How do you go about telling your customers that ...

... you are going to increase your hourly rate

[le_gber]

Here's the deal:

I work for a lot of customers on an hourly basis - mainly updates or add-ons to their existing site. I also charge whole project the same way from time to time (mainly when I work for other web companies).

I charge different rates for different types of work - they 'rank' as follow

basic html, image or text changes

xhtml, css and accessibility work

easy db/programming stuff

seo and hard db/programming stuff

I finally have a per day rate where I work on the customer's premises.

I haven't changed my rates for the past couple of years and I feel that now's the time

new financial year that is about to start

thinking of taking an office, hiring staff and going ltd

wanting to buy my own house (being based in the South East of UK - [webmasterworld.com...] for some fun reading about house prices in the UK)

I also want to implement what I think is common practice - a minimum number of hours charged per job (in my case one will do) - at the moment if I spend 1/2 hour on a job I charge 1/2 hour.

So how would you go about it? Do you email you clients? Send them a letter?
What would you put in it - obviously the breakdown of new rates but would you relate the types of jobs to each rates (to avoid future disputes), would you also include the reasons (not the first or last one though, but develop on the other two).

Cheers

Leo

[beckie]

I sent an email to all of my clients stating that the hourly rate has changed to $XX/hr. I mentioned that I did not raise rates in the past few years and it's time to raise prices to stay competitive within the market.

I wouldn't tell them why exactly - that's none of their business. I only had 1 out of many not like the rate increase, but she still stuck with me.

[stuntdubl]

I've tried to raise rates periodically for NEW clients, and keep old clients at their existing rate for a set amount of time. It's worked pretty well for me, and GOOD clients are usually pretty understanding of this sort of thing. Explain the higher value of your services, and something great that you have done for them lately or have planned for them in the future.

[jmbishop]

What we did when we raised prices was we gave our clients plenty of notice (3 months). Then in the letter we sent them we included a coupon for a free hour of work when they booked a minimum of 6 hours of work at our new rates.

Then we also let them book up to 20 hours of time at our old rates for use anytime within the next 12 months if they paid for it upfront.

Most of them were so jazzed about the free hour of work and the ability to buy time at the old rate that they didn't really have anything to complain about with the new prices.

Also, most of the clients that bought the time at the old rate didn't use it all within the 12 month period.

We got a lot of kudos over it and several clients have since implemented a similar offer when raising their prices.

[le_gber]

jmbishop, these are great ideas!

also I am now thinking of going VAT registered which might throw some oil in the fire, so I need to think things a bit further

any advices on how to tie things together?

leo

[Essex_boy]

People are so coy about asking for money I can never understand it.

Talk it through with your customers and give them a lead time warning of about 4 - 6 weeks theyll take it easier than you think, they already know your good.

[iamlost]

The previous posts address the "how to tell the client" concern.

However, you mentioned several quite separate but interrelated new costs:

* One: going ltd - in my opinion very wise. I recommend doing so as soon as finances allow for the added "respectability" as well as the easing of liability insurance and tax rates. Discuss with your accountant, there may be several options to consider.

* Two: taking on an office - if you just need additional space moving to larger accommodation might be more cost effective. If meeting clients in "your own office" is necessary there are many options, investigate them all. Remember to factor this and related costs into your new rate(s). Can you justify such an increase all at once or should you institute several smaller increases over the next year or so?

* Three: taking on employees - the biggest bloody step in business. Remember that an employee will cost you at least 50% more than the wage you pay him/her. To be safe budget 200%. Can you grow the business enough to cover this additional expense? How soon? Do you have the funds to cover costs until additional income meets the additional expense? Do you understand the paperwork required? Have you budgeted that time you will spend away from production? The reason so many of us "small guys" use sub-contractors is to sidestep these issues. Take the time for careful analysis and discussions with your solicitor and accountant.

* Four: buying your own house - if within your means by all means :-)

* Five: rates static for several years - inflation has been low but still eating away at value so topping up is certainly indicated.

If you have a running Business Plan "war game" the various numbers. If you don't I suggest you take the time to create one. The changes you are contemplating equate to starting anew. Don't guess.

Once you are clear on all the costs (business and personal) plus a profit margin you can determine hourly/daily/project rate(s). But not until then. Before that is just guessing.

Then comes the marketing:
le_gber ltd is pleased to announce the grand opening of their new premises at <insert address> ...
le_gber ltd is pleased to announce the addition of <insert name> to their highly qualified staff ...
le_gber ltd is pleased to announce a new pricing format adjusted to meet the changing requirements of todays client ...

A simple price increase is not what you face. A major sea change by several orders of magnitude is.

[le_gber]

iamlost

thanks for the post.

Yes many things to consider - have spoken to accountant and the costs of going ltd would be covered by going Vat registered as well - so that's a bonus.

I think I will first do that + increase the hourly rate and annouce all that in a nice personal letter to my customers.

No business or marketing plan as of yet but will be attending a seminar at the end of the month to help you create them.

Regarding the new office and the employee(s), I guess I will wait to make sure that the first step (ltd+vat+new rates) went well - shall we say for 6-12 months.

Gotta get the ball rolling! Exciting times ahead.

Thanks all for your advices

Leo

[nking79]

When I raise my hourly rate, I write an e-mail to all my current clients saying that I'm raising my rate to $75 dollars per hour, but since I value their business they will only be charged $70 per hour until July.

- this will make them work with you on projects sooner to get the lower hourly rate

- it makes them feel important and valued.