Every agency conversation about pricing right now ends up in the same place. AI is cutting the hours. If we bill by time, we lose revenue. So we should move to value-based pricing.

There's some truth in that. But it misses where most agencies actually lose margin...and AI doesn't fix that.

The time saved ≠ profit

Your team is getting tasks done faster. Copy drafts, research, first-pass designs and code are all quicker than they were 18 months ago.

But more often than not, the hours saved on tasks are being lost somewhere else. Usually it's in the parts of the project nobody could predict at the start: the moving brief, the new stakeholder who appeared in week six, the feature that turned out to mean something different to the client.

You can't always account for that level of uncertainty.

The cone of uncertainty

The idea of the cone of uncertainty (Barry Boehm, Steve McConnell) comes from software estimation. The idea is simple: at the very start of a project, your estimate could be out by a huge margin, in either direction. As decisions get made, requirements get confirmed and work gets done, the range narrows. By the end, you know exactly what it took.

The problem is that agencies are almost always asked to commit to a price at the widest point of the cone, when they know least.

AI makes the work inside the cone faster. It doesn't make the cone any narrower.

A familiar example

Take a website or app build. The client wants a fixed price. Fair enough, they have a budget to sign off. But the scope can't be fully pinned down until you're into the work. So you end up promising a fixed price and fixed scope, then delivering in an agile way, where learning and changing as you go is the whole point.

Those two things pull against each other. Every sprint uncovers something. Each discovery is small on its own, but together they eat into your profit. AI won't fix that. Producing the wrong thing faster still costs you.

Value-based pricing doesn't remove the risk

I'm a believer in value-based pricing. Charging for the outcome you create rather than the hours you spend is the right way to do it, and for some agencies it works brilliantly.

But a value price set at the wide end of the cone still has the same uncertainty underneath it. The only difference is that the agency now carries all of it. If you've plucked a number out of the air, you have no idea whether you'll make money on it.

That's why you still need to track time. Not to bill by the hour, but to know what work actually costs you, so your next value price is based on evidence rather than hope.

"But AI makes our timesheets useless"

I hear this a lot. It's wrong.

If your team is tracking time accurately, the data shows how long things take now, with AI. That's exactly what you should be estimating from. Old data gets replaced by current data. That's how it's always worked.

The real problem is that most teams don't know why they're filling in timesheets. To them it's admin, or worse, surveillance. If people understood that their data protects the margin and shapes the next proposal, you'd get far better data.

What to do about it

Be honest about where you are in the cone. When you price, know which parts of the project are well understood and which aren't. Price them differently.

Make the uncertainty a client conversation, not a secret. This is the big one. Be clear with clients, from the start, about what can be fixed and what can't yet. Agree how scope will be revisited as it becomes clearer. Most clients would rather have that conversation early than get a nasty surprise later.

Give your team permission to have those conversations. Account and project leads need to feel able to raise scope as it shifts, not simply absorb it to keep the client happy. 

Watch your burn down. Tight project management tells you when you're drifting from the price you set, while there's still time to do something about it. Burn down is your early warning that it's time for the client conversation.

The bottom line

AI is changing how long the work takes. It isn't changing how much you know at the start. The agencies that protect their margin will be the ones that price with the cone in mind, talk openly with clients about it and run delivery tightly enough to spot drift early.

💜 If you're not sure where your margin is actually going, that's exactly what a Visibility Session is for.

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