The Fourth Sin of Agency Owners – Underpricing to Win the Deal
This is a sin that I see a lot of agencies do for the first five years of being in business. If you’re reading this right now, you’re probably under-pricing without realizing it.
Getting an agency off the ground isn’t easy.
You try to get as many clients as possible as quickly as you can. The problem here is that you end up under-pricing your service. This is a mistake that a lot of agency owners make in the first five years of business.
And if it’s not you under-pricing, it’s your salespeople. They’re making concessions and offering discounts just to get people on board.
That’s a sin that’s going to prevent you from scaling.
Have you ever had a client accept your proposal a little too quickly?
If you have, that’s a symptom of under-pricing. You’ve probably left a lot of money on the table and they’d jumped at the chance to get an under-priced service.
Another is that you don’t tie the services value to the time it takes. There’s the misconception that you need to spend a lot of time on something to charge a lot for it. However, most clients want you to deliver quality results quickly.
The third symptom is desperation. This typically happens towards the end of the deal and it highlights the big problem that many agency owners have…
Fear of missing out (FOMO) is the big problem that creates these symptoms.
That leads to you under-pricing just to get the client. Then, you hit another problem. You’ll never feel confident about the client growing over time. In fact, they’ll look to nickel and dime you because that’s the relationship that you created at the beginning.
In the end, you have a lot of clients who aren’t paying anywhere near what they should.
The Root Cause
Why do so many agency owners experience FOMO?
I boil it down to a lack of confidence in your own positioning in the market. For example, if you have a website that’s very similar to a competitor’s, that’s weak positioning. You feel like you’re replaceable and you’re showing the client that another company can do the exact same thing.
I have a client named Joy who brought up this issue a couple of years ago. She told me that she had real trouble showing clients the value that her SEO agency brings to the table.
In her case, she needed to gain confidence by talking in the client’s language.
Before, she’d say something like “This month we attracted 1,000 visitors to your website.”
That became “This month, we generated 200 leads with a potential value of $150,000. You received that for a $10,000 investment, meaning you get $15 for every $1 spent.”
Straight away, she has a more confident message. That means she can feel comfortable raising her prices to meet her true value.
Have confidence in what you do and demonstrate it using the client’s language.
That’s how you ensure that you charge what you deserve.
Dev “Pricing Master” Basu