Beyond Selling Services to Creating Value

Their killing it. And it’s killing you.

Here is a common question I’m often asked by owners who are frustrated by their firm’s slow growth:

“My competitors seem to be killing it. And it’s killing me. How can my studio reach that next level?”

If you are asking this question, something in your gut already knows you can’t get there just by doing more of the same. You know you don’t need more, you need better.

Motion design studios and production companies who jumped from the Painful Season to the Push Season ($1+ MM in annual revenue) and are now growing well into the Punch Season ($2+ MM in annual revenue) know this:

Instead of more clients, you need better clients.
Instead of more projects, you need better projects.
Instead of more revenue, you need better profits.

Let’s look at a pair of shifts your firm can go through to reach the next level.

Evolving Your Firm’s Pricing Model

Does your firm make money by selling services? If so, you can only go so far.

Now that the digital democratization transition is complete, creative firms can no longer compete by offering mere services. Rather, smart owners today are shifting their business model from creating new services to creating new value.

Smart creative firms are shifting their model from creating new services to creating new value.

Services are capabilities like design, animation, editing and directing. Value, on the other hand, takes the form of highly customized innovation, answers and solutions. Firms that know how to create value are magically able to escape the fee-for-services trap as they seize the bigger and better opportunities.

Note: don’t confuse value with deliverables. The deliverables your firm creates – promos, commercials, rebrands, or the like – do contain the value you create, but they are not the value itself. Like a book, it is not the binding, pages and ink that are valuable, it is the ideas contained within.

Step 1: Change How Your Firm Charges

Stop Selling Services

How do you know if your firm is selling services? There is a simple scorecard that will reveal your business model: your proposal. Pull out some recent proposals and ask, has your pricing model fundamentally changed since you started your business?

Most young firms start off with a proposal that is a really just a bid form (i.e. price quote) listing service descriptions, hours and rates. If you are still pricing your firm this way, you are selling commodity services. And because your clients perceive you that way, you will never be able to charge more than “the going rate.” That’s the definition of a commodity. Try raising your prices and the market will immediately beat you back into submission.

This is why the Services Model works to a point, then it hits a dead end.

For creative firms, the Services Model works to a point then it hits a dead end.

Think about how freelancers, contractors and laborers price services. It usually looks something like this:

150 hours of Motion Design @ $125/hour = $18,750

Is this really how you want your firm to be perceived? In the Services Model, each line item is a commodity. “Motion Design” could be any Tom, Dick or Harry motion designer. He is replaceable with anyone willing to do the job for $125 per hour.

Whatever it is – that amazing, unique, genius thing you do – should never appear replaceable.

Start Creating Value

How does simply changing how you charge move your firm towards value creation? Because charging higher fees is a form of reverse psychology you can use on yourself. If you raise your prices, you will be forced to step up your game.

Upping your game means creating new value in the form of highly customized solutions – not just costs of services – where the whole is greater than the sum of its parts. Now all those intangible things you could never seem to list as a line item – maybe it’s your unique aesthetic, your scalable freelance resource pool, or your wicked sense of humor – are rolled up into one big value proposition.

As opposed to a contractor’s proposal (showing costs), a value creation firm offers proposals that can be summed up as follows:

(Studio) will create (description of amazing and valuable solution) for (Client).

Fee: $22,500

This means the heart of your creative firm’s proposal – your proposed genius value proposition – should fit on a single page. This is what I’ve dubbed my One Page Proposal system.

Naturally, the larger the project, the more likely supporting pages are included. But these are merely present to reassure the client of your solution (e..g, reference images, mood boards, style frames, storyboards), not to justify your hours and rates. These materials are also an important part of your value proposition. But a cost breakdown (such as an AICP bid form) may be included, or not, at your discretion. You’re the expert, so you decide.

Value Creation model = the heart of your creative firm’s proposal should fit on a single page.

Use Rounding

Note the psychology of the numbers here, too. A fee of $96,145.50 looks like a calculated sum. A number like this invites your client to ask for the formula that generated the figure. He wants to make sure you are not nickel and diming him.

Instead, a large, round number – like $97,500 – is better. Tell your client you will make sure to utilize every penny of his $97,500 budget to create the maximum value possible. Get him wishing he had given you even more budget to work with!

Step 2: Change How Clients Perceive Your Firm

Now that your pricing model is moving towards value creation, how will you talk to the world about it? Through your new-and-improved brand positioning. If your firm is going to act all grown up, it’s time for it to look all grown up, too.

Let’s take your firm to the next level where you look like who you say you are. To do so, we will tweak your firm’s name, positioning and identity.

Tweak Your Name

I recommend you tweak the name of your firm. Don’t part ways with your firm’s legacy, but rather give it an upgrade. No need to throw out the baby with the bathwater.

I find the easiest way to do this is to drop the word “creative,” “productions,” “pictures,” “studios,” “images,” “films,” etc. from your name. In the early days of a firm, you may have found it helpful to include such a suffix in your name as a clue to what you do. But once your firm is established, this is no longer needed. For example, “Apple Computer” one day became simply “Apple” and “Pepsi-Cola” became “Pepsi.” When the time is right, your firm should do the same.

Refine Your Positioning

While you’re at it, refine all of your firm’s positioning language. Extricate all industry catch phrases like “turnkey” and “collaboration” and “storytelling.” If you sound like other firms, you have more work to do.

If your firm has become verbose over the years, strip it down to its bare essence so no one can possibly confuse who you are and what you do. Re-listen to Simon Sinek’s classic TED talk about how to inspire your audience by speaking from your why.

Refresh Your Identity

I recommend you refresh your firm’s identity. This can be as simple as refining your logo to be more modern and simple, all the way up to a full-blown identity rebrand. Your goal should be to evolve your identity to be absolutely consistent with your new focus on value creation. The standard you are aiming for is, “Do we look like who we say we are?”

An Impossible Example

In 2012, I decided that my motion design studio / production company was ready to make the leap to the next level. I made a very deliberate shift to move from a broad positioning (i.e., we do it all) to a narrow positioning (i.e, we are experts who do one thing amazingly well, for a price).

I needed to get our prospects and clients excited while asserting our deep expertise. Here is what we did:

Tweaked our name from !MPOSSIBLE PICTURES to the much simpler, crisper IMPOSSIBLE.
Refined our positioning from a vague “Spots, promos and content for networks, advertising and entertainment” to a more lofty, “Idea-driven design and effects.”
Rejecting SEO conventional wisdom, moved our domain from impossiblepictures.com to impossible.tv.

The results were phenomenal. The new-and-improved Impossible was well positioned to win agency engagements (network rebrands, show launches and client-direct campaigns) and create value like never before. We grew quickly beyond the Push Stage into the Punch Stage and then the Perform Stage in less than two years.

Summing up, when you are ready, consider:

Tweak your firm’s name.
Refresh (or redesign) your identity.
Update your positioning.

Throughout the process, keep asking, “Do we look like who we say we are?” When the answer is “Yes!” you’re on your way.

The well-positioned creative firm keeps asking, ‘Do we look like who we say we are?

Ready to (Re)Launch

Now your firm is ready for the final – and most daring – step in making the leap: because you cannot ever change your old clients’ perception of your firm, you must begin replacing your old clients with new ones.

The good news is that when you pursue new clients, you are not fighting precedent. They don’t know the old you. Your new-and-improved firm is all they know. You can say whatever you like and so long as you look like who you say you are, they will believe it. As Tim Thompson often says, “Steal the opportunity.”

Tip: whenever you land a new, good client, view it as a chance to finally part ways with an old, bad client. Remember, you don’t want more of what you already have, you want better.

I look forward to seeing your firm reach the Perform Stage, with new clients and poised to create your best – and most profitable – work ever.