Running a service-based business means, sooner or later, you'll have to raise your rates. It’s a natural part of business growth, but how you handle it with clients can make all the difference. So, how do you communicate a price increase without jeopardizing long-standing relationships? What’s the right way to craft a notice that conveys both professionalism and empathy?
In this guide, we’ll explore the common reasons for rate changes and best practices for notifying clients and provide a few templates to help you craft the perfect price increase notice.
Why service providers increase prices
There are plenty of valid reasons to raise your rates, and most clients will understand if you’re transparent. Some common reasons include:
- Inflation and rising costs: According to the U.S. Bureau of Labor Statistics, inflation rates have ranged from 1.2% to 4.7% in the past decade, depending on economic conditions. This means that the cost of supplies, labor, and other operational expenses steadily rises over time. Service-based businesses are no exception to this trend, and periodic price increases are often necessary just to maintain profitability.
- Business growth: As your team or service offerings expand, you’ll need to adjust pricing to reflect your improved capacity.
- Improved expertise: Over time, your skills grow, and the value you bring to clients increases. It’s only fair that your rates rise in line with that.
- Market conditions: Sometimes, shifts in demand or competitor pricing force your hand, requiring you to make adjustments.
Being clear about these reasons can soften the blow and make the transition smoother for your clients.
Best practices for notifying clients
When it comes to informing clients about price increases, timing, transparency, and tone are key. Here are a few best practices to ensure a seamless process:
1. Give plenty of notice
No one likes surprises when it comes to pricing. Ideally, notify your clients at least 30 days in advance. This shows respect for their planning processes and gives them enough time to adjust their budgets, evaluate the new pricing, and make any necessary internal arrangements. A timely notice is key for avoiding frustration and maintaining a smooth transition.
2. Explain the reasoning
As mentioned earlier, transparency goes a long way when communicating rate changes. Clients are more likely to accept price increases when they understand why they’re happening. Share the reasons behind the decision, whether it’s due to rising operational costs, business expansion, improved service offerings, or market shifts. Being upfront about these factors shows that the increase is justified and not arbitrary.
3. Be direct but polite
You don’t need to over-apologize or sound uncertain about your decision. While expressing gratitude for the client’s business is essential, you should also be confident in the value you’re providing. Politeness goes a long way, but so does clarity. Ensure the new pricing is stated clearly without being vague.
4. Offer to discuss further
Some clients may have questions or concerns about the price change, especially if it affects their budget significantly. Offering a short call or meeting to discuss the details shows that you value their input and are open to addressing any concerns they may have. This level of personal engagement also shows that you’re committed to finding a solution that works for both parties.
5. Use email as your primary medium
A written notice, sent via email, provides your clients with something they can refer back to at any time. It also ensures there’s a formal record of the communication, which is important for both parties. Email is often the most appropriate method because it’s professional, quick, and easy to document. However, for key clients or high-touch relationships, it may be wise to follow up with a phone call.
How to write a price increase letter
Writing a price increase notice doesn’t need to be overwhelming. We’ve put together a loose structure you can follow to help you get your message down clearly and professionally. Any letter you send should include the following:
- Greeting and personalization: Address your client by name and express your gratitude for their ongoing partnership.
- Reason for the increase: Briefly explain why prices are changing. Keep it short and to the point.
- Details of the new rates: Be specific about the new pricing and when it will take effect.
- Call to action: Offer to discuss the change if they have any questions or concerns.
- Positive close: End with a note of appreciation and emphasize your commitment to delivering great service.
3 sample price increase notice templates
To help you visualize how you might put a letter like this together, we’ve prepared a few samples. These should give you a sense of what to include in your price increase notice and perhaps inspire you as to what approach to take.
1. Simple price increase notice
Subject: Upcoming Service Rate Changes
Hi [Client Name],
I hope this message finds you well! First, I want to express my appreciation for your business and the trust you've placed in us.
I’m writing to inform you of an upcoming change in our service rates. Due to [brief reason for the increase, like rising operational costs], we will adjust our pricing to reflect these changes. Beginning [effective date], our new rate for [service] will be [new price].
We greatly value our relationship and remain committed to providing you with the highest level of service. Should you have any questions or would like to discuss this change, feel free to reach out to me directly.
Thank you for your understanding, and I look forward to continuing our work together!
Best regards,[Your Name]
2. Price increase notice with a personal touch
Subject: Important Update on Our Rates
Dear [Client Name],
I hope everything is going well on your end. It’s been a pleasure working with you, and we’re excited to continue our partnership moving forward.
As we’ve continued to grow and enhance our services, we’ve reached a point where an adjustment in our rates is necessary. Starting [effective date], our new rate for [service] will be [new price]. This increase will allow us to keep delivering the high-quality results you’ve come to expect.
If you have any concerns or want to chat about the details, I’m more than happy to set up a quick call. As always, I appreciate your trust and look forward to what’s next for us!
Warm regards,[Your Name]
3. Notice for long-term clients
Subject: An Update to Our Service Rates
Hi [Client Name],
I hope you’re doing well! I want to personally thank you for being a valued client of ours for [number] years. Your trust and loyalty have meant the world to us.
Due to increasing operational costs, we’ll be adjusting our rates starting [effective date]. We’ve kept these changes as minimal as possible, and the new rate for [service] will be [new price].
We’re proud of the relationship we’ve built and want to ensure a smooth transition. If you have any questions or need further clarification, please reach out.
Looking forward to continuing our great work together!
Best regards,[Your Name]
Send an effective price increase notice and preserve customer relationships
Handling a price increase notice with care can maintain and even strengthen your client relationships. By being transparent, providing sufficient notice, and offering a helpful tone, you’ll find that most clients will be understanding and appreciative of the service you continue to deliver. Remember, the value you provide justifies the increase.
Lastly, constant time tracking and service costing can help you identify the true cost of your services and ensure price increases are fair and accurate. Using a tool like Elorus makes it so much easier to streamline these tracking processes for agencies and service providers alike.
Approaching this topic thoughtfully and following the best practices outlined here can set your business up for success while ensuring smooth communication with your clients. Best of luck!
