You love your small business. And you know you’re providing a valuable service to the marketplace, whether that’s technology consulting, financial coaching or a new product that is changing lives.
But if you’re barely breaking even, you may not be getting paid what you’re worth. As we’ve discussed at length, many small business owners set a rate for their time that is way too low for their product or service. And that’s unsustainable! You’re offering something of great value in exchange for serving your customers, growing your business, paying your bills and ultimately working toward Financial Freedom. You should get paid appropriately.
Raising your rate is part of owning a business, but many of us feel skittish about doing it. Either we don’t see ourselves as being “worth” a higher number, or we’re afraid we’ll turn off potential new clients (and existing ones) by asking for more cash. But if we’re going to live according to the principles of Financial Freedom, we’ve no choice but to charge an appropriate price.
Think of it this way: Other leading entrepreneurs, experts, consultants and essential professionals aren’t afraid to charge you for their time. So why are you?
Ready, Set, Raise!
The first thing you should do before raising your rates is to calculate what your time is worth by using the “Value Your Time Calculator” tool in Cash Flow Cure Module 5. The tool asks several questions and has corresponding columns where you can plug in numbers. When you’re finished, you’ll know how much you need to charge to reach Financial Freedom when you want to.
Once you understand better idea of what you’re worth—and it’s probably more than you would have guessed off the top of your head—you’re ready to incorporate that number into your business practices. To shift to a higher rate as smoothly as possible, I recommend the following steps:
Step #1: Inform Customers In Advance
Most successful business owners agree your customers need a little advance warning before encountering a higher rate. In writing a letter announcing the new rate, you should be sure to thank customers for their business.
Then, you should offer some information behind the new rate, such as “it reflects market trends” or “It reflects the experience we bring.” If you purchased a new product that will help your business, you may consider including that in the letter. This freelance writer’s sample letter from the blog 1099Mom, in which she announces her new, higher rate, emphasizes that the writer will utilize new software to create more compelling, Internet-search-friendly web content. Make sure to clearly state the date that the new rate goes into effect (e.g., on January 1).
Step #2: Brace For Initial Feedback
Letting customers know is often hardest part of raising your rates to a new level. The good news is that many business owners find the feedback isn’t as bad as they imagined. But you should be prepared to address the occasional rumble from a client.
If someone complains, politely reiterate some of the points you already covered in your letter. Say “I need to align myself with the direction of the market.” Or “We want to make sure we can provide you with the highest-quality service.”
If someone threatens to use another business, or drops you altogether, don’t waste time bargaining. If you’ve already proven your worth, the good customers will stay.
Step #3: Offer Alternatives
If you’re still stressed about your new rates, consider offering a lower-tier product or service. For example, if you’re a consultant or coach, offer clients the option of group coaching as an alternative to one-on-one time you provide.
Step #4: Send Reminders
As the date when your new rate goes into effect approaches, consider giving customers a gentle, virtual nudge. A simple, two-sentence email to remind them the new rates are going into effect is enough. They’ll appreciate the reminder, especially if the rate goes into effect in a new year. With everyone busy digging out from the holiday, rate changes are easy to forget.
Getting paid what you’re worth is how you create a sustainable business. And a big part of Freedom from Money Stress. While asking for a higher rate may feel uncomfortable, you’ll feel better in the long run as your business grows.
image credit: Bigstock/Wayhome Studio
The views and opinions expressed are those of the guest author and do not necessarily reflect the views and opinions of MindShift.money.
Marisa Torrieri is an award-winning journalist and freelance writer specializing in personal finance, business, healthcare and technology. She has a master’s degree in journalism from Northwestern University and resides in Fairfield, CT. Her work has appeared in dozens of media outlets, including LearnVest, Forbes, The Washington Post, Business Insider, TIME and Health.com.