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4 Agency Billing Methods: Discover Which One Works for You!

On Oct 28-29th, we’re pleased to be hosting a FREE webinar for agency professionals. Hosted by Jason Blumer, a CPA for the creative industry and expert in agency business, and Gavin George, General Manager here at WorkflowMax, the webinar looks at how hourly billing might not be the best pricing method for your business - and offers a new model for you to consider.

Today, here’s a little teaser of what you can expect to learn.

One of the things Jason will be looking at is a comparison between the different types of billing/pricing you could use at your agency. What are the advantages and disadvantages? Why are some types of pricing models firm-focused and others customer-focused?

 Billing vs Pricing - Agency Pricing Webinar

Have a look at the four agency billing methods below:

Hourly Billing

  • This is an objective form of pricing. It’s a simple calculation - cost per hour x number of hours worked. Everyone can understand how the billing works.
  • Hourly billing is firm-focused - it bills based on what your firm does. The customer doesn’t enter the equation at all.
  • Hourly billing uses “time spent working” as the metric determining the value of your work. As an agency, you’re not selling time, you are selling you talent, so hourly billing is using the wrong metric to determine value.
  • Your income is capped by the number of hours you can work. You have little potential to realise large profits, even if you’re providing enormous and continued value to the client.

Cost Plus Billing

  • There’s an element of judgement here as you define what that “plus” is that impacts the pricing.
  • This type of billing is still firmly connected to project costs, so it’s still firm-focused.
  • Your profit is still tied to the amount of work you can physically do in a day.
  • You are starting to think of ways to demonstrate value in your pricing model.

Fixed Fee Billing

  • Clients often like this as they receive a single price for a job and know what to expect.
  • With a fixed fee, the price is not related to your agency’s productivity. This is no longer a firm-focused pricing model.
  • You can set your rate higher than you could in hourly billing, as you’re not having to explain your rate in terms of hours worked.
  • Fixed fee rates are usually based on the average time and cost of certain packages - for example, designing and printing business cards at a graphic design firm takes roughly the same amount of time for each job, so there is a specific fee for that task. This is simple to figure out.

Value Pricing

  • Subjective price based on the value the service provides the customer. No two prices are the same, even for the same service.
  • Customer-centric pricing - the customer explains what they need and you price based on that.
  • Depending on the value you provide your clients, you can price as high as you want.
  • Process is not as straightforward as a simple calculation, but relying on experience and known strategies you can arrive at an accurate figure.

When looking at all these different models, to me it seems obvious that value agency pricing has several advantages to an agency. It might take longer to figure out exactly how to price your services, but the benefits are much greater than the cost.

Warren Buffett quotes on pricing

Learn more about value pricing, how it works and how you can implement it in your agency by signing up to the free webinar!