A detailed look at 7 different agency pricing models, the economics behind them and pros and cons to help you select which one is best for you.

1. AGENCY PRICING
MODELS
Everything you need to
know to set your prices
THE BEST PRICING STRATEGY
I’ll be covering the optimal way to price your
services, based on my 10+ years of experience
working with and running agencies and the
economics of it.
7 PRICING METHODS
We surveyed agencies to find their most
common means to price their services and
break down the pros and cons of each.
HOW TO IMPLEMENT THIS PRICING
STRATEGY INTO YOUR OPERATIONS
Step by step methodology on how to pick the
right price point for your services.

2. 2
FIXED FEE
PRICING
1

3. Fixed fee pricing
What is it?
Charging a flat amount for a campaign - I generally look at
this as an ongoing scope / engagement (not one off).
A lot of agencies start here because it’s simple to quantify,
both from an agency management + client understanding
perspective.
Examples:
● $500 / month for SEO
● $300 / per content published
● $1,000 / month for ads management

4. Fixed fee pricing (cont.)
How is it calculated?
I’ve seen a lot of young agencies calculate this based on what they believe their service is
worth, market pricing or competitors.
It should be built based on projected number of hours to complete a given task.
$ = (Hours required x Hourly rate) x Desired margin
$ = (10 hours x $100/hr) x 40%
$ = $1,400

5. Fixed fee pricing (cont.)
Pros
● Good for small, young agencies
● Easy to justify to a prospect
● Good for prospects with a set budget
Cons
● Estimates can become inaccurate quickly,
leading to massive scope creep
● Disincentivizes an agency to find new growth
opportunities for a client
● Not a good method to grow larger
engagements and scale your agency

6. 6
PROJECT BASED
PRICING
2

7. Project based pricing
What is it?
Similar to flat fee, but focused on short term campaigns
or deliverables.
A client would outsource a specific item they need
done.
Examples:
● $5,000 for a technical audit
● $2,000 for a set of blog posts
● $500 / page for web design

8. Project based pricing (cont.)
How is it calculated?
Similar to fixed free pricing, with the assumption that it will be a one
time scope of work.
$ = (Hours required x Hourly rate) x Desired margin
$ = (1 hour x $100/hr) x 40%
$ = $140

9. Project based pricing (cont.)
Pros:
● Good opportunity get foot in the door (i.e. run
an audit, then upsell full scope)
● Works well for design, dev where there’s a
finite end to a project
● Works well when you work fast (i.e. a logo) and
produce high quality results
Cons:
● Again, scope creep
● Limiting to the relationship

10. 10
VALUE BASED
PRICING
3

11. Value based pricing
What is it?
Where work is priced based on the “value” it delivers to the
client as opposed to the agency’s time, costs, margins, etc.
It can be viewed as the price clients are willing to pay for
your services based on the value brought. This generally
means you need something unique about your service.
Examples:
● Value brought from having someone like Gary
Vee (or relevant influencer) on staff
● Value brought from having proprietary
software in house

12. Value based pricing (cont.)
How is it calculated?
Pricing is calculated based on the customer’s perception of value AND the value you determine
you can bring to a client campaign. They need to align to strike a deal.
Or, you can project the value you’ll provide and price off that.
● Calculate the value of a visit, multiply based on projected increase in traffic
● Use their conversion rate / lead value, multiply based on projected increase in
leads / sales

13. Value based pricing (cont.)

14. Value based pricing (cont.)

15. Value based pricing (cont.)
Pros:
● Works well if you have a lot of klout and demand,
value can be derived
● Can have huge margins
Cons:
● Value is difficult to define
● Value is subjective
● Slows down the process
● Still doesn’t reduce scope creep
● Need to have proprietary advantage in the market
over competitors

16. 16
PERFORMANCE
BASED PRICING
4

17. Performance based pricing
What is it?
When your agency is compensated based on the
output of your work. For example, if you’re working
with an attorney running PPC ads. Everytime you drive
a phone call, you get paid.
Examples:
● $500 each phone call driven
● 15% of each sale made as a result of services
● 5% equity stake in the business based on X
milestones hit
● Free until you rank for “boner pills KW”

18. Performance based pricing (cont.)
How is it calculated?
You need to make sure you’re tracking the right things in Analytics /
CRM closely, as you’ll be compensated based on the results you drive.
● Set a fixed price ahead of time per lead, visit or sale.
● Charge for each as they are accrued in real time.

19. Performance based pricing (cont.)
Pros:
● Clients are always happy to pay per result
● Can be highly profitable if you can dial in the
arbitrage right
Cons:
● There’s a lot of work that goes into driving
results (months)
● Results are never guaranteed
● Client has all the advantage here

20. 20
RETAINER BASED
PRICING
5

21. Retainer based pricing
What is it?
When a client agree to a pre-negotiated and pre-paid
fee for either a) a set amount of time, or b) a set number
of deliverables.
Examples:
● $5k/month for 50 hours of SEO work
● $5k/month for 4 posts a day on each social
platform, create 20 images, respond to 100
comments, etc

22. Retainer based pricing (cont.)
How is it calculated?
You need to forecast the number of hours it will take to deliver work across
the entire agreement. You need to build detailed hourly forecasts during
the proposal phase and sum / amortize these into monthly retainers.
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6
SEO 4 10 10 10 10 10
Content 8 10 6 4 10 0
Total 12 20 16 14 20 10
Multiply by hourly rate, amortize (or don’t)

23. Retainer based pricing (cont.)
Pros:
● Clients like retainers because it helps them budget
easier (no variable costs)
● Easy to track and manage if you’re tracking hours
internally
● Easy to pitch and justify to a prospect
● Paid up front
● Easy to scale
Cons:
● Mismanaged hours will cause HUGE issues
with profitability and scope creep

24. 24
POINTS BASED
PRICING
6

25. Points based pricing
What is it?
Each project within a campaign is assigned a fixed-point total
based on value creation rather than hourly estimates.
Point allocations are defined at the start of every month, and
are based on an agreed-upon scope. This allows for more
efficient and accurate forecasting and planning.
Examples:
● 20 points of work each month = 3 points for a blog
post (4/month) and 4 points for email blast
Source: https://www.pr2020.com/pricing/point-pricing

26. Points based pricing
How is it calculated?
Point allocations are defined at the start of
every month, and are based on an agreed-upon
scope.
Points are roughly based on hours to complete
work x desired margin. You need to create an
entire scale of this to pitch to clients.

27. Points based pricing
Pros:
● It’s easy for clients to pick the work they want
● You’re able to easily meet expectations
Cons:
● Regardless of how much time is invested to
complete each project, the point totals remain
constant (scope creep)
● Becomes a lot of ongoing work to manage
points
● Creates more work (comms) and you become
an “on demand” vendor, almost outsourced
● Convoluted and confusing, slows down sales
process

28. 28
HOURLY
PRICING
7

29. Hourly pricing
What is it?
The client pays for your staff’s time, by the hours. Generally,
hours are sold with minimums or in monthly retainers.
Examples:
● 10 hours of on page work month 1, 10 hours of
keyword research month 1 and 2
Job Title Rate
Director $102
Sr Strategist $68
Strategist $54
Analyst $41
Intern $16
Offshore $7

30. Hourly pricing (cont.)
How is it calculated?
Hourly (aka billable rates) are assigned to each
employee.
More on this in a minute...
Assumption Value
Desired Margin 40.00%
Taxes 30.00%
Benefits 30.00%
Yearly work days 261
Yearly work hours 2088
Monthly work hours 174
Yearly billable days 229
Yearly billable hours 1374
Monthly billable hours 114.5
Billable multiple (x cost) 3

31. 31
I’VE EXPERIENCED THEM ALL…[SOME
FORM] OF HOURLY PRICING IS THE
BEST OPTION.
***There’s always nuances, this is a general statement.

32. 32
“But I don’t trade time
for money...?”

33. Let me sell you on the hourly model...
● It’s the easiest way to manage resources.
When you’re running on hours, you can track
your internal profitability and utilization rate
which clearly feeds back into project planning
and sales.
● Billing & tracking hours is industry
standard...because it works. Let’s be real, we’re
not building a disruptive company here...
● It lets you get paid for EVERYTHING. How
many times has a client requested extra stuff
assuming it’s included? It’s not buddy.

34. Why hours?
● It’s an easy upsell and its quantifiable (the client understands it too). One of the most
common questions we all get as SEO's is "how can we get results faster?"
You can answer this question easily by saying "I can do 12 hours a month, or I can do 20 or
more, of course the more time you put in, the more work we'll get done and the faster you'll
see results" This is how I take a $2,500 a month client and turn them into a $4,000+ a
month client.
● It’s the most justifiable. When you’re pitching, a prospect can clearly see what they’re
paying for. When you go down the route of “value based” or “performance based”
pricing, it gets convoluted (value and performance are both subjective). These models
work better for advertising where you can better control results.

35. 35
This is why your
agency needs to move
to an hourly model.

36. 36
Eventually, you’ll need a more
strategic approach to management.
We need to understand how much each
staff member can handle to make
better informed decisions about who to
hire and why.

37. Monthly Hourly
Bucket Job Title Total Total Total Total
Leadership
CEO, COO, CFO $13,542 $27,083 $85 $169
Delivery
Director $10,833 $16,250 $68 $102
Sr Strategist $8,667 $10,833 $54 $68
Strategist $6,500 $8,667 $41 $54
Analyst $3,792 $6,500 $24 $41
Intern $1,250 $2,500 $8 $16
Offshore $750 $1,167 $5 $7
Account
Director $7,583 $10,833 $47 $68
AM / PM $3,467 $7,042 $22 $44
Finance
Analyst $3,792 $5,958 $24 $37
Sales
Director $10,833 $16,250 $68 $102
Analyst $3,467 $7,042 $22 $44
Marketing
Director $7,583 $10,833 $47 $68
AM / PM $3,467 $7,042 $22 $44
HR
Director $7,583 $10,833 $47 $68
Analyst $3,467 $7,042 $22 $44
Billable
Hourly Hourly

38. Scale your agency responsibly...
You can make educated business decisions about your agency because it’s cut and dry data. All the
gray area is removed, you’re looking at mathematical justification for who to hire, margins, etc.
Revenue Per Seat Utilization Rate Pipeline Needs
How much do we need to
bring in to support our staff at
the current burn rates?
How much revenue is each
person generating (billing) for
the agency?
Hours billed / Hours available.
Do we need to hire another
position? Do we need to sell
more work? This is the key
figure to optimize your agency
against!!!

39. How to build an hourly (billable) rate?
Assumption Value
Desired Margin 40.00%
Taxes 30.00%
Benefits 30.00%
Yearly work days 261
Yearly work hours 2088
Monthly work hours 174
Yearly billable days 229
Yearly billable hours 1374
Monthly billable hours 114.5
Billable multiple (x cost) 3
● You need all of your expenses (rent, software,
etc)
● Account for the total billable hours accounting
for sick, vacation, holidays, weekends and daily
working hours (we use 6 / day)
● Factor in your tax rates (into your expenses)
● Your desired margin (profit first mentality)

40. 1. Calculate expenses
Overhead expenses: $20,000
Salary: $100,000
Benefits/insurance: $12,000
The total annual expenses: $132,000

41. 2. Calculate cost of business
As mentioned, you also need to calculate the profit margin you
want to see in your business. I like to use 30%.
$132,000 × 1.30 = $171,600

42. 3. Calculate hours worked
● Holidays: 10
● Vacation: 14
● Sick Days: 8
● Business Travel Days: 5
The total number of holidays, vacation days, sick days, and business travel days equal 37 days or 296
hours.
You can’t bill for hours not worked on client engagements, so we like to use 6 hours per day, or 30/week
1,560 hours - 296 (off time) = 1,264 (aka the number of billable hours per year)
30/week x 52 weeks = 1,560 hours

43. 3. Calculate hourly rate
● Cost of business = 171,600
● Billable hours / year = 1,264
$171,600 / 1,264 hours = $135.75
Adjust based on experience, as well...

44. 44
No worries, we did this
all for you...

45. ● Use a solution that works for you
It doesn’t have to be software, you can just use a Google Sheets file if you want.
Time tracking systems...

46. ● Use hours to rebuild project plans
Our template lets you build project plans at
the detail level, accounting for the exact
amount of hours it will take to complete
each task. This then feeds into your
utilization rates for easy tracking.
Feeding that into your PM systems...

47. ● The hours data builds line items
With hours data in hand, you can build proposals
much easier by simply estimating hours to
complete specific line items. This pushes directly
into proposals + agreements
Building sales projections with hours...
● You don’t have to BILL hourly
Meaning you can still use retainers, flat fee or
project based agreements, but these should be
BUILT off the back of hourly rates
● You don’t have to send hours to clients...
We use hours to build retainers. We DO track
hours meticulously, but rarely send them to
clients UNLESS they ask.

48. Let’s chat in Slack!!