The Pricing Problem
Was reviewing an agency's financials a while back and noticed the day rates hadn't moved in six years. Not adjusted for inflation. Not adjusted for the fact that they'd hired substantially better people and were doing considerably more complex work than they had been. Same rates as 2020.
I asked why. They didn't want to lose clients.
Which is understandable. But they had a longer waiting list than they'd had in years. They were turning work away. The market was telling them something they weren't listening to.
But! Their clients were still increasing their prices by RPI. So six years of fixed prices by the agency meant the agency was delivering extra profit to the client – not by doing great work, but by reducing their rates by RPI every single year, while the client increased theirs by RPI every single year.
The agencies with the strongest margins I work with raise prices consistently — usually once a year. Not aggressively, but without apologising. And they lose fewer clients over it than they expect to. Clients who've been with you for years rarely leave over a 10% increase if the work is good. The ones who do tend to be the most price-sensitive relationships, and losing them often improves the overall margin.
The subtler effect is what happens to the kind of work you attract. When you raise prices, the conversation changes. Clients start buying expertise rather than capacity. The briefs get more interesting. The team is more motivated. That dynamic tends to start with the pricing.