‘If it’s too good to be true, then it probably is’ words you can comfortably live by; don’t let it prevent you from taking advantage of an opportunity though. I’ve not necessarily lost the chance to work with someone due to my rates being too cheap, but it is a line of questioning I get a lot.
There are actually mechanisms in play which allow me to suppress my hourly rate. Some of these mechanisms welcomed and some are, what I deem, penalties. Let’s firstly look at this from a slightly different angle.
Why are marketing agencies so expensive?
The same exact service from Shane Parkins could cost you anywhere from £30/hr to £115/hr, depending on how you use my services. If I walked into an agency tomorrow, my hourly rate would sit between £80-£100. I have white label clients selling my service for £115/hr – why? The key here is overheads.
Agency overheads are eye watering, to the point they usually put customers into two camps – portfolio customers and payroll customers. These portfolio customers are the case studies, brands they want to shout about. The other side of the coin is payroll customers, the customers to help pay payroll/overheads.
What specifically do agencies buy that don’t burden me? well there are a few considerations:
- An office; agencies can spend my total amount of overheads for a year in a single month of rent.
- Staff – additional national insurance contribution, pensions, tax and non-revenue driving staff to manage other staff.
- Staff wellbeing, IT systems, higher hosting costs, enterprise software costs, the list goes on.
There is also something under sea-level which doesn’t impact a freelancer, agencies need security. If all my clients moved tomorrow I could likely survive as a freelancer for some time, it would be turmoil for agencies. Their business model often requires security which is usually enforced by contractual agreements. When you think about it, the service you would typical buy is fulfilled by time, there is no static overhead when it comes to time. If that makes sense….
When you strip away overheads
My total overheads each month are £145, at the time of writing this. That means I have to make just over £7 a day to pay my business overheads. This presents a massive opportunity for my clients because I acquire a substantially higher wage than being in employment, my clients pay a substantially lower rate than agency and you are hiring an expert.
My downsides, your benefits.
There is a major penalty I pay each day for the way I currently operate. My clients never pay a monthly retainer and only pay for the hours I spend on a campaign. This forces me to have the results I deliver to do the selling for me.
There is also a penalty on being efficient, I have one client who was spending around £1,800 per month with a previous agency. I was able to reduce their PPC costs by 5% and increase revenue by 22%, for a little under £500. I would have loved to invoice more, the client would have been happy to pay more but the service I’m trying to drive here is great value, great results and long term relationships. There is a major penalty on being efficient with my pricing structure. But I think it is the fairest way to let my results do the talking and not a contractual obligation.
I’m not against agencies here, they provide a critical service and some of my best work is working alongside them. As a freelancer I am often met with hostility from current agencies or in-house staff, with the wrongful presumption I’m here to take over their job!