There are lots of options out there for service pricing models. Some are aligned by industry, some by presumed level of “professionalism.” For example, lawyers charge a retainer and then an hourly rate. Doctors charge an hourly rate. Major consulting teams charge by project. Despite some of these standards, there’s still no right answer in the service space. In our blog this month, I’ll walk through my pricing models by service, and the “why” behind each.
MRR
MRR stands for “monthly recurring revenue.” This pricing model is my go-to for regular services, which are some of my favorite tasks on my broad list of what I can do for your business. This includes digital data analysis and ad management in Meta (Facebook and Instagram) and/or Google and/or Bing and/or LinkedIn. (Yes, there are other platforms, but they are not often requested.) It also includes email marketing and SMS. Contracts in these spaces are typically a one-year commitment, and I always suggest that small businesses amortize any project work along with this monthly invoice, as to not have to realize a bigger hit one month for a bulk of the work performed. This model can also include strategy sessions for a fixed amount of time, though those can also be one-offs that are billed as project work.
Project Work
Project work is typically a lump sum payment for professional services. Often part of the bill is due at start and the remainder is due once the work is completed, especially in the case of larger products or “enterprise” work. Out of consideration for the client, I try not to structure mine this way. Many of the projects I complete have fixed pricing based on industry standards, but I offer an amortized option to smaller businesses so they can get vital work completed without drastic changes in their expenses from month to month. Project work for me includes any and all tag installations: Meta Pixel, Google Analytics, Conversions, Google Tag Manager, Bing Pixel, LinkedIn Conversions, and heatmaps. This pricing structure also includes account setup of Google Ads, Analytics, Bing Ads, blogging, SEO, and similar services. Lastly, it includes some of the more miscellaneous one-off work, like individual strategy sessions, coaching, competitive analysis, site improvements, and website audits.
Hourly
Many industries do their work strictly on an hourly basis. I do not. Please don’t ask, thanks! Not pricing this way does save me some time and a few headaches, but it is ultimately in the best interests of your business.
Why don’t I do hourly work? Well first off, it’s impossible to accurately quote for an initial estimate, because I don’t do “cookie cutter,” due to treating every project as uniquely as it truly is, and my desire to optimize your business to its full potential. There’s also not a whole lot of control over scope creep when working hourly, which screws my calendar up quite a bit. How does this impact you? Well, you think you’re getting work done in a certain timeframe, and then when the scope is added to, you’re not happy when it takes twice as long and costs twice as much.
Yes, I could argue that hourly doesn’t make sense because when I’m good at something, I get paid less for it. I suppose that’s true, and it is unfair. But really, you get a lower hourly rate when you DON’T have someone bill by the hour.
Performance
This one is uncommon, but not unappreciated. Performance pricing is essentially this: rather than charging for the monthly service, I charge by the deliverable. This only works for certain services, and even then it is extremely rare… I have only done this twice ever! With advertising, for example, I would charge based on the deliverable of a lead or of revenue to your business. I only get paid when you get your conversion action, is ultimately how it works. With this model, I am hedging my bet. Obviously, I have no problem doing this and will put my money where my mouth is. The client, on the other hand, sees this as a win-win. If it doesn’t perform super well, they pay less and still get the service. If it performs super well, they pay me extra and are thrilled with the results. Insight: I always end up getting paid more. That’s okay though, because performance is what my business is all about. There’s also the hybrid option of a lower service charge (MRR) and a bit of this as well.
The Field
There are lots of more creative ways to pay. I’ve had startups pay me in product equal to a portion of my salary, as to offset costs and they got up and running. I’ve had an exchange of services. I’ve even had companies leverage other companies that owe them a favor to pay me off instead. I love being flexible and admire the creativity. Nothing is off the table, really.
Conclusion
There are all sorts of payment models for services, and many hybrids of the few listed above. Outside of medical and law, there’s not really a payment model that makes more sense than any other. I tend to have my standards by the service I offer, rather than an “across the board” system for my labor. While I’ve listed the more common options for my offerings (based on personal experience), there’s a lot more out there. I encourage you to look at all of your options, and even present something unique to me. I get a real kick out of some of the unique ways we might be able to work together.