Points of Interest

0:00 – 0:14 – Introduction to Pricing Framework: Marcel introduces a universal pricing formula that applies across all billing models, setting the stage for simplifying agency profitability assessments.
0:54 – 1:38 – Solo Episode Overview: Marcel explains that the episode will draw from his All Agency Summit presentation, covering how to price profitably and choose optimal pricing models.
1:50 – 3:08 – The Best Pricing Model: Marcel emphasizes that the "best" pricing model is the one that consistently delivers the best margin, not a specific method like value-based or hourly billing.
5:22 – 6:59 – Differentiating Pricing and Scoping: He defines pricing as determining what the client will pay and scoping as calculating what the service will cost the agency, advocating for separating the two.
8:00 – 10:03 – Introduction to Delivery Margin: Marcel presents delivery margin as the cornerstone metric for agency profitability, explaining how to calculate it using agency gross income and delivery costs.
11:02 – 12:34 – Setting Delivery Margin Targets: He recommends targeting a minimum 70% delivery margin to achieve healthy profitability after accounting for overhead and utilization inefficiencies.
13:15 – 15:14 – Finding the Minimum Price: Marcel shares a formula to calculate minimum pricing: dividing delivery cost by (1 - margin target) and adding any pass-through expenses.
16:39 – 17:16 – Introducing the Pricing Model Quadrant: The two vectors—client-perceived value and delivery risk—are introduced as key factors for determining the appropriate pricing model.
17:49 – 19:17 – Understanding Value in Positioning: Marcel explains how niche positioning increases perceived value, affecting the pricing strategy and client comparisons.
20:08 – 22:02 – Accounting for Delivery Risk: He discusses how accurately agencies can predict project costs and why risk significantly impacts pricing model selection.
23:00 – 24:55 – Matching Pricing Models to Risk and Value: Marcel outlines when to use models like time-and-materials, abstracted time billing, flat fees, or value-based pricing depending on project risk and value.

Show Notes

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Pricing & Scoping for Agencies, With Marcel Petitpas

The Agency Profit Podcast