Here are five pointers picked up from discussions with firm leaders and advisers about the always-sensitive “dance” of how and how much to raise rates:
1. Do the math. Your costs may have risen this year, as the costs of a business often do: salaries, facilities, travel, equipment, software upgrades—all of those expenses involved in running a business have probably gone up. An overall assessment of higher costs can help your firm get a sense of how much firm revenue needs to increase to cover these costs.
2. Consider an across-the-board hike—or not. There’s no law that says all hourly billing rates must go up—or that the rates must increase the same amount for every biller or in every billing category. For example, a fast-growing niche that produces tremendous demand for your firm’s services is practically asking for higher rates, since you are delivering exceptional and desirable value. You may want to raise those rates but make the increase a modest one. Or, you may raise the niche rates while staying flat in services where you have strong competition from other local firms. Your strategic plan will help you consider these issues.
You can also assess whether this is a good time to add more set fees or value-based billing to your mix—which also will affect your billing-rate mix.
3. To surcharge or not to surcharge. That’s a question that many firms will always continue to bat around, and it is a good one. There is no right answer to whether or not you should list a separate charge for technology, mailings, or other activities. Local custom may help guide you—if you are the only one to try it, it may be well received. Try an experiment with one client group this year and see how it goes before converting the whole firm to a surcharge scenario.
4. Don’t apologize. CGA firms should take a tip from their lawyer friends and colleagues—law firms tend to be a lot firmer about price increases, and they don’t hang their heads. Yours is a professional and expert firm, and its owners and staff deserve to be compensated for your expertise, your knowledge, and your trusted adviser contributions to your clients’ success.
5. Communicate, communicate, communicate. Depending on the client, the market, and the increase, you may want to let clients know the price is going up. You have the client relationship, so you know best who may want more details about the increase, which clients may benefit from a more detailed bill, or who will simply accept that the best costs more. And always make sure to put increases in writing.
Do you have a tip to add to these? Just put it in a comment below.
[Adapted from an Illinois CPA Society publication.]