Oct. 21, 2024
Why and How to Raise Your Solo PR Rates
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That Solo Life, Episode 271: Why and How to Raise Your Solo PR RatesIn this Episode
In this episode of That Solo Life co-hosts Karen Swim, APR and Michelle Kane welcome back one of their favorite guests, Chip Griffin, from the Small Agency Growth Alliance. The episode centers around a crucial topic for PR professionals and marketers who work independently: raising rates.
We kick off the discussion by acknowledging a common challenge faced by solos and small agencies—undercharging for their services. Chip emphasizes that most professionals in this space undervalue their work and are often hesitant to ask for what they’re truly worth. He encourages listeners to consider raising their rates, asserting that the majority of solos are not charging enough.
The conversation then shifts to the mechanics of how to implement a rate increase without alienating existing clients. Chip shares that it’s essential to communicate any changes thoughtfully and to avoid abrupt or insignificant increases. Instead of small, incremental adjustments, he advocates for meaningful rate hikes that reflect the true value of the services provided.
Karen adds her insights, highlighting the importance of raising rates for new clients while also addressing the sensitive issue of existing clients. She suggests incorporating rate increases into year-end business reviews, where professionals can present a comprehensive look at past performance and future plans. This approach not only justifies the increase but also positions the professional as a strategic partner rather than just a vendor.
Throughout the episode, we discuss the importance of understanding one’s value and the need to think like a business owner rather than an employee. Chip points out that many solos treat their expenses like an employee would, failing to account for overhead and the true costs of doing business. He encourages listeners to adopt a value-based pricing model, which allows them to charge based on the expertise and results they deliver rather than just hourly rates.
As the conversation progresses, we touch on the significance of maintaining a healthy client mix and the necessity of ongoing business development. Chip reminds us that it’s vital to regularly assess our client relationships and to be proactive in seeking out higher-paying clients. He also warns against the pitfalls of complacency, urging listeners to avoid falling into autopilot mode with their client engagements.
In closing, we emphasize the importance of clear communication with clients regarding rate increases and the need to approach these discussions with confidence and strategy. Chip shares valuable resources available on his website, smallagencygrowth.com, encouraging listeners to seek help and not navigate their business challenges alone.
This episode is packed with actionable advice and insights that will inspire PR pros and marketers to evaluate their pricing strategies and take charge of their business growth. We hope you enjoy this enlightening conversation and feel empowered to raise your rates smartly and effectively!
About Chip Griffin
Chip Griffin is the Founder & CEO of Small Agency Growth Alliance (SAGA). He is a serial entrepreneur with a track record of building businesses that serve the PR and marketing community.
Chip helps small PR and marketing agency owners build businesses that they want to own. He works with them to grow profits, eliminate overwork, and improve their overall satisfaction.
As an experienced entrepreneur and agency owner himself, Chip shares the wisdom of his successes and the lessons from his failures. He understands the challenges and opportunities that face agency owners because he sat in the same chair and faced similar decisions.
You can email Chip at chip@chipgriffin.com if you’d like to talk.
Episode Timeline00:00:00 - Introduction to Raising Rates Join Michelle, Karen, and guest Chip Griffin as they introduce the topic of raising rates for PR pros and marketers.
00:01:00 - The Importance of Valuing Your Work Chip discusses how many solos and small agencies undervalue their services and the need to raise rates.
00:02:00 - Strategies for Raising Rates Exploration of effective ways to raise rates without alienating clients, including communication strategies.
00:03:30 - New Clients vs. Existing Clients Karen emphasizes the importance of charging new clients higher rates and the challenges of raising rates for current clients.
00:05:00 - Understanding Your Value Discussion on determining your worth and setting rates based on desired income and expenses.
00:06:30 - Stop Thinking Like an Employee Chip advises against treating rate increases like salary raises and encourages a business mindset.
00:08:00 - Avoiding Small Increments The pitfalls of small, incremental price increases and the importance of making meaningful adjustments.
00:09:30 - Value-Based Pricing The benefits of value-based pricing over hourly rates and the importance of tracking effective hourly rates.
00:11:00 - Annual Business Reviews Karen shares her approach to incorporating rate increases into year-end business reviews for clients.
00:13:30 - Strategic Planning for Price Increases The advantages of presenting a new plan and budget to clients when discussing rate increases.
00:15:00 - Communication is Key The importance of clear communication with clients regarding rate increases and avoiding surprises.
00:17:00 - Assessing Client Relationships Chip discusses the need to evaluate client relationships and the risks of raising rates on certain clients.
00:19:00 - Client Mix and Profitability The significance of maintaining a balanced client mix and focusing on profitability rather than just revenue.
00:21:00 - The Importance of Business Development Encouragement to continuously seek new clients and opportunities to ensure business growth.
00:23:00 - Final Thoughts on Rate Increases Chip and Karen summarize the key takeaways on raising rates and the mindset needed for successful business management.
00:25:00 - Resources and Closing Remarks Chip shares where to find more resources and advice, and the hosts express gratitude for his insights.
Resources:
- Best Practices for Raising Rates (Solo PR Pro)
- Agency Health Assessment (SAGA)
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Say Thanks to Chip Griffin!
If you liked this episode with Chip Griffin please say thanks on LinkedIn.
Listen to the episode on our website, Apple Podcasts, Spotify, Amazon Music, or on your favorite podcast platform. You can also watch the interview on YouTube here.
That Solo Life, Episode 271: Why and How to Raise Your Solo PR Rates
Michelle Kane (00:17):
Thank you for joining us for another episode of That Solo Life, the podcast for PR pros and marketers who work for themselves, people like me. Michelle came with Voice Matters, my wonderful co-host, Karen Swim of Solo PR Pro, and Karen, look who's here. We have a guest today. My goodness. It's Chip Griffin. Hello, Chip
Karen Swim, APR (00:37):
One, as
Michelle Kane (00:38):
Always, one of our absolute
Karen Swim, APR (00:39):
Most favorite people. Hey Chip. And he is also one of our most popular guests of all time.
Michelle Kane (00:46):
Yes, he is. Yes, he's,
Chip Griffin (00:49):
Because most people listen and they don't watch.
Michelle Kane (00:52):
Oh, now, now we should add Chip Griffin, if you don't already know. And why don't you? It's with the Small Agency Growth Alliance. So we're going to talk some shop today, but our primary focus is on a great subject for all of us is raising our rates because tis the season to start thinking about that, right?
Karen Swim, APR (01:13):
Tis the season. Tis past the season, but you still have time.
Chip Griffin (01:17):
It should always be the season.
Michelle Kane (01:19):
This is so true. So true. Yeah. I know we talk a lot here about just the value of what we do and communicating that, and that certainly goes hand in hand with making sure that we're compensated at that appropriate level of value. And so what are you seeing out there, Chip, and what pointers might you offer our audience today that maybe they can take action on?
Chip Griffin (01:44):
Sure. I mean, I think that the reality is, and this doesn't come as a surprise, I know to the two of you, and probably to most listeners, most solos and small agencies under undercharge, their clients fairly substantially. They undervalue the work that they're doing and they're afraid to ask for their true value from their prospects and clients. So whenever I'm asked, should I raise my rates? Are my rates high enough before I even get any data points from 'em? I pretty much always say, yeah, just go ahead and raise your rates because chances are 99% of you are not charging as much as you could or should. And so that's the starting premise is you should be raising your rates, but then how do you do that? Because there's a lot of bad ways to do it, and there are some good ways as well. And I think that we need to think about how we go about doing, because we don't want to alienate our clients. We don't want to tick them off. We don't want to lose business because we're raising our rates. And so we don't want to be like a lot of those vendors out there in our own space, in fact, that come in and say, we're doubling your rates this year. Good luck. You really need to think about how you do it, how you communicate it, and how big an increase you go for at any one time.
Karen Swim, APR (02:51):
And it's always easier. And I agree with you, Chip, we've been doing Solo PR Pro for more than a now nearing two decades, believe it or not. And my answer is always the same as well. It's like, am I charging enough? No, because we have found through surveys that solos grossly undercharge their services. So I think there's two things. One, it's raising your rates moving forward, which means all new clients should get a new rate and you should go substantially higher because you think you can't, but you can. But some of the discussions today around, Hey, I have these clients right now, how do I raise rates for my current clients? And I think this is probably a popular question this year in particular, because we've all been hit with inflation. We've all seen these huge rate increases from every tool that we use throughout our entire life.
(03:47):
Everything we touch has a price increase. So people are like, Hey, I really need more budget. And so it's easy to raise rates for new clients. They don't know what you charge before. And this also is a great time when you're raising for new clients to really think about the value that you offer, how you sell your services and the people that you target. Because I also feel like solos sometimes forget that there is no reason that you cannot think of yourself as an agency. You are. And many, many, many big companies seek out smaller agencies because they want that intimacy. They want streamline services, nothing against big agencies, but there's a place for all. And it doesn't mean small agencies small dollars. So you need to get away from that line of thinking.
Chip Griffin (04:39):
Absolutely. And look, you need to first of all, start with your new clients and charge them more. Because if you're not comfortable charging new clients more, then don't even bother trying to charge your current clients more. Because if you can't get comfortable with someone who didn't know what your rates were initially, it's going to be a real struggle to communicate that to your existing client bases. And it's a great opportunity to test things because you can try out your new pricing model, and it doesn't have to be just more per hour. You can structure things differently, whatever, try different things with those prospects and see what works, take valuable feedback. And then once you've done that successfully, now you can start applying that to your existing clients. But to your point, one of the things you need to be thinking about is what is your value and how much are you looking to make?
(05:25):
And frankly, I think that this is where a lot of solos fall down because if you're a solo, you need to sit down and say, okay, look, if I want to make $125,000 a year, then I need to be charging the equivalent of at least $125 per hour. Bare minimum. If you're not charging at least $125 per hour, chances are as a solo, you will not make 125,000 to yourself. And so that's just a good rule of thumb, easy way to start and figure out are you even in the ballpark? So if not, then you need to either figure out how do I charge more? How do I go to different client bases? Who are you targeting the things that you raised, Karen?
Karen Swim, APR (06:02):
And we're going to get into some of the mechanics, but here's one tip, stop thinking like an employee. I find that people approach rate increases like a salary increase. I'm asking my boss for a raise. You are not an employee, you are a business owner. And they do this also with their expenses. So you have these expenses that are inherent in you doing business, your PR tech stack for example, and you treat your expenses like an expense report so you're not marking up or adding in anything additional to cover potential increases into building that into your whole rate structure because you're treating it like, oh, my employer is going to reimburse me for my rate through this. Well, that's kind of not how a business thinks. Do you think that your painter is charging you at cost for the paint? No, because there's other things involved. You have to cover your overhead and your expenses. And we used to say that, oh, the overhead is almost covered because Solos keep things low, but that's not true. We are using the same tools that agencies are using, and you need to be reimbursed for those tools because you're not personal stuff. This is a business expense. So account for that. Stop treating yourself like you're an employee. You're not going with your pat in your hand going, oh, dear boss, please recognize that I did a great job this year and give me that 2% raise. No.
Chip Griffin (07:32):
Yeah, absolutely. And look, I mean, I think to that same point, you're not an employee, don't do these nickel and dime price increases on clients. One of the things I hate most are people who tell me, oh, I'm covered because I've got a cola increase in my contract with clients. So every year we go up by two and a half, 3% or whatever. That's ridiculous. Again, you're not an employee, so a 3% salary increase, generally it's not going to cut it anyway. But secondly, with a client, you're just irritating them for no good reason. If you're going to raise your client's prices, raise it a significant amount so you feel the difference. I mean, if you raise it 3% and you're making a couple hundred extra bucks a month, is that really worth it to you? I mean, the problems that you run into with clients are like, well, now we got to get this approved by someone else. I know it was in the original contract, but finance isn't going to let me do it. We forgot to put it in the budget, whatever. So if you're going to ask for a price increase for existing clients, make it meaningful.
Michelle Kane (08:27):
Yeah.
Chip Griffin (08:28):
Yeah,
Michelle Kane (08:28):
That's so true. I love that. Yeah, and I love what you said when you said make $125,000 for yourself because you have to factor in what's my tax rate? What do I want to keep alongside all of, like you said, Karen, my overhead,
Karen Swim, APR (08:49):
What you pay people. And let's face it, you might be working 40, 50 hours a week, but you're not working 40 to 50 billable hours a week. That is just lies and falsehoods. And so you need to account for that as well. You still need to, which is why I don't like hourly pricing. I am not a fan. I know some people do. Some of you work in structures where the hourly is what they want from you, so be smart about your hourly pricing. But I prefer value-based pricing. I prefer basing the pricing on the value of the services that I'm offering, my expertise, my specialized skill sets. There's all those other soft things that work on behalf of your client. My years of experience, the fact that I can do things faster than a junior person, the things that I know that aid in my strategic counseling are things that you really, it's hard to put a price tag on that, but I do, and you all should too.
(09:49):
So value gets you more money, it gets you the premium rates. When you look hour to hour, then you're also forced to track your hours. And I don't know, some of you like that. I don't. I just want to get in there, get the job done. I don't want to be futsing around with tools. I spent 1.2 hours on that task. That's just extra to me, and I don't want any additional admin work. If it works for you, go for it. But for those of you that are like me, that's just not the way to go.
Chip Griffin (10:23):
But I'll tell you, you should be tracking your own time for your own personal use because otherwise you don't really know if the work that you're doing
Karen Swim, APR (10:30):
Is profitable.
Chip Griffin (10:31):
And so why
Karen Swim, APR (10:32):
Really
Chip Griffin (10:32):
That in general, I would try to avoid charging a client hourly rates. You should know what your effective hourly rate is for the work that you're doing. And I think your point is that people are not, even if you're working 40 or 50 hours a week, that's not billable time in any form. That's something that a lot of people forget. And so they set an hourly rate and they say, okay, well I've got a hundred bucks an hour, so that means that's like $200,000 for me, like work 2000 hours. No, no, because really the max most solos are going to work is about a thousand billable hours per year once you factor in all of the other things that come into the mix. And so you need to be thoughtful about that and understand that a lot of your work time is not really being directly compensated. And so that needs to be accounted for in a higher hourly effective rate or effective hourly rate.
Karen Swim, APR (11:21):
Completely agree.
Chip Griffin (11:23):
If you're going to increase the rates for clients, this was a discussion that came up in the Solo PR Facebook group recently. I think your advice, Karen, was really spot on. And so perhaps you could share what you shared in that forum because I think you hit the nail on the head as far as the best way to do price increases.
Karen Swim, APR (11:41):
So what I do is I build that into the year end business review, which is happening no later than Q3. So it's not the full year, but it's a look back. And so you're hitting on, in that business review, you're looking at what went well, what didn't go so well, you need to be honest about that. You want to look at your wins, your losses, you want to look at areas for improvement, and then you want to make recommendations for your PR program for the coming year. That PR program then has a budget attached to it. The reason I do that is because I am not a fan of somebody charging me more money for the same exact set of services, and you're setting yourself up for a one-to-one thing. You're setting clients up to say, I'm sorry, we just don't have the extra budget for next year When you're going and saying, Hey, it's a new year, we're looking for a price increase.
(12:31):
Instead of charging you $12,000 a month, your program's now going to be $20,000 a month for the same stuff. Why? What's the reasoning on that? But when you are thoughtfully working through, Hey, here are the things that we did, here's the impact that it had on your revenue stream to the goals that we set to the KPIs, here's where we can really make some additional inroads next year. Here's some areas that we see for improvement. Here's how we want to structure the program next year to build on our success, and here's the budget for that. You're now giving them something brand new to actually look at. And so now they're thinking of that particular program and the price of that. That's a much better way to proceed. And I have found that you always get an increase that way. It is a built-in increase, and it also gives you your framework and structure for planning for the coming year.
Michelle Kane (13:28):
I love that. I love how it solves for so many things, and it allows you to both end the year with the notion or just the knowledge that, okay, we can hit the ground running in the new year.
Chip Griffin (13:41):
Yeah, I mean, I love it for three reasons. The first is that it puts you in that strategic driver's seat in the relationship, and one of the leading reasons that clients give perhaps second to budget for canceling a client or agency engagements or solo engagements is because the relationship got stale. You stopped giving me new ideas. You were just on autopilot. And so your approach takes you off of autopilot and says, look, let's look at this past year and now let's look ahead and come up with a brand new plan. So you've put yourself in the strategic driver's seat. The second thing is it allows you to have that price increase without comparing apples to apples. And so anytime you can take that out of the equation, you get out of the stupid discussion of, well, did your costs really go up by 11%? Should it really be an 11% increase?
(14:29):
Well, it's a silly place to be, but the third reason that I think it's useful is because it allows you to encumber yourself from all sorts of useless things that the longer client engagement goes on, the more useless things we continue to do for them. We agreed to start doing it three years ago. It stayed on autopilot. And so we still do it. And so we accumulate all of this gunk, and it's often in the form of reports or checkbox items that we're doing on a weekly or monthly basis that the client doesn't even care about. But we don't want to go to them and say, can we get rid of this? Because we're afraid that we'll rock the boat if we're reframing the relationship every year, we can just get that stuff out of it. And frankly, we could charge them the same amount probably, and it's an effective price increase because instead of working 40 hours a month, we only have to work 30 hours a month. And so our effective hourly rate has gone up and they don't even realize it. So there are three reasons why your annual strategic planning and budgeting approach really, I think is the key to successful rate increases for existing clients.
Michelle Kane (15:32):
So true. So very true. That's smart. And it's so true. We always need to be cognizant of not going on autopilot. And in work like ours, I often say, look, I'm only as good as the information that I'm given or that I have access to. And sometimes just in the busyness of a client's workday, week, year, month, they don't have the bandwidth required to keep things moving forward. So that's always an ongoing challenge, and sometimes it's kind of easy to fall into, well, I guess if they're okay, we're okay, and it doesn't always end up okay.
Chip Griffin (16:06):
Absolutely, and I think the key to all of this is having clear lines of communication with your client. So I've seen a lot of bad ways that agencies and solos raise prices. The first obviously we talked about was the fixed cola increase every year, but some of the others are giving too short a notice and just saying, my rates are going up starting next month. You've got to give your clients time to plan because they need to include it in their budgets. And so simply announcing it, first of all, simply announcing it to an existing client isn't really good. It needs to be more of a dialogue anyway. But to the extent that let's say that you do bill hourly and you just say, okay, this is my new effective hourly rate. You got to let them know months in advance so that they can build that into their own proposals. You also need to avoid just blindsiding people and telling them, this is just what's happening. It needs to be that discussion so that they feel like this is a partnership still, if it feels like you're a vendor, they'll treat you like a vendor and you don't want to be a vendor. I mean, I don't know any solo or agency that wants to be a vendor.
Karen Swim, APR (17:10):
Absolutely not. That's great advice. I love that. And I've seen some discussions around that. I need data to back up what's happening, which misses the point, as you said, of treating, really respecting each individual client relationship because every client is not going to have the same PR program. We're always customizing that to each client's needs. And so your budgets are going to vary, but at the end of the day, even though your scope of work and what you're doing may vary, your rate should really be the same. And so I always agree too with having an hourly rate, you need to map that out, make sure that that's like a checkpoint to make sure that you're getting to that. A lot of times you'll get more, but it shouldn't be below that for any
Chip Griffin (18:00):
Client. Yeah, I think it's easy to get too scared about raising your prices on clients, but you also shouldn't do it completely fearlessly because as soon as you have that rate discussion, it does put the relationship at greater risk than it was before. And so if you've got a client that's already on the edge, maybe they've expressed some dissatisfaction with the work that you're doing, or they don't quite see the value or something like that, or that they're having real serious financial problems themselves, that may not be the client that you want to go to and try to raise rates on right now. You don't have to raise rates across the board. You can exercise judgment in how you do it, because ultimately, frankly, the way that you end up with higher rates is by swapping out low paying clients for higher paying clients. So you're saying, okay, I want to grow by 50%.
(18:48):
You're never going to get there by just increasing rates on existing clients. You're going to have to bring in larger engagements, more profitable engagements that you can swap out as you lose clients over time. We all lose clients. None of us keep clients forever. And I always talk about the profitability bell curve with clients. Clients are unprofitable in the early stage because you're spending a lot of time learning them, learning their systems, getting to know them, trying to impress them. Then you become efficient and you figure out how to get the results and how to do it with less work. And so now your profitability increases, but at some point you get scared of losing them, and at some point you get to the point where you haven't been raising rates at the right rate, and so now your profitability starts to decline at some point on that bell curve, it's better for you to let them go and get a new client than it is to sit there and just figure out, how can I jack up their prices? You're not going to be able to get them high enough to make it worthwhile in some cases.
Karen Swim, APR (19:39):
Yeah,
Michelle Kane (19:39):
That's so very true. Very true.
Karen Swim, APR (19:42):
I know some of the best advice I got when I was starting out is to look at your client mix at least twice a year and realizing that you were always going to have paying high value clients, then you were going to have a bigger portion in that middle tier, and then you were going to have some that were your low budget clients. And you should always be looking to reshift that mix with the goal of pushing more people up to the top of the paying high value and getting rid of all of your low budget. Because when you start out, sometimes you do take on things and then later you're like, yeah, that wasn't worth it, or I'm not really making money. And some of us have those clients where you continue to work with just because you like them and because you like the people, you really enjoy the work, and so you keep 'em on, but they're not the most profitable for you.
(20:36):
And so think about that mix all the time. And I think Chip, you just made a good point is for all of us, this is a good reminder that we must always have a full pipeline. You should always be doing business development period. Even if you feel like if I get one more client, I'm going to shoot myself. Because if you are at a point in your business where you can't take on new clients, it probably means you're not charging enough. That's another flag. You're not charging enough. Your rates are way too low if you are choking on business, probably not charging enough. And then there's the idea that you, maybe it's time to expand. If you have all high value clients and you're making your rates, maybe expand your business, think about bringing on teaming up with other people so that you can continue to grow or really take a hard look at your mix. And are there any clients that really are low value? I would say that the answer for most solos is probably Yep.
Michelle Kane (21:39):
And keeping in mind too, sometimes those lower budget clients are the most labor intensive, and that has an impact on both you and your business in the long term.
Karen Swim, APR (21:49):
Yeah. You cannot convince the cheapies to raise their rates. You just can't. I don't care what programs you present, they're never going to want it. These are your budget shoppers. They shop at Dollar Store and you can't convince them to pay Nordstrom prices not going to happen.
Chip Griffin (22:06):
Yeah, no, that's a great point. I think it's so important when you're thinking about your rates, you need to remember that what matters is not how much you charge, it's how much you profit. And so even when you're a salt, even if you're not contracting any of the out, you need to think about that effective hourly rate that you have because that is in essence, your profit. And so oftentimes, to your point, Karen, about the small, medium and large clients, it's the medium sized ones that are actually the most profitable because the small ones are cheap. And so whatever you do, you can't make 'em happy. And so it's going to be work at the high end. You get so scared of losing them because they're 20, 25, 30% of your revenue that you bend over backwards to make them happy. Even if they don't ask for the work, you spend a little bit extra time on it, polishing it, making it just so and so, it's those middle clients that are often the most profitable. And so you need, as you're setting your rates and you're increasing your rates, you need to think about the money that you're actually putting in your pocket that matters far more than what you're charging them or what your total revenue looks like, or any of those kinds of vanity metrics that we often think about.
Michelle Kane (23:09):
So true, Chip is bringing the wisdom today, giving us so, so much to think about, which is good. And we do need to think about this, not to let it plague you every day, but we definitely need to keep this top of mind as we continue to grow our business and consider the clients that we want to work with and the kind of work that we want to do.
Chip Griffin (23:34):
That's right. It's a business and it's our job, and we've got to be smart about it.
Karen Swim, APR (23:39):
We shouldn't be afraid to discuss these topics. And by the way, if it's the third quarter and you're suddenly shocked that you might be losing a client, that's not great either. I feel like that's probably not true. You just are paralyzed by it and you haven't been able to take action to either fix it or really start the hunt to replace the business. It's like people wait until a business goes out of business or they get a layoff. They know it's coming. There are signs. You just ignore the signs hoping for something different because change is uncomfortable. But I want to encourage solos to step into that role of being the CEO of your business and truly stop getting what's handed to you and make happen what you want for your own business, because that's your job, and you should be happy, and you should be making the money that you want to make. You should enjoy the work, and you should enjoy the people that you work with. It should be your choice. And even if you have people that you don't really enjoy, it's your choice to work with them if you feel like, eh, they're a pain, but I love the money. That's okay. That's a choice.
Michelle Kane (24:52):
And the more that you think of yourself that way, that will be noticed and the way you carry yourself and the way you project yourself and the way you talk about your work, not just, oh, I do some stuff. It's like, no, I
Chip Griffin (25:02):
Haven't. You produce better results too. I mean, if you're miserable,
Michelle Kane (25:04):
Exactly.
Chip Griffin (25:05):
You are not going to produce good results. I mean, I don't care how much of a Hercules you are, it's just not going to happen,
Michelle Kane (25:11):
Right? Yeah. Right, right. Exactly.
Chip Griffin (25:15):
So go raise your rates.
Michelle Kane (25:17):
Yeah, I know we have the pause of soaking in this great information.
Karen Swim, APR (25:22):
I want to remind our audience that Chip gives amazing free advice, but I want you all to head over to his website, check him out. And if you're really serious about growing your agency, then you need to hire him. He does amazing work. He gives practical, actionable advice. I love that he meets you where you are, but he's going to hold your feet to the fire and help keep you accountable to really reaching the goals that you want to reach. And it doesn't take a whole lot of research to run across people who have benefited from his wisdom and experience. And we all know that Sometimes we can convince ourselves that we can do the best on our own, but we really can't. I mean, it's why people hire fitness trainers. It's why you go see doctors. It's why you pay experts. He really is an expert at helping you to have your best business. So I just want to remind people of that because he's so kind and generous, and he does so many things for free, and he puts his knowledge out there, but hey, he's for hire too.
Chip Griffin (26:25):
Got to pay the bills somehow. But no, I love giving free advice. And look, the bottom line is that folks should be looking for help somewhere, whether that's by being part of communities like Solo PR Pro, just having conversations with peers, hiring coaches or consultants. There are so many ways that you can get help out there that you shouldn't be thinking about doing this alone. And the fact that you're listening to this podcast means that you're already taking at least one step towards getting that help. So don't do it alone. Find help somewhere, whether that's me or someone else.
Michelle Kane (26:54):
How true is that? And Chip, if you don't mind reminding our listeners, what's the best way to find you and get in touch with you?
Chip Griffin (27:01):
Yeah, you can find all of those great resources that I put out@smallagencygrowth.com. The search function there is actually quite good. And we'll find podcast episodes, videos, articles, workbooks, guides, all sorts of different things,
Michelle Kane (27:14):
A plethora of information. Well, gosh, Chip, we are so grateful that you have joined us yet again. We always love when Chip comes on the show, and we're so grateful for your time. And to our listeners out there, please do share this around. This was a good one, and we hope that you are inspired to think about, Hey, how's my business doing and how can or should I be raising my rates? And until next time, thanks for listening to That Solo Life.
Michelle Kane (00:17):
Thank you for joining us for another episode of That Solo Life, the podcast for PR pros and marketers who work for themselves, people like me. Michelle came with Voice Matters, my wonderful co-host, Karen Swim of Solo PR Pro, and Karen, look who's here. We have a guest today. My goodness. It's Chip Griffin. Hello, Chip
Karen Swim, APR (00:37):
One, as
Michelle Kane (00:38):
Always, one of our absolute
Karen Swim, APR (00:39):
Most favorite people. Hey Chip. And he is also one of our most popular guests of all time.
Michelle Kane (00:46):
Yes, he is. Yes, he's,
Chip Griffin (00:49):
Because most people listen and they don't watch.
Michelle Kane (00:52):
Oh, now, now we should add Chip Griffin, if you don't already know. And why don't you? It's with the Small Agency Growth Alliance. So we're going to talk some shop today, but our primary focus is on a great subject for all of us is raising our rates because tis the season to start thinking about that, right?
Karen Swim, APR (01:13):
Tis the season. Tis past the season, but you still have time.
Chip Griffin (01:17):
It should always be the season.
Michelle Kane (01:19):
This is so true. So true. Yeah. I know we talk a lot here about just the value of what we do and communicating that, and that certainly goes hand in hand with making sure that we're compensated at that appropriate level of value. And so what are you seeing out there, Chip, and what pointers might you offer our audience today that maybe they can take action on?
Chip Griffin (01:44):
Sure. I mean, I think that the reality is, and this doesn't come as a surprise, I know to the two of you, and probably to most listeners, most solos and small agencies under undercharge, their clients fairly substantially. They undervalue the work that they're doing and they're afraid to ask for their true value from their prospects and clients. So whenever I'm asked, should I raise my rates? Are my rates high enough before I even get any data points from 'em? I pretty much always say, yeah, just go ahead and raise your rates because chances are 99% of you are not charging as much as you could or should. And so that's the starting premise is you should be raising your rates, but then how do you do that? Because there's a lot of bad ways to do it, and there are some good ways as well. And I think that we need to think about how we go about doing, because we don't want to alienate our clients. We don't want to tick them off. We don't want to lose business because we're raising our rates. And so we don't want to be like a lot of those vendors out there in our own space, in fact, that come in and say, we're doubling your rates this year. Good luck. You really need to think about how you do it, how you communicate it, and how big an increase you go for at any one time.
Karen Swim, APR (02:51):
And it's always easier. And I agree with you, Chip, we've been doing Solo PR Pro for more than a now nearing two decades, believe it or not. And my answer is always the same as well. It's like, am I charging enough? No, because we have found through surveys that solos grossly undercharge their services. So I think there's two things. One, it's raising your rates moving forward, which means all new clients should get a new rate and you should go substantially higher because you think you can't, but you can. But some of the discussions today around, Hey, I have these clients right now, how do I raise rates for my current clients? And I think this is probably a popular question this year in particular, because we've all been hit with inflation. We've all seen these huge rate increases from every tool that we use throughout our entire life.
(03:47):
Everything we touch has a price increase. So people are like, Hey, I really need more budget. And so it's easy to raise rates for new clients. They don't know what you charge before. And this also is a great time when you're raising for new clients to really think about the value that you offer, how you sell your services and the people that you target. Because I also feel like solos sometimes forget that there is no reason that you cannot think of yourself as an agency. You are. And many, many, many big companies seek out smaller agencies because they want that intimacy. They want streamline services, nothing against big agencies, but there's a place for all. And it doesn't mean small agencies small dollars. So you need to get away from that line of thinking.
Chip Griffin (04:39):
Absolutely. And look, you need to first of all, start with your new clients and charge them more. Because if you're not comfortable charging new clients more, then don't even bother trying to charge your current clients more. Because if you can't get comfortable with someone who didn't know what your rates were initially, it's going to be a real struggle to communicate that to your existing client bases. And it's a great opportunity to test things because you can try out your new pricing model, and it doesn't have to be just more per hour. You can structure things differently, whatever, try different things with those prospects and see what works, take valuable feedback. And then once you've done that successfully, now you can start applying that to your existing clients. But to your point, one of the things you need to be thinking about is what is your value and how much are you looking to make?
(05:25):
And frankly, I think that this is where a lot of solos fall down because if you're a solo, you need to sit down and say, okay, look, if I want to make $125,000 a year, then I need to be charging the equivalent of at least $125 per hour. Bare minimum. If you're not charging at least $125 per hour, chances are as a solo, you will not make 125,000 to yourself. And so that's just a good rule of thumb, easy way to start and figure out are you even in the ballpark? So if not, then you need to either figure out how do I charge more? How do I go to different client bases? Who are you targeting the things that you raised, Karen?
Karen Swim, APR (06:02):
And we're going to get into some of the mechanics, but here's one tip, stop thinking like an employee. I find that people approach rate increases like a salary increase. I'm asking my boss for a raise. You are not an employee, you are a business owner. And they do this also with their expenses. So you have these expenses that are inherent in you doing business, your PR tech stack for example, and you treat your expenses like an expense report so you're not marking up or adding in anything additional to cover potential increases into building that into your whole rate structure because you're treating it like, oh, my employer is going to reimburse me for my rate through this. Well, that's kind of not how a business thinks. Do you think that your painter is charging you at cost for the paint? No, because there's other things involved. You have to cover your overhead and your expenses. And we used to say that, oh, the overhead is almost covered because Solos keep things low, but that's not true. We are using the same tools that agencies are using, and you need to be reimbursed for those tools because you're not personal stuff. This is a business expense. So account for that. Stop treating yourself like you're an employee. You're not going with your pat in your hand going, oh, dear boss, please recognize that I did a great job this year and give me that 2% raise. No.
Chip Griffin (07:32):
Yeah, absolutely. And look, I mean, I think to that same point, you're not an employee, don't do these nickel and dime price increases on clients. One of the things I hate most are people who tell me, oh, I'm covered because I've got a cola increase in my contract with clients. So every year we go up by two and a half, 3% or whatever. That's ridiculous. Again, you're not an employee, so a 3% salary increase, generally it's not going to cut it anyway. But secondly, with a client, you're just irritating them for no good reason. If you're going to raise your client's prices, raise it a significant amount so you feel the difference. I mean, if you raise it 3% and you're making a couple hundred extra bucks a month, is that really worth it to you? I mean, the problems that you run into with clients are like, well, now we got to get this approved by someone else. I know it was in the original contract, but finance isn't going to let me do it. We forgot to put it in the budget, whatever. So if you're going to ask for a price increase for existing clients, make it meaningful.
Michelle Kane (08:27):
Yeah.
Chip Griffin (08:28):
Yeah,
Michelle Kane (08:28):
That's so true. I love that. Yeah, and I love what you said when you said make $125,000 for yourself because you have to factor in what's my tax rate? What do I want to keep alongside all of, like you said, Karen, my overhead,
Karen Swim, APR (08:49):
What you pay people. And let's face it, you might be working 40, 50 hours a week, but you're not working 40 to 50 billable hours a week. That is just lies and falsehoods. And so you need to account for that as well. You still need to, which is why I don't like hourly pricing. I am not a fan. I know some people do. Some of you work in structures where the hourly is what they want from you, so be smart about your hourly pricing. But I prefer value-based pricing. I prefer basing the pricing on the value of the services that I'm offering, my expertise, my specialized skill sets. There's all those other soft things that work on behalf of your client. My years of experience, the fact that I can do things faster than a junior person, the things that I know that aid in my strategic counseling are things that you really, it's hard to put a price tag on that, but I do, and you all should too.
(09:49):
So value gets you more money, it gets you the premium rates. When you look hour to hour, then you're also forced to track your hours. And I don't know, some of you like that. I don't. I just want to get in there, get the job done. I don't want to be futsing around with tools. I spent 1.2 hours on that task. That's just extra to me, and I don't want any additional admin work. If it works for you, go for it. But for those of you that are like me, that's just not the way to go.
Chip Griffin (10:23):
But I'll tell you, you should be tracking your own time for your own personal use because otherwise you don't really know if the work that you're doing
Karen Swim, APR (10:30):
Is profitable.
Chip Griffin (10:31):
And so why
Karen Swim, APR (10:32):
Really
Chip Griffin (10:32):
That in general, I would try to avoid charging a client hourly rates. You should know what your effective hourly rate is for the work that you're doing. And I think your point is that people are not, even if you're working 40 or 50 hours a week, that's not billable time in any form. That's something that a lot of people forget. And so they set an hourly rate and they say, okay, well I've got a hundred bucks an hour, so that means that's like $200,000 for me, like work 2000 hours. No, no, because really the max most solos are going to work is about a thousand billable hours per year once you factor in all of the other things that come into the mix. And so you need to be thoughtful about that and understand that a lot of your work time is not really being directly compensated. And so that needs to be accounted for in a higher hourly effective rate or effective hourly rate.
Karen Swim, APR (11:21):
Completely agree.
Chip Griffin (11:23):
If you're going to increase the rates for clients, this was a discussion that came up in the Solo PR Facebook group recently. I think your advice, Karen, was really spot on. And so perhaps you could share what you shared in that forum because I think you hit the nail on the head as far as the best way to do price increases.
Karen Swim, APR (11:41):
So what I do is I build that into the year end business review, which is happening no later than Q3. So it's not the full year, but it's a look back. And so you're hitting on, in that business review, you're looking at what went well, what didn't go so well, you need to be honest about that. You want to look at your wins, your losses, you want to look at areas for improvement, and then you want to make recommendations for your PR program for the coming year. That PR program then has a budget attached to it. The reason I do that is because I am not a fan of somebody charging me more money for the same exact set of services, and you're setting yourself up for a one-to-one thing. You're setting clients up to say, I'm sorry, we just don't have the extra budget for next year When you're going and saying, Hey, it's a new year, we're looking for a price increase.
(12:31):
Instead of charging you $12,000 a month, your program's now going to be $20,000 a month for the same stuff. Why? What's the reasoning on that? But when you are thoughtfully working through, Hey, here are the things that we did, here's the impact that it had on your revenue stream to the goals that we set to the KPIs, here's where we can really make some additional inroads next year. Here's some areas that we see for improvement. Here's how we want to structure the program next year to build on our success, and here's the budget for that. You're now giving them something brand new to actually look at. And so now they're thinking of that particular program and the price of that. That's a much better way to proceed. And I have found that you always get an increase that way. It is a built-in increase, and it also gives you your framework and structure for planning for the coming year.
Michelle Kane (13:28):
I love that. I love how it solves for so many things, and it allows you to both end the year with the notion or just the knowledge that, okay, we can hit the ground running in the new year.
Chip Griffin (13:41):
Yeah, I mean, I love it for three reasons. The first is that it puts you in that strategic driver's seat in the relationship, and one of the leading reasons that clients give perhaps second to budget for canceling a client or agency engagements or solo engagements is because the relationship got stale. You stopped giving me new ideas. You were just on autopilot. And so your approach takes you off of autopilot and says, look, let's look at this past year and now let's look ahead and come up with a brand new plan. So you've put yourself in the strategic driver's seat. The second thing is it allows you to have that price increase without comparing apples to apples. And so anytime you can take that out of the equation, you get out of the stupid discussion of, well, did your costs really go up by 11%? Should it really be an 11% increase?
(14:29):
Well, it's a silly place to be, but the third reason that I think it's useful is because it allows you to encumber yourself from all sorts of useless things that the longer client engagement goes on, the more useless things we continue to do for them. We agreed to start doing it three years ago. It stayed on autopilot. And so we still do it. And so we accumulate all of this gunk, and it's often in the form of reports or checkbox items that we're doing on a weekly or monthly basis that the client doesn't even care about. But we don't want to go to them and say, can we get rid of this? Because we're afraid that we'll rock the boat if we're reframing the relationship every year, we can just get that stuff out of it. And frankly, we could charge them the same amount probably, and it's an effective price increase because instead of working 40 hours a month, we only have to work 30 hours a month. And so our effective hourly rate has gone up and they don't even realize it. So there are three reasons why your annual strategic planning and budgeting approach really, I think is the key to successful rate increases for existing clients.
Michelle Kane (15:32):
So true. So very true. That's smart. And it's so true. We always need to be cognizant of not going on autopilot. And in work like ours, I often say, look, I'm only as good as the information that I'm given or that I have access to. And sometimes just in the busyness of a client's workday, week, year, month, they don't have the bandwidth required to keep things moving forward. So that's always an ongoing challenge, and sometimes it's kind of easy to fall into, well, I guess if they're okay, we're okay, and it doesn't always end up okay.
Chip Griffin (16:06):
Absolutely, and I think the key to all of this is having clear lines of communication with your client. So I've seen a lot of bad ways that agencies and solos raise prices. The first obviously we talked about was the fixed cola increase every year, but some of the others are giving too short a notice and just saying, my rates are going up starting next month. You've got to give your clients time to plan because they need to include it in their budgets. And so simply announcing it, first of all, simply announcing it to an existing client isn't really good. It needs to be more of a dialogue anyway. But to the extent that let's say that you do bill hourly and you just say, okay, this is my new effective hourly rate. You got to let them know months in advance so that they can build that into their own proposals. You also need to avoid just blindsiding people and telling them, this is just what's happening. It needs to be that discussion so that they feel like this is a partnership still, if it feels like you're a vendor, they'll treat you like a vendor and you don't want to be a vendor. I mean, I don't know any solo or agency that wants to be a vendor.
Karen Swim, APR (17:10):
Absolutely not. That's great advice. I love that. And I've seen some discussions around that. I need data to back up what's happening, which misses the point, as you said, of treating, really respecting each individual client relationship because every client is not going to have the same PR program. We're always customizing that to each client's needs. And so your budgets are going to vary, but at the end of the day, even though your scope of work and what you're doing may vary, your rate should really be the same. And so I always agree too with having an hourly rate, you need to map that out, make sure that that's like a checkpoint to make sure that you're getting to that. A lot of times you'll get more, but it shouldn't be below that for any
Chip Griffin (18:00):
Client. Yeah, I think it's easy to get too scared about raising your prices on clients, but you also shouldn't do it completely fearlessly because as soon as you have that rate discussion, it does put the relationship at greater risk than it was before. And so if you've got a client that's already on the edge, maybe they've expressed some dissatisfaction with the work that you're doing, or they don't quite see the value or something like that, or that they're having real serious financial problems themselves, that may not be the client that you want to go to and try to raise rates on right now. You don't have to raise rates across the board. You can exercise judgment in how you do it, because ultimately, frankly, the way that you end up with higher rates is by swapping out low paying clients for higher paying clients. So you're saying, okay, I want to grow by 50%.
(18:48):
You're never going to get there by just increasing rates on existing clients. You're going to have to bring in larger engagements, more profitable engagements that you can swap out as you lose clients over time. We all lose clients. None of us keep clients forever. And I always talk about the profitability bell curve with clients. Clients are unprofitable in the early stage because you're spending a lot of time learning them, learning their systems, getting to know them, trying to impress them. Then you become efficient and you figure out how to get the results and how to do it with less work. And so now your profitability increases, but at some point you get scared of losing them, and at some point you get to the point where you haven't been raising rates at the right rate, and so now your profitability starts to decline at some point on that bell curve, it's better for you to let them go and get a new client than it is to sit there and just figure out, how can I jack up their prices? You're not going to be able to get them high enough to make it worthwhile in some cases.
Karen Swim, APR (19:39):
Yeah,
Michelle Kane (19:39):
That's so very true. Very true.
Karen Swim, APR (19:42):
I know some of the best advice I got when I was starting out is to look at your client mix at least twice a year and realizing that you were always going to have paying high value clients, then you were going to have a bigger portion in that middle tier, and then you were going to have some that were your low budget clients. And you should always be looking to reshift that mix with the goal of pushing more people up to the top of the paying high value and getting rid of all of your low budget. Because when you start out, sometimes you do take on things and then later you're like, yeah, that wasn't worth it, or I'm not really making money. And some of us have those clients where you continue to work with just because you like them and because you like the people, you really enjoy the work, and so you keep 'em on, but they're not the most profitable for you.
(20:36):
And so think about that mix all the time. And I think Chip, you just made a good point is for all of us, this is a good reminder that we must always have a full pipeline. You should always be doing business development period. Even if you feel like if I get one more client, I'm going to shoot myself. Because if you are at a point in your business where you can't take on new clients, it probably means you're not charging enough. That's another flag. You're not charging enough. Your rates are way too low if you are choking on business, probably not charging enough. And then there's the idea that you, maybe it's time to expand. If you have all high value clients and you're making your rates, maybe expand your business, think about bringing on teaming up with other people so that you can continue to grow or really take a hard look at your mix. And are there any clients that really are low value? I would say that the answer for most solos is probably Yep.
Michelle Kane (21:39):
And keeping in mind too, sometimes those lower budget clients are the most labor intensive, and that has an impact on both you and your business in the long term.
Karen Swim, APR (21:49):
Yeah. You cannot convince the cheapies to raise their rates. You just can't. I don't care what programs you present, they're never going to want it. These are your budget shoppers. They shop at Dollar Store and you can't convince them to pay Nordstrom prices not going to happen.
Chip Griffin (22:06):
Yeah, no, that's a great point. I think it's so important when you're thinking about your rates, you need to remember that what matters is not how much you charge, it's how much you profit. And so even when you're a salt, even if you're not contracting any of the out, you need to think about that effective hourly rate that you have because that is in essence, your profit. And so oftentimes, to your point, Karen, about the small, medium and large clients, it's the medium sized ones that are actually the most profitable because the small ones are cheap. And so whatever you do, you can't make 'em happy. And so it's going to be work at the high end. You get so scared of losing them because they're 20, 25, 30% of your revenue that you bend over backwards to make them happy. Even if they don't ask for the work, you spend a little bit extra time on it, polishing it, making it just so and so, it's those middle clients that are often the most profitable. And so you need, as you're setting your rates and you're increasing your rates, you need to think about the money that you're actually putting in your pocket that matters far more than what you're charging them or what your total revenue looks like, or any of those kinds of vanity metrics that we often think about.
Michelle Kane (23:09):
So true, Chip is bringing the wisdom today, giving us so, so much to think about, which is good. And we do need to think about this, not to let it plague you every day, but we definitely need to keep this top of mind as we continue to grow our business and consider the clients that we want to work with and the kind of work that we want to do.
Chip Griffin (23:34):
That's right. It's a business and it's our job, and we've got to be smart about it.
Karen Swim, APR (23:39):
We shouldn't be afraid to discuss these topics. And by the way, if it's the third quarter and you're suddenly shocked that you might be losing a client, that's not great either. I feel like that's probably not true. You just are paralyzed by it and you haven't been able to take action to either fix it or really start the hunt to replace the business. It's like people wait until a business goes out of business or they get a layoff. They know it's coming. There are signs. You just ignore the signs hoping for something different because change is uncomfortable. But I want to encourage solos to step into that role of being the CEO of your business and truly stop getting what's handed to you and make happen what you want for your own business, because that's your job, and you should be happy, and you should be making the money that you want to make. You should enjoy the work, and you should enjoy the people that you work with. It should be your choice. And even if you have people that you don't really enjoy, it's your choice to work with them if you feel like, eh, they're a pain, but I love the money. That's okay. That's a choice.
Michelle Kane (24:52):
And the more that you think of yourself that way, that will be noticed and the way you carry yourself and the way you project yourself and the way you talk about your work, not just, oh, I do some stuff. It's like, no, I
Chip Griffin (25:02):
Haven't. You produce better results too. I mean, if you're miserable,
Michelle Kane (25:04):
Exactly.
Chip Griffin (25:05):
You are not going to produce good results. I mean, I don't care how much of a Hercules you are, it's just not going to happen,
Michelle Kane (25:11):
Right? Yeah. Right, right. Exactly.
Chip Griffin (25:15):
So go raise your rates.
Michelle Kane (25:17):
Yeah, I know we have the pause of soaking in this great information.
Karen Swim, APR (25:22):
I want to remind our audience that Chip gives amazing free advice, but I want you all to head over to his website, check him out. And if you're really serious about growing your agency, then you need to hire him. He does amazing work. He gives practical, actionable advice. I love that he meets you where you are, but he's going to hold your feet to the fire and help keep you accountable to really reaching the goals that you want to reach. And it doesn't take a whole lot of research to run across people who have benefited from his wisdom and experience. And we all know that Sometimes we can convince ourselves that we can do the best on our own, but we really can't. I mean, it's why people hire fitness trainers. It's why you go see doctors. It's why you pay experts. He really is an expert at helping you to have your best business. So I just want to remind people of that because he's so kind and generous, and he does so many things for free, and he puts his knowledge out there, but hey, he's for hire too.
Chip Griffin (26:25):
Got to pay the bills somehow. But no, I love giving free advice. And look, the bottom line is that folks should be looking for help somewhere, whether that's by being part of communities like Solo PR Pro, just having conversations with peers, hiring coaches or consultants. There are so many ways that you can get help out there that you shouldn't be thinking about doing this alone. And the fact that you're listening to this podcast means that you're already taking at least one step towards getting that help. So don't do it alone. Find help somewhere, whether that's me or someone else.
Michelle Kane (26:54):
How true is that? And Chip, if you don't mind reminding our listeners, what's the best way to find you and get in touch with you?
Chip Griffin (27:01):
Yeah, you can find all of those great resources that I put out@smallagencygrowth.com. The search function there is actually quite good. And we'll find podcast episodes, videos, articles, workbooks, guides, all sorts of different things,
Michelle Kane (27:14):
A plethora of information. Well, gosh, Chip, we are so grateful that you have joined us yet again. We always love when Chip comes on the show, and we're so grateful for your time. And to our listeners out there, please do share this around. This was a good one, and we hope that you are inspired to think about, Hey, how's my business doing and how can or should I be raising my rates? And until next time, thanks for listening to That Solo Life.