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Raising Your Rates for Existing Clients

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With a new year on the horizon, you may be thinking about how you can raise revenues. It’s common to consider upping your hourly rates or flat fees annually, but there are right and wrong ways to go about this. As we talked about last year, a simple “Happy New Year! We’ve raised your rates!” is not likely to go over well with clients.

Especially in circumstances where you’ve worked with a client for years without increasing their hourly rate, changing that unilaterally in January will likely lead to objections and may run afoul of the ethics rules. You don’t have to limit your fees even when it comes to your best clients, but you do have to communicate with them so that the change doesn’t come as a shock.

Clients need to be reminded of the value you have provided. When you’re looking to raise your rates on existing clients, it’s up to you to provide the context that lays the foundation for the price hike. Use the year end as a reason to schedule an informal (and free) call or meeting to discuss the relationship and review where things stand on various matters.

Compile success stories into a document that summarizes the progress you’ve made on matters for that client and showcases the value you have provided. This doesn’t need to be a glossy marketing piece. It can be a few paragraphs in a letter or a list in the body of an email. If you’re unsure about where to start, look over your invoices for that client to review what you’ve accomplished.

If you expect to continue working with this client for a good while, it’s worth taking the time to create a “year in review” summary and come to an understanding on how you want to move forward.

When it comes to actually asking for a higher rate, here are five specific guidelines to follow:

  1. Make sure your messaging is geared toward what matters to the client. Don’t try to justify your increase by citing higher costs. That is unlikely to be persuasive.
  2. Instead, discuss what you have done in the past and then suggest higher rates that appear reasonable in relation to what you have accomplished since the last time you increased rates.
  3. Consider suggesting an overall increase of at least ten percent.
  4. Be prepared to make a selective and targeted proposal. Suggest hourly rate increases on specific matters or on parts of a project that will arise in a few months. For example, suggest that the new rates kick in after the current discovery phase ends and dispositive motion practice begins.

Take a multi-year approach. The longer you have allowed rates to go unchanged, the more likely it is that you will need more than one year to get your rates to where you want them to be. Increasing rates the first year is the first step to increasing them again in subsequent years.

The Right Way to Communicate High Hourly Rates

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When you charge higher hourly rates than most of your competitors, it’s important to understand how you can effectively justify this number to prospective clients.

The first rule of quoting fees to potential clients is not to mention a specific hourly rate until you and the client have discussed what is at stake for them. Your hourly rate might be fifty times the minimum wage, which could seem outrageous to a prospective client in the framework of money for time spent. For this reason, you need to discuss the context of the representation. If you charge $600/hour – or the equivalent of $10 per minute – that could sound unreasonable unless the client has a $10 million business deal or potential jail time on the line.

Secondly, reframe the discussion to focus on total cost and costs relative to the client’s exposure or potential upside. Lawyers have been conditioned to discuss their fees in terms of hourly rates, but this is counterproductive when your hourly rates are higher than your competitors’. Instead, educate the prospective client about their total cost, cost per phase of the representation, or cost per month. Any of these options will make a lot more sense to a client than the hourly rate alone. Discussing fees this way will also allow you to showcase that a higher hourly rate doesn’t necessarily translate to a higher overall cost.

Third, and perhaps most importantly, emphasize your expertise and what makes you well positioned to solve the client’s problem. When lawyers focus too much on their hourly rates, it can have the unintended consequence of reinforcing the idea in the client’s mind that competing lawyers are essentially the same. If the client feels that they are choosing between apples, the lower-priced apple is likely to win out. That is why highlighting your specific expertise, in addition to focusing on total costs, is so important when your hourly rates are higher.