Why Selling Time Is Killing Your Public Relations Agency

Every PR firm knows the drill. Client says here's my budget. Firm divides by twelve. Monthly retainer, same amount, January through December, whether the work demands it or not. 

Need a press release? Flat rate. Need ten? Multiply. 

Need an editor or a videographer? That's by the hour, and one minute is one hour. 

The pricing isn't creative. It isn't strategic. It's arithmetic dressed up as a business model.

And it worked fine, until AI started doing the arithmetic faster. Suddenly teams are twice as productive in half the time, and if you're still selling hours, you're punishing yourself for getting better. Meanwhile, the client's procurement department is happy to keep paying by the hour, because now those hours cost less. So, who's really winning? 

The firms who don't rethink how they price will be replaced. Not by AI, but by hungrier competitors who already have.

Listen For

3:42 Why Are PR Firms the Least Creative in Pricing?
6:34 Are You Losing Money by Defaulting to Retainers?
9:08 How Should Agencies Identify Where They Create the Most Value?
12:19 How Do You Avoid the “Bait and Switch” With Senior Talent?
15:27 Is AI Killing Hourly Pricing Models for Good?

Guest: Blair Enns, Win Without Pitching

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David’s books including Pricing Creativity

Doug

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Farzana

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Transcript

David Olajide (00:00):
Every industry has a pricing model it swears by, but very few remember who invented it or whether it was ever meant to last.

Farzana Baduel (00:17):
In the very beginning, lawyers charged for what they knew. A will would cost $100. An adoption cost $500. A drunk driving defence cost a thousand. The price was the price. It had nothing to do with how long it took. But then in 1940, a Boston lawyer named Reginald Herbert Smith had an idea. He started writing down how long things took. Six minute increments, neat columns on a timesheet. He said it was about fairness, about showing the client the math. His partners hated it. They called it a slave system, but the American Bar Association absolutely loved it. They printed Smith's method in a pamphlet and sent it to every firm in the country. By the late 1950s, they were campaigning for it. By the 1970s, it was law. Well, not actually law, but something worse. Culture. And here's the thing about culture. It just spreads. The consulting firms adopted it.

(01:21):
 The ad agencies adopted it. The PR firms adopted it. Nobody remembered why. Nobody asked if it still made sense. They just started the clock and sent the invoice. Reginald Herbert Smith died in 1966. He never saw what his timesheet became. He meant it to measure fairness, but it became a trap. Today, on Stories and Strategies, why the smartest firms are breaking the clock before the clock breaks them.

(02:06):
 My name is Farzana Baduel.

Doug Downs (02:08):
And my name is Doug Downs. Our guest this week is Blair Enns joining us today from near Vancouver. Blair, how are you?

Blair Enns (02:15):
I'm pretty good, Doug and Farzana. Great to see you both.

Doug Downs (02:18):
How close now? You're not actually in Vancouver proper. You're just sort of east, north and east of

Blair Enns (02:22):
Vancouver, right? No, I'm straight east of Vancouver. I could drive there in about ten and a half hours.

Doug Downs (02:29):
Okay. Do you get the same amount of rain? Because Vancouver's weather is just wacky.

Blair Enns (02:33):
You

Doug Downs (02:34):
Never know what you're going to get.

Blair Enns (02:35):
No, it's a completely different climate. We're in the Kootenays in the mountains. Well, it's not completely different. The winter here is a little bit depressing, so I tend to leave. I just spent a month in Palm Springs, so that's why I look all so tanned. Wonderful. Usually I have a deathly winter pallor.

Doug Downs (02:53):
Blair, you are the founder of Win Without Pitching and the author of Pricing Creativity, which at first glance are two terms that most firms kind of treat as a contradiction. You've spent over two decades teaching agencies and consultancies to stop giving away their thinking and to start charging for what it's actually worth.

Farzana Baduel (03:14):
Blair, we PRs consider ourselves quite creative people, but yet I have been following you for many, many years and your content is fantastic. And you always actually take the position that we're not creative enough in the area of pricing. So I wanted to just draw that from you. If you could explain what do you mean by pricing creativity, and why do you think we as PRs, as creative people, don't take that creativity to the pricing world?

Blair Enns (03:42):
I'm not sure I know what it is about PR people that are... And I'll say it, they're the least creative of all of the types of creative businesses when it comes to pricing. This came up in a conversation yesterday. So a client has a challenge, approaches a PR firm that they're not currently working with, and they say, "I need help with X and my budget is Y." Let's say the budget's 100, and to make things simple, $120,000. The PR firm immediately takes that budget and divides it by 12. Even if it's a short... So the PR firm assumes a relationship even when it's not what the client wants, like an ongoing retainer based relationship, even when it's not what the client wants, even when it's not in the best interest of the client, even when the payments don't align with how the firm creates value, when in the relationship they create value, they do it because it suits them because everybody would like to have this recurring revenue where our clients pay us monthly.

Farzana Baduel (04:52):
I must admit, I think I've done that in the past, taken a budget and immediately thought, how can I divide it into sort of months? And I think it's just that legacy mindset of having clients on retainer. And in the last decade that's moved and shifted to project based work. And I think PRs, I think we've generally resisted that project based model because you can end up with a feast or famine scenario. And our preference is that monthly secure amount coming in. But yeah, I totally hear you, Blair.

Doug Downs (05:22):
Retainer. Retainer. So what does pricing creativity look like? Because Blair, when I hear that and I have a subcontractor who says they're going to price creatively, you are, are you? I get, sure you are.

Blair Enns (05:38):
Well, I'm not sure that you would express it to the client as pricing creatively. I think you should just think more creatively about your pricing. I think the first time this came up for me, I was quite a young consultant and I had a PR firm client and they were telling me about an opportunity they had that they had turned down. And usually I'm getting my clients encouraging them to turn down more opportunities. But this one was, I forget what the exact numbers were, but let's say it was $60,000. The client had a problem of a short term nature it needed to fix. They had a $60,000 budget for it, but this firm had a minimum retainer amount of $20,000 a month. So they were half of what they could afford. So they walked away from the opportunity and I pointed out you could have solved this problem in six to eight weeks, right?

(06:34):
 So you could have billed more than 20 grand a month for one of you. You could have taken the $60,000, sold them a solution, and made even more money, but you would have walked away from a long term relationship, which was not in their best interest. It was only in your best interest. Now, I

Farzana Baduel (06:53):
Will

Blair Enns (06:53):
Point out that when you go from a model where everybody is on monthly retainer and you start adding projects of this nature in, short term projects, it does affect your staffing a little bit. It does affect how you apply resources against opportunities. But I think PR firms generally need to wake up to this idea that a certain percentage, I would suggest it might even be approaching the majority, but a significant percentage of their clients would rather hire them on a project basis and would be willing to pay them more than they pay every month.

Farzana Baduel (07:37):
And I think there's the opportunity because you mentioned something very practical, Blair, that agencies, they need to resource plan and they will hire permanent team members and they pay monthly salaries. And in their mind, they would like to have a monthly income that goes to pay those monthly salaries. And actually we can be a lot more agile because, for instance, when you have feast or famine, you have lots of projects coming in in one quarter, you can actually lean on sort of freelance support, project based support. There's a lot of senior counsel, but that obviously sounds easier than the reality as well, because you have the onboarding and offboarding. But as you said, companies are willing to pay a premium for projects. So that premium can then go to offset the additional costs in having a more complex resource planning. Now, if people are listening and tuning into this episode and they're thinking, "Do you know what?

(08:33):
 I love PR, I love the work that I do, but I'm just not able to get that ideal and a 20% profit margin, for instance." And you have a lot of owner managed PR firms, for instance, who end up paying themselves the least amount because they can't get their head around it. What are the general tips that you would give to people who want to improve the way that they price, from what kind of mindset they need to adopt, what kind of practical considerations? What would be your overarching points for them to start thinking about?

Blair Enns (09:08):
Well, I would take a closer look at how and where in the relationship you create the most value.

(09:16):
 And let's say, so over the course of a year, there are certain things that a PR firm would do. You could put them under the category of monitoring or ongoing support of some kind. And then there's the super valuable stuff of executive crisis communications for executives. And that stuff, you can't plan for it because you don't know when it's going to come up, but that is probably the most valuable service that a typical PR firm would provide. And what you're doing is you're effectively averaging out in your retainer, you're averaging out the kind of ongoing services and some sort of expectation of a crisis or the need for the senior partner to come in and do some significant work of high value. Now, if no crisis arises, the client starts to feel like they're overpaying you.

(10:04):
 If it's all crisis, the professional starts to feel like they're undercharging or the client's taking advantage of them. And that's often the case in a retainer relationship. Somebody feels like they're getting the short end of the stick. I had a conversation with a PR firm owner the other day and she was explaining a problem about... She does crisis communications. So she comes in, she's hired when the problem is most significant, the willingness to pay is highest. She comes in, does her magic and then tries to turn it into a long term engagement, which she's typically pretty successful at. But then the problem that arises for her is that when she gets dragged down into the minutiae of the day to day business, she loses her kind of status as the problem solver, the crisis person

Farzana Baduel (10:59):
That

Blair Enns (10:59):
The CEO would reach out to. I pointed out that her firm was large enough, she had a few staff members, other counsellors, where she should not get involved in the day to day business. And maybe even her services, there's only a certain amount of capacity that's available to the client, but when she steps in, the client should know it's expensive and high value. And it's not that they can't bundle together a long term engagement on a monthly retainer, but she should not be involved in that. Again, there might be some access to her, but she should not be kind of lowering herself in the eyes of the client by doing this day to day stuff.

Doug Downs (11:46):
So this makes the initial sale very important because often the most senior people are put in front of the client to bring the client into the fold. And the client tends to think, "Well, I'm going to get that senior person." That's what convinced me to go with that firm. Yet, so much of what you just said was there will be times you will, but there will be times you don't. And so how important is it for that clarity to be expressed when initiating a project or a relationship with a new client?

Blair Enns (12:19):
Yeah, it's very important. It's actually pretty easy to do. When you don't do it properly, it feels like we all use the term bait and switch, right? It feels like a bait and switch. Exactly. I met with the senior partner, I hired the senior partner, now I'm saddled with this junior person. So in a closing conversation or in the first meeting after a closing conversation, when you've agreed to work together, but probably in the closing conversation, the senior person, let's assume that the senior partner is the closer, who's the person who gets the deals done, and that's not a bad thing. And they're probably selling to somebody senior on the client side. They have the more junior person with them in the room. Now, when you move from closing the deal to onboarding the client, let's say it's even after the closing conversation, the deal is signed.

(13:07):
 I mean, in the closing conversation, you would be clear about the roles, but in what you might call the kickoff meeting after you're hired, the senior partner would be there leading that meeting. The more junior person would be in that meeting, and it's a very important, subtle but vital cue here, or sorry, clue, is that the senior person never takes notes. So you will find, if you have a senior person and a junior person in a meeting with the client and you're talking about what's going to get done, it is the junior person taking the notes and you will see that the client, when they're imparting information about what's to happen on logistics, et cetera, they will turn to whoever's taking the notes. So the senior person should never be seen visibly taking notes in a meeting like that where there's a junior person present.

(14:05):
 And of course, if we're doing it on Zoom, we've got our note takers anyway, so it gets a little bit trickier. But when you're meeting face to face, try that approach.

Doug Downs (14:13):
I would take that to mean the CTAs, if it's an AI recording, which could also be in person these days, the CTAs are expressed back by the non senior person that

Blair Enns (14:23):
Yeah. And they're visibly taking control of the day to day relationship. And at some point, the senior person might just reiterate the role. So Armando here is going to take care of this on the day to day basis. I'll be working with him at a high level. You have access to me at a high level, but Armando's going to make everything run on time and he's responsible for the success of your account. When things get serious, I'm there for you and I'm also there for Armando.

Farzana Baduel (14:54):
I love that clarity. Now, there have been some conversations in the industry that the PR folk, we are very rigid in the way that we price, be it retainer or project. But also there's another layer that people have been critiquing PRs on. And that is whether we should be pricing based on time or should we be looking into pricing based on outcomes and how valuable that outcome is to a particular client? Where do you stand on that, Blair?

Blair Enns (15:27):
Well, I wrote a post recently, and I'm not the only one to have written a post like this, but that says that AI is basically the death of labour based pricing. I can see exemptions for... Even though I could see an exemption for it, I wouldn't necessarily think about it this way, but I could see exemptions for crisis communications. The senior partner who's behind the glass with the sign in case of emergency break glass, with a ridiculous hourly rate for the right types of clients, it's just the benefit of buying and selling time is it's easy to measure, even though it's only a proxy for value.

(16:07):
 And there are certain things... And so AI is making everybody productive. So if you're charging the same hourly rate, you're creating more value for your clients. Your clients are looking at the tools that you're using or the tools that you should be using to increase your productivity. They're pressuring you to change your rates, to lower your rates. So you're getting pressure from all kinds of different places. But generally speaking, yeah, just because you're on a retainer, like most retainers are hourly based, but they don't need to be hourly based. And we really should be thinking more creatively about how we structure them. So the obvious alternative is the deliverables that you get for that retainer. So the outputs rather than the inputs of time and materials.

Doug Downs (16:58):
I love it. I love it. Can I play devil's advocate on you?

Blair Enns (17:01):
Yeah,

Doug Downs (17:02):
Please. Because in the industry, we express very clearly outputs are not the result. Outcomes are, and yet I can't guarantee an outcome, nor would I necessarily want to bill on an outcome because I can't control it.

Blair Enns (17:19):
Well, I mean, you've articulated the three things that you can price. You can price the inputs of time and materials, the outputs at the deliverable, or the outcome or the value that you create. And I think that's a common sentiment, that we can't charge based on outcome or value creation. We can. If we choose to do so, we're taking risk when we do that. So there's all kinds of parameters around value based pricing and the highest expression of value based pricing, which is performance pay. So instead of getting paid on the expectation of the value to be created, we're going to get paid on the actual value created. Sometimes that's hard to measure. There are all kinds of issues with that. I wrote a post on that recently. It's called When Your Pricing Creates Resentment. And it was specifically about performance pay models that don't properly align with the value being created temporally.

(18:17):
 So in time, it's a bit of a complex topic.

Doug Downs (18:21):
So there's the other piece though. Sometimes the work that we do doesn't pay off even within the project timeframe. It pays off two, three, five years later. And I can't necessarily directly connect it because people are people and we take multiple paths to get to our choice of action.

Blair Enns (18:43):
Yeah. In those situations, it's hard to price outcomes. But let's look at a personal injury lawyer. They not only value price, it's not only performance pay, it's the highest expression of performance pay. It's contingency. "I don't get paid unless you get paid." So you could. I'm not suggesting that you should, but if we're talking theoretically here, sometimes in crisis communications, an outcome is not going to jail or not getting sued. So it's easy to imagine how you could structure a full contingency pay if you wanted to take the greatest amount of risk or performance pay where you take a certain amount of risk. You get paid fees and then bonuses for incentives.

Farzana Baduel (19:34):
Blair, one last question. Timesheets, should we keep them close and hug them and use them or should we burn them?

Blair Enns (19:43):
Well, thanks for the softball setup, the pitch right down the middle. I had a client, I was just trading emails with them yesterday. I haven't heard from them in a while, but when I worked with them many years ago, the topic of timesheets came up and he said, "We don't do timesheets." I said, "That's interesting. You're one of the few firms that don't. Why is that?" He said, "Because one of my partners is adamant that timesheets are lies and one of our core values is we never lie." And I thought, "That is brilliant." And I immediately thought of all the lies I have recorded on my timesheets over time. It's such a calling out of timesheets. It's like the drunk looking for his lost car keys under the street lamp, not because he lost them there, but because the light is better there.

Farzana Baduel (20:32):
Oh, dear. Oh, dear. Well,

Blair Enns (20:34):
That

Farzana Baduel (20:34):
Is one.

Blair Enns (20:35):
Burn them.

Doug Downs (20:37):
Love it. Blair, ironically, we're out of time.

Blair Enns (20:42):
Well, I've enjoyed my time with both of you. Thank you, Doug. Thank you, Farzana.

Farzana Baduel (20:46):
Thank you, Blair. It

Doug Downs (20:47):
Was valuable. All right. Here are the top three things we got today from Mr. Blair Enns. Number one, stop defaulting to monthly retainers. Not every client wants a 12 month relationship. Many will pay more for a focused project. Number two, price the value, not the hours. AI is killing labour based pricing, so tie fees to deliverables or outcomes instead of time. And number three, protect senior talent's premium. Keep your top people out of day to day work so their involvement signals high value, high cost moments. Farzana, you and I, I could almost see your ears perking up when he was talking down that path.

Farzana Baduel (21:28):
Now, if you'd like to send a message to our guest, Blair Enns, we've got his contact information in the show notes. Stories and Strategies is a co production of Curzon Public Relations and Stories and Strategies Podcasts. And if you liked this episode, please, please leave a rating and possibly a review. And a big, big thank you to our producers, Emily Page and David Olajide. And lastly, do us a favour, forward this episode to one friend, and thank you for listening.