By Jordan Platten, Co-Founder of LearnAds.io, an online education platform that simplifies paid digital advertising for business owners.
Starting an agency is exciting, for so many reasons. You get this newfound freedom and sense of real responsibility and the luxury and ability to say, “I work for myself.” But let’s be honest — most people don’t feel natural in those shoes straight away. It’s a difficult and confusing transition going from working in a corporation 9-to-5 to owning your own marketing agency, and I believe that it’s because of this main thing: having to decide for yourself how much your expertise is worth.
We are taught that an hourly rate is the only way to measure your contribution and the only way to determine the value that you’re providing, and that very quickly turns you into a commodity. We are essentially raised to believe that our time has a direct relationship to the amount of money we deserve.
The key is to stop focusing on time-based pricing and instead focus on what is known as value-based pricing — and trust me, this structure works in the interest of both you and the businesses that you work with. In simple terms, most agencies begin by offering their services at an hourly rate and not pricing them based on the value that said service provides, and this is wrong.
So, let me tell you what’s wrong with time-based pricing. The faster you work, the less you get paid. Naturally, your clients will want you to work less so they have less to pay at the end of the month because that’s just the world we live in, but ultimately this results in a lower standard of work fulfilled. Once you reach a peak of time in the day, because time is limited, you won’t be able to scale your agency any further.
You need to start by valuing your time correctly, and I know that’s easier said than done when you are a new starter and you’re eager to get cash in the bank. But I’d like to shed light on how I price my services on value and not time.
An easy way to start introducing value-based pricing within your business is through fixed recurring monthly retainers. We set one amount every month that our clients pay us in return for our service. And this can be anywhere from £500 to £10,000-plus a month, but there are a few questions you need to ask yourself before deciding on this figure.
Start by having a clear understanding of how much revenue your services could make for your client, get an estimate for how much revenue your client makes monthly and, finally, be honest with yourself about your experience level. Answering these questions will help put you in the mindset of value and not time spent.
Once you’ve answered these, overcoming the anxiety that comes with setting your price is next. A lot of you reading this might be thinking that I’m suggesting that you charge your clients a large figure in return for doing very little work, but I can assure you that tackling your business success in this way and leading with greed always leads to failure. My advice would be to walk before you can run and charge your services at a very fair price — because if not, you will end up burning lead after lead. Consider your experience, stay humble and build your client portfolio to increase your knowledge and build your confidence. But don’t ever undervalue yourself.
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