How to Increase Your Consulting Fee With Existing Marketing Clients

Transcript

Hey, David Bradley here. And I want to talk to you about how you raise your rate as a consultant over time. And so this is when you have clients on retainer, they’re paying you monthly or quarterly, possibly annually, but typically it’s a monthly or quarterly arrangement. And I do typically recommend quarterly retainers. And over time you can justify and actually raise that rate with your client. And you can do that in an effective way so that it increases your profit per client. And I want to talk to you a bit about how to do that. Also the question of when and how you decide what that rate is going to be. So first I would never recommend more than once a year, changing our rate for a consultant. And it shouldn’t be sooner than the one year Mark of starting to work with someone. And now this assumes that you’re on retainer.

So you’re performing the same services each month, each quarter. What have you, and it’s perfectly reasonable and seen in other industries for you to raise our rate. It’s not much different than an employee will receive a raise each year and they might get a 3% bump in their pay. It’s similar to the insurance industry, where all of a sudden your car insurance will end up going up a bit. And that’s just a rate increase that they might impose. And it might have their reasons and their criteria, but nonetheless, it happens. And it happens in professional services as well. Accounting firms and so forth will occasionally raise their rates. Now you want to be reasonable when you do this, you don’t want to suddenly double your rate and say, well, last year for the last year, we’ve been charging a thousand a month. Now it’s going to be 2000, but you know, five to 10% is a safe and reasonable amount.

And if it is a $1,500 a month client, and you raise it to $1,600 a month, that gives you a little bit more cushion to work with a little bit more profit. And it’s also reasonable to your client. It’s not taking advantage of them or completely renewing the agreement. It’s really just a slight, moderate and reasonable increase. And that’s what you’re going for here. And the reason we’re not being super aggressive is that we want to be fair. And we want to make sure that this client relationship continues. And if it needs to be aggressively increased, that’s a different situation, but we don’t want to keep it the same either. And that’s what a lot of consultants and marketing agencies and service providers do. They typically keep the same rates and that’s all they provide for year and year after year. And you always want to reevaluate your profitability because we’re in the business of making profit, not just dating by.

So keep that in mind, a five to 10% increase. You’re going to do it once a year. And how do you actually deliver this? Well, something like this should be formalized. It should be in a written document. It shouldn’t be something that you just discussed over the phone. Even if you decide to deliver the message, you also need some paperwork to follow you up as well. And so you should have a letterhead designed. You can do that easily enough with Microsoft Word, with Canva, with any tool out there and have the professional letterhead, the professional letter written in that letter. You want to say a couple of key things. First. You want to address it with your main point of contact. The one that is highest up on the chain that is reasonable to you to let them know, Hey, this is the change that is going to happen.

This letter should begin with reinforcing the value of the services that you provide in a relationship and that you value the relationship itself. And you’re exciting, excited about the amazing performance that you’ve seen over the last year. You want to state the reason that the increase is happening. And the reason typically it is because in the marketing industry, things change a lot. We need to keep up to date on the new changes, the new tech techniques that we employ, the new education that we’re always going after in accordingly, the rate is going to increase as well. Let them know exactly when this rate change is going to happen. So if they have an upcoming invoice, they know what to expect, and it’s not going to surprise them and make sure you give adequate lead time for this. You don’t want to necessarily send that next invoice in this letter on the same day, that’s just not good business practice.

That’s not really something that seems like it has integrity with. It seems like you’re trying to sneak that in, but give them some good lead time. A couple of weeks in advance to let them know this is happening. If you have a cancellation period, a cancellation policy where they need to give you at least 30 days, notice if they don’t want to continue before the next invoice, then this should come 45 days or 60 days in advance. You just want to make sure that you’re reasonable and fair to them and not even appearing tricky to any degree. So you reinforced the value mutually you state. The reason you set the beginning date, this is what’s going to happen. You also explicitly say, this is what the increase is going to be. And I would typically say, you know, your rate is going to increase by $200 or $250 per quarter, if they’re on a quarterly arrangement so that they know the exact dollar amount.

And they also know the time period that that’s in, you’re not saying on a monthly basis or an annual basis, or letting them assume either you’re saying explicitly, okay, this is the quarterly amount. And just match that to whatever your invoicing cycle is for that client. And close out with some gratitude, reinforce, love working with them. You’re grateful to have them as a client, and you’re looking forward to the year ahead. But you just needed to let them know about this. So that is essentially how you handle rate increases. Something that consultants should do. It’s important for the business, the health of the business. And if you really want to serve your clients the best that you can, you need them to be profitable. If they’re not profitable. And if a slight rate increase, isn’t going to make it. Then you need to step back and re-scope things out and create a new agreement.

Or you need to prune that client from your list. So you can focus on profitable clients. But if you are going to increase your rates, look at somewhere between that five to 10% range, because that’s reasonable. Look to do this once a year and make sure you professionally handle it, stating it on letterhead. You have that paper trail reinforcing the value, the benefits of working together mutually you state the reason the beginning, date, the amount, and you close out in a very positive tone and future pacing in the sense of we’re looking forward to our continued work together. So you’re assuming that that work continues. You don’t want to be too tentative to say, Oh, if this isn’t going to work for you, then I’m sorry. I wish we could continue working together. You don’t want to go down that path and set a negative and doom and gloom type of tone. So take that and start to employ it, make it a practice. And once a year, you might want to set not necessarily at their typical budgeting time, which might be say, November late fall, maybe in August, you reach out and say, Hey, this is what’s happening, but say cadence. So that once a year, you know, this is what you’re going to do.