The Anatomy and the Agony of Raising the Rates

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After almost a decade, we went through the very grown up and emotionally difficult task of raising our rates for ITW Consulting. Some of our clients (you) might remember the good old days when Jason and I were working out of Tim Horton’s. We had one consulting rate and invoicing was easy. Write down what you did and how long it took. Send that to Vanessa who would copy & paste that into QuickBooks and then she would email a simple bill to the client. Ah, the good old days.

With a growing managed services practice in addition to 30 Weapons Grade consultants, the business has gotten a lot more sophisticated in 12 years. Now we have a state-of-the-art facility, a full ERP and enterprise financial system with all its tracking, double checking, and automated reporting systems, and Vanessa still looks after every Service invoice! We’ve grown up, our costs increased, we built out several data centres, inflation happened, and we kept our rates the same.  Until this summer.

We were able to hold off for as long as we did because we have always been obsessed with the concepts of efficiency, TCO, and ROI.  As we do with our own operations, we’ve done our best to do the right thing for our clients and that approach has kept us a strong profitable company. As a business owner, raising the rates was something we approached with great caution and admitted naivety. What should we charge? What is reasonable? At the end of the day, we kept it simple and did what our conscience said. We sent our teams to work to figure out as precisely as they could, the cost of having and paying a fully burdened employee – down to the hour. Then we added the margin required to keep on keepin’ on.  Honest and straightforward.  That’s the anatomy of how it happened. We did some arithmetic and figured out what we needed in good faith. Then came the agony.

Now we had to tell everybody our rates were going up. Yikes. How would people react? Are the clients gonna get mad at us? Do we send a newsletter out? Book appointments and put together a PowerPoint slide show of what we did and why? Perhaps do as some competitors have done … attach the notice to the footer of an invoice and hope they see it? In the end, we did what we hoped people would expect from us – we sent a short and earnest email to our clients and directed any questions or concerns directly to me. I wanted to see and address any issues personally –and I was prepared for the worst … Ready to explain the painful decision we made internally and demonstrate the business case with facts and figures to some angry clients.

We sent out over 1000 emails. I got 11 direct replies.  Most were simple acknowledgements and a couple clarification questions about pre-purchased consulting hours they had on retainer. Nobody got pissed off.  A few legacy clients even took the opportunity to make me sweat with comments like “Raising the rates … Are you serious? You are killing me.” Only to find out after I drove downtown for a meeting that they were kidding!

The moral of the story is two-fold. First, a situation is never as bad in reality as you think it’s going to be. Second, if you do what is right in business and be truthful with your clients, they will understand.

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