January 1, 2025 • 43 mins
Podcast Title: Schmidt List
Episode Title: Garrick: Mastering Pricing Strategies and Building Client Confidence
Description:
In this episode of Schmidt List, host Kurt Schmidt welcomes Garrick, a pricing strategy expert specializing in B2B software and professional services. Together, they explore the art and science of pricing and how understanding the "why" behind c"in" decisions can drive agency growth and success.
Key Topics Covered:
Shifting the Narrative
Move beyond selling products. Learn how focusing on solving client business problems can significantly boost profitability.
Building Confidence
Understand how uncovering unpriced client value can instill confidence in creatives and founders, empowering better decision-making.
Unbundling Services
Discover the advantages of unbundling service offerings to refine both pricing and delivery.
Transparent Pricing
Explore the importance of upfront pricing to ensure alignment, build trust, and save valuable time.
Evolving Billing Practices
Hear Garrick’s journey to adopting annual retainers and value-based fees for greater efficiency and profit.
Strategic Service Management
Gain insights into balancing building new services versus maintaining existing ones to optimize performance and revenue.
Customer Development
Discover why strong customer development is crucial before investing further, with real-world examples to illustrate its importance.
Cultural Challenges in the Industry
Learn how to tackle the persistence of hourly billing and embrace better project management practices.
Garrick shares invaluable lessons, with Kurt teasing even more insights in future episodes. Don’t miss this conversation with actionable strategies to enhance your pricing approach and client relationships!
Connect with Garrick:
https://forstarters.substack.com
https://linkedin.com/in/garrickvanburen
https://cal.com/garrick
https://throughconsulting.com
Subscribe, rate, and review the Schmidt List podcast to stay up-to-date on the latest expert advice and industry insights!
Become a supporter of this podcast: https://www.spreaker.com/podcast/schmidt-list-entrepreneurial-insights--2664825/support.
Episode Title: Garrick: Mastering Pricing Strategies and Building Client Confidence
Description:
In this episode of Schmidt List, host Kurt Schmidt welcomes Garrick, a pricing strategy expert specializing in B2B software and professional services. Together, they explore the art and science of pricing and how understanding the "why" behind c"in" decisions can drive agency growth and success.
Key Topics Covered:
Shifting the Narrative
Move beyond selling products. Learn how focusing on solving client business problems can significantly boost profitability.
Building Confidence
Understand how uncovering unpriced client value can instill confidence in creatives and founders, empowering better decision-making.
Unbundling Services
Discover the advantages of unbundling service offerings to refine both pricing and delivery.
Transparent Pricing
Explore the importance of upfront pricing to ensure alignment, build trust, and save valuable time.
Evolving Billing Practices
Hear Garrick’s journey to adopting annual retainers and value-based fees for greater efficiency and profit.
Strategic Service Management
Gain insights into balancing building new services versus maintaining existing ones to optimize performance and revenue.
Customer Development
Discover why strong customer development is crucial before investing further, with real-world examples to illustrate its importance.
Cultural Challenges in the Industry
Learn how to tackle the persistence of hourly billing and embrace better project management practices.
Garrick shares invaluable lessons, with Kurt teasing even more insights in future episodes. Don’t miss this conversation with actionable strategies to enhance your pricing approach and client relationships!
Connect with Garrick:
https://forstarters.substack.com
https://linkedin.com/in/garrickvanburen
https://cal.com/garrick
https://throughconsulting.com
Subscribe, rate, and review the Schmidt List podcast to stay up-to-date on the latest expert advice and industry insights!
Become a supporter of this podcast: https://www.spreaker.com/podcast/schmidt-list-entrepreneurial-insights--2664825/support.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:01):
On this episode of Schmidt List, we welcome pricing Strategies
expert Garrick Van Buren learn how focusing on solving business
problems rather than just selling services can transform your agency's success.
Garrek's insights on confidence, unbundling services, and changing building practices
are invaluable. Tune in now, Eric, how are you today?
Speaker 2 (00:24):
I am well today, Kurt, delightful here.
Speaker 1 (00:26):
I'm so excited that you are here. I'm so excited
you are joining me. So tell me a little bit
about the work you're doing these days and who are
specifically working with.
Speaker 2 (00:35):
I work with CEOs and B to B companies, software
and professional services that are struggling with pricing. Where where
that came is. I've done a lot of work in
the past on value propositions, customer research, understanding what is
interesting to somebody's customers, how to frame it, how to
package it, and all of that gets condensed down into price,
(00:58):
and price is so actful both as an interface to
your customers as well as a key to making a
profitable business. So it's unleveratable.
Speaker 1 (01:07):
Yeah, and you've got a big history in the agency
and service space too as well. Before you started down
this path right.
Speaker 2 (01:15):
Yeah, And that's where a lot of this came from
and was inspired by whether my own work or the
agencies and teams that I would work with always seemed
to struggle here and never quite were able to price
that a level that made a sustainable business on the
professional services side, and whether that down to how do
(01:36):
we get away from a billable hour, or how do
we price shift over to something like value pricing, or
just how do we adjust our business model in a
way that can minimize those feast and famine that is
so often professional services, And what I've seen recently is
at a certain level, with a certain kind of customer,
(01:59):
the SaaS business model starts to look a lot like
professional services, just from the level of support that a
vendor is providing their customer, whether you've got a dedicated
customer success person, whether you've got a dedicated account exact,
it starts to look almost indistinguishable. Even though it's a
little bit more self service, even though it's a little
(02:22):
bit more hands off at the core value proposition, all
the things around it look a lot like professional services.
Speaker 1 (02:28):
Makes a lot of sense. Let's talk a little bit
about the history of what we've been dealing with here,
because I remember fifteen years ago a book came out
called Hourly Billing Is Nuts, and I read that and
I was like, oh my gosh, hourly billing is nuts.
But you couldn't tell the agencies or the clients that
hourly billing was the nuts. I mean, I literally just
(02:50):
talked to you an agency yesterday that I'm coaching and
they have a new client and they asked right away
for their rate card. And this is still an industry
where the tail wags the dog a bit. If the
clients want a certain thing. It's really hard to push
against what they're used to working with, especially as you
(03:11):
get into bigger companies with procurement and things like that,
they have rules in regulations. So tell me a little
bit about your history with billing in general over the
last few years and how that's shaped and changed the
way that you approach it these days. Yeah.
Speaker 2 (03:27):
When I started my firm twenty years ago, originally the
convention was hourly billing yea. And I quickly found out
that I only had so much billable capacity as a
one man show, and that is even less than your
billable capacity as an agency. Because if you're one man,
(03:47):
you've got to do delivery and admin and new business,
and those last two really eat away. And so by
the time I hit twenty billable hours, I was exhausted.
And I still have had another half a week to
go of just running the business. And I can't set
my rate high enough yep to be able to accommodate
(04:10):
this and to cover that other half a week. I
gotta I gotta change that. And it was about about
ten years ago that I shifted from hourly billing to
I had I had annual retainers, I had monthly retainers.
I had a value based project fees, and that really
helped ease things out from a cash flow perspective and
also from like how much time is it taking me
(04:32):
to invoice? I really got annoyed with, Oh, I got
I'll record all these hours and build up this massive invoice.
Whereas by the time I was at the tail end
of that business, I was sending invoices once a year
to clients m H. And that was amazing and they
actually thanked me for it.
Speaker 1 (04:52):
Sure they did a lot less work on their end,
but yeah, that's the surprise on my side was like,
oh wait, I'm actually saving you effort as well. But
keep going. But if they have a machine built to
handle that effort, like procurement in certain companies, they're not
changing anytime soon, because I mean their jobs are literally
built into that process.
Speaker 2 (05:14):
Yes, And I've been fortunate since restarting my practice that
the places that I've worked with, we've been able to
find ways around that because all different kinds of businesses
that need to be accommodated by a procurement system, and you,
if you've got a good champion, they will find that
(05:37):
thing on the procurement side that they can slot you
into that is that is a win win for both
of them. And not been really fortunate for that. Yeah,
that's got somebody who is locked in on a billble hour. Okay,
it can It just makes it more weird. But you
can work around that.
Speaker 1 (05:54):
And so that that's one tip that I want to
talk about because the one thing that I've been telling
people is when you're working with your clients and you
want to move to this thing, or you want to
bring up how they're working with other vendors or outside folks,
are all of are all of those people billing by
the hour, And you can go all the way down
to the housekeeping sort like the people who clean clean
(06:18):
up the place and things like that, how are they
working with your organization? And while our work is going
to be different, there is similar types of engagements where
we need to show up at certain times and perform
and deliver certain types of services. My first thing is
usually inquiring into them if you're if they're asking for
(06:38):
what the rate is those sorts of things I'm asking
responding to their question with another Christian like how are
you working? How are you working with other places right now? Yeah?
Speaker 2 (06:47):
And to me, we haven't really dived deep into the
problems with the billible hour, but the primary one that
I have that I keep going back to in these conversations,
it's hard to get the kind of impactful result that
we're both explained that unit, and to some degree it
(07:09):
incentivizes the vendor to stretch that out and delay providing
the result to the client until they get some certain
volume of hours spent. And to me, that is just
seems responsible.
Speaker 1 (07:26):
Yeah, it is, And I mean we all know, and
it's it's a lie that we've danced around forever. Because
one person's hour is not the same as another person's hour.
It just it just isn't. So even my.
Speaker 2 (07:38):
Month morning hour is different than my Friday afternoon hour exactly.
Speaker 1 (07:42):
So even the concept of it, both sides know that
it's a fabrication. And but why is it part of
our culture? Garrick, Like, why is this so ingrained in
the way that we have to transact with other people?
Speaker 2 (08:00):
I would say, I mean, I've got I've got kids
who are getting their first jobs right now. Yeah, and
those first jobs are hourly os. Yeah. Sure, some of
that makes sense, is hourly jobs, right, Like one of
the kids is handling dinner service for assisted living place.
Speaker 1 (08:22):
And that's that's the difference set because they're required to
be at a certain place at a certain time between
a certain amount of time. So yes, absolutely that makes sense.
Speaker 2 (08:31):
That's different than provide me a creative solution to a
business problem I'm struggling with and I don't know why. Clients, Oh, okay,
so maybe this is maybe this is the pressure. Maybe
we're getting to this right now on this conversation is
kind of fun. Maybe the pressure is on the client
(08:52):
side to say, I actually want this result as quickly
as possible, and against what you're telling me about how
you do business, the way that I can ensure that
is to put pressure against an hour m hm, right,
And I also want to provide the result as quickly
as possible. And I have been delighted in those instances
(09:14):
where while I either was on a retainer or on
a value based fee, was able to get not as
finished is a result as I was expecting to deliver it,
but it was substantial enough that the client was like, Okay,
got it, this is what I need to move on.
I don't it doesn't need to be polished. Great, let's
(09:35):
keep going.
Speaker 1 (09:36):
Yeah, And this is I mean because we tried to
do this at agencies I was at in the past,
where we'd offer a fixed bid price versus a time
materials price. The client would always go with the time
of materials because they thought they could get it cheaper.
You'll just move faster and it'll come in under that thing.
And I was like, have you ever worked with a
lawyer before, because again, we look at these parody sort
(09:58):
of places like law practices and how they build by
the hour in a lot of cases, and there's a
bit more standardization in those spaces, so they can they
can get away with a lot. But I mean, how
many times have we heard in the news about lawyers
overcharging or something or whatever, some kind of discrepancy with
(10:20):
those with those with those services because they're doing the
same thing. They it's all they know, it's all fudged numbers.
Speaker 3 (10:27):
Yeah, And and that at the end of the day,
they're the the outcome is worth something for their clients,
A good out for sure, and bad.
Speaker 2 (10:38):
Oncon are worth something different. And that billable hour sort
of hedges it a little bit. But I know that
there are, especially the high profile some of those engagements
are based on the outcome.
Speaker 1 (10:52):
Yeah, and and but again you look at how other
service industries have transition over time, medical for example. Right,
so if anybody's had speaking of kids, if anybody's had
a kid in the last ten so years, and you've
looked at your billing, these are served. These are services
that cost this much. There's no breakdown of hours or
anything like that. It's like the IV does cost seven
(11:15):
hundred dollars And you could be like, why does it
cost seven hundred dollars. They're like, because it costs seven
hundred dollars, that's what.
Speaker 2 (11:20):
And that's a great example. You don't know they're they're
they're billing you seven hundred dollars for that, but it's
likely they build somebody else twelve hundred and somebody else
one hundred.
Speaker 1 (11:36):
Absolutely, yes, yep. And and there's no there's no there's
no standardization other than there is there is what each hosts.
And again it goes different to each hospital to or
clinic or whatever the case may be, because that they built,
they bill according to what they need to make for profit.
Speaker 2 (11:57):
Yeah, and there's there's some there's a lot of don't
have a lot of experience in the healthcare world. There's
a lot of opacity in pricing in the healthcare world,
and we as consumers of it, don't have yet a
great deal of levers to pull to be able to like. Whereas,
by contrast, travel airfare prices are constantly changing. They have
(12:23):
lots of options to choose from and lots of They're
increasingly make it more and more clear what is and
isn't included, so I can make a decision on what
is the most valuable things for me in this trip,
and how does that translate to how my price is
changing against all of these options.
Speaker 1 (12:40):
Yeah, which, and airlines are it's a terrible business. I mean,
they make hardly any money. I think they make seven
dollars a passenger in some cases. It's just incredible how
much expense goes into maintaining such a large machine like
an airline. Now again, over the last ten fifteen years,
(13:01):
us as service providers have, especially in knowledge based industries,
have had to deal with people coming in from other
countries where they're undercutting the prices of what people are
used to paying. And so there was this big surge
of we're going to take all of our stuff offshore
and get things made overseas. We're going to follow Apple's model.
Right is everything it's this fancy luxury item all made
(13:23):
in Vietnam or China or something, but it's it's this
American pie sort of company, right, and here we are.
I've seen in the last few years a number of
agencies pop up where it is just sort of there's
frontmen and then all the teams are distributed all over
in different parts of the world, and so the front
(13:44):
men are just going out and selling the services and
then it's executed on in India, Belarus or Brazil or
somewhere in South America, and there's child billing teething. Yeah,
there are still billing by the hour, and so into
the world. What somebody comes to you and is like Garrek,
like I'm building by the hour. You know, I'm up
(14:06):
against this kind of these these firms and these things.
Where do you start What sort of questions do you
want them to ask themselves as they are figuring out
their pricing? What is what is the best questions that
they should.
Speaker 2 (14:18):
Be asking at the end of the day, after all
these engagements have concluded, after the final invoice has been sent,
total it all up and compare it against other ones.
If you land in about the same spot, do you
know what your price is for that scope of thing,
and say, hey, we could go through all this machine again,
(14:41):
this mischief whatever, but at the end of the day,
you're going to pay X get this engagement.
Speaker 1 (14:47):
Yep, it costs this much.
Speaker 2 (14:50):
It costs as much.
Speaker 1 (14:52):
Right.
Speaker 2 (14:52):
And also there's what I what has really helped me
is and I know that a lot of businesses do this,
especially and you get to larger agencies with multiple there's
a there's a floor for there's a minimum engagement that
if we own this engagement above that number, it's not
(15:13):
going to be profitable for us. We're gonna be worth
our while and sometimes that number is unspoken and sometimes
it's very clear. And so to me, that's the start
is take a take a look backwards facing at the engagements.
What are the what's the what did you charge all
in at the end, and how does that compare against
(15:34):
some agency floor that you need to set to know
whether or not it's worth your while to continue doing
those kinds of engingments.
Speaker 1 (15:41):
Yeah, that's a that's an incredible thing because we would
do that at my last agency and determine what services
are ones that we want to continue to invest in
and which ones we don't want to continue to invest in.
So things like maintenance obviously are always an hourly type
of thing. And I've seen even more and more companies
show up that are just maintenance companies, And I think
(16:04):
that makes a lot of sense because if your job
is to do a lot of building and maintaining is
just it's a different cadence, it's a different structure, it's
a different model in many cases for maintaining software or
advertising design sounds like that, or websites, and it makes
sense that you almost have to split the company into
(16:25):
two different groups in order to be able to do it.
When I was at a very very large agency. I
mean we literally did. We had special groups that were
just the maintenance groups, and projects would move over. They
would move away from the people they've worked with for
the last year or two on building the thing, and
they'd have to move over to that team because that
group was really good at building stuff. But that job,
(16:47):
their job is not to maintain it. So that's the
other piece that I found is that it's a cultural
problem in a lot of these places because they look
at they look at an hourly rate is something that's
easy to hold the client accountable too. But if I
fix it, I've got to hold my team accountable. Oh
(17:10):
to that if I'm not a good leader, if I'm
not good people manager. And I recently was working with
an agency on this and I'm like, why are we
always billing hourly? And then they couldn't really answer it
other than their clients wanted it that way. But then
as I dived in and I find out they didn't
have any dedicated project managers, and I could see very
(17:30):
clearly that expectations were not set appropriately at the beginning
of engagements. So it was way easier because there was
not a lot of gates at the beginning where you
have to get a little bit more to fix the cost,
and that they could just slide right in and move
into an hourly rate and they just build bill bilbil bill,
And so I find that culturally it's a stop gap
(17:53):
for some of these organizations as well as that's been
your experience as well. Absolutely, it gives.
Speaker 2 (17:58):
Them a chance like they don't really need to think
about what they're doing because until they're doing it right,
until they're doing it and then realized, oh my goodness,
we're over our heads and this is bigger and they're
more complicated, And what I think is worse there is
often you're missing what the impactful result is that your
(18:19):
client is going after. When you just blindly build, build build,
I think there's a lot of interesting opportunities and innovation
and just delight in saying, Okay, getting the team together
and saying we've got this opportunity with this client, here's
the result they're going for. What does a six week
(18:42):
engagement look like, What does a twelve week engagement look like?
What does a ninety day engagement look like? To get
to the same result and start to stretch and be
creative rather than just assuming that we can just send
a website down the assembly line.
Speaker 1 (18:58):
I think the more niche are, the easier it is
to do this as well, because back to your point
about if I've got more repeatable processes, I know a
woman that runs a fantastic web design company that all
they do is work with HVAC places. So they have
basically got a product that they can stand up for
people very quickly because it's it's not a lot different
(19:20):
than the others in terms of functionality, right, It's book
of time, get an appointment, pricing, frequently asked questions, all
that stuff, and they can turn these things out pretty
quickly and spend more time on the creative and the
messaging and the stuff to make them stand out versus
some fancy like mapping feature or different things like that,
(19:41):
and they can move them through the pipelin quicker and
they can fix these the cost of these things and
move them out. But as you and I both know,
there's a difference between building your lifestyle business and building
a business. Because I know so many creative people that
would look at that and turn up their knows and
be like, I want to create great things in the world, Garrett,
(20:04):
I want, I want to invent the next whichever. But
I feel like if you're in a transactional services base model,
like you've got to tamper your expectations a little bit
when it comes to building a profitable business. Because again,
like I know, lots of lifestyle agencies like they're they're
just a few people and they just build stuff and
(20:26):
that's it. They're fine, they don't they don't need any
more than that, and that's and that's great. I think
it's great.
Speaker 2 (20:32):
Yeah, And that is the vast majority of businesses in
the US. Sure, yeah, yeah, I've got a stats someplace
in one of my First Starters newsletter. I actually went
through the stats and it's something like eighty two percent
of all businesses in the US have fewer than eight employees.
Speaker 1 (20:50):
Yeah, fewer they make less than a million dollars a year. Yeah, yep, yep,
I've seeing that, Staffy. Now, do you want to get
above that? Do you have ambitions to be more pro
fitable or make something that is more substantial than that,
that might even be a saleable asset.
Speaker 2 (21:06):
We're gonna have to take a look at that. We've
got different approaches to that, right, and do a lot
of work with early stage founders as well, and many
of them go towards I'm gonna need to raise funding.
I'm like, maybe at some point, but you're gonna have
a lot easier time raising funding if you have a
business here that is profitable, that has demand, that has
(21:29):
predictable revenue, that you can draw a box around and
say this is the thing.
Speaker 1 (21:35):
It's like I bought some I bought some raw land
on the North Shore a while ago, and I realized
I can't get a mortgage because there's nothing on there
to mortgage. And yeah, so to your point, I want
you to give me money, but what am I actually
investing in if it's not something that already exists and
(21:56):
an improfitable idea. And I get it. You watch all
the tanks and all these different things, and yes, I
totally agree. You bet on the jockey, not on the horse, right, Like,
I think that's a smart move if you've got to
if there's a great team, then we'll figure something out.
But that means something's already been figured out to prove
that they are that good of a team, right, not
(22:17):
just an idea, Because ideas are cheap.
Speaker 2 (22:20):
These are cheap, and I mean, you've I'm sure, been
on projects with a very enthusiastic founder absolutely slightly bigger,
fatter wallet than they deserve it for this idea and
they decided to burn it.
Speaker 1 (22:34):
I got it in my head, I know exactly the one.
Speaker 2 (22:36):
Yeah, And they were like, you know what, we're gonna
burn it all. I'm building a product.
Speaker 1 (22:39):
That because we're gonna change the world, done customer development
on Yep, We're gonna change the world. But I haven't
talked to one single potential customer or buyer about this.
I had. I had a guy once this is great,
reached out wanted to build something, but wouldn't talk about
it over the phone because he was concerned that whatever,
NBA and all this stuff. But I was like, that's fine,
(23:01):
I'll sign an NDA or whatever, and and we came
and met with him, and he proceeded just to tell
us about an idea that already existed in the word.
It is pretty common actually, and we were like, haven't
you didn't you He's like, I didn't put it. I
didn't search Google because I didn't want them to steal
my idea. And I was like, okay, okay, I I
(23:23):
had a call, we should the best with the founder.
Speaker 2 (23:26):
Article, you stay with the founder who was similarly as
hesitant to talk. And then when I got into it,
I'm like, oh, the reason I was confused about who
you were is because you are now telling me the
same value proposition that's three people earlier this week did.
Speaker 1 (23:42):
Yeah, exactly, And you're solving a problem that's already been
solved and.
Speaker 2 (23:47):
You haven't done customer development. You when I say, hey,
do you have ten people that could be your buyers
right now? He said no. Like, Okay, let's take the
rest of this time and flush that out so you've
got some tangible direction to this idea, and then call
me back and we can talk about who you talk
to and how significant a problem they said they were having,
(24:09):
and then then we can start to get to is
it worth you actually pursuing this because you've got these
people who say they could use this kind of help,
and that kind of help is worth this to them. Yeah.
Speaker 1 (24:21):
And that's why I've encouraged people I've worked with in
agencies that I'm working with, I mean, read Clayton Christensen,
read jobs to be done, and have an understanding of
why people are buying your services. They are trying to
solve a business problem. They're not trying to buy a website.
They don't want to buy a website. That's the last
thing they want to play, but they have to because
it has to solve a business problem for them. And
(24:43):
if you speak, if you can speak to how you
solve those business problems, your value goes way up versus
your hourly rate. And once we had made that change
at my last agency of talking and leading with the
business problems we're going to solve and the impact that
doing this work is going to have with their businesses
and how we've seen it change other businesses, and then
(25:07):
and then led with that, and then tail end was
the actual execution part. Change the whole conversations. It changes
the profitability of the organization. Everything everything changed. So back
to my point about this cultural aspect to pricing, it's
so hard when you're not confident in your business or skills.
(25:28):
I mean, you feel confident, you feel like, oh, I
can knock out any logo anytime, no big deal. But
all of a sudden, you've got a person in a
business suit sitting across from you, questioning your value. And
a lot of people will shrink absolutely. I see that
so often in the creative world. A lot of my
work with founders is sometimes just helping them unblock the
(25:54):
internal confidence.
Speaker 2 (25:56):
And part of that unblocking is sitting or what I've
been calling customer rediscovery. I will talk to all your
previous customers to understand all of the amazing value that
you provided them that was unpriced you just naturally provided
that was outside of the scope of work. That which
(26:17):
is why they're repeating clients. But nobody says it's explicitly
this this or this like, oh, your responsiveness is so
amazing better than anybody we've.
Speaker 1 (26:26):
Worked for before.
Speaker 2 (26:27):
That's why we do business with you. They are right,
Are you speak more clearly or whatever that attribute is,
to like dust that off, to discover that, to show
that back to my clients and say, here are all
of the things that people are enjoying when they're engaged
(26:49):
with you. And you can dial that up or down
against price, but it's or you can unbundle it and say, oh,
only the special people we'll get that price, We'll get
that offering. And I now know that explicitly, yeah, that
is part of my value, and I can choose to
offer a journey.
Speaker 1 (27:08):
Mm hmm. Yeah, And that's that's what's key, is that
I'd love that idea of unbundling what those aspects that
might have been providing these these services without actually pricing
them correctly. And if you unbundle them a little bit,
you can start to see, oh, I am providing a
good amount of value here. And I think it goes
(27:29):
back to then the cultural aspect of no, no, actually,
we're a real business and things like that. I mean,
I remember being an agency street have it one hundred people.
It'd be like something would happen and be like, we're
like a real business, and yeah, like a real business.
We have one hundred We're like a little business. It's
like we have one hundred people.
Speaker 2 (27:48):
You're in fiction for all of us in this room right.
Speaker 1 (27:50):
Now, I know exactly. But go again. People assume that
people have it all figured out and everybody's just winging
it as we go. But what I found during the
pricing discussions was that it is a solid matter of confidence.
It's a it's a statement of confidence too. And I've
had so many clients where they're like, you're more expensive
(28:12):
than these guys are, and I was like, yep, and yep,
yes we are. I mean we are and and and
one reason I could point to is that in the
last seven years of business we haven't lost one single
client and and and so the people that pay for
our services get value out of our services, and that's it.
(28:35):
And so if but if I couldn't point back to
that stat and I was just like, yeah, again, if
you don't stand for something, you just stand for nothing.
And so many of these people don't stand for a
lot other than I want to make some money by
doing stuff. And I think that trickles into every little
(28:56):
aspect of the choices you make as a business owner,
or how you price things, how you manage employees, the
type of people you hire, the type of clients you attract.
Speaker 2 (29:05):
Yeah, And the more I dig into this, the more
it is clear to me that your pricing strategy is
your business strategy and it just flows from there. And
wherever you put yourself premium or commodity by the hour
or value or whatever, the rest of your business is
(29:25):
led by that. And if you're not continually revisiting all
of that, is this pricing strategy working. Is it getting
the kind of clients and engagements that we want? Is
our internal operations and delivery shaping up the way we want.
Sometimes just changing the pricing model can have these amazing
(29:49):
rippling effects that I have seen. It can create calm
where there was frazzledness, can create clarity where there was chaos,
and creating simplification there was complexity.
Speaker 1 (30:01):
Yeah, I think transparency plays into it too. I used
to say that in a salary negotiation, they always say
the first one that puts out a number loses, right.
But to me, in a scope or services, the first
one puts out a number wins. Is that the faster
I can give you an idea of what this might cost,
the sooner I stop wasting anybody's time. And what I
(30:23):
find interesting is that still so many agencies are so
scared of sharing potential costs for their services because what
if they're too expensive? And yeah, and it's yeah, what
if maybe And I can't tell you how many times
I've I've been coaching agency er. I'm like, that was
a bullet dodged, because they they would have they would
have been a terrible client over the long term.
Speaker 2 (30:46):
Yeah. The measure that I use is when the number
was state dead, did the prospect blink and still say yes.
And if they they said yes and didn't blink, you've
got a lot of head Yeah, you can get breaking it. Yeah,
if they said no, you're too high for them. And
you can decide whether or not you want to keep
(31:07):
going or not.
Speaker 1 (31:08):
You can decide whether or not I want to keep
pursuing it. And and what I also find funny too
is over the years is how agencies keep their rates secret,
especially from each other, right because there's a scarcity mindset
of if if if somebody knows what my rate is,
somebody else could just charge five dollars lesson win the business.
And my answer was always like, if they can do that,
(31:29):
good for them, because because I don't want to, I
don't I probably don't want to work with that client
that it chose shows them.
Speaker 2 (31:38):
That's what so many founders I talked to are going
after a problem space and saying we can compete on price,
and I said, good God, don't do that, no, because
while that might like the current offerings might seem more
than you want to pay or more than the customer
wants to pay right now, you will immediately find out
(31:59):
why that price exists. Once you go to market. There's
just some barrier that's not obvious to you that as
soon as you open your doors, you'd be like, oh,
and this is why prices are.
Speaker 1 (32:13):
Yeah, especially in regular industries and other things too. It's
so common. I mean, I can't tell you how many
in the course of my twenty five plus years of
doing agency work where I've had somebody show up with
something that's going to compete against the MLS for real estate.
But the real MLS is a monopoly and you can't.
I mean, it's just unless the government steps in, you
(32:35):
can't outwit and outsmart the MLS. It's just the way
it It's just the way it is. And there's certain
parts of areas where people thought we can, we can
outdo this stuff, right, So uber blit scaled taxis out
of existence, right, which was just a weird thing, and
(32:55):
airbnb blitz scaled with renting out rooms and things. And
then but then if you've seen it, try over and
over again with other things. They're like, oh, they worked
with cars, lets do with scooters and yeah, not that
great about business, yeah.
Speaker 2 (33:10):
Yeah, And I think the I think it's gonna be
interesting in the business history books to see if they
shake out how much. Those two entities are a result
of really, really, really cheap money. Yeah, And I think
part of the shift of the shift in my practice
(33:31):
over the pricing is a belief that the era of
cheap money is over, that comfortable, profitable, sustainable business models
is the future. And we've got to think we've got
a lot of work to get more businesses sustainable and
profitable and confident in the world where just doing another
(33:53):
raise is no longer an easy option.
Speaker 1 (33:56):
No, And if you're using utilizing outside services to build
those companies or other things, you can't just go the
cheapest route anymore because it's too risky for you. Whereas
before you could fudge it a bit, right, because we
have to build it twice, we still got time. Yeah,
(34:16):
but you know these days now you're not You're not
gonna get away with it. Plus, investors are much more
savvy these days than they used to be. Right back
in the dot com bubble and things like that, they
were like, oh, I hear this is good, so let's
let's invest in price. But we still see it again.
You have to I think number one, if you're if
(34:37):
you're a service provider, you're out there, you're doing agency
work and you're in you're pricing your things. You start
by talking to your clients, any potential clients. Are you
getting value for your money? And to your point, that's
super scary for lots of people to ask their clients
these things because what if I What if I get
answer I don't want to hear I.
Speaker 2 (34:58):
And that is the kind of work that I absolutely
love doing, is I will. I am happy to go
to your clients, your best clients, your worst clients, your
new clients, your old clients, and have that conversation with them,
whether or not you're in next to me. And to me,
it would be great if my client was next to
(35:19):
me in those conversations. But for them to do that
and be able to have get the value out of it,
they need to have a really strong relationship and be
really comfortable getting punched in the gutt a lot. And
so sometimes it's easier if I just do that alone
then come back to them, be the intermediary. But you
(35:40):
will always get new kinds of value, new kinds of insights,
new ways, new kinds of opportunities to shift the value
offering of that agency in that service.
Speaker 1 (35:51):
Yeah, and that's something I would do at a lot
of my agencies and pastes have an outside third party
come in to talk to the clients because they didn't
want to be honest with us in the first place,
and not not that they were trying to hide something necessarily,
but it's if you worked with the team for a year,
you don't want to say anything bad about the team.
What if it gets back to them and you like
(36:12):
that person and you saw pictures of their new dog
and stuff on slack and like, you don't want to
But if you bring a disinterested third party and have
them do the you're going to get a lot better
results and you'll get them a lot quicker as well.
So I think that's the key. I think that's a
key unlock for anybody listening to this episode is is yes,
(36:35):
survey or clients, ask them what they like and value,
But if you want the real story, bring somebody in
to help you with it. I think you're going to
find a lot more value with it.
Speaker 2 (36:46):
Absolutely, And you could just your your offerings could be
off just by ten degrees, yep, but that sometimes that's
a really tough ten degrees to shift because of all
the internal culture of things we talked about and the other.
I think the other value about the the disinterested third
party is any kinds of those those personality things so
(37:07):
often get dissolved into a larger pattern that is not
about the person but about communication, expect its and all
of those kinds of things. All are ye, all the
soft stuff that you can then go back and say, Okay,
this is actually the pattern it presents in these ways.
So when we see these things, we know what's gone sideways?
(37:30):
How do we how do we get it on the
right track and keep it on the right track.
Speaker 1 (37:33):
Yeah, And if you're getting pushed back and you're in
the delivery side of things, I've I've run into this
before where sales is like we own the customer, don't
don't talk to the customers, don't ask the about their
experiences and stuff. Make sure you're challenging them then when
you're going to talk to the customers, because we need
this data. We need this information to know how things
are performing, if they're performing at the right speed, if
(37:54):
we're providing value, and if that cost is effective. Right,
we can't just go with ane yep, I'm good, or
we need and I think this.
Speaker 2 (38:06):
Is where this is where a good pricing strategy comes in.
And also one of the innovations on the SaaS side
of the house that I think also helps this is
the introduction and the notion of a customer success manager
or lead, someone whose job it is to ensure that
the customer is maximizing their usage of the service of
(38:28):
the software in a way that is valuable and in
maybe in the agency world, this is like an account
exec or something like that. Sure, the idea is there's
somebody in addition to the salesperson who is looking at
that relationships or a different lens, and therefore it becomes
less about an individual and more about a cross functional
(38:48):
view of that relationship and the direction the win wind
direction needs to be moved against the pricing strategy.
Speaker 1 (38:56):
I think it's super smart and I've implemented that's in
success before and I'll tell you, and this is the
same advice I give a lot of the agencies I'm coaching.
The one interesting thing you'll find when you start implementing that,
whether it's a dedicated role or somebody in the business
takes on that title for part time of maybe they're
(39:16):
an HR person and they're spreading out they want some
more opportunities in the company on the profitability side. Maybe
it's other overhead you have and you want to get
them to engage with the customers more. Wherever this comes from,
you will find that your customers do not know the
full extent of what you offer. And it will blow
your mind how little they know about what your business offers.
(39:41):
And it's such an opportunity to re educate them on
that you provide these additional services because they I guarantee
you eighty percent of the people I talk to you
if I ask them, do you know that this customer
also does these things, They're like, oh, I had no idea.
Speaker 2 (40:00):
Because they they engaged to make progress on a specific job,
going back to jobs Benign, Clayton, christianson and they're making
progress on that and they're good with that.
Speaker 1 (40:11):
Yep. Yeah, And they don't look at you any in
any other way. They don't. I always use the Tires
Plus example, right, I go to Tires Plus and to
get tires. But even though there's a sign up front
that says like we do breaks and stuff, I wouldn't.
I wouldn't. Tires Plus would not be the first place
I would think of when it comes to two breaks.
(40:33):
No matter how much they're advertising. Yeah to me, but
if they had somebody, a representative, and they had a
program that was there to educate their customers on the
full breadth of what they they did, it's great. But right,
a lot of places don't put that kind of effort.
Speaker 2 (40:50):
In and where where do we And then it becomes
a roll out strategy or marketing strategy about where do
we put that communication, how do we do that bundle
in and what's the hit we want to we're comfortable
taking to get that word out. A becomes delightful conversations
that I could keep going on. Yes, let's have a
cool example.
Speaker 1 (41:10):
I know, and we have to stop here, but with this,
so we'll just call this part one Grek and well
we'll come back and continue our conversation. I'm excited. Is
here if people's opinions. If you've got opinions, make sure
you share them in comments, shoot me a message. Make
sure you connect with Grek. He's very active on LinkedIn.
He's posts some great stuff over there. If I want
to find out more about working with you or follow
(41:31):
and listen to your ideas, Gerrek, whe where can I
get multi info?
Speaker 2 (41:35):
LinkedIn is good? I have a substack called for starters,
all the things that early stage founders put off until
it's too late. We talked about pricing on there, we
talked about value propos should we talk about customer research?
All the things founders put off until it's too late.
And also through consulting dot com you can learn more
about my pricing practice.
Speaker 1 (41:53):
That's awesome and I will have links in the discription
below for everybody if you want to check it out.
I highly recommend it. Grek has been an icon in
the at least around my town for a long time.
In the agency business, though, you're going to learn a
lot if you follow them, so Eric, thank you for
taking the time out of your busy schedule and joining me.
I appreciate it.
Speaker 2 (42:13):
So in my pleasure. Kurt, thanks so much. All right,
talk soon.
Speaker 1 (42:16):
Thanks for tuning in to another episode. If today's conversation
resonated with you, it would be greatly appreciated if you
could take a moment to leave a review on iTunes
or Spotify reviews, help others find the show and make
a big difference for those serious about leveling up their business.
My coaching services at Schmidt Consulting doc Group. Maybe what
(42:37):
you're looking for, have someone in mind who'd make a
great guest. I would love to hear about them. Thanks
so much for listening. It truly means everything. Until next time,
take care and keep moving forward.
On this episode of Schmidt List, we welcome pricing Strategies
expert Garrick Van Buren learn how focusing on solving business
problems rather than just selling services can transform your agency's success.
Garrek's insights on confidence, unbundling services, and changing building practices
are invaluable. Tune in now, Eric, how are you today?
Speaker 2 (00:24):
I am well today, Kurt, delightful here.
Speaker 1 (00:26):
I'm so excited that you are here. I'm so excited
you are joining me. So tell me a little bit
about the work you're doing these days and who are
specifically working with.
Speaker 2 (00:35):
I work with CEOs and B to B companies, software
and professional services that are struggling with pricing. Where where
that came is. I've done a lot of work in
the past on value propositions, customer research, understanding what is
interesting to somebody's customers, how to frame it, how to
package it, and all of that gets condensed down into price,
(00:58):
and price is so actful both as an interface to
your customers as well as a key to making a
profitable business. So it's unleveratable.
Speaker 1 (01:07):
Yeah, and you've got a big history in the agency
and service space too as well. Before you started down
this path right.
Speaker 2 (01:15):
Yeah, And that's where a lot of this came from
and was inspired by whether my own work or the
agencies and teams that I would work with always seemed
to struggle here and never quite were able to price
that a level that made a sustainable business on the
professional services side, and whether that down to how do
(01:36):
we get away from a billable hour, or how do
we price shift over to something like value pricing, or
just how do we adjust our business model in a
way that can minimize those feast and famine that is
so often professional services, And what I've seen recently is
at a certain level, with a certain kind of customer,
(01:59):
the SaaS business model starts to look a lot like
professional services, just from the level of support that a
vendor is providing their customer, whether you've got a dedicated
customer success person, whether you've got a dedicated account exact,
it starts to look almost indistinguishable. Even though it's a
little bit more self service, even though it's a little
(02:22):
bit more hands off at the core value proposition, all
the things around it look a lot like professional services.
Speaker 1 (02:28):
Makes a lot of sense. Let's talk a little bit
about the history of what we've been dealing with here,
because I remember fifteen years ago a book came out
called Hourly Billing Is Nuts, and I read that and
I was like, oh my gosh, hourly billing is nuts.
But you couldn't tell the agencies or the clients that
hourly billing was the nuts. I mean, I literally just
(02:50):
talked to you an agency yesterday that I'm coaching and
they have a new client and they asked right away
for their rate card. And this is still an industry
where the tail wags the dog a bit. If the
clients want a certain thing. It's really hard to push
against what they're used to working with, especially as you
(03:11):
get into bigger companies with procurement and things like that,
they have rules in regulations. So tell me a little
bit about your history with billing in general over the
last few years and how that's shaped and changed the
way that you approach it these days. Yeah.
Speaker 2 (03:27):
When I started my firm twenty years ago, originally the
convention was hourly billing yea. And I quickly found out
that I only had so much billable capacity as a
one man show, and that is even less than your
billable capacity as an agency. Because if you're one man,
(03:47):
you've got to do delivery and admin and new business,
and those last two really eat away. And so by
the time I hit twenty billable hours, I was exhausted.
And I still have had another half a week to
go of just running the business. And I can't set
my rate high enough yep to be able to accommodate
(04:10):
this and to cover that other half a week. I
gotta I gotta change that. And it was about about
ten years ago that I shifted from hourly billing to
I had I had annual retainers, I had monthly retainers.
I had a value based project fees, and that really
helped ease things out from a cash flow perspective and
also from like how much time is it taking me
(04:32):
to invoice? I really got annoyed with, Oh, I got
I'll record all these hours and build up this massive invoice.
Whereas by the time I was at the tail end
of that business, I was sending invoices once a year
to clients m H. And that was amazing and they
actually thanked me for it.
Speaker 1 (04:52):
Sure they did a lot less work on their end,
but yeah, that's the surprise on my side was like,
oh wait, I'm actually saving you effort as well. But
keep going. But if they have a machine built to
handle that effort, like procurement in certain companies, they're not
changing anytime soon, because I mean their jobs are literally
built into that process.
Speaker 2 (05:14):
Yes, And I've been fortunate since restarting my practice that
the places that I've worked with, we've been able to
find ways around that because all different kinds of businesses
that need to be accommodated by a procurement system, and you,
if you've got a good champion, they will find that
(05:37):
thing on the procurement side that they can slot you
into that is that is a win win for both
of them. And not been really fortunate for that. Yeah,
that's got somebody who is locked in on a billble hour. Okay,
it can It just makes it more weird. But you
can work around that.
Speaker 1 (05:54):
And so that that's one tip that I want to
talk about because the one thing that I've been telling
people is when you're working with your clients and you
want to move to this thing, or you want to
bring up how they're working with other vendors or outside folks,
are all of are all of those people billing by
the hour, And you can go all the way down
to the housekeeping sort like the people who clean clean
(06:18):
up the place and things like that, how are they
working with your organization? And while our work is going
to be different, there is similar types of engagements where
we need to show up at certain times and perform
and deliver certain types of services. My first thing is
usually inquiring into them if you're if they're asking for
(06:38):
what the rate is those sorts of things I'm asking
responding to their question with another Christian like how are
you working? How are you working with other places right now? Yeah?
Speaker 2 (06:47):
And to me, we haven't really dived deep into the
problems with the billible hour, but the primary one that
I have that I keep going back to in these conversations,
it's hard to get the kind of impactful result that
we're both explained that unit, and to some degree it
(07:09):
incentivizes the vendor to stretch that out and delay providing
the result to the client until they get some certain
volume of hours spent. And to me, that is just
seems responsible.
Speaker 1 (07:26):
Yeah, it is, And I mean we all know, and
it's it's a lie that we've danced around forever. Because
one person's hour is not the same as another person's hour.
It just it just isn't. So even my.
Speaker 2 (07:38):
Month morning hour is different than my Friday afternoon hour exactly.
Speaker 1 (07:42):
So even the concept of it, both sides know that
it's a fabrication. And but why is it part of
our culture? Garrick, Like, why is this so ingrained in
the way that we have to transact with other people?
Speaker 2 (08:00):
I would say, I mean, I've got I've got kids
who are getting their first jobs right now. Yeah, and
those first jobs are hourly os. Yeah. Sure, some of
that makes sense, is hourly jobs, right, Like one of
the kids is handling dinner service for assisted living place.
Speaker 1 (08:22):
And that's that's the difference set because they're required to
be at a certain place at a certain time between
a certain amount of time. So yes, absolutely that makes sense.
Speaker 2 (08:31):
That's different than provide me a creative solution to a
business problem I'm struggling with and I don't know why. Clients, Oh, okay,
so maybe this is maybe this is the pressure. Maybe
we're getting to this right now on this conversation is
kind of fun. Maybe the pressure is on the client
(08:52):
side to say, I actually want this result as quickly
as possible, and against what you're telling me about how
you do business, the way that I can ensure that
is to put pressure against an hour m hm, right,
And I also want to provide the result as quickly
as possible. And I have been delighted in those instances
(09:14):
where while I either was on a retainer or on
a value based fee, was able to get not as
finished is a result as I was expecting to deliver it,
but it was substantial enough that the client was like, Okay,
got it, this is what I need to move on.
I don't it doesn't need to be polished. Great, let's
(09:35):
keep going.
Speaker 1 (09:36):
Yeah, And this is I mean because we tried to
do this at agencies I was at in the past,
where we'd offer a fixed bid price versus a time
materials price. The client would always go with the time
of materials because they thought they could get it cheaper.
You'll just move faster and it'll come in under that thing.
And I was like, have you ever worked with a
lawyer before, because again, we look at these parody sort
(09:58):
of places like law practices and how they build by
the hour in a lot of cases, and there's a
bit more standardization in those spaces, so they can they
can get away with a lot. But I mean, how
many times have we heard in the news about lawyers
overcharging or something or whatever, some kind of discrepancy with
(10:20):
those with those with those services because they're doing the
same thing. They it's all they know, it's all fudged numbers.
Speaker 3 (10:27):
Yeah, And and that at the end of the day,
they're the the outcome is worth something for their clients,
A good out for sure, and bad.
Speaker 2 (10:38):
Oncon are worth something different. And that billable hour sort
of hedges it a little bit. But I know that
there are, especially the high profile some of those engagements
are based on the outcome.
Speaker 1 (10:52):
Yeah, and and but again you look at how other
service industries have transition over time, medical for example. Right,
so if anybody's had speaking of kids, if anybody's had
a kid in the last ten so years, and you've
looked at your billing, these are served. These are services
that cost this much. There's no breakdown of hours or
anything like that. It's like the IV does cost seven
(11:15):
hundred dollars And you could be like, why does it
cost seven hundred dollars. They're like, because it costs seven
hundred dollars, that's what.
Speaker 2 (11:20):
And that's a great example. You don't know they're they're
they're billing you seven hundred dollars for that, but it's
likely they build somebody else twelve hundred and somebody else
one hundred.
Speaker 1 (11:36):
Absolutely, yes, yep. And and there's no there's no there's
no standardization other than there is there is what each hosts.
And again it goes different to each hospital to or
clinic or whatever the case may be, because that they built,
they bill according to what they need to make for profit.
Speaker 2 (11:57):
Yeah, and there's there's some there's a lot of don't
have a lot of experience in the healthcare world. There's
a lot of opacity in pricing in the healthcare world,
and we as consumers of it, don't have yet a
great deal of levers to pull to be able to like. Whereas,
by contrast, travel airfare prices are constantly changing. They have
(12:23):
lots of options to choose from and lots of They're
increasingly make it more and more clear what is and
isn't included, so I can make a decision on what
is the most valuable things for me in this trip,
and how does that translate to how my price is
changing against all of these options.
Speaker 1 (12:40):
Yeah, which, and airlines are it's a terrible business. I mean,
they make hardly any money. I think they make seven
dollars a passenger in some cases. It's just incredible how
much expense goes into maintaining such a large machine like
an airline. Now again, over the last ten fifteen years,
(13:01):
us as service providers have, especially in knowledge based industries,
have had to deal with people coming in from other
countries where they're undercutting the prices of what people are
used to paying. And so there was this big surge
of we're going to take all of our stuff offshore
and get things made overseas. We're going to follow Apple's model.
Right is everything it's this fancy luxury item all made
(13:23):
in Vietnam or China or something, but it's it's this
American pie sort of company, right, and here we are.
I've seen in the last few years a number of
agencies pop up where it is just sort of there's
frontmen and then all the teams are distributed all over
in different parts of the world, and so the front
(13:44):
men are just going out and selling the services and
then it's executed on in India, Belarus or Brazil or
somewhere in South America, and there's child billing teething. Yeah,
there are still billing by the hour, and so into
the world. What somebody comes to you and is like Garrek,
like I'm building by the hour. You know, I'm up
(14:06):
against this kind of these these firms and these things.
Where do you start What sort of questions do you
want them to ask themselves as they are figuring out
their pricing? What is what is the best questions that
they should.
Speaker 2 (14:18):
Be asking at the end of the day, after all
these engagements have concluded, after the final invoice has been sent,
total it all up and compare it against other ones.
If you land in about the same spot, do you
know what your price is for that scope of thing,
and say, hey, we could go through all this machine again,
(14:41):
this mischief whatever, but at the end of the day,
you're going to pay X get this engagement.
Speaker 1 (14:47):
Yep, it costs this much.
Speaker 2 (14:50):
It costs as much.
Speaker 1 (14:52):
Right.
Speaker 2 (14:52):
And also there's what I what has really helped me
is and I know that a lot of businesses do this,
especially and you get to larger agencies with multiple there's
a there's a floor for there's a minimum engagement that
if we own this engagement above that number, it's not
(15:13):
going to be profitable for us. We're gonna be worth
our while and sometimes that number is unspoken and sometimes
it's very clear. And so to me, that's the start
is take a take a look backwards facing at the engagements.
What are the what's the what did you charge all
in at the end, and how does that compare against
(15:34):
some agency floor that you need to set to know
whether or not it's worth your while to continue doing
those kinds of engingments.
Speaker 1 (15:41):
Yeah, that's a that's an incredible thing because we would
do that at my last agency and determine what services
are ones that we want to continue to invest in
and which ones we don't want to continue to invest in.
So things like maintenance obviously are always an hourly type
of thing. And I've seen even more and more companies
show up that are just maintenance companies, And I think
(16:04):
that makes a lot of sense because if your job
is to do a lot of building and maintaining is
just it's a different cadence, it's a different structure, it's
a different model in many cases for maintaining software or
advertising design sounds like that, or websites, and it makes
sense that you almost have to split the company into
(16:25):
two different groups in order to be able to do it.
When I was at a very very large agency. I
mean we literally did. We had special groups that were
just the maintenance groups, and projects would move over. They
would move away from the people they've worked with for
the last year or two on building the thing, and
they'd have to move over to that team because that
group was really good at building stuff. But that job,
(16:47):
their job is not to maintain it. So that's the
other piece that I found is that it's a cultural
problem in a lot of these places because they look
at they look at an hourly rate is something that's
easy to hold the client accountable too. But if I
fix it, I've got to hold my team accountable. Oh
(17:10):
to that if I'm not a good leader, if I'm
not good people manager. And I recently was working with
an agency on this and I'm like, why are we
always billing hourly? And then they couldn't really answer it
other than their clients wanted it that way. But then
as I dived in and I find out they didn't
have any dedicated project managers, and I could see very
(17:30):
clearly that expectations were not set appropriately at the beginning
of engagements. So it was way easier because there was
not a lot of gates at the beginning where you
have to get a little bit more to fix the cost,
and that they could just slide right in and move
into an hourly rate and they just build bill bilbil bill,
And so I find that culturally it's a stop gap
(17:53):
for some of these organizations as well as that's been
your experience as well. Absolutely, it gives.
Speaker 2 (17:58):
Them a chance like they don't really need to think
about what they're doing because until they're doing it right,
until they're doing it and then realized, oh my goodness,
we're over our heads and this is bigger and they're
more complicated, And what I think is worse there is
often you're missing what the impactful result is that your
(18:19):
client is going after. When you just blindly build, build build,
I think there's a lot of interesting opportunities and innovation
and just delight in saying, Okay, getting the team together
and saying we've got this opportunity with this client, here's
the result they're going for. What does a six week
(18:42):
engagement look like, What does a twelve week engagement look like?
What does a ninety day engagement look like? To get
to the same result and start to stretch and be
creative rather than just assuming that we can just send
a website down the assembly line.
Speaker 1 (18:58):
I think the more niche are, the easier it is
to do this as well, because back to your point
about if I've got more repeatable processes, I know a
woman that runs a fantastic web design company that all
they do is work with HVAC places. So they have
basically got a product that they can stand up for
people very quickly because it's it's not a lot different
(19:20):
than the others in terms of functionality, right, It's book
of time, get an appointment, pricing, frequently asked questions, all
that stuff, and they can turn these things out pretty
quickly and spend more time on the creative and the
messaging and the stuff to make them stand out versus
some fancy like mapping feature or different things like that,
(19:41):
and they can move them through the pipelin quicker and
they can fix these the cost of these things and
move them out. But as you and I both know,
there's a difference between building your lifestyle business and building
a business. Because I know so many creative people that
would look at that and turn up their knows and
be like, I want to create great things in the world, Garrett,
(20:04):
I want, I want to invent the next whichever. But
I feel like if you're in a transactional services base model,
like you've got to tamper your expectations a little bit
when it comes to building a profitable business. Because again,
like I know, lots of lifestyle agencies like they're they're
just a few people and they just build stuff and
(20:26):
that's it. They're fine, they don't they don't need any
more than that, and that's and that's great. I think
it's great.
Speaker 2 (20:32):
Yeah, And that is the vast majority of businesses in
the US. Sure, yeah, yeah, I've got a stats someplace
in one of my First Starters newsletter. I actually went
through the stats and it's something like eighty two percent
of all businesses in the US have fewer than eight employees.
Speaker 1 (20:50):
Yeah, fewer they make less than a million dollars a year. Yeah, yep, yep,
I've seeing that, Staffy. Now, do you want to get
above that? Do you have ambitions to be more pro
fitable or make something that is more substantial than that,
that might even be a saleable asset.
Speaker 2 (21:06):
We're gonna have to take a look at that. We've
got different approaches to that, right, and do a lot
of work with early stage founders as well, and many
of them go towards I'm gonna need to raise funding.
I'm like, maybe at some point, but you're gonna have
a lot easier time raising funding if you have a
business here that is profitable, that has demand, that has
(21:29):
predictable revenue, that you can draw a box around and
say this is the thing.
Speaker 1 (21:35):
It's like I bought some I bought some raw land
on the North Shore a while ago, and I realized
I can't get a mortgage because there's nothing on there
to mortgage. And yeah, so to your point, I want
you to give me money, but what am I actually
investing in if it's not something that already exists and
(21:56):
an improfitable idea. And I get it. You watch all
the tanks and all these different things, and yes, I
totally agree. You bet on the jockey, not on the horse, right, Like,
I think that's a smart move if you've got to
if there's a great team, then we'll figure something out.
But that means something's already been figured out to prove
that they are that good of a team, right, not
(22:17):
just an idea, Because ideas are cheap.
Speaker 2 (22:20):
These are cheap, and I mean, you've I'm sure, been
on projects with a very enthusiastic founder absolutely slightly bigger,
fatter wallet than they deserve it for this idea and
they decided to burn it.
Speaker 1 (22:34):
I got it in my head, I know exactly the one.
Speaker 2 (22:36):
Yeah, And they were like, you know what, we're gonna
burn it all. I'm building a product.
Speaker 1 (22:39):
That because we're gonna change the world, done customer development
on Yep, We're gonna change the world. But I haven't
talked to one single potential customer or buyer about this.
I had. I had a guy once this is great,
reached out wanted to build something, but wouldn't talk about
it over the phone because he was concerned that whatever,
NBA and all this stuff. But I was like, that's fine,
(23:01):
I'll sign an NDA or whatever, and and we came
and met with him, and he proceeded just to tell
us about an idea that already existed in the word.
It is pretty common actually, and we were like, haven't
you didn't you He's like, I didn't put it. I
didn't search Google because I didn't want them to steal
my idea. And I was like, okay, okay, I I
(23:23):
had a call, we should the best with the founder.
Speaker 2 (23:26):
Article, you stay with the founder who was similarly as
hesitant to talk. And then when I got into it,
I'm like, oh, the reason I was confused about who
you were is because you are now telling me the
same value proposition that's three people earlier this week did.
Speaker 1 (23:42):
Yeah, exactly, And you're solving a problem that's already been
solved and.
Speaker 2 (23:47):
You haven't done customer development. You when I say, hey,
do you have ten people that could be your buyers
right now? He said no. Like, Okay, let's take the
rest of this time and flush that out so you've
got some tangible direction to this idea, and then call
me back and we can talk about who you talk
to and how significant a problem they said they were having,
(24:09):
and then then we can start to get to is
it worth you actually pursuing this because you've got these
people who say they could use this kind of help,
and that kind of help is worth this to them. Yeah.
Speaker 1 (24:21):
And that's why I've encouraged people I've worked with in
agencies that I'm working with, I mean, read Clayton Christensen,
read jobs to be done, and have an understanding of
why people are buying your services. They are trying to
solve a business problem. They're not trying to buy a website.
They don't want to buy a website. That's the last
thing they want to play, but they have to because
it has to solve a business problem for them. And
(24:43):
if you speak, if you can speak to how you
solve those business problems, your value goes way up versus
your hourly rate. And once we had made that change
at my last agency of talking and leading with the
business problems we're going to solve and the impact that
doing this work is going to have with their businesses
and how we've seen it change other businesses, and then
(25:07):
and then led with that, and then tail end was
the actual execution part. Change the whole conversations. It changes
the profitability of the organization. Everything everything changed. So back
to my point about this cultural aspect to pricing, it's
so hard when you're not confident in your business or skills.
(25:28):
I mean, you feel confident, you feel like, oh, I
can knock out any logo anytime, no big deal. But
all of a sudden, you've got a person in a
business suit sitting across from you, questioning your value. And
a lot of people will shrink absolutely. I see that
so often in the creative world. A lot of my
work with founders is sometimes just helping them unblock the
(25:54):
internal confidence.
Speaker 2 (25:56):
And part of that unblocking is sitting or what I've
been calling customer rediscovery. I will talk to all your
previous customers to understand all of the amazing value that
you provided them that was unpriced you just naturally provided
that was outside of the scope of work. That which
(26:17):
is why they're repeating clients. But nobody says it's explicitly
this this or this like, oh, your responsiveness is so
amazing better than anybody we've.
Speaker 1 (26:26):
Worked for before.
Speaker 2 (26:27):
That's why we do business with you. They are right,
Are you speak more clearly or whatever that attribute is,
to like dust that off, to discover that, to show
that back to my clients and say, here are all
of the things that people are enjoying when they're engaged
(26:49):
with you. And you can dial that up or down
against price, but it's or you can unbundle it and say, oh,
only the special people we'll get that price, We'll get
that offering. And I now know that explicitly, yeah, that
is part of my value, and I can choose to
offer a journey.
Speaker 1 (27:08):
Mm hmm. Yeah, And that's that's what's key, is that
I'd love that idea of unbundling what those aspects that
might have been providing these these services without actually pricing
them correctly. And if you unbundle them a little bit,
you can start to see, oh, I am providing a
good amount of value here. And I think it goes
(27:29):
back to then the cultural aspect of no, no, actually,
we're a real business and things like that. I mean,
I remember being an agency street have it one hundred people.
It'd be like something would happen and be like, we're
like a real business, and yeah, like a real business.
We have one hundred We're like a little business. It's
like we have one hundred people.
Speaker 2 (27:48):
You're in fiction for all of us in this room right.
Speaker 1 (27:50):
Now, I know exactly. But go again. People assume that
people have it all figured out and everybody's just winging
it as we go. But what I found during the
pricing discussions was that it is a solid matter of confidence.
It's a it's a statement of confidence too. And I've
had so many clients where they're like, you're more expensive
(28:12):
than these guys are, and I was like, yep, and yep,
yes we are. I mean we are and and and
one reason I could point to is that in the
last seven years of business we haven't lost one single
client and and and so the people that pay for
our services get value out of our services, and that's it.
(28:35):
And so if but if I couldn't point back to
that stat and I was just like, yeah, again, if
you don't stand for something, you just stand for nothing.
And so many of these people don't stand for a
lot other than I want to make some money by
doing stuff. And I think that trickles into every little
(28:56):
aspect of the choices you make as a business owner,
or how you price things, how you manage employees, the
type of people you hire, the type of clients you attract.
Speaker 2 (29:05):
Yeah, And the more I dig into this, the more
it is clear to me that your pricing strategy is
your business strategy and it just flows from there. And
wherever you put yourself premium or commodity by the hour
or value or whatever, the rest of your business is
(29:25):
led by that. And if you're not continually revisiting all
of that, is this pricing strategy working. Is it getting
the kind of clients and engagements that we want? Is
our internal operations and delivery shaping up the way we want.
Sometimes just changing the pricing model can have these amazing
(29:49):
rippling effects that I have seen. It can create calm
where there was frazzledness, can create clarity where there was chaos,
and creating simplification there was complexity.
Speaker 1 (30:01):
Yeah, I think transparency plays into it too. I used
to say that in a salary negotiation, they always say
the first one that puts out a number loses, right.
But to me, in a scope or services, the first
one puts out a number wins. Is that the faster
I can give you an idea of what this might cost,
the sooner I stop wasting anybody's time. And what I
(30:23):
find interesting is that still so many agencies are so
scared of sharing potential costs for their services because what
if they're too expensive? And yeah, and it's yeah, what
if maybe And I can't tell you how many times
I've I've been coaching agency er. I'm like, that was
a bullet dodged, because they they would have they would
have been a terrible client over the long term.
Speaker 2 (30:46):
Yeah. The measure that I use is when the number
was state dead, did the prospect blink and still say yes.
And if they they said yes and didn't blink, you've
got a lot of head Yeah, you can get breaking it. Yeah,
if they said no, you're too high for them. And
you can decide whether or not you want to keep
(31:07):
going or not.
Speaker 1 (31:08):
You can decide whether or not I want to keep
pursuing it. And and what I also find funny too
is over the years is how agencies keep their rates secret,
especially from each other, right because there's a scarcity mindset
of if if if somebody knows what my rate is,
somebody else could just charge five dollars lesson win the business.
And my answer was always like, if they can do that,
(31:29):
good for them, because because I don't want to, I
don't I probably don't want to work with that client
that it chose shows them.
Speaker 2 (31:38):
That's what so many founders I talked to are going
after a problem space and saying we can compete on price,
and I said, good God, don't do that, no, because
while that might like the current offerings might seem more
than you want to pay or more than the customer
wants to pay right now, you will immediately find out
(31:59):
why that price exists. Once you go to market. There's
just some barrier that's not obvious to you that as
soon as you open your doors, you'd be like, oh,
and this is why prices are.
Speaker 1 (32:13):
Yeah, especially in regular industries and other things too. It's
so common. I mean, I can't tell you how many
in the course of my twenty five plus years of
doing agency work where I've had somebody show up with
something that's going to compete against the MLS for real estate.
But the real MLS is a monopoly and you can't.
I mean, it's just unless the government steps in, you
(32:35):
can't outwit and outsmart the MLS. It's just the way
it It's just the way it is. And there's certain
parts of areas where people thought we can, we can
outdo this stuff, right, So uber blit scaled taxis out
of existence, right, which was just a weird thing, and
(32:55):
airbnb blitz scaled with renting out rooms and things. And
then but then if you've seen it, try over and
over again with other things. They're like, oh, they worked
with cars, lets do with scooters and yeah, not that
great about business, yeah.
Speaker 2 (33:10):
Yeah, And I think the I think it's gonna be
interesting in the business history books to see if they
shake out how much. Those two entities are a result
of really, really, really cheap money. Yeah, And I think
part of the shift of the shift in my practice
(33:31):
over the pricing is a belief that the era of
cheap money is over, that comfortable, profitable, sustainable business models
is the future. And we've got to think we've got
a lot of work to get more businesses sustainable and
profitable and confident in the world where just doing another
(33:53):
raise is no longer an easy option.
Speaker 1 (33:56):
No, And if you're using utilizing outside services to build
those companies or other things, you can't just go the
cheapest route anymore because it's too risky for you. Whereas
before you could fudge it a bit, right, because we
have to build it twice, we still got time. Yeah,
(34:16):
but you know these days now you're not You're not
gonna get away with it. Plus, investors are much more
savvy these days than they used to be. Right back
in the dot com bubble and things like that, they
were like, oh, I hear this is good, so let's
let's invest in price. But we still see it again.
You have to I think number one, if you're if
(34:37):
you're a service provider, you're out there, you're doing agency
work and you're in you're pricing your things. You start
by talking to your clients, any potential clients. Are you
getting value for your money? And to your point, that's
super scary for lots of people to ask their clients
these things because what if I What if I get
answer I don't want to hear I.
Speaker 2 (34:58):
And that is the kind of work that I absolutely
love doing, is I will. I am happy to go
to your clients, your best clients, your worst clients, your
new clients, your old clients, and have that conversation with them,
whether or not you're in next to me. And to me,
it would be great if my client was next to
(35:19):
me in those conversations. But for them to do that
and be able to have get the value out of it,
they need to have a really strong relationship and be
really comfortable getting punched in the gutt a lot. And
so sometimes it's easier if I just do that alone
then come back to them, be the intermediary. But you
(35:40):
will always get new kinds of value, new kinds of insights,
new ways, new kinds of opportunities to shift the value
offering of that agency in that service.
Speaker 1 (35:51):
Yeah, and that's something I would do at a lot
of my agencies and pastes have an outside third party
come in to talk to the clients because they didn't
want to be honest with us in the first place,
and not not that they were trying to hide something necessarily,
but it's if you worked with the team for a year,
you don't want to say anything bad about the team.
What if it gets back to them and you like
(36:12):
that person and you saw pictures of their new dog
and stuff on slack and like, you don't want to
But if you bring a disinterested third party and have
them do the you're going to get a lot better
results and you'll get them a lot quicker as well.
So I think that's the key. I think that's a
key unlock for anybody listening to this episode is is yes,
(36:35):
survey or clients, ask them what they like and value,
But if you want the real story, bring somebody in
to help you with it. I think you're going to
find a lot more value with it.
Speaker 2 (36:46):
Absolutely, And you could just your your offerings could be
off just by ten degrees, yep, but that sometimes that's
a really tough ten degrees to shift because of all
the internal culture of things we talked about and the other.
I think the other value about the the disinterested third
party is any kinds of those those personality things so
(37:07):
often get dissolved into a larger pattern that is not
about the person but about communication, expect its and all
of those kinds of things. All are ye, all the
soft stuff that you can then go back and say, Okay,
this is actually the pattern it presents in these ways.
So when we see these things, we know what's gone sideways?
(37:30):
How do we how do we get it on the
right track and keep it on the right track.
Speaker 1 (37:33):
Yeah, And if you're getting pushed back and you're in
the delivery side of things, I've I've run into this
before where sales is like we own the customer, don't
don't talk to the customers, don't ask the about their
experiences and stuff. Make sure you're challenging them then when
you're going to talk to the customers, because we need
this data. We need this information to know how things
are performing, if they're performing at the right speed, if
(37:54):
we're providing value, and if that cost is effective. Right,
we can't just go with ane yep, I'm good, or
we need and I think this.
Speaker 2 (38:06):
Is where this is where a good pricing strategy comes in.
And also one of the innovations on the SaaS side
of the house that I think also helps this is
the introduction and the notion of a customer success manager
or lead, someone whose job it is to ensure that
the customer is maximizing their usage of the service of
(38:28):
the software in a way that is valuable and in
maybe in the agency world, this is like an account
exec or something like that. Sure, the idea is there's
somebody in addition to the salesperson who is looking at
that relationships or a different lens, and therefore it becomes
less about an individual and more about a cross functional
(38:48):
view of that relationship and the direction the win wind
direction needs to be moved against the pricing strategy.
Speaker 1 (38:56):
I think it's super smart and I've implemented that's in
success before and I'll tell you, and this is the
same advice I give a lot of the agencies I'm coaching.
The one interesting thing you'll find when you start implementing that,
whether it's a dedicated role or somebody in the business
takes on that title for part time of maybe they're
(39:16):
an HR person and they're spreading out they want some
more opportunities in the company on the profitability side. Maybe
it's other overhead you have and you want to get
them to engage with the customers more. Wherever this comes from,
you will find that your customers do not know the
full extent of what you offer. And it will blow
your mind how little they know about what your business offers.
(39:41):
And it's such an opportunity to re educate them on
that you provide these additional services because they I guarantee
you eighty percent of the people I talk to you
if I ask them, do you know that this customer
also does these things, They're like, oh, I had no idea.
Speaker 2 (40:00):
Because they they engaged to make progress on a specific job,
going back to jobs Benign, Clayton, christianson and they're making
progress on that and they're good with that.
Speaker 1 (40:11):
Yep. Yeah, And they don't look at you any in
any other way. They don't. I always use the Tires
Plus example, right, I go to Tires Plus and to
get tires. But even though there's a sign up front
that says like we do breaks and stuff, I wouldn't.
I wouldn't. Tires Plus would not be the first place
I would think of when it comes to two breaks.
(40:33):
No matter how much they're advertising. Yeah to me, but
if they had somebody, a representative, and they had a
program that was there to educate their customers on the
full breadth of what they they did, it's great. But right,
a lot of places don't put that kind of effort.
Speaker 2 (40:50):
In and where where do we And then it becomes
a roll out strategy or marketing strategy about where do
we put that communication, how do we do that bundle
in and what's the hit we want to we're comfortable
taking to get that word out. A becomes delightful conversations
that I could keep going on. Yes, let's have a
cool example.
Speaker 1 (41:10):
I know, and we have to stop here, but with this,
so we'll just call this part one Grek and well
we'll come back and continue our conversation. I'm excited. Is
here if people's opinions. If you've got opinions, make sure
you share them in comments, shoot me a message. Make
sure you connect with Grek. He's very active on LinkedIn.
He's posts some great stuff over there. If I want
to find out more about working with you or follow
(41:31):
and listen to your ideas, Gerrek, whe where can I
get multi info?
Speaker 2 (41:35):
LinkedIn is good? I have a substack called for starters,
all the things that early stage founders put off until
it's too late. We talked about pricing on there, we
talked about value propos should we talk about customer research?
All the things founders put off until it's too late.
And also through consulting dot com you can learn more
about my pricing practice.
Speaker 1 (41:53):
That's awesome and I will have links in the discription
below for everybody if you want to check it out.
I highly recommend it. Grek has been an icon in
the at least around my town for a long time.
In the agency business, though, you're going to learn a
lot if you follow them, so Eric, thank you for
taking the time out of your busy schedule and joining me.
I appreciate it.
Speaker 2 (42:13):
So in my pleasure. Kurt, thanks so much. All right,
talk soon.
Speaker 1 (42:16):
Thanks for tuning in to another episode. If today's conversation
resonated with you, it would be greatly appreciated if you
could take a moment to leave a review on iTunes
or Spotify reviews, help others find the show and make
a big difference for those serious about leveling up their business.
My coaching services at Schmidt Consulting doc Group. Maybe what
(42:37):
you're looking for, have someone in mind who'd make a
great guest. I would love to hear about them. Thanks
so much for listening. It truly means everything. Until next time,
take care and keep moving forward.
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