104- Billing and charging your clients in a post-pandemic world

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In this episode of TheStrugglingBiz.com, we discuss some ideas and reflections on how to charge your clients in a post-pandemic world. And this will include the ideas of making up for lost revenues due to the sham-demic lockdowns, as well as any training you may have had to undergo and pay for to acquire new skills or keep your own skills and certifications current.

However, this idea is not new. We entrepreneurs go through this all the time, almost every year when we should decide on a price increase for our services or offerings or offers or proof-of-concept time and materials when we approach a client with a bill.

In order to see what the pre-pandemic world was like, I wanted to deliver to you a 9-minute episode from a prior podcast show that I had (which is now podfaded, but it holds evergreen content) which was called The Struggling Entrepreneur:

But today’s concept is different, as we have the additional costs which we had to pay to stay “open” and available for our clients, even though we may work at home in our entrepreneurial venture. And these include:

costs to get certified (if applicable);
costs to acquire new skills needed;
fixed cost of subscriptions for the business and skills;
costs that need to be recovered for time spent on proposals and RFP and RFQ documents for client in planning various big projects — especially when the proposals were either rejected or put on “hold” due to the lockdown status (that is, the client would not be able to confirm or move on them until later times, when the lockdown would be over);
overhead of fixed or variable costs that are needed to be paid in order to keep your entrepreneurship going (e.g., telephone, internet, product upgrades every year, etc.);
any “back-wages” that you feel should have been paid to you, if you were in the habit prior to the lockdown of taking your “salary” or remuneration from your gross profits;
any taxes that are still owed, regardless of lockdowns, and regardless of client and project and contract status;
any other filing fees for government requirements for your business;
and finally, you need to add in your normally project price increases for your business for the lost year of 2020;
the additional cost of sanitizers, masks, gloves and other PPP items to keep yourself and your equipment clean and virus-free;
the cost of education and your getting or updating your skills needed for your ability to deliver the customer solutions;
and so forth.

So the key question would be now: How to I “fix” or update my pricing structure for contracts for services or my offerings or products to recover from the lockdown losses?

One simplistic way is to add up all the lost revenue and see what that would be; then you would add up the additional charges due to the lockdown with no revenue, and you can quickly see the large difference; and then you can either divide that number by a certain figure, or you can raise your prices by a projected percentage (based on history of your revenues for quarterly projects, etc.) to get the new number needed for a price increase.

Now, because of the sham-demic lockdowns, this topic of price increases may be a rather sensitive theme to discuss with your customer when the project is either re-proposed or continued or resumed (if once started and put on “hold” at the customer’s request). And you have to find the way to deal with this topic, depending on the customer.

I, myself, dealt with a price increase situation prior to the year 2020, and so I was set with my new rates and did not have to go through the grueling situation of bad news to the client(s). But I, myself, will be charging in some way (for each client is different) to bill for the additional cost of my LEARNING THE SKILLS, as was said in the prior podcast episode from The Struggling Entrepreneur. It is not as simple as just a rate hike; instead, it must be handled professionally and gently to get agreement with each customer before blatantly announcing this as a general standard operating procedure.

But most of the clients are now getting used to paying for billing that includes a “pandemic surcharge.” Perhaps you can go that route, and it can be a slight increase. I would advise the clients that this would go into effect within X number of months from the time that you inform them. This can, at least, soften the blow for rate increases. Or you can create a proposal and include a section on post-lockdown situations for both TIMING AND PRICING. This will let the client know that you will need more time, due to education and skills requirements after the lockdown, as well as the new rates to be in effect. And most customers will probably be very understanding to this — after all, many of them are in business, themselves, and will probably have to resort to the same tactics (in fact, they may emulate you in your method, if reasonable and professionally courteous).

Also, there are some entrepreneurs that will win customer loyalty and become raving fans of their clients if the small business owner does NOT raise their rates, but accepts to swallow the losses. Case in point: Delta Air Lines did not raise rates and did not furlough or lay off anyone during an economic slowdown or recession — and that won them the ever-dying loyalty of their workers and their customers (that is, until they finally did go with the rest of the airline world and begin layoffs — which was described by their employees at that time as the “great betrayal” of their basic beliefs).

And so, you need to decide how you will make up for the “lockdown losses” and make up for not only lost time, but lost revenues in your future rates and prices. We hope that your decision will be handled professionally and have a successful recovery with your clients, your projects, your services and your products and offers — so that you can get back on track and become a successful entrepreneur again.

Thank you for your attention.