Should my agency move away from time and materials?
Yes, deliberately and over time. Time and materials is the most common commercial model and the least valuable. It commoditises your time, caps income at the hours you can sell, and hands every efficiency gain to the client. Buyers pay a premium for agencies that price on value with defined scope. The shift takes operational capability and leadership conviction, not just a new rate card.
The commercial framework is the mechanism that converts your positioning into income. Get it wrong and no amount of delivery excellence will save the margin.
What time and materials really costs you
T&M commoditises your time. It caps your income at the hours you have available to sell. And it transfers every efficiency benefit to the client: the better you get at the work, the less you earn from it.
That last flaw is about to get much more expensive. As AI strips hours out of delivery, an agency selling time hands the entire gain to the client by design. Your commercial model decides who keeps the benefit of your improvement. Make sure it's you.
What to build instead
The income to aim for is specific in scope, contractual in commitment, and outcome-oriented by design. Outcome or deliverable-priced agreements with defined scope, a quarterly scope refresh and a minimum commitment period produce the most defensible income and the strongest buyer signal.
Two warnings from experience. Framework agreements look predictable but have proved commercially undefendable when clients change priorities. And any open-ended scope attached to a fixed fee guarantees over-service over time: you absorb the cost, the client absorbs the benefit, and everyone pretends it's fine until the P&L says otherwise. [Internal link opportunity: the paper references your piece on losing faith in retainers. I could not verify the page is live at hunterhawes.com/blog/why-i-lost-faith-in-retainers, so confirm before linking.]
Buyers read your model mix directly. A majority of income that is outcome-based or deliverable-priced with defined scope earns a premium, because it demonstrates the commercial confidence to price on value rather than cost. Fees that vary widely by individual or circumstance signal a leadership confidence problem as much as a commercial one.
Why most agencies never make the shift
I've seen agencies talk about value pricing for years without ever doing it. The ones that make the shift tend to have a leader who was fed up selling hours and working weekends, and decided to change the business.
That's the honest answer about what this takes. Not a pricing framework. A leader who genuinely believes the agency's work is worth more than the hours it takes, and who can hold that position under client pressure. If you don't believe it, your clients won't either.