Mastering Agency Pricing Through Delivery Margins

Points of Interest

• 0:00 – 0:13 – Introduction: Marcel Petitpas introduces the importance of pricing in agency profitability, emphasizing that even great delivery and project management can’t compensate for poor pricing strategy.
• 1:00 – 1:39 – The Problem with Pricing Guesswork: Kristen Kelly explains that most agencies lack a formal pricing framework, often relying on gut feelings, competitor comparisons, or outdated rate cards.
• 2:09 – 3:49 – “Vibe-Based” Pricing Explained: Marcel highlights how pricing decisions are frequently made without math or structure, leading to unclear expectations and poor profit outcomes.
• 4:00 – 5:35 – Budget-First Pricing Pitfalls: Agencies that accept client budgets without recalibrating scope or checking for margin risk setting themselves up for failure from the outset.
• 6:27 – 7:46 – Undercharging and Overdelivering: Many agencies underestimate the margin needed for true profitability, aiming too low and failing to account for overhead, unutilized time, and business costs.
• 9:00 – 10:33 – Scope Creep and the $0 Change Order: Kristen and Marcel discuss strategies for managing out-of-scope requests, including the effective use of $0 change orders to maintain boundaries.
• 11:43 – 14:20 – The Right Way to Factor in Overhead: Marcel breaks down how to incorporate overhead and indirect costs into pricing without overly complex calculations or flawed net profit heuristics.
• 16:15 – 19:49 – Choosing the Right Pricing Model: Using the Agency Pricing Quadrant, the episode explores how risk and value should guide pricing models—ranging from hourly to value-based strategies.
• 19:53 – 22:34 – Tracking Average Billable Rate (ABR): A simple but powerful metric, ABR helps agencies estimate delivery margin and benchmark performance across services and projects.
• 22:56 – 25:09 – Overcoming Fear of Raising Prices: Kristen and Marcel debunk fears around increasing prices, offering strategies for timing and managing legacy client transitions.
• 25:21 – 26:54 – Delivery Margin as a North Star: The key takeaway: aim for a 70% delivery margin when pricing services to ensure room for overhead, profit, and sustainable operations.

Show Notes

• Connect with Kristen via LinkedIn
• Free Agency Toolkit
• Parakeeto Foundations Course
• Free access to our Model Platform
• Pricing Calculator
• Pricing & Scoping Episode
• Pricing Model Quadrant