How to price agency work without guessing

Most agency pricing is the last number someone got away with. Here is how to build one you can defend, raise, and explain.

Ask most agency owners how they arrived at their prices and, if they are honest, the answer is that it is roughly what the last client agreed to, adjusted upward when it felt possible.

That is not a strategy. It is a rounding error that compounds for years.

Know what an hour costs you before you sell one

Not the salary. The loaded cost: salary, tax, software, the desk, and the fact that nobody bills eight hours a day.

The last part is where the arithmetic usually breaks. Sold time is somewhere between fifty and seventy per cent of paid time in a healthy agency, once you take out admin, pitching, internal meetings and holiday. If you price against an eight-hour billable day, you are pricing against a day that does not exist.

Work out your real figure. It is the floor under every decision that follows, and until you have it, every quote is a guess wearing a suit.

Retainer or project

A project suits work with an end: a site, a campaign, a launch. Clean to scope, clean to close, and it has to be re-sold every time.

A retainer suits work that compounds: SEO, content, ongoing outreach. Predictable for both sides, and it is where agencies become stable businesses.

The failure mode is a retainer that is secretly an unbounded project. If the scope is "marketing", the client will keep asking and you will keep saying yes, and by month five you are working a project's hours for a retainer's fee and resenting a client who has done nothing wrong.

Retainers need a defined shape: what is included, how much of it, and what happens when there is more. Not to be rigid. So that "can you also..." has an answer that is not silent absorption.

Three tiers, and the middle one is the product

Given one price, people decide yes or no. Given three, they decide which, which is a far easier question and a much better conversation.

Build them properly:

• The entry tier exists to make the middle look reasonable. It should be genuinely useful and visibly limited.
• The middle tier is what you actually want to sell. Most clients should land here.
• The top tier exists to make the middle look modest. Somebody buys it every so often, which is a pleasant surprise rather than the plan.

The mistake is making the tiers differ only by volume. "Ten posts, twenty posts, thirty posts" invites a negotiation about the number. Tiers that differ by scope invite a decision about fit.

Charge for the outcome where you can

Hourly pricing punishes you for getting better. The faster you work, the less you earn, which is a strange thing to build a business on.

Value pricing is the alternative, and it is harder in the way that most good things are: you have to know what the outcome is worth to the client, which means asking questions during the sale that most agencies skip.

The bridge, if you are not ready: price by deliverable at a rate derived from your real hourly cost, and stop showing hours on the invoice. The client is buying an audit, not fourteen hours.

Raising prices

Existing clients are the hardest and the most important, and there are only three rules.

Give notice. Sixty days, in writing, before the renewal. A price rise that arrives with the invoice is an ambush and it is remembered as one.

Give a reason that is about them. Not "our costs have gone up". Something in the shape of "the scope has grown to include X and Y, and the new rate reflects the work as it now is".

Expect to lose one. If nobody objects, you were further under the market than you thought, and the rise should have been larger.

The arithmetic is friendlier than the fear. A ten per cent rise across ten clients survives losing one of them and leaves you with less work for the same money.

The quick audit

Take your three most recent clients and, for each, write down the fee, your honest estimate of the hours delivered, and the loaded cost of those hours.

One of the three will be worse than you expected. That client is not a pricing problem in isolation. They are the reason the other two feel tight.