Increase Revenue? Yes. Raise Your Rates? No

Celebrating 20 Years

What were you doing in 1999? Besides wondering if the hysteria about Y2K was meaningful, I was launching Trivers Consulting Group. I had sold my Café Aurora the previous summer and had a vision about working with business owners to accelerate their revenue and create a business of lasting value.

Twenty years later, I can say, we’ve done that. Welcome to 2019, the 20th Anniversary year of Trivers Consulting Group.

Thank you, every reader, every friend, every client and prospective client, for your support over the past 20 years. It means the world to me.

During our 20th anniversary year, we will be exploring and going deep on the topic “How to create a business that lasts and that is a business of lasting value.”

Trivers Consulting Group has advised business owners what to do at each new moment. What worked in the past may not work in the future. What was once cutting edge is now old hat. We will continue to share with you what works, today and tomorrow.

Don’t “Raise Your Rates”

I’ve lost count of the number of company owners and professionals who told me that they were going to “raise their rates” in 2019.

What do I think when I hear “I’m going to raise my rates”?

When you announce you’re going to raise your rates I wonder:

“Why? What changed that you deserve this increase?”

What are you going to tell your clients and customers?

  • “Hey, we just raised our rates, for the same thing we’ve been doing for you at a lower rate for the past year or more.”
  • Or maybe you’ll say “Well, we’ve been undercharging, so now we’re going to make it up.”
  • Or you could justify with it “We’ve got more expenses now.”
  • Or, “We just need to make more money.”
  • And what do you mean by “rates”? That implies that you charge by the hour. Why should your hour be priced any higher than it’s been, each hour has the same 60 minutes in it?

These owners and professionals are also leaving themselves open to price-shopping. “If you’re going to charge $X, I’ll go looking for someone else who charges only $Y.”

And once you lose to someone who is charging less, what will you do? You’ve unwittingly entered a competitive drive to the bottom.

The Solution

Hourly rates for anything other than routinized work undervalues the worker and reduces revenue for the company. Hourly wages became the norm during industrialization. Business owners figured out what each job contributed to the final output, and priced those hours accordingly. That model is long gone in most cases.

The alternative for both seller and buyer is to charge for the value of the outcome. In some cases the revenue will decrease and in others it will increase. Most importantly, however, is that it allows the company the freedom to create new, additional value, if they desire, and get compensated for it.

Buyers benefit from value based fees in powerful ways:

  • They get their outcome sooner rather than later, as the seller is eager to deliver.
  • They can evaluate different offers in terms of value to them, not in terms of inputs from the seller’s perspective.
  • They can ask for more or less value, which they know will be priced accordingly.

It takes confidence in their offerings and the commitment to understand what their buyers value for a company or professional to charge according to value.

Value based fees or prices are the only way to increase revenue and profit. When are you going to stop raising rates and start going to market with your value?

If you are open to a conversation about how I might work with you to reach your 2019 goals, and go beyond this year to the long term–your own 20th or more anniversary—I would love to hear from you. I did not reach this milestone alone. I am grateful to every one of the advisers that has helped me, and I look forward to working with you.

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