If you have just started working in an agency, you are probably wondering: what is a rate card?
Basically, each service company can apply its own rate cards to clients’ projects. The objective is to frame the content and rates for better budget control. The rate cards then play a key role in financial reporting, particularly for comparing the sold vs. the achieved or for forecasting.
We note two main trends in terms of rate cards:
- The creation of a template containing all the profiles that you usually sell to your clients
- The creation of a template of the phases necessary to produce a packaged offer
The more detailed your charts are, the more time your employees will save when creating quotes. The prices, descriptions and quantities in the price list remain editable when creating quotes on Furious. It is also possible to create content blocks directly on the rate card templates that will be pre-loaded on your quotes. Time saving guaranteed!
In this article, you will discover :
- the importance of rate cards
- how to set up a standard (default) rate card for your agency
- the three main challenges that agencies face with rate cards
the importance of rate cards
So you have heard of pricing schedules or rate cards. But why is it essential for an agency to manage its price lists properly? Can it affect the success of your business? [Spoiler: YES]
Rate cards can really contribute to the financial success of your business. If your rate cards are set up, used and regularly updated, it will be more difficult for your customers to try to lower your prices, for example. Not to mention saving time and reducing the risk of errors for your operational teams!
By setting standard rates for your agency’s services, you also set clear expectations for clients. This in turn will have a positive influence on the exchange of information and the projects will be more successful.
Finally, it prevents you from simply forgetting to estimate something. By loading a ready-made template, it is impossible to forget project management, quality, reports, management committees etc…
How do you establish a standard rate card for your company?
There are a few key elements to take into account when setting up rate cards in your agency :
- Will you establish price categories? For example, standard rates (default rates), negotiated rates, rates for non-profit customers, or even rates for urgent requests.
- Will you establish differentiated rates according to the profile of your employees? A consulting director costs the company more than a project manager, for example.
- Do you already know the total cost of your full-time employees (FTEs)? You need to include salaries and benefits to obtain this amount.
- Do you know your company’s overhead cost per employee? This is calculated by dividing your company’s overhead costs by the total cost of all your full-time employees.
Now let’s examine each of these elements in more detail.
1. Should tariffs be differentiated according to the type of project?
Depending on the variety of services offered by your company, you will decide whether or not to create different price categories. Maybe a standard rate will not be enough to cover the costs related to last minute requests for example?
Optionally, you can assign a rate card to a client. This allows you to create a specific price list for a client if your selling prices have been negotiated for example (when creating the quote on Furious, this will appear at the top of the drop-down list with the client’s name).
2. Should tariffs be differentiated according to the type of profile?
This question is usually answered by comparing the differences in costs per employee. Media or PR (public relations) agencies often use a fixed rate card for all their profiles. This question is usually answered by comparing the differences in costs per employee. Media or PR (public relations) agencies often use a fixed rate card for all their profiles. Differentiated rate cards are mainly used in digital agencies or 360° agencies, for projects where several profiles work together on the same project for a fixed period.
Of course, on Furious you can accumulate as many rate cards as you want, in day/unit/hour rates, by simply going back to the drop-down menu and selecting a new one.
It is also possible to customise its content if required 🙂
Another tip: on Furious, you can also fill out your quote in charge plan mode!
3. How to create a cost-effective pricing schedule for your agency?
Once you have calculated the total cost of your full-time employees and your overhead costs per employee, increase the amount by 20%. And there it is!
The three main challenges of rate cards
Setting up a rate card for your business can be simple, but managing it properly is not always so easy.
Over the course of time, your agency will most likely face common problems with rate cards. The three main difficulties are as follows:
1. Obsolete rate cards
A good practice to keep in mind: update your rate cards every year.
Because the main expenses of your company (salaries and general expenses) usually change every year, or even more frequently. So it will help you to make sure that you remain profitable and that you are always competitive on the market.
2. Inconsistency in applying established agency rates
Sometimes we all offer an ad hoc discount or, worse, agree to do work for free to save a client or a project. Although our job is to offer services, it is essential to respect your pricing structure in order to enhance your service offers.
3. Update agency rate cards in one place
To anticipate conflicts and communication problems, it is important that you centralize the management of your rate schedules in a business management tool.
The main advantage of updating rate cards in one place is obvious: everyone has access to the latest rates for your company’s services. This avoids confusion and mistakes in the way services are charged.
Maybe you are part of an advertising agency? Or maybe you work in a digital agency, or an ESN or for a software publisher? Depending on the type of business you run, your rate cards will be different.
The key is to standardise the rates for your company’s services and have your staff update and monitor these rates to maintain your financial health.
To learn how to create and set up your rate cards in Furious,contact the Success team!