Pricing the services of your agency is a very popular question we get in our community so I have decided to take some time to write a post with some useful tips.
When I first started my agency, I changed our pricing three times:
I undercharged (mistake #1), offered too many services (mistake #2) and did not know who my ideal clients were (mistake #3).
Here are some tips on how to effectively price your agency services:
1. Niche down your target market
The truth is, not every type of client will be a fit for your agency (either they're not the right size, or in the right industry) and your agency or productized service cannot make every client happy.
The first step to price your agency services effectively is to niche down your target market.
Why? For two reasons:
1. To improve your positioning
2. To match your services/plans (and pricing) to your client needs..
Here are some questions to define your target market and ideal clients:
- Who is my target market?
- What problems am I solving for that target market?
- What solutions have they tried before?
- How much were you paying for those solutions?
- What are their goals?
Let's take an example, ZenOutreach (a lead generation service).
Instead of focusing on every type of customers, they only focused on two types: Agencies and SaaS businesses.
By narrowing their target markets they are able to fully understand the goals and even mention it on their website: "Get more demo calls for your software" or "Get more meetings with your ideal clients". This speaks to the potential client that visits their website.
How to define your ideal agency clients
The best way is to do some research.
- LinkedIn and Email outreach: Reach out directly to clients! You can ask questions, and some of them might even become client for your services.
- Facebook groups: Lots of clients post on Facebook groups various questions. It's a great way for you to identify the problems they face in their business.
- Quora: Find questions related to your agency's services and see the most common pain points and answers.
- Reddit: Reddit has multiple subreddits for pretty much every type of clients. Hang out
Something you can do is to create a Google form asking questions and give them a $50 voucher for your services as an incentive.
2. Scope your service offerings
The second biggest mistake most agencies do when it comes to pricing is saying yes to every type of request.
If your agency offers everything and out of scope requests it will be difficult to price your services.
Scoping your service offerings so you can have more predictable client requests and pricing.
How to define your service offerings
Here are some questions I would ask myself:
- What services do I want to offer to solve the problems of my target market?
- What services are most in demand by clients?
- What services / tasks are the easiest and hardest to deliver?
- What will my service include and not include?
- What am I good at and what do I enjoy doing? (This one is optional but a key question to make sure you build a business that you actually enjoy working on daily)
For example this could be ...
- E-commerce stores that use Shopify and have at least $10,000 in monthly revenue
- Need to customize their stores but don't have the resources for a full-time developer
- I will offer a Shopify maintenance plans, but graphic design changes will be an add-on
- We focus only small Shopify tasks, so we will keep tasks we offer to take maximum 1 hour
- I want to build a business that can run without me
Again, do some research. For example you could look at other agencies in the same space, review sites, as well as freelancer websites.
Here's what I searched on Upwork looking for "Shopify" services:
With that query I get a tons of results and I can understand what are the most common tasks requested by clients.
3. Choose the right pricing model
Once you know your core offerings and who your ideal clients and core offerings are, it's time to decide how you will charge them.
This could be:
- Hourly-based (example: Virtual assistants starting at $15/hour, or a package of 20 hours at $300/month)
- Retainer-based (example: Monthly video editing for USD $800,-)
- Per task or project based (example: 1 blog post for USD $500,-)
- Performance-based (example: $1 per lead generated)
You could also mix and match models, for example: Project-based (Website for $1500), then retainer based (Monthly maintenance for $99/month)
4. Estimate your costs
The next step in pricing your agency services is to estimate your costs.
Here are some costs to take into account:
- Employees and freelancers
- Sales taxes
- Payment processing fees
- Software costs
- Marketing costs
- Founder salary
Knowing your costs will help you know your profit margins for the services you sell.
5. Analyze the market for prices
The next step is to analyze what are the usual prices.
One way to do so is to look at your competitors and how much they charge for similar services.
For example you could look at the following places:
- Freelancers marketplaces like Upwork and Fiverr
- Agency directories like Clutch and Sortlist
6. Create your plans
Finally, I would create plans or at least a standard pricing list.
Let's say you run a Shopify maintenance services and found out that you have different type of clients:
Type A: They're small stores owners that have a budget of $500 to $2k per month. They care mostly about having a cost-effective service.
Type B: They're large e-commerce stores that that have a budget of $2k to $10k per month. What they care about is the availability/speed of response.
This is why customer research and knowing who your ideal clients are is very important.
You could create two plans:
Plan Basic: Shopify maintenance for $300/month, 48 hours delivery
Plan Premium: Shopify Premium for $900/month, 24-48 hours delivery, Slack support
For each plan, decide what is included and not included in your services.
Pro tip: You can use ManyRequests (our software) to create one off and recurring services. You can then either send invoices to your clients or create checkout forms.
7. Charge your clients
The next question you may have when it comes to agency pricing is "When should I charge my clients?"
There are several ways to charge your agency clients:
- Upfront (you can create checkout forms with ManyRequests and embed pricing on your website)
- Downpayment and after completion (for example: 50% upfront, 50% after completion)
- On competion
In addition, you could also add a discount on the first month or create free or paid trials to let clients test your services.
Pricing your agency services effectively start from two foundations: Knowing your target market and their needs, and having a well scoped services to address those needs effectively.
Once you establish that, you'll be able to price your services more effectively, directly helping your clients achieve their goals.
The next step is to analyze the market (and your competitors) and to estimate the costs of rendering your services , taking into account your own compensation and marketing costs.