There comes a time when you need to raise your consulting rates to match the value you’re offering. You’ve grown a lot since you first started your consulting business, so you need to make sure you’re charging what you’re worth and are compensated fairly. But do you have to justify your hire rates to clients, or is it your right to raise your rates as you see fit? How much should you add to your consulting rates? How do you inform current and prospective clients?
We share some tips for when and how to raise consulting rates in this blog post.
Good reasons to raise your consulting rates
As you’re here and reading this blog post, it probably means that you already know the factors that influence consultant fees. Your consulting fee needs to include overhead costs, insurance, licenses, other business costs, and a profit margin.
If it’s been a while and you’re thinking of giving yourself a raise, here are some situations when asking clients to pay more for your consulting services makes sense:
- You’ve gained additional qualifications that increase the value of your delivery outcomes
- You’ve gained additional skills and experience since you started
- The demand for your services has increased significantly. It’s a good sign that you provide more value if you’re getting more clients than your competition
- The scope of your consulting work has expanded beyond the initial agreement with your client
- You need an increase to cover additional expenses
You could also consider changing your pricing model, or having a different pricing structure depending on the consulting projects that you accept in order to get the maximum profit.
- Hourly rate: For small projects with billable hours
- Project-based rate: An one-time fee for the entire project
- Monthly retainer: A fixed price paid every month for the duration of the contract
- Base, plus commission: A client pays a commission for any revenue you generate for them
How much should I charge?
To help you determine how much more your consulting fees should be, ask yourself the following questions:
- What are the market rates?
If you overcharge a client, it’s likely that they would soon look for another consultant who can deliver similar services at a lower hourly rate. So before you raise your hourly fee, find out how much other consultants in your industry with similar skills and experience are charging.
2. What’s your value?
It’s common for clients to pay a higher consulting rate when a consultant provides value that others cannot offer. If you have qualifications, niche expertise, or significantly more experience than your competitors, don’t be afraid to raise your consultancy fees.
3. Are you covering your business expenses?
The price of inflation could be eating into your profits if you haven’t raised your prices in a few years. Review your business costs to see if you need to raise your consulting fees. List everything that contributes to running your consulting business annually to find out how much more you will need to charge. Consider:
- Office supplies
- Software
- Equipment
- Subscriptions services
- Marketing
- Professional certifications and memberships
- Education and training
4 steps to raising your rates
Once you’ve decided on your new rates, it’s crucial to plan how you will let your existing clients know. Here are a few tips for preparing for the change.
- Prepare mentally
You may be a bit nervous about telling existing clients about the change in your consulting rates. You may have a particular client in mind who may not be happy with the news. However, keep in mind that raising your rates occasionally is normal practice for any business, including consulting firms. Even your most difficult client should understand this.
Be prepared to speak confidently and to the point when communicating your new consulting fees. This brings us to our next tip:
2. Prepare what to say
When you explain that you will be implementing new rates, state your reasons for the change. Tell them when it will happen, and be prepared to answer any questions they may have.
Prepare to handle objections. List down some of the objections you may receive and write a firm, logical response to each objection.
Be prepared for some clients to decide to find a new consultant for future projects. Don’t take it personally — their decision is most probably based on budget constraints. But if you’d like to keep a client that cannot afford your new rates, you can negotiate a custom fee for them or offer an added service for free.
3. Choose good timing
For returning clients, it’s best to raise your rates for the next project or the next financial year so they can prepare budget-wise and can accommodate the change. Choose an effective date that you can share with your clients.
4. Communicate early
Whenever you choose to raise your rates, make sure you communicate the change early. You should inform your clients as early as possible. Two or three months in advance is a fair amount of notice and will prevent your client from feeling caught off-guard. Remind them again about your rate revision a month in advance, and on the effective date to make it official.
5. Use the right channels of communication
Notify your existing clients in person, via a video call, or over the phone when you first inform them about the change. This way, your clients will feel valued enough for you to want to speak to them personally. You should follow up your first conversation with an email that covers all the important points of your updated rates.
Conclusion
The most important thing about raising our rates is to be fair about what you charge as a consultant. You don’t want to overcharge your clients or undercharge for your services. The increase that you charge should be in line with the value that you provide.
If you need a refresher on how to set consulting fees, read our blog on How to calculate your hourly rate as an independent contractor.
