Why Raising Prices is the Real Game Changer to Increasing Profitability
How can you boost agency profitability? Do you have a clear plan for being profitable? Some agency owners start out thinking they want to get to $100 million. But, whatever you expect to get at $100M, could you get it at $10M? How about right now? Most likely, what you really want is freedom. Today’s guest found out getting there is just a matter of setting up the right processes and having the right team. In tandem, these two elements remove the owner from daily operations and eliminate the need for your input at every step.
Chris Rodgers is the founder and CEO of Colorado SEO Pros, a boutique SEO agency that helps market leaders solve complex SEO challenges. His team achieves big results with an exceptional SEO strategy, AI technology, and top talent. He shares his experience in his first few years with his agency, and how he learned the importance of knowing the agency’s value and having the right people in the right seats on the bus.
In this interview, we’ll discuss:
- Early mistakes when you’re building your agency.
- Why raising prices is a real game changer to increase profitability.
- Changing your hiring strategy to get the right people on the bus.
Sponsors and Resources
E2M Solutions: Today’s episode of the Smart Agency Masterclass is sponsored by E2M Solutions, a web design and development agency that has provided white label services for the past 10 years to agencies all over the world. Check out e2msolutions.com/smartagency and get 10% off for the first three months of service.
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Treat Your Agency SEO As Important As Your Clients’ SEO
Chris started his career working in corporate marketing. He was first attracted to the digital marketing side because of all the data and tracking and the transparency it provided. When he moved to Colorado, he worked as a senior analyst for an agency and, after a failed venture, eventually decided to create his own agency.
His agency started in his home office with an intern that showed up to work in his pajamas. (#Agencylife, right? 🙂 He first started contacting businesses ranking on the second page of Google results to tell them why they needed SEO. Their answer: What is SEO?
Chris knew he needed to change his approach and went back to work on his own website’s SEO. Eventually, his website knocked down the biggest company in Colorado for the #1 spot in Google results and they started getting leads from all over the country.
This was a huge step for his agency and got them to a new level where they were actually struggling to keep up with demand. At this point, it was still a two-person operation and both he and his intern were SEO specialists. He still needed to figure out how to build an agency around their SEO services.
Common Struggles the Early Years of Running an Agency
Lack of knowledge on building a business around his skills led to some early mistakes. Chris and his team started off offering custom solutions as a way to differentiate from their competition. However, they experienced years of setbacks by not having the correct processes in order to scale.
By the second and third years, Chris had periods where he really couldn’t afford the salary for his team. The swings of the business were especially hard. If they lost a client, all of a sudden he had to skip a paycheck for himself in order to make payroll for everyone else.
For a couple of years, every time he felt they were starting to grow, there was a new setback. It seemed like he was never making enough money to pay his employees what they needed to make while also growing his agency.
The True Game Changer to Increase Your Agency’s Profitability
Things started to change once his agency got to $1 Million revenue and beyond. There was just more room to breathe. Chris focused on determining their ideal client. In order to grow the agency’s reputation, it needed to work with higher-profile brands on large and complex projects. They searched for brands that recognized the value the agency brought and paid accordingly.
However, the true game changer was raising their prices. They doubled their minimum prices and increased their contract length. They were finally getting paid on the value they delivered. In part, they were able to do this because they had a vault of case stories and a reputation for success.
In hindsight, Chris realizes that while considering the value the agency delivers what he did in the backend was sabotaging the effort. Always be aware of the value you provide.
Don’t start out too eager, doing too much for your first big clients. They can leave you in a heartbeat. Instead, start the year by setting clear goals for your agency. Look at the value you deliver. Think about the salary you personally want to make that year. Then ask:
- What revenue does the agency need in order to make that happen?
- How many clients do you need in order to get there?
- How much would you need to charge?
Break it down to smaller, attainable goals and then reach for them. If you just have the mindset of getting as many clients as you can, you’re creating a big headache for yourself.
Getting the Right People On the Bus So You Can Charge More
Chris recalls advice from another agency owner about addressing management issues. He was essentially told to get the wrong people off the bus, which he proceeded to do.
In the beginning, his agency focused on hiring and training new talent right out of college. It seemed like the best approach compared with hiring more experienced professionals requiring a higher salary and still needing some training.
However, years later Chris found they did not have the acumen and experience to deliver at the level needed to raise prices. As a result, they changed their hiring philosophy and started hiring more experienced talent. Now they have a staff of twelve with over 100 years of combined experience and lower turnover. It has been the best way to ensure a high-level experience for their clients.
When it comes to retaining employees, Jason says you’ll have a better chance with workers who have a lot of experience in a different field. If they are willing to learn, it can work out better than hiring young workers who receive your training and then leave after one or two years.
Also, don’t forget to take culture into account as a very important part of your hiring process. For Chris, it’s been a striking difference, and he doesn’t have an endless stream of fires to put out. Things are now stable and growing.
Don’t Feel Guilty About Your Hard Earned Freedom
A more stable situation at the agency allowed freedom from being bogged down by emails and meetings. He no longer handles everything and his team has things under control. This gives him more time to focus on CEO-specific tasks but it also sometimes makes him feel guilty.
As an agency owner, it’s completely normal to feel displaced when going from working non-stop to finally having some freedom. You’re so used to having a long list of things to do and suddenly finding no one seems to need you anymore leaves you feeling useless or insignificant.
However, remember this is what you’ve been working for since the beginning. Don’t feel guilty about the time you get to spend on your hobbies and family. This is what helps you recharge and have more energy to pour into your business strategy and vision. Also, it doesn’t mean you’re out of it forever. Many agency owners work out a happy medium according to how involved they want to stay. You can find a way to be relevant and just do the things you love without doing all the things — that is called balance.
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