How to Create and Manage Rate Cards at your Creative Agency

Agency rate card management is an important component of financial reporting. An agency rate card is applied to individual client projects to establish billing forecasts and project budgets. In this article, we will discuss the importance of agency rate card management, how to set up a standard rate card for your creative, digital or advertising agency, and how to correctly manage your rate cards.

If you’re looking to create a new agency rate card or need guidance on how to manage existing ones, read on.

What is an agency rate card?

A rate card is a document that outlines the pricing structure of a creative agency for the services they offer. The purpose of a rate card in agency is to provide clients with a clear understanding of the costs associated with specific services. Typically, a rate card includes information about the hourly rates or flat fees for different services such as graphic design, copywriting, media planning, and web development, as well as additional expenses like travel costs or equipment rental fees. 

For creative agencies, having a rate card helps establish clear client expectations from the project’s outset. It also streamlines the billing process and minimizes misunderstandings about project costs. Additionally, you can use creative agency rate cards to identify areas where you can adjust the pricing structure to improve profitability.

What to include in a rate card?

While it is customizable, there are 5 key components that every rate card should include, whether you’re a creative agency, digital agency, or PR agency.

  1. Name and a short bio: Include your agency name and a brief description to introduce your company and establish yourself as a competent and approachable candidate for tendering.
  2. Contact information: Provide your phone number and business email address as the communication method for important messages and documents.
  3. Your products or services: List down the services you can offer, with clear conditions to set appropriate expectations for the clients. You can also showcase the list of brands you have previously worked with.
  4. Your pricing: Display the rate for each service line, and state clearly the unit rate, such as hourly or lump sum. If lump sum, ensure to put down the maximum revisions you can offer. 
  5. Payment methods: Let your client know your preferred payment method beforehand to make it easier in the long run, assuring you will be paid correctly when you finally complete the project.

Why is managing rate cards so important for agencies?

So, why is it important for your agency to have a rate card to begin with?
Agency rate cards serve as the first line of defence for creative and advertising agencies, setting them up for long-term profitability and financial success. Rate cards leave little to no room for clients to try and negotiate lower costs while also allowing agencies to be transparent. A well-designed advertising agency rate card can help attract new clients, retain existing ones, and build a reputation for transparency and fairness in pricing.

Moreover, standardized service rates allow you to accurately calculate and forecast project budgets, which clarifies clients’ billing expectations even before the start of a project. Clear expectations mean clear communication between creatives, clients, and, ultimately, happier customers!

To remain competitive and accurately reflect the costs associated with their services, you should regularly review and update your agency rate cards.

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Common challenges with managing agency rates

As illustrated above, setting up an advertising agency rate card can be straightforward and easy. But managing them and doing it well isn’t quite as simple. Many creative agencies struggle to manage rate cards over time. Make sure to watch out for the following challenges associated with managing rates:

1. Not Following the rate card

Creative agencies love pleasing their clients and often do so by offering “ad-hoc” pricing for creative services. While this may make clients happy and help agencies win a potential deal, off-the-cuff pricing can later eat into agency profitability and likely open the doors to client over-servicing, an extremely common but highly unprofitable practice in the creative industry. Stand by your rate card and be clear on what you offer. Steering away from your rate card for a client should really be reserved for select circumstances.

2. Everyone has a different rate card

If we’re being honest, agencies are certainly known for their creativity. Not so much for their ability to keep things organized. Working in or running a creative agency is no easy business and sometimes things can get chaotic (chaotic enough that we forget to often update our teams on important process updates). Rate cards are no different. It is likely that we each passing year, and sometimes during special circumstances such as COVID-19, you adjust the rates of your agency’s services. These adjustments may happen overnight and especially if your processes are manual, it’s possible that not everyone in your digital agency gets an updated version of your agency rate card.

If you have agency management software, you should be able to update your new rates quickly in the system and this serves as a way for everyone to have central access to your updated agency rate cards. You don’t have to worry about folks accessing an old document. A single update in the system should update the rates for everyone!

3. Not reviewing & updating rates yearly

Keeping up with frequent changes in your agency rate cards might be hard but on the other end of the spectrum lies another common challenge – not updating rate cards regularly enough!

Almost all creative, digital or advertising agencies introduce staff salary increases and new overhead cost changes, annually. Remember the steps to calculate your rate card we discussed in the section above? If any of those costs change, so should your rate card price.

As a rule of thumb, update your rate cards on an annual basis, if not more frequently, to ensure you are still profitable and remain competitive in the market.

Deciding on a standard rate card for your agency

When creating your agency’s rate card, here are a few things to consider:

1. Rate Categories

You might find that depending on the size of your agency, the variety of services it offers, and who it services, a single standardized rate card might not be enough. If that’s the case, you might need to build rate card categories. A few agency rate card examples of categories include:

  • Standard Rates: These rates are typically built based on the time required to complete a project or task within a standard turnaround time.
  • Rush Job Rates: You charge rush job rates for projects that need to be completed quickly. Since expedited projects require more effort and resources, they are usually charged at a higher rate than standard rates.
  • Discount Rates: These are the rates offered to specific clients or projects, such as discounts for long-term clients with high order value, which can serve as an incentive to attract new clients or reward loyal ones.

2. Staff rates or blended rates?

Do your agency’s service offerings depend on multiple staff members who have significant cost differences? This is usually the case for public relations and media production agencies. If the same holds true for your agency, consider defining your rates by staff/job role.  In this way, you can inform clients of the costs associated with each staff member’s time.

On the other hand, if this is not the case for you, consider using blended rates (most used when multiple staff contributes specific hours to the same project). This is most seen in digital and full-service agencies.

3. Use a hybrid model

It may be that your agency’s workflow warrants having both, blended and staff rates. You can certainly have both and this will give your account management teams more flexibility when presenting proposals to prospective clients. However, employing both types of rates can be harder to manage and require the right management system to support them.

Setting up a proper system to manage agency rate cards

If you’re not using an estimating tool or a project management software yet, your best bet is to use a spreadsheet to set up and manage your agency’s rate cards.

However, the downside is that while excel gives you the flexibility to make quick edits, any updates made to rate cards need to be manually shared with your team. There is a lack of central access and automation, with a high risk of misinformation or the repeated use of stale rates; this can cause a financial strain as well as frustrations for both, you and your client.

It would be worthwhile to consider investing in an estimating tool, especially if you’re a growing agency. Below is an example of what Function Point’s estimating tool looks like. FP’s CRM for agencies and estimating tools allow you to blend your rates or charge by the staff member, for accurate estimates every time. You don’t have to pull rates from Excel and hope they’re up to date. Everything is in one place.

Steps for Creating Agency Rate Cards

If you’re new to building rate cards, below are some steps to get you started on creating a profitable rate card for your creative, digital or advertising agency’s services:

  1. Identify the services to be offered: Before creating your creative agency rate card, determine which services your agency offers. These may include graphic design, branding, web development, video production, and more. Then, you can start thinking about how you want to price them.
  2. Define the pricing structure: The pricing structure shows how you charge for your services. You can choose to charge per hour, per project, or by retainer. Each pricing structure has its pros and cons, so pick the one that works best for your agency and clients.
  3. Determine the pricing strategy: Your pricing strategy should reflect your agency’s goals and market position. For example, if you are a premium agency targeting high-end clients, you may want to charge premium prices. Conversely, if you are a startup agency trying to gain a foothold in the market, you may want to charge lower prices to attract clients.
  4. Set the rates: Once you have defined your pricing structure and strategy, it’s time to set rates for your services. Remember to take these factors into consideration for your rate: the experience level of your team members, the project complexity, and your agency’s overhead costs. Here’s a suggestion:
  • Step 1. Find the total cost of your Full-Time Employees or FTEs (This includes salaries and benefits
  • Step 2. Find the overhead cost per employee (This is your agency’s total overhead costs/total number of FTEs)
  • Step 3. Markup the final cost by 20%
  1. Review and refine the rate card: Your rate card is not set in stone, thus periodic review and refinement are vital as your agency grows and your positioning changes. This should be done at least once a year, or whenever there are significant changes in your agency’s services or market conditions.

Best Practices for Managing Advertising Agency Rate Cards

  1. Communicate rate changes to clients: If you update your rates, make sure to be transparent with your client and clearly explain the factors influencing the changes. This will help build trust and avoid any misunderstandings or disputes. Additionally, ensure that all team members are well informed of the rates and can communicate them effectively to clients.
  2. Track time and resources: Monitoring time and resources with tools like agency resource management software allow you to price your services appropriately, as well as identify areas where you can improve productivity and reduce costs.
  3. Consider competitive pricing: Do some market research on the pricing of your competitors. Make sure your rates are competitive enough, but still in line with your quality and the competency of your team.
  4. Apply technology: An agency management software like Function Point helps you manage advertising agency rate cards efficiently. You can track time, bill clients, generate reports, and gain insights to make informed decisions about your pricing strategy.
  5. Negotiation strategies: It’s important to have negotiation strategies in place when dealing with clients who may be hesitant to pay your rates. Some tactics include offering package deals, discounts for long-term contracts, or incentivizing prompt payment. Know your bottom line and say no to rates that are too low for your agency to sustain.
  6. Tracking and analytics: Use data and analytics tools to monitor client feedback, conversion rates, and overall revenue generated. This information can help you refine your rate cards and tailor them for your clients.
  7. Continual improvement: Creating and managing rate cards is not a one-time task. You should encourage team members to provide feedback and stay up-to-date with industry best practices. Continually seeking feedback and improvement lets you develop competitive rates to meet your client’s needs. 

Conclusion

As we’ve discovered throughout this article, there is no one secret agency cost formula. How you set up your rates depends on how you run your agency. A design agency rate card is completely different from an advertising agency rate card, and that’s okay. What matters is that you standardize service rates, have your teams follow them, and update them regularly to maintain your agency’s financial health and profitability.

Check out this detailed walkthrough of how to create and manage an agency rate card using the Function Point system.

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