Raising prices with existing clients

Clients rarely object to a price rise in principle. They object to being told about one, in an email, six weeks before it takes effect, with no basis given and no prior mention that this was ever going to happen.

Handled that way, a modest increase becomes a procurement event. The client's side has to justify it internally, and the easiest way to do that is to test the market. So the increase produces a competitive review it did not need to produce.

Everything below is about removing the surprise. Put the mechanism in the agreement at signing, state the basis before you apply it, and bring evidence that comes from somewhere other than your own opinion of your worth.

The best time to introduce an annual increase is before the client is a client. A clause in the original agreement that states an annual review, its timing, its basis and its notice period is uncontroversial at signing and load-bearing forever after.

Write four things: when the review happens, what it is indexed to, how much notice you give, and what the client's options are. Options matter. A client who can decline and terminate on notice is being treated fairly, and most of them will not exercise it. A client with no option is being presented with a fait accompli, which is what makes people shop.

If your existing agreements have no clause, add one at the next renewal rather than trying to backfill it. And accept that the first increase without a clause is the hardest one you will ever do, which is an argument for doing it now rather than later.

The same document should already carry the assumptions and exclusions the price depends on. Those are what make a mid-term re-price legitimate when circumstances change, which is the wider subject of scoping a retainer so it does not erode.

Most working increases combine the first and the third. The index component is uncontroversial and gets waved through. The scope component is where the real money is, and it is defensible only if you have been recording the growth as it happened.

The second row is a trap worth naming. Once you justify a price by naming your own costs, you have invited the client into your cost base, and next year they will ask which of those costs went down.

An index-linked increase works because the reference number is published by a third party and neither side gets to argue with it.

In Canada the natural reference is the Consumer Price Index. The Bank of Canada aims to keep inflation at the 2 per cent midpoint of a 1 to 3 per cent inflation-control target range, expressed as the year-over-year increase in total CPI, and it has monitored CPI-trim, CPI-median and CPI-common as its preferred core measures since January 2017. The current series is published on the Bank's consumer price index page, and Statistics Canada maintains the underlying Consumer Price Index portal along with the monthly Consumer Price Index table.

The arithmetic is published too. The Bank of Canada's inflation calculator states the equation as the original cost multiplied by the ratio of the two CPI values, and notes it uses monthly CPI data from 1914 to the present, with results based on the most recent month available, normally about two months prior. That last detail matters operationally: if your clause says "the most recent published CPI", you should expect that figure to lag by roughly two months, and your review timing should allow for it.

Name the exact series in the clause. "CPI" is ambiguous, because there are several measures and they do not agree in any given month. Total CPI, all-items, Canada, year over year is a specific thing that both sides can look up. Anything vaguer is an argument waiting to happen.

Be honest with yourself about what an index recovers. It holds your price flat in real terms. It does not reprice work that has grown, and it does not correct a rate that was set too low in the first place. Those are separate conversations that need separate evidence.

A scope-based increase is only as good as your record of the scope growing, and that record has to be contemporaneous. Assembled at review time, it reads as a case being built. Kept monthly, it reads as a log.

Three things are worth logging all year. The estate: how many properties, accounts, dashboards, markets or locations you are responsible for, with dates. The change work: what was delivered beyond the standing obligation. The absorbed requests: anything you did for free, priced and marked as absorbed.

The estate log is the one that wins reviews, because it converts a feeling into a count. A migration that moved 154 data sources onto a new platform leaves behind an environment whose size is a matter of record rather than opinion, and an estate that has demonstrably grown since signing is the least arguable basis for an increase there is.

That third one is the most valuable and the most neglected. Absorbing small requests is good business. Absorbing them silently is not, because an unrecorded concession is a discount the client never knew they received, and at review time you have no evidence that anything changed.

Timing helps too. Raise the subject when the relationship is at its strongest, which is usually just after a delivery the client valued, not in the month when something went wrong. That is not manipulation, it is choosing a moment when both parties can think clearly.

Applying it to everyone at once. A blanket increase across the roster invites clients to compare notes, and someone will have negotiated better. Stagger by anniversary, which is also what a properly drafted clause implies anyway.

Leading with your costs. "Our costs have gone up" is a statement about your problems, and it puts the client in the position of deciding whether your problems are their responsibility. Lead with the clause and the index, which are statements about the agreement.

Increasing the price without ever having said no. If you have absorbed every request for two years and then raise the price, the client hears a penalty rather than an adjustment. Change control used routinely does more for a price increase than any argument made at review time, and it is where fixed-fee margin actually goes when it is missing.

There is a fourth, less common and more damaging: raising the price on an engagement you should be exiting. If an account is unprofitable because it is too small, the answer is a threshold rather than an increase, which is the subject of setting a minimum engagement and holding it.

Some clients will decline. Plan the response before you send the notice, because improvising it is how an increase turns into a discount.

Three legitimate responses exist. Hold the price and reduce the scope, which keeps the effective rate intact and is usually the right answer. Hold both for a defined period in exchange for a longer term, which trades price for certainty. Or accept the decline and let the engagement end on notice, which is a real option and should be treated as one.

The response that is not legitimate is holding both price and scope indefinitely, because that is a permanent rate cut with no expiry and it will be the baseline for every future conversation.

If you are running these reviews across a portfolio and the same three arguments keep recurring, the fix is structural. A repeatable review format with the clause, the index reference and the evidence log already in it is part of what statement of work scoping produces, and the delivery discipline behind it is what a fractional technical project manager brings to a program that has outgrown informal management.

Ninety days out, pull the evidence log and compute the index figure from the published series. Sixty days out, send the notice with the clause referenced, the basis stated, the number shown and the options listed. Thirty days out, have the conversation with anyone who asked for one. Then apply it on the date you said.

Do it the same way every year and it stops being an event. That is the objective. An increase nobody remembers is an increase that worked.