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Pricing your consulting work - SLCSEM DMC2017

This is a presentation I gave at SLCSEM's DMC2017 conference. It is the culmination of all that I have learned over the last two years selling consulting work, seeing over 1,000 marketing projects, and speaking with 250+ agencies and consultants as well as the Digital Marketing Pricing Survey released in February 2017 on GetCredo.com - https://www.getcredo.com/digital-marketing-industry-pricing-survey/

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Pricing your consulting work - SLCSEM DMC2017

  1. 1. Pricing in the Digital Marketing Industry John Doherty Founder, GetCredo.com SEO consultant @dohertyjf
  2. 2. Let me tell you a story about pricing @dohertyjf
  3. 3. My background I have seen a lot of digital marketing projects 1,000+ Ranging in budgets from $500/mo to $30,000/mo I’ve sent a lot of work to marketers $6,000,000+ In the last two years I’ve discussed work with a lot of marketers 250+ In the last two years alone @dohertyjf
  4. 4. I have seen a lot of pitches and proposals @dohertyjf
  5. 5. How most people approach pricing ¯_(ツ)_/¯ @dohertyjf
  6. 6. No one wants to talk about how they price or how much/little they make! @dohertyjf
  7. 7. Too many end up too hungry to eat. @dohertyjf
  8. 8. Today I try to change that @dohertyjf
  9. 9. Today’s goals 1. What do agencies/consultants charge for their digital marketing work? 2. How to price your own work 3. How to sell better consulting projects 4. How to buy marketing services @dohertyjf
  10. 10. Bringing clarity to pricing What do agencies/consultants charge for their digital marketing work? @dohertyjf
  11. 11. https://www.getcredo.com/digital-marketing-industry-pricing-survey/
  12. 12. Pricing in generalities (consultants) • Solo consultants charge less per hour than agencies on average ($153.75 vs $161.58-$185.49 depending on size). • US solo consultants charge $165.02 per hour on average. This is more than the worldwide average for consultants - $153.75. • Solo consultants price themselves consistently based on their years of experience, with all of the three major areas we looked at (hourly, minimum monthly, and minimum project) going up as the years of experience went up. • More experienced solo consultants on average charge less per hour than less experienced consultants, but their minimum projects are bigger. @dohertyjf
  13. 13. Pricing in generalities (agencies) • Agencies who do only strategy charge a 66% higher hourly rate than agencies who do only services ($194.55 vs $120 per hour). • Agencies do not price themselves consistently based on the amount of time they have been around. • US hourly rates range from 35.54% to 222% more expensive than UK hourly rates, depending on the size of the agency. • Strategy consultants and agencies command higher hourly rates, minimum projects, and one-time project fees. It pays to work on strategy as well as services, or just strategy at the expense of services. @dohertyjf
  14. 14. A word about benchmarks @dohertyjf
  15. 15. Average rates by company size @dohertyjf
  16. 16. Agency/consultant prices by type of work @dohertyjf
  17. 17. Consultant pricing by years of experience @dohertyjf
  18. 18. Takeaways for pricing • If you are an agency and charge less than $120/hr, $1,500 monthly, or $1,250 for a single project, you are below the average. • If you are a consultant and charge less than $150/hr, ~$1,000 as a minimum project, or ~$1,000 as a retainer, you are below average. @dohertyjf
  19. 19. How to price your own work Everyone’s needs are different @dohertyjf
  20. 20. You should never be able to say this “We agreed to work together after I significantly came down on my pricing.” @dohertyjf
  21. 21. So how do you price your work? No one prices themselves the same, but there are some rules of thumb that you need to follow (IMO). And my advice might be a bit contrarian. Stick with me. @dohertyjf
  22. 22. Pricing is dynamic As you get more experience, your types of clients change, and your business changes to keep up with the market, your pricing will necessarily change. How you price as a solo consultant is very different from how you price as a small agency is very different from how you price as a larger agency. @dohertyjf
  23. 23. Traditional pricing advice Most pricing advice follows along these lines: 1. As a solo consultant, figure out your desired income, then work backwards according to the number of hours you want to work a week and number of weeks per month you want to work. That’s your hourly rate. 2. In an agency, you need to bill a client at minimum 3x per hour what it costs you to pay the people doing the work. @dohertyjf
  24. 24. Some problems with this As we see with pricing, generalities are a starting point. 1. Solo consultants often overestimate how many hours per week they can bill. Realistically you’ll bill 30 maximum, not 40. 2. If you start with what you want to make, you’ll likely undervalue yourself. Why put a limit on it? 3. To build a profitable agency, you need to pay your people as little as possible and charge clients as much as possible. Not good! @dohertyjf
  25. 25. Price (and pitch) on value Start with what you need at minimum to cover your costs (whether a consultant or an agency). That’s your floor, not your maximum. Good pricing involves going deeper than hourly rate. What is your work worth to your client? @dohertyjf
  26. 26. That is your price Why should someone pay more for services than someone else? Because the payoff is bigger. There’s more at stake for them. And often, the work is a lot more involved and specialized. Any decent marketer can make someone $500 more per month. @dohertyjf
  27. 27. It’s a lot harder to make someone an extra $500,000 per month. If you can make them that, then they should pay more than the $500/mo extra client. @dohertyjf
  28. 28. Agency pricing The industry standard is that you need to be billing 3x salaries paid to run a healthy agency. Less than that you'll run out of cash or come into a crunch if you lose a big client. Of course if you can bill 4-5x salaries then do it! If you can’t, then you either need to automate some pieces or move into clients that can pay it. @dohertyjf
  29. 29. Solo consultant pricing If you are a solo consultant, it's cleanest and easiest to price as a retainer. It’s much easier to build a successful consulting practice of retainers than one-off projects. Less overhead to get new clients, do sales, etc. That said, you can build a great life off high-priced one-off projects. @dohertyjf
  30. 30. My pricing rubric Hourly rate (to reach base expenses and income after tax) * hours needed per month + 20% @dohertyjf
  31. 31. Why +20%? Isn’t that price gouging? No. An extra 20% when it’s within your client’s budget covers scope creep (for a while). It can also mean the difference between a profitable and unprofitable project when unexpected expenses come up (new tools, etc), especially on lower priced projects. @dohertyjf
  32. 32. Sales tips for marketers How to sell better consulting projects @dohertyjf
  33. 33. How to sell a retainer project Retainers can take a bit longer to sell, but they are ultimately the best way to build a consulting practice/agency. To sell them, you must: 1. Tell them the results you are hoping to see based off past experience. 2. Outline the first few months of effort (no results without effort). 3. Explain how results are seen (especially in SEO, not one month). @dohertyjf
  34. 34. How to sell a single project One-off projects are much easier to sell than retainers. You need more of them each year to meet (and surpass) your revenue goals, which means increased overhead. To sell a single project (eg an audit): 1. Have an example of that deliverable ready to go 2. Have case studies from prior clients like them 3. Be clear what is included and what is not 4. Set expectations for what you need and time to completion from start date. @dohertyjf
  35. 35. Selling hourly pricing projects I almost never do hourly-based consulting. You shouldn’t either because then your income is directly tied to the hours you work. If you must do an hourly project: 1. Only do it for people you know and trust; 2. Try to set a minimum number of hours (eg a retainer) 3. Take your retainer hourly rate and increase it by 25% @dohertyjf
  36. 36. What about pay + equity/profit sharing? I have a lot of startups asking if agencies/consultants will work on the basis of lower hourly rate + equity. My advice is to not do this. If you cannot control the outcome and don’t understand startup equity, you will likely get screwed. Not everyone is your client. @dohertyjf
  37. 37. Negotiating pricing When someone asks you will do the work you pitch to them for cheaper, you need a good way to respond. Something that works well: “I negotiate on scope, not base pricing.” If they want $5,000 of work for $2,500, show them what they can get for $2,500. Do not give $5,000 of work for $2,500. @dohertyjf
  38. 38. Discussing budgets Most businesses are reticent to tell you how much they have budgeted. Some businesses also do not know what they should expect to pay for good SEO/PPC/marketing because they are not marketers. Everyone has an upper limit though. @dohertyjf
  39. 39. Discussing budgets Ask them this: “If I told you that what you want is going to cost $XX,XXX per month, what would you say?” XX,XXX is variable depending on who your client is (Fortune 500 vs SMB, for example). Their reaction will help you gauge their ability to pay. @dohertyjf
  40. 40. Hiring the right marketing agency/consultant How to buy marketing services @dohertyjf
  41. 41. For the inhouse folks in the room Sometimes you need backup from an agency because you have too much on your plate. 68% of large enterprise companies have an SEO team of less than 5 people (study on Moz). Compare to 77% of 501-1000 person companies. @dohertyjf
  42. 42. So how do you hire the right help? If you’re looking to hire an agency/consultant to help you out, you need to take the following into account: 1. What do you need help with? (strategy, services/production, combination?) 2. Do you need them onsite (either in your city or to travel to you)? 3. Are you set up internally to get their work done? 4. Who will manage them? @dohertyjf
  43. 43. So how do you hire the right help? There are 4 factors to look at when hiring an agency/consultant: 1. Do they have proven experience with your type of website (to do the marketing)? 2. Can you afford them? 3. Is their work style similar to yours? 4. Can you trust them in front of your executives? @dohertyjf
  44. 44. Doing great work is not enough To be successful in working with an agency/consultant, you must find the right combination of ability to do the work and ability to help you get things done internally. Culture matters very much when working with a marketing provider. Most people overlook this. Would you want to hire them fulltime? If not, why are you hiring them part time? @dohertyjf
  45. 45. You get what you pay for Bargain hunting will not serve your end needs. Would you hire a babysitter for your child simply because they are cheaper than another? @dohertyjf
  46. 46. Get clear on what you will get Asking the agency/consultant to break out what you will specifically get for the prices they are charging is totally reasonable. You set your own expectations. @dohertyjf
  47. 47. Hourly rate doesn’t matter Knowing their hourly rate doesn’t serve your end goal. Better to understand what you'll accomplish by working with them (get them to help you forecast based on data) @dohertyjf
  48. 48. NDAs and non-competes Asking them to sign an NDA before you share any details with them is counter productive. Avoid at all costs. Most good agencies won't do it. Getting an NDA or before sharing your Analytics/Search Console data with them *is* ok. Depending on your type of business, non-binding non-competes can be ok. Ask if you can trust them though. Caveat - I am not a lawyer. @dohertyjf
  49. 49. “How much does it cost?” Don't come to an agency or consultant with what you need and ask what it costs. Anyone who gives you a flat rate won't get you the results you want (broadly). Instead, come with what you think you need, ask them to come back with a proposal based on data, then go from there. @dohertyjf
  50. 50. Be willing to commit Doing something as a "test" for just a month will never turn out well for SEO. Similarly, marketers shouldn’t agree to this. PPC, it might make a bit more sense (I’m no PPC expert) depending on the project. @dohertyjf
  51. 51. In conclusion @dohertyjf
  52. 52. Pricing is really hard @dohertyjf
  53. 53. It’s dynamic @dohertyjf
  54. 54. It’s different for each client @dohertyjf
  55. 55. Set your minimum to meet your needs @dohertyjf
  56. 56. Know benchmarks, but don’t treat them as law. @dohertyjf
  57. 57. Goal is to price on value, not hours worked. @dohertyjf
  58. 58. I’m writing an ebook (will be paid) on pricing. Sign up here: Johnfdoherty.com/pricing-book/ @dohertyjf
  59. 59. The whole survey results can be found here https://www.getcredo.com/digital-marketing-industry-pricing- survey/ @dohertyjf
  60. 60. Thank you SLC! @dohertyjf
  61. 61. Thank you. Find Credo online:  GetCredo.com  Twitter.com/getcredo  Facebook.com/getcredo Find me online:  Johnfdoherty.com  Twitter.com/dohertyjf  Facebook.com/mrjohnfdo herty My weekly newsletter:  johnfdoherty.com/email- newsletter/ John Doherty Founder of digital marketing marketplace/platform GetCredo.com Former Growth Lead and Marketing Lead at Trulia Rentals and HotPads.com, part of the Zillow Group family Former consultant at Distilled in New York City Based in Denver, Colorado