Let’s be honest, the mere thought of raising your prices probably makes your stomach do a little flip. If you’re like most service providers we work with, you’ve probably put it off longer than you should have, worried about client reactions or questioning if your work is really “worth it.”
Here’s what we know after working with hundreds of service-based businesses: pricing decisions directly impact both your business sustainability and your personal income. Yet they’re often based more on emotion than strategy.
The truth? Strategic price increases aren’t just normal – they’re necessary for growing, thriving businesses. And when implemented thoughtfully, they benefit not only you but your clients as well. (Yes, really!)
This blog will walk you through exactly when to raise your rates, why it matters more than you think, and how to do it successfully without losing your valued clients.
1. Signs It’s Time to Raise Your Prices
How do you know when it’s time for a price increase? Look for these clear indicators:
You’re consistently booked out. When your calendar is filled weeks or months in advance, that could be a market signal your services are underpriced relative to their demand. This is especially true if you find yourself turning away potential clients.
Your costs have increased. Perhaps you’ve invested in better tools, brought on team members, or your general overhead has risen. As your costs increase, your margins shrink unless you adjust your pricing accordingly.
You’ve leveled up your expertise. Have you earned new certifications, developed specialized skills, or accumulated significantly more experience since setting your current rates? Your pricing should reflect your growing expertise.
Your process has improved. If you now deliver better results, more efficiently, or with higher quality than when you set your current prices, your rates should reflect this increased value.
The value you provide has increased. Maybe your work now drives better results for clients – more leads, higher conversions, increased efficiency. As the value you deliver increases, so should your compensation.
Your rates haven’t changed in over a year. At minimum, annual price reviews should be standard in your business. Even with no other changes, inflation alone erodes your purchasing power over time.
You’re experiencing burnout or resentment. That subtle dread when a new project comes in or resentment about the work you once loved are often signals that your compensation doesn’t match your effort or value.
If you recognize even one or two of these signs, it’s likely time to seriously consider a price increase.
2. The Real Cost of NOT Raising Your Prices
Many service providers focus so much on the potential risks of raising prices that they completely overlook the very real costs of not doing so.
Let’s put this in perspective:
Financial Impact: If you’re charging the same rates you set two years ago, inflation alone means you’re effectively taking approximately a 10% pay cut compared to when you set those rates. That’s like voluntarily giving back more than a month’s income each year.
Opportunity Cost: Every hour you spend working at lower rates is an hour you can’t dedicate to better-paying work, business development, or creating systems that would allow you to scale. This hidden cost compounds over time.
Value Perception: Like it or not, your pricing sends strong signals about your value to potential clients. Underpricing can actually repel your ideal clients who associate higher prices with better quality and results.
Personal Sustainability: Perhaps most importantly, chronically undercharging leads to burnout, resentment, and eventually can destroy your passion for the work you once loved. No price is worth that.
Remember: staying stagnant isn’t just a neutral choice – it actively costs you in real dollars, opportunities, ideal clients, and personal wellbeing.
3. Calculating Your New Rates Strategically
When determining your new rates, avoid the common mistake of picking a number that “feels right” or that you think clients will accept. Instead, use one of these strategic approaches:
Percentage Increase: A straightforward approach is applying a consistent percentage increase (typically 5-15%) across your services. This works well for regular, smaller increases that keep pace with inflation and growing expertise.
Cost-Plus Pricing: Calculate your true costs of doing business, including:
- Your desired hourly rate (be honest about what you want to earn!)
- Overhead costs (software, team, equipment, etc.)
- Time spent on admin, marketing, and other non-billable work
- Taxes and benefits you must cover as a business owner
Add your target profit margin (20-30% is a good place to start), then determine your rates based on typical project scopes.
Value-Based Pricing: Consider the tangible outcomes clients receive. If your work typically generates $50,000 in additional revenue for clients, charging $10,000 represents clear value. This approach often reveals that your current rates are significantly below the value you create.
Market Positioning: Research what competitors with similar expertise, results, and target clients are charging. Decide strategically where you want to position yourself – premium, mid-range, or accessible – based on your unique strengths and business goals. This is not my favorite method, but it does sometimes help to get an idea of what others are charging.
The most important part of this process is aligning your rates with both your business goals and lifestyle needs. What income do you need to sustain the life you want? Work backward from there.
4. Timing Your Price Increase for Maximum Success
Strategic timing can significantly impact how smoothly your price increase goes. Consider these factors:
Natural Business Cycles: Many service providers raise prices at the start of a new year or right before their busy season when demand is highest. Others align increases with their business anniversary or quarterly planning.
Client Contract Renewals: For retainer clients, timing increases to coincide with contract renewal periods creates natural decision points without disrupting ongoing work.
After Delivering Exceptional Results: Following a project where you knocked it out of the park makes it easier for clients to recognize your increased value.
When Introducing New Services or Features: Adding new deliverables or enhancing your offering provides a logical opportunity to adjust pricing.
Whatever timing you choose, plan ahead:
- For modest increases (10-15%), provide at least 30 days’ notice
- For significant increases (20%+), give 60-90 days when possible
- For retainer clients, consider timing increases quarterly or bi-annually
Create a strategic timeline that includes when you’ll announce the increase, when it takes effect, and when you’ll next review your pricing. Making price reviews a regular business practice removes much of the anxiety around them.
5. Communicating Your Price Increase to Clients
How you communicate your price increase is often more important than the increase itself. The goal is to frame it positively and confidently:
Focus on value, not costs: Remind clients of the results you deliver and how your services benefit them. When possible, quantify the ROI they receive from working with you.
Be professional and confident: Avoid apologizing or over-explaining. Present the increase as a normal business decision rather than asking for permission.
Provide appropriate notice: Give clients time to adjust their budgets, especially for significant increases.
Consider your communication channel: For important client relationships, have the conversation via Zoom. For others, a well-crafted email may suffice.
Here’s a sample script for communicating a price increase:
“I’m reaching out to let you know that beginning [date], our [service name] will be increasing to [new rate]. As you know, we’re committed to providing exceptional [type of service] that helps you [key benefit]. This adjustment allows us to continue delivering the high-quality results you’ve come to expect while investing in [new tools/team/resources] to serve you even better. The new rate will apply to [explain specifics about timing]. If you have any questions, I’m happy to discuss them with you.”
For long-term clients, consider acknowledging the relationship:
“As one of our valued long-term clients, we wanted to give you advance notice about this change and thank you for your continued trust in our services.”
Be prepared for questions or objections with clear, confident responses that reinforce the value you provide. If I’m sending via email, I like to follow it up with a voice note through Slack to add a personal touch!
6. Implementation Strategies That Work
There’s no one-size-fits-all approach to implementing price increases. Consider these strategies:
Grandfathering vs. All-at-Once: You might maintain current rates for existing clients while charging new rates to new clients. While this can ease the transition, be careful not to create unsustainable pricing disparities that lead to resentment.
Phased Approaches: Implement increases in stages (e.g., 10% now, another 10% in six months) to give clients time to adjust.
Add Value: Consider what you could add to your services to enhance the value proposition alongside higher prices. This isn’t about doing more work, but rather about strategic additions that increase perceived value.
Create New Service Tiers: Develop premium packages that offer enhanced deliverables or results, allowing you to move upmarket while maintaining options for different client budgets.
Test With New Clients: If you’re uncertain about market reception to your new rates, test them with new clients before rolling them out to your existing client base.
Set Clear Boundaries: Whatever approach you choose, establish clear policies and stick to them. Inconsistent application of price increases creates confusion and potentially uncomfortable situations.
Remember that not all clients will stay with you through price increases – and that’s okay. Part of growing a healthy business is making space for clients who value your work appropriately.
The Path to Profitable Growth
Regular, strategic price increases are a normal part of a healthy, growing business. They’re not just about making more money (though that’s certainly important!) – they’re about creating a sustainable business that allows you to serve clients at your highest level without burning out.
View pricing as an evolving strategy rather than a one-time decision. As your expertise grows, your client results improve, and your business matures, your pricing should reflect that evolution.
If you’re struggling with determining the right pricing strategy for your business or want support in planning your next increase, we’d love to help. Book a 1:1 strategy call with Annie {INSERT LINK} to discuss your specific situation and create a pricing plan that supports both your business goals and your ideal lifestyle.
Because when your pricing is locked in, everyone benefits – you get to do your best work without resentment, and your clients get a service provider who’s fully invested in their success.
The content in this blog post is provided for general informational purposes only and should not be considered professional tax or legal advice. The author is not a Certified Public Accountant, and no assurances can be made regarding the outcomes or consequences of tax returns, IRS actions, or any financial decisions based on this information. Readers are strongly advised to consult with a qualified tax professional or legal advisor for personalized guidance specific to their individual circumstances. The author expressly disclaims any liability for decisions made based on the information presented in this blog post.
