The Margin Question

A founder I work with sat me down over coffee at the end of last year and asked me a straightforward question. His agency had become about 35 per cent faster at delivering its core services since adopting AI. Should he lower the prices?

He was getting pressure from two clients who'd worked out, roughly, that the work was taking less time. They knew the hourly rate and they could do the maths. He was worried that if he didn't adjust, he'd look like he was overcharging.

I asked what the clients thought of the work itself. He said they were happy, probably happier than before. Speed had improved, but so had the depth. More research, more iterations, faster turnaround on revisions. The quality bar had genuinely moved up.

So I asked why he was thinking about lowering prices for better work delivered faster. He went quiet for a bit.

Agencies have been trained by years of time-based billing to equate value with hours. When the hours drop, it feels dishonest to charge the same amount. But the client isn't buying hours. The client is buying the outcome, and the outcome has improved.

He didn't lower the prices. He restructured the pricing conversation around deliverables and outcomes, and he was transparent about using AI in the process. Two of the three clients accepted the new framing without much pushback. The third left, and was replaced within two months by a client willing to pay for the value.

His margins went from 22 per cent to about 34 per cent. Not because he charged more, but because he stopped apologising for being efficient.