Author: Ray Martinez
SEO agency owners and freelancers need to protect their margins to ensure scalability and profitability—especially as generative AI and other developments disrupt the industry.
To accurately assess your agency's profitability, it’s essential to understand your earnings relative to expenses. After all, your team might produce top results for your highest-billing client while losing money for the company.
As VP of SEO for Archer Education, I’ve felt the pressure of both having to price my services accurately and the pain of not knowing how to price a project appropriately. How do you balance what it takes to win versus what it costs to get there?
So, how can you set competitive pricing to safeguard profits and margins? Below, I’ll walk you through multiple considerations and steps to take to define your SEO agency pricing with the goal of creating a healthy profit margin.
Table of contents:
Determine your value proposition
The first step to defining your SEO pricing model is understanding what makes your agency valuable to potential clients.
Determining your unique value proposition (UVP) will help you better contextualize pricing for your products or services. Your UVP is a statement that communicates your business, product, or service’s key benefits—it’s essentially a “why” statement. As in, “Why should this client sign with your business?”
Examples of UVPs for various agency types
Below is a general breakdown of UVPs for the most common types of SEO agencies/service providers.
Agency type | Unique value proposition (UVP) |
Independent contractors/Practitioners | Cost-effective and highly tailored SEO solutions, ideal for small businesses, startups, and individual brands seeking dedicated attention and customized strategies. |
Small boutique agencies | Customized SEO strategies that are agile, adaptable for rapidly changing market conditions, and done at scale. Their focus on niche markets allows for deeper understanding and expertise. |
Mid-sized agencies | Tailored strategies with a focus on scalability and growth. Offers a mix of specialized and general SEO services suitable for mid-level markets. |
Enterprise-level agencies | High-end, data-driven SEO campaigns leveraging cutting-edge technology and extensive research capabilities. Suitable for large enterprises with complex needs. |
To understand your agency’s UVP, assess the factors that help set you apart from other SEO service providers.
One factor might be the composition of your team and their strengths—in this case, you might build your UVP based on breadth or depth of expertise, diversity, capabilities, etc. Does your agency focus on a niche, product, or industry? If so, that should probably be part of the UVP you communicate to potential clients.
For example, at Archer Education, we specialize in higher education enrollment marketing. We have years of experience in the industry, can speak to historical trends, as well as forecast future trends. As a team, we can look at a university’s down-funnel metrics and diagnose the critical issues behind underperformance pre- and post-lead. That type of expertise translates to real value, which we convey through our UVP.
Now that you’re on your way to pinpointing why a client would be interested in your SEO services, it’s time to look at how your value proposition, pricing, and benefits compare to competitors in your space. In doing so, you can identify the critical benefits of your products or services (or a competitor’s), enabling you to make better informed decisions on agency pricing.
Pricing models for SEO agencies
Now that you have a deeper understanding of the value your agency provides clients, it’s time to determine the most appropriate pricing model for your agency.
Monthly fixed-rate pricing
For SEO agencies, a fixed-rate pricing model involves setting standard prices for specific services or bundles, offering simple billing and transparent upfront costs for clients.
However, my experience at a small business-focused SEO agency revealed challenges with this pricing model, especially for lower-tier clients paying $500 (or less) monthly. The effort required to generate results for these clients often exceeded the value of their payment, leading to overextension and financial strain for the agency. This situation highlighted the risks of over promising and under delivering, as it impacted client retention and the agency’s financial health due to a lack of clear expectations set from the start.
Hourly pricing
The hourly rate model calculates pricing based on the amount of time your agency spends on SEO tasks, making it critical for freelancers, consultants, and agencies. It allows for flexibility and compensates you for all work performed. However, it can lead to unpredictability in billing for both the provider and the client.
For freelancers and consultants, your hourly rate is heavily influenced by the market cost for similar services, making pricing straightforward. Check out the hourly rate (including the high, median, and low ends) on sites like Salary.com, Glassdoor, and Indeed.
“A drawback to this pricing model is it can open up an avenue for clients to begin scrutinizing the amount of time billed for certain work. Many times, this can be solved with some additional client education, but that will depend on the client-agency relationship.” — Mary Carroll, Managing Director, Partnerships at Archer Education
If you set your hourly rate on the high end, be prepared to justify that cost. If you set a rate on the low end, this affects the way people perceive your agency or services. You may also see high turnover with clients on the lower end due to budget constraints and perceived value.
To calculate your agency’s hourly rate, you’ll first need to calculate your hourly cost by dividing a project’s total cost (not including your profit margin) by billable hours.
Profit margins will vary based on your financial goals and funding.
This method requires that you know the actual cost to provide your products or services—not just the price the client pays. Track the time spent on each part of a project to calculate average completion hours, then multiply by your hourly rate (excluding profit) to estimate the cost.
Undertaking this detailed process, as I did in 2023 with the help of project managers, is essential (especially when managing numerous deliverables), and you should prioritize it for your organization.
Project-based pricing
This model bases pricing on the complexity, duration, and resources required for individual projects. The agency (or freelancer) evaluates each project individually and sets a price according to the project’s specific requirements. This model is suitable for one-off projects or when the scope of work is clearly defined from the start, such as technical SEO migrations or other specialized projects.
The most critical piece of project-based pricing is developing a scope of work. If a new need arises, this will be outside the scope of work, leading to three potential outcomes:
Creating an addendum to cover the additional costs
The client handling the additional need independently
The agency absorbing the cost
Any of these options can lead to friction in a client relationship. If you offer project-based pricing, it’s best to ensure that the language in your scope of work enables you to avoid scope creep.
“One approach to that out-of-scope language is including an hourly rate for out of scope work that may need to be covered. This is a simple way to prepare clients for the fact that changes may arise throughout the project and to ensure you can invoice for your SEO team’s work!” — Mary Carroll, Managing Director, Partnerships at Archer Education
Retainer-based pricing
This approach involves providing ongoing SEO services for a fixed monthly or quarterly payment. Retainer-based pricing provides agencies with a stable income, while ensuring clients receive continuous support for their SEO strategies.
In my current role, we deploy a similar model. The retainer model creates tiered pricing based on the number or types of programs we support. For example, we may work with a university with multiple bachelor’s degree programs. As the number of programs we support grows, so does the budget. So, for a school with one program, we might start at a $10K per month retainer; as they add two programs, spending will ramp up to $25K per month or more.
Since we know that the relationship with the client will continue through the contract period, we can plan for the future and set quarterly strategies, enabling us to tackle new needs and opportunities. This model differs from a fixed-rate contract, which offers a set list of services. The retainer model allows for more customization and flexibility for a partner.
“Ensuring clients get what they paid for (from an hours and deliverables standpoint) is a vital component of this pricing model,” Carroll said. “This model can also leave an agency vulnerable to dependency on fewer clients, which is a significant financial risk,” she added, noting, “If one or two large clients leave, expect a significant drop in total revenue.”
Performance-based pricing
Performance-based pricing ties your compensation to achieving specific, measurable SEO outcomes, such as rankings, traffic increases, or other KPIs. It incentivizes agencies to deliver results but requires explicit agreement on targets and measurement methods to ensure accountability.
Performance-based pricing models, while potentially lucrative, differ across industries. For instance, online program management (OPM) companies that offered services like marketing and admissions to support online education growth initially benefited universities by attracting more students and enhancing technology access. However, these revenue-sharing agreements, which often locked in long-term commitments, have been criticized for exploiting universities and burdening students with additional costs. Recently, the US Department of Education’s scrutiny of such deals has led to the downfall of major OPM providers.
Let’s take a look at some common performance-based SEO pricing structures and the agency types that use them below:
Performance-based model | Description | SEO agency type |
Revenue sharing | Sharing of profits and losses between parties |
|
Dollar amount per sale | Fixed amount for each sale |
|
Commission-based | Percentage of sale value as commission |
|
Affiliate marketing | Earnings from promoting others |
|
Cost-per-action (CPA) | Payment for specific actions (sign-up, purchase, etc.) |
|
Cost-per-click (CPC) | Payment for each click on an ad |
|
In specific industries, we’re seeing a higher adoption of performance-based models because of their lucrative nature. The publishing side of the SEO industry is an excellent example of this. Companies like Archer and Red Ventures offer clients a cost-per-click or cost-per-action pricing model. They use relevant owned sites to drive organic traffic and conversions for clients across various industries and/or verticals. In higher education, this translates to offering university leads that become enrolled students. Niche.com is another company that combines the CPC/CPA approach with affiliate marketing and links. Both Niche and Red Ventures have a massive footprint that extends across multiple verticals.
SEO agency pricing model table
Pricing model | Pros | Cons | Suitable agency types |
Fixed-rate | Predictable pricing | Price may not reflect actual effort |
|
Hourly | Flexibility in billing | Unpredictable costs for clients |
|
Project-based | Customized pricing | Potential for scope creep |
|
Retainer-based | Stable, predictable income | Potential for dependency on a few clients |
|
Performance-based | Lucrative for high-performing agencies | Complex to define outcomes/expectations |
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Refer to the pricing models mentioned above to decide the most suitable model for your agency, but keep in mind that your agency might also need different pricing models for different client types. And, before you finalize your pricing, remember to familiarize yourself with any laws, regulations, or caveats that could affect your business.
Now that you are closer to providing actual quotes to clients, let’s discuss how you can protect your pricing—by defining the scope of your work.
Define your statement of work
A statement of work (SoW) is a document produced during your sales and contract period that outlines a project’s:
Work activities
Deliverables
Timelines
Milestones
Goals
A good SoW combats scope creep and sets reasonable client expectations.
When building your statement of work, ask the right questions. If it’s a technical SEO project, for example, I like to ask things like:
Who’s tackling implementation for technical SEO? This is important because you need to understand the implementation resources and the hours you’ll need to charge for them.
Are you expected to manage uploads in the CMS? Getting your hands dirty in the front end of a CMS can take time and effort, which can hurt your profit margins.
What products, programs, or services do we support, and what is their priority? Some products or services are more challenging to compete for than others, which will dictate a need for spending. For example, due to a product's complexity, you may need to hire a specialized writer who charges more per word.
What problem are you looking to solve? Are you looking for lower cost per acquisition, lead, or revenue goals? Understanding the client’s needs allows for detailed scoping by addressing their core issues.
In my experience, asking these questions builds trust with your client and sets your agency up for success. When these questions aren’t asked, you (or the client) will absorb unexpected costs. Schedule detailed discovery meetings to help avoid this situation and inform your SoW.
Communicate pricing and expectations to clients
The next step is to communicate the statement of work you’ve built to your clients.
Use a document, a pitch deck, or a spreadsheet. This representation of work protects your organization and readies your client for what’s coming down the pipeline.
Whatever method you choose (I prefer pitch decks), I recommend connecting deliverables and tactics to a particular goal or objective—this enables you to provide transparency and build trust with your clients.
I use quarterly strategies to adjust deliverables for my clients to allow us to be agile with our application of a data driven approach. These strategies align us with our priority programs and let the clients know how their money is spent.
In my deck, I’ll refer back to the previous quarter’s goals and benchmarks to show a complete path: If we’re down in traffic and conversions, here’s what went wrong. If we’re up, here are the tactics that got us there. In both instances, we set up what’s coming next and why.
Evaluate and adjust your pricing model
Once your agency pricing is established and working, it’s time to measure success. You’ll want to understand if what you’re charging is profitable at a deliverable level. Is your agency making money from the pricing model? Are you running over on costs?
There’s no secret formula here—compare your estimated expenses to your actuals to stay on top of costs and get an accurate measure of your profit margins. In addition, your sales team should review the number of deals closed since implementing this pricing model. Are you winning new business, and is that business retained?
Keep in mind that your pricing model can (and should) change under certain circumstances. It may be more efficient to provide different pricing if you find that your client base has shifted. Your profit margins may adjust depending on the demand for your services, and even that can affect what’s profitable for your agency to offer.
Benchmark and iterate to scale your pricing and grow revenue
After you’ve settled on a pricing model, it’s time to test it with benchmarking. After all, the only way to craft a pricing strategy that resonates with your agency and clients is by diving deep into the figures and getting your hands dirty.
When you launch your new pricing, track your deals in whatever CRM you use. Compare your deals won/closed rate to the previous period to gauge the success of your new pricing structure from a client perspective. On the backend of a deal, track internal and external costs to ensure that your products or services are profitable.
And, compare your pricing to your competitors to get insight on your strengths and weaknesses. Understand your costs, team strengths, competitors, and your brand strengths. By doing this, you’ll be well on your way to scaling pricing that helps you sustain and grow revenue.
Ray Martinez is the VP of SEO at Archer Education, where he leads a dedicated team comprised of senior analysts, specialists, and project managers. Together, they craft, implement, oversee, and evaluate SEO strategies for prestigious higher education institutions across the globe. Twitter | Linkedin