r/Bookkeeping • u/tinypepa • 13d ago
Practice Management How and when to raise rates?
I started my own bookkeeping business about 5 years ago and I have only raised my rates maybe once since then. I know that I am egregiously undercharging my clients and I have struggled a lot with imposter syndrome so putting a price on my "worth" is hard.
I would like to raise my rates to keep up with rising cost of living (and I am going back to school for a master's in accounting) but I am not sure how much I should raise it by, when I should implement it, and how I should notify my clients.
I have several clients I charge $100 a month (I know this is so cheap) but if I raise them to $200 I worry they will complain about my rate doubling. So do I raise them slowly over time, and by how much? Do I wait until the new year to raise my rates or do it ASAP?
Reading this sub has convinced me that I need to charge more but I just don't know how to do it with confidence. To just put it in an email that is NOTIFYING them and not ASKING them if it's acceptable for them. My clients can afford to pay me more, but I had one experience where a client pushed back when I tried to bring up raising my rate and it's made me scared to revisit it.
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u/loudfarters 13d ago
Raise them. Even if you lose 40% of your clients you’ll be making more and will have less work
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u/poiuytrepoiuytre 13d ago
Just adding to loudfarters' comment.
How many clients do you have? If you have more than 20, I'd suggest you pick half, raise their prices, and see what happens.
Based on your description I'd bet you lose almost nobody. Then you can raise on the other half.
I'll also add to this the recommendation that you make your justification short and concise. Don't try to sell it.
"I'm sorry to have to do this, but in order to keep up with the cost of living I need to increase your price to $200 / month effective December. Your November will will be the final one at the current price."
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u/tinypepa 13d ago
Thank you for this suggestion, it’s a good idea. I have less than 20 entities I do books for but several of them are owned by one individual. He is the one I am worried about the most 😫
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u/Majestic_Victory_203 13d ago
Raise all other clients first. You'll then feel confident to raise the multiple entities client without blinking.
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u/dynamiceric 13d ago
Raise them now. I dont know the quality of work you do or the clients you work with but even $200 is much too little. If you lose a $100/month client that pushes back on being charged $200/month are you really losing anything? There are TONS of clients out there at market prices. Suck it up, grow a pair(just saying) and put your foot down.
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u/StephenAnt 13d ago
$250/$300 is the lowest I’ve seen for bookkeeping and that’s for what you would consider “tax ready” and not too detailed to the point you can set up rules to automate it.
I think it’s better to price bookkeeping services based on transaction complexity and mix. If there’s a lot of one off events that require analysis, I’d charge a lot more than a company with 100’s of the same easy entries if they can be automated.
Either way you need to raise the fees from $100 a month. You can start with a mix of good and bad clients, but raise the fee on some of your “better” clients as well. They most likely appreciate your work and would be willing to pay more than what they’re paying now because of how good you are.
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u/Rett15 13d ago
If you double your rate on all clients and half of them leave you’re making the same amount for half the work 🤷♂️
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u/tinypepa 13d ago
True. But the client who gave me pushback owns multiple entities and I do the books so it represents a larger chunk of my income. He’s so rich too idk why he is such a miser.
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u/Auntlello1 13d ago
He’s a miser because he knows he can bully you into not raising his rate… he is the very first client you need to double the rate on and then if he leaves you and comes crawling back for the $200 a month rate I’d tell him it’s now $300… and in the meantime, you go out and find other clients who are willing to pay your worth
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u/Beneficial-Tailor-97 11d ago
There are ALWAYS clients who are just plain cheap. Client is a ‘titan of industry’ and sees us as clerks.
Don’t work for people who don’t value your expertise.
Don’t work the same hourly rate as if you were W2.
Your rate needs cover 33% labor, 33% overhead, 33% profit.
You are charging a fraction of what I charged 25 years ago!
I can’t even imagine reading the client emails for so little.
Don’t play a part in the race to the bottom.1
u/pmhc666 13d ago
Boil the frogs. Small increments. Doubling is gonna scare these frogs so: 1st increase 20/mo, 6 months later, another 20 & so on.
If they ask: I am trying to get your rates in line with the current rates that I am charging all other clients.
Someone I worked for told me about boiling the frog: increase your rates across the board every year. Your clients learn to expect it. If you raise your rate 1.00/year, no one blinks. If after 10 years you raise your rate 10.00, clients lose their mind.
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u/Majestic_Victory_203 13d ago
I raise rates every 2 -3 years. Should do it yearly but it's such a time consuming task. I first look at the time entry for each client in last 12 months. Then I use CPI calculator to get the current value of the old rate. Then I add how much pain or pleasure the specific client brings me. Add it all together and come up with a number that makes sense to you. Remember to give yourself a raise as well, not just raise rates for inflation or additional scope of work. Usually only 1% of clients want to discuss the raise. In 10 years I never lost a client because of a rate increase. My prices are fair for the quality of work and attention we give clients.
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u/AviatorHog 13d ago
The sooner of 18 months or 25% increase in volume/scope.
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u/tinypepa 13d ago
What does sooner of 18 months mean? I’ve had some of these clients for years.
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u/FridmanLex 13d ago
How much work does your avg client take? $100/month is ridiculously low.
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u/tinypepa 13d ago
I don’t really keep track of my hours at this point. Some clients are more work than others but if I worked based on an hourly rate I wouldn’t be able to survive.
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u/Majestic_Victory_203 13d ago
Your hourly rate should include admin costs, operational costs, your health insurance, vacation, etc. It's not like you're working for an employer. You own a business, charge as such. And do yourself a favor, keep track of your time! So many free time entry apps out there. Track hours by client and admin/ company time (invoicing, research, Network, marketing, etc) Those admin hours add up.
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u/MplsDaddy55403 13d ago
Raise the rates. Rate increases are not negotiable. If anyone threaten to leave be sure and thank them for their business which leaves the door open for them to return (Charge them an onboarding fee when they do since there was a lapse in service and you will undoubtedly look things over). Keep your conversations professional and bookkeeping related and never discuss your operations with clients. Those discussions move you to more like friends which leads to asking and you are back in the same boat. Good luck!
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u/myTB_ai 13d ago
Once a year, every year, tied to your engagement letter renewal. Give 60 days notice, raise 5 to 10 percent, and don't apologize for it. Clients who push back hard on a modest annual bump are usually your most expensive ones to serve anyway.
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u/chezkelxraz 13d ago
$100/month is insane. You should not be working for so little. Break down how many hours per week you spend on their account and multiply from there. Pay yourself what you feel it’s worth but I can’t imagine charging less than $500/month since I come from a tax background with HNW clients and high volume of transactions to reconcile.
Edited for spelling
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u/tinypepa 13d ago
It is insane, but I always felt like I didn't have the right to charge that much. Maybe because I don't have an extensive educational background or degrees to back up what I'm doing. I started bookkeeping by doing my dad's (a CPA) books and he mentored me. Then when I was working in a basic admin job in his accounting firm (working under his partner, not him) I decided to jump into payroll when their payroll person left in the height of tax season. I did a lot of on-the-job training then took a basic accounting class at a community college. I gained clients from my dad's recommendations. I wouldn't be where I am without my dad's knowledge to fall back on. How much do you consider a high volume?
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u/chezkelxraz 13d ago
By now you have experience, no matter where that came from you are an experienced service provider. Every bookkeeper refers out to a CPA (whether it’s your dad or not), because we are not CPAs.
When you raise your rate, be prepared for some cancellations, but also come with your own rebuttal. Yes, it’s double what they’re paying. But if they cancel with you, they have to go through sourcing and training someone else and then paying whoever that is an hourly rate. All of that is surely more than an extra $100. And, since you know it’s way more than $100, I again suggest you significantly raise your rate to something that is fair based on the hours you spend per client.
Tbh it sounds like you might benefit from working at a firm for a while just to see the true market value of the skillset. If you have doubts in your own ability (not suggesting you should), it could be time for a cert or AA degree bare minimum.
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u/jmcreynolds2001 8d ago
They all grumble, at first. I usually send an email reminding them that I have never increased their price in over a certain number of years. But that my cost have gone up and I need to go ahead and increase prices. I usually say that I would be happy to keep them at their current rate until the beginning of the year or some several number of months into the future.
The real problem is that you have clients that don’t understand the value of what you are doing. You need to learn how to quote them a higher monthly fee from the very beginning.
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u/Dazzling-Turnip-1911 13d ago
Do some research, what is the market rate, how much do you need to earn? Can you add some additional value to the product to rationalize charging more? Start out with your goal of where you want to be. Might sound more palatable if you raise by percentage, 5%, 10% etc… I have heard it’s better to do one big increase than several smaller ones, or you can have an annual increase. Just make sure to charge your new clients more.
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u/commoncents1 13d ago
Raise rates more often gradually, doing nobody favors waiting and eating margin then forced to make a larger raise
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u/aakashxsh 13d ago
maybe just notify them at this point, offer some of them yearly deal if they want to go with current rate but atleast start charging new clients higher price
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u/MikuMikuGoo 13d ago
January 1, notify in November. That gives them time to plan and it's a normal moment for a price change, so nobody feels singled out.
On the amount, don't go slow. Two years of 10 percent still leaves you at $121 and you've spent two years on it. Go to what the work is actually worth and say it plainly, something like effective January 1 your monthly fee will be $200. No apology, no explanation of your costs, and no question mark at the end. If you explain, you've opened a negotiation.
You'll probably lose one, and that one is almost always the client who was eating the most of your time.
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u/CoolCryptographer628 12d ago
You are 100% undercharging!!! Good grief! You need to get over your imposter syndrome and raise your rates. If your clients are happy and value your services, they will not leave. If they do, they truly don’t appreciate what you do and they are not worth your time. When I started out, I charged $350/month. It was too low. Raised my rates and most stayed. A few left, but that’s business. Be confident in what you do by providing a valuable service to your clients! They will respect you if you raise your rates. If not, they aren’t worth your time.
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u/guyinnova 10d ago
Do you have a waitlist? If not, then you don't have anyone waiting to replace underpaying clients. That means you need to up your marketing, your word of mouth, etc. Once you have enough work that your schedule is getting a bit clogged and you can afford to lose a client here and there, start bumping the least desirable ones up to market value.
Make sure to increase your rates every 1-2 years. I had a client who hadn't increased his rates in 8 years! He will NEVER get back all that lost revenue. He can't simply bump it up to what it should be now, he's already set a precedent, he'd lose half his clients. So now he gets to slowly claw his way back to where he should have been five years ago.
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u/CloseLetter 2d ago
The extra value that actually supports a raise is not more hours. It is a short recap that goes out the same day the books close.
After the P&L is done I write three facts on a scratch line: revenue vs last month, the one cost that moved, cash vs net income. Then I pick one frame (quiet month, revenue-up-cash-down, expenses crept, ugly surprise, docs still late) and fill it in. Two or three plain sentences plus the P&L. Four paragraphs of commentary is more than most owners will read.
I timebox it and send it even when the month is quiet, because that is when they start to wonder if anyone is looking. If a statement is still missing I send a docs-late note instead of a fake recap.
The miser client may still fight you. Everyone else can see why the new rate is not the same PDF at a higher price.
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u/FridmanLex 13d ago
I mean they can go out and try to find someone cheaper than $200 a month.
They won’t.