When Should You Raise Your Business Rates?
Contributed by SBOC Member:
Pat Miller
Founder of the Small Business Owners Community
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The Uncomfortable Math on Business Rates
When’s the last time you raised your rates?
If you can’t tell me right now, it’s been too long.
Here’s the math nobody wants to hear: Even if inflation is coming down, if you haven’t raised your rates in two years, you’re making approximately 15% less in real money than you were before.
The same dollar is worth less. You’re falling behind while standing still.
The compounding cost of living means that if you’re not raising your rates consistently, you’re sinking to the bottom of the swimming pool.
The Existing Client Dilemma
“But I have clients on old rates. Do I keep them? Do I rip off the bandaid?”
This is a common question with no single right answer. But there are factors that will guide your decision:
Factor 1: How much of your inventory is sold?
If you can serve 10 clients a month and you’ve only sold 5, you could simply raise rates on all new clients starting today. Your existing clients stay at old rates. Within a few months, your average rate increases naturally.
But if you’re at 90% capacity and still need more revenue, raising rates on that last 10% won’t move the needle much. You may need to address your business rates to existing clients.
Factor 2: How long is your average engagement?
If clients typically stay for one month or 90 days, you could set new rates today knowing that within a quarter, all your clients will be on updated pricing through natural turnover.
If clients sign annual contracts, you have a different timeline to consider.
Factor 3: What’s your natural churn?
Understanding your typical client turnover helps you project how quickly new rates will apply across your client base without forcing the conversation.
The Worth Question
Here’s the question that cuts through all the strategic considerations:
Do your clients get what they pay for?
Yes?
Then you’re worth it. Raise your rates.
If you’re providing value, if you’re solving problems, if you’re delivering results—you deserve to be compensated fairly for that. And “fairly” means keeping up with economic reality.
Your Challenge for Today
Find something in your product offering and raise the rates. Today.
Don’t overthink which product. Don’t spend a week analyzing your pricing strategy. Pick something and raise it.
Because what is your work worth? Do your clients get what they pay for?
Yeah, they do. You’re worth it.
Go raise your rates today.
Key Takeaways
- If you can’t remember when you last raised rates, it’s been too long
- Two years without rate increases = ~15% less in real money
- Consider: inventory sold, engagement length, and natural churn
- If clients get what they pay for, you’re worth the increase
- Challenge: Raise rates on something TODAY
Listen to the full discussion on Businessing with Pat Miller.
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Contributed by
Pat Miller
Founder of the Small Business Owners Community
Pat spent two decades in broadcasting management and hosting. After leaving the radio industry, he spent time consulting small businesses and realized the support system for entrepreneurs was broken. Where could you find help for improving small businesses and building real connections with other like-minded people. In June of 2020, the Idea Collective Small Business Community was born.