A lot of service based businesses get stuck trading time/effort for money.
There’s nothing wrong with this, as it’s usually the easiest way to quantify the cost of your services.
However, this time for money model is challenging to scale, as you can only grow through hiring more people.
This article will present you with a simple alternative – a systematic approach to increasing your prices WITHOUT adding more services, more people or more time.
To get the most insights, you have to watch the video. This blog post is simply a high level summary, there’s tons of additional nuggets in the video!
- 00:47 – understanding INFO vs LABOR
- 04:35 – breaking down the 4 traditional service offers
- 09:47 – plotting real agency offers on the matrix
The offer impact matrix
Broadly speaking, there’s 2 main ingredients that go into a service:
- Information – the amount of expertise required to deliver desired results.
- Labor – the amount of time required to deliver desired results.
- Those seeking an information offer (i.e. a training product) have more time than money
- Those seeking an DFY offer (i.e. an agency) have more money than time
The matrix below will help you understand where different offers land, based on these 2 ingredients.
The bottom right hand corner is where offers go to die -> low information, high labor. A good example of this would be something like a lawn mowing service. It doesn’t require a ton of expertise, yet a ton of effort in order to deliver. Because of this, the market sets a low price point for a service like this.
On the flip side of the chart -> high information, low effort, would be getting paid $100,000 for a consulting call. This can only be achieved when you hold information about how to solve a very painful, expensive problem.
Breaking down traditional agency offers
- Freelancer -> low information, high labor. This is where most of us start, selling our services to whoever will pay for them. We quickly realize this model isn’t scalable, as it requires you to continuously pile on more work in order to grow.
- Training Program -> moderate information, low labor. A great way to transition out of trading time for money is to trade information for money, via a training product. The main challenge with training programs is their low cap (this can be solved by moving to a consulting or coaching model).
- DFY agency -> high information, high labor. This is where most people end up, creating a done-for-you service to handle the problem for clients. This model has a ton of friction scaling, as it requires you to grow through people.
- Consulting -> high information, low labor. The only way to make this model work is if you have intimate experience and information on solving a very painful problem for clients. I usually push DFY agencies to explore a consulting based model, where they’re solving the same problem, with far less effort.
Plotting service offers on the matrix
- Offer = SEO for dentists -> moderately high info, moderately high labor. This offer is a good example of why we don’t work with small businesses. Not only does it require high info and labor, but the cap on what the client is willing to pay is low. The only way to make this offer work is with a highly productized service offering, that can be executed at a very low cost to your business.
- Offer = SEO for attorneys -> high info, moderately high labor. A perfect example of how switching your position will allow you to raise your pricing. 5 leads to an attorney could be worth $5m. 5 leads to a dentist could be worth $500. By understanding the value of your services, you can charge a lot more for your work (hence why the cap on SEO for attorneys is so much higher than that for dentists).
- Offer = Leads for agencies -> moderately high info, low labor. When you understand your client, you can get creative with your offer. In this case, we know agencies need to bring lead generation in house (it’s stupid to hire an agency to do this). So this offer taps into your knowledge about lead generation and partners with agencies on a consultative basis to teach, coach and learn this internally.
- SEO for B2B companies -> high info, moderately low labor. This is our agency’s current offer…Just watch the video (18:30), I talk about how we moved from a DFY service to a consulting service.
Here at The Blueprint Training, we partner 1 on 1 with agencies to work through complex business problems like offer design, positioning and lead generation. Our growth specialists are standing by to have a free consultation about your agency and show you how our growth framework can help you grow.