The Transformative Benefits of a Productized Business
Professional service firms operate with the belief that everything they do is unique and that all client work is custom. No doubt we bring bespoke thinking to every engagement, but most engagements follow a framework; a set of steps that constitute a roadmap for diagnosing problems and prescribing solutions. By codifying these roadmaps, we can reframe our competencies as programs or even products. In place of a bullet-point list of services (which are generally widely available from similar organizations), firms can command a premium price for premium offerings …
Why Your Clients Want You to Change Your Pricing
Clients don’t necessarily want to pay agencies more – they want to pay differently. Time-based billing creates misaligned incentives and reactive relationships, while value-based pricing builds trust, alignment, and better results. When agencies price outcomes instead of hours, both sides win: clients gain stronger partnerships, and firms finally capture the true value they create …
Price the Building, Not the Bricks
Clients don’t want to buy hours or parts – they want outcomes. By packaging services into programs and pricing the deliverable instead of the labor, agencies can elevate perceived value, simplify pricing, and strengthen profitability. When you price the building, not the bricks, you transform your firm from a collection of tasks into a creator of complete solutions …
For the Agency Business to Live, the Billable Hour Must Die
The agency business isn’t dying from lack of innovation – it’s suffocating under the weight of the billable hour. Professional firms can’t compete for top talent or scale their profits when their revenue is tied to time instead of value. To survive, agencies must abandon the hourly rate and reimagine their work as scalable products and programs – decoupling growth from headcount and creating true exponential potential …
To Capture More Value, First Create More Value
Clients don’t buy ingredients – they buy outcomes. Agencies that list skills instead of solutions are missing the point (and the profit). By turning repeatable expertise into named programs and products, firms can demonstrate deeper value, create differentiation, and scale their impact. The key to capturing more value is simple: start by creating more of it …
The Unscalable Business Model
The faster you work, the less you earn. The more productive you become through investments in technology and training, the less you can charge. The expertise, intellectual capital and intellectual property you accumulate can never be directly monetized. Welcome to the world of professional service firms that bill by the hour. Meet the unscalable business model. But it doesn’t have to be this way …
Inside-Out and Bottom-Up: No Way to Design a Revenue Model
Many of the challenges faced by professional service firms today can be linked directly to having an upside-down, inside-out revenue model. Suboptimal margins make it chronically challenging to attract, pay and retain the best talent, creating a vicious cycle …
Earn a Higher Return on Your Talent Investment
There is a cardinal belief in professional services that our inventory is not parts, but people. If that’s true, professional firms are facing unprecedented inventory shortages. Competition for the best people has always been fierce, but is now intensified by the economic impact of a global pandemic …
Pricing an Assignment? Begin With the End in Mind
The fees you charge your clients should not be set based on the scope of work, but rather the scope of value. In professional services, you’re not selling your ability to do, but rather your ability to solve — your head, not your hands …
Who Else Is Doing This?
It’s human nature to prefer copying over innovating. But simply duplicating the practices of other businesses only keeps us mired in the present. Copying is “Karaoke Capitalism” that directs of limited energy and resources toward avoiding risk instead of pursuing opportunity …
Your Self-Imposed Profit Ceiling
If all your billable people work the maximum number of billable hours, you can hypothetically achieve your minimum profit margin. But no more than that. No amount of hard work, innovation or dedication will help you beat this figure, because you’ve defined your inventory as buckets of hours, of which there is a finite and limited supply. In effect, professional firms operating on the hourly rate system have a self-imposed ceiling on profitability …
To Boost Your Profits, Diversify Your Remuneration Portfolio
When creating an investment portfolio for retirement, no reasonable person would put all their money just in just one type of investment. In a professional services firm, if your client compensation agreements are all based on the same remuneration system — just fees based on hours, for example — it means you’re not diversifying your portfolio, and by definition not maximizing your firm's profitability …