How to Determine Agency Prices Without Racing to the Bottom

By Jason Swenk on July 17, 2019

Not sure how to determine agency prices? How can you stay competitive while separating your agency from the competition? The first step is to stop copying the competition because it’s a race to the bottom! When you focus on your competition it always results in losing money and being a copycat agency. If you want to grow, you have to dare to be different.

In today’s episode, we’ll cover:

  • The best way to determine your agency pricing structure.
  • Why agency meetings may be costing you too much.
  • How to separate your agency in a crowded market.

Today, I talked with Nick Eubanks, CEO and Founder of From the Future. Nick got his start by spamming cold emails and working real estate. But, once he started his agency, he grew fast! In just 5 years, Nick’s agency was worth millions. He’s sharing his story so you can grow quicker, and also avoid some of his mistakes.

The Best Way to Determine Your Agency Pricing Structure

Many agencies determine their pricing structure by looking at their competitors and matching or competitively pricing themselves in the market. Let’s be honest — a lot of you probably started out by picking a fair-sounding price point. Am I right?

Price your agency’s services intentionally. Sure, you can do what your competitors are doing. But, at that point, you’ve already lost. Instead, try this — price your services based on your value and desired margins.

The average net margin for a services company in the U.S. is 32% – so make that should be your goal.

To figure out how much you should charge clients, add up your agency expenses and labor expenses, then figure in the value of your services. Then charge clients at least 32% above the cost of your expenses. But, remember, you’re selling a solution — not just a product. You can charge as high as 50% or more over margin and still attract clients.

Bear in mind, you need to factor in all of the miscellaneous business costs into this model. For example, have you ever considered how the expense associated with internal meetings?

Why Your Meetings May Be Costing You Too Much

Internal meetings are a great way to build company culture, create rapport among the team, and of course, brainstorm. But Nick says they’re more expensive than we realize.

Let’s say you have 4 team members attend an hour-long meeting. If you’re billing their time at $200 an hour, that meeting is costing you $800.

Not only is that meeting costing you billable hours, but those four employees aren’t directly servicing clients during that time. So, the meeting expense is actually more than you think.

The lesson here is not to cut out meetings – team meetings are a great way to keep your team working cohesively. But, you need to be aware of how much meetings cost. And, build those costs into your price structure.

How to Separate Your Agency in a Crowded Market

Nick’s agency started using technical SEO strategies combined with a design/UX team to stand out. But, it’s about more than just services. Being unique requires some critical thinking.

What are your competitors doing? Whatever it is, think about doing the opposite. That’s how to fast track your growth. For example, if everyone is approaching SEO the same way, add a twist and do technical SEO.

Look for opportunities in your niche. And, when you find one — latch onto it. Sure, you should definitely compete for clients. And, you don’t have to just go after clients no one else is taking on. But, you should always be looking for under-serviced prospects within a market.

In other words, don’t watch your competitors and just copy what they’re doing. Figure out what they’re doing and do something entirely different. Identify your strengths and develop your unique selling proposition based on what you do better than anyone else.

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