How to write a price increase letter to your clients

Whether you’re a freelancer or large digital agency, raising your prices is something you’re going to have to deal with at one time or another. You might send clients a letter, an email or just tell them in person. Either way, you’ll want to give some thought to the words you use to explain and justify your increases.

In this post we’ll discuss what to say, how to say it and provide a sample letter template. Before that though, let’s look at some of the background behind raising your prices.

Just starting out? Now is the time to future-proof your pricing

If you’re at the start of your new lifestyle you’re probably experiencing the buzz, excitement and slight panic of working for yourself. That could mean you rarely think further ahead than next week because you just want to get clients on board first.

However, it’s good to take a little time out and think about your pricing strategy for the first 12 months and beyond. Does that feel a little presumptuous? If you feel that way it’s perfectly natural, but many freelancers – myself included – later reach a point where they wish they’d given more thought to their pricing strategy at the very start.

Different prices for different channels

There are many ways to find work when you start out. Some work well in the short-term to get you established, whereas others provide good quality work and relationships that you’ll want to build for the future. Each route to market has its own pricing implications.

You’ve probably heard people dismiss the likes of UpWork and Fiverr because they involve offering cheap work to people with tiny budgets. That criticism is warranted, but do you know what’s great about these sites? You can build a portfolio and a reputation and then just drop them. Then you’ll have a portfolio and you’ll be ready for better work at better rates.

Now let’s imagine you’re a freelancer and you start working with a local marketing agency. Let’s say you do SEO on their clients’ websites because they don’t have any in-house SEO expertise. This is a match made in heaven, right? You really want to work with them so you set your rates very keenly, but fast-forward a few months and they’ve fed you lots more work and you’ve taken it on at the same rate. You’re now much better at what you do and should be charging more but you don’t want to rock the boat so you don’t ask for an increase.

Long story short, if a route to market is one you want to develop over time, price on the high side, unless you’re happy to work on those rates for a very long time. If you price it too low at the start, it isn’t fair to them if you need to hike your prices by 20% a year later.

If you need to prove yourself, cheap busy market places offer a great opportunity for you to over-deliver and build a great reputation, which you can then take with you into better-paid opportunities.

Why increase your prices?

Unless you can be sure that none of your bills and expenses will be going up in the next year, you need some sort of rate increase just to stand still.

What’s more if you invest in your skills through training, reading industry blogs or going to conferences, you’ll probably be getting better at what you do all the time. That means your clients are getting more value from you, so if you don’t increase your prices at some point, you’re probably selling yourself short.

Is there an alternative to raising your prices?

Despite everything I’ve said above, for some people there is a way to avoid raising your prices – greater efficiency. If you can create greater efficiency by systemising your processes and workflow and maybe creating SOPs (Standard Operating Procedures) you could save a lot of time on projects as you get more proficient.

Let’s say you build websites and typically earn about $5,000 per project. If you can reduce the time you spend on building each site by 20% you can take on more projects at the same rate and earn more. As long as you actually find more work, that’s effectively the same as a 20% increase on your rates.

However, eventually you might hit a ‘wall’ where you just can’t improve your efficiency any further. I’d also still consider reviewing your prices anyway, because quite frankly if you’re diligent enough to make such efficiencies, you deserve to reap the financial rewards of it.

How to communicate your price increase

So now let’s assume you’re ready to raise your prices and you want to know how best to inform your customers. Before we look at a specific letter template, let’s explore some dos and don’ts.

Get to the point

Let’s face it, this letter or email is all about one thing – a price increase. It’s best to just get to the point quickly – tell them how much their prices will be going up by, what they will be afterwards and when this all takes effect. If they want to read the whole letter and find out more, they will and they don’t want to have to get in touch with you because the prices weren’t clear. 

If you waste too much time on fluff and preamble, your client will see right through it. As they read it they’ll be thinking “come on, what’s the bad news?” so they’ll be grateful to you for getting to the point.

Don’t be apologetic

You have every right to put your prices up once in a while. Don’t forget that probably every bill you have to pay will go up on a regular basis. Keep your letter factual and resist the temptation to sound apologetic.

Use the passive voice

Copywriters will often talk about using either the active or passive voice in copy and content. The active voice can be used to explain what you will do, for example “I will prepare a quote for you and email it to you by the end of the day”.

The passive voice is subtly different and gives the impression that something will just routinely happen, rather than as a result of any special effort on your part, for example: “A quote will be prepared and emailed to you by the end of the day”.

The active voice implies decisive action on your part and is great for delivering good news. The passive voice however can be better for news that might be perceived as bad, so it could work much better for a price increase.

So rather than saying “we will be increasing our prices….” you could simply say “our prices will be increasing…”.

Don’t create a reason for the relationship to end

If your insurance premium goes up at renewal time, then there’s a good chance you will shop around for a better deal. Industries like insurance know that every renewal brings the risk of losing a customer.

However, as a creative – even if you do offer annual contracts or ongoing retainers – you aren’t necessarily ruled by renewal or review dates like other industries are. It’s important that you don’t create the perception in your customers’ minds that the price increase is a reason for them to shop around.

You should also avoid creating too prominent a “call to action” in your letter or email. It’s enough to simply ask them to contact you if you have any queries, then you can deal with any questions in the appropriate way.

Remind them what they get from you already

No matter what you do, there may still be a few clients that do choose to look around for a cheaper service. If that should happen, you don’t just want them benchmarking you against your competitors on price alone.

Remind them of the value you offer them, month in month out. This might be as simple as a bulleted list of the services provided under a retainer, or for key clients you might want to tailor the letter to include specific results or metrics you’ve achieved for them.

For longstanding clients, it’s also good to remind them that you’ve built up many years’ knowledge of their business and can provide what they want quickly and easily. If you’re doing your job well, replacing you with a cheaper competitor could backfire on them. It could take months or years before they know your customer’s business well enough to provide the quality of service that you do.

Price Increase Letter Template

So here’s my suggested template for communicating price increases to your clients. As you’ll see, once the above thoughts have been taken into account there really isn’t the need for a long, rambling letter. What you don’t say is just as important as what you do say.

Subject: Price Changes – April 20XX

Dear __________

I’m writing to let you know that our prices will be increasing by 3% with effect from 1^st April. For you, this will mean an increase from $800pcm to $824pcm starting with your April invoice. 

As you know, we value your business and have enjoyed working with you and achieved some great results along the way. Like any business though, our own operating costs do increase over time.

To maintain the level of service you’re accustomed to, this modest increase is necessary, so we wanted to communicate this to you in good time. We’re confident that our prices remain competitive within our sector for the quality of the service that we provide and as always, we’re focused on the results we provide to clients.

I’d like to remind you of the service we provide to you on a monthly basis, which includes:

·      Service 1

·      Service 2

·      Service 3

Thanks again for your business, and please contact me if you have any questions about your new prices.

Yours Sincerely

Not all customers are created equal

This simple template should give you a good starting point for communicating your new prices to customers. Remember though, you should adapt the tone and wording to suit both your organisation and the client in question.

You should even go as far as asking yourself whether a letter or email is the right approach for certain clients. For larger clients, you may prefer to raise the subject face-to-face in a meeting first, and simply follow up by email or letter as a courtesy.

Be flexible (but only for the right clients)

Think about the likely reactions from your clients. If the increases aren’t well received, there may be some you’d be happy to work with to agree a more modest increase or extend your existing pricing for a longer period.

Equally there may be others that you’re happy to see go if they don’t see the value you provide in return for your fees. It’s vital that you have a strategy in mind for each client, should they take the opportunity to question your pricing.

It’s over to you

I hope you find the template and all the other thoughts on pricing useful. I know that pricing can be one of the most contentious issues for agencies, accountants and almost any business, so I’d love to hear your thoughts and comments.