Why Your Agency Pricing Stops You Scaling — Transcript

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1. 0:00We sell performance marketing and demand
2. 0:02generation services.
3. 0:04I told her about the visual thing. We
4. 0:06got to do the visual thing.
5. 0:07>> Yeah.
6. 0:07>> Predominantly to health care and med
7. 0:10tech companies. Although we have a lot
8. 0:12of other industries in our under our uh
9. 0:15our portfolio. We're based in Canada. We
10. 0:17service North America.
11. 0:19I'm here with Jean-François who's my VP
12. 0:21of demand gen.
13. 0:21>> Jean-François.
14. 0:22>> Jean-François. Oui.
15. 0:24So we do $2 million per year in revenue.
16. 0:27We'd like to be at $10 million.
17. 0:29And what's stopping me is I think my own
18. 0:32ability to take the gamble on
19. 0:38trusting other people with sales and and
20. 0:41marketing. Like we're a marketing
21. 0:42company and we do a great job at helping
22. 0:44our clients.
23. 0:46But I'm a bit shy about having the
24. 0:50courage to make the investments that I
25. 0:52know I need to.
26. 0:54In that side of it. And you can kind of
27. 0:57tell my voice is a bit raspy cuz I'm a
28. 0:58bit embarrassed.
29. 0:59>> Don't be embarrassed.
30. 1:00>> You know. So
31. 1:01>> So you're doing $2 million bucks a year.
32. 1:02You're in the top 5% of business owners,
33. 1:04man. It's like
34. 1:05This room is always weird for everybody
35. 1:07because I one of the big piece of
36. 1:08feedback I get is like I'm really cool
37. 1:10in my hometown. And then I came here and
38. 1:13I met like five people doing more every
39. 1:15month than I do every year. And then
40. 1:16you're like, "Okay. There's levels. It's
41. 1:18fine." But that's the point of being
42. 1:19here, right?
43. 1:20>> Yeah. Exactly.
44. 1:20>> Okay. So performance marketing. So how
45. 1:22are you getting customers right now?
46. 1:23>> So mostly my efforts are through events.
47. 1:27So we'll go to different events locally
48. 1:29and we go to different conferences. And
49. 1:30then I post
50. 1:32videos on LinkedIn. Which do pretty well
51. 1:34as well. So we do
52. 1:35>> So what percentage comes from each?
53. 1:37>> Pardon me?
54. 1:37>> What percentage like of customers How
55. 1:39many customers do you have right now?
56. 1:40>> Like 40.
57. 1:41>> Okay. Are you doing with SMBs?
58. 1:43>> No. Most of them are like mid-size.
59. 1:46>> You're probably mispriced.
60. 1:47>> That's what
61. 1:48Ed said, I think.
62. 1:49>> Yeah.
63. 1:50>> Yeah.
64. 1:51>> Yeah.
65. 1:51>> So we I mean our retainers are 3,500 to
66. 1:54to 10,000 a month.
67. 1:55>> All right.
68. 1:56>> So yeah. You're
69. 1:58right there.
70. 2:00>> Yeah, you're probably mispriced. But, um
71. 2:02what's your turn?
72. 2:03>> Uh
73. 2:04it was a few years ago quite high. We
74. 2:06would turn quite a lot of clients over 3
75. 2:08months, but with the help of
76. 2:09Jean-François
77. 2:10>> Jean-François
78. 2:11>> [laughter]
79. 2:12>> we our our turn is probably more like 10
80. 2:1510 20 10 to 20%.
81. 2:16>> Per?
82. 2:17>> Uh per year.
83. 2:18>> Oh, per year. Okay, yeah. Um so, it
84. 2:20seems like you've moved up an avatar,
85. 2:22I'm guessing.
86. 2:23>> Yeah.
87. 2:23>> didn't move You just didn't match it
88. 2:24with price. That's all.
89. 2:25>> Correct. We've gone up market and and
90. 2:28>> Just forgot to change your price.
91. 2:29>> Yeah, and I think part of it is
92. 2:31>> margin?
93. 2:32>> Uh 25%.
94. 2:33>> mispriced. That's all.
95. 2:36So,
96. 2:38why can't we do more? I'm afraid. Why am
97. 2:40I afraid? Because I don't make enough
98. 2:42money per customer. Why don't I not make
99. 2:43enough money per customer? Is it because
100. 2:45there's something structurally wrong?
101. 2:45Did I sell the wrong avatar? No, you
102. 2:47just simply forgot to change the price.
103. 2:49If you're probably appropriately priced,
104. 2:50you're probably closer to like sixish a
105. 2:52month okay is my guess on average
106. 2:54average revenue per user. And if you
107. 2:55were to do that, you would be at like
108. 2:5750% you know plus margins. If you had
109. 2:5950% plus margins, you'd be like, "Dude,
110. 3:01I don't mind spending 250 grand to get
111. 3:03another baller in here or spending more
112. 3:04on ads or whatever." It's just that
113. 3:06right now
114. 3:07when you're running 20% on 200, it's
115. 3:10$400,000 a year. Does that include owner
116. 3:12pay or no?
117. 3:13>> Um so, like the SDE would be like more
118. 3:16like 600 to 700.
119. 3:18>> Okay. Yeah, yeah. So, I think yeah, you
120. 3:19just you just need to you're just
121. 3:21mispriced. So, got to change the price
122. 3:23and then
123. 3:25um
124. 3:26and then we need to hire
125. 3:28to to then do more.
126. 3:29>> Yeah, so how will I know that
127. 3:31um because as as I assume as I go more
128. 3:33up market and price it higher, there's
129. 3:34going to be a little bit more of a the
130. 3:35conversion rate will go lower.
131. 3:37>> No.
132. 3:39You're probably losing people who are
133. 3:41legit because you're too cheap.
134. 3:43>> Interesting.
135. 3:44>> You're bordering on so cheap for a
136. 3:45mid-market company that they don't
137. 3:46believe that you're legit enough.
138. 3:48>> Yeah.
139. 3:49You know, we closed 15K a month the
140. 3:50other the other day and it the other
141. 3:51month and they weren't even batting an
142. 3:53eye actually.
143. 3:54>> Yeah, which means you undercharged.
144. 3:57>> [laughter]
145. 3:59>> No, but like and I like good.
146. 4:02>> Yeah.
147. 4:02>> Um
148. 4:03Yeah, price it's interesting. There's a
149. 4:04couple like big limiting beliefs like
150. 4:05price is a huge one because it's like
151. 4:07this emotional thing. Same thing with ad
152. 4:08spend weirdly like people are like I
153. 4:10can't go past a thousand dollars a day
154. 4:11like I just it just doesn't work. It's
155. 4:13like I mean
156. 4:14>> when you grow up like
157. 4:15pretty modest like below average
158. 4:17you know pretty poorish you know what I
159. 4:18mean? Suburban poor but right? You know
160. 4:21you kind of you're at a level where oh
161. 4:23two million dollars like I don't know to
162. 4:24your point other people that make that
163. 4:26>> Yeah.
164. 4:26>> outside of the room you know so maybe I
165. 4:28am kind of stuck in the
166. 4:30people won't be willing to pay that
167. 4:31because it's a lot of quote unquote
168. 4:33money.
169. 4:34>> Do you have big Do you have friends who
170. 4:35are business owners who make more than
171. 4:36you?
172. 4:38>> I do now.
173. 4:38>> Okay.
174. 4:39>> [laughter]
175. 4:41>> Yeah, this is like like you're selling
176. 4:42out of your own wallet. It's just a
177. 4:43classic like
178. 4:45it's just you're just selling out of
179. 4:46your own wallet. It's kind of like a
180. 4:47mechanic being like I would never pay
181. 4:48anyone to change my change my oil. It's
182. 4:50like yeah, cuz you know how to change
183. 4:52oil. But if your car's
184. 4:54and you don't know how to change oil
185. 4:55you'd pay a lot.
186. 4:57>> [laughter]
187. 4:57>> Right? And so if you know if if a
188. 5:00business needs leads and you guys are
189. 5:01obviously good at it cuz your turn's low
190. 5:03>> Right.
191. 5:04>> like why can't we do more? We need to
192. 5:07increase cash flow and increase how much
193. 5:09customers are worth. Great. What's your
194. 5:11close rate right now?
195. 5:12>> Uh pretty high 60 70%.
196. 5:14>> So do you know my pricing guide for for
197. 5:16close rates? Have you seen that?
198. 5:17>> I will download it after we
199. 5:19>> I'll tell you right now. I don't you
200. 5:20don't even have to.
201. 5:21Uh so for everybody if you're at for me
202. 5:24like my my my you're at the right price
203. 5:26is 35% close rate.
204. 5:28>> Mhm.
205. 5:29>> Um if you're between like 40 and 50 you
206. 5:31probably have like a 25 to 50% price
207. 5:33increase.
208. 5:33>> Sure.
209. 5:34>> If you're between 50 and 60 it's closer
210. 5:36to like you know one and a half to 1.75.
211. 5:38If you're at like 60 to 70 you've got at
212. 5:41least a double
213. 5:42>> Okay.
214. 5:42>> uh in pricing if you're at 60 to Did I
215. 5:44say 60 70 already?
216. 5:46Um if you're like 70 to 80 you probably
217. 5:47have like a double or triple in price.
218. 5:50That's that's kind of like sitting
219. 5:51there. So, I think the the six-ish a
220. 5:54month is probably a good first bet.
221. 5:58And do you have some sort of way that
222. 6:00they scale up if they
223. 6:02>> Yeah. Yeah. So, more services, more like
224. 6:05enhanced services.
225. 6:06>> is there anything that's tied to like
226. 6:07revenue or ad spend?
227. 6:09>> No. So, it it is flat.
228. 6:11It is typically been a flat fee, but we
229. 6:12know we've done some performance stuff
230. 6:14or I try to not scale with the ad spend.
231. 6:16We we tried to because we want the
232. 6:18client to like realize the gains of
233. 6:20investing in us.
234. 6:21>> Yeah. Well, what you can do is
235. 6:23something that I find works really well
236. 6:25is you can scale with the ad spend, but
237. 6:26you have
238. 6:28decreasing with each tier.
239. 6:29>> Oh, yeah. Yeah, we're doing that.
240. 6:30>> Yeah, and so what happens is you'll
241. 6:31quote you basically it's it's because of
242. 6:34the survivorship bias. Everyone wants to
243. 6:36look at the top most expensive one, and
244. 6:38you can make that one tiny.
245. 6:39And then people are like, "Oh, I just
246. 6:41want to get to there. It's almost free."
247. 6:42>> Right.
248. 6:43>> But you don't make it retroactive. So,
249. 6:45you have four like call it four
250. 6:47watermarks at, you know, 10,000 a month,
251. 6:4850,000 a month, 100 whatever, right? And
252. 6:51then like the first, you know, it's it's
253. 6:52$6,000 for the for no matter what you
254. 6:55do. And then above 20,000 to 100,000
255. 6:58it's an extra whatever 5%, and then from
256. 7:01you know, 100,000 to 200,000 it's an
257. 7:03extra two and a half, right? But that
258. 7:04that two and a half is only charged
259. 7:06there. So, it doesn't retroactively go
260. 7:08down. So, it just adds on top. But it's
261. 7:10all incremental margin for you cuz it's
262. 7:11just clicking buttons.
263. 7:12>> And what about like below 20K?
264. 7:14>> No, that's it's
265. 7:15or, right? Six the greater of. So, like
266. 7:17$6,000 no matter what. And I would say
267. 7:20that this is a requisite for being a
268. 7:21customer, which I'm sure you already
269. 7:22have some like
270. 7:24you got to spend at least 20 grand a
271. 7:25month or something like that on ads.
272. 7:26>> Yeah. For sure.
273. 7:26>> Right. So, it's like it's six for the
274. 7:28first 20 no matter what because it costs
275. 7:30us a lot to get you set up, and then
276. 7:31after that it's this.
277. 7:32>> Right. Okay. Um
278. 7:35I'm going to pass it on to the next
279. 7:36person, but I want to thank you for
280. 7:37having us here. Um it's a great
281. 7:38workshop, and uh we appreciate the uh
282. 7:40invite.
283. 7:40>> Don't be embarrassed about winning, man.
284. 7:42>> Okay. Thanks. I got to learn to say no
285. 7:44more.
286. 7:44>> [laughter]
287. 7:44>> That's fair.
288. 7:46If you like this video and you're
289. 7:46business owner who wants to break
290. 7:47through your current revenue ceiling, I
291. 7:49just spilled every lesson from scaling
292. 7:5010 businesses past 10 million and three
293. 7:52businesses past 100 million into a
294. 7:54completely free scaling roadmap that
295. 7:56I've used to go from zero to one, zero
296. 7:57to 10, and zero to 100 plus. And so you
297. 8:00can click here and you can check it out.
298. 8:01Again, absolutely free. And since you're
299. 8:03business owner, I appreciate you and
300. 8:04enjoy.