Rates – update your cost and sell prices

An agency should be reviewing its cost and sell rates at least once a year, often this is either in line with the new financial year, or at the start of a new calendar year.

Armed with your latest budget, calculate your cost per hour rates for your billable team; and compare them to your sell rates.

Sell rates – The four key ingredients :

  1. Costs
  2. Profit
  3. Productivity
  4. Value

Triple check that your cost rates are less than your sell rates, per person. Senior resources with low productivity levels may be a challenge, consider these people with say less than 30% billability to be overheads (a shared resource).

The moment of truth: can you achieve your revenue target when you apply your sell rates and ‘actual’ productivity levels?

Once you are happy with your final rates, update your job management program, effective 1st July (or 1st January if you are using the calendar year for review).

I recommend reviewing and updating cost rates whenever there is a significant change to your cost base, such as moving premises, or change in head-count.

Pricing is the responsibility of the business owner and finance team, so when you are tackling this once a year business critical project, and think you might like some mentoring – a top-up of external expertise to add value: email or call me – I’d love the opportunity to help.