Raising Fees in the New Year Without Losing the Room

Every December, a large number of UK service businesses make the same decision without ever recording it. They decide not to raise fees. The reasoning is rarely stated plainly, because it does not survive being stated plainly: the conversation would be awkward, one or two clients might leave, and the numbers can probably be absorbed for another twelve months.

That is a choice with a cost, and the cost compounds. Salaries, professional indemnity cover, software subscriptions, premises and employer National Insurance have all moved in recent years. A firm that holds nominal fees flat is accepting a real-terms cut and asking its team to deliver the same standard of work for less. Eventually the shortfall is paid for in something other than money: in recruitment, in morale, or in the quality of attention a client receives.

An apologetic increase costs more than a confident one

There is a persistent belief that the tone of a price rise determines whether clients stay. In practice, uncertainty does far more damage than the number. A letter that opens with three paragraphs of throat-clearing, hedges the figure, and offers an unsolicited discount signals that the firm is not sure the increase is justified. Clients reasonably conclude that there is room to negotiate, and they negotiate.

A plainly stated increase, explained in a sentence or two and delivered with a clear effective date, produces a small number of difficult conversations and very few departures. The firms that struggle are usually those that have not raised fees in five years, so the adjustment arrives as a shock rather than as a habit.

Segment before you write anything

A single letter to the whole client base is a mistake. Three broad groups are worth distinguishing.

Anchor clients. Long-standing, high-value, low-friction relationships. They are the least price-sensitive and the most sensitive to being taken for granted. A modest, well-explained increase here is normally accepted; a clumsy one is remembered.

Core clients. The bulk of the book. Standard increases apply, ideally on a predictable annual rhythm so that the letter is expected rather than received as a surprise.

Legacy and low-margin engagements. Work that has not been reviewed in years, often fixed-fee, often consuming disproportionate time. These need a decision rather than a percentage: re-scope, re-price fundamentally, or exit. Raising a legacy fee by three per cent simply delays the real question.

Before setting percentages, calculate the realised hourly rate on your ten largest engagements over the past year. The results are frequently surprising and always useful ammunition for internal conversations.

Timing the letter

The first working week of January is usually the right moment to send — the inbox is being cleared, decisions are being made for the year ahead, and the message lands before the quarter gathers pace. The effective date, however, should not be immediate.

Check the notice provisions in your engagement letters and terms of business first. Many professional appointments require a set period of notice for fee changes, and retail or consumer-facing arrangements attract separate considerations. Where contracts are silent, thirty days is a defensible convention and ninety is generous. An effective date of 1 April is common for retainer arrangements sent in early January, and it gives clients a full quarter to plan.

Quotes should be clear about VAT, and where a client is not VAT-recoverable the practical increase is larger than the headline figure. Say so. It is better that they hear it from you.

Scripting the letter

Four short paragraphs will do.

1. What has changed — one or two sentences, factual, no melodrama.
2. The new fee, stated as a figure or a percentage, with the effective date.
3. What remains the same — scope, team, service standards, response times.
4. An explicit invitation to discuss, with a named contact and a telephone number.

Nothing else. No apology, no lengthy justification, no comparison to the market. The letter is a notification, not an argument, and treating it as one keeps it short enough to be read.

The follow-up call

Give it five working days, then telephone. Not email — the clients most likely to leave are the ones least likely to reply. Whoever holds the relationship should make the call, and should be prepared for three responses.

Acceptance is the most common outcome and needs no more than a sentence of thanks.

Challenge on value is an invitation, not an attack. The correct reply is to ask what would make the increase comfortable, then discuss scope — the frequency of meetings, the depth of reporting, the level of Partner involvement. Adjusting scope is a legitimate response. Discounting the same work is not, because it teaches the client that the first figure was not real.

A request to leave should be handled with complete civility. Offer a clean handover, agree a final billing date, and keep the door open. Former clients return more often than firms expect, and they return to whoever behaved well on the way out.

What to measure afterwards

Two numbers matter at the ninety-day mark: retention by segment, and realised revenue per client against the intended increase. A third is worth watching quietly — the number of hours released by exiting genuinely unprofitable legacy work.

If retention holds above ninety per cent in the anchor and core groups, the exercise has worked. If a handful of legacy clients have gone, that is usually not a loss. The point of the whole exercise is not to raise every fee. It is to make sure that the only price your firm holds flat is one it has deliberately chosen.