Is it Safe to Raise Your Billing Rates?

Source: Inside Public Accounting

Following are excerpts from the article “Double-Digit Billing Rate Increases? In This Economy?”

Imagine the reaction if at your next partner meeting you stood up, looked your partners in the eye, and proposed that as a firm you would increase billing rates by 15%. “That will never happen!” “Not in this economy!” “Our clients will have a fit!”

According to IPA’s 2008 Annual Survey and Analysis of Firms, billing rate increases for 2009 averaged 6%. But one out of every seven firms took a bolder approach and planned to increase rates by double digits. Some firm leaders agreed to speak with us—anonymously—and explain their reasoning, strategies and challenges.

One MP says he realized the firm was charging much less than their competitors and raised rates accordingly. “We raised our rates based on the knowledge of what our direct competition was charging—we don’t anticipate any challenges from our clients.”

Higher than average rate increases (more than 10%) were justified by one MP who told IPA the focus was not on the additional cost but on raising the bar on what the firm can provide clients. “Our staff was educated and informed of the benefit of the rate increases and the value-add for the clients. We wanted to be able to show the client what we did last year and offer them more value this year.”

“Until you start hearing complaints that your rates are too high, they may be too low and you should reexamine them,” one MP says. Another firm offers this advice, “If you are going to raise your rates, plan on internal education for the staff so everyone understands the purpose and the value of the increase and what the firm expects from the staff.”

To read the complete article, click here.

From Inside Public Accounting, March 2009, p. 2, The Platt Consulting Group, www.plattgroupllc.com. Subscription $389 per year; back issues—nonsubscribers $50. 317-733-1920.