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How to Ask for a Fee Increase [Consulting Firm Skills]

Over the past three years, your consulting firm charged your client Fru Gal Corp. (FGC) roughly half a bajillion dollars for each of the two “big progress” projects they hired you to lead. Next year you’d like to charge FGC higher fees for the same type of projects.

How (and why) do you ask FGC for the increase in fees?

Every couple of years—if not every year—your consulting firm’s fee levels deserve the Farah Fawcett hair treatment: scrub and lift. Clean out clients and projects that deliver low fees and fluff up your pricing.

When your consulting firm has legacy clients, such as FGC, who have played a large role in recent years’ revenue picture, you may feel awkward or even unjustified in raising your fees.

Let’s address that.

You deserve higher fees for your consulting firm’s work, and asking for the increase doesn’t have to be difficult.

Why Your Consulting Firm Deserves Higher Fees Next Year

You probably already know a few justifications for attaching a higher bill to the same consulting project going forward. A few potential additions to consider are below:

  • Your consulting firm is more experienced now than you were in the past, and your advice is commensurately more valuable.
  • Your consulting firm is more in demand than you used to be—possibly much more in demand.
  • Your consulting firm underpriced your services early on with FGC (or in general) in order to gain a foothold. Now that you have that foothold, it’s time your fees are raised to fair levels.
  • Inflation is for real. Your consulting firm’s expenses are on the rise, and unless you keep pace with inflation, you’re effectively taking a price decrease.

How to Ask for a Fee Increase

Raising your consulting firm’s fees isn’t a big deal when you’re proposing work for a new client.

However, when you’re asked by a past client to complete similar work to a past project or when you’re continuing in a long-term advisory relationship, higher fees are obvious and could be a point of contention.

Generally speaking, you’re best off with a short, sweet notification to your consulting client, devoid of justifications and defenses. You don’t need excuses or rationale to support your consulting firm’s escalated pricing.

A few examples of how this could be handled in the cover note on a proposal:

Just a quick update on fees: our fees are increasing this coming year. We enjoy our work with Fru Gal and we’re excited about the goals we’ve mapped out together for the next “big progress” project. As you’ll see in the attached proposal, the fee for our “big progress” work will be $1.2 bajillion, rather than $1 bajillion. If you have any questions about this, let me know.

One quick note on the fee in the attached proposal. Since Fru Gal has been a long time client, you’ve been grandfathered through a number of fee increases. To be fair to my team and also have some equity across clients, we need to bring you more in line with what our standard fees are now. Therefore, you’ll see the next “big progress” project includes a modest fee increase to a kazillion bajillion dollars.

There’s good news and bad news related to the “big progress” project we talked about last week. The good news is that our work this year with Fru Gal has been extremely productive, the results are accelerating and our work together next year should produce even more powerful results. The bad new is that, alas, we are increasing fees on “big progress” projects starting in January. Details are in the attached proposal.

None of those examples offer a rationale, other than a possible reference to the length of time FGC has paid the current fees.

Statements like, “We’ve brought on higher-level talent to support your team” sets you up for a fight over whether that higher-level talent is necessary. Don’t go there!

How have you let your current clients know that your fees are increasing for the same work?

  1. Ian Tidswell
    November 3, 2021 at 7:07 am Reply

    As always, excellent advice. We tend to assume that clients are very price sensitive, but more often they are value-buyers, and are net-value sensitive: once one has an ongoing relationship, the “risk discount” (that the relationship won’t work out) and the “learning inefficiency” (the time to understand how they operate) both dissipate, increasing your value versus their Next Best Alternative.

    Also, pricing psychology suggests that many customers are less aware of the prices they pay than we think, and they are much more afraid of failure: great reasons to not make a big fuss about price increases.

    • David A. Fields
      November 3, 2021 at 7:47 am Reply

      Well said, Ian. You’re 100% right that experience with a client naturally boosts the value of your consulting firm’s engagements with that client. You’ve built Trust, which is one of the major drivers of a fee premium. (Trust based on prior experience is one of the reasons a client will hire a more-expensive consulting firm with less capability over a less-expensive, more capable firm.)

      Thank you for adding your wisdom to this article, Ian!

  2. John Ray
    November 3, 2021 at 9:36 am Reply

    What I always, always do with a client is have a conversation (sometimes more than one) which I’d characterize as a “value review”: we talk about the engagement, expectations vs. reality, how problems were remediated, value received, etc. It reminds the client of the value you’re delivering to them, and you’ll often receive feedback on value, tangible and intangible, you’re delivering you weren’t aware of or didn’t think was that meaningful.

    In a successful client relationship, this value reminder makes it easier not only for the client to accept the increase, but for you as the provider to ask for it in the first place.

    Thank you for your post, David!

    • David A. Fields
      November 3, 2021 at 4:07 pm Reply

      It sounds like you have a terrific feedback loop built into your projects, John. That’s impressive!

      And, as you point out, helping your client stay in touch with the value of your work makes it much easier to hold the fee-increase conversations.

      Well done, John. Thanks for sharing your wisdom!

  3. Dan Janal
    November 3, 2021 at 11:07 am Reply

    This advice comes at the right time! One of my suppliers raised their rates and I need to pass that increase along to my customers. Thanks for the advice!

    • David A. Fields
      November 3, 2021 at 2:53 pm Reply

      There’s a lot of this “passing along cost increases” going around. Hold onto your seats–we’re potentially in for a wild year on that front.

      I’m glad you posted your situation, Dan. That will give comfort to other readers too that they’re not alone in having to pass along rising costs.

  4. Norris Turner
    November 5, 2021 at 12:36 pm Reply

    Insightful and incredibly timely advice! We’re a relatively new consulting business – 2 years old later this month. I significantly underpriced (unintentionally) a major project we are close to finishing with a client. It looks very promising to get future projects with this client. Just a few days ago, I engaged my main client contact about the prospect of new project work . I received a highly encouraging reply and we will be discussing particulars later this month. The meeting in a few weeks is when I am planning to inform her that because I significantly underpriced the project we’re finishing, as it was the first time doing a project of this scale with a client, subsequent projects will be priced higher (at a bajillion dollars Lol!). So, you can see, this was a timely topic for us. Thank you for your awesome, ever-entertaining advice!

    • David A. Fields
      November 5, 2021 at 1:47 pm Reply

      Congratulations on the new practice, Norris, on winning a large project early-on and, most of all, on doing such outstanding work that your client wants to continue. That’s a lot of good news! A bajillion dollars sounds right. (She can always counter with a kazillion.)

      Thanks for sharing your feedback and situation. Let me know how it the conversation with your client works out!

  5. Norris Turner
    November 10, 2021 at 10:31 am Reply

    Thanks David for your reply. I will do that!

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