7 Ways to Increase Your Consulting Fees

7 Ways to Increase Consulting Fees

Increasing your consulting fees is one of the quickest and easiest ways to earn more. But it needs to be done right.

The more ‘new’ value you provide to your clients with the price increase, the less objections you’ll face.

Many consultants experience paralysis around this topic. The idea of losing customers as a result of increasing prices leaves them in a deep chill and unable to move forward and take action.

To help you increase your own consulting fees, here are 7 questions to ask yourself:

1. Is the Time Right?

Every client and industry has cycles. Periods where they are likely to be more busy and stressed. Consider what is going on in your client’s business before you come out asking for an increase in your fees. This shouldn’t stop you from moving forward however…it’s just an important consideration. Entrepreneur writes that you should “choose a time when you’ll encounter the least resistance.”

2. Are You Focusing on Value?

The most critical part of raising your prices is that your clients perceive an increase in value. The more ‘new’ value you provide to your clients with the price increase, the less objections you’ll face.

For example, you can offer a new service or product that your clients will value…and it doesn’t necessarily need to take you much (if any) more time to provide it. It could be some kind of additional reporting, maintenance, or monitoring to name a few.

I read a great study on Social Triggers by economist Richard Thaler. In the study, people were asked how much money they would give a friend to buy a beer for them if they were vacationing and sitting on the beach. In the first situation, it was explained that the place the friend was going to buy the beer from was an old run-down grocery store.

You need to clearly figure out why you’re increasing your price so that you can communicate the reason with your clients.

In the second situation, people were asked how much money they would give their friend if the friend was going to a luxury resort to buy that same beer.

The study found that on average people would give their friend 71% more money when the beer was to be bought at the luxury resort.

Now consider that this was the exact same beer. It would taste the same. The only difference was the perception of value associated with each of the places.

Again, the more perceived value you provide the more you can raise your prices.

3. What is Your Fee Increase Based On?

You need to clearly figure out why you’re increasing your price so that you can communicate the reason with your clients.

For example, are your own costs going up?

Is inflation increasing? Or maybe your insurance costs have jumped.

These are all logical reasons for you to increase your price and when you communicate them properly your clients are much more likely to understand the increase. In fact, they’ve probably done the same thing in their business.

Pricing Solutions tracked two of their clients and found that the firms hadn’t increased their rates to cover the increase in the Consumer Price Index (CPI). Think about that, if the CPI is increasing and you haven’t taken that into account with the fees you charge, it means that with every passing year, you’ll actually make less per client than you did the year before.

4. Will the Increase Be Consistent or One-Time?

Some consultants work annual price increases into their fee structure. Each year they may increase their fees 5-15%. To make this work you need to explain this to your client early on so they know the increases will happen and understand why they do.

This kind of increase is common in everyday life. The cost of food, gas and other items consistently increase (usually over time). In most of North America, landlords are also allowed to increase your annual rent by a few percentage points.

Other consultants believe this is a bad move. Tom Searcy calls this approach ‘Death by a Thousand Cuts‘. In an article Tom wrote in Inc Magazine, he suggests that instead of raising your prices a few percentage points on a regular basis, raise them to a level you’ll be comfortable with for a while. His argument is that each time you increase prices, clients feel uncomfortable and uneasy.

Tom makes a good point. The reality is that if you’ve setup your consulting fees the right way your price should be based on value. And that shouldn’t require a 5% increase each year…you should be making a great income per project already.

5. Are you Contacting Your Clients Directly?

Do not attempt to increase your consulting rate by email or by sneaking the information in an invoice. Just the other day I got a bill from my communications company. My monthly payment went up a few dollars. Not a big deal…yet I have a sharp eye on money and spending. That’s my style.

Justify it, connect it to value, and base it on facts. Don’t simply try to sneak it in there.

So I called them up to see what the increase was for. They said, “Oh Mr. Zipursky…the price did increase from last month and you were notified about this in your last invoice.”

There goes my trust towards this company. They could have sent me a letter, given me a call, or even an email (in this case because they have hundreds of thousands of customers).

Instead they likely hoped people wouldn’t notice the increase which was noted in small type on the previous invoice. Most people probably do notice at some point and feel like they’ve been burned. Even for a small amount.

The key lesson here is that you need to reach out to your clients, especially your best clients, and tell them about the increase. Justify it, connect it to value, and base it on facts. Don’t simply try to sneak it in there.

6. Are You Feeling Confident?

When you speak to your client about the fee increase you need to come across as confident. If they get a whiff of your uncertainty it shows that you, yourself, aren’t sure about the need for the increase.

In fact, Mel Robbins, a star in the talk radio world, says that having confidence in situations like these is key to getting what you want and is a big part of her success.

Before you can sell others on the idea, you first need to sell yourself. Your confidence matters.

7. Are You Seen as a Specialist?

Specialists have more clout. They are trusted and respected more than generalists. Not because they are ‘better’ people. But, simply because they have positioned themselves as an authority in their area of expertise.

When you’re a specialist solving a real problem your client has a greater need for you. If you’re seen as a generalist, every time you increase your fees, you’re giving your clients a reason to find your replacement…and the perception is that it’s much easier to replace a generalist than it is a specialist.

What experiences have you had around raising your fees? I’d love to hear from you in the comments below…

Check out our fully updated Consulting Success System! Learn More and Buy Now.
  • Aarni Heiskanen

    One argument I’ve heard about not increasing your fees is that there is a “market price” for a certain type of consulting. Whenever this happens you’re in trouble since you are not able to distinguish yourself from the crowd. In many cases the market price is under pressure, and will more easily go down, rather than up. Therefore questions number 6 and 7 are essential!

    • http://www.consulting-business.com Michael Zipursky

      Aarni – thanks for the comment!

  • Jenny H.

    Thank you for this article as it provides such great detail on important considerations all consultants should make.

    • http://www.consulting-business.com Michael Zipursky

      Appreciate your comment Jenny!

  • Perry R. O’Brien, MBA

    Research is endless in todays marketplace, because of high velocity change, not only regarding products being launched, but also with the modern consumer having more options.

    • http://www.consulting-business.com Michael Zipursky

      Indeed – people will always price shop. The key is to differentiate your offering so that the value you provide goes beyond what the others do.

  • rick stockton

    Does anyone have any sort of sample of what they would write to their clients to explain the increase in consulting fees?

    • http://www.consulting-business.com/ Michael Zipursky

      Rick – how about telling your client face to face at your next meeting? Give them some advance notice and explain why you’re increasing your fees.

  • Jakob Jenkov

    Great article, Michael. But is the title not slightly misfitting to the content? Would something like “7 issues to consider when raising your consulting fees” be more appropriate?

    • http://www.consulting-business.com/ Michael Zipursky

      Thanks for the comment Jakob and glad you enjoyed the article. There are many options I could have used for this title but this one stood at for me at the time.