Start an agency – The secret to value based pricing (How not to lowball yourself)

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One of the biggest challenges you will face when building your business is deciding on a pricing model that ensures you aren't selling yourself short. In this video we uncover the secret to…

Full Transcript of The Video

Eric: In this video we're going to talk about how you can price based on value and how not to low ball yourself.
Here's the first thing, a lot of people, when you're focused on building an agency, people focus on charging by the hour. This is a huge mistake. You're basically saying, my time's worth this amount per hour and working hourly sucks. It doesn't make sense. You can't really gain leverage that way and still a lot of agencies do that and they charge a really big amount.
For you in the very beginning, you have to charge based on value. If you generate one million dollars in sales, why shouldn't you make a percentage on that? If you generate one million and you were paid a couple of hundred dollars for that, well that's okay, the other business just got a lot of leverage over you.
For you, you have to make sure that you're watching your back all the time and you have to focus on pricing based on value. Here's an example what you can do. There's a performance market agency that one of my friends works for and they do 85 million dollars a year in revenue. Now, when you charge based on performance, well it's based more on value instead and it becomes more of a partnership, right?
What we do with our clients, we kind of have a hybrid of that, where we charge a percentage based on performance and sometimes we charge a flat fee as well, but we have the two built in together. That way we can leverage both sides of the equation. If you go all the way on performance, it's a lot more riskier, yes definitely. A lot of people just work based on, "Hey, if we get you a sale, you're going to pay us this amount of money." And that's a lot riskier for people that are starting out.
If you're starting out and you want to charge based on value in the beginning, you've got to figure out a hybrid model that might work for you. That way you can continue to make cashflow so you can put bread on the table for your family, and at the same time later down the road, you can collect more of the upside as well.
That's the secret basically. Working hourly sucks. I think when I first started doing this stuff, I was charging maybe 10 dollars and hour or maybe 15 dollars an hour, whatever it was exactly. I wasn't really making anything. You've got to keep that in mind.
You should charge based on how you're going to perform and if you think you can really do a good job, then charge what you think you're worth. And if you like videos like this, hit subscribe and we'll see you in the next one.

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