By Kathryn Williams, founder and CEO of KMint
There aren’t many things in agencies today that are the same as the pre-COVID times – but one thing that is across far too many agencies is their rate cards. And with costs having risen so dramatically it’s little wonder so many are struggling to make ends meet.
Inflation, talent shortages and escalating salaries have piled on the pressure, yet agencies remain hesitant to ask clients for more money. Why? Because they’re scared. Scared of losing business, of rocking the boat and, quite simply, of having difficult conversations.
But this fear is unsustainable. Agencies are businesses and businesses need to be profitable to survive. The problem is, many agency leaders see themselves as skilled craftspeople at heart and perhaps aren’t equipped with the financial literacy or strategic approach to confidently reassess and adjust their pricing. It’s time for that to change.
Kathryn Williams
The pricing stalemate
One of the things I have noticed in my work with agencies is that many still operate on an outdated hourly rate model – usually one that hasn’t been adjusted in years.
In the meantime, operating costs have skyrocketed. Agencies were forced to increase salaries during the talent crunch caused by COVID, particularly when international workers left the market. Now, as borders reopen and the talent pool expands, salaries remain high but the landscape no longer reflects that demand. It means agencies are reluctant to charge accordingly.
The result? Agencies are at risk of eroding their own margins, end up running on fumes and scraping the bottom of working capital just to stay afloat. And when clients, still cautious in their budgets, decide to delay spending, agencies may find themselves in a precarious position where they are unable to forecast, unwilling to act and paralysed by financial anxiety.
If you’re the owner of an independent agency, that anxiety can be very real – I know far too many great people who have had multiple restless nights worried about whether they’ll be able to make payroll this month. It has a huge knock-on effect on their life outside of work as well.
At its core, this issue isn’t just about numbers; it’s about confidence. Many agency leaders struggle with pricing conversations, fearing client pushback or rejection. They assume that if they ask for more, clients will walk away. But this assumption is flawed. Pricing isn’t a static transaction; it’s a negotiation.
Think of it this way – if agencies approached pricing with the same strategic thinking they apply to client campaigns, they’d be in a much stronger position. Yet, most don’t. Instead, they leave rate adjustments to the finance team, which simply run the numbers and apply an increase. No conversation, no strategy, no justification.
This is where I see the opportunity for agency leaders.
Kathryn Williams: ‘Pricing is not a passive exercise. It’s an active, ongoing strategy that needs regular attention.’
Implementing a strategic approach to pricing
Agencies need to stop treating pricing as an afterthought and start treating it as a core business function. That means dedicating proper time and resources to developing a pricing model that reflects their value, market position and cost structure.
Here’s what I would recommend:
• Make pricing a business priority – Just like any major client campaign, pricing should have a strategy behind it. Agencies should hold dedicated pricing strategy meetings – ideally, a half-day session involving all key stakeholders. I would encourage leaders to ensure pricing isn’t just a finance team task; it’s a leadership discussion that impacts every aspect of the business;
• Educate your team – Agency staff, from juniors to senior leadership, need to understand how pricing works. Why do rates need to change? What factors influence pricing? How does it impact profitability? When employees understand the business mechanics, they can make smarter decisions and even identify overlooked revenue opportunities;
• Benchmark and justify increases – Agencies should know where they stand in the market. Are they premium? Specialised? Commoditised? Understanding industry benchmarks helps frame the conversation with clients. If you’re delivering premium work, your pricing should reflect that. Agencies (meaning, their whole team) should be able to articulate their unique value proposition and be able to justify their rates with confidence;
• Diversify pricing models – The hourly rate model has its place but it’s not the only option, especially in an era where AI is potentially cutting huge chunks of time out of tasks. Agencies should explore alternative models, including project-based pricing, retainers, markups, performance-based fees and intellectual property monetisation. A well-rounded approach can create more stability and profitability;
• Train for negotiation – Asking for more money isn’t about making demands – it’s about making a compelling case. Agencies need to train their teams in negotiation techniques, ensuring they can have constructive conversations with clients about pricing without fear. Simply putting out a rate increase with no context is a surefire way to get pushback. Framing it as a value discussion, backed by data, is far more effective.
Failing to address pricing is a ticking time bomb. If agencies don’t start charging what they’re worth, they’ll be forced into cost-cutting measures – letting go of talent, reducing service quality or even shutting down. We’re already seeing this play out in sectors where salaries remain inflated but revenues haven’t caught up.
The irony is that many agencies position themselves as strategic partners to their clients yet they fail to apply that same strategic thinking to their own financial models. The agencies that thrive in the coming years won’t be the ones that keep their rates artificially low to appease clients – they’ll be the ones that confidently charge for their expertise and back it up with results.
The fear of asking for more money is deeply ingrained, but it’s also misplaced. Clients expect rates to rise – every other industry adjusts pricing based on costs and market conditions and agencies should be no different.
Pricing is not a passive exercise. It’s an active, ongoing strategy that needs regular attention. If agencies invest the time and effort into getting it right, they will do more than adapt – they will lead.
So, what’s stopping you?