When Should a Small Business Owner Raise Fees?

As small business owners prepare to put a bow on 2011, the time is right to consider whether it’s prudent to raise fees. Considering the move is both exhilarating and nerve-wracking. All business owners would love additional cash flow and/or improved margins. But the risk of offending or alienating clients is terrifying, especially if it’s one you count on every month. The key to making the decision comes down to positioning.

Ask yourself the following questions, and answer them honestly:

1. How good am I at my job? If you’re great at your job, raising your rates is no different than getting an annual raise.
2. Do I provide consistent value for my customers?  Consider what your customers would spend for comparable services elsewhere.
3. What would they do without me?  If your customer did explore other options, how difficult would it be for them to ramp up with a new vendor?
4. Am I working with the best-of-breed in an industry?  If you are the best, you want to be associated with the best.
5. Am I engaging in behaviors, such as frequent discounting or taking on excessive numbers of budget clients, which reduce my confidence in asking for more?  Practices like these undercut your ability to demand what you’re worth. If you know that the services you provide are worth more than you’re currently charging, you need to have the confidence to ask for more.

Before you go and announce an across-the-board rate increase, you need to ensure that your market is prepared. Send an announcement to clients indicating that rates will be raised but that they’ll still receive the exceptional level of service they’ve come to expect. For clients with whom you’ve had a long-term relationship, talk to them personally. Assure them that the increase is necessary to maintain the high quality product they value. Convey strength and confidence. You’re not asking for permission; you’re simply announcing a change in the way you do business.