If you’re in business long enough, one thing is inevitable. At some point, you’ll need to raise your prices. Business owners are often afraid of making that change, worried their customers will leave and revenues actually decline.

The truth is, customers can weather difficult changes when businesses approach the issue with the customers’ needs in mind.

We’ll talk about three common changes that business owners may fear sharing with their customers:

You’re making a change to your prices or your pricing model
You’re phasing out a product or service
You’re making a change to your account management process

How to tell customers about changes

First, let’s look at best practices that apply to any change you’re making that affects a customer’s experience of your product or service.

Communicate in advance

Your customers may need time, both mentally and logistically, to adjust to a change. They might have to reconfigure their budgets, train their team on a new product, or modify their processes. At the very least, they’ll need to get used to a new idea.

Recognize that the change will impact your customers, and give them enough time to digest it and make decisions accordingly.

Be authentic

Don’t tell a client that your costs have gone up and you have to raise prices if that’s not what’s going on. If you know you’re offering greater value now than you did a few years ago, call it what it is.

With the work we’ve been doing in the market, we’ve realized that the price point should be closer to $10,000 based on the impact that it has on your organization. And other customers are paying $10,000 now, so we’re going to raise your rates to $10,000 on July 7th.

Most of the customers are going to say, Yeah, your stuff is pretty valuable, and we appreciate that.

If you think you’re offering a good value at $10,000 rather than $5,000, and your customer disagrees with you — that’s really valuable information. You want to know that because it means you have other issues.

Make it palatable

One of the companies I worked for had integrity as a core value. They provided an example of what integrity looked like for them: “we will offer no deal that we wouldn’t accept ourselves.”

People understand that sometimes you need to raise prices for your own business model to make sense. You also need to put yourself into your customer’s shoes and come up with an approach they can accept.

If you have a long-time client whose pricing is way out of whack (not unusual for your earliest adopters), offer to migrate them over time.

We’ve worked together for a long time, and I haven’t raised your prices. Your rates are significantly lower than my other clients. Given our long-standing relationship, I can spread the increase over the next four months.

See: How Much Authenticity? When to Make Your Mess Your Message

Increasing your prices

We are often generous with our early customers as we’re trying to grow the business and establish our product-market fit. As we become a more mature company and better understand the value of our product, we often need to start charging more for it.

You may be in that position and delaying because you’re afraid the customer is going to leave. Even if they decide to stay, they’ll be less happy.

Remember that a fear is an emotion about something that hasn’t happened. In almost every price increase I’ve seen that was done in a thoughtful way, the customer accepted the change. It was more of a no-brainer for them than it was for the company.

I used to work with the owner of a fitness studio in one of my CEO peer coaching groups. He wanted to expand, but he couldn’t yet afford to do it. He knew he needed to raise his rates to be competitive with larger fitness studios in the area and make his business more scalable. He was afraid. He couldn’t afford to lose customers, and he didn’t want to have to market for new ones.

His peers sensed he was stalling and pushed him into creating that price increase. The studio owner let all his customers know that the prices would be going up on a specific date.

What happened? Not only did he not lose customers, people now perceived the studio as having more value — comparable to the larger fitness chains. And membership grew.

He was able to open a second studio.

See: How to Build a Multimillion Dollar Business: Stories from Entrepreneurs Who’ve Done It

Changing your pricing model

Sometimes you need to change the whole pricing model. You used to charge a flat price, and now you’re going to base it on volume. Or you used to charge per user, and now you’re switching to enterprise licensing.

Pricing model changes can be even scarier than price increases because you’re communicating to the customer that your value proposition has changed. And that may prompt a customer to reevaluate the value proposition as well.

Thinking about it from their perspective can help you sell it.

A company we’ve worked with creates project management software for the hospitality industry. Their previous fee structure was one-time fees per project. That created big spikes and big dips in their cash flow. They wanted more predictability and decided to switch their model to a monthly flat fee, and become more consistent with other SaaS business models..

When the company pitched it to their clients, they did the math for them. Over the course of the year, the new pricing model wouldn’t really change their billings. Instead, it would spread them out, make payments easier to manage and keep track of.

It made sense for both the company and for their clients.

Customers aren’t always so ready for the change, though. I worked with another company who had their customers on a SaaS monthly licensing model, a fixed fee for a certain package. When they introduced a new product that was much more impactful, they changed the pricing model.

They wanted to shift from a fixed fee to a percentage of the revenue the software processed for their customers. The company explained the benefits to their customers: we only grow when you do.

Unfortunately, many of their customers had an emotional response to the change. “That sounds like a tax,” they said. Some initially flat-out rejected any deal like that.

The company stood their ground. They might’ve lost a couple of opportunities — customers who are going to stay on the old product and not migrate. But they offered some of them compromises, like starting low and gradually increasing over the course of a few years.

Though some customers balked at the change, the company knew they’d approached the situation with integrity.

Compare that to my experience with database company Oracle back in its 1990s heyday. When I was at CDNOW, Oracle changed its pricing model on us every six months. Site-based license, or user-based license, or dataset size license, or by the number of CPUs in your server. It was clear that they were mainly trying to create confusion and mask price increases.

I told them what I thought about their whitewashing. They sent the regional VP of Sales to convince me the most recent change was in my best interests, despite its doubling our cost.

I was prepared by having our PR department draft up a legitimate press release announcing that CDNOW was moving from Oracle to Sybase, their biggest competitor at the time. I hadn’t had any such conversations with Sybase, but Oracle didn’t know.

After the VP of Sales and his entourage talked in circles for a bit, I handed them the press release from my desk. They read it, and the blood drained from their faces. They asked if it was real.

I said, “It’s up to you.”

I’m not saying they shouldn’t have been afraid to change their prices, but the way they did it was unfriendly and lacked transparency and authenticity.

See: Expanding Your Business Without Expanding Your Resources

Phasing out a product or service

You’ve learned a lot about your business. Your product is evolving, and some of your clients are on a product or a program that you’re contemplating as legacy now.

You have two options.

You could leave the legacy option there.

We know it’s important to you. We’re no longer investing in it. We’ll keep it up and running for you. We’ll fix any problems, but we’re not going to be enhancing it.

Or you could announce that you’re sunsetting the product on a certain date.

On August 31, we will no longer operate this program. We understand that it’s been valuable for many of you. We’ll offer a 6-month migration package for customers who want to move to our new premium program. For those who don’t want to, our partner company will accept new customers at your existing contract price for one year and will help with your transition.

You communicate in advance. You offer a migration path, a referral partner, or an alternative solution. You think about it from the customer’s perspective and make it palatable for them.

See: Build for Sale or Build for Growth

Changing an account management structure

Early on in your company, everyone had the CEO’s phone number. Now you need people to stop calling the CEO directly and start contacting their account manager instead.

The CEO will likely be having this conversation, and they’ll need to follow all the same best practices. Tell the client in advance and be authentic about it.

We’ve gotten really big. I’m not in the day-to-day operations anymore. In all honesty, I often don’t know what’s going on in a specific situation because I’ve successfully delegated that to my vice presidents. It’s really inefficient for us when you call or text me.

If you have to, make it more palatable. Some of your existing customers may have a long-standing relationship or more intimacy with the CEO. Be willing to adapt your process to make it more palatable for them.

Say one of your early customers has a lot of klout, and they don’t want to deal with the account manager. Maybe you just move them from the CEO to a vice president. Give them the Vice President of Customer Service’s direct number and ask them to reach out to that person instead.

That way, they know they’ve been heard and that you’ve considered what this means to them.

Final thoughts

What if your fears actually are correct, and the customer reacts in a negative way?

Maybe it’s time for an honest question: Is this a customer you really need? While you have an emotional connection to your early customers because of how instrumental they were in your ability to get to where you are today, you may have grown apart. Are you no longer a fit for one another? Is the relationship no longer mutually beneficial?

Occasionally — not often — your fears are founded, and you deal with a difficult situation. You’ll make it through that. You probably have practices in place for dealing with irate customers, and now is the time to employ them.

Sometimes there are ways to involve your customers in the decision — through surveys, focus groups, customer advisory panels. The opportunity to provide feedback may help them feel like they’ve been part of the conversation.

There’s a big caveat here, though: it has to be authentic. Don’t create a false narrative about how all the customers wanted some big change just to make them feel good about it. And remember that if 75% of the people you surveyed said they wanted something, that remaining 25% probably isn’t going to be excited about it.

We work with clients to make difficult (and necessary) decisions that help them reach their goals. How could we help your organization? Contact us to learn more.