position by telling you that you need to explain yourself to your customers. Respectfully I disagree. When you are standing there or sitting there on On the phone and you’re like, oh, okay, Mr. client, you know, I do need to let you know that my rates are going up by 10% effective on your next invoice and I need you to know why I need you to know that it is because of inflation. The cost of doing business has just gone up which has necessitated me giving this increase to you I have tried my damnedest not to pass this cause on to my clients. Okay, all right, it’s like let’s wait a minute melodramatic actor or actress? Do you? I’m doing this on purpose to illustrate the point that you are putting yourself in a position where you are justifying your actions, you are justifying the way that you operate your methodology and your business to your your customers, your clients, your end users. Ask yourself this question is that the position that I want to be in? Is that the way that an expert or an authority figure in an industry would behave? If you hired an attorney to represent you, let’s let’s use some big scary hypothetical situation. Let’s say that you the IRS is auditing you. And you’re very nervous, you’re very scared, you want to have the best tax accountant and the best tax attorney out there. If you let’s say that you dealt with the the tax accountant and the tax attorney for one situation. And then six months later, something else flared up and the tax attorney told you Well, I understand that in January, my rate was 350 an hour, it’s now 400 an hour. Silence. Would you want him to justify to you? Why would you want him to stand there with his hat in his hand staring at the floor telling you Well, in order to deal with the cost of living and the inflation in the economy, I’ve had to do this and dammit, I’ve tried not to pass that cost on to you, but I just have to do it. No, you wouldn’t give a damn you if he solved your problem before and you’re confident that he can solve your problem again, even if you’re like a hot kind of sucks, or that kind of screws up my budget a little bit, you’ll go ahead and do it, you’re not gonna smart off to them, you’re not gonna act like, you know, you’re just as offended as any human could ever be, you’re going to suck it up, Buttercup, and you’re going to pay the extra money. But it’s not his job as a tax attorney to stand there and jump through hoops and justify to you why he’s raising his price. He’s just raising it and letting you know, that’s going to be what you see on your invoice. And you as a consumer have the right to say, you know, I think I’m going to find somebody who can do this for a lesser amount of money. It’s your choice how you spend your money. Likewise, it’s that attorneys choice, what hourly rate he chooses to work for, in the same way that I don’t think it’s good idea for you to stand there and try to justify yourself and go through a bunch of inane economic discussions about why you had to raise your rates because dammit, you just didn’t have any other choice. Don’t apologize. It’s definitely not putting you in the position of being the expert and the authority figure to be like, Mr. client, I’m so sorry. I’ve had to raise my prices effective immediately by 10%. And I hate doing this, I’m so sorry. I know, times are tight. You know, don’t don’t get into that, oh, shucks. I’m so sad. I’m having to do this. Again, that puts you in the position of having to try to justify or explain to them why you’re raising your rates. And it’s like, you’re saying there’s shade in your game, you’re doing like you’re doing something that’s wrong, you’re doing something that’s gross. You know, it’s like when something’s rattling around in your car. So you go to the auto mechanic and he comes out, you know, he’s got the shop towel, and he’s wiping his hands off. And he’s like, well, I hate to tell you this, but your engine’s shot. It’s the same thing. You know, it’s like you are coming out to this person as the bearer of bad news. It’s not bad news. It’s not a crisis. And it’s not the end of the world. So you don’t stay in there and justify yourself and you don’t make some Oh, shucks apology to them either. The third thing I will say on this is, do not expect to go into a rate increase situation, that you will obliterate your business that all of your existing clients are going to walk away from you. They’re all going to be mad, they’re all going to be upset and offended or that new potential clients are going to be repelled. If you expect that that’s what’s going to happen and you’re scared and you’re nervous and you think it’s all gonna just blow apart and go straight to hell, more than likely it will, you need to have a sense of self confidence and you need to believe in yourself enough to see your own worth. As I’ve said before, in other episodes, you have to understand your own worth. First, it is not your clients or your prospects job to tell you that you’re worthy. It’s like the West mantooth thing about putting Vaseline on your hiney, your clients are not going to do that for you, nor should you be doing that for them, you need to understand the value that you bring to the market, your clients and your prospects will follow the lead that you set. So if you go into a situation and you’re confident and you have a strong backbone, and you know, you’re not going to play bs with people, your clients will respond to that the people that are looking to play games that are looking to run bs or run a scam on you, they will naturally be repelled, and they will naturally start to fall off. As you become confident, strong and empowered, I promise you. So I’ve talked about three things not to do. Now I want to talk about what you should do. One thing is to make sure that you structure the language in a sensible way, Don’t sneak around, don’t don’t try to just oh, well, maybe I’ll send them an invoice for this increased amount and not tell them what I’ve done. You don’t want to do that. That’s gross, it’s icky. And in some states, I’m sure it’s probably illegal to try to do something like that. So don’t in the words of Captain America, son just don’t. One strategy is you’re just matter of fact about it. It’s not a crisis, it’s not the end of the world. It’s not something that’s like you’re jabbing a knife into their gut by increasing your rate by $1 an hour, charging 10% more for your packages, whatever your price structure is, and whatever your rate increase is going to look like. You don’t want to use language that seems scary. It’s blowing it up and making it some big, huge, hairy, ugly beast just to be very calm, nonchalant. And Matter of fact about it. You don’t even have to say, I’m increasing my rates, if that feels uncomfortable to you, you can just say there’s a price change, or there’s a rate change that’s coming, you give them some notice, again, it’s not a surprise. And it’s not a little sneak attack, it’s you being straightforward. I wanted to let you know that effective 30 days, there’s a price change that’s happening. And again, it’s it’s a price change, it’s not an increase. It’s not me, coming after you, you’re not going to be able to afford me anymore, or Snowden. There’s no scary monster in this, you’re giving them a heads up, you’re letting them know that it’s coming. And you’re also not apologizing or going into some overdrive mode to try to justify yourself. Now I’m letting you know that effective immediately, my hourly rate is changing from 75 to 80. And then shut up. You don’t have to go into any kind of over talking the situation. Yeah, and you may have heard me tell the story before about a guy that I used to work with who had hit the mute button on the phone, he could not help himself, he wanted to over explain and he was having a lot of trouble with talking himself out of sales. So he would hit the mute button so that he would be talking he would be continuing to say what he wanted to say into the phone, but the other person couldn’t hear him. So he might be saying something like, you know, the I understand that your budget for this position is 75 to 85. This lady is absolutely amazing. She has everything that you’re looking for. But she requires 85 K a year and four weeks of paid vacation in order to make a move. And then he hit the mute button. And if he wanted to continue talking about how great she was or how low their budget was, or whatever, they weren’t hearing it, he was shutting up and giving that other person time to think and there was no justifying there was no apologizing. It’s just a very clear, crisp statement of what is. If the idea of just being that matter of fact, and simplistic with your clients, scares the crap out of you, then practice is the it’s like I’ve used the analogy before of practicing into the mirror or getting with a trustworthy friend or family member and doing a dress rehearsal. It’s totally fine to do that. And do it until you can feel comfortable enough in your own skin to pull it off. You’re not justifying, you’re not apologizing. You’re just simply saying, here’s the reality. A second option that may be more palatable for you is to leave your current customer base where they are in terms of the price. If you’re at a point where your business is covering your basics, and you have the time and the ability to take on new clients at a higher rate. Then You can always take that option, if let’s say just just so we’re using round numbers, let’s say you are charging $100 an hour for your service to your existing clients. And the idea of telling them that you now want to charge 120 an hour is scaring the poop out of you. And you just don’t think you could do it without having a full tilt panic attack, then perhaps you find clients who are willing to pay 120 an hour and you don’t increase the rates on the other people that maybe you finish your projects, you get to a point where you’re at, you’re at a good stopping place with them, you’re able to finish the deliverables and and finish strong, you know, do the right thing by these people. But then you don’t take on any additional projects with them, you phase out the clients that are paying you a lower rate and you phase in people who are willing to pay you at a higher rate. Now sometimes what happens in that scenario is the people who are paying you at a lower rate as you begin phasing them out, they may just ask, well, do we really want to work with you what what needs to happen in order for us to keep this relationship going. And that opens a door in a very, like sort of friendly, non confrontational type of way for you to lay your cards out on the table and say, Well, I know that when we initially negotiated this out, I charged you $100 an hour, my my current rate for new clients is 120. So if you want me to continue picking up projects and doing work for you, I’m happy to do that I’ve really enjoyed the work that we’ve done together. If we weren’t good working together, we wouldn’t be having this conversation. I just need to be frank with you and say it’s going to be done at 120 an hour. And then let them make the decision of whether or not they’re comfortable with that, more than likely they will be if they have felt that your work has been exemplary. And they are they’re calling you or they’re emailing you and saying we want to keep this going, what do we need to do to make it happen? More than likely they will agree to it. And it sort of lets you off the hook of having to just be extremely direct and Frank if that’s not your normal communication style. Again, I do understand that can be very scary when you’re trying to make the leap from survival into thriving really having more than just some bill paying money but being able to have money to save or invest or spend as you see fit in a in a discretionary fund budget kind of way. I hope you enjoyed today’s episode. If you did, please share it. 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