Today, we’re excited to welcome Paul Boag to delve into the topic of navigating the challenges of low payments and underestimation in agencies.
Paul Boag boasts an impressive 30-year tenure in the industry, with the majority of that time spent running his own agency. A prolific author of six books and the pioneer of the first-ever podcast on web design, Paul is renowned as an international speaker and contributor to various publications.
His expertise spans customer experience, conversion optimization, and user experience prototyping.
Paul’s extensive experience makes him the right person to discuss the challenges of agency low payment.
Without any further ado, let’s welcome Paul to discuss one of the major challenges agencies face: charging too low for complex projects, ultimately leading to delivering poor quality work and losing customers.
1. Can you introduce yourself and your background in the agency landscape? How did you get into coaching for agencies?
I have worked in the industry for 30 years, and for the vast majority of that time, I ran my own agency. As an active member of the web design community, I would regularly encounter stories of people struggling with the same issues repeatedly.
This led me to start speaking and writing about the challenges of agency life, which naturally evolved into offering coaching services.
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2. What are the most common challenges agencies face when it comes to low payments and underestimation, based on your experience?
In my experience, the biggest problem underlying low payments and underestimation is the concept of fixed-price projects.
Building websites is a complex process, and often, we lack sufficient upfront information to offer precise estimates.
Lately, I provide a rough estimate initially and then divide the project into sub-projects. This approach allows for more accurate pricing of subsequent phases, helping to prevent underestimation and enabling clients to manage their risks effectively.
3. How do you advise agencies to navigate through periods of low payments without compromising their financial stability?
If by low payments you mean pitching for projects at a rate below their worth in order to win them, I would suggest you should never do this.
Undertaking projects where you’re going to make a loss simply does not make sense, no matter what promises you’ve been made about future work.
4. What strategies do you recommend for agencies to accurately estimate project scopes and avoid Agency low payment/underestimation?
As I mentioned earlier, I recommend breaking larger projects into sub-projects and focusing on each one separately. For instance, I typically start with a discovery project to accurately estimate the cost of a prototyping project.
After completing the prototyping phase, I will have the necessary information to provide an accurate price for the final build.
By organizing the project in this manner, it enables me to offer more precise quotes and reduces risks for the client. While I will still give them an initial estimate for the entire project, I cannot commit to this figure as I may lack essential information for accuracy.
Additionally, dividing the project in this way allows for adjustments based on user research and testing.
5. How can agencies effectively communicate their value to clients to minimize the likelihood of negotiation challenges and underestimation?
This is a vast subject, one on which I could probably write an entire book. However, if I could offer just one piece of advice, it would be to invest time in comprehending your client and their motivations.
Clients typically aim to achieve something, whether it’s boosting revenue, expanding market share, or cutting costs. By grasping this core objective, you can align your services accordingly.
Most clients are not concerned about good design, high-performing websites, or user experience. What matters to them is achieving their goals and objectives, which should be our focus of discussion.
6. What proactive steps can agencies take to detect and address potential issues with payments and project scopes early on?
I always recommend taking a substantial deposit upfront. I would also encourage you to link your payment milestones to deliverables rather than the website launch. Websites can frequently face delays due to factors beyond your control, potentially causing payment delays.
7. How do you suggest agencies balance profitability with competitiveness in the market, especially when faced with pressure to lower rates or shorten timelines?
There is a perception that you need to be the cheapest and fastest in the market to be competitive, but that is simply not true. Many clients prioritize quality over speed and price. I encourage agency owners not to engage in that game, but to price accurately and improve their ability to explain why quality costs more.
I often remind clients of the risks associated with hiring the cheapest agency, as they may compromise on quality or fail to deliver on promises.
8. Should agencies explore leveraging agency partnership programs, such as the one Cloudways offers, to enhance visibility for their video marketing efforts?
Partnership programs can be a useful source of secondary income. However, it’s important not to let them distract you from building a robust sales funnel and properly pricing the project work you undertake.
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9. In conclusion, what advice would you give agencies looking to navigate the challenges of low payments and underestimation in their overall strategy, and how can they ensure a positive return on investment?
One of the significant aspects of my role as an agency coach is to assist those I mentor to transition from a fixed-price project model to alternatives like time and materials. Personally, I believe that fixed-price projects are fundamentally flawed when it comes to the web. They eliminate flexibility to adjust during the project based on changing business requirements or user research.
Shifting away from fixed-price projects immediately resolves estimation issues and enables adapting the scope based on the budget. Essentially, it transforms the entire premise of quoting from letting the scope determine the price to allowing the client’s budget to define the scope.
Abdul Rehman
Abdul is a tech-savvy, coffee-fueled, and creatively driven marketer who loves keeping up with the latest software updates and tech gadgets. He's also a skilled technical writer who can explain complex concepts simply for a broad audience. Abdul enjoys sharing his knowledge of the Cloud industry through user manuals, documentation, and blog posts.
