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There is a delicate balance between the fee you need to charge for
your products and services, and the fee that people are willing to
pay for them. But with gasoline, heating, shipping, health
care, and other costs rising, there comes a time when you must raise
your rates in order to remain profitable.
Most people see their own costs going up, and won’t be surprised
that you’re raising your fees, too. With proper communication
about it, you should be able to raise your fees effortlessly.
Here are some tips on how to go about it:
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Don’t let fear and limiting beliefs stop you from raising
your fees. If you hear yourself making excuses that you
don’t know are true, it’s probably your fears and limiting
beliefs raising their ugly head. Some of these include,
“All my customers will leave if I raise my rates,” or “I’m not
worth the new rate.”
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Have a clear idea of where your break-even point is, profit
wise. No matter how tempting, you cannot make a loss
on a sale. In fact, it’s not just about what you “need” to make,
it should be about what you “want” to make, too.
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Base your fees on what the benefits and results of using your
product or service are worth to your customer. For
example, as a small business consultant and coach, I help people
make more revenue and profit in their business. This has a
value to self employed small business owner, and my fees are
based on that value. If you can solve their problems, and if the
problem is important enough to solve, then they’ll pay you an
appropriate fee for that solution.
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Base your fees for services on your level of expertise.
If your expertise level is high, you’ll be able to charge higher
fees than someone just starting out.
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Check your competitors. Are there people out there,
with your same skill level, charging more than you do?
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See if your product or service is a “commodity.” A
commodity is a product or service that is the same, regardless
of who is offering it. If you’re selling The Little Giant
Ladder, it’s the same one that your competitors are selling.
In commodity pricing, there’s not much room for differentiation,
and customers will be looking for the lowest price.
However, if your product or service is unique, or your skill set
and experience are different and better than your competitors,
then you can charge more. You’d pay more for Oprah to teach you
how to create your own TV show empire than someone you’ve never
heard of. Bargain basement prices often scare off potential
customers, especially if they’re buying a unique product or
service. Use commodity pricing wisely and sparingly.
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Decide in advance whether you’ll raise fees across the board,
or only for new customers. Even if you only raise fees
for new customers, there may come a time when existing customers
will need to have their rates increased, too.
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Do the 80/20 evaluation. Find the 20% of your customers
who bring you the least profit and raise their rates. This may
sound harsh, but you’re in business to make a profit and you
can't keep an unprofitable client (or one you don't enjoy
working with).
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If you will be raising your fees with existing customers,
it’s a good idea to call them or write a letter, explaining that
the fees will be going up to the new rate, and giving them a
date when this will happen. I recommend giving them at
least a two month notice. Will you lose some customers who
aren’t willing to pay the higher rate? Yes. But if you do,
then you need to ask yourself, “Why hasn’t this customer found
value in what I’m offering so that the new rate was still
acceptable to them?”
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