As global markets reopen, inflation is causing corporations of all sizes to reexamine their rates. Supply chains are being affected by higher costs and increased demand for raw materials and labor. According to economists, the inflated costs aren't expected to abate until well into 2022, cutting into profit margins. CEOs are saying that higher costs will last longer than that. If your business operating costs are going up, have you considered charging more for the products and services you offer?
With inflation, is it time to review and raise the rates you're charging?
If you reduced or waived your rates, increased credit, or offered more time to pay to keep your clients during 2020, you may need to raise your prices. At the very least, it's a good idea to follow up on any unpaid or late paying invoices, especially if you paused on these activities due to COVID.
Do you have price increase contingencies in your contracts?
If you've built rate increases into your agreements caused by purchase volumes or availability of materials, now would be the time to review those clauses. The clauses may be different, depending on the customers, products or services, so check each one and makes the changes necessary. Also, be prepared to have difficult conversations about these changes with signed contracts to back you up.
Do you need to fire a customer for going out of scope?
Often, customers will take advantage of your kind nature or long-term relationship and gradually go out of the scope of the contract. Others will push boundaries from the beginning, always asking for more time, more effort, and more things they're not actually paying for. Now is definitely the time to bring them back into scope by setting boundaries, firing them or raising your rates.
If not now, when?
According to Harvard Business Review, the current economic environment "favors companies that act quickly to make the right pricing moves." Raising prices now because of inflation simply makes sense to business owners and leadership. Pushing these changes to later, due to fear of customer reaction or desperate times, may not receive a positive reaction. Also, depending on the market, availability may be more important than the price at the moment.
When inflation is chipping away at your freelance salary or profit margins, consider it an opportunity to raise your rates. Don't just send invoices with your new prices. Give your customers ample time to prepare with a brief explanation and what changes they can expect. Also, instead of making changes across the board, consider how long they've been a customer, the value you're providing and what they're paying compared to older customers. If needed, include rate changes in future contracts where necessary.