Raising your fees periodically is an essential part of running a viable private practice. However, the answer I often get to the question, “When was the last time you raised your fees?” is a hesitant “I don’t remember” or “a while ago…“.
Private practitioners know this is something they’ve got to do, but they often dread the process and fear sharing the news with clients (you’re raising your fees?!?). For those of you that don’t enjoy this part of practice life, or who have never increased your fees (I know there are some of you …), these tips are for you.
Tips For Managing Your Annual Fee Change
There are three questions you should answer before rolling out an annual fee change:
- How much should my fees raise by?
- When is the best time to raise fees?
- How do I share this news with my clients?
According to Statistics Canada, the Consumer Price Index rose by 1.5% between December 2013 and December 2014. That means that if you’re NOT increasing your fees annually by at least this amount, the profitability of your practice could start to fall behind. For example, if you had a service in 2013 for which you charged $120, you’d need to increase it to $121.80 to keep pace with this rate of inflation.
In many cases, it’s easier (though not required) to use rounded fee amounts. It’s generally advisable to round to the nearest $5, or at the very least the nearest dollar. In our example, charging $125, not $121.80. Some years you may increase beyond the rate of inflation (say $125), other years not quite as much (or not at all). But over time, make sure you’re keeping pace with the cost of running your practice.
Clearly you also need to factor in the affordability of your services for your clients, and the market rates that equivalent therapy is being offered at in your local area. The key here is to charge reasonable fees, while recognizing that periodic increases are fair and important.
2. Best time to raise fees
Some practitioners prefer January (new year, new rates), others want to avoid the year-end crunch time and prefer sometime in the fall (like Labour Day). And if your practice year-end is at another time of year, this is another logical choice.
While there is no ideal time to raise rates, what is important is that it happens with regularity. The word “annual” in this newsletter title was no coincidence. It is best if you acclimate your clients, and your practice, to this change each year. It’s much easier to use language like “as part of our annual fee increase …” both for you and your clients.
It is then important to set an Effective Date for your rate increase, ideally a date you could use year after year. Your college or professional body likely has some rules about the notice period you need to give clients, so make sure you factor that into your timing (generally at least 60 days notice).
Once you’ve chosen this timeframe, and built it into your practice’s calendar, it will become much easier to manage your annual fee increase.
3. Implementing your fee change
Communicating your rate increases to your clients clearly and with enough notice is critical. While no one likes to hear that fees are increasing, most people are reasonable and fine with fees being raised.
A personal letter, email or discussion with your client are usually good ways to share the new fees. Remember to draw clear attention to the date when the fees will change. There is no need for an apologetic tone here – be direct and to the point.
It may also be the case that you may have some clients who will be unable to afford your fee increase. Generally this group is small, but even if you continue providing services to them at older, reduced rates, it is important that they know about the new standard fees you’re charging and the discount you’re offering to them.
It’s also much easier to manage your practice if you don’t have different rates for each client. Try as much as possible to stick to your fee schedule and to migrate your clients to the new rates on your scheduled date with as few exceptions as possible.
If you want talk about your annual fee change, or are curious to learn more about Owl Practice, let us know. We’re hear to help!