April 22, 2025 • 48 mins
What if you could charge more, and keep your best clients happy?
Karl Sakas has spent over 20 years in agency operations and consulting, helping more than 600 agencies shift from reactive to strategic. In this episode, he joins us to break down why pricing isn’t just about numbers – it’s an ops play, and one that can define your agency’s future.
Here’s what we get into:
• Why time & materials pricing is on the way out, and what to do instead
• How to use “value anchoring” as a bridge to value-based pricing
• How to strategically churn clients that are holding you back
• Why you should consider raising your prices annually
• Why AI tools shouldn’t just make you faster, but more profitable too
Whether you’re raising rates, tightening up scope, or exploring performance-based models, this episode is full of sharp, practical insights to help you price smarter and scale with confidence.
📝 Articles & Blog Posts:
Karl’s Predictions for the Agency Space in 2030.
A Step by Step Approach to Raising Prices at your Agency.
How to Raise Prices – Case Study.
📚 Books by Karl Sakas
Calm the Chaos: 10 ways to run a better agency.
Work Less, Earn More: How to Escape the Daily Grind of Agency Ownership.
Additional Resources:
Karl’s Website – Sakas and Company.
Follow Karl on LinkedIn.
Follow Harv on LinkedIn.
Stay up to date with regular ops insights. Subscribe to The Handbook: The Operations Newsletter.
This podcast is brought to you by Scoro, where you can manage your projects, resources and finances in a single system.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Karl Sakas (00:00):
I am not the first person to say that hourly
pricing is going away.
Jonathan Stark has been sayingthat for years.
Now, though, it makes even lesssense.
There's the old joke about,there's a factory, the key
machine has stopped working.
They bring in a engineer andthey're like, we're, we're
losing millions while this isshut down.
(00:20):
And the engineer walks aroundand, gets out a small hammer,
taps on the machine, andsuddenly everything comes back
and they send a bill and it's,10,000 the factory's like, what,
what?
10,000 just for tapping?
And it's like, oh, okay, wellhere's an itemized bill.
It was, 10 for tapping and 99.90for knowing where to time and
materials doesn't convey thevalue of knowing where to tap.
Harv (00:44):
Before we get into the interview, as you know, this
podcast is brought to you byScoro.
Scoro is an agency platform thatbrings together your quoting,
task, time, and budget tracking,your invoicing, and your agency
reporting into one place.
One reason I brought Scoro intomy past agency was because we
were a multi entity business.
We had different agencies indifferent countries and we
(01:06):
needed a common platform thatallowed us all to collaborate
across the group and have asingle place where all our group
reporting was done.
So it made it really efficientfor finance, operations and all
the people in the team tocollaborate.
You can sign up for a free trialat scoro.Com or drop me a note
on LinkedIn and I'd love to tellyou about my experiences and why
(01:26):
my team loved using Scoro.
Now, back to the episode.
Harv Intro (02:02):
Welcome back to the podcast, all.
If you're running an agency,pricing is one of the hardest
and most important decisionsyou'll need to make.
Price too low and you're burningout your team on work that
doesn't pay the bills.
Price too high, and you'reworried about scaring off the
client.
But beyond the numbers, this isan ops problem because even with
(02:23):
solid pricing on paper,profitability often gets eaten
up by mis-scoped projects,inefficient delivery, or teams
constantly reinventing thewheel.
so today we're talking about howto price smarter and build a
more profitable agency, Withoutcompromising on quality or
client relationships.
Whether you're thinking aboutshifting to value-based pricing,
(02:44):
figuring out how to raise yourrates, or just wanna plug the
holes that are leaking margin,this one's gonna be packed with
practical advice.
Today's guest is Karl Sakas, anagency growth consultant who's
worked with hundreds of agenciesacross 36 countries.
For more than 20 years, he'sbeen helping agency leaders go
from overwhelmed and reactive toconfident and in control.
(03:08):
Through his consultancy, Sakasand company, Karl Blends
practical frameworks with deepoperational know-how, drawing
from his background and projectmanagement, digital strategy and
operations.
I've been following Karl's workfor a while now, and he's
absolutely brilliant.
His site is packed with hundredsof useful articles.
His latest book, Calm The Chaos,which I've just read, is full of
(03:29):
actionable advice on running abetter agency, I'm not even
kidding, even his out of officeemail delivers value.
He's super impressive.
I'm so excited to have Karl inthe show today.
Let's get into it.
Harv Nagra (03:41):
Karl, welcome to the podcast.
Thank you so much for beinghere.
Karl Sakas (03:44):
Harv great to be here.
Looking forward to helpingpeople
Harv Nagra (03:46):
Thank you so much.
I'd love to start with youtelling a bit about your agency
background, if you wouldn'tmind.
Karl Sakas (03:52):
before becoming an agency advisor, I served in
agency operations as a PM as aDirector of client services, a
director of operations, and ifyou go way back, back to the
days of dial up, I was afreelance web designer in high
school and college, so I've beenin the industry for quite some
time.
Harv Nagra (04:10):
Amazing.
And so when did you branch offand start your own consultancy?
Karl Sakas (04:14):
I started what's now Sakas and Company in 2013
Harv Nagra (04:17):
wow.
Karl Sakas (04:18):
worked for one agency and then another as a PM
and head of operations.
And I realized there is thisopportunity where people start
agencies'cause they love thework, not because they
necessarily love running abusiness.
And of course that's whereoperations will come in.
I, I joke that operations iseverything that needs to happen,
but that the agency owners don'twant to do themselves.
Harv Nagra (04:39):
Exactly that.
I, I can definitely relate tothose situations where people
start an agency because they'regreat at something, but not
because they're great at runninga business.
And certainly operations is notone of those things people tend
to be great at intuitively,perhaps.
So there's lots of brilliantthings you talk about Karl, so
much that I really had to thinkabout what I wanted to focus the
(04:59):
conversation on today.
I've settled on what I'm callingpricing, profitability and
predictions.
Side note, for anyone listening,Karl has a really interesting
article about predictions forwhere the agency space is gonna
be in the year 2030.
So we'll put a link to that inthe episode notes so you can go
and read that.
We're gonna try to cover a lotof ground as a result today,
(05:21):
Karl, so if you're ready, we candive in.
Karl Sakas (05:24):
Absolutely.
Harv Nagra (05:24):
I wanted to start with pricing.
There's a a few core ways youcan price work in your agency,
right?
There's time and materials,there's deliverable and
milestone based, which tends tobe quite common.
And then there's value basedpricing.
could you walk us through thesecovering when they're a good fit
and maybe some pros and cons ofeach of those.
Karl Sakas (05:43):
Historically, time and materials can be a good
option if you don't know howlong something will take, or if
you're doing sort of maintenancefee requests for a past client
who did maybe a big project andthey've, they've scaled back,
you're
Harv Nagra (05:57):
Right.
Karl Sakas (05:57):
per hour or for some agencies by day or half day.
Before the rise of AI tools,hourly or time and materials
made sense in certaincircumstances.
If it was the first time you'redoing something or if a client
was happy to say, oh yeah, youknow, whatever time it takes,
get it done.
The problem is that time andmaterials doesn't capture the
(06:18):
value of intellectual property,AI tools that you've built
internally or that you may beusing and, and things like that.
It also, and even before AIdoesn't capture the value of
your experience.
For instance, I've worked withover 600 agencies.
I do charge more certainly thanwhen I had less experience.
(06:39):
But, being able to solve aproblem quickly,
Harv Nagra (06:42):
Mm-hmm.
Karl Sakas (06:42):
in say a, a one hour call, we're in a, couple month
project that has a lot of valueand time and materials doesn't
capture that.
And the same is true foragencies.
So historically time andmaterials was helpful if you
know you needed thatflexibility.
ideally though agencies would bedoing the second model
deliverable based, fixed scope,fixed price that
Harv Nagra (07:04):
Mm-hmm.
Karl Sakas (07:05):
for projects and for ongoing retainers.
It's where the client is payinga flat amount to receive certain
deliverables or, certain thingsthat they're getting.
A lot of agencies, if you'relisting and you're doing time
materials, you probably wannamove toward deliverable based
Harv Nagra (07:21):
Mm-hmm.
Karl Sakas (07:22):
based.
The advantage there, of course,is that you're charging a fixed
price for fixed scope.
If you can get things doneefficiently and effectively
faster, you come out ahead.
Of course, it doesn't work ifthings go way over your plan and
you're still on the hook to getthings done.
It does require some sometimesdifficult conversations with
(07:42):
clients about scope management,because if a
Harv Nagra (07:45):
Right.
Karl Sakas (07:45):
something that's out of scope, you need to say no.
Although ideally, you give themoptions, you could say, for
instance, we're glad to do that,would you like to take care of
that next month?
When we have budget for it orwould you like to shift some
things around this month orwould you like to potentially
add some extra budget and get itall done right now?
(08:06):
If your team avoids conflict,that can be a problem with, with
fixed scope.
Value-based has a few forms, butin its purest form, value based
pricing is about charging apercentage of the value the
client gets.
You could think of it as acommission or a royalty.
For instance, if the client getsan extra 5 million in sales and
(08:29):
you're charging 10% of that,you're gonna get 500,000.
And if they get more, you getmore.
If they get less, you get less.
And some agencies will oftencharge a fixed amount plus a
value-based fee on top of that.
Value based pricing is a holygrail for agencies, but often if
you're struggling withprofitability, you're better off
(08:50):
moving from say, time andmaterials to fixed price, or if
you're in fixed price now,getting better at scoping and
scope management rather thangoing to a totally different
model.
Harv Nagra (09:00):
between value-based and performance-based, is there
a difference in those pricingmodels?
Karl Sakas (09:05):
they're pretty much synonymous.
Some agencies will describethemselves as performance based
when they're, focusing on clientperformance, but not necessarily
charging based on it.
Harv Nagra (09:15):
Hmm.
Karl Sakas (09:15):
instance, pay per click oriented agencies,
affiliate marketing orientedagencies, they are working to
drive performance.
They may not necessarily beexactly doing value-based
pricing.
Harv Nagra (09:27):
I mean, the whole value-based pricing thing can
feel like a leap for someagencies, when they might
already be feeling like it's arace to the.
Bottom in terms of, competingagainst everyone else out there.
And there's so many agencies, ina given niche.
We, recently had an episode withMax Tray on how to position
yourself as a strategic partnerwith your clients, so you can
(09:47):
get out of that race to thebottom.
But in your point of view, howdo you break through to
value-based pricing if you'venever done that before?
Karl Sakas (09:55):
Max has great advice.
So if people haven't seen theepisode or checked out his books
and materials, definitely wantto dig in.
A great starting point towardvalue-based pricing without
leaving a fixed scope model isto do what I would call value
anchoring.
That's where you have aconversation with a client about
the value you're trying todeliver for them, and then
(10:15):
framing your fixed fee as a muchsmaller percentage of that.
For instance my initialengagement is an eight to 10
week agency growth diagnostic.
It is a fixed price based on thenumber of stakeholders involved,
Harv Nagra (10:29):
Okay.
Karl Sakas (10:30):
tends to be a proxy for the complexity of what alls
is going on.
you know, a particular agencyreached out and they, they're
interested in selling theagency, but their valuation now
isn't as high as they want it tobe in the future.
I did some estimates.
My sense was that a roughvaluation was somewhere between.
Two and a half to 3 million now,they wanted to sell for 8
(10:52):
million or more.
And so I said, I, I can help youdo that.
It it'll take some time.
You need direction on where togo and what to prioritize.
That's where that initial agencygrowth diagnostic will help and
then can help them on an ongoingbasis toward that goal.
Or they can do it themselves.
in this case I was able toanchor
Harv Nagra (11:12):
Hmm.
Karl Sakas (11:12):
they are looking to add like$5 million in value and
the price of the initial projectis a fraction of it.
I, I mean, almost, I, I wasthinking, oh, I'm undercharging
for this relative the insightsthey'll get, of course, they
still have plenty to do.
I wouldn't get credit for thewhole increase.
(11:32):
but for people who arelistening, you know, and as
you're working with your salesteams as an operations leader.
Are they having conversationsabout the value the client is
going to get?
If you don't have thoseconversations, you can't value
anchor.
Harv Nagra (11:45):
Hmm.
Karl Sakas (11:46):
if the client clear on what the value is, you can't
value anchor.
Harv Nagra (11:51):
Hmm.
Karl Sakas (11:51):
instance, I had a client as a director of client
services that was a cosmeticdentist that a general and
cosmetic dentistry.
Their ideal was to sell a smilemakeover, which adjusted for
inflation would be about$50,000today.
But I introduced them to theconcept of lifetime customer
value or for them lifetimepatient value.
(12:11):
And I, I told'em about the ideaand I was like, do you have a
sense of what that amount is?
And they said,$4,000.
And they said, and that'susually in the first four to
five years after that, we havemaxed out their mouth.
It was a little
Harv Nagra (12:25):
Okay.
Karl Sakas (12:26):
talking about maxing out your
Harv Nagra (12:27):
Yeah.
Karl Sakas (12:28):
Got it.
So for instance, if I could say,you know, in a month we had
helped them generate 20 newpatients who were worth 4,000 a
piece that was 80,000 in value,and they were paying less than
that in their retainer.
That helped anchor the value.
So I would start by valueanchoring before you jump
directly to value-based pricingor full performance-based
(12:50):
pricing.
It'll help set the stage.
Harv Nagra (12:51):
Mm-hmm.
Is it possible that when you'redoing that value anchoring if
you don't attain the resultsthat you were aiming for, does
that happen in, how do you avoidthat kind of situation?
Karl Sakas (13:01):
The idea is that you're doing a relatively small
percentage of the total value,if you're doing 10% and they
only get half the value, theystill paid you 20%
Harv Nagra (13:12):
Got it.
Karl Sakas (13:13):
amount and they received 80% instead of 90%.
Harv Nagra (13:18):
Understood.
That makes sense.
When you're working withexisting clients, agencies that
you consult with, are peopleable to make that transition
from fixed price, fixed scopeprojects to value based with
their existing client base?
And if so, what kind of advicedo you have to get people, to
make that transition.
Karl Sakas (13:36):
Agencies sometimes can make a transition to value
anchoring or even value based.
Harv Nagra (13:42):
with
Karl Sakas (13:43):
current clients, a challenge is that your current
clients are used to working withyour agency in a certain way.
So if they're used to saying,you know, yeah, we'll, we'll get
this done, it'll take threehours, and you've charged them
an hourly rate, and now you'resuddenly saying, well, that'll
be a percentage of this, and apercentage of that.
Hmm.
Clients were used to how you'reworking before, that can be a
(14:04):
tough sell.
Of course,
Harv Nagra (14:06):
Mm-hmm.
Karl Sakas (14:06):
can go in other ways.
I, I had a client once whowould, anytime he would send a
request, he would say, oh, Ithink that'll take you about an
hour.
Harv Nagra (14:13):
Mm-hmm.
Karl Sakas (14:14):
and we did time and materials.
I was like, well, actuallythat'll be eight hours.
Based on my discussion with theteam, He was like, oh, eight
hours.
I could have done it myself.
I'm thinking, no, probably not.
well, even if you could, you
Harv Nagra (14:27):
asked us
Karl Sakas (14:28):
to do it.
So it's eight hours.
Harv Nagra (14:30):
Mm-hmm.
Karl Sakas (14:31):
some of those clients who are.
Cheapskates or maybe don't havea good internal focus on the
value of their work may not moveto it.
It's a lot easier to move tovalue anchoring and higher
prices in general with newclients.
But you can say to existingclients, I talk about this in an
article, I wrote for the Shopifypartner blog that applies to any
(14:53):
kind of agency about raisingyour prices.
One of the keys is that if youdon't raise a particular
client's price, make sure theyknow that other people are
paying more.
You could say, for instance, asa heads up, new clients are now
paying, 30% more.
We enjoy working with you.
You're locked in on a clientloyalty discount through the end
(15:14):
of the year or
Harv Nagra (15:15):
Right.
Mm-hmm.
Karl Sakas (15:16):
at that point their price goes up 10 or 15% instead
of 30%, and they're like, oh,we're getting a good deal.
It all depends on the client.
It depends on the relationship.
It's a lot easier to switch anykind of model or pricing with a
brand new client, but you canmake it work with current
clients if you make it worththeir while.
Harv Nagra (15:35):
Definitely, and I read that article by the way.
Really, really excellent adviceand examples on how to make that
transition with your customersand also being okay with losing
certain clients over time aswell, I think.
Karl Sakas (15:48):
the key there is, uh, you know, as you saw in the
article, it's a portfolioapproach to price increases.
It is not that every client getsthe exact same increase because
they all have different scopes,different histories, goals,
things like that.
But the idea is that you areraising the price to the
appropriate, suitable levelthat's gonna be higher for some
lower, for others, maybe noincrease.
(16:09):
It also gets into whether youwanna keep the
Harv Nagra (16:11):
client Mm-hmm.
Karl Sakas (16:12):
I have a concept I call strategic churn.
That's where you replaceprevious or current clients with
better new clients.
If it's a client, you're okay tolose, maybe they're gonna get a
higher increase if they wannastick around or a, a higher
increase if they want to keepworking with, say, the owner of
the agency, where maybe theowner used to work with lots of
(16:32):
clients directly.
Not really anymore.
If clients wanna keep workingwith the owner, they're gonna be
paying a lot more
Harv Nagra (16:38):
for that
Karl Sakas (16:39):
that premium service.
Harv Nagra (16:41):
I really, really love that Karl and I've never
heard anybody put it that waythat, if there are customers
that you're less happy to workwith, kind of price them out and
be okay with that.
But also the example of pricingyour senior team or certainly
your MD or CEO at a much higherrate is so good'cause sometimes
that happens where clients arelike, I refuse to work with
yourselves if I don't get towork with so and so any longer.
Karl Sakas (17:04):
Yeah.
Well, and, and you, you, you'renot forcing them to stop working
with, the senior person.
But now it's like, well, you'vebeen paying 7,000 a month.
New clients are now paying 15 to20.
If you want to continue at thatprice, we'll need to make some
changes to the, the team and thestrategist on the account, or if
(17:25):
you're willing to go up to 12 or15, we can continue with the
current team.
Which do you prefer?
I call that reason, options,choose.
Give a reason why.
Give them two or three handselected options that you've
identified and then let themchoose.
Harv Nagra (17:41):
Excellent.
One of the predictions you hadin your article for 2030 is that
we're gonna see a rise inperformance-based pricing.
could you just briefly go overagain where this works well if
there's certain kinds ofscenarios where this kind of
model tends to work better?
Karl Sakas (17:56):
Performance-based pricing works well when the
client has a clear idea of theirown internal value, the value of
a lead, for instance, or a saleif they're doing direct sales
and things like that.
Harv Nagra (18:10):
Mm-hmm.
They
Karl Sakas (18:10):
also have good attribution to know that things
came from your agency's effortsand ideally from a particular
campaign or particular program.
Harv Nagra (18:19):
Hmm.
Karl Sakas (18:19):
An agency is good at doing the work, right, that you
can get it done effectively andefficiently.
And ultimately, the clienttrusts you because there's a
risk if you're adding aperformance based component.
Is the client going to betruthful in the results?
They got to make sure thatyou're getting paid
Harv Nagra (18:38):
Right.
Karl Sakas (18:39):
Usually they are.
I mean, because ultimatelythey're making way more money
than the money they're, they'repaying you.
But, when it comes to riskmanagement, I, I recommend
looking at, at three things.
One what is most likely tohappen?
If If it's likely to happen, youshould have a plan for it.
What is not likely to happen,but would be catastrophic if it
(19:01):
did.
Harv Nagra (19:01):
Right.
Karl Sakas (19:02):
that's why people get homeowner's insurance or
renter's insurance or, or thingslike that where like your house
probably isn't going to burndown, but if it did, it would be
really
Harv Nagra (19:11):
Mm-hmm.
Karl Sakas (19:12):
you want the insurance coverage.
The third thing though, to lookat, so what's most likely to
happen?
What?
What would be catastrophic?
Unlikely to be catastrophic.
The third thing is what if itgoes really well?
What if things, go beyond yourwildest dreams?
And in that case, they might bepaying you millions in
performance-based fees.
(19:32):
Are they setting aside themoney?
Harv Nagra (19:34):
Right.
Karl Sakas (19:35):
are, are you set up to receive those payments?
Harv Nagra (19:38):
Yeah.
Karl Sakas (19:39):
Is your bank gonna think that you're receiving some
sort of money launderingpayments or something like
suddenly getting all of thismoney?
I would give your banker a headsup if you're about to get a,
sudden million or multimillionwire transfer.
The thing though is that ifthey're paying you somehow
millions in performance fees,it's because they're making
likely 10 or 20.
Harv Nagra (20:00):
Right.
Karl Sakas (20:01):
30 million themselves.
So are, are they ready for
Harv Nagra (20:04):
Mm-hmm.
Karl Sakas (20:05):
themselves?
Is the client able to fulfill
Harv Nagra (20:07):
Yeah.
Karl Sakas (20:08):
All these things to
Harv Nagra (20:09):
Mm-hmm.
is that just a conversation tomake sure that they're set up
for that, or is there anythingelse that you can do to make
sure that's all in place?
Karl Sakas (20:17):
Ideally, you're running some sort of attribution
process or system so that, andyou have access to their CRM or
their sales system or thingslike that.
I mean, it's, it's easy ine-commerce where you're able to
track pretty closely where aparticular sale came from.
If they are getting phoneinquiries, you'll need to work
(20:38):
with their team to make surethat their recording, where the
in inquiries came from andthings like that.
With the, the dentist officeexample, we did some training
with the office staff.
About how to log things when newpatients came in and actually
were able to get a new fieldadded into their internal CRM
(20:59):
but that does raise, you know,if you're questioning the ethics
of a client, You definitelydon't wanna do a performance
based deal with them.
Harv Nagra (21:07):
Absolutely.
Good point.
So what, makes you confidentthat this is gonna become more
common and prevalent in the nextfew years?
Karl Sakas (21:13):
It's all about incentive alignment,
Harv Nagra (21:15):
Hmm.
Karl Sakas (21:16):
clients want to grow, whether that's selling
more services or products orreaching other goals of their
own.
Maybe, maybe they're growing tohave an exit or something like
that.
The more you can tie what you doto what they want.
The
Harv Nagra (21:32):
Mm-hmm.
Karl Sakas (21:33):
better aligned you are toward their goals.
And performance-based pricingcan be a way to create that
incentive alignment in a waythat the traditional models of
time and materials andmilestone-based don't uh, in the
same way.
Harv Nagra (21:48):
that kind of leads us to my next question, which
was another kind of bold claimthat you've made is that time
and materials pricing is gonnadisappear by 2030.
So what makes you think that isgonna be completely on its way
out?
Karl Sakas (22:00):
I am not the first person to say that hourly
pricing is going away.
Jonathan Stark has been sayingthat, for years until the rise
of ai, though I, I was moreagnostic about time and
materials in the sense that,well, you know, if you haven't
done the work before, if theclient's happy with the model,
that can be fine.
Harv Nagra (22:19):
Mm-hmm.
Karl Sakas (22:19):
Now, though, it makes even less sense.
It goes from neutral for timeand materials to a negative.
if you can solve all of theirproblems in an hour, it's
probably worth more to them thanwhat they paid for that hour.
There's the, the old joke about,there's a factory, the key
machine has stopped working.
They bring in a engineer andthey're like, we're, we're
(22:42):
losing millions while this isshut down.
And the engineer walks aroundand, looks at a few things,
makes some measurements, getsout a small hammer, taps on the
machine, and suddenly everythingcomes back and they send a bill
and it's, 10,000 or somethinglike that.
And the factory's like, what,what?
10,000 just for tapping?
And it's like, oh, okay, wellhere's an itemized bill.
Harv Nagra (23:04):
Hmm.
Karl Sakas (23:05):
It was, 10 for tapping and 99.90 or what have
you for knowing where to
Harv Nagra (23:11):
Right.
Karl Sakas (23:12):
time and materials doesn't convey the value of
knowing where to tap.
Harv Nagra (23:17):
Really good point.
And it brings us back to whatyou were saying earlier with AI
and kind of recent conversationswe've had on the podcast as
well, is that if these toolsmake us more efficient, we
should not be passing on allthose savings in time and
efficiency onto the client.
Karl Sakas (23:31):
There's even an opportunity to potentially
charge more.
If you can get it done in ashorter duration, you can get
things turned around
Harv Nagra (23:39):
mm-hmm.
Karl Sakas (23:40):
People pay for convenience.
If you think about, baby carrotsversus regular carrots, like you
pay more per pound for the babycarrots, but they're pre peeled.
They're pre-washed,
Harv Nagra (23:50):
Yeah.
Karl Sakas (23:51):
to eat.
Labor has value, and you pay forconvenience.
Harv Nagra (23:57):
So Karl, let's talk about price reviews then.
Are there any good rules ofthumb about how often you should
be reviewing and adjusting yourpricing?
Karl Sakas (24:05):
I would review your pricing at least once a year,
Harv Nagra (24:08):
Mm-hmm.
Karl Sakas (24:08):
and that's looking at what you're charging new
clients as well as what you'recharging existing clients.
Harv Nagra (24:15):
Mm-hmm.
Karl Sakas (24:15):
with existing clients, it's gonna be a, a
portfolio of prices.
Not everyone is necessarily atthe exact same price'cause
everyone's in a somewhatdifferent situation, but
ultimately you would likelyraise prices for new clients and
then do that portfolio approachof different increases for
existing clients.
(24:36):
I probably do that once a year.
You may conclude that you don'tneed to raise prices.
Though there is value to doingsome sort of a, even a modest
increase every year so thatclients are used to it.
As opposed to suddenly they'relike, oh, it went up 15% and
it's like, oh, if you had done 3or 5% a few years in a row,
Harv Nagra (24:56):
Right.
Karl Sakas (24:57):
You, you would've been closer to that an easier to
digest way.
Harv Nagra (25:01):
Really good point and a great opportunity right
now to mention, again, thatarticle on raising prices that
we'll put in the episode notes.
I really think that there's alot of value to be gained by
reading that.
But should you be afraid to loseclients over your pricing?
What are your thoughts?
Karl Sakas (25:15):
If it's a client that you want to, as I would
say, strategically churn
Harv Nagra (25:19):
right?
Karl Sakas (25:20):
give them a higher price if they wanna renew, or a
higher price, if they want tokeep working with the owner or,
or the senior most team members.
On the other hand, if it is aclient where you feel like you
can't afford to lose themsometimes that's the case where
if you have a clientconcentration problem, which I
define as getting 20% or morefrom a single client.
Harv Nagra (25:39):
Okay.
Karl Sakas (25:40):
for those listening, I, I was speaking with an
agency, COO.
I was talking about the idea ofclient concentration her goal
was to bring me in to help and,you know, I had mentioned the
20% and you can't, you know, belike, well that's a different
department of this company.
And, and it's funny, she hadbeen trying to get her bosses to
understand that differentdepartments don't matter.
(26:01):
It's all about the company.
I'm like, well, you can say thatI said it right.
I've worked with 600 agencies.
Karl says 20% from the company,no matter the department, that's
a client concentration problem.
if you're concerned that theclient would just go away then
you may not press as hard.
Harv Nagra (26:18):
Right.
Karl Sakas (26:19):
but I would at least let them know even if they don't
have an increase.
That new clients are payingmore.
They're getting a clientloyalty, discount, and tip, put
that discount into every invoicethey get, every auto draft
receipt they get and things likethat.
Because if your client contactleaves and a new person comes
in, they don't see that they'regetting a special deal, they'll
(26:42):
assume it is a normal deal.
Harv Nagra (26:44):
Whereas
Karl Sakas (26:44):
if they're like, oh, they're getting a 10% discount
every month, they may stillexpect some sort of deal, but at
least they can't claim they hadno idea.
Harv Nagra (26:53):
exactly.
And it's funny how quicklyclients, even the clients that
you've been working with a lotor for a long time, easily
forget that they had thatdiscount if you're not spelling
it out on that invoice everysingle time.
Now about that 20% rule that youwere mentioning, is that all
about risk and mitigating thatif, if that client were to
disappear, what's your point ofview on that?
Karl Sakas (27:13):
So the idea of client concentration is that if
you become overly dependent onany one client.
If you lose them as a client,you're probably gonna have to do
layoffs.
I spoke with an agency wherethey had about 40% of the
revenue from one client.
They
Harv Nagra (27:29):
were a long
Karl Sakas (27:29):
time client.
They also weren't incrementallya, a very profitable client.
Like the overall profits weregood'cause they were a big
client, but they were at thelowest rate that the agency was
charging'cause the client hadbeen around for a while.
They were
Harv Nagra (27:42):
getting
Karl Sakas (27:43):
volume discounts.
The agency hadn't been raisingprices.
So if you lose a 40% client,you're gonna have to do layoffs.
Harv Nagra (27:50):
Right.
Karl Sakas (27:50):
have to make some really difficult cuts.
The other thing is maybe theclient doesn't fire you, but you
wanna fire them.
You're gonna feel trappedbecause you can't suddenly,
easily lose 40% of your revenue
Harv Nagra (28:02):
Mm-hmm.
Karl Sakas (28:03):
doing layoffs and owners cutting their pay and,
and things like that.
So the goal is to avoid gettingtrapped in, in a situation where
you couldn't afford to lose themif they initiated or where you
feel like you can't afford tocut ties with them.
Harv Nagra (28:21):
Mm-hmm.
Karl Sakas (28:22):
at.
Harv Nagra (28:23):
So we're gonna shift gears a touch and I wanted to
pick your brain aboutprofitability.
Besides sales pipeline anxiety,profit tends to be something I
hear a lot of agencies worryingabout.
What are the key levers that canbe pulled to improve margins?
Karl Sakas (28:39):
The biggest overarching driver for your
margins is your labor ratio.
Harv Nagra (28:44):
Okay.
Karl Sakas (28:45):
What percentage of your revenue are you spending on
team members?
But if we're setting asidechanges to your team, we can
look at delivery profitability,and there are three levers
there.
Harv Nagra (28:56):
Okay.
Karl Sakas (28:56):
It's pricing, second is scope, and the third is scope
management.
here's an example.
I was working with an agency inAustin, Texas several years ago.
owner said, I've been running myfirm for a decade.
I thought I'd be making moremoney at this point and that I
wouldn't be working quite ashard.
That was before I had releasedmy work Less Earned More book,
(29:18):
but she definitely was in thetarget audience for that.
Harv Nagra (29:22):
Mm-hmm.
Karl Sakas (29:22):
And so I, I dug in using what's now the agency
Growth Diagnostic, and I found aseries of problems.
She was undercharging, she wasdelivering too much scope, and
her team was not managing thescope very well.
she did not wanna make anychanges to her team.
I was working with her and herdirector of operations.
I said, well, here are the threelevers right now you're charging
(29:42):
about half of what similar wouldcharge for this type of work.
Ideally you would raise pricesstarting with new clients and
perhaps transitioning part ofthe way they are for existing
clients.
Her response, remember she'sworking too much and not making
enough.
She's like, oh, my clients couldnever pay that much.
(30:02):
I can't raise their prices.
I'm like, Hmm.
I, I mean, I'm thinking some ofher clients were smaller, but I
think others would've beenwilling to pay more and she
could also potentially look atsomewhat, instead of micro
businesses, smaller businessesas an option.
But she didn't wanna do that.
Harv Nagra (30:17):
Mm-hmm.
Karl Sakas (30:18):
you could also reduce the scope of what you're
providing.
instance, she was selling and,and her team were selling a
package that was a brandidentity package.
A website and all of thecopywriting for the website what
other agencies would charge justfor a website
Harv Nagra (30:35):
Oh, wow.
Karl Sakas (30:35):
for brand package.
Harv Nagra (30:37):
Mm-hmm.
Karl Sakas (30:37):
said, what if you set aside the copywriting as an
add-on where they didn't get itautomatically?
They could, but they could add
Harv Nagra (30:45):
Mm-hmm.
Karl Sakas (30:45):
price.
She's like, but then the websitewould have bad copywriting.
Okay, but I'm thinking if theclient's not paying for it,
Harv Nagra (30:52):
Right.
Karl Sakas (30:53):
are they getting it for free?
Harv Nagra (30:54):
Yeah.
Karl Sakas (30:55):
or you could say maybe it's the website and the
copywriting, but the brandidentity package is separate and
that's a, a first step for
Harv Nagra (31:02):
Yeah.
Karl Sakas (31:03):
She's like, well, if they don't do that, then it's
gonna have a bad brand.
And I don't want that to be inour portfolio.
I'm thinking like, if you can'tconvince clients to pay for
value, you're, you're not gonnamake more money.
I said, well, there's a thirdlever, right?
I'm talking with her and herdirector of operations, and I
said based on my calculations,they were regularly going over
(31:23):
scope by about 80%.
Clients were getting almostdouble of the, of the scope.
And I said, going forward youcan stop going over scope.
The team will have to be morefirm about what is and isn't in
scope charging for, scope creepand things like that.
And the operations directorsaid, how over scope can we go?
Harv Nagra (31:47):
Oh dear.
Karl Sakas (31:47):
And I'm, I'm thinking, how much money do you
wanna lose?
Harv Nagra (31:50):
Yeah.
Karl Sakas (31:51):
actually a case where I recommended stopping the
project halfway throughrefunding the rest of the
project.
'cause they didn't seem to wantto make changes.
And I laid that out as aboundary and they were like, no,
no, no.
We, we wanna follow it.
And I, I foolishly believed them
Harv Nagra (32:08):
Mm-hmm.
Karl Sakas (32:09):
going and.
I don't think they made changes,so I had some new things to keep
in mind for my screeningprocess.
Harv Nagra (32:16):
that's interesting.
Where does that mentality comefrom?
they seem to be wanting to run adesign charity or something like
that, where they're giving awaywork.
Karl Sakas (32:24):
Yeah.
I've started in my intakeprocess, I'll ask clients about
what is their relationship withmoney.
Harv Nagra (32:30):
Hmm.
Karl Sakas (32:31):
some things from their childhood that are still
showing up now
Harv Nagra (32:35):
Interesting.
Karl Sakas (32:36):
'em in trouble?
I think in her case it wasaround seeing the idea of like
money or having money is bad,
Harv Nagra (32:42):
Mm-hmm.
Karl Sakas (32:43):
was inadvertently making choices that undermined
Harv Nagra (32:46):
Wow.
Karl Sakas (32:47):
making money.
Harv Nagra (32:48):
Mm-hmm.
Karl Sakas (32:48):
Another client I'm working with, they mentioned
they were often overloaded withclient requests and things like
that, and tons of slackmessages.
And what emerged is that part oftheir value proposition is that
clients get direct Slack accessto the agency team, which is not
a good idea.
Harv Nagra (33:05):
Hmm.
Karl Sakas (33:06):
the team is getting overwhelmed.
One of the things that I'venoted is like, gotta stop doing
that.
And the agency owner is like,well that's really important.
That's why people hire us.
Harv Nagra (33:15):
Hmm.
Karl Sakas (33:16):
yeah, that's why they hire you.
'cause no one else is doingthat.
Or very few are doing that.
if they are, they're chargingtwo or three times as much per
month
Harv Nagra (33:24):
Hmm.
Karl Sakas (33:25):
you know, As I'm finalizing my advice for them,
is stop doing it or charge waymore.
Pick which you want and
Harv Nagra (33:33):
Yeah.
Karl Sakas (33:34):
you can make it happen.
Harv Nagra (33:35):
Mm-hmm.
Karl Sakas (33:35):
I have a book recommendation, which is
Overcoming Underearning.
Harv Nagra (33:39):
Okay.
Karl Sakas (33:40):
Barbara Stanley,
Harv Nagra (33:41):
Hmm.
Karl Sakas (33:41):
mostly on people who are in salaried roles of like
how to negotiate, getting moremoney, getting what you're
worth.
It does work for owners.
For instance, I recommended itto a client several years ago
where as soon as she read it,she reported back that she'd
raised her salary, like 50%,that she was underpaying
herself.
It also works, OvercomingUnderearning, on charging more
(34:03):
for your services.
Like, okay, it's worth it.
People need to pay for it.
Or at least, certainly newclients need to pay for it.
And you'll work on increasing.
So Overcoming Underearning.
Harv Nagra (34:13):
Excellent.
Do you see any kind of commonways agencies lose money without
realizing it and how can theystop that if that's the case?
Karl Sakas (34:22):
I've written a whole article on profit leaks,
Harv Nagra (34:24):
Okay.
Karl Sakas (34:25):
And, and how, how things can go wrong.
I, I would say as a startingpoint, look at your net profit
margins.
If your net profit margins are20 to 30% after market rate
owner compensation, you'reprobably doing fine.
On the other hand, if your netmargins are 10 or 15% or or
less, client came in recentlywhere they were in the single
digits.
(34:45):
You wanna dig into why.
Overspending on labor can be abig factor, especially if you
have a slower than projectedyear.
You've got the team that youexpected if it was a bigger
year.
And you don't make any staffingchanges.
That can be a big factor, but Iwould start by looking at what
are your net profit margins?
If it's below 20%,
Harv Nagra (35:04):
You've got profit leaks somewhere
Karl Sakas (35:06):
It could be staff, it could be how the team is
logging their time.
It could be something else.
But, as an operations leader,that's a sign to dig deeper.
Harv Nagra (35:14):
good advice.
Karl.
We're gonna come back topredictions.
There's a lot of change inexperimentation with ai.
You have some strong points ofview on how we can use these
technologies and theefficiencies they bring to our
advantage.
Something that you've said isdon't just use AI to be more
efficient.
Package it as a new, high marginservice.
(35:36):
So that I think is fantasticadvice, but I'd love to hear
what that looks like inpractice.
Karl Sakas (35:42):
That's gonna be unique to each agency and your
Harv Nagra (35:45):
Mm-hmm.
Karl Sakas (35:46):
I would start by looking at what are your clients
trying to accomplish bothprofessionally and personally?
ran a CMO networking group forfive years.
I was the only non CMO in theroom.
And because I only worked withagencies, I had nothing to sell
them,
Harv Nagra (36:04):
Mm-hmm.
Karl Sakas (36:04):
Because they weren't my, my target market.
And, there were themes that cameup around attribution that kept
coming
Harv Nagra (36:10):
Mm-hmm.
Karl Sakas (36:10):
what can your agency do attribution wise?
What could you do to coach yourclients on it where maybe
they're using AI tools andyou're helping them sort through
customization at their firm.
Maybe you're building customGPTs or agentic AI type agents
for the client, and then they'rerunning it.
(36:32):
Or something like that.
Or you're helping maintain.
You could be building out toolsor you could be providing
services.
It's gonna depend on what yourclients need.
Harv Nagra (36:41):
Hmm.
Karl Sakas (36:42):
the personal goals piece.
the CMO trying to get promotedto become the CEO?
Harv Nagra (36:46):
Right.
Karl Sakas (36:47):
can you position yourself to get there?
That could be AI related.
It might not.
I, I had a client years agowhere, they were a marketing
manager at a large corporationand they had an associate's
degree and they were going backpart-time to get their
bachelor's
Harv Nagra (37:01):
Mm-hmm.
Karl Sakas (37:02):
And I would ask like, what classes were they
taking that semester?
'cause then I could tie the workthat we were doing and upsell
opportunities to their classes.
And so it, created a, a win-win.
Harv Nagra (37:14):
Hmm.
Karl Sakas (37:14):
So the exact solutions are gonna depend on
your clients and also on youragency skillset.
On the other hand, if people arelistening and they're like,
more, you know, more of that,or, or the owners of the agency
where you work are like ai, dowe really have to, that could be
a sign that it may be time forthe owners to sell the business
(37:36):
and move on rather than keeprunning it.
Like things are gonna keepchanging.
not going to stop.
And if an owner is tired ofdealing with that.
It may be a sign that it's, timeto sell the agency and move on.
will say, I, I ran a, a workshopand then now it's available on
demand training, on control andmaximize your agency exit.
Harv Nagra (37:57):
Hmm.
Karl Sakas (37:57):
for the live attendees, I asked, these were
all agency owners of independentagencies, under a hundred
people.
What would they ideally do afterthey sell their agency?
And about half of therespondents said they would
start a new business.
Harv Nagra (38:11):
Hmm.
Karl Sakas (38:11):
Yeah, so you know if, if you're noticing that your
boss doesn't seem fully engagedin the business anymore, maybe
it's time for them to sell, andby the way, that's an
opportunity for you to move up.
Maybe it's to move up to becomethe CEO if you want, or managing
director or something.
There are probably someopportunities there, but it
starts by having that
Harv Nagra (38:31):
Mm-hmm.
Karl Sakas (38:32):
Call out what you've
Harv Nagra (38:33):
Mm-hmm.
Karl Sakas (38:34):
and see how you can help them.
Harv Nagra (38:36):
Interesting.
One of your kind of relatedpredictions on AI was also that
while clients may push back onimplementation costs, they'll
increasingly pay for expertstrategic insights to make sense
of AI generated data andmarketing noise.
Another prediction was agenciesthat package AI driven execution
with deep human expertise willthrive.
(38:59):
Can you unpack those a littlebit?
Karl Sakas (39:02):
So think about your services.
Agency services fit into threemain categories.
I think of it as think, teach,do, think is strategy.
Tell me what to
Harv Nagra (39:10):
Mm-hmm.
Karl Sakas (39:11):
Teach is training and empowerment where the
client's like, I wanna do itmyself.
Show me how,
Harv Nagra (39:16):
Mm-hmm.
Karl Sakas (39:16):
help me hire people to do it.
then think, teach, do, do isabout implementation.
It's about implementing thework.
So think about your agency'swork.
What could you use?
AI tools including buildingthings internally, whether
that's building custom GPTs,building ai agent related tools,
things like that, or using offthe shelf tools.
(39:37):
What can you do forimplementation there?
But it still needs to be guidedby strategic insight, though
probably strategists that areassisted by AI as
Harv Nagra (39:48):
Mm-hmm.
Karl Sakas (39:49):
right?
Feeding in all of the data is agreat, you know, into an AI tool
can be a great way to get asummary of things, notice things
you missed and things like that.
But at least at this point, westill benefit from human
involvement.
So the idea there is that you'reselling insights with AI support
(40:09):
and assistance.
And you make money doing it
Harv Nagra (40:12):
And this is a fantastic time, an opportunity
to really get ahead of thecompetition as well if you
really lean into this, usingthese tools to your advantage in
becoming that strategic partner.
Karl Sakas (40:23):
and also, I mean, you know, I, I've, I'd say I'm
sort of intermediate on AI atthis point.
There are events and programsand people where you can learn
from them.
I, I'm helping organize the AIin your agency event in August
of 2025.
Harv Nagra (40:38):
Amazing.
Karl Sakas (40:38):
San Francisco, I went to the first one as an
attendee two years ago Irecommended it to to clients
last year.
This is through the Bureau ofDigital, or the Bureau, Where I,
I'm involved as a member.
The speakers there are superplugged into what's going on.
It's about AI in youroperations, in ai, in your
services.
So I know that I'm gonna learn alot.
(41:00):
I learned a lot before, and
Harv Nagra (41:01):
Right.
Karl Sakas (41:03):
You don't have to invent it all from scratch.
Harv Nagra (41:06):
Yeah, really good point.
Just make sure you're pluggedinto those networks and those
groups, having thoseconversations, and learn as much
as you can.
Karl if you had to give onepiece of kind of parting advice
to an agency ops leader, doesanything come to mind?
Karl Sakas (41:19):
Make sure you understand the unique values,
goals and resources(VGR) tofollow.
usually that'll involve speakingwith the owner or owners of the
agency.
Values would be around howshould you approach things, how
do you approach work goalsaround where to go.
Understanding their goals,ideally, both professionally and
(41:40):
personally so that you cansupport them on that.
And then the resources in termsof time, money, people,
software.
Things like that to get thingsdone.
The more you know about that,the more you can help, your boss
or bosses achieve their goals.
And ideally that'll help youwith your goals as well.
So understand where you'regoing, how they want you to get
(42:02):
there within reason and theresources available.
It'll go a lot better foreveryone involved.
Harv Nagra (42:08):
really good advice.
I mentioned your latest book inthe intro, Calm the Chaos which
has just come out.
I had the pleasure of reading.
Fantastic.
There it is on screen.
But you've written a number ofbooks as well, haven't you,
Karl?
And I think relevant, today'sdiscussion might be Work Less,
Earn More, which you wereshowing us a few moments ago.
Could you be briefly tell uswhat we can find in each?
Karl Sakas (42:30):
Yeah, well, Work Less, Earn More is my third book
looks at Helping Owners is thesubtitle says, escape the Daily
Grind of Agency Ownership.
It works whether you are lookingto sell your agency to have an
equity event.
Lately clients are saying theywanna sell for five to 10
million.
Though I have some clients whoare, on track to sell, say 40
(42:51):
million.
Another client is seeking ahundred million as as their
exit.
That's gonna be a, a bit furtherout.
or if you wanna run a highlyprofitable lifestyle agency
where you're making above marketsalary, great profit margins,
things are running smoothly,you're doing the work you want.
That's the idea of Work Less,Earn More, making
Harv Nagra (43:09):
Okay.
Karl Sakas (43:10):
increasingly optional as an agency owner.
But for everyone who's listeningas an operations leader, part of
that is the owner is rewardingtheir best team members.
Harv Nagra (43:20):
Right.
Karl Sakas (43:21):
Are opportunities for you to move up.
For instance, I have a clientwhere the owner wanted to step
back and five years ago we builtan initial succession plan and
had a key team member who wasvery promising, so steps to move
up, account manager, director ofclient services, vp, president.
And earlier this year theemployee just got promoted to
(43:42):
CEO.
And
Harv Nagra (43:44):
Wow.
Karl Sakas (43:44):
the owner is working just a few hours a week
Harv Nagra (43:47):
Amazing.
Karl Sakas (43:47):
point.
Harv Nagra (43:48):
Mm-hmm.
Karl Sakas (43:49):
Yeah.
So Work Less, Earn More for theowners.
Yes.
But while rewarding the bestteam members, that's an
opportunity for operationsleaders to get promoted, to get
new responsibilities, more payboth now and potentially with
Phantom stock if they're headingtoward an that's Work Less, Earn
More.
You can go toworklessearnmorebook.com.
(44:10):
You can get all of the Amazonlinks.
It's available on Amazon,worldwide, different formats.
Print, Kindle, and an audio
Harv Nagra (44:18):
Mm-hmm.
Karl Sakas (44:18):
The most recent book Calm The Chaos, which just came
out this year in, in 2025.
And you can get the links forthat at calmthechaos.Xyz.
That takes a lot of the lessonsfrom Work Less, Earn More, and
focuses on leadership andmanagement.
It's calm the chaos, 10 ways toRun a better agency is really
(44:41):
about leading people, aboutdelegating, about building a
great team, about giving peoplea chance, but not too long.
And also about improvingmeetings.
I've kept it intentionallyshort.
It's about a hundred pages or ifyou listen to the audiobook I, I
narrated, it's about a littleunder two and a half hours.
And you can learn more atCalmTheChaos.Xyz.
Harv Nagra (45:03):
Excellent.
We'll include that in theepisode notes.
and like I said, it's anexcellent book.
I really enjoyed reading it.
Karl, where can people go learnmore about you and reach out?
Karl Sakas (45:12):
Feel free to
Harv Nagra (45:12):
I,
Karl Sakas (45:12):
my main website, which is SakasandCompany.com.
That's S-A-K-A-S-A-N-D, the wordcompany.com.
Or if you go to either of thebook sites, it'll, it'll get you
there as well.
There are hundreds of articleson agency growth, management and
operations.
Some of my clients joke that Ihave an article for everything.
(45:32):
I, I mean, it, it's approaching500 articles, but I still have a
few hundred article drafts todevelop
Harv Nagra (45:38):
Amazing.
Karl Sakas (45:39):
there's always more to come.
And also a newsletter, like ifyou want to get, helpful tips
twice a week that more than oneagency owner has described as
the, only email they read everytime.
So.
That's all atsakasandcompany.com, click on
free resources and you can, youcan get everything.
Harv Nagra (45:56):
And I can confirm an article for everything'cause I
went down that rabbit hole a fewweeks ago.
Karl Sakas (46:02):
Yeah.
Harv Nagra (46:02):
Karl, it's been an absolute pleasure having you on
today.
Thank you so much.
Karl Sakas (46:06):
Thank you and good luck everyone.
Well, there we have it, amasterclass on pricing,
profitability, and what thefuture might hold for agencies.
The biggest takeaway for me,pricing isn't just a finance
decision.
It's an operations strategy formoving away from time and
materials to using valueanchoring as a stepping stone to
value-based pricing Frompackaging AI into high margin
(46:28):
services to being moreintentional about how and how
often you review your rates.
It's clear that if agencies wantto grow and stay profitable,
they need to be braver, sharper,and more strategic in how they
price and deliver their work.
I really appreciated Karl'sreminder that not all clients
are worth keeping.
Sometimes the most powerfulthing you can do for your
(46:50):
business is to price out theones that are holding you back.
It's not the first time we'veheard that advice on this
podcast.
So if this episode struck achord, maybe you're
undercharging, over-servicing orstill stuck on hourly, now is
the time to rethink your model.
If you have any follow upquestions from this episode that
you'd like me to put to Karl,drop me a note
(47:11):
podcast@score.com.
Lastly, if you've enjoyedtoday's episode three actions
for you, please share theepisode with someone who would
enjoy the conversation.
Please join the conversationwhen you see me talking about
this episode on LinkedIn andsubscribe to the Handbook
Operations Newsletter by goingto scoro.com/podcast.
(47:32):
The newsletter signup form is atthe bottom of the page.
We send out a newsletter everyother week with the key
takeaways from the episode soyou have a cheat sheet in your
inbox.
That's it for me for now.
Thanks very much for listening.
I am not the first person to say that hourly
pricing is going away.
Jonathan Stark has been sayingthat for years.
Now, though, it makes even lesssense.
There's the old joke about,there's a factory, the key
machine has stopped working.
They bring in a engineer andthey're like, we're, we're
losing millions while this isshut down.
(00:20):
And the engineer walks aroundand, gets out a small hammer,
taps on the machine, andsuddenly everything comes back
and they send a bill and it's,10,000 the factory's like, what,
what?
10,000 just for tapping?
And it's like, oh, okay, wellhere's an itemized bill.
It was, 10 for tapping and 99.90for knowing where to time and
materials doesn't convey thevalue of knowing where to tap.
Harv (00:44):
Before we get into the interview, as you know, this
podcast is brought to you byScoro.
Scoro is an agency platform thatbrings together your quoting,
task, time, and budget tracking,your invoicing, and your agency
reporting into one place.
One reason I brought Scoro intomy past agency was because we
were a multi entity business.
We had different agencies indifferent countries and we
(01:06):
needed a common platform thatallowed us all to collaborate
across the group and have asingle place where all our group
reporting was done.
So it made it really efficientfor finance, operations and all
the people in the team tocollaborate.
You can sign up for a free trialat scoro.Com or drop me a note
on LinkedIn and I'd love to tellyou about my experiences and why
(01:26):
my team loved using Scoro.
Now, back to the episode.
Harv Intro (02:02):
Welcome back to the podcast, all.
If you're running an agency,pricing is one of the hardest
and most important decisionsyou'll need to make.
Price too low and you're burningout your team on work that
doesn't pay the bills.
Price too high, and you'reworried about scaring off the
client.
But beyond the numbers, this isan ops problem because even with
(02:23):
solid pricing on paper,profitability often gets eaten
up by mis-scoped projects,inefficient delivery, or teams
constantly reinventing thewheel.
so today we're talking about howto price smarter and build a
more profitable agency, Withoutcompromising on quality or
client relationships.
Whether you're thinking aboutshifting to value-based pricing,
(02:44):
figuring out how to raise yourrates, or just wanna plug the
holes that are leaking margin,this one's gonna be packed with
practical advice.
Today's guest is Karl Sakas, anagency growth consultant who's
worked with hundreds of agenciesacross 36 countries.
For more than 20 years, he'sbeen helping agency leaders go
from overwhelmed and reactive toconfident and in control.
(03:08):
Through his consultancy, Sakasand company, Karl Blends
practical frameworks with deepoperational know-how, drawing
from his background and projectmanagement, digital strategy and
operations.
I've been following Karl's workfor a while now, and he's
absolutely brilliant.
His site is packed with hundredsof useful articles.
His latest book, Calm The Chaos,which I've just read, is full of
(03:29):
actionable advice on running abetter agency, I'm not even
kidding, even his out of officeemail delivers value.
He's super impressive.
I'm so excited to have Karl inthe show today.
Let's get into it.
Harv Nagra (03:41):
Karl, welcome to the podcast.
Thank you so much for beinghere.
Karl Sakas (03:44):
Harv great to be here.
Looking forward to helpingpeople
Harv Nagra (03:46):
Thank you so much.
I'd love to start with youtelling a bit about your agency
background, if you wouldn'tmind.
Karl Sakas (03:52):
before becoming an agency advisor, I served in
agency operations as a PM as aDirector of client services, a
director of operations, and ifyou go way back, back to the
days of dial up, I was afreelance web designer in high
school and college, so I've beenin the industry for quite some
time.
Harv Nagra (04:10):
Amazing.
And so when did you branch offand start your own consultancy?
Karl Sakas (04:14):
I started what's now Sakas and Company in 2013
Harv Nagra (04:17):
wow.
Karl Sakas (04:18):
worked for one agency and then another as a PM
and head of operations.
And I realized there is thisopportunity where people start
agencies'cause they love thework, not because they
necessarily love running abusiness.
And of course that's whereoperations will come in.
I, I joke that operations iseverything that needs to happen,
but that the agency owners don'twant to do themselves.
Harv Nagra (04:39):
Exactly that.
I, I can definitely relate tothose situations where people
start an agency because they'regreat at something, but not
because they're great at runninga business.
And certainly operations is notone of those things people tend
to be great at intuitively,perhaps.
So there's lots of brilliantthings you talk about Karl, so
much that I really had to thinkabout what I wanted to focus the
(04:59):
conversation on today.
I've settled on what I'm callingpricing, profitability and
predictions.
Side note, for anyone listening,Karl has a really interesting
article about predictions forwhere the agency space is gonna
be in the year 2030.
So we'll put a link to that inthe episode notes so you can go
and read that.
We're gonna try to cover a lotof ground as a result today,
(05:21):
Karl, so if you're ready, we candive in.
Karl Sakas (05:24):
Absolutely.
Harv Nagra (05:24):
I wanted to start with pricing.
There's a a few core ways youcan price work in your agency,
right?
There's time and materials,there's deliverable and
milestone based, which tends tobe quite common.
And then there's value basedpricing.
could you walk us through thesecovering when they're a good fit
and maybe some pros and cons ofeach of those.
Karl Sakas (05:43):
Historically, time and materials can be a good
option if you don't know howlong something will take, or if
you're doing sort of maintenancefee requests for a past client
who did maybe a big project andthey've, they've scaled back,
you're
Harv Nagra (05:57):
Right.
Karl Sakas (05:57):
per hour or for some agencies by day or half day.
Before the rise of AI tools,hourly or time and materials
made sense in certaincircumstances.
If it was the first time you'redoing something or if a client
was happy to say, oh yeah, youknow, whatever time it takes,
get it done.
The problem is that time andmaterials doesn't capture the
(06:18):
value of intellectual property,AI tools that you've built
internally or that you may beusing and, and things like that.
It also, and even before AIdoesn't capture the value of
your experience.
For instance, I've worked withover 600 agencies.
I do charge more certainly thanwhen I had less experience.
(06:39):
But, being able to solve aproblem quickly,
Harv Nagra (06:42):
Mm-hmm.
Karl Sakas (06:42):
in say a, a one hour call, we're in a, couple month
project that has a lot of valueand time and materials doesn't
capture that.
And the same is true foragencies.
So historically time andmaterials was helpful if you
know you needed thatflexibility.
ideally though agencies would bedoing the second model
deliverable based, fixed scope,fixed price that
Harv Nagra (07:04):
Mm-hmm.
Karl Sakas (07:05):
for projects and for ongoing retainers.
It's where the client is payinga flat amount to receive certain
deliverables or, certain thingsthat they're getting.
A lot of agencies, if you'relisting and you're doing time
materials, you probably wannamove toward deliverable based
Harv Nagra (07:21):
Mm-hmm.
Karl Sakas (07:22):
based.
The advantage there, of course,is that you're charging a fixed
price for fixed scope.
If you can get things doneefficiently and effectively
faster, you come out ahead.
Of course, it doesn't work ifthings go way over your plan and
you're still on the hook to getthings done.
It does require some sometimesdifficult conversations with
(07:42):
clients about scope management,because if a
Harv Nagra (07:45):
Right.
Karl Sakas (07:45):
something that's out of scope, you need to say no.
Although ideally, you give themoptions, you could say, for
instance, we're glad to do that,would you like to take care of
that next month?
When we have budget for it orwould you like to shift some
things around this month orwould you like to potentially
add some extra budget and get itall done right now?
(08:06):
If your team avoids conflict,that can be a problem with, with
fixed scope.
Value-based has a few forms, butin its purest form, value based
pricing is about charging apercentage of the value the
client gets.
You could think of it as acommission or a royalty.
For instance, if the client getsan extra 5 million in sales and
(08:29):
you're charging 10% of that,you're gonna get 500,000.
And if they get more, you getmore.
If they get less, you get less.
And some agencies will oftencharge a fixed amount plus a
value-based fee on top of that.
Value based pricing is a holygrail for agencies, but often if
you're struggling withprofitability, you're better off
(08:50):
moving from say, time andmaterials to fixed price, or if
you're in fixed price now,getting better at scoping and
scope management rather thangoing to a totally different
model.
Harv Nagra (09:00):
between value-based and performance-based, is there
a difference in those pricingmodels?
Karl Sakas (09:05):
they're pretty much synonymous.
Some agencies will describethemselves as performance based
when they're, focusing on clientperformance, but not necessarily
charging based on it.
Harv Nagra (09:15):
Hmm.
Karl Sakas (09:15):
instance, pay per click oriented agencies,
affiliate marketing orientedagencies, they are working to
drive performance.
They may not necessarily beexactly doing value-based
pricing.
Harv Nagra (09:27):
I mean, the whole value-based pricing thing can
feel like a leap for someagencies, when they might
already be feeling like it's arace to the.
Bottom in terms of, competingagainst everyone else out there.
And there's so many agencies, ina given niche.
We, recently had an episode withMax Tray on how to position
yourself as a strategic partnerwith your clients, so you can
(09:47):
get out of that race to thebottom.
But in your point of view, howdo you break through to
value-based pricing if you'venever done that before?
Karl Sakas (09:55):
Max has great advice.
So if people haven't seen theepisode or checked out his books
and materials, definitely wantto dig in.
A great starting point towardvalue-based pricing without
leaving a fixed scope model isto do what I would call value
anchoring.
That's where you have aconversation with a client about
the value you're trying todeliver for them, and then
(10:15):
framing your fixed fee as a muchsmaller percentage of that.
For instance my initialengagement is an eight to 10
week agency growth diagnostic.
It is a fixed price based on thenumber of stakeholders involved,
Harv Nagra (10:29):
Okay.
Karl Sakas (10:30):
tends to be a proxy for the complexity of what alls
is going on.
you know, a particular agencyreached out and they, they're
interested in selling theagency, but their valuation now
isn't as high as they want it tobe in the future.
I did some estimates.
My sense was that a roughvaluation was somewhere between.
Two and a half to 3 million now,they wanted to sell for 8
(10:52):
million or more.
And so I said, I, I can help youdo that.
It it'll take some time.
You need direction on where togo and what to prioritize.
That's where that initial agencygrowth diagnostic will help and
then can help them on an ongoingbasis toward that goal.
Or they can do it themselves.
in this case I was able toanchor
Harv Nagra (11:12):
Hmm.
Karl Sakas (11:12):
they are looking to add like$5 million in value and
the price of the initial projectis a fraction of it.
I, I mean, almost, I, I wasthinking, oh, I'm undercharging
for this relative the insightsthey'll get, of course, they
still have plenty to do.
I wouldn't get credit for thewhole increase.
(11:32):
but for people who arelistening, you know, and as
you're working with your salesteams as an operations leader.
Are they having conversationsabout the value the client is
going to get?
If you don't have thoseconversations, you can't value
anchor.
Harv Nagra (11:45):
Hmm.
Karl Sakas (11:46):
if the client clear on what the value is, you can't
value anchor.
Harv Nagra (11:51):
Hmm.
Karl Sakas (11:51):
instance, I had a client as a director of client
services that was a cosmeticdentist that a general and
cosmetic dentistry.
Their ideal was to sell a smilemakeover, which adjusted for
inflation would be about$50,000today.
But I introduced them to theconcept of lifetime customer
value or for them lifetimepatient value.
(12:11):
And I, I told'em about the ideaand I was like, do you have a
sense of what that amount is?
And they said,$4,000.
And they said, and that'susually in the first four to
five years after that, we havemaxed out their mouth.
It was a little
Harv Nagra (12:25):
Okay.
Karl Sakas (12:26):
talking about maxing out your
Harv Nagra (12:27):
Yeah.
Karl Sakas (12:28):
Got it.
So for instance, if I could say,you know, in a month we had
helped them generate 20 newpatients who were worth 4,000 a
piece that was 80,000 in value,and they were paying less than
that in their retainer.
That helped anchor the value.
So I would start by valueanchoring before you jump
directly to value-based pricingor full performance-based
(12:50):
pricing.
It'll help set the stage.
Harv Nagra (12:51):
Mm-hmm.
Is it possible that when you'redoing that value anchoring if
you don't attain the resultsthat you were aiming for, does
that happen in, how do you avoidthat kind of situation?
Karl Sakas (13:01):
The idea is that you're doing a relatively small
percentage of the total value,if you're doing 10% and they
only get half the value, theystill paid you 20%
Harv Nagra (13:12):
Got it.
Karl Sakas (13:13):
amount and they received 80% instead of 90%.
Harv Nagra (13:18):
Understood.
That makes sense.
When you're working withexisting clients, agencies that
you consult with, are peopleable to make that transition
from fixed price, fixed scopeprojects to value based with
their existing client base?
And if so, what kind of advicedo you have to get people, to
make that transition.
Karl Sakas (13:36):
Agencies sometimes can make a transition to value
anchoring or even value based.
Harv Nagra (13:42):
with
Karl Sakas (13:43):
current clients, a challenge is that your current
clients are used to working withyour agency in a certain way.
So if they're used to saying,you know, yeah, we'll, we'll get
this done, it'll take threehours, and you've charged them
an hourly rate, and now you'resuddenly saying, well, that'll
be a percentage of this, and apercentage of that.
Hmm.
Clients were used to how you'reworking before, that can be a
(14:04):
tough sell.
Of course,
Harv Nagra (14:06):
Mm-hmm.
Karl Sakas (14:06):
can go in other ways.
I, I had a client once whowould, anytime he would send a
request, he would say, oh, Ithink that'll take you about an
hour.
Harv Nagra (14:13):
Mm-hmm.
Karl Sakas (14:14):
and we did time and materials.
I was like, well, actuallythat'll be eight hours.
Based on my discussion with theteam, He was like, oh, eight
hours.
I could have done it myself.
I'm thinking, no, probably not.
well, even if you could, you
Harv Nagra (14:27):
asked us
Karl Sakas (14:28):
to do it.
So it's eight hours.
Harv Nagra (14:30):
Mm-hmm.
Karl Sakas (14:31):
some of those clients who are.
Cheapskates or maybe don't havea good internal focus on the
value of their work may not moveto it.
It's a lot easier to move tovalue anchoring and higher
prices in general with newclients.
But you can say to existingclients, I talk about this in an
article, I wrote for the Shopifypartner blog that applies to any
(14:53):
kind of agency about raisingyour prices.
One of the keys is that if youdon't raise a particular
client's price, make sure theyknow that other people are
paying more.
You could say, for instance, asa heads up, new clients are now
paying, 30% more.
We enjoy working with you.
You're locked in on a clientloyalty discount through the end
(15:14):
of the year or
Harv Nagra (15:15):
Right.
Mm-hmm.
Karl Sakas (15:16):
at that point their price goes up 10 or 15% instead
of 30%, and they're like, oh,we're getting a good deal.
It all depends on the client.
It depends on the relationship.
It's a lot easier to switch anykind of model or pricing with a
brand new client, but you canmake it work with current
clients if you make it worththeir while.
Harv Nagra (15:35):
Definitely, and I read that article by the way.
Really, really excellent adviceand examples on how to make that
transition with your customersand also being okay with losing
certain clients over time aswell, I think.
Karl Sakas (15:48):
the key there is, uh, you know, as you saw in the
article, it's a portfolioapproach to price increases.
It is not that every client getsthe exact same increase because
they all have different scopes,different histories, goals,
things like that.
But the idea is that you areraising the price to the
appropriate, suitable levelthat's gonna be higher for some
lower, for others, maybe noincrease.
(16:09):
It also gets into whether youwanna keep the
Harv Nagra (16:11):
client Mm-hmm.
Karl Sakas (16:12):
I have a concept I call strategic churn.
That's where you replaceprevious or current clients with
better new clients.
If it's a client, you're okay tolose, maybe they're gonna get a
higher increase if they wannastick around or a, a higher
increase if they want to keepworking with, say, the owner of
the agency, where maybe theowner used to work with lots of
(16:32):
clients directly.
Not really anymore.
If clients wanna keep workingwith the owner, they're gonna be
paying a lot more
Harv Nagra (16:38):
for that
Karl Sakas (16:39):
that premium service.
Harv Nagra (16:41):
I really, really love that Karl and I've never
heard anybody put it that waythat, if there are customers
that you're less happy to workwith, kind of price them out and
be okay with that.
But also the example of pricingyour senior team or certainly
your MD or CEO at a much higherrate is so good'cause sometimes
that happens where clients arelike, I refuse to work with
yourselves if I don't get towork with so and so any longer.
Karl Sakas (17:04):
Yeah.
Well, and, and you, you, you'renot forcing them to stop working
with, the senior person.
But now it's like, well, you'vebeen paying 7,000 a month.
New clients are now paying 15 to20.
If you want to continue at thatprice, we'll need to make some
changes to the, the team and thestrategist on the account, or if
(17:25):
you're willing to go up to 12 or15, we can continue with the
current team.
Which do you prefer?
I call that reason, options,choose.
Give a reason why.
Give them two or three handselected options that you've
identified and then let themchoose.
Harv Nagra (17:41):
Excellent.
One of the predictions you hadin your article for 2030 is that
we're gonna see a rise inperformance-based pricing.
could you just briefly go overagain where this works well if
there's certain kinds ofscenarios where this kind of
model tends to work better?
Karl Sakas (17:56):
Performance-based pricing works well when the
client has a clear idea of theirown internal value, the value of
a lead, for instance, or a saleif they're doing direct sales
and things like that.
Harv Nagra (18:10):
Mm-hmm.
They
Karl Sakas (18:10):
also have good attribution to know that things
came from your agency's effortsand ideally from a particular
campaign or particular program.
Harv Nagra (18:19):
Hmm.
Karl Sakas (18:19):
An agency is good at doing the work, right, that you
can get it done effectively andefficiently.
And ultimately, the clienttrusts you because there's a
risk if you're adding aperformance based component.
Is the client going to betruthful in the results?
They got to make sure thatyou're getting paid
Harv Nagra (18:38):
Right.
Karl Sakas (18:39):
Usually they are.
I mean, because ultimatelythey're making way more money
than the money they're, they'repaying you.
But, when it comes to riskmanagement, I, I recommend
looking at, at three things.
One what is most likely tohappen?
If If it's likely to happen, youshould have a plan for it.
What is not likely to happen,but would be catastrophic if it
(19:01):
did.
Harv Nagra (19:01):
Right.
Karl Sakas (19:02):
that's why people get homeowner's insurance or
renter's insurance or, or thingslike that where like your house
probably isn't going to burndown, but if it did, it would be
really
Harv Nagra (19:11):
Mm-hmm.
Karl Sakas (19:12):
you want the insurance coverage.
The third thing though, to lookat, so what's most likely to
happen?
What?
What would be catastrophic?
Unlikely to be catastrophic.
The third thing is what if itgoes really well?
What if things, go beyond yourwildest dreams?
And in that case, they might bepaying you millions in
performance-based fees.
(19:32):
Are they setting aside themoney?
Harv Nagra (19:34):
Right.
Karl Sakas (19:35):
are, are you set up to receive those payments?
Harv Nagra (19:38):
Yeah.
Karl Sakas (19:39):
Is your bank gonna think that you're receiving some
sort of money launderingpayments or something like
suddenly getting all of thismoney?
I would give your banker a headsup if you're about to get a,
sudden million or multimillionwire transfer.
The thing though is that ifthey're paying you somehow
millions in performance fees,it's because they're making
likely 10 or 20.
Harv Nagra (20:00):
Right.
Karl Sakas (20:01):
30 million themselves.
So are, are they ready for
Harv Nagra (20:04):
Mm-hmm.
Karl Sakas (20:05):
themselves?
Is the client able to fulfill
Harv Nagra (20:07):
Yeah.
Karl Sakas (20:08):
All these things to
Harv Nagra (20:09):
Mm-hmm.
is that just a conversation tomake sure that they're set up
for that, or is there anythingelse that you can do to make
sure that's all in place?
Karl Sakas (20:17):
Ideally, you're running some sort of attribution
process or system so that, andyou have access to their CRM or
their sales system or thingslike that.
I mean, it's, it's easy ine-commerce where you're able to
track pretty closely where aparticular sale came from.
If they are getting phoneinquiries, you'll need to work
(20:38):
with their team to make surethat their recording, where the
in inquiries came from andthings like that.
With the, the dentist officeexample, we did some training
with the office staff.
About how to log things when newpatients came in and actually
were able to get a new fieldadded into their internal CRM
(20:59):
but that does raise, you know,if you're questioning the ethics
of a client, You definitelydon't wanna do a performance
based deal with them.
Harv Nagra (21:07):
Absolutely.
Good point.
So what, makes you confidentthat this is gonna become more
common and prevalent in the nextfew years?
Karl Sakas (21:13):
It's all about incentive alignment,
Harv Nagra (21:15):
Hmm.
Karl Sakas (21:16):
clients want to grow, whether that's selling
more services or products orreaching other goals of their
own.
Maybe, maybe they're growing tohave an exit or something like
that.
The more you can tie what you doto what they want.
The
Harv Nagra (21:32):
Mm-hmm.
Karl Sakas (21:33):
better aligned you are toward their goals.
And performance-based pricingcan be a way to create that
incentive alignment in a waythat the traditional models of
time and materials andmilestone-based don't uh, in the
same way.
Harv Nagra (21:48):
that kind of leads us to my next question, which
was another kind of bold claimthat you've made is that time
and materials pricing is gonnadisappear by 2030.
So what makes you think that isgonna be completely on its way
out?
Karl Sakas (22:00):
I am not the first person to say that hourly
pricing is going away.
Jonathan Stark has been sayingthat, for years until the rise
of ai, though I, I was moreagnostic about time and
materials in the sense that,well, you know, if you haven't
done the work before, if theclient's happy with the model,
that can be fine.
Harv Nagra (22:19):
Mm-hmm.
Karl Sakas (22:19):
Now, though, it makes even less sense.
It goes from neutral for timeand materials to a negative.
if you can solve all of theirproblems in an hour, it's
probably worth more to them thanwhat they paid for that hour.
There's the, the old joke about,there's a factory, the key
machine has stopped working.
They bring in a engineer andthey're like, we're, we're
(22:42):
losing millions while this isshut down.
And the engineer walks aroundand, looks at a few things,
makes some measurements, getsout a small hammer, taps on the
machine, and suddenly everythingcomes back and they send a bill
and it's, 10,000 or somethinglike that.
And the factory's like, what,what?
10,000 just for tapping?
And it's like, oh, okay, wellhere's an itemized bill.
Harv Nagra (23:04):
Hmm.
Karl Sakas (23:05):
It was, 10 for tapping and 99.90 or what have
you for knowing where to
Harv Nagra (23:11):
Right.
Karl Sakas (23:12):
time and materials doesn't convey the value of
knowing where to tap.
Harv Nagra (23:17):
Really good point.
And it brings us back to whatyou were saying earlier with AI
and kind of recent conversationswe've had on the podcast as
well, is that if these toolsmake us more efficient, we
should not be passing on allthose savings in time and
efficiency onto the client.
Karl Sakas (23:31):
There's even an opportunity to potentially
charge more.
If you can get it done in ashorter duration, you can get
things turned around
Harv Nagra (23:39):
mm-hmm.
Karl Sakas (23:40):
People pay for convenience.
If you think about, baby carrotsversus regular carrots, like you
pay more per pound for the babycarrots, but they're pre peeled.
They're pre-washed,
Harv Nagra (23:50):
Yeah.
Karl Sakas (23:51):
to eat.
Labor has value, and you pay forconvenience.
Harv Nagra (23:57):
So Karl, let's talk about price reviews then.
Are there any good rules ofthumb about how often you should
be reviewing and adjusting yourpricing?
Karl Sakas (24:05):
I would review your pricing at least once a year,
Harv Nagra (24:08):
Mm-hmm.
Karl Sakas (24:08):
and that's looking at what you're charging new
clients as well as what you'recharging existing clients.
Harv Nagra (24:15):
Mm-hmm.
Karl Sakas (24:15):
with existing clients, it's gonna be a, a
portfolio of prices.
Not everyone is necessarily atthe exact same price'cause
everyone's in a somewhatdifferent situation, but
ultimately you would likelyraise prices for new clients and
then do that portfolio approachof different increases for
existing clients.
(24:36):
I probably do that once a year.
You may conclude that you don'tneed to raise prices.
Though there is value to doingsome sort of a, even a modest
increase every year so thatclients are used to it.
As opposed to suddenly they'relike, oh, it went up 15% and
it's like, oh, if you had done 3or 5% a few years in a row,
Harv Nagra (24:56):
Right.
Karl Sakas (24:57):
You, you would've been closer to that an easier to
digest way.
Harv Nagra (25:01):
Really good point and a great opportunity right
now to mention, again, thatarticle on raising prices that
we'll put in the episode notes.
I really think that there's alot of value to be gained by
reading that.
But should you be afraid to loseclients over your pricing?
What are your thoughts?
Karl Sakas (25:15):
If it's a client that you want to, as I would
say, strategically churn
Harv Nagra (25:19):
right?
Karl Sakas (25:20):
give them a higher price if they wanna renew, or a
higher price, if they want tokeep working with the owner or,
or the senior most team members.
On the other hand, if it is aclient where you feel like you
can't afford to lose themsometimes that's the case where
if you have a clientconcentration problem, which I
define as getting 20% or morefrom a single client.
Harv Nagra (25:39):
Okay.
Karl Sakas (25:40):
for those listening, I, I was speaking with an
agency, COO.
I was talking about the idea ofclient concentration her goal
was to bring me in to help and,you know, I had mentioned the
20% and you can't, you know, belike, well that's a different
department of this company.
And, and it's funny, she hadbeen trying to get her bosses to
understand that differentdepartments don't matter.
(26:01):
It's all about the company.
I'm like, well, you can say thatI said it right.
I've worked with 600 agencies.
Karl says 20% from the company,no matter the department, that's
a client concentration problem.
if you're concerned that theclient would just go away then
you may not press as hard.
Harv Nagra (26:18):
Right.
Karl Sakas (26:19):
but I would at least let them know even if they don't
have an increase.
That new clients are payingmore.
They're getting a clientloyalty, discount, and tip, put
that discount into every invoicethey get, every auto draft
receipt they get and things likethat.
Because if your client contactleaves and a new person comes
in, they don't see that they'regetting a special deal, they'll
(26:42):
assume it is a normal deal.
Harv Nagra (26:44):
Whereas
Karl Sakas (26:44):
if they're like, oh, they're getting a 10% discount
every month, they may stillexpect some sort of deal, but at
least they can't claim they hadno idea.
Harv Nagra (26:53):
exactly.
And it's funny how quicklyclients, even the clients that
you've been working with a lotor for a long time, easily
forget that they had thatdiscount if you're not spelling
it out on that invoice everysingle time.
Now about that 20% rule that youwere mentioning, is that all
about risk and mitigating thatif, if that client were to
disappear, what's your point ofview on that?
Karl Sakas (27:13):
So the idea of client concentration is that if
you become overly dependent onany one client.
If you lose them as a client,you're probably gonna have to do
layoffs.
I spoke with an agency wherethey had about 40% of the
revenue from one client.
They
Harv Nagra (27:29):
were a long
Karl Sakas (27:29):
time client.
They also weren't incrementallya, a very profitable client.
Like the overall profits weregood'cause they were a big
client, but they were at thelowest rate that the agency was
charging'cause the client hadbeen around for a while.
They were
Harv Nagra (27:42):
getting
Karl Sakas (27:43):
volume discounts.
The agency hadn't been raisingprices.
So if you lose a 40% client,you're gonna have to do layoffs.
Harv Nagra (27:50):
Right.
Karl Sakas (27:50):
have to make some really difficult cuts.
The other thing is maybe theclient doesn't fire you, but you
wanna fire them.
You're gonna feel trappedbecause you can't suddenly,
easily lose 40% of your revenue
Harv Nagra (28:02):
Mm-hmm.
Karl Sakas (28:03):
doing layoffs and owners cutting their pay and,
and things like that.
So the goal is to avoid gettingtrapped in, in a situation where
you couldn't afford to lose themif they initiated or where you
feel like you can't afford tocut ties with them.
Harv Nagra (28:21):
Mm-hmm.
Karl Sakas (28:22):
at.
Harv Nagra (28:23):
So we're gonna shift gears a touch and I wanted to
pick your brain aboutprofitability.
Besides sales pipeline anxiety,profit tends to be something I
hear a lot of agencies worryingabout.
What are the key levers that canbe pulled to improve margins?
Karl Sakas (28:39):
The biggest overarching driver for your
margins is your labor ratio.
Harv Nagra (28:44):
Okay.
Karl Sakas (28:45):
What percentage of your revenue are you spending on
team members?
But if we're setting asidechanges to your team, we can
look at delivery profitability,and there are three levers
there.
Harv Nagra (28:56):
Okay.
Karl Sakas (28:56):
It's pricing, second is scope, and the third is scope
management.
here's an example.
I was working with an agency inAustin, Texas several years ago.
owner said, I've been running myfirm for a decade.
I thought I'd be making moremoney at this point and that I
wouldn't be working quite ashard.
That was before I had releasedmy work Less Earned More book,
(29:18):
but she definitely was in thetarget audience for that.
Harv Nagra (29:22):
Mm-hmm.
Karl Sakas (29:22):
And so I, I dug in using what's now the agency
Growth Diagnostic, and I found aseries of problems.
She was undercharging, she wasdelivering too much scope, and
her team was not managing thescope very well.
she did not wanna make anychanges to her team.
I was working with her and herdirector of operations.
I said, well, here are the threelevers right now you're charging
(29:42):
about half of what similar wouldcharge for this type of work.
Ideally you would raise pricesstarting with new clients and
perhaps transitioning part ofthe way they are for existing
clients.
Her response, remember she'sworking too much and not making
enough.
She's like, oh, my clients couldnever pay that much.
(30:02):
I can't raise their prices.
I'm like, Hmm.
I, I mean, I'm thinking some ofher clients were smaller, but I
think others would've beenwilling to pay more and she
could also potentially look atsomewhat, instead of micro
businesses, smaller businessesas an option.
But she didn't wanna do that.
Harv Nagra (30:17):
Mm-hmm.
Karl Sakas (30:18):
you could also reduce the scope of what you're
providing.
instance, she was selling and,and her team were selling a
package that was a brandidentity package.
A website and all of thecopywriting for the website what
other agencies would charge justfor a website
Harv Nagra (30:35):
Oh, wow.
Karl Sakas (30:35):
for brand package.
Harv Nagra (30:37):
Mm-hmm.
Karl Sakas (30:37):
said, what if you set aside the copywriting as an
add-on where they didn't get itautomatically?
They could, but they could add
Harv Nagra (30:45):
Mm-hmm.
Karl Sakas (30:45):
price.
She's like, but then the websitewould have bad copywriting.
Okay, but I'm thinking if theclient's not paying for it,
Harv Nagra (30:52):
Right.
Karl Sakas (30:53):
are they getting it for free?
Harv Nagra (30:54):
Yeah.
Karl Sakas (30:55):
or you could say maybe it's the website and the
copywriting, but the brandidentity package is separate and
that's a, a first step for
Harv Nagra (31:02):
Yeah.
Karl Sakas (31:03):
She's like, well, if they don't do that, then it's
gonna have a bad brand.
And I don't want that to be inour portfolio.
I'm thinking like, if you can'tconvince clients to pay for
value, you're, you're not gonnamake more money.
I said, well, there's a thirdlever, right?
I'm talking with her and herdirector of operations, and I
said based on my calculations,they were regularly going over
(31:23):
scope by about 80%.
Clients were getting almostdouble of the, of the scope.
And I said, going forward youcan stop going over scope.
The team will have to be morefirm about what is and isn't in
scope charging for, scope creepand things like that.
And the operations directorsaid, how over scope can we go?
Harv Nagra (31:47):
Oh dear.
Karl Sakas (31:47):
And I'm, I'm thinking, how much money do you
wanna lose?
Harv Nagra (31:50):
Yeah.
Karl Sakas (31:51):
actually a case where I recommended stopping the
project halfway throughrefunding the rest of the
project.
'cause they didn't seem to wantto make changes.
And I laid that out as aboundary and they were like, no,
no, no.
We, we wanna follow it.
And I, I foolishly believed them
Harv Nagra (32:08):
Mm-hmm.
Karl Sakas (32:09):
going and.
I don't think they made changes,so I had some new things to keep
in mind for my screeningprocess.
Harv Nagra (32:16):
that's interesting.
Where does that mentality comefrom?
they seem to be wanting to run adesign charity or something like
that, where they're giving awaywork.
Karl Sakas (32:24):
Yeah.
I've started in my intakeprocess, I'll ask clients about
what is their relationship withmoney.
Harv Nagra (32:30):
Hmm.
Karl Sakas (32:31):
some things from their childhood that are still
showing up now
Harv Nagra (32:35):
Interesting.
Karl Sakas (32:36):
'em in trouble?
I think in her case it wasaround seeing the idea of like
money or having money is bad,
Harv Nagra (32:42):
Mm-hmm.
Karl Sakas (32:43):
was inadvertently making choices that undermined
Harv Nagra (32:46):
Wow.
Karl Sakas (32:47):
making money.
Harv Nagra (32:48):
Mm-hmm.
Karl Sakas (32:48):
Another client I'm working with, they mentioned
they were often overloaded withclient requests and things like
that, and tons of slackmessages.
And what emerged is that part oftheir value proposition is that
clients get direct Slack accessto the agency team, which is not
a good idea.
Harv Nagra (33:05):
Hmm.
Karl Sakas (33:06):
the team is getting overwhelmed.
One of the things that I'venoted is like, gotta stop doing
that.
And the agency owner is like,well that's really important.
That's why people hire us.
Harv Nagra (33:15):
Hmm.
Karl Sakas (33:16):
yeah, that's why they hire you.
'cause no one else is doingthat.
Or very few are doing that.
if they are, they're chargingtwo or three times as much per
month
Harv Nagra (33:24):
Hmm.
Karl Sakas (33:25):
you know, As I'm finalizing my advice for them,
is stop doing it or charge waymore.
Pick which you want and
Harv Nagra (33:33):
Yeah.
Karl Sakas (33:34):
you can make it happen.
Harv Nagra (33:35):
Mm-hmm.
Karl Sakas (33:35):
I have a book recommendation, which is
Overcoming Underearning.
Harv Nagra (33:39):
Okay.
Karl Sakas (33:40):
Barbara Stanley,
Harv Nagra (33:41):
Hmm.
Karl Sakas (33:41):
mostly on people who are in salaried roles of like
how to negotiate, getting moremoney, getting what you're
worth.
It does work for owners.
For instance, I recommended itto a client several years ago
where as soon as she read it,she reported back that she'd
raised her salary, like 50%,that she was underpaying
herself.
It also works, OvercomingUnderearning, on charging more
(34:03):
for your services.
Like, okay, it's worth it.
People need to pay for it.
Or at least, certainly newclients need to pay for it.
And you'll work on increasing.
So Overcoming Underearning.
Harv Nagra (34:13):
Excellent.
Do you see any kind of commonways agencies lose money without
realizing it and how can theystop that if that's the case?
Karl Sakas (34:22):
I've written a whole article on profit leaks,
Harv Nagra (34:24):
Okay.
Karl Sakas (34:25):
And, and how, how things can go wrong.
I, I would say as a startingpoint, look at your net profit
margins.
If your net profit margins are20 to 30% after market rate
owner compensation, you'reprobably doing fine.
On the other hand, if your netmargins are 10 or 15% or or
less, client came in recentlywhere they were in the single
digits.
(34:45):
You wanna dig into why.
Overspending on labor can be abig factor, especially if you
have a slower than projectedyear.
You've got the team that youexpected if it was a bigger
year.
And you don't make any staffingchanges.
That can be a big factor, but Iwould start by looking at what
are your net profit margins?
If it's below 20%,
Harv Nagra (35:04):
You've got profit leaks somewhere
Karl Sakas (35:06):
It could be staff, it could be how the team is
logging their time.
It could be something else.
But, as an operations leader,that's a sign to dig deeper.
Harv Nagra (35:14):
good advice.
Karl.
We're gonna come back topredictions.
There's a lot of change inexperimentation with ai.
You have some strong points ofview on how we can use these
technologies and theefficiencies they bring to our
advantage.
Something that you've said isdon't just use AI to be more
efficient.
Package it as a new, high marginservice.
(35:36):
So that I think is fantasticadvice, but I'd love to hear
what that looks like inpractice.
Karl Sakas (35:42):
That's gonna be unique to each agency and your
Harv Nagra (35:45):
Mm-hmm.
Karl Sakas (35:46):
I would start by looking at what are your clients
trying to accomplish bothprofessionally and personally?
ran a CMO networking group forfive years.
I was the only non CMO in theroom.
And because I only worked withagencies, I had nothing to sell
them,
Harv Nagra (36:04):
Mm-hmm.
Karl Sakas (36:04):
Because they weren't my, my target market.
And, there were themes that cameup around attribution that kept
coming
Harv Nagra (36:10):
Mm-hmm.
Karl Sakas (36:10):
what can your agency do attribution wise?
What could you do to coach yourclients on it where maybe
they're using AI tools andyou're helping them sort through
customization at their firm.
Maybe you're building customGPTs or agentic AI type agents
for the client, and then they'rerunning it.
(36:32):
Or something like that.
Or you're helping maintain.
You could be building out toolsor you could be providing
services.
It's gonna depend on what yourclients need.
Harv Nagra (36:41):
Hmm.
Karl Sakas (36:42):
the personal goals piece.
the CMO trying to get promotedto become the CEO?
Harv Nagra (36:46):
Right.
Karl Sakas (36:47):
can you position yourself to get there?
That could be AI related.
It might not.
I, I had a client years agowhere, they were a marketing
manager at a large corporationand they had an associate's
degree and they were going backpart-time to get their
bachelor's
Harv Nagra (37:01):
Mm-hmm.
Karl Sakas (37:02):
And I would ask like, what classes were they
taking that semester?
'cause then I could tie the workthat we were doing and upsell
opportunities to their classes.
And so it, created a, a win-win.
Harv Nagra (37:14):
Hmm.
Karl Sakas (37:14):
So the exact solutions are gonna depend on
your clients and also on youragency skillset.
On the other hand, if people arelistening and they're like,
more, you know, more of that,or, or the owners of the agency
where you work are like ai, dowe really have to, that could be
a sign that it may be time forthe owners to sell the business
(37:36):
and move on rather than keeprunning it.
Like things are gonna keepchanging.
not going to stop.
And if an owner is tired ofdealing with that.
It may be a sign that it's, timeto sell the agency and move on.
will say, I, I ran a, a workshopand then now it's available on
demand training, on control andmaximize your agency exit.
Harv Nagra (37:57):
Hmm.
Karl Sakas (37:57):
for the live attendees, I asked, these were
all agency owners of independentagencies, under a hundred
people.
What would they ideally do afterthey sell their agency?
And about half of therespondents said they would
start a new business.
Harv Nagra (38:11):
Hmm.
Karl Sakas (38:11):
Yeah, so you know if, if you're noticing that your
boss doesn't seem fully engagedin the business anymore, maybe
it's time for them to sell, andby the way, that's an
opportunity for you to move up.
Maybe it's to move up to becomethe CEO if you want, or managing
director or something.
There are probably someopportunities there, but it
starts by having that
Harv Nagra (38:31):
Mm-hmm.
Karl Sakas (38:32):
Call out what you've
Harv Nagra (38:33):
Mm-hmm.
Karl Sakas (38:34):
and see how you can help them.
Harv Nagra (38:36):
Interesting.
One of your kind of relatedpredictions on AI was also that
while clients may push back onimplementation costs, they'll
increasingly pay for expertstrategic insights to make sense
of AI generated data andmarketing noise.
Another prediction was agenciesthat package AI driven execution
with deep human expertise willthrive.
(38:59):
Can you unpack those a littlebit?
Karl Sakas (39:02):
So think about your services.
Agency services fit into threemain categories.
I think of it as think, teach,do, think is strategy.
Tell me what to
Harv Nagra (39:10):
Mm-hmm.
Karl Sakas (39:11):
Teach is training and empowerment where the
client's like, I wanna do itmyself.
Show me how,
Harv Nagra (39:16):
Mm-hmm.
Karl Sakas (39:16):
help me hire people to do it.
then think, teach, do, do isabout implementation.
It's about implementing thework.
So think about your agency'swork.
What could you use?
AI tools including buildingthings internally, whether
that's building custom GPTs,building ai agent related tools,
things like that, or using offthe shelf tools.
(39:37):
What can you do forimplementation there?
But it still needs to be guidedby strategic insight, though
probably strategists that areassisted by AI as
Harv Nagra (39:48):
Mm-hmm.
Karl Sakas (39:49):
right?
Feeding in all of the data is agreat, you know, into an AI tool
can be a great way to get asummary of things, notice things
you missed and things like that.
But at least at this point, westill benefit from human
involvement.
So the idea there is that you'reselling insights with AI support
(40:09):
and assistance.
And you make money doing it
Harv Nagra (40:12):
And this is a fantastic time, an opportunity
to really get ahead of thecompetition as well if you
really lean into this, usingthese tools to your advantage in
becoming that strategic partner.
Karl Sakas (40:23):
and also, I mean, you know, I, I've, I'd say I'm
sort of intermediate on AI atthis point.
There are events and programsand people where you can learn
from them.
I, I'm helping organize the AIin your agency event in August
of 2025.
Harv Nagra (40:38):
Amazing.
Karl Sakas (40:38):
San Francisco, I went to the first one as an
attendee two years ago Irecommended it to to clients
last year.
This is through the Bureau ofDigital, or the Bureau, Where I,
I'm involved as a member.
The speakers there are superplugged into what's going on.
It's about AI in youroperations, in ai, in your
services.
So I know that I'm gonna learn alot.
(41:00):
I learned a lot before, and
Harv Nagra (41:01):
Right.
Karl Sakas (41:03):
You don't have to invent it all from scratch.
Harv Nagra (41:06):
Yeah, really good point.
Just make sure you're pluggedinto those networks and those
groups, having thoseconversations, and learn as much
as you can.
Karl if you had to give onepiece of kind of parting advice
to an agency ops leader, doesanything come to mind?
Karl Sakas (41:19):
Make sure you understand the unique values,
goals and resources(VGR) tofollow.
usually that'll involve speakingwith the owner or owners of the
agency.
Values would be around howshould you approach things, how
do you approach work goalsaround where to go.
Understanding their goals,ideally, both professionally and
(41:40):
personally so that you cansupport them on that.
And then the resources in termsof time, money, people,
software.
Things like that to get thingsdone.
The more you know about that,the more you can help, your boss
or bosses achieve their goals.
And ideally that'll help youwith your goals as well.
So understand where you'regoing, how they want you to get
(42:02):
there within reason and theresources available.
It'll go a lot better foreveryone involved.
Harv Nagra (42:08):
really good advice.
I mentioned your latest book inthe intro, Calm the Chaos which
has just come out.
I had the pleasure of reading.
Fantastic.
There it is on screen.
But you've written a number ofbooks as well, haven't you,
Karl?
And I think relevant, today'sdiscussion might be Work Less,
Earn More, which you wereshowing us a few moments ago.
Could you be briefly tell uswhat we can find in each?
Karl Sakas (42:30):
Yeah, well, Work Less, Earn More is my third book
looks at Helping Owners is thesubtitle says, escape the Daily
Grind of Agency Ownership.
It works whether you are lookingto sell your agency to have an
equity event.
Lately clients are saying theywanna sell for five to 10
million.
Though I have some clients whoare, on track to sell, say 40
(42:51):
million.
Another client is seeking ahundred million as as their
exit.
That's gonna be a, a bit furtherout.
or if you wanna run a highlyprofitable lifestyle agency
where you're making above marketsalary, great profit margins,
things are running smoothly,you're doing the work you want.
That's the idea of Work Less,Earn More, making
Harv Nagra (43:09):
Okay.
Karl Sakas (43:10):
increasingly optional as an agency owner.
But for everyone who's listeningas an operations leader, part of
that is the owner is rewardingtheir best team members.
Harv Nagra (43:20):
Right.
Karl Sakas (43:21):
Are opportunities for you to move up.
For instance, I have a clientwhere the owner wanted to step
back and five years ago we builtan initial succession plan and
had a key team member who wasvery promising, so steps to move
up, account manager, director ofclient services, vp, president.
And earlier this year theemployee just got promoted to
(43:42):
CEO.
And
Harv Nagra (43:44):
Wow.
Karl Sakas (43:44):
the owner is working just a few hours a week
Harv Nagra (43:47):
Amazing.
Karl Sakas (43:47):
point.
Harv Nagra (43:48):
Mm-hmm.
Karl Sakas (43:49):
Yeah.
So Work Less, Earn More for theowners.
Yes.
But while rewarding the bestteam members, that's an
opportunity for operationsleaders to get promoted, to get
new responsibilities, more payboth now and potentially with
Phantom stock if they're headingtoward an that's Work Less, Earn
More.
You can go toworklessearnmorebook.com.
(44:10):
You can get all of the Amazonlinks.
It's available on Amazon,worldwide, different formats.
Print, Kindle, and an audio
Harv Nagra (44:18):
Mm-hmm.
Karl Sakas (44:18):
The most recent book Calm The Chaos, which just came
out this year in, in 2025.
And you can get the links forthat at calmthechaos.Xyz.
That takes a lot of the lessonsfrom Work Less, Earn More, and
focuses on leadership andmanagement.
It's calm the chaos, 10 ways toRun a better agency is really
(44:41):
about leading people, aboutdelegating, about building a
great team, about giving peoplea chance, but not too long.
And also about improvingmeetings.
I've kept it intentionallyshort.
It's about a hundred pages or ifyou listen to the audiobook I, I
narrated, it's about a littleunder two and a half hours.
And you can learn more atCalmTheChaos.Xyz.
Harv Nagra (45:03):
Excellent.
We'll include that in theepisode notes.
and like I said, it's anexcellent book.
I really enjoyed reading it.
Karl, where can people go learnmore about you and reach out?
Karl Sakas (45:12):
Feel free to
Harv Nagra (45:12):
I,
Karl Sakas (45:12):
my main website, which is SakasandCompany.com.
That's S-A-K-A-S-A-N-D, the wordcompany.com.
Or if you go to either of thebook sites, it'll, it'll get you
there as well.
There are hundreds of articleson agency growth, management and
operations.
Some of my clients joke that Ihave an article for everything.
(45:32):
I, I mean, it, it's approaching500 articles, but I still have a
few hundred article drafts todevelop
Harv Nagra (45:38):
Amazing.
Karl Sakas (45:39):
there's always more to come.
And also a newsletter, like ifyou want to get, helpful tips
twice a week that more than oneagency owner has described as
the, only email they read everytime.
So.
That's all atsakasandcompany.com, click on
free resources and you can, youcan get everything.
Harv Nagra (45:56):
And I can confirm an article for everything'cause I
went down that rabbit hole a fewweeks ago.
Karl Sakas (46:02):
Yeah.
Harv Nagra (46:02):
Karl, it's been an absolute pleasure having you on
today.
Thank you so much.
Karl Sakas (46:06):
Thank you and good luck everyone.
Well, there we have it, amasterclass on pricing,
profitability, and what thefuture might hold for agencies.
The biggest takeaway for me,pricing isn't just a finance
decision.
It's an operations strategy formoving away from time and
materials to using valueanchoring as a stepping stone to
value-based pricing Frompackaging AI into high margin
(46:28):
services to being moreintentional about how and how
often you review your rates.
It's clear that if agencies wantto grow and stay profitable,
they need to be braver, sharper,and more strategic in how they
price and deliver their work.
I really appreciated Karl'sreminder that not all clients
are worth keeping.
Sometimes the most powerfulthing you can do for your
(46:50):
business is to price out theones that are holding you back.
It's not the first time we'veheard that advice on this
podcast.
So if this episode struck achord, maybe you're
undercharging, over-servicing orstill stuck on hourly, now is
the time to rethink your model.
If you have any follow upquestions from this episode that
you'd like me to put to Karl,drop me a note
(47:11):
podcast@score.com.
Lastly, if you've enjoyedtoday's episode three actions
for you, please share theepisode with someone who would
enjoy the conversation.
Please join the conversationwhen you see me talking about
this episode on LinkedIn andsubscribe to the Handbook
Operations Newsletter by goingto scoro.com/podcast.
(47:32):
The newsletter signup form is atthe bottom of the page.
We send out a newsletter everyother week with the key
takeaways from the episode soyou have a cheat sheet in your
inbox.
That's it for me for now.
Thanks very much for listening.
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