Eric Siu explains how to price agency work as a percentage of client outcomes instead of monthly fees. He landed a $100K retainer by quantifying a prospect's $10M revenue goal, versus the typical $3K SMB rate. The approach works with mid-market founders but fails with enterprises that have rigid forecasts and procurement teams demanding discounts.
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I was actually listening to calls from like 8 years ago when I was on sales calls, right? And so you want to know the difference between a $10,000 a month contract versus a $100,000 a month contract?
$100,000 a month?
Yeah, $100,000 a month.
What's the difference?
Okay, so literally I'm listening to this call, okay? All I had done on these discovery calls, so 7, 8 years ago I was on these discovery calls. Literally I would just say, hey Neil, tell me what your goals are exactly, okay? So what metrics do we need to hit exactly to be successful, right? And you see where I'm going with this. And then I'll be like, okay, Neil, what's the value of meeting that metric? Oh, okay, $10 million. Well, Neil, let's just say hypothetically we can guarantee that we can hit the $10 million 100%. Is it fair for you to pay us $1 million? Why yes, Eric, if you can guarantee it, right? Nobody, like what idiot is going to say no to that, right? I'm going through, I'm like, I'm listening to this segment of the call and literally we priced it on value. We said, okay, we, if we think 50% success rate for us, We're going to take that 50%, multiply it by that 10%, right? Which is $1 million. Then that, the high end of the contract is going to be $500K, then $250K, then like $125K. Okay. Instead of just saying, we're just going to charge you $3,000 a month, which is what SMB people are used to selling. So long story short, I listened to that segment. We had priced this thing on value.
Okay.
And basically one of the deals was the guy was like, oh yeah, no, we don't do the smaller ones. We're going to do the $100,000. Okay. But like that, it was just reframing a little bit, asking a little more, asking about the value. And you can't do that for everyone, by the way, just keep that in mind. But the more you can frame around value-based pricing, the more successful you're going to be. I've literally, I've like, we've done this, like we have like a couple calls recorded where I just did this and we just, for whatever reason, we stopped doing it.
And you can't do this for enterprise deals, by the way, as much as you like.
No, no, no. I was like, this won't work for us. Yeah. You can do this for, we're talking like smaller or mid-market or so, especially if it's founder-driven, they're just like, no, no, especially when there's egos sometimes too, if they raised a lot of money. Oh yeah, yeah, no, we're just going to go for the big one.
Yeah, Gajan from Spiralize, they're based out of Atlanta. They do this—
Great company.
Really well. Their agency does a lot of performance-based stuff. But you're right, this kind of stuff works for SMBs. We don't do it. We've thought about doing it years and years ago. It just doesn't work. Like you go to a company that makes, $10 billion a year in profit.
Forget revenue. They have their forecasts.
Yeah, they have their forecasts. Their CFO's like, oh, this is what we're telling the market. Like, they're not going to do anything that can screw up their stock price.
Yeah. So it's just, I think our thing here is like, it depends.
It depends. But I think you should start implementing this at Single Grain, I guess.
I'm just like, dude, like there's so much game tape and like my blood boils as I listen to that thing. I'm just like, dude, it's really not that hard. I think it's, you know what it is? I would just say for those of you that are listening to this that have the ability to implement this, I think it's for your job is to kind of go there and disarm your sales team and say, hey, look, it's okay. Like, I know you're used to selling it this way, but I'm telling you, if you just frame it first, hey, would you like to make more money? Would you like to make 10 times more money? Right? Maybe just frame it that way. And then like you can have a coaching conversation because, and oftentimes if you're the founder listening to this too, maybe they're a little scared to listen to you. So just disarm them and just say you're here to help them. And that's how you make it easier.
Dude, one thing that people get wrong with sales and marketing, and I hear this all the time, Because a lot of people ask me, how do I go upstream? Even when I was in Singapore, not the most recent trip, but the one before, I did an interview with Tim from Ahrefs, and he was talking about how to go more upstream.
Guess who set that up?
Yeah, you set it up.
That's right.
So I appreciate it, by the way.
All right, so I wanted to take a moment to tell you about my podcast co-host Neil's agency called NP Digital, and they work with a whole host of global companies or global organizations. Also, Neil has SEO tools such as Ubersuggest and AnswerThePublic. All you have to do is go to npdigital.com to learn more, and we'll see you on the other side.
And when I was with Tim, he was asking me questions like how to go more upstream.
I actually listened to that one.
Yeah.
It was a long interview.
It was a long interview. And I get that question a lot. And people believe that enterprise contracts are for a lot of money and they're sticky and they don't churn as much. You know, you can make really great money. And a lot of those things are true, but what they forget is most enterprise contracts, even if they're RFP, sometimes they do, but majority of the time they don't start out at $2 million, $5 million, $10 million, $100 million. They start out really tiny where they test you out with something that's $100,000, $200,000, maybe even smaller, sometimes a little bit larger. And if you do well, You keep getting more contracts, more divisions, more regions, because these enterprise brands typically have a lot of different product divisions because they bought a lot of companies and they're in a lot of different countries. So you can grow your contract by expanding by regions or by division and selling multiple products for them or services. And then it adds up to multiple millions of dollars over time, but it's just a long game and people just believe that, oh, I'm going to end up Getting these enterprise contracts and it's going to be great. It's just like, no, you're going to close a contract and you're not going to get what you want in the first 12 months.
And you might not even be profitable. You're going to take it on the chin, but you're playing the long game. It's, it's, and by the way, when you're in, you're in.
Like, dude, we just had one enterprise company that we work with in one region introduce us to another region and they said, Okay, now that we introduced you to another region, we want a discount.
Mm-hmm.
And I was like, wait, wait, wait, we haven't even closed the other region. And they're like, yeah, yeah, but we want a discount. And there's a certain point, and I was telling them like, we already have terrible margins with this, with your business. And I just shared the results with them. Like I literally was very transparent. I'm like, here you go, here's all the profitability on your account. I'm like, if I do what you're asking me for, I will lose money. It doesn't even make sense for me to keep you on as a customer, but it's not that easy to deal with depending on the region because each region, their procurement departments have different cultures. And some regions, their goal is to just continually squeeze and squeeze and squeeze. And there's a point where you have to say no. Some companies are great though. Like we had one company ask us to go above and beyond, be there for a lot of meetings, Do things that were out of scope, help us on other regions that we didn't even have a contract for. And if we didn't do those things, they would get upset and they would rate us very poorly when we were doing the reviews. So we sat down with this gentleman, older gentleman, I think he's in his 60s or something like that. Nice guy. And I'm like, look, I know you're not happy because we're not doing these things. Here's our contract. Here's what you're asking us for. Here's our profitability on your account. We're losing money. And I know you're not happy. We're discussing on how we move forward. We're open to just ending the agreement or we can readjust the agreement. And they're like, oh, I didn't realize you were losing more money. And this gentleman was really kind. And they're like, look, it's in our company culture to just keep grinding our vendors. And I'm like, I get it. You should do whatever's best for you, but I don't want to lose $300,000, $400,000 on an account a year. That's a lot of money to lose. And they're just like, okay, no problem. We'll fix this. We'll stay within bounds. And, you know, if we want extra work, we'll add additional scope. And I was like, cool. But sometimes you just have to speak up and let people know.
By the way, when I, when I said, um, once you're in, you're in, what I really mean by that is once you're in with the enterprise company, procurement sometimes takes a very long time and you might be taking on a chin for a year or two, but once you're in and you're doing a decent job, they're going to try to expand you because it's easier because they don't want to go through procurement No, they don't, but they usually have to for expansion.
It still goes through procurement, but it's easier because you're in your system, you're already a vendor, they can just easily add you. And for certain things, they don't have to go to RFP again because they have different rules depending on the company. If they onboard new vendors, sometimes they would be like, okay, you want to do this? You want to try to find new vendors? All right, let's issue an RFP. They don't want to waste 6 months to a year of their time. They're just like, let me just onboard someone quickly and just get it done.
It's interesting for us because a lot of the agency deals we have are, I would say, probably more mid-market, but on the Carrot side, we're going through procurement quite a bit. Like it constantly gets thrown in front of us, but you can pick the next one.
I look at, before we pick the next one, I look at your Single Grain and Carrot business as 2 different types of businesses because it's different customers.
Yeah, I look at it as the same because Single Grain's ultimate mission, and my team will listen to this, but the ultimate mission is focusing on B2B, and so it's the marketing partner that focuses on B2B customers. Sorry.
Yeah, yeah, no, that makes sense.
Yeah.
