It’s official. Effective January 1, 2012, I’m raising my legal and coaching fees across the board. I’ve spent the last two weeks poring over 2011’s financials and which goals I met and which goals I didn’t. And it’s clear. I didn’t make two of my 2011 goals. I didn’t open as many new clients (or repeat business) files as I had planned and I didn’t reach the financial goals. And I know why.
Now, you might say it’s because I didn’t have as many clients as I planned for. And, to a certain degree, you would be right. Clearly, if I had hit my target for new clients, I would have been closer to my revenue goal. But, that’s not the whole story. Because even if I had hit my new client number and my revenue number, my NET income would have been stagnant. And since that’s the number that pays my bills, that’s the number I’m focused on.
Are you ready for some shocking news? My expenses increased in 2011. And in 2010. And I bet yours did too. Actually, the truth is they went down because I went on an expense reduction blow out in late 2010. But, I couldn’t cut out every expense, and the remaining ones increased in 2011 above what I had budgeted for, so, in fact, my expenses went up, even though they went down. Confused now?
The point is, as a mentor of mine once said, you can’t save your way into prosperity. You can only attack the bottom line so much. Eventually, you have to raise the top line or, well, you’ll end up like me. Regretting that I’m not going to hit my financial goals in 2011. But, I realized that I haven’t raised my fees in 3 years. Like many other small business owners, I felt that I needed to hold the line on fees in order to keep clients coming in the door. Now three years later, I know that it’s time. My expenses are going up and I’ve got to be able to meet those expenses and generate a profit worthy of my investment of time, money and energy. Otherwise, why bother?
So, with that lesson behind me, and looking ahead to 2012, I’m setting new goals for the number of new client matters (vs. new clients because the “new” work could come from existing clients) and net income. And they are aggressive and intimately connected. I won’t hit the net income goal without getting enough new client matters in the door (I’m not raising my revenue goals that much) and I won’t reach the revenue goals if my new client matters don’t increase from this year. I need them both to increase.
This means that I need to aggressively market my business and deliver exceptional service and value to my clients so that they feel comfortable not only coming back to me, but also recommending that their friends and family call me as well.
What about you? Do you need to raise your fees in order to be more profitable? I’d love to hear from you about your plans for 2012.
I really struggle with this one! No matter how many times it happens, I still feel caught off guard when someone acts me for a significant discount on my services. I want/need to stand firm on my pricing.
I don’t know why women seem to have particular difficulty with this. I am determined to conquer this in 2012!
I reviewed my plan at the end of 2010 and made adjustments in three areas: location serviced, rates and resources. This combination allowed us to reach our goals by Sept of 2011 and continue to grow in Q4. Our goals for 2012 are quite lofty but we have decided to hold rates and acquire new clients that can help us meet these goals.
As for discounting rates, I’m not a fan but we do offer package deals and payment options that can ease the burden. Your business rate should accurately reflect your capabilities/value and you shouldn’t have to take less for them.
Thanks for commenting. You make some excellent points Sheryl. And congratulations on meeting goals/growing in 2011! That’s an awesome accomplishment given the tough business climate we’re facing.