How Often Should You Raise Your Rates?

Today I continue the series I started yesterday, “The Price is Right.” There’s been a lot of chatter lately in my circles around this topic of pricing, so I wanted to address it. Yesterday it was about strategies for setting your rates. Today let’s look at some ways for raising your rates. ‘Cuz you know at some point you do need to charge more. You see there’s this thing called inflation, and when it happens stuff costs more. So unless you start to cost more, you kinda start making less, even though you’re charging the same. Get it? No? Don’t worry. Just trust me on this one. But, how do you go about doing it? How much? How often? What about referrals from old clients. Yes, that will all be covered.

There are three common strategies for raising rates:

1. A set amount after a set number of gigs booked.
2. A set amount at a set time(s) each year.
3. Whenever the heck you feel like it.

As you might expect, none of these ways is “right” or “wrong.” A lot of what will go into how you do it will depend on the kind of decisions I mentioned yesterday (e.g. if you’re going for the high or low end, lifestyle you want, your costs, etc.) For each method, there may be certain caveats you need to consider. So let’s briefly look at each.

A Set Amount After a Set Number of Gigs Booked

I was listening to Jasmine Star’s interview with Chase Jarvis and she mentioned this was how she did it her first year. After every three gigs booked she raised her rates $300. In her first full year of business she booked 47 gigs. So if you quickly do the math, at the end of her first year, she would have raised her rates 15 times at $300 each. That means at the end of year one, she was charging $4500 more per gig than when she started. Not bad. This worked well for her. And it could for you too. It ties your rate increase to actual performance. You only get the “raise” when you book gigs. That’s a good thing. Having that factor into your pricing strategy is good because it forces you to work harder. It’s kind of like an incentive bonus. The other good thing about this method is that for most clients, it will be a gradual increase. Not everyone starting out in the biz will have the marketing chops Jasmine has. So, it should not necessarily be expected that you’ll book 40+ gigs your first year. I would reckon that for most folks, the number gigs booked will be more of a gradual incline. That means subsequent clients that book you won’t necessarily be as shocked if your rates are only a few hundred dollars more than the gig of the friend that referred them.

A Set Amount at a Set Time(s) Each Year

When I started in this business, weddings were my primary focus. I knew I wanted to cater to a high-end clientele, and I knew I wanted to get there pretty quickly. So I was pretty aggressive in my rate increase. As I mentioned yesterday, my very first gig was $800 (this was back in 2002). The next was $1100, then $1800 then $2500. A year after I started I was in the $3000 range. In 2003 the average for a wedding video in San Jose, CA (the area I was located) was about $2000 +/-. So I was 50% higher than the average. From that point on I increased my rates 10% ever six months: once in April and again in October. This greatly limited the number of gigs I booked a year. Eventually I was averaging about 20 weddings a year. That plus the 10- 20 or so small corporate gigs I got was more than enough work for me to handle. Since I recognized the importance of that incentive factor, I did a hybrid of this and the prior strategy. I would only raise my rates 10% in the aforementioned times IF I had booked a certain number of gigs since the last time I raised the rates. If not, I kept them the same. I think the hybrid approach worked well for my business.

Whenever the Heck You Like

Lastly, you can raise your rates whenever you like.  There is absolutely nothing wrong with that, so long as when you do and how much is in line with what make sense for your business. Wait too long, and you could be missing out. Do it too often and you could alienate too many clients too soon. Also, there’s no incentive tied to this randomization of rate-raising. Suffice to say, I’m not too crazy about this method. But if it works for you, go for it.

If you do have a strategy for raising rates periodically, make it known to prospects that your rates are subject to change until booked. They can’t call you up 4 months later and balk that you’re fee is now 10% higher. Make it clear that until they pay the retainer and sign a contract, rates could rise.

Referrals from Past Clients

So, how do you handle referrals from clients who balk at the fact that you shot her friend Suzie’s wedding for $1500 three years ago and now you’re $5000 or more. This is what I said, “Get over it!” No. Just kidding. I never said that. 🙂 Seriously, I said something along the lines, “It was so great for Suzie to refer us. She was such a terrific client. We’ve learned so much since then and our work has exponentially improved. Because of the quality of our work, and the demand for our services, we’ve had to raise our rates to an amount that we feel is fair for the value we provide. Suzie got us at a great time, but it was a very different time. If our current rates are not within your budget, I would be more than happy to refer you to some colleagues whose rates and work may be more in line with what you’re looking for. But, remember how amazed Suzie was with what we did for her. Just imagine what we could do for you.”  Then you have to be okay with letting that referral go.

The irony is, past client referrals can be a great source of business. But at the same time, during a season when your rates are quickly rising, referrals from past clients can be few and far between. They actually were for me just for that reason. So I had to get referrals from new sources. Primarily networking with vendors servicing the kind of clients I wanted. For my money, that’s where the best new gigs came from.

The Psychology of it All

The one downside to a more aggressive method is that you can go a long time without booking. You have to hear a lot of “no’s.” There’s a psychological component. You hear so-and-so is booking 30, 40 or more gigs a year, while you’re only at 15. You can’t let that get to you. Everybody’s situation is different. Don’t compare yourself to Joe down the street. You need only worry about making the lifestyle for your family that you need. I know that’s easier said than done. Lord knows I’m no expert in that area. My head knows I shouldn’t compare, but my heart frequently gives in. But know this: the grass is NOT greener. It’s the same color grass as yours. Trust me on this. You don’t know all the trials and tribulations Joe may be going through with those 40+ bookings. How it’s affecting his family. His health. His work. Or maybe Joe is a 24 year-old bachelor with no kids who works from 6 am to 1 am every day and you’re a family man with 4 kids, a wife, church activities, etc. Joe may be looking at you thinking: “Man. What a life. Beautiful wife. Great kids. Settled. Only has to shoot 20 gigs a year and still has the lifestyle he wants. Man. That would be nice.” You get my point. Nobody’s life is perfect. Not mine. Not Jasmine Star’s. Not Chase Jarvis. Not Zack Arias. Not Jeremy Cowart. Or Dane Sanders. Or Philip Bloom. Or Patrick Moreau. Or Ray Roman. Or [insert the name of the photographer or filmmaker you’ve put on a pedestal]. Everybody, and I do mean EVERYBODY, has issues they’re dealing with. It’s okay to be inspired by these folks. To even dream about attaining their success. But don’t for a minute think they got it all together. The ones who are honest will tell you they don’t. (And I’ll be the first one in line to admit that.)

Give ‘Em More

One last thing I want to add. You should always strive to give your clients more value for their money. That doesn’t meant give all your clients a $10,000 video for $2,000. But it means always be thinking about the next level of client you want to achieve. What kind of work will they want to see? Then strive to do it. Maybe you will give one or two clients 50% or more value if it means improving the quality of your portfolio. Don’t get too caught up in “I’m only giving them what they pay for.” Because if you do that, unless you’re doing a lot of extra personal work that allows your craft to grow, you won’t have anything amazing enough to impress that next level of client. Also, you’ll have a great chance winning repeat business from past clients if you’re always wow-ing them. If I shoot a promo video for a small non-profit, I want it to look like they hired the same guys that make Apple Computer’s videos. It needs to scream quality.

Share with us how you’ve raised your rates over the years and the lessons you learned.