Think Beyond the Retainer
Before any agency engages in a client relationship they must first discover how much to charge the client. Every agency handles this differently, of course. From throwing a dart at the board, to setting hourly rates and predicting how many hours you'll spend each month on the client to charging a percentage of their overall spends, there's no wrong way to develop your pricing. (Actually, that's a lie. I could spend hours discussing why percentage of spend is the worst way ever to determine pricing. And, there's my next blog post.)
I have always been a big fan of the retainer. Determine your hourly worth, predict the hours you'll be spending on the client each month, discount for an annual contract and get on your way. Easy, right? Well, no.
See, while to you it might be easy, when you have other people in charge of the bottom line there will come a point when they'll want to know just how many hours you're actually spending each month on that client. This will help determine whether that client is profitable or not. This is the point where things get sticky.
Let's do some simple math and hypotheticals to get this going. Your rate is a flat $100/hr across the board. Your client is looking for strategy, SEO, paid media and content development. For strategy, performing researching, creating the goals, developing the strategy, maintaining the strategy and developing new initiatives will take 5 hours a month, or $500/month. For SEO, you have the initial audit, citation building, site health checks, collaborating with social, technical site maintenance, keyword strategy, auditing new copy, etc. Quite a bit each month, so let's assume 20 hours a month, or $2,000/month. Paid media includes the build, ongoing research and optimizations, so let's assume 15 hours a month for $1,500. Then for content development, we'll do 2 hours of research, 2 hours of creation and an hour for editing for 5 hours per content piece, do 3 a month for 15 hours, or $1,500/month. Total that up to $4,500. Now, consider internal and client meetings and reporting, emergencies (plan for this, heed the warning) for 10 hours (because you have all team members on your calls) and we can finish pricing at $5,500/month and 60 hours.
You should know this when you're engaging with a client. But, here's where most agencies and consultants get lost: what do you do when you've reached 60 hours by mid-month and the client needs more attention? Do you tell them you're sorry, wait till next month? Well, yeah, some do. Managing this correctly is the difference between a good agency and an agency responsible for bringing me my next client.
Honestly, I should just start paying commission to some of these agencies who are so poor at managing time and clients. Your number 1 goal is to make the client happy. The level of service you provide your clients should be white glove. Does this mean letting them walk all over you? No, but it means that you should make sure that the ability to increase prices each year is a part of your contract. Track hours and know whether or not a client is profitable, but don't let this rule your business.
Don't prevent yourself from maintaining strong client relations due to going over a few hours each month. Maintain a level of excellence and your clients will recognize this. There's no real way to accurately predict how many hours you'll spend on a client in December, when you're creating the proposal in May.