Have you grown your business and surpassed the $1M revenue mark, but realize you are not maximizing your profits? It might be that your costs have increased, or you may have inefficiencies in your operations that are causing this challenge. Or it might be barriers within your market, but whatever the cause, you realize that you need to be raising prices. Despite reaching the revenue goals you dreamed of, your rising stress levels have outpaced your net profit. Let’s address the challenges and, rather than raising prices as a reactive response, instead approach raising prices as a CEO. A CEO raises prices as a proactive measure to ensure the firm’s longevity―without losing clients. Instead of raising your fees in order to “charge what you’re worth”, focus on pricing for the capacity, risk, and specialized expertise your firm has developed.
Why Static Fees are a Strategic Risk
As a business owner, you need to be aware of the inflation capacity paradox. This situation occurs when inflation persists despite an economy that is growing. The problem is that resources are underutilized. As your team grows to 5-10 people, you need to be aware that your Cost of Doing Business (CODB) increases rapidly, not linearly
If, while labor and operational costs increase, your fee structure does not change, you are then using your own profit to subsidize your clients’ projects. Remember, this is not a hobby―you are not in business to “dabble”―you are in business to be profitable. This realization can sometimes be challenging. Many designers love what they do so much that they may forget to view their firm through a CEO’s lens, or feel greedy just for wanting fair compensation.
There needs to be a shift from a “service-oriented” mindset to a “results-oriented” mindset. That is a mindset where price is a tool for resource allocation. It’s not a “one size/price fits all” mentality.
Pricing for the Risk Premium of High-End Design
As your projects increase in size and cost, be aware that they also become more complex. Your fees need to reflect that. A $2.5M project involves a great deal more logistical risk than a $500k project. It goes beyond just raising your fees to understanding the increased cost of managing those more complex projects.
In an era of supply chain instability and tariffs, your firm is acting as a “financial shield” for your clients. That definitely adds value for the client, but it also increases the risk factor for your firm, so be sure your fees reflect that. Raising prices is a way to mitigate your own risk.
In growing your firm to work on larger high-end projects, you need to adjust your mindset. You are not just charging for the design. You must reframe the value you deliver. You are charging for the insurance that these large-scale projects won’t fall apart under their own weight.
Experience-Based Fee Structure
Experience-based fee structure involves strategic vision. It is what you need to incorporate both into the culture of your firm, but also into how you market your firm. Begin pricing your input as the principal of the firm as a high-value consulting fee rather than an hourly rate. As your firm and your projects grow, so must your thinking regarding your fees.
The change in your fee structure also needs to expand to the operations of your firm: how projects are executed. By standardizing team rates, you can ensure the majority of the project is consistently profitable without your constant intervention.
Again, as the principal of your firm, there is value for the client to work directly with you the entire time. That means premium/high-tier pricing for that opportunity, or it might mean that you, as the principal, get to pick your projects more discriminately. Then a standard rate can be applied to the rest of your team.
Communicating the Shift
High-net-worth clients usually have a background in business or may run volunteer organizations. As such, they value transparency and leadership. If they are your ideal clients, they understand those qualities in running their own businesses or organizations.
High-net-worth clients value transparency and leadership; they are suspicious of “soft” pricing and apologies. Again, if they are your ideal clients, they will be more concerned with the value related to the price than with finding the lowest price. Educate and inform them on the difference in pricing, whether it involves the product or the design itself. Sometimes designers feel that price is a client’s highest priority. That is usually not the case if you have clearly explained the difference in value and why you advise specific design decisions be made.
Clear communication is key when raising prices. Communicate well in advance, stating the reasons behind your decision. Focus on the value the client will receive with an investment in a better client experience, greater resources, and an even stronger client journey. Market the advantages to the client well before the timing of the increase. You might offer ideal longtime clients special offers during the transition period, such as current pricing for projects started by a certain date, or other special offers.
Realize that a price increase can offer a clarity filter to identify your ideal clients. Those are ideal clients who truly value your professionalism and understand the value of a strategic partnership with your firm beyond simply dollars.
Dealing with the Fear of Success
Often, designers have a fear that as they grow their business and raise their fees, they will lose existing clients and miss out on prospective clients. Shift your focus from worrying about if they will say “yes” to asking if they are truly ideal clients that will benefit your firm.
Examine your most profitable leads, and you will most likely find that they come from your ideal clients. Understand the value of referrals from those clients who respect your high-level business strategy and relationship-driven model. They relate to your focus on client relationships as well as the strong relationships within your team.
Establish a goal of achieving financial freedom and stay focused on that goal. It allows you to stop putting out daily fires and instead develop and become a leader of your legacy brand.
Pricing for the Future You Want
Now it’s time for a reality check. If you are serious about scaling a powerhouse firm with a CEO mindset, understand that you can’t do so without sustainable rates. It’s time to step up and take action. Start by reviewing your net profit goals for the year and then ask: Is my current pricing fueling my growth or funding my burnout? If you are honest and it is funding your burnout, then it’s time to change course. Commit to making the necessary changes, and you will once again enjoy the business of design―while also enjoying the increase in your bottom line!