The Digital Service Pricing Guide

Productive Profits Spark is a free newsletter created to help digital consultants reach their impact and revenue goals. In each Spark post, I’ll share frameworks from my own growth playbook that’s helped startups ranging in size from $800k to $50M+ grow.

I’ll also be sharing with you personal insights to help you expand your impact and contribution to society through your work, all through a holistic approach to humanity. 

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You could just double your pricing and be done with it, however, that’s just as good as throwing darts in the dark. Doing so won’t give you the certainty you need to ensure you’re growing your team profitably and that you’re serving your clients at the highest level possible. 

In this Spark, we are going to go deep on designing profitable Task Units, identifying your real market promise, understanding why your client truly buys from you with Perception Mapping, and positioning yourself to win with Product Value Mapping. These strategies have helped teams I’ve consulted be able to create greater profit margins, stronger offerings, and a better overall client experience. 

Even if you are a solo Digital Consultant the following strategies will prepare you for when you are ready to fly with a team and also on your next discovery call 😉  

Let’s dive in. 

For starters, we need to have the “aha” moment. 

You’re most likely undercharging for your digital services

And if you ever want to get out of spinning the wheel of your business by yourself and grow a thriving team, you’ll need to design profitable Task Units. 

Designing Profitable Task Units

Most Digital Consultants know they are not charging enough for their services but struggle to answer “how much should I be charging?”. 

Let’s solve that now. 

Take out a sheet of paper or a spreadsheet and list our your monthly company’s overhead costs. 

That includes your operations, vendors, salaries of staff/contractors that support all clients (i.e. accounting, operations manager, graphics, copywriting, etc), office space, tools, software, and so on. 

I also would include your base salary as part of the overhead expenses depending on how you like to pay yourself. Some business owners want to have owners pay as part of expenses while others only want to take owners’ pay from the profit that is leftover or do a combo of base salary plus owners pay from profit.

Next, isolate the salaries for team members that work directly with and only with a specific set of clients. This will become your Task Unit. 

Divide their salary by 12 to get a monthly cost. 

For example, you may have: 

  • A client director 

  • A client account manager 

  • A client support specialist

Next list how many clients you have and your average revenue per client per month. 

After getting this information, you will have the following: 

  1. Total number of clients

  2. Average Revenue per client per month 

  3. The total cost of your company’s overhead as defined above 

  4. The total cost of your Task Unit to deliver services to your clients 

I know this is boring work but trust me, once we have this dialed in, you’ll literally be able to design what profit margin you want with your digital services, budget in the salary you want for yourself, and build a team profitably. 

Now simply multiply the total number of clients your Task Unit is managing by the total average revenue per month per client. This is how much revenue your Task Unit manages for your company. 

Finally: 

Add up the total monthly company overhead costs + the total Task Unit monthly cost for a Monthly Task Unit Cost. 

And voila, simply calculate your Task Unit’s ROI (Task Unit Revenue – Task Unit Cost / Task Unit Cost)

NOTE: If you have a larger team with more than 1 Task Unit you will have to divide the total overhead cost by the number of total Task Units to attribute company overhead evenly across your Task Units. 

Here’s an example sheet that clients go through:  

You should now have an overview of your Digital Services profit margin and you will either be ecstatic at your margins or have wide eyes looking at how low the profit truly is. 

If you are unhappy with your profit margins here are the key variables you control:

  1. Your average revenue per client (controlled by your pricing)

  2. Total numbers of clients (controlled by your marketing and sales) 

  3. Your labor efficiency (controlled by your ability to hire, operations, team structure design, and training) 

  4. Your overhead costs (controlled again by your operations) 

Use this exercise to model what pricing options make the most sense to reach the profit margins you’d like to see in your Digital Firm (and don’t forget to add the salary you want into the overhead). 

If you ended up raising your prices, you’re not alone. This is the first step most founders make when we go through this exercise. 

With higher prices come greater responsibilities. We will next cover how to position your offering in a way that can demand your new prices and possibly even higher… 

Identifying Your REAL Promise To The Marketplace 

“What do you do?” – probably one of the most annoying questions you get asked during cocktail hour. (Don’t worry, we aren’t going to go over how to pitch yourself.)

We will, however, be going over how to identify the REAL transformation you provide to your ideal client. 

This simple exercise alone has helped clients increase their pricing up to 3x and attract clients who love working with them. 

The core to this exercise is answering the Transformation Question

What specific, high-leverage, problem do you solve for your clients, and what changes in their world when this problem is solved?

This is how you get accountants from saying “oh I just do accounting” to “I help my clients become better husbands by saving them $X so they can take more vacations with their family”. 

This is just one example. 

To run with the example, you may do accounting but your ideal clients may not be men, may not be married, and may not even care to take more vacations. 

The question then becomes: who are my ideal clients and what do they truly care about?

Here is a simple starter research list that I recommend you get answers to (and yes these are the exact points of research that I’ve used). 

  • What is my ideal client’s annual business revenue? (If you are B2C, replace “revenue” with income) 

  • What is the unique problem I help them solve? Why does this matter? Refine your answer by asking “so what?” or “who cares?

  • How much is this problem costing them? (If you help your ideal client earn more business then answer: how much is a new client worth to them?) 

  • What are their true deep desires? 

    • What are their driving core world views?

    • What core values matter most to them?

    • Where and with whom do they spend most of their free time?

By taking the time, doing this research, and answering these questions and the Transformation Question you will know what real transformation you provide and whom it’s best suited for. 

NOTE: This is an iterative process meaning you will refine this over time. 

You don’t need to have it perfectly nailed on day 1. Odds are you won’t have it perfectly down. However, by talking to more ideal clients, understanding who they are, refining your delivery process, and measuring your impact (and client satisfaction) you will refine your core promise to the marketplace… 

…AND you will be able to contrast your pricing to the true value of the impact you deliver.

Now I would recommend you name your unique methodology to help your clients create their transformation. 

This step is important because it will allow you to own the transformation mechanism your clients use to get the results they want. And you will move from a place of selling services to selling transformation

Clients don’t buy services, they buy results. 

But a name alone won’t trigger your clients to buy an expensive service. You have to map your offering’s value and impact on clients. 

The first step to do that is for you to see value the way your clients see value… 

Mapping Your Client’s Perception of Your Service’s Value 

This is going to be a fun exercise. 

You know how I said that client’s buy results? Well, it’s true but I left out the core premise involved in every human purchasing decision:

emotion.  

In this exercise, we are going to identify the core emotions your ideal clients desire from your transformation and match that with the services you provide to meet those emotional demands (and make more sales). 

NOTE: You only need empathy and at least 21 conversations with your ideal clients to do this exercise correctly. That being said, remember: you can refine this as you talk to more and more ideal clients. 

Shoutout to Seth Godin for inspiring this exercise! 

Take out a sheet of paper and make a big “t” – dividing the paper into 4 quadrants. 

On the X-axis write down 1 core feeling your ideal clients desire with the transformation you help them achieve. 

On the Y-axis write down a second core feeling. 

Next, plot out your service offerings on the map and see where they fall in the scale of the two feelings you’ve written down. 

Which offerings get your clients to experience these two feelings the fastest? This is where your core offer should be (ideally). What can you do differently to deliver at this level?

Let me share my personal Perception Map with you. 

For my ideal clients, the X-axis is “performance” and on the Y-axis is “safety & reliability”. On my map, the very top right is a Sprint Program that delivers “Safety & Performance” in a very quick timeframe (hence the name “Sprint”). 

In contrast, to the left of the Y-axis and sitting right on the X-axis, I have this Spark Newsletter. It delivers but not as quickly as the Sprint. 

You can see the wide spectrum of how far you can go with your offerings. Are you surprised by where your core services ended up? 

Take a moment to chew on this exercise: 

  • Identify how your services stack up in the eyes of your ideal clients

  • Identify (and maybe be surprised) that your competitors may not actually be competing with you for the same clients since they go after different feelings (giving you a competitive advantage),  

  • Identify your real competitors

  • What words you should consider adopting (and removing) in your company vocabulary to drive these core feelings home with your ideal clients 

  • On the next exercise to map your Product Value Matrix and be able to deliver these core feelings at scale

BONUS TIP: Take a look at other brands that deliver the same feelings to the marketplace. They don’t necessarily need to be competitors. The purpose of the bonus tip is for you to identify how other brands delivering your core feelings put themselves out there. What colors do they use? What scenery? Take inspiration, don’t copy. 

Mapping Your Product Value Matrix & Setting the Foundation To Deliver At Scale 

In the last exercise, you understood where your core service stood in your ideal client’s perception based on the 2 core feelings your ideal clients are buying in form of a transformation. 

In this exercise, we are going to take your core services in order from lowest to highest delivery of these 2 core feelings and match your pricing accordingly in a Product Value Matrix.

Take out that sheet of paper, again! 

Draw a big “H” and divide the paper into 3 columns.

These 3 columns will be 3 different versions of your core services, based on the lowest to higher on your Perception Map, with: 

  • Different deliverables

  • Different timeframes to achieve your ideal client’s desired result

  • Different pricing (hint one of these is your new higher price) 

Even though these 3 versions of your core offer differ, they all drive your ideal clients closer to their ideal transformation. They just have different options on how to get there. And you are going to be providing them with such options. 

This is the first step to productizing your services

As a savvy Digital Consultant, you want to make sure that with every option you provide your clients, that you have a streamlined onboarding and delivery process to deliver the key outcomes for each of your offering options. 

Doing so will make it much easier to scale delivery as you grow your team profitably thanks to the Task Unit design exercise you did earlier. 

Winning Clients Want To Work With The Best 

Raising your prices does not only help you take care of the foundation of your business and team, it also allows you to be conscious about the types of clients you aim to attract and serve. 

The fascinating psychology of the best clients is that they are not afraid to spend top dollar to get the best experience they can to create the transformation they want. This is why if you create an incredible transformation for clients but price too low, the best clients will question your service’s quality. 

With this new awareness of what you are capable of doing and achieving in your business, it is now your responsibility to do everything in your power to create the best experience for your clients and craft the best offerings that deliver for your clients, at a fair price that takes care of both you and your team. 

It’s an honor to be a small part of your journey. 

Do Good Work, 

Raul


Know a Digital Consultant that needs to read this? Consider sharing this Spark with them. You may be the catalyst that opened them up to a new way of operating their business. #dogoodwork

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