EnTrends

Setting prices is a dilemma most
service business owners encounter
at one time or another. This week, it
was Susan's turn. "When I first
started my business, I felt
uncomfortable charging for my
services. Since I was doing it to make
a living, I finally just picked a price I
thought wouldn't scare too many
people away. Now, based on my
available work hours, I can't really
take on more clients but at the rate
I'm charging them, I'm not going to
make enough money to keep the
business alive. How do I raise my
prices without losing my clients?"
she wanted to know.

For whatever reason, it is
uncomfortable for many of us to look
a person in the face and state our
hourly rate or the cost of a project
they want us to complete for them.
This is usually rooted in our fear of
rejection. We think, 'What if the
prospect gasps and falls out of his
chair convulsing on the floor?' or
'What if he snorts with disdain or
launches into uncontrollable
laughter?' At the beginning, we really
need the work and generally decide
we'd rather start getting some clients
to build our reputation and skills,
thinking we'll charge a rate we know
they'll accept. Besides, we can
always raise our prices later. Well,
now is "later", so it's time to bite the
bullet.

First, understand you aren't asking
for their firstborn child -- you are
asking for money in exchange for the
service you are offering. Shakti
Gawain, author of "Creating True
Prosperity", introduced me to the
concept of thinking about money as
just another form of energy. Just as
you put energy into the service you
provide, the client puts energy into
their field of interest in order to make
money to pay you for your service.

On the business-to-business side of
things, the client's business has
clearly made the decision to
outsource the service they are
discussing with you. They have
decided to use their internal staff's
energy to focus on their core
business while outsourcing those
things they don't have the skills or

time to do. The same is true of
individuals - they could paint their
house, but they're calling you.
Clearly, they don't want to do it and
know it's going to cost money to get
someone else to do it. Either way,
they are going to hire someone to do
it, so why not you?

That said, it's time to raise your
prices. You've got two sets of people
to deal with here -- your current
clients and your future clients.
Future clients are easy - simply start
quoting the higher hourly rate or
basing your flat rate proposals on
the new hourly rate with no mention
of a recent price increase. Your fear
that you will lose out on some bids
WILL come true. You've been fishing
in the pond that attracts the lower-
end clients, so you will probably
have to start marketing to and
networking with prospects on the
next higher rung. But, so what? It's
still your choice - you can stick with
the low-end guys and struggle to
make your business profitable or you
can start charging a respectable rate
for the skills and professionalism you
bring to the table to create a
prosperous business. It's up to you.

Now, the current clients are the ones
you are likely most afraid of. What
will they say? Will they never want
to work with you again? The best
time to raise prices is at the
beginning of the year, either calendar
or fiscal, or at the beginning of a new
contract with an existing client.
Never try to negotiate a price
increase in the middle of a project. If
a project is taking significantly more
hours than you quoted for a reason
out of your control or it's directly
within the client's control, you can
consider discussing it with them.
However, if you want to be sure to
maintain positive client relationships,
you may choose to learn your lesson
from this one and protect yourself
with a contract that outlines
contingencies such as that going
forward. But, in most cases, never try
to increase your hourly rate on a
client in the middle of a project. This
sends a message that will likely get
you the response you most fear -
that you are a money-hungry so-and-
so who only cares about him or her
self.

Instead, wait until a natural
beginning, ending, or transition
period to communicate your price
increase. One way to do it is to send
your client a beginning of the year
letter that expresses your
appreciation of their business in the
prior year, outlines any policy
changes you've made for the coming
year, communicates your price
increase, and states your anticipated
pleasure of working with them in the
coming year. If you are raising prices
at the end of one project and are
about to bid on another project with
the same client, during your
discussions tell them you have
raised your hourly or project rate and
hope they still find it to be
competitive and will continue to work
with you since you've really enjoyed
collaborating with them.

Notice you did not hear me
guarantee you will keep every single
one of your current clients. Like you,
your clients make purchasing
decisions based on a variety of
factors, each person weighing each
of the factors differently. If you've
been the lowest price available in
your field, you've no doubt attracted
clients who make decisions based
mainly on price. Increasing your
price so you are no longer "the low-
price guy", may send them packing.
So be it. Once you raise your prices
to a respectable rate you can profit
from, that's competitive and fair, you
will begin to attract clients who will
pay it. It's all about positioning. You
can position your company as the
low-price guy, the top-of-the-line
guy, or the value guy (middle of the
road price with a quality service).

The lesson here ... it's your business
and your revenues are what you
make them.

Kimberly Stevens is a business
coach who works with business
owners who want it all - a joyful
personal life and a meaningful and
profitable business. Her web site
http://www.askthebizcoach.com
offers weekly TeleTalks on business
topics, a discussion board, business
assessments tools, and an ezine
addressing business challenges from
a more personal angle.