99% of Agencies make this mistake
Let me ask you a question.
Are you unknowingly a prisoner of your business?
You might THINK you’re running a business.
But all the benefits that you should be experiencing – creating an asset, removing yourself from the day-to-day, detaching your time from your income, not being stressed,– always seem to be just outside of your grasp.
Can you relate?
Instead, you have never-ending work days and constantly start from scratch with each new client and project.
I’ve noticed two recurring mistakes most Agencies and consultants make.
1. Pricing their services by time, rather than the value and outcome they provide. I covered pricing and value more in-depth here.
2. Saying “yes” to every type of request, thus pushing them further and further into a spiral of scope creep and unscalablity.
I recently spoke with Alex Boyd, CEO, and founder of RevenueZen about these mistakes.
Since Alex started RevenueZen, he’s always priced his services based on the value he brings his customers.
Most don’t start like this.
Doing so has allowed Alex to package and productize the service delivery, making it easier to scale the business. It has resulted in the separation of his time from income and allowed him to focus his energy on higher-value growth initiatives within RevenueZen.
Alex brought up a great point during our call:
RevenueZen has around 50+ clients, pulling in $200k-$300k MRR (Monthly Recurring Revenue). If Alex were charging for time instead of value, he wouldn’t have been able to scale to six figures a month. This is one of the barriers you will have to overcome.
You will eventually hit the time trading ceiling as your work capacity evaporates. This is normal. You then need to “install” the productized operating system into your business and build leverage with key contractors and team members.
Charging for time, which many of us have been conditioned to do instead of the value we bring to our customers, is a common trap.
When you trade time for money, you’re more of a freelancer as opposed to an actual business owner.
The two lessons I want you to take away from today's are:
1. Know the value your services bring to the customers and price them accordingly. Firstly, you need to settle on what exactly is the value of your services. You might think that your value is the infographics you design. But after some analysis, you might conclude that, actually, the value is not in the infographic itself, but in your strategic vision and clarity of what this infographic will do for their business. Suddenly, the value of your product is way greater than before, therefore, you should price it accordingly.
Most business owners will know how much they are willing to spend on the needed service (or at least have a ballpark figure in their mind). Your goal is to extract that number – also called willingness to pay or WTP – gently, so you can maximize profits. You can determine WTP by conducting surveys, focus groups or using data about consumers’ past choices. You can read more about WTP here.
2. Promise a clear outcome as a packaged or productized offering to streamline what you do. This way, you avoid unnecessary negotiations, bottlenecks and you can start delegating tasks and scale effectively. You can read more about how to manage customer expectations here.
That’s all for today!
p.s. Looking for more?
→ Want to check out the full interview I did with Alex Boyd of RevenueZen? Click here to watch.