Annual price increases on agency contracts: how to apply them

Ask an agency when it last raised prices on active contracts. The most common answer is silence, followed by "that client is an old one, we cannot touch it". That old client is usually the least profitable in the portfolio, and the agency normally does not know it.

What not raising prices costs

A $6,000 retainer signed three years ago with no increase, against roughly 12% cumulative inflation and team and software costs rising at the same pace, is worth about $5,350 in purchasing power today. If the original margin was 30%, it is now near 15%.

Do that across five old contracts and the whole agency runs out of margin without a single wrong decision having been made. It only requires making no decision at all.

The root cause is contractual, not emotional

Increases do not happen because they depend on courage rather than a clause. A contract that does not define percentage, index and month turns the increase into an annual negotiation, and nobody wants to open a negotiation with a happy client.

The fix is writing it in from day one: an annual increase every January indexed to inflation, or a fixed defined percentage. From then on the increase is an expected notification, not a request.

How to communicate it when the clause exists

Sixty days notice, in writing, short, with no apology. Three sentences: the contract provides for an annual increase, the fee moves from X to Y from this month, scope stays the same. Do not invite a negotiation, inform.

It helps to mention what improved in the service over the period: new formats, more channels, richer reporting. Not as a defensive justification, as context.

How to communicate it when the clause does not exist

Then it is a negotiation, and it needs data. The strongest argument is hours: "the contract was scoped for 30 monthly hours, and the last six months averaged 44". That shifts the conversation from "I want more money" to "the work grew".

Offer three paths instead of an ultimatum: keep the fee with scope trimmed back to the original hours, adjust the fee keeping current scope, or phase the increase in two steps. A client choosing between options rarely walks away.

How much to ask for

Inflation for the period is the floor. But if the contract was mispriced from the start, or scope has grown, the floor solves nothing: it just freezes the mistake. In that case, reprice the contract from scratch using your current cost per hour and the real hours consumed, and use that as your reference.

A phased increase works well for large jumps: 12% now and 12% in six months lands softer than 25% at once, and the twelve-month result is nearly identical.

Expect to lose one

If you raise prices on ten contracts, one will probably leave. That is not a process failure, it is the process working: the one who leaves is normally the lowest-margin, highest-maintenance client. The gain across the remaining nine almost always exceeds the loss of the tenth, and the agency frees hours to sell better work.

The worst price increase is the one that never happens, and that is the default outcome when contract values and renewal dates are not visible in one place. Eluvie keeps that calendar in view so increases stop depending on memory. Before setting the new fee, run the hourly rate calculator with your current costs.