How do I price my agency? What do I charge for my consulting services? How do I charge what I’m worth? How do I price my proposal so that the client wins and I profit? If you’ve ever struggled with pricing strategy, read on.
I’m going to just walk through four high-level pricing, strategy rules. First, understand that pricing, that value, and fairness, it’s all subjective.
Usually, the price is in your head. Meaning the struggle you have is with your internal belief of what you should charge based on knowing that you are providing a ton of value to a client.
If you’re not providing value, let’s rewind. Before you work on pricing, figure out how to give value. If you know you’re going to give value and you know you’re going to help that client, then the pricing is in your head. It’s a mindset thing.
Beyond that, there are four pricing strategy rules I want to help you with and walk you through.
The first rule is to customize your pricing. There’s a quote by Ronald Baker, he says:
“The most common pricing mistake among professional firms, (which is what you are if you sell agency or consulting services), alongside under-pricing is pricing the service and not the customer.”
All too often, people come to me and they ask, “Joe, here are my packages. What should I charge for this?” Or “Joe, I have a client and they want this service. What should I charge for that service?”
From these questions, I already know they’re approaching this in the wrong way. You want to customize your pricing by pricing the client, not the service.
I know that goes against the grain what you might think, but that’s why you may not be making a lot of money as well.
Always price the client, not the service.
The easiest thing to do is to charge everybody the same price for the same exact thing, for the same service, but there’s no greater mistake that you can make in value-based pricing, which is the model I teach in my Marketing Agency Academy; a value-based pricing model, not a model based on what package or service that you sell.
Some people are willing to pay more for your work, for your project, for your services, and your job is to let them. The way you do that is to always price the client, not the service.
I’ll give you an example. For several years, for three years, we primarily sold and marketed to restaurants. From about the end of 2014 to 2016-ish. For the exact same amount of work that we would do for a restaurant that we would do for another client, maybe a $50 million professional B2B client, we would charge three or four times more for monthly retainers than what we would ever charge for a restaurant that had a smaller budget. A restaurant is a smaller client, and we priced the client, not the service. Yet, we provided the same amount of service.
We’d sell, for example, Facebook ad management and ad campaign and creative services to a professional B2B service company, we might start with a $3-4,000 retainer. For a restaurant client, it’s a $1200-1500/mo. on average for our retainers, which is what the right size restaurant clients can afford to pay. That’s for about 80% of the restaurants out there unless they’re a restaurant group – in which you can charge more to manage multiple locations.
Keep in mind for different clients, different companies, the return, the value you’re going to give for the same amount of effort, is more. If you’re going to help somebody sell a higher ticket product or service, and you’re running ads for them, for example, and they get a lot more monetary value and revenue growth from your efforts, you can charge more for that.
If you’re talking about a local business that is only doing maybe $ 1 million per year and their average sale is $60-100, it takes a lot more quantity for you to justify charging a higher fee. So keep that in mind. It’s an important distinction. A lot of people don’t make it.
In a customized services firm, which was what I would encourage you to adopt the mindset of, where every engagement is truly unique, the value created is always different even if the output appears similar from client to client. For example, the output would be the services, the marketing services, we might render, but different clients are going to get different returns on their investments and so we’ll price that accordingly, so it’s fair on both ends.
I’ll throw this in here. There’s a concept called the minimum level of engagement, your MLOE. I always like to frame our pricing, if somebody says, “Well, how much do you charge?” I don’t throw out monthly fees usually. I’ll usually throw out a yearly engagement fee. So I’ll say, “Listen, for the year, our minimum level of engagement is approximately $30,000 in fees over the course of 12 months, spread out.” If you’re doing some math, that’s a minimum of $2,500 a month retainer.
Another way that you can frame it is particularly if you have a project consulting services that you offer, is you can say, “Typically our projects start at around $25,000.” We typically offer a 90 day, then a month to month commitment with our clients, but I would encourage you to be upfront and congruent with those fees and pricing anchor high, which we’ll talk about in a moment.
Remember, scaling is not adding more clients, it’s adding more revenue.
You don’t want to worry about always trying to get more clients. You want to learn how to manage your client churn, which means how do I replace my smaller clients with larger incoming clients? If that’s something you struggle with, and you’re not yet in my Marketing Agency Academy, then you might want to check it out.
I want to encourage you to move from being a productized service firm selling packages or bundled services to a customized service firm and you’ll start to be a lot more profitable. Believe me. You’ll thank me later.
To learn the next 4 rules, I invite you to watch my YouTube video I recorded on all 5 rules called “How to Price Your Consulting or Agency Services” below:
I’d like to hear your feedback, comment on the video, check out some of my free training programs, and I’ll see you on the other side!