TFYW#076: 3 Tactics To Start Charging For Freebie Services

Feb 23, 2024

This week, let’s dive into how to tactfully get your clients to pay more.

Navigating Price Increases

This week’s newsletter is my response to a question from Jennifer:

Q: “Newsletter idea: How to make a client pay for the additional value services that we provided for free in the past.”

My response assumes an ongoing monthly service agreement is in place, but this is still applicable for once-a-year compliance services.

First and foremost, all of us have been there.

Don’t feel like you’re the only one who’s done this.

We’ve all needed revenue, so we dropped prices or said yes to silly client requests to get signed engagement letters.

I did this a few times when I started my firm.

I would ‘throw in’ payroll to get clients to say yes.

Most of us know that payroll can be the simplest of services and one of the most time-consuming at the same time.

I feel embarrassed sharing this.

As a CPA and a ‘small business advisor,’ I made some pretty stupid financial moves while building my firm – I did the exact opposite of the advice I gave my clients.

Many seasoned firm owners still do client work for very little profit. We’re all learning.

But before making tactical moves

 

If you don’t remember anything else from this newsletter, remember this:

 

Most of our hesitations around raising prices concern us and our perception of ourselves.

 

Clients aren’t paying for your experience, credentials or kindness. Those things are just requisites for them even to consider buying from us.

They’re paying for results and outcomes.

You wouldn’t expect a client to stick around if your work was junk, despite carrying the title of CPA and you were ‘doing them a favor.’

The favor has no impact because your work was not adequate.

So why do you think if you offer a good service, you need to give favors or discounts to keep them?

Offering this type of favor impairs the very relationship the favor is trying to improve.

Worst Case Scenario

You might still hesitate to raise your prices even once you’ve divorced the value of your services from you.

So, let’s play out the worst-case scenario.

The worst case is that the client leaves you. It’s ok to be adverse to this because you’re going to lose the revenue.

But revenue shouldn’t be on the top of your list of concerns. Profit should.

I’ve discovered that easy revenue usually leads to hard profit or, in some cases, no profit.

A fast ‘yes’ from a client is usually not ideal for building a sustainable firm.

There are things you can do to demonstrate your value, but destroying your profit margins is not one of them. You cannot increase value by simply lowering your price.

I know how nerve-wracking it can be to lose a client, even if that client nets zero dollars to you. That client is probably helping pay for your team and some of your overhead.

But every time I’ve used the tactics below to raise prices or start charging for a freebie service, I’ve retained the client.

These tactics help align my goals with those of the client.

It’s What You Give Them

First, remember that there is a difference between raising prices and getting your clients to pay more.

Raising prices implies that there is no choice for the client.

Getting your clients to pay more comes down to direct and honest communication.

1. Give them notice of the change

I would delay as much as possible, telling my clients I was raising my prices or needed to start charging them.

It usually played out that I would bring it up at the end of a conversation “Oh, by the way, I need to charge you more…”

If your change notice is at the last minute, it will blindside your client and taint the relationship.

Being deliberate and timely with your communication puts you in a position of confidence.

You’re not in business to make friends. You’re in business to deliver value and charge for it.

2. Give them a reason for the change

I avoid completely placing the reason for a price increase on external factors, like ‘inflation’ or regular ‘annual increase.’

I know that inflation does play into our cost structure, but making that the sole reason for the client to pay more turns your service into a commodity.

You’re saying there is nothing special about you, and you’re substitutable.

When you give them reasons like:

  • Staying current on laws impacting your industry
  •  Maintaining our responsive to your individual concerns
  • Continuing to research the best tools and apps in your industry

you’re highlighting that the price increase is for their benefit.

Note: If you have a service renewal coming up, that is a perfect time to address the pricing change. However, a service renewal isn’t mandatory if a change needs to happen.

3. Given them options

People don’t like being forced to do stuff.

The same goes for your clients.

When the time comes to start charging for a freebie service, give them a choice:

  1. They can stop receiving the free service, OR
  2. They can start paying for the free service.

Without the choice, you turn the decision about the free service into a decision about your relationship.

If they have to start paying you more, you potentially jeopardize the entire engagement.

You want them to know that it’s not them who is the issue. The issue is that you’re footing the bill for a service they’re receiving.

Delivery

How you communicate the change will depend on your relationship. If you feel that the change will profoundly impact the client, I recommend a phone call.

When in doubt about what communication level you should use, always over-communicate.

Hi Client X,

I want to inform you that in three months, effective June 1, I will start charging for my payroll services. I understand that this has been included as a bonus in our service agreement for the last 12 months, but at this point, this free service is impacting the mutual benefit of our relationship.

To maintain the level of service I offer your growing company, the new price for payroll will be $250/month.

**You can list everything that they receive in the payroll service. They may not know what you’ve been doing**

I understand that this is an added investment to your business, and if you cannot afford it now, I can provide you with the template I use to complete your payroll or refer you to one of my payroll provider partners.

I appreciate our relationship and value you as a client. I would happily discuss this change with you if you have any questions.

Thanks,

Build The Firm You Want.

Mark

P.S. Email Mark@FirmNexus.com with something that you want me to talk about. I’ll add it to the list. 

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