Embracing Value-Based Pricing for Small Business Week and Beyond
May 2, 2023
During Small Business Week, we want to address a challenge many small businesses face when working with agencies: hourly rates. According to Forbes, agencies should use value-based pricing rather than the status quo of hourly rates. At Keenability, we've already made the switch and want to discuss the benefits of the value-based pricing model for small businesses. Focusing on value provided instead of hours accrued can help create a successful and sustainable partnership between your business and ours.
Why Agencies Need to Move Away from Hourly Rates
Aligning Interests: When agencies charge by the hour, it can cause a conflict of interest with small businesses. The client may think the agency is purposely taking longer to increase their payment, while the agency may feel rushed to complete the work and compromise its quality. Value-based pricing eliminates this issue by focusing on achieving the desired results rather than the hours worked, fostering a more cooperative relationship between both parties.
Transparency: Small businesses can become confused and frustrated when it comes to billing with hourly rates. This is often due to unclear scopes of work and undefined timelines, which can lead to unexpected costs. However, a value-based pricing model provides transparency as the client knows precisely what they are paying for and what results to expect. At Keenability, we prefer to operate with our cards out on the table. The only thing we will ever surprise our clients with is how easy we are to work with.
Encouraging Efficiency: Charging hourly rates can hinder efficiency because it doesn't encourage agencies to streamline their processes. Adopting a value-based pricing approach motivates agencies to find more effective ways to deliver results that benefit their small business clients and themselves.
Focusing on Results: When using an hourly rate model, the focus is on the amount of time spent on the project rather than the quality of the work produced. On the other hand, value-based pricing prioritizes achieving desirable results. This approach is particularly beneficial for small businesses, as it helps them evaluate their investment returns and guarantees that the agency's work aligns with their objectives.
Celebrating Small Business Week: The Value-Based Pricing Advantage
Small Business Week is a chance to acknowledge the creativity, perseverance, and development of small businesses throughout the nation. Implementing value-based pricing can help small businesses efficiently handle their finances, establish better connections with agencies, and concentrate on achieving tangible outcomes.
Here are some ways small businesses can leverage value-based pricing during Small Business Week and beyond:
Reevaluate Your Agency Relationships: Small Business Week is an excellent time to assess your current agency partnerships. Are they delivering the value you need to grow your business? Do you have a firm grasp on what you are receiving from the hourly rates you are paying to agencies? Consider exploring value-based pricing models with your existing or potential agency partners.
Communicate Your Goals: Clearly articulate your business goals and objectives with your agency partners. Doing so ensures that the value-based pricing model aligns with your desired outcomes and that both parties work towards a common goal.
Measure Your Success: Value-based pricing relies on measurable results. Establish key performance indicators (KPIs) with your agency partners to track the success of your campaigns and projects, ensuring that you are receiving the value you expect.
During Small Business Week, we should consider adopting new working models that promote collaboration, efficiency, and success. By transitioning from hourly rates to value-based pricing models, small businesses and agencies can build stronger and more sustainable partnerships. This can lead to long-term growth and innovation.
- Small businesses should consider value-based pricing instead of hourly rates when working with agencies.
- Keenability has already made the switch to value-based pricing.
- Value-based pricing aligns interests and promotes a cooperative relationship between both parties. - It focuses on achieving desired results rather than the number of hours worked.
- This model can help create a successful and sustainable partnership with agencies.