Most firms feel they’re stuck on a treadmill when it comes to agency compensation. Actually, it’s more of a time warp. That’s because the cost-plus model employed in most agency-client agreements dates back to the early days of the industrial age.

It’s a curious fact that advertising agencies don’t know much about selling — at least when it comes to selling their own brand. Even though agency professionals show good sense (and sometimes sheer brilliance) when crafting messaging strategies for their clients, this is rarely applied to how they market themselves.

Do you feel locked in a zero-sum game with the professional buyers of your services (procurement)? Most firms do. A zero-sum game is one in which gains for one party result in losses for the other party. In effect, each party is fighting for a bigger slice of the same pie.

The last time you bought a new pair of shoes, did you first demand to know the costs that went into manufacturing them? It seems like a ridiculous question because buyers rarely (if ever) have visibility into the costs of the seller. Except in the professional services business.

You’ve just found $100 on the sidewalk. Should you put it under your mattress or buy a lottery ticket? What role does your tolerance for risk play in your decision?

If your firm sells hours, how do your clients know if they're paying for "busy fools" or "eureka moments?" This is the provocative question raised by David Meikle in How to Buy a Gorilla. The billable hour, while arguably an easy thing to track, is not an easy thing to value.

The next time a client requests a set of “deliverables,” remember that this is not the real reason your firm was hired in the first place. You were hired to deliver business and marketing outcomes. The deliverables are just a means to that end.

The way to win more business is not to offer the best price, but rather the best pricing approach.

Would you like to earn money while you sleep? Most of your clients do.

While most product and service companies have diverse ways of generating revenues, agencies and other professional firms generally don’t make money unless they’re recording hours on a timesheet. “Work a million hours, make a million dollars,” as the saying goes.

Is doing better enough? Marketing professional Harry Beckwith asks us to imagine the typical year-end company meeting in which the CEO’s approach to continued success is "Let’s look at what we did last year, and do at least 15% better."

Upon his return to the company he founded, Steve Jobs’ first executive action was to announce that Apple would scrub almost all of the 300+ projects currently under development and instead focus on no more than four.

Would you rather be hired for your ability to execute, or your ability to solve? Which is more valuable?

Do you perform an annual assessment of your firm’s strengths and weaknesses? Most of the firms in this habit have a similar way of interpreting the results: breeze right past the strengths and instead focus laser-like on the weaknesses. In extreme cases, managers ignore the findings about strengths altogether and quite literally obsess about the weaknesses.

If it feels like you’re in an unrelenting race for new business, competing against agencies offering similar services in a similar way, there’s an easy way out: stop offering similar services. The new business frustration experienced by talented agency teams is largely of their own making, the result of getting caught in a cycle of “harvesting” instead of “planting.”

Agencies are routinely given various “Scopes of Work,” then dutifully proceed to fulfill their client’s requests. But what’s missing from this sequence of events? What should come before the SOW? Our answer: the SOV — Scope of Value.

What makes a great restaurant? The things that are not on the menu. The world’s most mediocre restaurants famously have virtually everything on their menus, making them average at everything and excellent at nothing. Similarly, you could argue that a great museum is defined by the things that are not on the walls. 

If there’s one indisputable economic principle, it’s that incentives matter. Inside professional firms, some incentives are obvious and overt. Firms are highly incentivized to issue timely and accurate billing, for example. The consequences of sloppy invoicing manifest themselves quickly in the form of unhappy, frustrated clients. 

Imagine a coffee shop in which there is only one size coffee. Or an electronics store that sells only one size TV. In the consumer goods world, we are surrounded by options. Small, medium, large, extra-large. Would it make sense for a professional firm — like an agency — to do the same?

If you’re like most agencies and other professional firms, you’re likely missing a critical component in the model upon which you have built your business. Here's why having a cost structure is not the same as having a revenue model …

When a talented ad agency transforms the global reputation of a brand through a brilliant marketing program based on unique customer insights, that’s an example of the kind of high-value problem solving professional firms get hired for in the first place. It’s the kind of “magic” that characterizes knowledge work, creative thinking, and professional expertise …