Last week, we had a discussion about the different pricing models you can consider, particularly if you work for or in a service business.
Don’t know what that means? You can probably surmise, but remember Goldilocks and the three bears?
She started out by eating porridge that was too hot, then some that was too cold, and then some that was just right.
Then she sat in a chair that was too big and another chair that still didn’t fit right, but the third chair fit perfectly. And so on.
That’s how I want you to think about the clients you work with—some will be too big, some too small, but some will be exactly right.
You have to get your pricing right, as we discussed last week, and when you do that, the magic begins to happen.
It also gives you a massive amount of freedom because you know exactly how much something costs with profit on top, and it makes it lots easier to say no when a prospect wants to negotiate it.
This, by-the-way, is one of my biggest pet peeves,
No one goes into a restaurant and sits down and says, “This menu looks great! I’d really like to pay only half of the price you have listed here. Can we do that?”
Yet, everyone wants to do that when they hire a creative agency.
It makes me nuts!
But that’s why knowing exactly what things cost in your agency, with profit added in, is so important.
Champagne Taste On a Beer Budget
Once you have that down, it’s time to think about who the clients are that are just right.
Clients who can just barely afford your services create one set of problems.
Those who think your fee is a drop in the bucket also have their issues.
This is why you need to follow the Goldilocks Principle when signing up new clients.
I’m a big proponent of low, medium, and high pricing, just from a psychology perspective, because humans don’t want to be seen as too cheap, but they also don’t want to buy the most expensive option.
So when you offer low, medium, and high pricing, you put the price it takes to do the job in the middle and human psychology says, nine times out of 10, they will go with that one.
Now extrapolate that to the type of clients you want to attract.
If someone were to go for your lower-priced model, it’s typically going to be a smaller business where their pennies mean far more than that of a larger business.
Because of that, they tend to be squeaky wheels and want more for their budget than they can afford.
You’ve probably heard this described as champagne taste on a beer budget or wanting a Tesla for the price of a Datsun.
Not Enough Skin In the Game
On the flip side, if someone goes for your higher-end, you may find that it’s A LOT of money for you, but a drop in the bucket for the client.
These clients tend to view it less as a priority and they tend not to have as much skin in the game—so it’s challenging for you to get what you need out of them to do your job.
While the budget may be great for you and the growth of your business, it’s not going to last long because, to no fault of your own, they’ll realize they’re not getting their money’s worth and you’ll part ways.
But when you find the exact, right client.
The one who fits all of your ideal client criteria, though?
That’s the Goldilocks of your business.
Finding Your Goldilocks Client
The fairy tale of Goldilocks has always made me laugh.
She broke into that bear family’s home, ate their food, broke their furniture, and slept in their beds! And yet…they welcomed her with open arms.
While you don’t want your ideal client to break into your business and try out all your services, there is something to be said for you attracting the Goldilocks’ of the world—your ideal client, so to speak.
This is why it’s so important for you to clearly define who your ideal clients are.
If you don’t do that, you will get yourself into trouble.
I have an agency owner client who has a very particular specialty.
And every time he is tempted to take on a new client that does not fit his ideal profile, he thinks to himself, “Is this Goldilocks or am I tempted by the budget so I can grow faster?”
If it’s the latter, I always coach him to reconsider.
We’ve been working together for almost three years now and it’s been fun to watch him continue to specialize.
Because he knows exactly who his ideal client is, it’s far easier for him to say no to the ones who are not ideal AND he’s grown a lot faster because of it.
Who Is Your Ideal Client?
One way to do this is to write down the size or revenue or the number of employees or lifecycle stage of your ideal client.
This will give you an easy way to both position your brand on your website and disqualify prospects before they take any of your time.
We have a checklist internally that we use.
Just like when we interview people to join our team, we interview our prospective clients the same way.
We ask questions such as, “Tell me about a time that your former agency exceeded your expectations. What happened? Why were you so happy with the results?”
And, on the flip side, “Tell me about a time that your former agency disappointed you. What happened?”
You can learn A TON by asking those types of questions.
I joked last year that I was going to add, “Are you a racist?” to our list of questions.
I can’t ask that, of course, but we can ask questions that will help us understand how the prospective client thinks about systemic racism and social injustices and if they’d be a good fit for us.
It’s become abundantly clear in the past year that if they don’t have our same values, it’s almost impossible for us to work with them, especially during a crisis.
So we ask questions that allow us to find that out—and also dig out whether or not they’d be a great fit for us.
What Is Your Pricing Model?
Once you know who your ideal client is, get very clear on your pricing.
If you read last week’s article on pricing and you still need help with it, jump into the Spin Sucks Community and let us all help.
And if you haven’t read it yet, do that because it’ll help you figure out which pricing models make the most sense for your business.
Then hold firm on your pricing.
If you adjust it for smaller clients, you’re going to overservice.
If you adjust it for larger clients because they seemingly have deeper pockets, you’re going to get your agency into trouble.
Neither of those things are helpful.
Know what the price of your bone-in filet with two sides costs and do not stray from that price.
One of the most helpful things you can do is just write down the word Goldilocks in all caps and post it next to the camera on your computer.
This way, you see it every time you have a conversation with a client and it will remind you that you want to work with clients that are not too hot and not too cold—they are just right.