Instead, always give them three options. This option should be your ideal sale and what’s really best for the client. Once you’ve constructed your “middle” option, strip some of those deliverables away to create a first option. When you present these three options, more often than not, clients will talk themselves into the second option. Virtually all agencies have a gaping hole called scope creep: allowing the scope of a project to get larger without the price rising accordingly. Often, your scope documents are too vague, failing to define deliverables in a way that leaves no room for interpretation. In most agencies, leaders never take the time to teach employees how an agency makes money. When your scope documents are too vague, you’ll get clients exceeding them in no time at all, asking for the 12th or 13th revision. By the time I calculate the change order costs, write up a document, send it to the client, and get him to sign off on it, we could have just made the change. But not spending time on new business is a big money-sucking mistake agencies make every day.
These days, agencies tend to get caught up in near-constant talk of creativity, innovation, and disruption. But all that noise can drown out the real reason you’re in this business: to make money.
The truth is that you’re trying to make a living — for yourself, your family, and your employees. And no matter how hard you work to serve clients, when you don’t make money, it’s pretty tough to sustain enthusiasm.
Even when you are making money, this is a tough business. That’s why it’s crucial to avoid certain catastrophic mistakes agencies make every day.
Draining Water From Your Own Pool
Even smart agency owners make some of these painful mistakes. They don’t willfully sabotage their own efforts, but they fail to realize the long-term impact these seemingly innocuous decisions carry.
You might even recognize yourself in these five financially draining errors — and not realize how harmful they are to your bottom line.
5 Mistakes That Will Bankrupt Your Agency
1) Your pricing is too basic.
Nine times out of ten, agencies present clients with a single price and package. However, when you do this, nine times out of ten, they’ll push back.
Instead, always give them three options. Build the middle option first because this is the one they’re likely going to choose. This option should be your ideal sale and what’s really best for the client. According to a study on the center-stage effect, consumers feel that options put at the center of a range of options are the most liked.
Once you’ve constructed your “middle” option, strip some of those deliverables away to create a first option. This bare-bones option is priced about 20 percent to 25 percent lower than the middle option.
As for the third option, add some bells and whistles — not ones that are meaningless to the client, but factors that take things above and beyond the minimum standard. Price it about 30 percent to 35 percent higher than the second option.
When you present these three options, more often than not, clients will talk themselves into the second option. What’s beautiful about it is that they feel like they have control over their budgets and over the work.
2) You give it away for free.
Virtually all agencies have a gaping hole called scope creep: allowing the scope of a project to get larger without the price rising accordingly. If we could control it, we would all be driving nicer cars and taking better vacations.
I’m not suggesting you nickel-and-dime your clients to death, but you do have to plug that hole. Of course, we can look at our clients and be frustrated that they keep asking for more and more. But the truth is that the blame sits squarely with us.
Often, your scope documents are too vague, failing to define deliverables in a way that leaves no room for interpretation. Or maybe they’re too broad, without any boundaries.
If you have account people managing client project budgets, they may not…
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