I hear from way too many service businesses who haven’t raised their rates in way too long. Some of them, their teams are even begging them to raise their rates!

So here’s the newest episode of the CredoCast. Why you should raise your prices as a service business.

We cover:

• How you’re losing money (not just not making it) every year if you’re not


• Why higher rates leads to happier and more successful clients


• How to raise your rates so you don’t screw your revenue

Transcript

John:

Hey there everybody. Welcome to this episode of the Credo podcast. I’m John Doherty, the founder of getcredo.com. On this show, I interview smart marketers and entrepreneurs who can help you grow and scale your business through great digital marketing. Every now and then I do a shorter me only episode teaching you something that is on my mind specifically. This episode is of course sponsored by getcredo.com, my company, where we have a highly curated network of vetted digital marketing professionals who are best in class at what they do. We’ve interviewed them. We’ve seen their client metrics and we’ve accepted them into the network only after they’ve checked the necessary boxes. At Credo, we specialize in helping companies find and hire the best digital marketing firm or consultant for their specific needs. So if that’s you, get in touch with us at getcredo.com, that’s G-E-T-C-R-E-D-O.com, and click the find a marketer button in the top right navigation.

John:

Hey, what’s up, you all? John Doherty, founder and CEO of Credo here, back here in your ears, talking with you about some topics that I have come across recently that I’ve been thinking about a lot, that people have honestly been asking me to share about, and I haven’t been doing it. So I’m getting back to it. So welcome to another episode of the Credo Podcast. Super glad that you’re here. Today, I’m talking to the service business owners out there, really any kind of business. It doesn’t have to be a marketing agency. You can be a coach. I don’t know. You can be teaching people how to build websites without having to write a line of code. I don’t care what it is.

John:

To shout out to you, Tara Reed from Apps Without Code, asked me to go deeper about all this. So Tara, this is for you. So the topic here is about pricing and about raising prices. People often ask me, they’re like, “Well, why should I raise my prices? I don’t want to be greedy. I don’t want to overcharge people,” that sort of thing. What I find honestly, is that the first one, I really, really… I respect both of those, but I think that they’re both false statements, right? If you’re like, “Well, I’m happy where I am, making the money that I’m making. So why should I raise my rates?” Right? Or you’re like, “Well, I don’t want to be greedy. I don’t want to act like I’m just in it for the money,” that kind of thing.

John:

The reality is you’re running a business here, right? I firmly believe that you can provide better services to your clients and have a saner life so you don’t have to make more necessarily. You can make the same amount and work less and focus on other things, have more time to do the things that you love doing, right? You don’t have to work… What I often find is people that are saying those things that, “Oh, I’m happy making what I’m making. I don’t want to be greedy,” that sort of thing, the reality is they’re working a ton. They’re working a ton.

John:

They’re stressed out. They’re not getting time with their family, their kids, to pursue their hobbies. Their health is probably a little bit. So I want to help people fix that. I exist on this earth to help people fix those problems to live a fuller business life in that way, right? I believe that entrepreneurship can drive incredible change in the world and incredible change in people’s lives. So when people ask me like, “Why should I raise my rates?” There’s really three specific reasons that I want to cover today.

John:

Number one, did you know that you’re literally, if you’re not raising your rates yeah every year, and I think you should review your rates every three to six months, I actually think you should always be raising your rates, but at minimum reviewing it every three to six months, and at absolute minimum reviewing it every year, if you’re not raising your rates by at least 3% every year, you’re literally losing money every year due to inflation, right? You’re doing the same work for less money because, not like top-line, but your expenses are going up, right? You’re giving people raises. Software is getting more expensive. You’re growing your email list. You have to pay more for your email software. All these sorts of things go on. So if you’re not raising your rates, you’re literally losing money every single year due to inflation.

John:

Number two is if you’re not raising your rates, you’re making less per hour every single year that you don’t raise your rates because you’re getting better at what you do. Now, I don’t think hourly pricing is good. I don’t think anyone should do hourly pricing, or it should rarely be done. When we were running kind of an escrow marketplace service through Credo, which we sunsetted about nine months, 12 months after we launched it. But we didn’t even do hourly billing because I don’t think hourly billing aligns incentives on either side, specifically for this reason that I’m talking to you about.

John:

Because you’re making less money per hour and having to sign more clients and thus work harder to make the same amount of money if you’re not raising your rates because it per every year that goes on, shoot, every three months that goes on, every month that goes on, you should be getting better at what you do. You should be getting better at what you do, figuring out processes and getting quicker at what you do. So if you’re doing that, you’re literally making less money per hour by charging by not raising your rates. You’re being penalized for getting better at what you do and being more efficient at what you do, which is why I don’t like hourly billing on the supplier side, on the agency side, which is probably where you are.

John:

Number three, you need to close more clients meeting your expenses, right, if you don’t raise your rates because of what I just mentioned, that the better you get at your work, you should be making more and working less rather than working more, right? So it’s going to lead you to having to, if you’re not raising your rates, it’s going to lead you to having to close more clients, which is going to add to the stress, it’s going to add to the workload, right? It’s not a one-to-one relationship. Every client that you sign, it’s not just the 20 hours that you sold them, but it’s increased mental overhead and operational overhead because of invoicing and all of that sort of thing, right? It’s more work than just those 20 hours that you signed to deliver to them every month for whatever service it is that they know decided to pay you for.

John:

So the question comes down to, now that I’ve convinced you… It’s not even an argument, I’ve convinced you, right? Now that I’ve explained all of this to you, let’s talk about how you raise your rates. Number one, I don’t think you have to go and do it on your existing clients yet. Actually, I would say, don’t go and do it on your existing clients. Now, if you haven’t raised your rates in at least 12 months, and for a lot of you it’s probably 24, 36 months. I recently pulled my Twitter followers and got, I don’t know, a hundred plus responses maybe. There were some that review their pricing every three to six months, but a lot of it was like 18, 24 plus months. If you’re doing that, you are under priced for sure, and probably your clients know it, right?

John:

At one point when I raised rates on Credo, which by the way, we 13X’ed our pricing on Credo since 2017, and we still have a lot of the same customers, because we were crazy under priced. I had some people actually say, “I was wondering when you were going to raise your prices,” in which case you know that you waited too long. But you don’t have to go and do it on your existing customers yet. Number one, raise it for new prospects. Something that I tell people to remember is that your current… The person you’re currently pitching doesn’t know what you quoted the last person. Remember that. The person you’re currently pitching does not know what you quoted the last person.

John:

So you quote them say $1,500 for this, whatever, 10 hours worth of work. They don’t need to know that the previous person you quoted them 1,300 or 1,400 or 1,200. It does not matter to them because what you quoted that last person is not the price for them. It is not your current price now. Your price is what you just quoted them, right? If they come back and say, “Can you do a better price?” Then you ask them what scope they want to trim out in order to get down to that price that they would prefer to pay, right? You don’t just reduce it because they would prefer to pay less. You charge them what they need. You charge them what it’s worth, right?

John:

You have to believe that what you are charging them is what it’s worth, right? If you don’t, right, the