How often do you think about it?
If you’re involved in setting prices for a web agency, even if it’s an agency of one (especially if it’s an agency of one), you’re likely to spend a lot of time wondering if you are too high or too low.
It’s natural. Nobody comes out of the womb pricing perfectly.
In the beginning, most people err on the side of pricing low. Eventually, rates rise, but issues remain such as time tracking, scope creep, unbillable time, and generally being too busy.
That’s where these podcasts come in.
Prepare to “Think Different” About Pricing…
These episodes are straight fire. 🔥
They go beyond the old “raise your rates” with specifics on how to figure out your prices, how to have conversations about pricing with prospective clients, and if hourly-based billing is even an appropriate model.
You will notice that much of the discussion around pricing these days is about value-based pricing. However, even if you are set on hourly rates, these podcast still contain a wealth of practical advice.
Notes About This Page
- We tracked down the embed codes whenever possible for one-stop-shop listening.
- We listened to every minute of every episode to provide summaries and quotes..
- Click the links to the shows for additional information and subscription options.
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Podcasts About Pricing:
This accessible episode breaks down the transition from standard pricing to value pricing, based on understanding a client’s real needs. Particularly interesting was the discussion about providing three pricing options for varying levels of awesomeness.
“The important thing we did wrong, people came, they said they wanted a website… and we’d say, okay, we’ll give you a website.”
“They (clients) come with a surface need. Then there’s so much beneath that they don’t realize. We’re starting to help people to discover things they didn’t know about their business.”
“Q: Aren’t you scared about cash flow? Everybody’s like, “I don’t want to lose a client because I’ll lose cash.
A: That’s the thing though. If you price one project accurately, that’s worth four projects (priced) inaccurately.”
Starts by exploring the relationship between pricing and customer service, how hours are not what the customer actually wants. Covers tracking time for pricing vs. tracking time for planning… is there a good time or way to think in terms of time? Also covers asking others for help on pricing, as we often don’t value ourselves highly enough.
“Clients aren’t buying time from me. They’re buying peace of mind, they’re buying sleep, they’re buying results, they’re buying an outcome, they’re buying a transformation, but nobody buys time. I mean, nobody goes in a Porsche dealerships and says, oh look at this great car, turns around and ask the salesman, I’d like to see the time sheets on that. Nobody cares.”
“Compare that to the cost of keeping time sheets. Especially when you have these expensive programs, when you have people filling them out — we estimate somewhere between 5 and 15 – 20% of a firm’s gross revenues feeding the beast. And what’s the ROI on that? It’s certainly not making us better pricers, I don’t think it’s making you a better project manager…”
Rob gamely volunteers to be the “hourly pricing apologist” on a podcast that is very much about value-based pricing. While addressing the complaints people often have with the hourly model, it becomes clear that there is a strong value-based mindset at work here.
“We actually have two different hourly rates. We have a production rate which is $165 per hour and a consulting rate which is $200 an hour.”
“When we went from $150 to $165, (clients) were like, we were really happy at $150. I’m like, okay, do you really want me to prioritize everyone else over you? They said, well, no, of course we want to be your #1 priority. And I said, we can ensure that our objectives still align, and that ended the conversation for the most part.”
“In know we are talking about pricing but… I think that this industry, the web agency industry, we sometimes get wrapped up in trying to find the next project, instead of finding good accounts that we can continue to service in the long term.”
Talks about how important pricing is to sustain and grow a business. The guest is an agency owner who previously worked at Ellis Lab, makers of the Expression Engine CMS, where he got brought in on a lot of sales demos and saw a lot of deals.
“Prior to that, I would have told you an expensive website was $60,000 to $70,000. And working at Ellis Lab told me that, no, it’s actually over $1,000,000, and can go up from there. And that a good majority of the larger agencies are working on projects that are six figure projects.”
“Q: What do you a consider to be a healthy profit margin?
A: If you had asked me a month ago, I would have told you that 40% is a reasonable percentage… (but) I recently attended Owner’s Summit… listening to some of the stories of what people are charging in the industry… you could see 60% to 70%, easy.”
“If you can’t communicate to somebody the value you bring… then you’re missing out on what life has to bring you, because you may be able to make more money, have better relationships…”
Expanding on their earlier pricing episode, this explores the practical, actionable things you can do right now to improve pricing of your services. The interviewee went through a rough stretch a few years ago before re-evaluating pricing.
“This shop rate… is the basis for all pricing calculations. It is what determines if you are profitable, if the client fits your business needs, if you can take work or not, it helps you determine if they are a value to you. It puts you in a position to flip the conversation around and put you in the driver’s seat, you’re shopping your clients.”
“The biggest eye-opener was: even when we thought we were billing our rate, we weren’t billing our rate.”
“Q: What’s the difference between your shop rate, base rate, and what you bill?
A: The line you cannot cross is losing money, the line you should not cross is not making a profit, and the line I prefer you not cross is not making a significant profit. The shop rate is the point of no return, the line you won’t cross in a negotiation. A billing rate will be driven by what your market will bear, what’s been offered (etc)… The most important thing is that the billing rate is more than your shop rate. They could be the same… you’re still making a profit, because profit is built into the shop rate… but you’re selling yourself short.”
How To Use Value Based Pricing in Your Web Design Business
Show: Web Agency Podcast
Guest: Brent Weaver of uGurus
Date: September 19, 2014
Time: 1 hour, 2 minutes
“Every web designer wants to just go out there and throw a number in their proposal that is grossly over the commodity price, they want to just put some number in a proposal and not explain it, and that to them is value based pricing… Give them no concrete evidence of why that (extra) zero is there.”
“One thing we always asked was for our clients to share their Google Analytics accounts with us or added us as a viewer, so we could actually see, 3 months after launch, 6 months after launch, what kind of impact did we have on their numbers. And when I started to do that stuff, it started to give me information that I could then use on my next pitch. So I don’t think you go from fee-based pricing to value based pricing overnight. I think you do have to learn how to change the conversation. You do have to learn how to build that value.”
Not as focused on pricing strategy details as some of the other episodes. The main gist seems to be on delivering results for businesses as a basis for getting better pricing.
This is an early episode, so ignore the first 30 seconds of dead air. This was from back when there were two hosts, and they work through their sometimes different opinions about pricing. Also goes into detail on the concept of always quoting three prices.
“I tried pricing hourly before, and it works, and it’s easy. But what I found was, for me, I got to a cap of an hourly rate that people are just not willing to pay. I got to a rate of $150 per hour… and I’m not able to charge more than that.”
“You mean to tell me that as you get better, as you get more experience, you should be making less money?”
The shortest episode in this list provides an overview of value based pricing. Also points out the irony of clients who want to capture more value in their own business, but who do not value the web designers who are better positioned to help them achieve this goal.
Unlocking the Power of Value-Based Pricing (Hint: It’s More Than Flat Rates)
Show: seanwes podcast
Guest: Matt Riopelle of mattriopelle.com
Date: September 4, 2013
Time: 1 hour, 14 minutes
The first of several episodes from this podcast dealing with pricing. This show is very dense with good information. It’s hard to only pick a few quotes.
“Q: How would a website like that figure out what kind of value a website would bring to them?
A: The short answer to that is they may not know. And it’s up to us, that responsibility as professionals in this industry, to really figure that out.”
“When you’re focusing on the time instead of the results, you’re positioning yourself as an expense to the client.”
“What is your time worth to you? Another way of asking that is… what is the value of something else you could be doing with that time?”
“One thing that frustrates me the most is to see people advise new designers to take whatever work they can get. And that’s not to say I haven’t taken on sub-par jobs. I think we all have. But the difference is, I’m not going to turn around and recommend that to someone who’s new, i.e. ‘Yeah, take on any crap jobs and you’ll figure it out later.’ What they don’t tell you is those crap jobs are never going to lead to the good jobs. You cannot do unprofessional work and have that lead to professional work. Unprofessional work and bad clients will only lead to more of the same.”
All of these episodes from the seanwes podcast are must-listen.
“We’re going to talk about the two prices: full price and free. This is something we talk about fairly often. We keep referencing it, but we don’t have a canonical episode to go to. I noticed someone in the chat saying they were looking for the episode on two prices… so here it is.”
“Best friends pay full price… I respect my friends too much. I want to pay them full rate, and tip them on top of it, because I respect them. What kind of friend wouldn’t do that? When you go out to eat and your friend is a waiter or waitress, do you try and get their discount? How about, give them a really nice tip, because you’re a good friend, and probably most of their customers don’t tip them that well.”
Show: seanwes podcast
Date: January 30, 2015
Time: 1 hour, 22 minutes
Series: 1 of 3
This is a different kind of episode. It involves a conversion between the buyer and seller in a value-based transaction. Usually we only hear from the seller side.
“If you’re asking the client what their budget is upfront, that immediately focuses the project on money. It immediately says, what I’m interest in is how much I can make off of you. Whereas, if you do not talk about money upfront and you focus on problems… with expense, people try to minimize expenses… with investments, people try to maximize their return on those investments. “
“Here’s the thing. Yeah, budgets can (help) filter out certain kinds of clients, but here’s what it does… budgets filter out the $50 clients… but by positioning yourself as an investment, by being someone that consults with the client on the right problems to solve, that can be the difference of thousands, or tens of thousands of dollars.”
“You want to be paid enough that you’re not even thinking about money. When you’re working on your projects, are you thinking about money? If you’re thinking about money, you’re not getting paid enough.”
“If you’re going to switch to value-based pricing… you may need to ditch your current clients. Here’s the reality: in many cases it’s going to be very, very hard, and in most cases impossible, to convert a client that you have been working with on an hourly-based rate to a value-based price. That’s because you’re trying to make the leap from expense to investment. Think about it, the things in your expense category, the things you try to minimize and keep down. What if one of them starts suddenly saying, ‘Hey, I want to start charging you for your phone based on the value you get out of it.’ And you’re like, “Calm down AT&T, you’re one of my expenses!’ That’s how the client sees you.”
Show: seanwes podcast
Date: February 4, 2015
Time: 1 hour, 28 minutes
Series: 2 of 3
The Nuts and Bolts of Value-Based Pricing
Show: seanwes podcast
Date: February 6, 2015
Time: 1 hour, 55 minutes
Series: 3 of 3
Enough of the introductory episodes, this gets into all the factors that go into the price you give to the client. Or don’t give the client… interesting discussions on when a project is not worth it, either for you or the client. This podcast, in every episode, has fantastic, nuanced discussions about the right mindset.
“(Ben) The internal hourly rate we are talking about here is not designed to drive the price to the client. What it is designed to do, in the context of value-based pricing, is to ensure that the project is worth your time, and that you’re not going to lose money on it….
(Sean) I think one of the reasons you need this baseline rate, even if it is an internal factor that you keep to yourself, is because value is a completely separate factor that you don’t determine… In a lot of cases, the value to the client is low enough that the project simply isn’t viable.”
“(Ben) If you’re in a scenario where a client has come to you… and you know the project will take you 8 hours to accomplish… Let’s say your hourly rate is calculated at $100/hr. $800 that you need to cover. But if the value to the client that you discover is actually lower than that, like if they only have a value of $400 for the project, that means you don’t do the project.”
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