Agency Profitability from Dollar ONE: Your Scalable Agency Success Blueprint and how to boost profits with your Agency Pricing Model.

5 reasons to use digital marketing:

Why will businesses want to seek out your service in the first place? Keeping your vision focused on providing the solutions to their problems (not just fancy ad campaigns) will lead to the clients you want to have seeking out your services.

Remember to put yourself in the mind of your prospective customers when you are determining your agency’s strategy:

• They likely don’t have the bandwidth to achieve their vision within their own team, so they are relying on your processes to achieve their goals. Make working with you as easy as possible.
• You’ll get them a return on your investment, faster. Building an effective marketing team doesn’t happen overnight. Recruiting a new creative team (especially one that could execute the vision they have in mind) may not be feasible for them right now. 
• Their creativity is tapped out, and they are looking for new ideas. They are willing to invest in a creative process to spruce up the work they’ve been able to produce so far.  
• They want to see measurable results and need your help and expertise to see a return on their creative investments.
• They want to scale their business, and can’t do it alone. Your agency is better equipped to handle project constraints, and get the job done on time no matter what happens.

When a business owner approaches a marketing agency, chances are they’ve been sitting on their problem for a while. Remember, the better you get at understanding the root cause of their problems (and generating the solutions to solve them), the more successful your agency will become. 

Now that you have a better idea about the basic needs your prospective customers have, it’s time to get a little more specific. 

Out of the millions of businesses out there, how can you pick the RIGHT ones to work with?

How to secure high-ticket digital marketing contracts:

“Shiny object syndrome” is a common trap, especially for new agency owners. 

When you are eager to fill your roster with clients, it’s tempting to want to say “yes” to everyone.

But as backward as it may seem, the more you say “yes,” the more you are actually limiting your earning potential.

So why would you want to turn down a client willing to generate your agency revenue?

While it may seem counterintuitive, you will attract bigger and better quality clients by niching (or specializing) your service offering. Taking the time to analyze your skillset, align your work with your passion, and specialize your services will expedite your road to profitability.  

When you provide a niche (vs. generalist) service, you are selling expert knowledge and effective problem-solving solutions to your prospects. Instead of having to take a “winging it” attitude across wildly different types of clients that will come through your door,  you will have:

• The luxury of saying no. Instead, you are in control of your sales conversations and price. You’ve done the work before and know how to execute the ROI the prospect is looking for. You’re an expert at solving a specific type of problem. 
• A tried and true, seamless process that will result in a happier client, and less stress on your team. 

An in-depth understanding of the specific target market you are consistently working with. This is essential to creating the killer content your clients love to see.

Boosting Profits with Your Agency Pricing Model:

So you’ve picked a lucrative niche, have an impeccable reputation, and referrals are flowing in. That’s all you need to achieve scalable success, right? 

Not quite. 

The most important piece of the profitability puzzle is determining your agency fee structure. To do this, you need to choose the best marketing or creative agency pricing model for your business. Don’t allow yourself to get swept up in the worries of “what should agencies like mine charge?” You don’t need a full digital agency price list to decide what is best for your business. Instead, evaluate what will help you stand apart from your competition.

Your business is 100% unique, so you should be approaching your agency’s pricing with the same mindset. The expertise and creative process your niche offers should be the primary factors when choosing your pricing model. 

Imagine you saved up a year’s worth of salary to buy and import a new, foreign specialty car. Thousands of hours and months of waiting have built up the anticipation of this big purchase. After a few months of driving, it comes time to schedule its first service. 

Considering how much you value your new car, do you make an appointment at the cheapest mechanic you can find? Or do you seek out the only mechanic in the city who has experience working with your beloved car (even though it’s almost double the price). 

The same buying thought process applies to seeking out a marketing agency. Businesses who are serious about seeing the return on their marketing investment shouldn’t be seeking generalist agencies for their projects. This will result in frustrating longer timelines, who are costing them more in the long run. Cheaper always costs more.

No matter if you are a branding agency, digital marketing agency,  SEO agency, PR Agency, Social Media, or Video Production Studio, which criteria should you use to decide your agency fee structure?

1. Get into your prospective client’s mind and know your niche. They will also be asking themselves: “how much should my company be spending on digital marketing?” You need to understand their budget and service needs in order to get into the sweet spot. 
2. Choose the best creative agency pricing model that best suits your current agency structure and your potential prospect’s needs.  A newer agency will have different limitations than a tenured one, the same way clients seeking services will differ based on the maturity of their business. 
3. Productize your agency services, and control the way potential clients perceive your services. 

The Hourly Model: The most common agency pricing model

Historically the most popular of them all, the hourly model works exactly as it sounds: the client is billed for the total amount of hours logged for the project. 

However, running an agency doesn’t just include client work… 

The hourly pricing model typically doesn’t account for required administrative hours or business development. As your client base grows so will the amount of talent you’ll have to bring on (and pay for!!). More heads = more risk and eventually, agencies relying on this agency pricing strategy will reach a profit plateau and have a difficult time climbing out of it until they restructure their pricing model.

As a general rule, the emphasis of a project proposal should stay focused on the value the client will receive from the end result. Not the time it took to get there. This model is typically found when outsourcing content creation-type roles. 

The final verdict:

While the hourly pricing model may seem like the fastest (and easiest) way to ramp up operations, this mode will quickly lead to profit burnout. Avoid solely relying on this model if you can.

Project-based/ Fixed fee Pricing Model:

Agencies that are further along in their journey will likely have developed a better understanding of their niche, clear deliverables for the offer, and general time investment required for each service offering. Using a fixed fee model simply means they are charging a fixed price for a fixed deliverable (regardless of the amount of time or resources it takes to complete). 

A fixed-rate fee should be considered because:

• Specialized expertise means faster turnaround time (which translates to a larger profit margin win). 
• This model well supports a client’s ability to request smaller projects before committing to a wider scope (promoting overall client satisfaction and perceived value). This can also promote the development of the ideal, retainer-based model in the future.
• It becomes increasingly easier to scale (especially in comparison to the hourly model). The better you get at completing the project type, the more profit it will yield). 
• Fixed rates satisfy clients with clearly defined budgets. 

But what if the project runs into delays, or ends up requiring extra resources? When working with a fixed rate, additional costs, unfortunately, will eat into bottom-line profits. Clients may also be apprehensive of this pricing model, given they don’t have as thorough of control. 

Branding, content creation, SEO, and social media agencies will typically utilize this pricing model (or variations of it). 

The final verdict:

A fixed fee pricing model will enable more business growth potential compared to the hourly model but will require clear communication of the deliverable breakdown to clients when proposing this type of contract. Be prepared to be transparent!

Performance or Commission-Based Agency Pricing Model:

Only seasoned agencies should consider using the performance-based pricing model, as the money only comes from the results. You need to be confident in what you know you can deliver before proposing this type of contract to a client, as you as the agency are assuming most of the risk. 

Performance-based models are typically paid out on an “as per” basis on some sort of performance measurement metric the client uses (eg. per click). Commission-based models are based on total sales or the ultimate success of the project.

This model can be an attractive alternative when:

• The desired outcome of the project is clear, and measurable performance outcomes can be collected. 
• You want to display your agency’s tenured confidence to a prospective client (if you’re betting on your own horse - you must be confident in your ability to perform). 
• Successful work will lead to naturally scalable success (more success = larger clients = more skin in the game. 

But what if the project bombs? You’ll need to have a financial safety net ready if you’re presenting this pricing model to a client. If they don’t get the results they want, you better be prepared to take the hit.

The final verdict:

This model is the most work-intensive of them all but has the potential to yield highly profitable results when working with more developed clients. The larger the campaign, the more potential profit there is to be made, so only tenured agencies should be considering this model. This model enables both the agency and the client to scale synchronously.  

Value-based Agency Pricing:

If the current goal of the agency is to promote long-term customer retention and scale business development, then a value-based pricing model should be considered. This marketing agency pricing model is primarily oriented around the competitiveness of the niche, the current monetary value of their offer, and the estimated time investment required. The more accurate the predictive data you use, the larger the potential return. 

Similar to the performance-based pricing model, this structure largely benefits tenured agencies:

• Value-based models align both the client and the agency on the ultimate goal - the end result. Agencies won’t be focusing on time over value, and clients will have increased confidence and satisfaction throughout the creative process.  
• If you already have a satisfactory pipeline of prospective clients, this model promotes the highest profit margins. 

But remember…

You’ll need a proven track record of high-ticket marketing wins before pursuing this model. You’ll need to identify and quantify the client’s unique definition of “value” from the start. Otherwise, a lack of clarity can quickly lead to lost opportunities.

Retainer Model:

Nothing is more stressful than not knowing how you are going to make payroll next month. 

Expecting your agency to survive on a project-to-project basis is anxiety-inducing and unnecessary, but unfortunately far too common in the industry.

Imagine how calm and predictable forecasting monthly revenue 60-90 days in advance would feel.

You’d never have to dip into the savings fund or accept low-barrel clients again… 

These are all of the benefits of using a retainer (or monthly recurring revenue) based pricing model. 

The goal of this model is to have the client commit to retaining the services of the agency for a recurring number of months. 

The key to presenting this agency pricing model, is Instead of focusing on the amount of time it takes to complete the project, highlight the value the client will receive instead. 

By planning project touchpoints and payments in monthly milestones, you will:

• Have predictable, monthly revenue consistently coming in (stabilizing your cash flow).
• Be able to generate more accurate revenue forecasts, which in turn will improve capacity planning efforts.
• Have more time to proactively strategize how to attract the clients you really want to be servicing.   

The final verdict:

In general, a value-based, retainer model is the most recommended marketing agency pricing package. Using this model ensures that every stakeholder on the project wins (including your bank account). 

Not quite sure how to transition your pricing structure to resemble a value-based retainer model? 

Start with strategic steps towards your goal. Set your foundation with a fixed-price model. This will allow you to observe over time where your delivery timelines and overhead costs usually fall. As you gain expertise and optimize your processes, you can pivot into a more profitable retainer model.

• Confirm the prospect's top pain point(s) as early in the conversation as you can. The more you can communicate to the customer how you will eliminate their problems, the more likely they are to buy from you. Try to address any sales objections before they even arise.   
• Don’t forget to let the prospect talk. The idea of working with a new client is exciting (and potentially nerve-wracking), but don’t let your nervous chatter monopolize the conversation. The more opportunity a prospect is given to communicate, the more trust and enthusiasm they will develop. 
• Be honest, even when you think it could cost you. Mismanaged expectations is the #1 reason agency/client relationships turn sour, so only promise what you know you can deliver. 
• Be prepared for a cost objection. If the prospect is weary of the price you’ve presented, it likely means they can’t envision the end result yet. Focus on making them solution (not problem) aware. Why is YOUR solution worth it? A client stuck with a poor-quality result is actually worse off than if they did nothing at all, so be proud of the value you provide.  Have the prospect’s original pain points clearly positioned in the rearview mirror, to help remind them why they approached you in the first place. 

When to charge your clients:

Getting your new client to sign on the dotted line is half the battle, but a project is never complete until the money hits your account. 

It is imperative that you select a billing cycle that aligns with the pricing model and service offering you are selling. Otherwise, your agency will quickly become susceptible to cash flow problems, and run into unnecessary roadblocks while completing projects for clients to deadline.  

No matter what billing cycle you choose, the #1 goal is to keep revenue flowing into your agency on a monthly basis as frequently as possible. 

Frequently used billing cycles include:

• Initial deposit, remainder at final delivery.
• 50% upfront, 50% at final.
• Milestone events (based on project type). 
• Monthly amount that’s billed on a specific day of the month. 

Similarly to the rationale of sticking to a retainer-based pricing model, you should aim to bill your clients on a monthly basis (regardless of project milestone status). 

This will promote accurate financial forecasting and revenue reporting accuracy, and promote better overall liquidy in the business. This also benefits the client, as it promotes better feedback processes, and ensures they are satisfied with the investment by the time the end result is produced. 

If the project is set to incur any additional fees (such as media buying-related costs for example), they should be charged upfront, before work begins. 

Who’s getting the word out?

Hearing the word “no” in our business can be a real source of anxiety for many agency owners, so much so that many avoid prospecting new clients altogether. But as we’ve learned before, our ability to say “no” is actually a valuable source of power for the success of your business..

Performing cold outreach for example, will always yield more “no’s” than “yes’s.” You’re reaching out to businesses without fully knowing if they’re even interested (or have the budget) in your services. In fact, it’s actually quite unlikely that a recipient of cold outreach will purchase your services from their first interaction with you alone. While some will eventually remember you when they DO need your services, there are many leads you will reach out to that will never buy (and if you’re lucky, you find out early). 

Remember, every no you receive is pushing you towards a more fulfilling yes. Currently, 80% of agency owners are falling short in their prospecting efforts. Remember, the money is in the follow-up!

If you go the extra mile to secure that top 20% spot, you’ll quickly get ahead of the game.

Time to fill the pipeline!

Before you start your first round of prospecting outreach, assess your current sales process:

• How many leads do you currently have? How many new leads are you generating monthly? 

• What is your current lead generation process? Are you engaging with a mailing list? Referrals? Networking events? Are you seeing the ROI? 
• How much time per week are you spending on lead generation efforts? Are you effectively balancing growth tasks and client work? 
• Are your prospects problem, or solution aware? How much education about your solution will you need to provide before they will be ready to buy?
• What data is available to you to gauge the effectiveness of sales efforts?

Understanding the current state of affairs will help you optimize your sales process, drive better success to your pricing model, and ultimately improve your conversion rate. 

Ready to meet your new clients?

1. Review your sales process to ensure initial prospecting, nurturing, ad closing efforts are in place with clear calls to action. No lead gets left behind! 
2. Evaluate your current lead generation assets. Whether that is an email list, podcast, website chatbot or blog, your sales channels should be working to engage with your prospects on a regular basis. 
3. Build an outreach schedule to regularly connect with and move your prospects through your funnel. The majority of the time, leads will sit for up to 60-90 days before they are ready to engage with you, so don’t give up!  
4. Ensure you’re providing your prospects value in the information you share. No one will want to be “pitched” to constantly. Make the effort to volunteer some solutions to their problems, and build credibility with your audience.
5. Identify your lead qualifiers. Harassing a client into a yes does no good for anyone. Ensure prospects who truly are not interested in buying your services have the ability to opt-out. Your time is much better spent fostering those who are.

Your goal should be to standardize your sales process in such a way that prospect has the same experience when communicating with your agency. This means your process should be efficient enough to address every qualified prospect that comes through the door. It’s your opportunity to set the stage for a successful client relationship and demonstrate value, consistency and trust to your clients. If you succeed, they will be thanking you for being the solution to their problems before you know it. 

How can you ensure your process remains consistent?

• Create a sales script that contains a high-level overview of all the points you MUST cover during your initial sales call. No need to read something word for word, just have a guide prepared so you don’t miss anything important. 
• Use an information intake template, to collect all new client information in a replicable, streamlined way. 
• Stick to your guns. If a prospect doesn’t meet your qualifying criteria, don’t accept them as a client. Spending too much time in a niche grey area can cause costly delays in your projects. 

When you’re NOT investing time into lead generation efforts, you’re not enabling your agency to attract clients that support your growth. With an empty pipeline, you’ll quickly feel like you’re losing control of your boundaries and your clients will start running YOUR show before long. 

I want to raise my rates, but I’m scared of losing my existing clients. 

Now that you’ve fully committed to your niche, restructured your pricing model, and reevaluated who you're targeting, your pipeline is full of higher-paying projects.  

But what about your original clients who have been loyal since the beginning? 

You’ve been avoiding raising your rates on them, but it is starting to make less and less financial sense to keep them on your roster. After all, you’ve got your newly cultivated lineup of higher-quality work.

While some clients may eventually get priced out of your services (and that’s okay!), there IS a way to break a price increase to them gently and walk away with a renewed, bigger contract. 

Since you originally signed this client have you…

• Learned new skills or increased capacities on your team to offer new services?
• Seen an improvement or increase in the results your projects have been yielding?  
• Increased the average turnaround time for projects?

These are just a few examples of the types of rationale you can present to clients who give you pushback but follow what is organic to you and your business.

The good news is, is that some clients will not be able to afford to continue your new rates. This simply replenishes your bandwidth for clients who are not priced out of your new rate, meaning you’re grossing the same amount (if not more), but working less.

Measure what matters: 

A profitable agency doesn’t happen by chance. It’s a result of data-driven decision making. 

The only thing that truly determines your success is the numbers, so you need to know them like the back of your hand. Guesswork belongs nowhere near your balance sheet. 

By getting into the habit of regularly reviewing your performance metrics and communicating action items to your team, you’ll be amazed how quickly performance can turn around.   

What data should you be looking at?

Client and market data, sales data, and productivity data are just a few examples of the types of numbers you need to be consistently monitoring to drive success within your agency. By developing routine reporting and data analysis processes, you will be able to stay one step ahead of your balance sheet. 

There are 3 main reports you should be generating on a weekly basis. Get into the habit of reviewing them with fellow leadership, so no one has any surprises. 

• The Break-even Report is the bread and butter data to collect. Remember, you want to be profitable from dollar ONE, so your position should be evaluated weekly. 
• Monthly revenue projections develop the roadmap to achieving profitability. What revenue are you generating every 30, 60, & 90 days? Hold yourself accountable to your goals. 

• The effective burn rate is calculated by taking the total revenue earned / the total number of hours tracked within the organization as a whole. This ensures that administrative and operational hours that contribute to the success of projects (but are not considered “billable” hours) are accounted for. Currently, the industry average is 72%.  By tracking these metrics on a daily basis, you can scale your operations to exceed this benchmark in no time. 

Make sure you make the most of the softwares you are paying for. Time trackers, project management software, and CRM platforms all contain valuable data that can be exported to aid in decision-making. 

Learning From the Past:

Growth will never come from comfort. Every project your agency sees to completion presents a new opportunity for growth, improvement, and change. It’s important to review every finished campaign (successful or not), to determine areas of opportunity to action for the next time.

The final outcome does not solely fall on one specific team or individual. It takes the entire agency to see a project to completion (billable or not), so all stakeholders should participate in the review. This should include (if possible):

• The creative team (who executed the work)
• The sales/business development team (who managed initial client expectations)
• The finance team (who determines bandwidths for future projects)
• The operations team (if any processes or SOP’s need to be adjusted to optimize efficiency for next time). 

To better structure the conversation, implement a closing checklist to guide your post-mortem reflections, and identify process gaps that need to be addressed:   

• What feedback did the client provide about the final product?
• Were any of the original expectations set out in the sales process NOT met? If so, why?
• Did this project remain within the budget? If not, where was the extra expense incurred?
• Did this project perform to the original success criteria? If not, why?
• What improvements could have been made, if given additional time?
• Should any internal processes be created?

An agency that diligently follows a project close-out process is guaranteed to have better cross-functional communication, higher customer satisfaction rates, and will see their bandwidth expand faster.  

Pricing Model for Digital Agencies: 10 Best Practices

Picture this:

You just wrapped up your weekly team meeting before you head out for a (disconnected) long weekend. You were blown away by the sales team this week - they’ve tripled booked discovery calls compared to last month. For the first time in months, you’re leaving at the end of the day on time, and with no outstanding client tasks. You even got to the gym this week. Life is good. 

You now have the blueprint to make this your reality. You have the power to make the changes you want to see in your life, and in your business.   

So what can you do to start seeing improvements NOW?

• Select and focus on one niche and specialized offer. Become an expert solving a specific set of problems, to stand out against the competition. 
• Transition your business to a retainer-based pricing model to enhance forecasting and cash flow efforts.  
• Optimize your systems and document all of your current processes. Analyze your business from the eyes of a new hire. How accessible is the information they would need?  
• Let the data guide your strategy. Utilize breakeven, revenue projection, and burn rate reports to make data-driven decisions. 
• Remove your entrepreneurial blinders by joining a coaching program. Mentorship is an extremely valuable resource for your entrepreneurial journey. Receive the advice you need to stay accountable and remain confident in your decision-making moving forward with your free copy of your agency pricing e-book.
• Discover your Agency Aura in 5 mins or less to better understand your personal work style, the effectiveness of the agency model you’re currently using, and how to maximize your personal leadership journey. 
• It’s never too late to give your email list a little love. When you start to catch their attention by giving away free value, the leads will start to come.
• Communicate consistently. Constantly remind your prospective clients they shouldn’t be going even one more day suffering from problem you’re equipped to solve and watch your client roster grow. 
• Evaluate your current roster of clients. Which contracts are harming your ROI? Strategize how to transition them to a retainer-based pricing model. 
• Analyze your most recently completed project, and commit to 3 improvement action items to implement in the next one.  

All it takes is 90 days and a few small changes to tip the scale in your digital marketing agency. 

If you stay focused on your ultimate goal: helping business owners to yield success, your own will naturally follow.