How to raise your prices

You may be closing too many deals.

That sounds like a weird thing for an agency consultant to say. Bear with me.

I had a client come to me recently who was closing at over 60%.

Sixty percent of every proposal they put out came back signed. And they were proud of it, obviously I understand why - that's a number most agency owners would kill for.

But it was unfortunately the core of their profitability problem.

If you're closing way more than 30% of your proposals, the market is telling you that you're charging too low. People are saying yes too easily. There's no friction, no one's pushing back on price and no one's saying "let me think about it." They're just signing, which means you haven't found the ceiling yet.

This is why I created what I call the 30/30 rule.

There are so many factors - what your competitors charge, your sales process, your target market's ability to pay, your brand, how good your case studies are, how rare or unique your service is. I could go on forever. The 30/30 rule cuts through all of it and gives you two numbers to check.

Number one: can you deliver your service for 30% or less of total direct cost? Direct cost meaning all the people involved and the tools required to deliver the work. If your delivery cost is 30%, your delivery margin is 70%. That's the target.

Number two: is your close rate at or around 30%? The sweet spot is somewhere between 28% and 35%. High enough that your pipeline converts consistently. Low enough that the market is telling you the price is right at the edge of what buyers will pay.

How to use these two numbers together:

If your close rate is above 30% - and especially if it's at 40%, 50%, 60% or higher - you raise your prices. Full stop. It doesn't matter what your cost structure looks like. The market is telling you it can support more. You increase price on new clients until the close rate drops back into that 28-35% range.

This client I mentioned? We took them from $125 an hour to $150, then $175, then $200. At $200 per hour, they're still closing above 50%. Which means we could probably go even higher. For them, the difference between $125 and $200 an hour - applied across their entire client base as they gradually transition older clients to new pricing - is the difference between 5-10% profit and 35-40% profit.

If your close rate is below 30% and your delivery cost is under 30% - this is rare, but it happens. You're efficient at delivery but you're priced too high for what the market will bear right now. The fix is straightforward: lower your price until your delivery cost hits 30-35%. This alone might push your close rate back above 30% because you've become genuinely competitive.

If your close rate is below 30% and your delivery cost is above 30% - this is the hard one, and it's where most agencies that are struggling sit. You can't close enough deals to grow, and the ones you do close aren't profitable enough to sustain you. You're caught in a squeeze.

The fix here is proof.

You need to be able to demonstrate the value of what you deliver so convincingly that people will pay what you need to charge. And the way you build that proof is through internal case studies - not the marketing version you put on your website, but a deeper version where you reverse engineer exactly how you got the results for your best clients. What did you do, what did the client already have going for them that contributed to the outcome and what variables were in your control versus theirs.

When you build these internally first, two things happen. One, your delivery team learns how to replicate the result because they now understand every variable that contributed to it, not just the ones they were directly responsible for. Two, your sales team can speak to the full value equation in a way that positions you as a strategic partner instead of a vendor. They can walk a prospect through exactly what it takes to get great results - both what you'll do and what the client needs to bring to the table - and that creates a qualification process that naturally increases both close rate and client quality.

The 30/30 rule matters so much at the macro level.

If your delivery cost is above 30%, you don't have room to scale. Period. Because at full scale, an agency's cost structure looks roughly like this: 30% direct delivery, 15% non-billable staff and management, 20-25% SG&A. That leaves 30%+ profit. But if your delivery cost is sitting at 45% or 50% right now, the moment you start adding the management layers and operational infrastructure that growth requires, your margin disappears. There's nowhere for it to go. This is why so many agencies between $1M and $3M feel like they're working harder than ever and making less than they used to. Revenue went up. So did costs. And the pricing never got fixed.

Run your two numbers this week. It takes about twenty minutes. Look at your close rate over the last six months and calculate your direct delivery cost as a percentage of revenue. If either number is off, you now know exactly what to do about it.

If you want help figuring out what your 30/30 looks like - or if you run the numbers and don't love what you see - book a call here.

Nick