Stop Undercharging: How to Raise Your Law Firm’s Rates

There is no good reason to undercharge. You may think you have one. You are wrong. There is no good reason to undercharge. Not one. If you live in a small city or a small community and you are charging $350 or less and you have a ton of experience, you have got to look at that. You need to go up to $400 minimum. Minimum. I'm telling you. I'm not going to give you the directive to go raise your rates to $400, although feel free, because I've done all the research. I've worked with clients on this. We have done experiments, and it never falls below $400 for this level of expertise that you are bringing.

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Hi there and welcome to the Law Firm Owner Podcast. I'm so glad you're here with us this week. We're talking about rates today and, more specifically, are you undercharging? And if any of you have wondered if you should raise your rates, if maybe it is a little low and you're not sure, you don't have confidence to bump it, I want you to listen to what I say today.

And actually, I'm thinking about all of you who are listening. There are many of you who have untested assumptions about what you can and cannot do for your local market. And I just want you to be open to what you hear today because I have a lot to say on this topic. I'm going to try to keep this succinct. I'm going to try to keep this digestible, but there are things that most of you are wrong about, and you're running on assumptions that are untested, and they are usually coming from a place, like a lack of confidence or fear or whatever, you name it. It's just you're coming from a place of lack. 

And that's preventing you from really digging in to figure out what's true, what's not true. It's preventing you from experimenting to find out really what the market will do, what the market will pay.

I'm getting ahead of myself here, but that's what we're talking about today, is undercharging because I see it all the time. And you have to course-correct. If you want a healthy business that has healthy margins and can have room to breathe financially, you are going to have to fix this problem, and you're going to have to start to wake up and have an awareness about where are you making assumptions that are false? And how can you test assumptions to see if you are right or wrong about what you think? 

So many of us think things. I do this too. We have assumptions that we feel like are facts. And that's where we go wrong. That is where we keep ourselves pigeonholed into something that is untested and often times untrue. That happens. I see that happen with rates and what people are charging. So that's what we're going to talk about today. 

All right, generally on the topic, I have some points I want to make right out front, and then we'll dig into some truths about how you need to think about your rate, some ways to go about it. We'll talk about average revenue and how important that is to a business. We're going to talk about how you can play things all the way out to the end so that you can have a sense of what you want to experiment with. We're going to talk about when you raise them, how to raise them, and about how to stand on your own two feet when you're quoting your rates to a potential new client. 

Undercharging, generally speaking. Here are some thoughts I have. I see people who live in small cities, and yet they think of them as towns. I see people who live in towns, and they have assumptions about what people who live in that town will pay. I see people who live in large metropolitan cities who are undercharging. All of this is about undercharging. And have fear about the clientele that they want to attract and what they will pay. 

So across the gamut, when I see undercharging happening, everybody has a similar story as to why they are charging what they are charging and why they don't feel like they can go up with their rates. And it is always untested when people are talking to me about it. They have never experimented with it. They have never made a decision to go up because there's some sort of fear that they have. And then what ends up happening is I have to work through that fear with them and help them understand, come at it from a more logical perspective, and put something into play so that we can test it.

I know, I'm telling you, 99% of the time, I know what the result of the experiment is going to be that we are running because I've seen this enough. But people need to see it for themselves, and I think that's great. And also I think experiments are great. I think it lets us make sure that we are staying connected to data and real information instead of just hunches and assumptions. 

But it all comes back to some version of the market won't pay for that. People, those exact words don't come out of law firm owner's mouths, but that is what they are all saying. The things that do come out of their mouth is, "People won't pay that in this town," or, "I don't want to price myself out of the market," or something along those lines. And they've stood still for a while because of that. 

Now, the other thing I'm going to offer here is most of these people that I'm talking about have a ton of experience. They are very good lawyers that have seen a lot. The breadth of knowledge and the depth of knowledge is truly impressive, and it does set them apart, but they are not using that to set themselves apart.

And by the way, with that level of experience should come a rate that's not standard. It's not average. That's not what we're doing here. The work that you do is not standard. It's not average. The work you do is good, and you know it, and you trust yourself. You would hire you if you understood the experience you have and the way that you approach matters or client files. You would hire you, and there's a reason for that.

So I see people often who have 15, 20 years of experience and are quicker at making good decisions for their clients, are quicker at presenting the truth of what needs to be known in order to move forward. They are quicker with research. They just move faster, and they're wiser. That is a benefit to any client that hires you.

And what you will find is there are people in your market that don't have the breadth and depth of knowledge that you do, and yet they're charging what you charge or more. When I say to them, "Make that make sense," you can see them soften to a point where it's like, "Well, yeah, but I don't know that the market will pay for it." It's like they believe that. They believe that they are worth more, but they don't think that the market will pay for it. They think they will lose clients. They think that they won't get new clients because the people will go down the street to someone who is charging what the client who's standing in front of me used to charge before they raise their prices. 

And all of that, all of that is you, and I'm saying we all do this in certain respects, right? So I'm not trying to point a finger at the listeners, but listen, this is just how it works. This is how we roll as humans. You are all up in other people's mental business about what they will or won't do. And when you do that, when you are all up in someone else's business mentally, there is no action being taken. There's no information being learned. There's no new informed decisions to be made. You're just spinning in your own swirl of thoughts that's all up in other people's business and what they will do or won't do, what they will find valuable, what they won't find valuable. 

Now, your job is to go get answers and make decisions. Your job is to be able to stand on two feet confidently and charge for the value that you bring a client. So when I hear people who are in small cities who have 15 to 20 years of experience, and they're really good at what they do, and they're charging $350, for example, I'm like, "Oh god, we got to get that up." It doesn't make sense, right? And I have to help them, walk them through why it doesn't make sense.

Now, at face value, it doesn't make sense because of all that experience, you can charge more than the normal rate in your town.  If someone wants an average, someone who has less experience and is less polished and cares less about the client experience and all the things you guys work so hard to do a great job with owning this business and owning this firm and providing great service and having a good team and being organized inside, all of that, that is value to your clients. And it can be reflected in your rates. And quite frankly, it should be reflected in your rates.

And so when I hear $350 an hour, for example, for an owner attorney who has tons of experience and is very good at their job and cares deeply about the client experience, cares deeply about the community, it's all there, then your rate should reflect as such. You don't need to be sort of a status quo in your community. If people want you, if people want what your firm is offering, they will pay the rates that your firm is charging. 

There's something else here. By the time I meet them, they either haven't raised their rates in a while, like a while. So there's that. Or they've been chipping away. Like, they raise it by like $10 an hour or $15 an hour. Don't even do that. Don't do that. It's not worth it. It's just like a chipping away when really you should be at a different level in terms of your rate. And so this chipping away at getting higher and higher in terms of your rate, that is not the way to go. It feels more nickel-and-dimey than just raising your rate to a different level that it should be at. 

And when I watch firms do this, actually businesses, I will tell you. There's someone else who's really close to me in my life, and they charge per session for body work. So massage, but it's a specialized type of massage. And they're raising their rates by like $10 an hour. I was like, "Okay, you need to, you need to raise your rates for real."

And how I know that is because I'm privy to understand the margins in the business. I know what they pay their people. I know the work and the heart and the soul that they pour into this. I know the experience that they have. I know the certifications and the licensures that they have. It's like, "Stop, just nickel and diming your way up the chain. Say what you're worth. That's it." 

And again, even with that outside business, so you guys, this isn't just law firms, but I'm talking to you all, but even with that example of the person that's close to me that does really specific body work, that was the same thing. "They, people won't pay that here." I'm like, "Yes, they will. And also, maybe I'm wrong, but let's test it. You do not know that you're right." "Yes, I do. People here where I live, they won't pay that." You do not know that. You have never tried. 

So let's just get data instead of speculating. That is not worth it. Not one ounce of your energy should be spent on speculation when it comes to your business and your rates. Your energy should be used to get data and make decisions. Period. Speculating doesn't do any of that.

And also speculating what that does, again, anytime you speculate on what will happen and the psychology behind it, and what will people think, what will people say, what will people do, will they go down the street? Will they…? All of that needs to be set down, and then we need to come from a more logical place, objective place when you look at you, your experience, what you bring to the table, what you care about, why clients should hire you, and the value that you and your firm provide to your clients. 

When you do that, then what rate do you think makes sense given where you have been? If you're going to make a jump, what should you make it to? What number would you say? 

 will tell you, when I work with people, it's usually a jump of at least $50 an hour when they're hourly. And I even do this when I'm checking for if someone is flat fee. When I am checking to see, I'll ask for a few different matter types where they're not positive that they are profitable on those flat fees, and I will put up on the board. I will just start asking, "Tell me what happens first and who it is." And they tell me. "How much time do you think that person spends? Do not undercut." And so they'll think, they'll think, they'll give me an amount of time. Great.

And I'll do that all the way through from start to finish on the matter, and then I know what each person who's involved in that, what their rate is. I will add up all the time, and I will see what that fee should be and see if there is even there. And it shouldn't be, again, it shouldn't be perfectly aligned. It shouldn't be a perfect margin. I'm just doing that to check and make sure that they are not losing money on those matters or that they're not just breaking even on those matters because that also ultimately means you're losing money.

I do all of that, and so then I'll check it again with the new rates we decided. So I do work on this with flat fee, but I'm going to really keep talking about hourly, and hopefully you understand why based on what I just said. 

$50 an hour is usually the minimum that it would be raised. I don't really see a point in raising it $25 an hour unless they're already at the higher end, and it's like, "You know what? I need to get out of this work more. I need more work to go to my associates. So I am going to bump it up. People can pay that. I do think I'm already at the top of my geographical region," which, again, sometimes they're wrong about that, but I can tell if their rate is $550 or $600, then bumping it by $25, I'm fine with that.

They'll end up bumping another, they'll keep doing that, but I'm not going to fight so hard on that because the business isn't losing money at that rate typically. When we're talking about $350 an hour, it's very difficult for the business to get ahead, which means, by the way, owners, it's very difficult for you to get ahead. 

Also, there's something else I feel like I should say right here. I'm thinking of specific people who they want to bring home a certain amount every year. And with what they're charging, they make that so difficult on themselves. It's crazy and maybe impossible or maybe means that they're just sucking everything out of the business to be able to take home their minimum baseline for themselves and for their families. It shouldn't have to be like that, guys. It shouldn't have to be like that. 

And that's another thing that I'm looking at, and remember, when I'm working with clients, I've got the whole picture. I know them well. I know what matters for them to take home for their families and for their lives and what they're okay with, what they're not okay with, given where they are in their life. I know about their team and what they're paying their team. I know their overhead. I know their net income. I know everything about this business. I know where they're from. I know what size of city or town or where they live. I have an understanding of that. I really do have a whole picture. 

When someone is telling me, with all their experience, that they are charging $350, I don't care where they are. I know I'm going to tell them to go up because $350 anywhere in the United States for the level of experience that you have, and as a business owner in your firm, it's very difficult to cover you and what you likely want and need to take home at that rate.

It's almost like, which I have seen this too, you hiring somebody for close to $200,000, say all-in cost, $200,000 for an attorney, and you're putting their rate at $300 an hour or $350 an hour. What on God's green earth? How do you think that's going to work? They are going to have to work so many hours in order to make that okay for you and for your business to pay for that. 

Now, depending, I do have one client that they're getting close to $200,000. It is where they live. That is what was required for this rate. I've been a part of this process for a while, and they have been looking for a long time. This is a specialized role. $200k is about what it takes, all-in cost, to get an attorney that they need in their firm. Now, who they ended up hiring doesn't have a ton of experience, but because of their background will likely learn very quickly and will get up to speed very quickly.

So initially, the rate is lower. Initially, the rate is $350. And the hourly requirements are really high. Also, that's sort of the culture within that practice area specifically and for the city that they are in. This is not a big deal. And actually, I think it's less hours required at my client's firm for this associate than it was where they came from.

But I'm telling you that only works if you have a lot of hours, which I'm not going to do the math right now to figure that out, but you have to figure out, you have to make sure that they three times what you pay the producer, all in cost, they have to bring that through the door, three times. Now, if you're flat rate, this is a little different with how you look at it. I'm talking about hourly right now.

So three times the producer all-in cost has to come back through the door. So that's in this case, $600,000. So $600,000 for someone you're paying basically $200k all-in costs per year. So $600k is the floor, the floor, not the goal, it's the floor. So $600k coming back through the door. Now divide that by $350 an hour. That's the number of hours the person has to do in a year. You do have to look at this, but for someone experienced, I'm talking about you as the owner more than I am about associates.

This conversation usually comes down to me and the owner about their rate. Their rate is too low for what they are bringing to the table for the clients. It is too low for the value that they bring. It is too low. And honestly, with that kind of experience, most of the time you can move more quickly on matters than someone who has less experience. So yes, while the rate is higher per hour, you usually don't have to spend as many hours doing the work it takes to get the result that you want to get for the client. So that's another thing to keep in mind.

So what's in my head, this is sort of, there's just so many tentacles in my head of things to talk about within this topic. And what I really want you guys to understand is there is no good reason to undercharge. You may think you have one. You are wrong. There is no good reason to undercharge. Not one.

If you live in a small city or a small community and you are charging $350 or less, and you have a ton of experience, you have got to look at that. You need to go up to $400 minimum, minimum. I'm telling you, test this out, right? I don't want you to just, you don't have to run blindly in. I actually don't like setting people up for that. I want them to really understand what they're walking into. I want them to play it out to the end. But I'm telling you, I have not worked with anyone yet where that didn't end up making sense after we experimented, et cetera.

I guess maybe that's what I should say is I'm not going to give you the directive to go raise your rates to $400, although feel free, because I've done all the research. I've worked with clients on this. We have done experiments, and it never falls below $400 for this level of expertise that you are bringing and the value that you're bringing. It never falls below $400 that we never see people fall off to an extent because they don't want to pay it, clients fall off to the extent that it negatively impacts the business. It doesn't happen. It's like everybody's fear, but it doesn't happen. 

Run your own experiments. Don't just take what people tell you to do and go run and do it. Run your own experiments. That's fine. But I want you to know that to me, that's the floor. I don't care where you are. That's the floor I would test. There are many times it's not the floor. It just depends on a lot of things, right? But $400 would be the floor that I would test with a client. And when I have tested that floor, I'm telling you, the fears that everybody thought were going to happen don't happen, and the rate can stay there. Period. 

Now, I have a client who is in Middle America, a small city in Iowa. And same, had this story, right? 20 years. This is a litigator, 20 years of experience, so good at what they do. And the rate that they have been charging for years was $350 an hour. Okay. So we start going down this path. We start talking about you've got to raise it. They have associates. They have paralegals to do the work that can be done by a paralegal, that can be done by an attorney, they have associates. 

And so I was pretty adamant, like we've got to raise this. Very nervous. Client was very nervous to do this, and I said, "Just, we're meeting again in three months. Do it for three months." So the rate was raised to $425. After the first month, I got a message on Voxer, we use Voxer for like real-time communication, asynchronous communication, but it's like a direct line to me and my team.

And they got on and said, "Okay, well, I've had three potential new clients this month, and two said no, and one said yes to that rate." Now, they don't know for sure why the other two said no. Maybe it was the rate. We don't know. But two said no, one said yes. And they said, "I think we need to bring it back down." And I said, "Do not do anything. Do not make a move. That is not enough data for us to make have any sort of look at what the truth is.

So do not make a move, hold the line, and let's talk at your next retreat and see what happened. And then you can make a decision from there. But here's the other thing I said, which is really important. And I want to make sure that we, that I make this point here. When you decide to raise your rate and do an experiment with it, which I'll talk more about that in just a minute.

When you decide to raise your rate, you cannot get shaky or get bashful when it comes time to say your rate. Because energy is everything. And people will sniff out very quickly if it feels like it doesn't, if you don't feel confident about it, why would they feel confident about it? If you have a hard time, if you swallow in the middle of saying what you are trying to say, which is a clear sign of nerves, then they're going to feel that from you. They're going to notice it. And even if it's unconscious or subconscious, it will be noticed. And it doesn't mean they're going to say no, but give yourself the chance to really get a yes. Like really stand on your own two feet for the rate that you are charging. 

Because no one that I work with to set their rates appropriately for what the value that they bring those clients, no one that I work with, I'm never suggesting that it is so high that we're not sure if it feels too high for, like I don't know if it's too high for the market. And but I know we need to take a step up. We need to level up.

So, the first level up is usually something that is for sure within the realm of it reasonable considering what this attorney is bringing to the table. So, there's zero reason to feel nerves. Also, it is an experiment. And you only came to the decisions you made through really looking at things through more of an objective lens and less subjective lens, which is always a good thing. And so because you did that, you should be able to stand on two feet for whatever rate you put yourself at.

And when people, when you get a little quiet when it comes to the rate or you speak too fast when it becomes to the rate, like whatever your energy is, you got to clean that up. And if that means before you get on the consult call or whenever you're going to have that conversation with the potential new client, then you have got to remind yourself before you get on that call of the truth of the more objective perspective that we took to get to that rate and make a decision on, let's do this for the next three months.

You've got to remind yourself of all those reasons. You have to remind yourself of the experience that you have. You have to remind yourself of this amazing firm and how much it cares about the clients, about how efficient you care about being, about the value that you bring to the client. That is what the rate should be set on. 

So, remind yourself of that if you are a little bit nervous to say what the new rate is, which is very normal and very human, but you're going to have to recognize that if you don't sound calm and confident when you're saying your rate, something is going to translate to that potential new client that you didn't intend to. So calm and confident, that's what you're looking for when it's time to tell them what it costs.

Let me just talk about how to raise it or just give you some thoughts about how I typically have these conversations with my clients when they are going to raise their rates.

First of all, I have them place something out all the way out to the end. I know generally, because I have all their data, about how many new clients they gain every month. And I play around and say, if we raise your rate by $50 an hour or by $75 an hour for new clients, by the way, we'll get to the clients that you already have, just for new clients coming through the door. Let's say half of them do not sign up with you and half of them do, which would mean there's a smaller conversion rate from your potential new client to client, that conversion rate is going to be smaller. 

So, if you have half of the number of clients come in every month that say yes to your new rate, then when you do that math and play it out till the end, helping you see what it means for the top-line revenue of the business. And you know, when we play around with these and say, okay, if you have, if 25% fall off, then you end up with this amount of revenue per month on average versus if you would have stayed at your old rate and everybody would have signed up, your normal amount, your average new matters that walk through the door, that it stays the same. 

Okay, so then what's that revenue? And you compare. And you start to see how fewer clients don't mean less revenue. And that is all because of average revenue per client or per matter or per hour. But average revenue in any business matters a lot. And looking at that matters a lot. Because the lower the average revenue per unit, whatever unit you're going to look at, so per client, for example, or per hour, for example, the more volume you have to do in order to attain a certain level of revenue. If you want to hit that same level of revenue, but your average value per unit, per client or per hour, is higher, then you need fewer clients in order to reach that revenue level.

Now, I know this is sort of common sense, but people don't actually play these scenarios out. By the way, you have AI that can help play these scenarios out with you. It's easier than ever right now. But when you play these scenarios out, you realize it isn't as risky as you think to raise your rate. 

So, doing that work is worth it because it helps you become more objective. It helps you get facts, not feelings. It helps you look at different scenarios. If this, then that. And that can help you feel more confident about raising your rate. Once you play your scenarios out all the way to the end and you look at things from different angles, meaning, you know, if I get the average number of new clients that I have been getting every month paying my current rate, this is what it means. If I get 75% less, if I get 65% less, if I get 50% less new clients walking through the door, what does that, but it's at my new rate. What does that mean for my revenue? And when I figure that out, really am I at a loss? Or am I very similar or the same?

And in some cases, what you'll find is you'll be ahead, depending on the rate that you're raising to and the difference between your old rate and your new rate. Now, once you decide, you look at the data and you say, okay, I'm going to raise it by $75 an hour and/or $50 an hour. Okay, which by the way, you don't have to do one of those two. I'm just using that as an example. You could do whatever you think is appropriate. And for some of you listening, based on where you are. And I'm afraid you guys are going to misconstrue some of the things I'm saying. So, for example, what I said $400 is the floor. But if you're at $375, raise it to $425 as a minimum. Like, don't go with these small increments. Just raise it by 50 bucks or more, at least 50 bucks an hour. 

Okay, so when you do that, then it's time to put things into action. And so what that will look like is that you need to update your fee agreements for the new clients coming in. Make sure you're set and squared away. That's usually not that heavy of a lift. So, do that. And then start offering the new rate. Also, if you want to push yourself, if you know you'll sit on a to-do and you'll mean to have somebody in your firm adjust the fee agreements, but it's just a to-do that's going to stay on some list somewhere, then just have a consult and quote the right thing. And then you guys have to do it real quick, send it over, right?

But start raising your rates and start saying the new rate, hourly rate. Put this into practice for three months minimum. I would say three to four months is okay enough of a data set. You can go longer. Longer is better, but don't go shorter. It's not enough. Don't go shorter. Put this in as an experiment for new clients only and just watch what happens. But make sure you're managing your energy so that you are not coming across a little soft or a little meek or a little shy when it comes to your rates. You need to be calm and confident. 

And so if that means you need to practice, practice, practice saying it out loud, practice saying it while you're driving in your car, practice saying it so that it's not the first time you're saying it is in front of a client and you do have nerves and you do wonder if this is too much money and you do, like you're in your head about all of this. You need to practice beforehand.

And again, have reminders before you walk into that consult call of why this is true, why these rates are what they are and why you've raised them to what you've raised them. Stand on your own two feet with it. Say it calmly and confidently and then see what happens. Just watch what happens.

And then you start to track what your conversion rate is from consult to new client and see if it dips significantly enough to affect your revenue in a negative way. I really mean in a negative way. Not just affect it a little bit. Like, is it proving to be problematic? And if it's proving to be problematic, before you just lower it down again, you need to ask yourself, am I showing up the way I need to show up? Am I, meaning in the consults and with energy? Am I organized? Is there anything off about the way I'm approaching this? Check yourself first. Look in the mirror first before you just kick your rate back to something. 

And I'm saying this, it's like, God, I've never had anyone needing to kick their rate back to something. I just haven't. So, I don't know what that scenario would look like. I really do want you to first consider that it's you as the problem and not your rate is not the problem. I want you to lend your thinking that direction first because I just haven't had that happen. And I'll be honest, you know, if that ever does happen, I would love to do an episode on it and what the factors were and how we determined, yes, it was the rate. And so we backed off a little bit, but it hasn't happened yet. It hasn't happened yet. 

Okay, so let's say you do this experiment with new clients only, and then the next thing is to figure out, like, let's say it's working. Everything is okay. Your revenue is staying right where it should be or more than what it was prior to you raising this rate, your top-line revenue. And which happens a lot, by the way, because people think it's going to dip by 75% or 50% of less people are going to say yes to them, but it doesn't work like that.

So what ends up happening is like 95% of people say yes, in terms of the same number of new clients per month is still happening even when you raise your rate. And so then you're making more money. Your revenue is up with the same number of new clients, which is awesome, which is awesome, because that's the whole reason I'm asking you guys to raise your rates is because you need more breathing room in your firm. The money that comes through the doors, the producers has to pay for everything in the firm, not just cover who's doing the work on the firm.

Having a short-sighted view about the purpose of that money coming in can really hurt you. The purpose of the money coming through the door is, yes, to pay for the work being done and the rest of the overhead of the business and for there some to be left over because that's healthy in a business. And if the money coming through the door can't do that, the business is going to feel strained. It's going to feel suffocated a bit. Things are going to feel too tight. And this is a lever you can pull to alleviate. You can alleviate that just with this one lever, but it's one lever of a few that you can pull in order to get a healthier business with margins that are healthier than what you've had previously. 

Okay. So when it comes time to, you've run the experiment, it's going just fine. So then you need to raise your rates with your current clients. Now, I've had different people go about this different ways, but I would set a date in the future that feels reasonable. It seems to be two to three months down the line. I would send a letter soon letting your clients know that your rate is going to be increased to this amount.

And if there are a couple of big clients that give you a lot of work every month and you for whatever reason, you feel like it's going to be a problem. I've had a couple of firms say, I'm going to raise you, but I'm not going to raise you all the way to the rate that new clients coming in are paying us. And you can give them a bit of a break, but you're still raising it, right? So that's something else you can do. That's only happened twice in the history where it really felt like that was necessary to the owner. And, you know, that's fine. The owner, the owner gets to make their decisions for their business. I'm not going to fight them at every turn, right? 

So, if that's something you want to do, you can do it. My whole point here is stop undervaluing yourself. Hold your chin up high, stand strong on two feet. Look at you. Look at your experience. Look at the value you're providing. And truly, what you offer to your clients is worth more in many, many cases for many, many of you listening. It's worth more than what you are charging. And that has got to change.

And until it does change, you are going to have a difficult time getting ahead in your own business. You're going to have a difficult time paying the salaries you want to pay your team, giving the raises that you want to give, getting something for your office space, investing in technology that's going to make everything better and smoother, being able to take home what you want to take home as the owner.

All of this matters a lot. It seems like it wouldn't make that big of a difference, but you would be surprised what kind of a difference it makes when you raise your rates by $50 or more. And again, not the $15 an hour, $25. No, just raise your rate. And when you do that, the ripple effect from that is huge. It is huge. So, do not underestimate it.

To give you a concrete example of how this math plays out. The client I was mentioning before that we had some conversation on Voxer and I was like, do not lower that rate yet. They went from $350 an hour to $425 an hour. And on average, 1200 hours a year. So, when you do that math, that is $90,000 difference, same number of hours, but the new rate. It's $90,000 difference. And I know the ins and outs of this firm. I know under the hood of this firm. That is going to help immensely, immensely.

So, and that's just one person in the firm that we're talking about. It's just that owner. So that's how it can play out using that scenario that I already previously mentioned. So play yours out. See what you think. If you raised it by whatever to whatever number based on what I have said here on this episode, sit down, work with different scenarios, see what it would look like when you play this out to the end.

Use AI to help you if you want to. We help our clients with it for sure. And I think we do that efficiently. And also we help them work through the psychological aspects, which you can use AI for too, but you got to push it to do that. I just really want to encourage you to take this step. And hopefully that math shows you why you should.

Imagine what your firm could do with the $90,000 that it's not able to do right now. This firm that I'm talking about, they couldn't hire who they needed to hire that was a non-producer, you'd be able to do otherwise, like the firm I was just telling you about. They didn't feel like they could afford a non-producer in the firm, an administrative assistant that they needed. And now they'll be able to, plus some to the profit margin in the end. 

These things make a massive difference to the business. And again, I don't just walk in and think about every client we're going to raise rates. There's a percentage of clients I don't even, I don't touch their rates. That's not the first thing. It's not the first lever to pull at all. At some point, they do need to somewhat consistently, right? Year over year, but that's not- I don't walk in with that agenda. I walk in looking at what makes sense. And I'm telling you all, a lot of you listening to this, if I could get under the hood of your business and see you for what you provide clients, what you are charging them, your clients does not make sense.

And the only reason that you're staying at the rate you're staying at is because you have beliefs and assumptions that are untested. You think they are facts. You might think they're facts, but you don't actually know that they're facts. You haven't tested the market. You have to go to market to test these things and see what you learn and adjust from there.

You all deserve this. I don't ever talk to somebody who I feel like doesn't deserve to raise their rate. I'm looking at the full picture and it doesn't make sense to me. And so I will flag that. We will talk about it and we'll look at different scenarios, and then we'll talk about how we're going to move forward for three months if they're really nervous about it.

Some people aren't nervous about it at all. They don't need a test. They're just going to raise their rates. So if that's you, do it. You don't have to do this experiment. Really, this episode is for those of you that feel so much trepidation about raising your rates to something that when you are looking objectively, you really should be charging. And if you are that person, if you feel paralyzed or there's too much fear of something happening if you were to raise your rate, then do an experiment.

If you do not have that fear and you're sitting here thinking, yeah, I should be raising my rate. Okay, Godspeed. Go do it. You're going to do great. You're going to change your business meaningfully. Get out of your own way and make this an afterthought. Just move right along. But if you are feeling a ton of fear, then do confidently move through an experiment and see where you end up. But y'all need to be changing what you're charging. I'm telling you, so many of you, so many of you. 

All right, everybody. Listen, I almost didn't do this episode. There's episodes that I have like this where I do notice trends and patterns and I want to talk about them. And I think that you all will have limiting beliefs and barriers, internal barriers to making these changes and moving forward in the way you need to. And I with, it's like, I don't know what any barrier you might bring up. I think I've brought a lot of them up, but you do need to have data, and you do need to be objective. That's what I know. And all of you, I would argue to say like 95% of you who are undercharging, you're not looking objectively at your scenario when it comes to your rate. 

And also, the other reason that I hesitate to do this is because I've been talking about these scenarios where clients are charging, you know, $350 or maybe if they're in a large metropolitan area and they're charging $400 and they have more experience than someone down the street who's charging exactly the same, and in some cases more than my client. I'm like, no, no, no, no, no. No, no, no. Wait a minute here. Like, we're seeing what the market will bear. So there's that. And let's go test this out for ourselves and we need to be objective about what you should charge. Period.

So it's not just even though I'm using that the client and I've been saying a lot, $350 and having people jump their rate to $400 or $425. But when I'm working with people in bigger cities and they're undercharging, then it's maybe $400, and we need to go to $450, $475, right? So this is all relative. And I'm trying to meet all of you where you are, which is very difficult to do on a podcast episode, which is why I almost didn't do this episode. 

But I hope that my point is well taken. No matter where you are geographically, no matter where you are in your experience, like really just listen to what I said. And my hope is that what you can do is walk away and decide to look through an objective lens at your rate and make adjustments.

If you're nervous about it, run an experiment. If you're not nervous about it, move right along, right? You raise the rate and keep moving. I want to meet you all where you are and you all run the gamut. All listeners are, you guys are listening from all different parts of not just the country, but the world, which always shocks me. I love that, by the way. Hi to those abroad.

But just be objective, stop playing small, stop working from a place of fear, and making decisions from a place of fear. You are only hurting your business, which is only hurting you, which is also undercutting what you can provide your team members, which is also undercutting what you can provide your clients. Like, just get out of your own way and stop meddling with other people's minds on what they're going to think and how they're going to feel and what they're going to do. Just stop. Just look objectively, go off data, make some decisions, run your decisions, and then move on. Okay. I hope that helps.

All right, everybody. Thank you for tuning in and I'll see you here next Tuesday.

Hey, want to watch the video of this episode? Head over to Velocity Work’s YouTube channel. You’ll find the link in the show notes.

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