Time to Raise Prices

Hey, everybody. Drew McLellan here from Agency Management Institute this week coming to you from beautiful San Diego. You know, many of you are coming to the realization, probably a little later than you should have, that all of your expenses have been rising for the last several years. And the one thing that hasn't changed is how you price. So if you remember, for the last couple of years we've been talking about, you need to raise your billable rate from $150 an hour to at least $175 an hour, but many of you have not embarked on that journey yet. So several folks are asking, how do I have this conversation with clients? And how do I have this conversation with prospects? The good news is with prospects, the conversation is pretty straightforward. This is what we charge. Most of you don't actually talk about an hourly rate with your clients. 99% of you are project priced based, which means clients want a thing or a series of things, and you're going to give them a flat fee for the delivery of those things. So it might be strategy, it might be monthly PPC or SEO campaign, it might be something else, but you're not really unraveling for them your hourly rate. You're just saying you want these deliverables. And here's the price. So for prospects it's pretty easy. You need to start calculating your prices based on a minimum of $175 an hour. Great.

What about the clients we've had for a long time who are paying far less than that, in some cases $100 an hour, $125 an hour? Hopefully at least $150 an hour. How do I raise those rates? So it depends on how you've how you've shared your rates in the past. If you have an MSA or a purchase agreement or a project authorization that spells out how you calculate your prices, meaning that you give them some sort of an hourly rate inside the formula of how you set prices, then you need to inform them that that formula is changing, and we'll get back to that in a second. If you haven't declared that, if you've just always given them a flat

fee for deliverable work, then you're just going to give them a new flat fee that is at the new hourly rate. Or however you calculate the cost for your clients. It's a good idea to have a conversation with your client. And the conversation looks like this. Normally, you're going to give them a window of time, especially if it's in your MSA, purchase agreement, project authorization. You're going to say, “You know what Drew, for the last five years, as you know, in our MSA, we've been calculating our work based on a an hourly rate of $150. As you know and have experienced in your own business, the cost of doing business has has risen dramatically and we have held off raising our rates for as long as we can. As of this date (and you're going to want to give them at least 90 days notice) we're moving from $125 to $150 or $150 to $175” (whatever that jump is). And if you're by the way, if you're doing $125 or $100 – $100, you maybe can't jump up to $200, you're going to have to do this incrementally with the clients that you have.

So you're going to say, “We're moving as of this date, 90 days out. We're going to be raising our hourly rate to this, which is, x percent. You know, over the course of the last five years, what that would have meant is a 1 or 2% increase over time. But we've delayed that. And now we're taking this one time, pricing increase to X. Here's what that's going to look like for the projects that we're working on. We'll obviously honor our what we've already bid out at the at the rate that we bid it out. But future projects will be bid out at this new rate."

And then I would give them an example. So if we're if you're normally doing, let's say PPC and SEO campaigns for them, you would say, okay, you are normally paying $500 a month or $5,000 a month. You're now going to be paying $5,300 a month or whatever the new thing is. And show them the percentage. You can also give them an option of reducing the deliverables if they want to keep their budget where it's at. This is really easy to do at the turn of a new year. It's more complicated when you are doing it in the middle of a year, but nonetheless, your clients honestly have been expecting it. We've had a lot of agencies that have been going through price increases over the last, gosh, year or two. And very, very rarely do any of their profitable clients say to them anything other than, yeah, I totally get it. You know, I'm not excited about it, but I totally understand it. And, we're fine. Every once in a while, a client that's already not profitable, that's already kind of squeezing you down on price will say, sorry, can't do it. It's great if you have something in your back pocket, someone else, a freelancer or someone else that you can offer them that will do the work at a lower price. But for most of you, 95% of your existing clients aren't going to blink. And if they're being honest with you, what they're going to say is, I've been kind of waiting for this. I've been wondering when you were going to do this.

So, you got to be bold, be very direct, be clear, and don't be bashful about it. Don't be shy. You deserve to be paid what your work is worth, and you deserve to be a profitable business. And it's getting harder and harder to do that if you are paying new prices and still charging old prices. So make a plan, clearly communicate the plan, and then sit back. And I think you're going to be surprised at how easy it is.

All right? See you next week.