When I practiced law in the mid-1990s, my law firm sent out its new fee rates every January. And our clients basically just said “ok.” Our rates would go up a bit each year, and it was generally viewed as no big deal.
With the incredibly competitive marketplace these days not only for lawyers but seemingly everybody, it’s a much bigger deal for anyone to raise their rates. It’s thus even more important to engage in this negotiation strategically, in the right way.
What’s the secret sauce?
1. Explain your raise based on benchmarks/standards
Don’t just announce your new rates. Instead, explain the justification for them and tie your increase to a standard or benchmark your client can appreciate.
For instance, I raised my rates last year and indicated that a) it came after several years of no rate increases due to the pandemic, b) inflation had increased significantly in those years, so my costs had effectively gone up, and c) others had also raised their rates during this time, so I was just keeping pace with the market.
Regular readers will recognize this strategy as implementing my Third Golden Rule of Negotiation – Employ “Fair” Objective Criteria by using the precedent, costs, and market value standards.
2. Don’t be too aggressive
It’s more effective to regularly raise your rates in small increments than in one big chunk over a long period of time. This is the beauty of relatively small, ongoing rate increases, which many organizations do annually.
Doing it this way typically does not trigger a client’s “I better check the competition and run a reverse auction to get their rates back down” reaction.
3. Give them a break
The psychological element involved in raising rates is crucial. You want your clients or customers to feel that you still really care about them even as you raise your rates. So match your rate increase with some “I still care” message.
Perhaps offer them special payment terms if that has been an issue for them in the past. Or throw in an extra hour of consulting at a special discount along with your new rates.
Latz’s Lesson: You’ll be more likely to get that “ok” response next time you raise your rates if you tie it to standards, don’t ask for too much, and let them know you still care.
* Marty Latz is the founder of Latz Negotiation, a national negotiation training and consulting company that helps individuals and organizations achieve better results with best practices based on the experts’ research. He can be reached at 480.951.3222 or Marty@LatzNegotiation.com.