How to Raise Rates on Current Clients w/Loren Fogelman

Podcast

Summary

In this episode of Growing Your Firm, host David Cristello welcomes back returning guest Loren Fogelman, a sports psychologist turned business coach specializing in helping accounting professionals. 

Loren shares her insights on a crucial yet often overlooked topic: raising fees for existing clients. She emphasizes the importance of understanding client hesitations, particularly when they respond with, “I’ll think about it,” suggesting that this often indicates unasked questions or a lack of perceived value. 

David and Loren explore strategies to approach these conversations with curiosity and confidence, aiming to help listeners maximize their income while working smarter, not harder. Tune in to learn practical tips for implementing fee increases with your current client base.

Guest Bio

Loren Fogelman is a distinguished business coach and a former sports psychologist who has dedicated her career to empowering accounting professionals to achieve unprecedented success. 

With a unique blend of psychological insight and business acumen, Loren has transformed the way accountants approach their practice, helping them to not only double their income but also to work half the time. Her philosophy centers around the belief that understanding one’s value is crucial for sustainable growth and fulfillment in the accounting profession.

Having transitioned from sports psychology to business coaching, Loren brings a wealth of knowledge and experience to her clients. She understands the pressures and challenges that accounting professionals face, and she leverages her background to instill a mindset of confidence and self-worth. 

This approach has allowed her to guide numerous firms in recalibrating their pricing strategies, particularly in raising fees for existing clients—a topic she passionately advocates for, as evidenced by her appearances on various platforms, including the “Growing Your Firm” podcast.

Loren’s achievements are noteworthy. She has developed a comprehensive framework that enables accounting professionals to assess their current pricing structures and identify the revenue they are leaving on the table. 

By encouraging her clients to embrace value-based pricing, she has helped them shift from traditional time-based billing to a model that reflects the true worth of their services. This transition not only enhances profitability but also fosters a more client-centered approach, allowing firms to focus on delivering exceptional value rather than merely clocking hours.

Her work is underpinned by research and statistics that reveal the potential for significant revenue growth when firms embrace change. 

Loren emphasizes that a staggering 82% of clients are likely to accept new pricing if they feel valued and understood. This insight has empowered many firm owners to confront their fears about raising fees, ultimately leading to a healthier, more sustainable business model.

Loren’s ethos is rooted in the idea that fear often holds professionals back from realizing their full potential. She encourages her clients to confront their anxieties about pricing changes and to view these adjustments as opportunities for growth rather than threats.

 By fostering a culture of curiosity and open communication, she equips accountants with the tools they need to navigate difficult conversations about fees with confidence and empathy.

In addition to her coaching practice, Loren is a sought-after speaker and educator, frequently sharing her insights through webinars, workshops, and podcasts. Her engaging style and practical advice resonate with audiences, making her a respected voice in the accounting community. 

She is committed to providing actionable strategies that empower professionals to take control of their pricing and, by extension, their financial futures.

Detailed Synopsis

Raising Fees for Existing Clients: A Path to Revenue Growth

Raising fees for existing clients can be a daunting task for many firm owners, primarily due to the fear of losing clients. However, research indicates that approximately 82% of clients are likely to accept new rates if the changes are communicated effectively. 

This statistic highlights a significant opportunity for firms to enhance their revenue without necessarily increasing their client base.

Understanding Client Value

One of the key reasons many firm owners hesitate to raise fees is a lack of understanding of their own value. Many professionals mistakenly tie their fees to the time spent on tasks rather than the results they deliver. 

Clients are primarily concerned with the outcomes of the services they receive, such as tax advantages, revenue increases, and strategic growth. By shifting the focus from time-based billing to value-based pricing, firms can better align their fees with the benefits they provide.

The Client-Centered Approach

To successfully implement a fee increase, it is crucial to adopt a client-centered approach. Here are some steps to consider:

1. Communicate Changes : Inform clients that changes are being made to enhance the value they receive. Avoid blaming external factors like the economy or rising costs, as this can feel punitive. Instead, frame the conversation around how these changes will benefit the client.
2. Schedule Meetings : For significant fee increases (over 30%), it’s advisable to schedule a meeting to discuss the changes. This personal touch can help clients feel valued and more receptive to the new rates.
3. Engage in Value Conversations : During discussions, focus on the client’s goals and how your services can help them achieve those objectives. This approach reinforces the value of your services and justifies the fee increase.
4. Present Options : When discussing new fees, consider offering tiered pricing packages. This allows clients to choose the level of service that best fits their needs and budget, making them feel more in control of their decision.
5. Prepare for Objections : Anticipate common objections, such as concerns about affordability or the need to think it over. Prepare thoughtful responses that emphasize the value and benefits of your services, helping to alleviate their concerns.

The Upside of Fee Increases

The potential benefits of raising fees extend beyond immediate revenue growth. By recalibrating your client base, you may find that the clients who choose to leave are often those who are price-sensitive and do not fully appreciate the value of your services. 

This can lead to a more engaged and profitable client roster, allowing you to focus on high-value clients who recognize and are willing to pay for your expertise.

Raising Fees for Existing Clients: Strategies and Insights

In a podcast episode featuring Loren Fogelman, a business coach specializing in helping accounting professionals, the discussion centers around the often daunting task of raising fees for existing clients. 

This topic is crucial for firms looking to enhance their profitability while maintaining strong client relationships. Here are some key insights and strategies shared during the episode:

Understanding the Value of Your Services

One of the primary reasons many firm owners hesitate to raise their fees is a lack of understanding of their own value. Fogelman emphasizes that clients do not care about the time spent on tasks; they care about the results and benefits they receive. 

Therefore, it is essential for firm owners to recognize and communicate the value they provide, which can include:

• Helping clients achieve tax advantages.
• Increasing revenue and profit margins.
• Providing strategic guidance for business expansion.

The Impact of Legacy Clients

Fogelman points out that many firms have legacy clients who are paying outdated rates. This creates a disparity where newer clients pay significantly more for the same services. 

By not adjusting fees for these legacy clients, firms may be leaving substantial revenue on the table. Fogelman suggests calculating the potential revenue increase by determining how much more income would be generated if all clients were paying current rates.

Client Retention Statistics

Research indicates that approximately 82% of clients will continue with a firm after a fee increase, especially if the firm has invested in building a strong relationship with them. 

The remaining 18% who may leave are often the clients that firms secretly wish to part ways with, as they tend to be price-sensitive and may not fully appreciate the value of the services provided.

Strategies for Implementing Fee Increases

Fogelman outlines several strategies for effectively raising fees:

Start with New Clients: 

1. If possible, begin by charging new clients your updated rates. This allows you to become comfortable discussing your fees and understanding client perceptions of value.

Gradual Increases for Legacy Clients: 

1. For existing clients, consider gradually bringing them up to current rates. You can start with clients you feel less attached to or those who are already low-value clients.

Communicate Changes Effectively: 

1. When informing clients about fee increases, it’s important to frame the conversation around the value they receive. Fogelman suggests a five-step approach:
2. Communicate that changes are being made to enhance client-centered services.
3. Schedule a meeting to discuss the changes.
4. Focus on the client’s goals and how you can help them achieve those.
5. Present the new fees in a client-centered manner, possibly offering tiered options.
6. Prepare for objections by anticipating common concerns and practicing responses.

Handling Objections

When clients express hesitation or say, “I’ll think about it,” it often indicates they have unanswered questions or do not fully understand the value of the services. 

Fogelman advises leaning into this uncertainty by asking clarifying questions to uncover their concerns. This approach not only helps address objections but also reinforces the value of the services offered.

Transitioning to Value Pricing

Fogelman also discusses the shift from traditional hourly or fixed pricing to value pricing. This model allows firms to charge based on the value delivered rather than the time spent. 

She introduces the “Good, Better, Best” pricing model, where firms can gradually increase their rates by offering different service tiers. This method helps firms become more comfortable with value conversations and allows clients to choose the level of service that best fits their needs.

A Client-Centered Approach to Price Increases

When discussing price increases with existing clients, adopting a client-centered approach is crucial. This method emphasizes the value and benefits that your services provide to clients, rather than merely justifying the increase based on your costs or the time spent on their accounts. 

Here’s how to effectively implement this approach:

1. Communicate Changes with Client-Centered Messaging

Begin the conversation by framing the price increase as part of your commitment to enhancing client service. Instead of attributing the increase to external factors like rising costs or economic conditions, focus on how these changes will benefit the client. This aligns with the ethos of being client-centered, which is likely how you already operate your firm.

2. Engage in Value Conversations

During discussions about the price increase, shift the focus from the fees themselves to the value you deliver. Ask your clients about their goals and initiatives for the upcoming year. 

This not only shows that you care about their success but also allows you to highlight how your services contribute to achieving those goals. For instance, you might discuss how your expertise has helped them save on taxes, increase revenue, or avoid penalties.

3. Present New Fees as an Investment

When discussing the new fees, frame them as an investment in their business rather than a cost. This perspective helps clients see the increase as a means to access greater value and improved outcomes. 

Providing options, such as tiered pricing packages, can also empower clients to choose the level of service that best meets their needs, making them feel more in control of their decision.

4. Prepare for Objections with Empathy

Anticipate common objections that clients may raise, such as concerns about affordability or the need to think it over. Prepare thoughtful responses that reinforce the value of your services. For example, if a client expresses concern about the increase, you can remind them of the specific benefits they’ve received from your services, such as increased profitability or strategic growth.

5. Utilize Client Feedback

Before implementing the price increase, gather feedback from clients about how your services have impacted their businesses. This information can be invaluable in demonstrating the tangible benefits of your work during the conversation about fees. 

By showing clients the positive changes that have resulted from your services, you reinforce the rationale behind the price increase.

Implementing a “Good, Better, Best” Pricing Model

Transitioning from traditional time-based fees to a value pricing model can be a daunting task for many accounting firms. However, adopting a “good, better, best” pricing model provides a structured approach that allows firms to make this shift gradually. 

This method not only helps in attracting higher-value clients but also ensures that the workload does not increase disproportionately. Here’s how it works:

1. Understanding the Pricing Tiers

The “good, better, best” pricing model consists of three distinct tiers:

• Good Rate : This is the initial price point, typically set at 1.5 times the original fee that would have been charged to a new client. By enrolling three clients at this rate, firms can gauge the market’s response and begin to understand the perceived value of their services.
• Better Rate : After successfully onboarding clients at the good rate, firms can then move to the better rate, which is double the original fee. This tier allows firms to further test their value proposition and refine their messaging based on client feedback.
• Best Rate : The final tier is the best rate, set at three times the original fee. This tier is designed for clients who are willing to pay a premium for enhanced services and results. Engaging clients at this level not only increases revenue but also allows firms to work with clients who appreciate the value of their expertise.

2. Benefits of the Model

• Attracting Higher-Value Clients : By offering multiple pricing tiers, firms can appeal to a broader range of clients. Those who see the value in premium services are more likely to choose the best rate, while others may opt for the good or better rates based on their needs and budget.
• No Increase in Workload : One of the most significant advantages of this model is that it allows firms to earn more without necessarily increasing their workload. As firms transition to value pricing, they can focus on delivering results rather than just hours worked, which can lead to greater efficiency and satisfaction for both the firm and its clients.
• Gradual Transition : The tiered approach provides a gentle way to shift away from time-based fees. It allows firms to build confidence in their pricing strategy and develop better communication skills regarding the value they provide. This gradual transition can help mitigate fears associated with raising prices, as firms can test the waters before making more significant changes.

3. Implementation Steps

To successfully implement the “good, better, best” pricing model, firms should consider the following steps:

• Calculate Initial Fees : Determine the original fee that would have been charged to a new client. This serves as the baseline for setting the good, better, and best rates.
• Enroll Clients : Start by enrolling three clients at the good rate. Use this opportunity to gather insights on client perceptions and any objections they may have.
• Refine Messaging : Based on feedback from clients at the good rate, refine the messaging and value proposition before moving to the better rate. This iterative process helps firms become more comfortable discussing their fees and the value they provide.
• Expand to Best Rate : Once firms have successfully onboarded clients at the better rate, they can confidently introduce the best rate, further increasing their revenue potential.

Timestamps

[00:01:30] Raising fees for existing clients.

[00:05:08] Pricing and client value recalibration.

[00:10:08] Price increase strategies for clients.

[00:11:24] Client-centered fee communication strategies.

[00:15:46] Value pricing over time-based fees.

[00:19:33] Value pricing strategies explained.

[00:22:05] Raising fees with legacy clients.