Here are strategies for successfully implementing a price increase, should your firm opt to do so.
Financial Models to Consider
The first step is to determine the financial model. Consider what is appropriate and easiest to implement. You may want to engage your accountant for assistance in determining the best approach for your firm.
Here are some popular options:
- A percentage increase to existing markup/bill rate for all clients (most common)
- Increasing existing bill rates by # dollars(less common)
- Increasing existing bill rates by # dollars(less common)
Communication Guidance
When you receive a letter in the mail informing you that your insurance premium is increasing, there is typically one or two paragraphs followed by a lot of white space!
That’s because when communicating bad news, short and sweet is best.
There is no need to go into detail and leave the door open to interpretation by your client about the specific additional costs you are incurring.
Sample Script:
_Dear (Client), _
_Due to the rising costs of sourcing, screening, and deploying workers in what is the tightest labor market in U.S. history, effective January 1, 2024, we will be implementing a X% price increase. _
_The new rates will be reflected in your (date) invoice for temporary and contract workers currently on assignment through (your firm) at your company and future workers. _
_As always, we value our relationship with you as a trusted provider of supplemental staffing and look forward to supporting your success providing the supplemental labor required to serve your own customers. _
_Regards, _
(Name of highest-ranking senior executive in your firm)
Be sure to send both an email and a letter to mitigate risk of your client not receiving the communication. If your firm has multiple offices, this effort is most successful when centralized; communication should come from your corporate headquarters.
No communication is necessary to dormant clients until they place their next order, at which point if the question of price arises you can explain the rate increase.
Guidance for Large Accounts and MSP Agreements
Don’t assume that you cannot raise rates on a large account simply because “there is a service agreement in place at X rate already.” Contracts can be amended, and this could be your best approach. Consult your attorney for guidance.
With respect to MSP supplier agreements, you may have options here too. Contact the MSP program executive and ask if they are planning to negotiate a price increase on behalf of all suppliers. If the answer is no, you can then attempt to negotiate a lower fee percentage the MSP takes from your rate. Remember, MSPs need their suppliers to enable their own success, and as such should advocate for them.
What to Do If You Get Pushback
To maintain your gross profit margins, anytime you give a client a price concession, you should in turn reduce your cost of delivery.
If negotiating becomes necessary to avoid the loss of a high-value client and you ultimately decide to maintain the existing price structure, inform your client that you must either discontinue providing specific services, or charge for them.
For example, the cost of testing or background screening your firm may currently be absorbing can be passed through with an administrative surcharge on the client’s invoices.
If your client still resists, you may have a decision to make as to whether this client is one you want to continue doing business with.
No one is in business to lose money. If your firm’s margins are continuing to slide because it’s costing more money to employ workers, there is a solution.
