Raising rates is an area many Fit Pros know they need to do but have trouble knowing how to go about it.
Like anything, there’s a right way and a wrong way to do it. Here is an example of a wrong way.
Raise all of your clients’ prices by $100 and don’t tell them. Just let them see it in their statements.
First, I’m going to discuss pricing in general, then how to decide if and how much to raise them, and finally, I’ll share some strategies for effectively raising them.
None of it really matters if you don’t know what to charge so let’s start there.
Figure out your goal revenue per hour. First you figure out the cost to run your facility per hour. The way you do that is to divide your total expenses by the hours you are operational.
Let’s say it costs you $50 to operate your business per hour and you’re going to operate 200 hours per month. That means it’s going to cost you $10,000 per month to run your facility at breakeven. If you personally want to make $10,000/mo, that means you need to make $20,000per month in GROSS income. $20,000/200 operating hours = $100/hour.
It can be simplified it this way:
(The income you want) + (Expenses)
———————————————– = # of clients you need
$ You make per client
While that’s not a way to determine pricing, it helps you realize what your pricing will get you.
Here are some additional thoughts especially if you’re just starting out or feel like your pricing is broken.
Come up with a spectrum. Here is how you figure out the low end. List out ALL of your expenses. Make sure you have them all on the list. Any cost you incur from doing business would count. Add them all up and divide by the hours you plan to service clients.
You need to charge that much to not lose money.
It’s amazing how there are trainers who charge so little and are actually paying the client to train them.
I’m not suggesting anyone charge this low end but it’s good to know. To determine the high end, take some time and list out all of the benefits you offer your ideal clients.
Be sure to include external benefits as well as internal ones. External would be things like weight loss, coming off meds, etc. The internal is more valuable and includes things like more confidence and other areas of their lives improving. Take your time and list everything you’ve helped people with. You’re selling results!
Then ask yourself how much those things are worth. Trust me that there are trainers/coaches out there who are not as good as us but charge way more.
You might do this exercise and realize that it’s worth 1k per hour. That doesn’t mean you start charging that much tomorrow. It just helps your confidence in determining the right price.
From there, you’ll just determine where your confidence is. You’ll factor in your experience and actual results you’ve helped people with.
I hope this is getting the wheels spinning.
Let’s talk about how to know when to raise em.’
Here are 12 signs that you should consider raising your rates. Spoiler alert. You probably should raise them.
You may feel like there is overlap with some of these or even that some are the same. It’s just meant to get you thinking in different ways.
1.You’re kind of relieved when someone quits because you know they’re not helping your bottom line. If I’m honest this has happened to me. Someone leaves and while I may miss training them but deep down I know it probably wasn’t the best situation economically.
2.You start feeling resentful towards your clients because you feel they’re not paying you enough. Hopefully you are excited to train your clients not just because you enjoy helping them but also because it’s helping you move forward financially.
3.You feel maxed out and burned out and you’re still not making enough. There’s only so much time you can spend with your clients and if you’re spending those hours but still not making enough, something may be broken with the pricing model.
4.You can’t serve your clients well because you have no margin to do any of the “extras.” It’s nice to be able to have some bandwidth to do things like give a session some time to prepare for or even follow up after. When every slot is filled, you’re not able to do those things which make the experience and your job more enjoyable.
5.You haven’t raised prices in a long time even though your expenses have increased. It’s normal for businesses to raise their prices just to keep up with inflation. Look at all the businesses around us who are raising their prices. I just went for a haircut and it was more than last time!
6.You have more clients than you can handle. If you have a waiting list, it’s probably an sign you’re in a great position to raise rates
7.Your close rate is through the roof. If almost everyone you meet with signs up, it might be time
8.Your clients tell you to. Clients routinely saying things like, “I’d pay you double what you charge” or “This is worth so much more than I pay” is a telltale sign.
9.You don’t have enough cash to grow. You need cash flow to hire employees and grow your business. If your current rates aren’t high enough to do that, you may need to look at your pricing structure.
10.Even after knowing your numbers, it’s not working out. I alluded to this at the start but it’s crucial to know what you’re bringing in, where it’s going, and what you need to at least survive. Once you know those things, you can better decide if your pricing model works. Without knowing those things, it won’t matter how much you’re bringing in.
11.You deliver great results. It’s hard to put a price on improving people’s lives. If you’re constantly adding value, have the testimonials to prove it, and are still lower than the competition something may be wrong.
12.You don’t need a reason. Here is my giving you permission to raise your rates just because you want to. There is a lot of power in being firm in knowing what you charge and sticking with it.
Look through this list and see how many make your head nod. If all of them do, it should be pretty clear. If none of them do, you might be good where you are. Perhaps some ring true while others don’t. I’ll give specific strategies based on where you land.
Now that we’ve covered general pricing guidelines and how to know when it’s time, let’s dive into the tactical side.
The first step to raising prices, once you decide to, is figuring out who you will raise prices on and how much.
There are a few options here and I would base it on how much you are feeling the 12 signs that you should raise them. For example, if half of them made your head nod, perhaps you don’t go as extreme as if you checked every box.
One option is to raise prices for new clients only. This is a much easier process because new clients usually have no idea what you previously charged. This is a great option if you have enough new clients coming in for it to make a difference. If you have a full client load and super high retention, it might not make a significant difference to your bottom line.
Option 2 is to raise rates for everyone across the board. This would be the option to consider if you have a full member roster and everyone is paying too little for you to be profitable enough. People are often scared of losing people with this method. The strategies I’ll present here are guaranteed to minimize client losses and quite honestly, if prices are too low, sometimes losing some is the best thing that can happen in order to make room for higher-paying clients who value what you offer.
The final option, one which I like in a lot of scenarios, is raising everyone but only slightly for current members. This allows them to still feel valued and rewarded for their business.
All of these options can work and I’ve done them all successfully (not perfectly) over the years.
Once you decide who will be raised, it’s time to make a specific plan.
First, decide on a date. I’m a big believer in being respectful of people and giving them notice, perhaps 2 months. This gives them time to plan and budget.
For new people, raising rates is a great way to create urgency. Let them know that your prices are going up but they can still get in at the older rates.
One of the mistakes people make (including myself) is just sending out a mass message about price increases. This can backfire because people may not feel as valued. It also becomes tricky because many of us have people on different programs so it’s hard to send a coherent message about it.
Instead, I recommend sending a positive message that you’ll be making some updates to your program (don’t mention rates) and want to schedule a short chat (in person if possible) to discuss.
From there, you’d use a calendar link or just schedule a time via email.
If you feel like you need to build up some confidence here are 3 things you can do.
1. Give yourself a pep talk – Read through testimonials and client successes to remind yourself of the value you deliver. Remember all of the continued education you’ve done and the improvement you’ve made.
2. Refer to the list you made – (mentioned in Part 1) about all the benefits you provide
3. Start with your A-listers – We all have clients that are fans no matter what we do. Talk to them first. This will build confidence and give you the reps you need to talk to the ones you’re not as sure about.
Now you’re ready to have those personal conversations. They’re not always easy for people but you’ll be building valuable skills in having uncomfortable conversations.
I recommend positioning the rate increase as part of an overall upgrade to a program.
Many people are uncomfortable with these conversations and start in a defensive mode explaining all the reasons they need to charge more. The reality is, your clients mostly trust that you are charging reasonable fees. You may not even have to go into it.
You might say something like this:
“Thanks for coming in to discuss the program updates Rich. We’re excited about all of the wonderful things happening. As part of the upgrade, the investment in your membership will be going up slightly in 2 months. Right now your weekly investment breaks down to $57 per week but as of (X date), it will be $67.”
I remember a conversation I had like this early on. I was so nervous because I was almost doubling the rate for a client. When I was finished explaining it, he responded with, “That’s fine.” We overthink it.
With that said, objections or concerns may come up.
They might say something like, “That’s a lot of money.”
Just hear their concerns.
Don’t get too defensive. Something like, “I understand you feel like that’s a significant investment.”
Now you can go into some of the reasons. Point out that you haven’t raised rates in years, have improved the programming specifically, etc.
Then maybe something like, “I think you’ll be pleased with the value you get moving forward.”
It would also be wise to have a plan for people who aren’t on board. Perhaps you have a referral for them or a lower-tiered service that works.
The goal of this blog post was to shed some light on pricing strategies, how to know when it’s time to increase your rates, and a blueprint for doing so. Feel free to reach out to me with your biggest takeaway by texting 631-505-3943. That is my direct line.
You can also schedule a 15 minute Q&A here!
Now go charge what you’re worth!