When I reflect on the work I do as a business coach, I like to see if I can spot any similarities in the businesses of my highest performing clients.
Success leaves clues, as they say – learning what one business does to win in their specific market often gives an insight into what it takes to win in general too.
Last month, we talked about the power of establishing a clear niche for your business (you can read that here if you missed it).
And yes – across time, I’ve seen well-niched agencies outperform their generalist competitors 9 times out of 10. But there’s more to running a high-performance agency than simply choosing a good niche – if only it was that simple!
As for the other commonalities…
I was preparing some case studies for my website recently and came across an interesting example I’d like to share with you.
PR agency Pedroza Communications sought me out to assist with their business. They had been around for five years but were facing challenges around growing the agency sustainably.
Bear in mind this was an agency that had defined their niche, won plenty of customers and established a respected position in the marketplace…
But despite having these wins under their belt, they were still struggling to shift to the next level.
I got to work, digging deep to find out into what was holding them back from achieving the results they sought. It quickly became apparent that their pricing model was a key issue. Upon review, we decided that the business needed to move from a time-based pricing model to a value-based one (more on that a little later).
With some bravery on the part of the MD (to make this shift), this process – coupled with some other interventions on my part – helped the agency grow their profits by 66% in just over a year.
We’ll return to this case study a little later in the article, but for now, just bear in mind that big improvements often come from taking small corrective actions, including shifting your mindset.
As an agency coach, I’m used to helping clients deal with a variety of problems. Staffing, strategic planning, winning new business and client retention – I’ve had clients contact me to assist with all these areas and more.
But hands down, one of the most valuable things I do as a coach is to help my clients get their pricing right.
Value pricing and selling is a huge part of building a successful agency, but most of the information floating around online doesn’t truly teach you how to implement a value-based pricing and selling strategy.
In this article, we’ll be diving deep into the topic of value-based pricing and specifically HOW you can implement it in your agency.
Here’s what we’re going to cover:
So if you’re ready to break free of time-based pricing, start earning the fees you deserve and dramatically boost your agency’s profitability, read on!
Want to get an instantly actionable list of takeaways from this article? Click the image below to download the Value Selling One-Page Action Plan.
Before we get onto the topic of value pricing, I think it’s important to first get clear on the standard agency pricing models you can choose from. Here are the three most common pricing strategies you could employ in your business:
This is simply where you charge your clients based on the time you spend working on their account. You might have an hourly or daily rate, likely different hourly or daily rates for different team members that work on the account. The prices you quote to clients are based on:
Simply put, it’s a direct trade of resources (i.e. labour hours and materials used) for pay. It’s a standard model, one that many agencies employ when they’re still finding their feet in a market.
There’s nothing wrong with it, per se – but tying your income to your time will hold you back as you try to scale your agency.
There are only so many hours in the day that you can work. And depending on your market/niche, quoting high hourly rates can be a huge turnoff for prospects (when you’re selling based on time, at least).
Of course, charging higher hourly/daily rates is a viable strategy. That’s essentially what the next model allows you to do.
On the face of it, this might look similar to value-based pricing… but the difference lies in where your focus is.
With a “Cost Plus” or fixed fee pricing model, you focus on inputs and outputs i.e. the resources you use to complete work for the client.
For instance, a web developer might figure out the price for a particular project by outlining the various components of a project. That could look like the following:
And so on.
Once that’s done, you would then move to assign a cost to each part of the project.
For instance, maybe you estimate that developing the wireframes will take two designers four workdays to complete. Perhaps the initial meeting requires two hours of preparation on behalf of the Creative Director, etc. Essentially, you’ll figure out how much time & resources the project will take, then assign a cost to each.
When you have completed this step, you’ll have an estimated cost for the total project. And this is where “Cost Plus” pricing diverts from value pricing.
In this case, the final price quoted to the client is dependent on the cost of time/materials used, plus some fixed percentage (e.g. 20%).
For example, if you estimated it would take 10 hours of a designer’s time and their internal cost to you is £600 for this time, you would charge the client £600 + 20% mark up resulting in a total cost to the client of £720.
(We’ll return to this web design example a little later on in the value pricing section, so keep an eye out for that!)
This “Cost Plus” approach can sometimes be used to negotiate a fixed fee for the project. This is a double-edged sword: if the project goes to plan, you’ll make as much profit as you forecasted (or even more if it goes well). But if it should happen to drag out longer than you planned for? You’re left with two choices…
Neither scenario is great. When you also consider that the fee you quote could simply be based on a fixed hourly/daily rate + a fixed percentage, it’s easy to see how you can end up working on projects that aren’t beneficial for your agency.
The next pricing model on our list is another common one that takes the idea of charging a fixed fee and improves upon it slightly.
A retainer is where you agree a fixed monthly fee and outline the work you will do for that fee. For example, say you run a PR firm. You could negotiate a fixed monthly PR retainer of £3,000 per month with a client. For that amount, you might agree to the following deliverables:
A retainer-based agency can often be more profitable than ones using the previous models. This is because their income is independent of their time. With this approach, you get paid the same whether it takes you 10 hours or 100 hours to complete the work required.
The price you quote for a retainer is often derived from how long you estimate a standard deliverable will take to complete but allows some scope for variance depending on the client (which is good).
However, while it’s a step in the right direction, it’s not the best option for your agency. It’s still an exchange of resources for money – just in this case, the resources in question are the various deliverables you’re obliged to work on (and not your time).
Additionally, most agencies will still get sucked into quoting a retainer price that reflects the effort they have to put into the work (and not necessarily the value it creates – more on that shortly).
When we look at these approaches presented so far, what’s the flaw common to each of them?
They focus on inputs and outputs… not outcomes and impact.
Not sure of the difference between these terms? Read on to learn what they mean (and why you should care).
All of the pricing models we discussed in the previous section are acceptable choices, but they each share the same common flaw…
They are based on YOUR agency and what YOU are doing i.e. your inputs and outputs.
This is a problem because clients only really care about their own business. By this, I mean:
That’s not to say they don’t care about quality or deadlines (these things obviously matter), but what really matters are the OUTCOMES and the IMPACT of your work.
Let’s take a second to define precisely what these terms mean.
When we sell to clients, we sell four things:
Inputs and outputs are easier to quantify, but they matter a lot less than outcomes and impact.
Focusing on the former two is a hallmark of agencies focusing on the wrong thing and therefore likely to lead to misunderstandings and shorter-term relationships. Rather than framing their work in terms of how it will benefit the client, they instead spend their time worrying about the stuff that’s easily measured. Sadly, this is one of those cases where choosing the simpler upfront option holds you back in the long run.
A press release might take five hours’ worth of labour to complete. The inputs and outputs, in this case, are easy to measure (‘research’, ‘time to write’ and ‘the press release’). But how do you go about articulating the outcomes & impact of that positive press release? Of coverage achieved (outcomes) Of a stronger brand? Or a more receptive market (impact), thanks to your efforts?
I’ve lost count of the number of agencies I’ve encountered over the years who fail to spot the mismatch between what they’re selling (inputs & outputs) and what the client is truly buying (outcomes & impact). This lack of alignment costs them new opportunities, profits and a chance to build a much bigger business…
And rectifying this mismatch is where value pricing and selling comes in.
As we just discussed, there’s a variety of standard pricing models you can employ in your business, but in my experience, the best pricing model for agencies is a value-based one.
There are many reasons this is your best approach. Consider these two quick stats:
So the facts are clear – value pricing is the way to go if you’re running an agency. But what exactly is value pricing?
Simply put, it’s buyer-centric (not supplier-centric like the other methods).
The price you quote is based on the value delivered to the buyer (the outputs & outcomes), and is not based on how expensive it is for you to deliver (i.e. the inputs). It’s often referred to as outcome-based pricing for this very reason.
Value pricing allows you to get paid based on the value you create for clients (and not just on the resources you expend in creating deliverables for them).
Consider a web design agency. If they employ a time-based pricing model in quoting a project to a prospect, they might find it hard to justify more than £5,000 based on the hours it will take.
This might feel frustrating for the agency owner, but that’s because we’re still trapped in a limited paradigm (i.e. time-based or “Cost Plus” pricing). By shifting to a value pricing approach, we can begin to charge more than £5,000.
Let’s say that you’ve worked with similar clients in the past, and were able to increase their on-site conversion rates to the point where they were earning an average of £200,000 more per year directly from their websites.
That’s £200,000 in profit directly attributable to your interventions. In this case, it would be very reasonable to charge say 10% of that as the project fee (i.e. £20,000).
By learning to frame the project in terms of value for the client (and not just simple inputs and outputs), this web design agency could earn four times as much from a single project.
(Note that this £200,000 figure doesn’t have to be an average or even a figure you’ve personally produced for a client. Ultimately, your goal is to get the prospect to tell you the value of your proposition by exploring with them the goals of the project and what ‘success looks like’. If you do this, you’ll be framing a value-based price).
Hypothetical web design agency aside – how well does this approach work for real businesses?
You’ve already read about the success of Pedroza Communications above (who boosted profits 66% in a year after implementing a value pricing model). This experience isn’t unusual – I’ve seen other clients snap out of slumps and boost their profits by double-digit amounts in a matter of months.
And even as a coach, I know that the day I shifted towards value-based pricing was the day I started getting paid the fees my work deserved.
You’ll read more about my personal (hard-won) experience with value pricing later in this article. For now, let’s address the question that’s been at the front of your mind since you started reading this article…
How can you put value pricing to work in your agency?
Now, you might have read the previous section and thought, “There’s no way I could justify charging x% of my client’s earnings as the project price”.
And yes, sometimes that’s true…
But when you think about it, value pricing is everywhere.
It’s more obvious in some sectors than others, of course. For instance, consider the fashion industry. The same basic material is used to manufacture Primark shoes and Nike ones – but Nike shoes can retail for 5-10 x the cost of their cheaper equivalent. All that separates the two is belief in the value of the brand.
Another example is seen in the construction industry. No one prices based on the cost to build + a margin of profit… it’s all down to what people are willing to pay. In a way, that’s the ultimate value sell!
Selling clients based on value requires you to take a different approach. Rather than focusing on yourself, you need to become intimately aware of what your client is hoping to achieve.
You can’t possibly hope to deliver value to them without first understanding what they value. How can you succeed if you don’t know what success is? More importantly, how can you create value for their business if they don’t truly know what they want themselves?
The quality of the questions you put to your prospects will determine how much value you can add to their business. Your goal is not to figure out how much you can charge them – it’s all about determining what a valuable solution is worth to them.
Inputs and outputs are secondary. Outcomes and impact are what you need to be worrying about. Getting a crystal-clear picture of how they will gauge success is of the utmost importance.
Once you’ve figured out:
You’ll naturally be able to align your proposal with their desires. That goes for pricing, too – once you know what they need & how much value that can bring to them (financially), you’ll be able to give them a price that works for both of you.
In our web design example, the agency in question had experience and a track record of delivering results to similar businesses. That made it easy for them to pitch their value – they had evidence to point to their impact, and a compelling story to tell about their value proposition.
If you’re in an industry where it’s harder to quantify these things, there are two other methods you can employ.
Whatever the case may be, remember that figuring out the true impact you can have on their business is what will enable you to get paid value-based fees…
Don’t take their stated goal of wanting more website traffic as their definitive goal. Dig deeper: look for the true impact you can deliver for them (keep asking ‘why’ questions so you can align your project to their business goals).
If you’re interested in learning more about having effective (value-based!) sales meetings, check out the resources section below for a free copy of my Value Selling eBook. Additionally, you’ll also find a link to a webinar I recorded on the topic.
Using this material, you’ll find it easier than ever to figure out what clients really want – so you can be the one that supplies it to them.
Let’s consider the realities of value pricing by changing tack for a minute.
Consider one of the most widely available substances in any shop in the world – bottled water.
If we apply the pricing models we’ve previously discussed, we can see how we could come to very different values for the same product depending on how it’s presented to us.
Let’s take a simple 500 ml (16 oz for my American readers) bottle of store-brand water.
If you have a time-based pricing mindset, you might estimate how long it took to manufacture the bottle, and how long it took to locate the spring it was filled from. Say the end cost is 60p.
If you were a little more generous and used a “Cost Plus” model, you’d add a margin of profit so the seller has an incentive to work with you. Let’s say the end cost is £1 in this case.
Both fairly modest prices, but they’re quite in keeping with what you’d expect to see. However, what would happen if we applied a value pricing paradigm?
To consider how this could happen, imagine the following situation:
You’re walking through the desert. With the sun beating down on you, the sand beneath your feet feels like it’s on fire. There’s nothing but dunes for miles around…
But worse than the burning sand is your thirst. You’re desperate for a drink, and you’d pay any price for it right now.
Then in the distance, you see a figure on the horizon. It’s another lost traveller, just like you – but they seem to be in much better condition. As they get closer, you see why: they’ve got a bag filled with little plastic bottles of water on their back!
In this moment, how much would you pay for one of those little bottles?
As the sun beats down on you with no reprieve in sight, wouldn’t it be fair to say that a little bottle of water could be worth far more than 60p?
Odds are you’d pay whatever you could just to get your hands on it. £10, £20, £100 – it all depends on just how thirsty you are.
And if you were thirsty enough to hand over £100 to this well-stocked traveller but they only charged you £20, how happy would you be?
Likely jumping out of your skin at the great deal you got!
That’s what value pricing is all about: figuring out how badly your client needs a drink, then giving them that drink at a cost that excites them (i.e. that makes working with you a no-brainer).
Granted, the situations you face as an agency aren’t as life and death as a wander through the desert, but the moral of the story still applies:
Clients don’t buy time, effort or input.
Clients buy results.
Once you internalise this lesson, you’ll be in a much better position to both deliver great results to clients and get paid much more attractive fees.
To drive home the importance of this shift in mindset, I’d like to share with you a story from the very early days of my coaching agency.
Let’s take a trip down memory lane together as I recount a tale from the early days of my coaching business.
I remember it like it was yesterday…
I had met a great prospect, and things were going well. They were receptive to my pitch – they were even interested enough to ask for a quote.
Without giving the matter much thought, I quoted them a day rate I felt was reasonable for both of us. I didn’t have much to base this on bar a little research I had done on some of my competitors.
The price didn’t seem to concern them (in hindsight, this was a red flag: I should have seen that I was clearly too cheap) – they said they’d think about it and let me know.
A few days later, that prospect got back in touch with me. They were eager to work with me, totally sold on my proposition and offer to them…
Except there was one little hitch.
They had been in contact with another coach whose day rate was £100/day less than mine. And unless I was willing to price match, they were going to go with my competitor.
Being new to the coaching game, I felt I had no choice but to discount my prices to win that first client. There was no escaping the Price-Match Trap in this instance…
But as I established my business, the lessons I learned from that first encounter proved invaluable, namely:
Let’s expand on these three points now.
Time is a commodity. When you quote a price to your client based on how long something will take you to complete, you leave yourself vulnerable in two ways:
In either case, it’s very easy for prospects to compare your proposal to what other agencies are offering too. And not only is pricing based on time easy to compete against – it also fails to take the client’s true desires into account (i.e. the outcomes and impact they’re after).
In my case, there was no discussion of the value my competitor and I could bring to the table – it was purely a matter of cost. Because I had chosen to quote a day rate (and hadn’t taken the time to properly articulate my value), I was bargained down.
Being able to perform some technical task isn’t what sets you apart from the competition. Copywriting, web design, SEO, PR management – these skills are commodities. There are hundreds of other businesses out there that can do those same basic things.
What sets you apart is your experience and your creativity in generating great results for your clients… but so often, agencies get bogged down in the technical side of their work.
Your skills are a prerequisite but remember: the real value you can offer clients comes from your experience and creativity.
A run-of-the-mill web design agency is competing with cheap freelancers in Eastern Europe & Asia, website building software such as Wix and GoDaddy, and a dozen other local firms all offering the same services. In this environment, it’s easy to see how competing based on price is a race to the bottom.
However, if they can learn to use their experience serving a particular niche (or their creativity in delivering great results) to their advantage, they can more easily stand out from the crowd. Discussions of price will fade into the background in the face of the new reality:
All your competitors could be cheaper upfront, sure – but what you’re offering is so much better.
As we’ve already covered in this article, clients don’t really care how much the work costs you, how long it will take you, or if you’re proud of the final results.
All they truly care about is the value you can create for their business.
If you can learn to frame your relationship in terms of value (and not just how much you cost), then you’ll be in a position to earn far better fees for your work.
These three truths were hard-won for me (to be honest, this wasn’t the only client I let talk me down to a lower rate!), but I’ve been able to spare my coaching clients plenty of headaches by passing these lessons on.
If you find yourself competing based on price, bargaining with clients (and losing), and even losing out to other businesses that don’t deliver as much value as you do…
Then consider how you could best sell your value to prospects.
Develop systems for communicating your worth, and for figuring out precisely what your clients are looking for.
If you can internalise these truths and use them in your dealings with clients, you’ll be in a much better position than your competitors.
In the next section, we’ll look at a relevant case study that will show you how effective using a value pricing model could be for your agency.
I’ve mentioned their name a few times throughout this article already. That’s because I think you can learn a lot from this case study if you’re currently trying to implement a value pricing structure in your agency.
Pedroza Communications is a PR company working in the education sector. They took me on because, despite being pretty well-established in their niche, they felt they were not growing as much as they could. In fact, they felt as if they constantly taking one step forward and one backwards, never getting any closer to that endpoint they were aiming for.
My work as an agency coach is rarely a simple “one and done” proposition. We dig deep and look to see what’s really going in the business. Oftentimes, the client is surprised when we find the real cause of their troubles.
In this case, we made a few minor changes to the operational structure, workflows, and the like… but the single biggest area of concern was their pricing model.
Like many other agencies, Perdoza Communications employed a time-based pricing model when pitching to new prospects. And while that helped them to secure plenty of business, the work they were doing wasn’t as profitable as it could be.
We looked at their pricing model and identified a few key changes they could make (maybe you could use these too?):
With a little bravery, the MD committed to making these changes. We worked together on the next brief, and by using this approach, we came to a price that was substantially higher than they would have charged previously…
But despite this increase in price, they were still able to easily land the prospect as a new client. It was almost a no-brainer, considering the value they brought to the table.
Just one year later, they had switched over to using this approach with all their prospects. And the results?
Their profits were 66% higher than they had been just 12 months prior.
I’ve seen results just like these happen for agencies in many other markets too. The same rules apply, regardless of your niche: learn to sell based on value (and not just on time), and your business will reap the benefits.
In this article, we’ve dug deep into the topic of value selling and pricing.
Switching to a value-based pricing model can seem quite challenging with lots of questions and excuses including:
Answering these questions can be tough…
But luckily, I’ve got some great resources to help you with the process.
First off – you can get a free copy of my Value Selling eBook (click here), which outlines the 10 steps you can take to implement value selling and pricing in your business. Inside, you’ll get the exact steps for selling based on value, how and when to have the value conversation with prospects, and much more.
Additionally, Hubspot has some great content on value pricing frameworks. You can read more about that here.
In case you’re sceptical about how well these techniques will work for your business, here’s a case study of a small design agency that revolutionised their business by switching to a value-based pricing model.
Finally, here’s a link to a book called “Breaking the Time Barrier”. Published by FreshBooks, it’s a short read, but very valuable. And best of all, it’s free!
We’ve covered a lot of information in this article. At this stage, your head is probably spinning at the possibilities before you!
To help you get started with the process of value pricing, I’ve outlined the very next steps you should take in a handy One-Page Action Plan.
To get your copy for free, just click the picture below for instant access.
Switching to a value-based pricing model is one of the best things you can do to grow your agency sustainably and improve your profits…
And with the information shared in this article, you’ll be able to make this switch faster and easier than ever before.
I guarantee you that taking this approach will have the biggest impact on your profits more than anything else you can do in your agency.
My aim with this article was to teach you everything you need to know to start implementing a value pricing model in your business today. And with everything we’ve discussed here, I’m confident that you can:
I’d love to hear about your experiences with value pricing, so please reply in the comments below with your thoughts to these 2 questions:
What pricing model do you use in your agency, and what do you think the advantages/disadvantages of doing so are?
If you don’t currently use a value pricing model in your business, what’s stopping you?
I look forward to reading your answers below!
P.S. Don’t forget to download your One-Page Action Plan. Click here to get instant access.
Yet in business, I see time and time again, agencies trying to sell their prospective clients a vitamin pill. This is not a good way to sell.
Imagine going to your best friend’s wedding and having too good a time and waking up with an almighty headache the next morning. Would you reach for a pain killer or take a vitamin pill? Well a pain killer of course!
Clients who are in pain have an urgent need to solve that pain (with your solution). Yet many agencies are trying to sell their prospective clients a vitamin pill (something that is nice to have but not urgent) rather than a pain killer!
So when you are marketing & selling your product or service, are you addressing the client’s pain or are you telling them your product is something that would be great to have in their business?
A real bugbear of mine is that many websites make this mistake by starting out selling the vitamin (which looks like telling the client how great YOU are and what YOU do on your home page) rather than recognising the pain (which looks like building empathy with your client by showing you understand the pain they are in).
This could well be the case with your own website?
They are trying to sell the client something they may not be aware that they currently need (the vitamin pill) because although it might enhance their business, it doesn’t solve one of their major pains right now (the pain killer).
Let me give you a real example of this – something that happened to me last week. I got a cold call from a company that can track visitors to your website and give you detailed info on them.
Sounds great right?
The issue is that this isn’t one of my current pains. A current pain for me (regarding web traffic) is that I would like to get more traffic to my site. Only then would it be worth investing a monthly fee on visitor tracking software. Meanwhile, that product is just a vitamin pill for me, so I am not going to buy it! The guy on the phone wasn’t really listening to me and just tried to tell that spending £500 / month on their software was a good investment. Not if it doesn’t solve one of my key pains!
They needed to better target by understanding who they were calling first.
If we start by identifying the client’s pain then we ‘stand in the client’s shoes’ and demonstrate we understand them (which builds empathy, a crucial part of the sales process). The language we use when we discuss our product or service will then be geared to show the client how we solve that pain rather than just discussing the features of our product (which we can do later).
If we do this we are much more likely to build empathy with a client which will lead them to say ‘tell me more’ and then you have started a dialogue that can more easily lead to a sale.
They contacted Da Costa Coaching after listening to Rob gave a talk at a local networking event. They had worked with a coach previously but saw that Rob’s service-based agency experience together with his no-nonsense and pragmatic approach would be a good fit for Cityzen.
Charlotte Smith Director commented “From our experience, we saw that many coaching firms tend to have a predefined approach that they use with all clients, regardless of need or size. The first thing Rob said when I met him was “I’ll listen to you and address the underlying needs of the business”. True to his word, Rob did listen and adapted his tools and processes to fit our needs. For us, he has been a coach, mentor, trainer and at times, a shoulder to cry on! He has created accountability to help drive our practice forward.”
One of the conundrums Cityzen faced was trying to service both domestic and commercial clients. This meant within one working day they could be designing homeless housing for a Council and a domestic loft conversion. It was clear that the domestic clients needed a lot more account management (hand holding, explanations, more frequent communications and so on) than the commercial clients, who had a better understanding of the process and also trusted fellow professionals to get on and deliver their work.
The coaching process led many discussions around identifying ideal target customers (customer personas), enabling Cityzen to define and focus on profitable and more enjoyable clients. But it soon became obvious there was a need to niche. Like many companies, there initially was a reticence because of the potential for lost business. After spending time researching the market and analysing time spent on customer work, it became apparent that (a) The commercial market was plenty big enough for Cityzen to solely focus on (b) the way to engage with this sector was by building face to face relationships and (c) the domestic clients took approximately double the amount of account management and as a consequence, were often unprofitable.
Faced with this information, Cityzen committed 100% to niching their agency to focus on commercial clients only. This meant
The whole of 2018-19: Offering professional services to B2B and B2C, delivering construction-focused design
2019-20: delivering the same package but niched to B2B only (developers, concept architects, contractors)
Charlotte Smith, Director, concluded “It took, what felt like, some bravery at the time to turn our backs on domestic work but the strategy we worked through with Rob has put us in the strongest position we have ever been in. Not only that, but the work we are being invited to do is more aligned with our values, and fulfilling for our team.”
This is a great story of focusing on a niche and using the intersection of where you get the best results, where you are most profitable and where your passion lies, to work out what your niche should be. It also shows the power having a clear niche will have on your bottom line (from £163k to £1.1m).
I’ve seen it time and time again...
Agencies that have a clearly defined niche massively outperform those that don’t in almost every way: revenue, customer retention, employee satisfaction, and in the quality of their client relationships (because prospects see you as the expert, not just as a supplier).
A big statement to make? Sure - but I know it’s accurate because I’ve lived it. Niching my agency allowed me to triple my profits inside 6 months (you’ll read more about that in the next section).
And in my coaching practice, helping clients to niche their business is one of my most common interventions.
I recently worked with a PR firm that served three main niches. They were doing well, but were struggling to grow their agency and win new business. They felt stuck - like they were perpetually taking one step forward and one step back, never truly making progress towards their goals.
We worked together to answer three core questions (covered later in this article) about their business, the answers to which revealed a clear target niche for them. And by honing in on this area of their business and committing to it in their sales & marketing, they were able to land three new (highly profitable!) clients in just 90 days.
The world values specialists. When you have a cold or a flu, you head over to the GP and take their advice as gospel. But when you need urgent surgery on your elbow, you don’t settle for a GP - you go for the best surgeon you can find.
It’s the same with your agency. People with burning problems want to have them solved by experts. When you serve a specific group of customers, you can:
How much less stressful would running your business be if you knew you could serve a highly targeted group of customers that saw you as an expert (and paid you the fees you deserve, without question)?
In this article, we’re focusing on how niching your agency can help you to supercharge your profitability, attract a constant stream of great prospects, and effortlessly build stronger relationships with clients (which is SO much less stressful than running a generalist agency).
Here’s what we’re going to cover in this article:
The information you’ll learn here is the kind of advice my coaching clients routinely implement with tremendous results. So if you want to start getting paid like a specialist (and have more fun with your business than ever before), then read on!
We cover a ton of information here, and I know how hard it can be to actually apply everything you read when you have so much else on your plate already. That’s why I’ve summarised everything you need to know in this One-Page Action Plan. Click the image below for instant access.
No matter what industry you’re in, niching works. I saw it when I was running my own agency. I’ve seen in my clients businesses’ - and I’ve even seen it in my coaching business.
Back in 2007, when I first started my practice, I was a generalist coach. Whether the client was a large corporation or a small startup, I was happy to help them all the same. I thought that I needed to be a generalist from the get-go so I could get my coaching business off the ground, and set up my website and marketing to reflect this.
The issue with this approach was that in trying to appeal to everyone, I ended up appealing to no one.
I didn’t have a compelling story to tell larger clients because I didn’t have loads of “large corporate experience”. As a result, those types of companies were hard to win.
On the other hand, I had plenty of relevant expertise to offer startups and smaller businesses - but when they heard that I also worked with bigger firms, they would assume that I couldn’t understand the particulars of their situation. Consequently, I struggled to land clients from either category.
I was in a lose-lose position. It turned out that my beliefs about niching and winning new business were completely backwards. Rather than making me more attractive to prospects, positioning myself as a generalist was actually hurting my chances.
But if I took the opposite approach, and instead chose to niche my offering and serve a small group of potential customers above all others?
I would be in a much stronger position to succeed.
Sometimes the simplest truths are the most difficult ones to accept… but after much soul searching, I made what I felt was a very brave decision to niche my business.
For me, choosing my niche was not difficult. I had been a part of the marketing agency world for the previous 15 years as head of my own agency, so I was certain of two things:
But despite being passionate about the niche, and being confident I could deliver results to my clients… I still hesitated.
Looking back now, I can see that it felt like a big decision to make because I still believed that I’d miss out on tons of business opportunities by picking one niche to serve.
I thought about it for hours, days, weeks on end. I’d ask myself “But if I focus just on the marketing agency sector, won’t I miss out on lots of other potential clients?”
As I’ve seen many times in my life, honest reflection is key to finding an answer to the difficult questions. In this case, I had to face up to the reality that I wasn’t winning many clients anyway. Most of them were put off by my generalist positioning, choosing instead to go with more focused alternatives. So really, I didn’t have much to lose. Worst-case scenario, I could pick a different niche, or go back to being generalist if niching didn’t work out.
Fortunately, that wasn’t an issue, as niching my business turned out to be the best decision I ever made.
Within six months, I had tripled my profits and was winning new business left and right. And not any old clients either - ones that I understood deeply (so I knew I could do a fantastic job for them)... ones I truly enjoyed working with.
It’s been almost 13 years since I first started serving this niche above all others. And with the benefit of this experience, I have two key learnings to share with you. Using this advice, you’ll be able to better establish your niche, serve your target audience and build a sustainable agency that profits for the months and years to come.
Defining a niche for your business doesn’t mean that you can never take on an opportunity outside of that niche. While you don’t market and sell yourself to other niches, it’s still possible that clients outside your chosen target audience will seek you out - or that a chance will come across your path that’s too good to ignore.
In these cases, you can make a decision based on the facts at hand. If you feel your agency is a good fit for the work based on your culture, you can deliver good results to the client and would also enjoy working with them, then go for it!
Few agencies will serve just their niche and no one else. You’re free to pitch for and serve business outside of your chosen market. As long as you don’t forget what your core focus is (and why you picked it), there’s nothing to worry about.
And remember: choosing a niche doesn’t mean you’re committed to it forevermore. In fact, I frequently tell my clients that it’s far better to start niche and then broaden out, rather than starting broad and trying to narrow down. As you establish a strong position in your target market, you’ll be able to expand the scope of services you offer to people outside that niche. Over time, you can transition completely if you like.
I’ve seen this in my coaching business. While I started out working with marketing agencies only, I’ve since gained enough experience in the marketplace to help other types of businesses too. My client base is still mostly marketing agencies, but has expanded to include clients outside this niche too. It’s a roughly 80/20 split between niche and non-niche clients.
You’ll probably experience a similar development in your business over time. If you choose your niche well at the beginning, you’ll continue to serve that market above all others - but there’s nothing wrong with dipping your toes in other waters too, if you feel the prospect is a good fit and you will be able to do a good job for them.
Niche businesses nearly always charge more than generalist ones, simply because they are seen as subject matter experts. The more narrowly defined your niche, the more likely it is prospects will assume you are an expert in the field.
As a niche agency, you are seen as an expert. You’re not a mere supplier for some commodity: you’re a trusted partner, someone to be consulted. This, in turn, allows you to build better relationships with your clients - and earn higher fees.
That’s why surgeons get paid far more than GP’s. It’s why World War II historians are seen as more knowledgeable than history teachers when it comes to discussions of World War II. And it’s why some web development agencies can charge £50,000 for a website (while others struggle get paid even £500).
To be honest… it was easy for me to select the niche I’d serve with my coaching business.
As we discussed in the previous section, it just made sense to serve marketing agencies. However, through working with over 250 agencies in a coaching capacity, I’ve seen that it’s not always so easy to pick your niche. In fact, it can be downright confusing if you don’t know what segment of your business to focus on.
I find that there’s a few key questions businesses need to answer before they can choose their best niche. Consider these questions when researching what niche you’d like to target:
You can visualise these questions with the following graphic:
You want your chosen niche to be at the intersection of the Money, Passion, and Results circles. This will allow you to build a sustainable business where you can deliver great results for clients, earn fees you deserve and enjoy the work you do.
Operating a business that fits in just one of these circles (or even in an overlap between two) will be unsustainable in the long run.
Take the time to figure out what niche lies in the overlap between these three circles. This market will become your core focus, allowing you to build a stable agency dedicated to serving those customers.
If you’ve run through the three questions above and are still having some trouble wrapping your head around niching… consider the following framework.
There are four easy ways you can think about niching your agency.
Let’s examine these in more detail below.
This one is self-explanatory: you can choose to serve a market based on geographic location.
This can be a good strategy when knowing the area is a competitive advantage. Understanding the lay of the land and being able to “speak the language” of your target audience is often an invaluable asset in winning their business.
Examples of industries/verticals include pharmaceutical, telecoms, tech, and education.
These sector definitions are quite broad, so it can be a good idea to niche down even further by identifying a sub-sector in the niche e.g. rather than serving tech companies, you could drill down and focus on helping consumer tech start-ups or B2B SaaS companies.
Examples of deliverables/services you may provide could include PR, web development, SEO etc. Once again, it’s important to ask yourself if the specific service you’ve identified is niche enough… or if it’s too broad.
If it is too broad, you need to establish a niche position that makes you look like a specialist, not a generalist. For example, you don’t just offer PR services - you’re an expert in Crisis Communications. You’re not just a web developer - you’re a web developer that specialises in integrating CRM systems.
Sometimes, you’ll find that a lot of your clients are facing broadly similar problems. E.g. you help startups win funding from competitive grant programs, or you help financial practitioners generate more leads for their services.
If you habitually help your clients with the same problems, you could consider basing your business around solving this problem. And if you can explain how and why you are uniquely qualified to serve this sector, you’ll do just fine!
Once you’ve picked your niche, you need to commit.
All of your outward communications should be crafted with this niche in mind. If you’re advertising, you should endeavour to speak to your target audience directly. Forget about being all things to all people - serve the few so that you may build a profitable, stable business that will eventually serve the many (if you want it to).
Your goal is to be seen as an expert in your chosen sector. In practical terms, your website should be geared towards achieving this outcome. First impressions matter. You don’t have very long to convince people you can help them. As soon as prospects land on your site, they should be able to tell:
Let’s look at some quick examples to really drive this point home.
Look at this web design agency. Here’s the first thing you see when you click in…
This is the site of a web design agency located in East London - but you wouldn’t know that from looking at their home page.
Their offer of “bespoke design and web development” is stuck in the top left corner in small white font. The most prominent thing on the page is the fact that they’re looking to hire developers.
Suffice to say that prospective clients who come across their website are unlikely to stick around for very long.
To apply the criteria listed above to this site:
Now, let’s look at a better example. This is another web design agency. Here’s the first thing you see when you click onto their site:
Instantly eye-catching visual imagery, a clear contact button, an uncluttered screen and an obvious next action to take. In addition to this, they instantly speak to their audience (ambitious businesses who want their brand to “thrive online”).
Their niche is even clearer when we scroll down to the next section…
Great use of white space, and a beautiful design in general. Important for a design agency, sure - but let’s apply our criteria from above to see how well they fare.
Of course, there’s more to marketing than just your website. You also need to think about how people will find you.
If you’re running ads, they need to be congruent with the niche you’re targeting. Speak their language, and tell a consistent story across all mediums you use to reach them.
Beyond ads and digital outreach, you also have to be mindful of the networking events you attend.
Packaging design business owners shouldn’t be attending events where they meet accountants, bankers, personal trainers & hairdressers. Sure, they might have some great conversations - but they won’t be talking to their target customers.
If you’re not sure who your target customers are, you need to spend some time developing crystal-clear customer personas (or customer avatars). For more info on how to do that, check out my Customer Personas Workbook (discussed in the Resources section below).
Having a clearly defined niche and understand who you’re targeting is a massive part of running a successful business in any industry, not just in the agency space. To prove this point, let’s look at another example… coffee.
I don’t know about you, but I can’t start my day without a good cup of coffee. And to be honest, I’m pretty spoilt for choice. Living in the seaside town of Brighton in the UK, I can’t go more than 100 yards without coming across a coffee shop.
In my eight years of living here, I’ve seen many coffee shops come and go. In fact, I’ve actually worked with one or two over the years (a good example of how you can take on clients slightly outside of your niche when you can add value to their business).
Trust me: it’s extremely difficult for a coffee shop to stand out from the crowd here. They all sell the same basic product (coffee), have roughly the same atmosphere and decor, and operate their businesses the same.
Most struggle to define a clear niche to target. And so they try to cover all bases (e.g. offering breakfasts, takeaway lunches, teas etc.) - this is a mistake. As we’ve already discussed, trying to appeal to more and more people usually has the opposite effect you’d like it to have.
Singing the same tune as everyone else is not a good way to get heard over the noise. This is why the majority of coffee shops are just getting by. The owners don’t get rich - at best, most just build a high-stress job for themselves.
Of course, some coffee shops are doing very well. Take Small Batch Coffee Company, for instance.
When they first started in 2007, Small Batch was a small-scale business. Their only goal was to roast small batches of high-quality coffee. After a couple of years of this, they opened their first few coffee shops. Gradually, they expanded the company’s wholesale and retail business to include multiple coffee shops.
Today, Small Batch Coffee is a hugely successful coffee wholesaler, supplying high-quality, ethically sourced coffee to cafes and restaurants all over the south of England. They also sell coffee online direct to retail customers and serve their own customers in seven different locations.
I believe that Small Batch have succeeded because, right from the start, they were clear about their niche. They didn’t open up another generic coffee shop and starting competing with the 15 other stores within walking distance of theirs. They focused on providing home-roasted, high-quality coffee to the exclusion of all else. At least at first. They were singing a different tune… and pretty soon, people started to pay attention to them.
You’ll also notice that they didn’t confine themselves to this niche. Once they had established a position in this space, they expanded outwards into complementary markets (known as ‘shoulder niches’). This contrasts with the standard generalist approach taken by most coffee shops.
In addition to this, Small Batch established a reputation for quality in the micro-roasting business, then carried it over into their retail operations. People know that if you’re looking for a good cup of coffee, you go to Small Batch. They prove that niching works.
In this section, I’m going to share with you some of the powerful tools you can use to help niche your agency.
Previously, we discussed some of the big issues that stop you from building a highly profitable niche agency. False beliefs, not taking the time to truly examine your business, and the fear of “missing out” on all the niches you don’t choose… all of these factors can hold back your business from growing like it should. Growing your agency is challenging enough - you don’t need all this extra baggage complicating matters too!
Luckily, I’ve developed some useful tools in my time as a coach to 250+ agencies. And in this section, I’d like to share these resources with you.
Firstly, you can get a free copy of my “Defining Your Niche” eBook. Inside, I break down the difference between niche and generalist agencies, the realities of running each type of business, and a super-simple (but powerful) framework for figuring out where your business is right now - and more importantly, how to get to where you want to be.
Secondly, If you’re completely new to the subject of niching, then I highly recommend you check out the book “Blue Ocean Strategy”. First published in 2005, it revolutionised the way I (and thousands of others) think about business. I’ve often applied its learnings with my coaching clients, many of whom have benefited tremendously from the ideas contained within.
The book likens competitive marketplaces to “red oceans”: waters where fish fight for scraps and tear strips from each other in an effort to survive. Companies operating in red oceans typically have smaller profit margins, experience more competitive pressure and have a harder, more stressful time in general.
The book then goes on to explain that you don’t have to dive into these overcrowded markets. You can instead head for open water and seek out your own “blue ocean” (an untapped or underserved niche). These spaces are less competitive, allowing you to more easily establish a position in the niche (and even become the dominant force in it).
Thirdly, you can also get a free copy of my Customer Personas Workbook. Rock-solid customer personas are the foundation your niching efforts are built on. In this PDF, you’ll get my step-by-step system for getting in the heads of your target market, deeply understanding their needs, and effortlessly tailoring your business to their desires. This is the exact stuff I do with clients every week as part of my coaching practice, and some of the highest-ROI work you can do as an agency owner.
Finally, we have to face up to reality - not all niches are created equal. Some seem great on paper, but don’t pan out like they should when it comes to overall market demand. And one of the best ways to gauge how viable a niche is? Keyword research.
One of my favourite keyword research tools is Keywords Everywhere. This free browser extension gives you access to tons of keyword-related info that you’d otherwise have to pay for via expensive Adwords campaigns and the like.
You can also consider Neil Patel’s namesake app: another great resource at your disposal.
And if you don’t mind spending a little money, you should check out Ahrefs, which has tons of useful content for researching a niche, and positioning yourself within one.
Using tools like these, you’ll be able to research your chosen niche & associated keywords in detail, assessing its viability without committing lots of money and time to the cause.
We’ve covered a lot of ground in this article. To help keep this actionable, I’ve outlined the very next steps you should take to start the process of niching your agency.
If you’re interested in getting your hands on this free One-Page Action Plan, click the picture below for instant access.
The value of having a clearly defined niche cannot be understated. In my experience, niche agencies outperform generalist ones in almost every way. They:
Running a niched agency doesn’t entrap you - it frees you to build a business that delivers great results to clients, earns you the fees you deserve, and allows you to work on projects you’re excited about.
Your ideal niche is at the intersection of profitability, your ability to deliver results to clients, and what you’re excited about (Money, Passion and Results). Making anything else your focus is unsustainable in the long run.
You can also think of niching in terms of geography, industry, service and the problem you’re solving. Remember, these are just four different ways of considering how you might differentiate your business from your generalist competitors.
Once you’ve picked a niche, you have to commit to it. All of your outbound communication (including your website) should demonstrate your understanding of that niche and your ability to solve their problems. Websites or ads that miss the mark with this will hold your agency back and cause you to lose out on lots of business, so it’s worth paying attention to.
Having a clearly defined niche to serve is important in any industry. Web design, marketing, 3D architectural rendering, and even for coffee shops - businesses need to pick a niche to serve above all others if they hope to succeed in these spaces.
My aim with this article was to teach you everything you need to know to start niching your business today. With the tools, processes, templates and frameworks we’ve discussed here, I’m confident that you can:
I’d love to hear about your experiences with niching, so please reply in the comments below with your thoughts to these 2 questions:
I look forward to reading your answers below!
P.S. Don’t forget to download your One-Page Action Plan by clicking the image below.
As we all know, the pressure to run faster can come from different sources. It might be clients who want everything yesterday or staff who always seem to want us to deliver more in less time. But for many of us, the biggest source of pressure is ourselves – because we like to busy but aren’t always clear what we need to be busy doing!
The busy fool works long hours and can’t turn their phone off. They are a hive of activity but ask yourself this – are they moving their business or project forward? If not, then they are being busy for the sake of being busy – the busy fool.
Understanding what is VITAL v what is IMPORTANT
Many people start their day/week with a “to-do list” which they diligently work their way through from top to bottom. Forget it. Instead, identify the top three vital actions on the list (which are often the hardest things) that can only be done by you. What are the real priorities? Focus on those first and then tackle the next three priorities and so on.
Doing nothing (procrastination) is rarely a safe option. Yet sometimes doing nothing and giving yourself some breathing space to think, stand back and prioritise, is exactly what you need to do!
What is the impact on the business? The danger is we become purely focused on the short term rather than the bigger picture and you get a sense of ‘1 step forward and 1 step backwards’.
Some organisations seem to work harder and longer but productivity goes down. A business full of busy fools!
So here are 7 useful tips to help you be busy doing the right things:
Focusing on the right things to do to move your business forward might seem like an obvious statement but you won’t be surprised to learn that this is a common topic of conversation with clients (hence this blog post!). Have a read of my eBook on ‘winning back time’ (complete the box below to get instant access).
Please leave a comment if you have any additional favourite tools and tips to share.
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I want to share something that may help my fellow agency owners. I ran my own agency for 11 years (before selling up), and even though I’m grateful for the experience… man, there were some hard times.
Lately, I’ve been reflecting on the experience I had towards the end of running my marketing agency. I was thinking about all the hard times, and how when I was so deep in the valley, it was tough to see the light. So I decided to write a letter to myself 15 years ago. I wish I had this letter at the time because it would have been so encouraging, given what I was going through. I wasn’t going to share this, but it may help some of you, so here you go. Here’s the letter I wrote to Rob, the burned out agency owner, 15 years ago.
I know you aren’t that motivated to be at work today and you are almost certainly distracted. No doubt your day will be filled with handling difficult clients. I know how hard it’s been recently dealing with the loss of XYZ client. They were 40% of your revenue, and you lost them virtually overnight. You’re panicking, and wondering how you’re going to make payroll with such a big loss.
You’re walking into work every day expecting to deal with yet another ‘wheelbarrow of crap’. Problem after problem. Frustration after frustration. You’re wondering how the hell the ACTUAL business has strayed so far away from the VISION you originally had for it.
You’re wondering how long you’re going to feel so damn… lonely.
But before you throw away a great business because you think the other man’s grass is greener, let me tell you one important thing: It gets better,
Rob, my friend, here is what you need to do to turn it around:
Trust me, if you do these things, you will quickly realise there are more options than just selling the business. And done right, you could have the freedom to pursue other things. Like travel more. Start that business in Spain. Become a coach and so on.
Do you know the best part, Rob? The part you can’t see right now, but I wish you could? It’s that you can do all this while keeping a business running that earns you a good income and provides a great life.
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We all know the type. You can feel them when you walk into the room and you can almost see a grey cloud over them. These are the people who put a pair of grey glasses on every day when they leave for work. They see the reason why something won’t work, as their default position. They are the victims; they are helpless to affect change. They are the energy sappers.
I occasionally get to experience this with clients or when delivering training. It only takes one! Then all the attention and time is swallowed up trying to convince that person to take their grey glasses off. Not only does this suck the energy from the room, it is also unfair on the rest of the team.
Some common traits of the sapper is that they constantly air negative views, fail to engage others, favour their own solutions or fail to deliver on the commitments they make and are poor listeners. These actions drain the energy of their colleagues, stifle creativity and hinder progress on initiatives.
Many business leaders believe that energy sappers are the biggest obstacle to success.
So what can you do?
The flip side of the sapper are those people who “energise” others.
They are high performers and help create high performance, high-energy environments. We want energisers in our business and we want to encourage, acknowledge and reward these behaviours. So define your company values and the behaviours that sit behind them. Ensure roles & responsibilities contain a description of ideal behaviours and not just tasks. Recognise and reward great behaviours not just the completion of objectives.
The traits of the energiser are not surprisingly the complete opposite of the sapper: they are open to ideas, inclusive, look for the positive, are great listeners and team players. Energisers bring energy into the room and we want them in our businesses.
So tomorrow morning, as you leave the house, consider what glasses you are going to put on – grey? neutral? or rose tinted? Are you going to be the sapper or the energiser?
Many organisations will be flattered and excited to be asked to write a proposal and won’t do their due diligence – establish budgets and timescales as well as understanding exactly what the client really wants and to look internally to work out if you can deliver it (i.e. you have the skills/capacity and it’s a core service can confidently deliver). This is a time to enact one of my favourite business expressions: ‘slow down to speed up’. Take your time doing your research, going back to ask the client more questions, gather more background info etc. And if you decide it’s a good fit, then go for it. If not, then have the courage to walk away.
Anything that feels too challenging or gives you a feeling it’s going to be difficult to deliver – undoubtedly will be.
So when you have met with a prospect, had a good chat and a nice coffee, and neither party knows exactly how to wrap up the meeting so you suggest or agree to put your thoughts in a proposal, think again! Have you identified all the buying signs; do they have agreed timescales? A budget? Are they clear what they want? Or are they going to use you to shape (or write) the brief and set a budget for them? If so, beware!
Now you have decided its worthwhile writing the proposal – make it about them not you! I am amazed at the proposals I have read that start of by telling the prospect how wonderful the supplier is! This is all well and good but before you do that, you need to prove to the reader that you understand their business, market, products and challenges. Then you should outline how you will creatively solve their challenges. And only then, can you blow your own trumpet and tell them how great you are and what relevant experience you have.
There is so much more to this subject so if you want to find out more, download my whitepaper on pitching and proposal writing by completing the box below.
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There are a number of stages we need to follow in order to truly understand our customers and therefore ‘speak their language’. Firstly, we need to understand who our target customer is. Sounds obvious right? You’d be surprised how few companies have identified their target customer groups (maybe 3-4 different types) and therefore can map their typical behaviours, challenges and needs of each group onto their product/service. If you do this as step one then you can start to produce sales and marketing messages that resonate with each group. Take me for example, as a business coach and mentor, 2 of my (3) customer personas are HR managers of mid-sized businesses and Owner/Managers of small businesses. Do you think they have the same needs when looking for a coach? No, they don’t. If I understand their specific and unique requirements then I can start to ‘talk their language’ when marketing to them.
Now you understand your client types you can start to map the journey they will take as they look to buy your solution and move through your sales funnel. What are the various stages they go through as the convert from contact to warm lead to prospect to hot prospect and finally customer (and then repeat customer)? And what can you do at each stage to ‘encourage ‘ them to move through this process? It will certainly be different messages at each stage; your communications will get more detailed and sophisticated the further they move through the funnel.
If not and you want to find out more, download my FREE ebook on developing your customer personas.
Welcome back! In the previous article, we talked about one of the most common problems agency owners face – managing clients expectations when they keep asking for more. We went over how having a rock-solid service level agreement in place is a huge boon, as it gives you an easy way to handle delivering extras and unforeseen changes.
In this week’s article, we’re going to dive deeper into the things that influence your client’s expectations, and what you can do manage them. Even before you first create that service level agreement, you have the chance to influence how they perceive you. And once you’re working together, you need to ensure that everyone on your team is on board with your methods.
Let’s turn first to how you win their business.
If you’ve read some of my other articles, you might already know that I’m a big proponent of value selling & pricing. Rather than figuring out how much time something is going to take you and then quoting prospects based on this time, you should instead figure out how much value (outcomes and impact) your work can create for them and price accordingly.
Getting crystal clear on the value your work brings to the table will allow you to charge higher prices, win better business, and build better relationships. Think about it – when your customers understand you’re solving problems for them that are saving them (or making them) far more money than it costs to keep you on retainer, they’ll be delighted with your arrangement.
Learning to pitch & sell based on value (and not just time) is a game-changing shift for your agency. If you’d like to learn about it in more detail, you can download my free Value Selling eBook here.
We won’t examine the topic in exhaustive detail here – just the bits that are most pertinent to our discussion about how to manage demanding clients.
First things first…
It’s normal to price based on time. Particularly for internal control purposes, it’s good to have an idea of how long a particular project is going to take, or how many man hours will be required to get something over the line. However, when it comes to pitching, basing your price on time (and not value) is a critical mistake.
Commodities do not command large prices. When the fuel gauge in your car is teetering towards empty, you probably don’t seek out the station that charges twice the price of all its competitors. You probably don’t like paying a premium for your phone plan or business cards.
All of these are commodities. We judge commodities based on price, nothing more. And if your clients should view the work you do as a commodity, then you’ll be judged relative to other agencies in your industry. If competitor X can get the job done in half the time, they’ll seem more attractive. Even if your work is better, more tailored to their needs, or you’re far more reliable… when you pitch solely based on time, you’ll be trapped in a race to the bottom.
When you give a time breakdown to clients upfront as part of your pitch, you leave yourself open to the extremely common question of “why will x take so long?” – and when faced with this criticism, you’ll often react by discounting your price, which starts you off on the wrong foot and sets the tone for the relationship.
The real issue with pitching based on price is symptomatic of the underlying issue… focusing on outputs instead of outcomes.
An agency that wins in the long-term is one that delivers great work to clients. Reputation is invaluable for client-facing businesses, and a reputation for doing great work is one of the most powerful assets you can build as an agency owner.
But to deliver outstanding results to your clients, you have to frame your relationship in terms of outcomes, not outputs.
The outcome is what your client is really buying. The output is what they use to get there.
Think of it like this:
“Outputs” are commoditisable. Plenty of other agencies can deliver the same outputs you can. But outcomes are harder to copy. If you build your business on helping clients achieve their outcomes, you’ll have stronger and longer-term relationships.
If they want to expand the scope of your project beyond what you’ve already agreed on, you can politely remind them that you’ve already decided on a direction for the project. If something is to be added, something else must be removed – or else an additional fee will have to be agreed for the extra work.
I’d like to finish off this article by giving you three quick tips that I’ve seen work wonders in agencies of all shapes and sizes. These practices are distilled from my years of experience coaching 250+ agencies in various sectors, so don’t be fooled by their simplicity.
And finally… if you’ve done all the above and clients are still asking too much of you, it might be time to consider whether you’re a good fit to work together. Working with your ideal clients is crucial to running a stress-free business in the long run.
The filtering process starts back when you’re first considering them as a client, so if you gut tells you they are not a good fit – listen to it and move on to the next prospect.
In the eyes of your ideal clients, you’ll be seen as a partner, not just a supplier. In the eyes of the non-ideal ones, you’re a supplier – a provider of a commodity, there to be used as necessary. Seek out those clients who see you as a partner.
For more information on how you can determine who your ideal client is, you can get a free copy of my Customer Persona eBook here.
In this two-part series, I’ve addressed one of the most common questions I’m asked in my coaching practice: what do you do with clients who keep asking for more?
These kinds of clients are often unclear about what to expect from your service because you haven’t adequately explained your terms upfront. To counter this, you can create a rock-solid service agreement at the start of your relationship. Include specifics as to the deliverables they’ll get each month, charges applicable for extras, outcomes you’re working towards, etc.
Another reason why clients seem unreasonably demanding is that you sell based on outputs, not outcomes. When you frame your work in terms of how much it costs or how long it will take, you make it easy to compare your proposal to that of many other agencies.
If you pitch based on the value you bring to the table instead, you’ll have less issues with clients demanding more from you (for no extra pay). When you’re both clear on the outcomes your work will deliver on, clients are less likely to request incongruent changes or take up your time with other requests.
Finally, it’s simply good business sense to do certain things (e.g. agree a contingency fee upfront, train your staff to handle clients correctly, and enforce response times to manage expectations). These tips can have a significant impact on your business if implemented, so don’t hesitate to give them a go.