Pricing. It’s an absolutely critical element of your profitability when running a creative agency. If your prices are too low, you can’t cover your costs, pay your team and come out with a tidy profit at the end of a project.
So what do you do to your pricing to whack up that profitability? Well, it’s simple – you put your prices up! Yes, it really is that straightforward. If your fee is bigger, your margins go up and you’re left with more of that precious revenue in your profit & loss account.
But just hiking up your prices willy nilly, without justification, could mean putting clients noses out of joint. So the key thing to underline here is the value you’re bringing to a project – it’s about the talent you and your team have and the quality of the end result for the client.
Getting your prices right
As a creative agency, you’re selling your talent. And that makes it incredibly tricky to set your prices. How do you measure that talent and put a price on it? The outcome is that lots of agencies are vastly under-charging for their services – and by under-charging you’re not making the profits you could!
There’s one very straightforward way to see if you could be charging more – put up your prices and see if your clients complain! If you’re not suddenly bombarded with pricing queries and angry clients, then you were probably underselling your talent in the first place.
The key here is to be confident in your talent, confident in the price you’ve set and confident in the value you’re delivering to clients.
Here’s how you do it
So, what’s the best way to raise those prices? To begin with, try putting up your prices just for new clients. Your existing clients are happy with the status quo, so leave their prices as is for now.
Your costs and overheads are the same for these news clients as for your existing clients. But by charging a higher price, the increase becomes pure profit. Which is pretty pukka!
A cunning plan, Mr B
Here’s another idea. And it’s as crafty as Clive ‘Crafty’ McCrafty the crafty fox.
Work out the price for a project as per usual. But then take the final price and add 10% to it before you total everything up. Odds on, the client won’t notice or even question this increase. And if they do notice, you can immediately give them 10% discount as a good-will gesture – everybody’s happy!
Feeling brave?
Try an even bigger increase! See what happens if you hitch up the price by 25%. One of our clients has been quietly increasing prices every month… and so far, nobody’s said a thing!
The key here is to be confident in your abilities as an agency. If the client loves what you do, and how you do it, they’ll be willing to pay the price you set.
You can find out more about boosting your agency’s profitability in our free eBook ‘Unlocking Hidden Profits’ – visit our My Profits page and fill in your details to get a free download of the book.
