We all know what it’s like to be in your shoes: you’re just the little guy trying to make a name for yourself and your company. You work tirelessly to develop relationships with clients, pitch new business, and make sure everyone is happy within the agency-client relationship.
You’re good at what you do. Everyone knows it. But sometimes, getting paid can feel like an uphill battle – especially when you’re using manual methods of accepting payments from your customers. It’s more of a pain than anything else.
If this sounds familiar, then let us help! In this guide, we’ll talk about how marketing agencies get paid, different payment tools available there that you can use to manage everything seamlessly, and more tips on generating invoices for your clients.
So let’s begin, shall we?
The first part of this guide will explain how different marketing agencies get paid. The second section will look at the various tools to manage payments. The last section will give you tips on generating invoices and collecting payments from your customers.
So, here’s the ‘Ultimate Guide To Accepting Payments for Your Marketing Agency!’
Table of Contents
How Do Marketing Agencies Get Paid?
Out of all the questions asked in agency life, ‘how do agencies get paid?’ has got to be one of the most common ones I’ve heard over the years.
There are four main ways that marketing agencies are typically getting paid by their clients: Hourly rate, Fixed-pricing, Commission-based, Retainer-based. We’ll look at each of these different business models in detail below.
Hourly Rate: This is one of the oldest ways for agencies to charge their clients – and remains popular today among many marketing agencies. As you might expect, this method involves charging your customer by the hour for everything you do for them. While this can be easily defined on paper, things get a little trickier when pricing ‘hourly’ work.
Some agencies choose to use an hourly rate dependent on their experience (and who they happen to be billing, i.e., some give discounts to new customers), while some just use what feels like ‘the industry average.’
Whatever you go about it, though, it’s crucial to have a pricing model in place before you start pitching business so that your clients can have an understanding of what you do. This will help them feel more confident about the potential costs involved if they hire you.
Fixed-Pricing: Fixed-pricing charges for marketing (and consulting) work based on its result, not on time spent working on it.
There are two types of fixed-pricing models that agencies use:
- Time & Materials Pricing: You bill your clients once they provide all the materials for their campaign (e.g., copy, images). The average retainer (minimum monthly fee) for this type of project tends to be around $3,000-$5,000 (and can go as high as $10,000+ if you’re good).
- Cost Per Thousand: You bill your clients for every 1,000 impressions (i.e., views) that their campaign generates. This is usually the most common pricing model for marketing agencies. The average CPM price tends to be around $1-$3, depending on what industry you specialize in and how much your agency costs.
Commission-Based: This is where things get a little more interesting! Sometimes using either of the above pricing models doesn’t work so well – especially when pitching new business to potential clients who don’t know too much about marketing.
Clients can sometimes find it tricky to understand how much time should be spent on something or what material should be provided for their campaign.
The solution? Commission-based pricing – some might say this is the most ‘honest’ way of charging your clients! This method means pitching fixed prices based on what you (the agency) think will cost vs. how much time/materials they (the client) will provide.
It’s also great because you can give them a ballpark estimate before starting work to help them plan better, and that often eliminates any confusion during the project itself. The average commission fees range between 5%-15% (or more if it’s an exclusive, direct deal).
Depending on what type of campaigns you do, you can expect a minimum fee for letting a client use your services, e.g., $1,000-$10,000/month.
Retainer-Based: This is the most popular pricing model for agencies that charge their clients monthly. Instead of billing your client per project, you charge them a flat fee every month (i.e., retainers) for providing marketing services whenever they happen to need them.
It’s an easy way for marketers to make sure that they’re working with the right people, and it also makes it clear what your services are worth – something that can come in handy when pitching new business to potential clients.
The average retainer fees tend to be around $3,000+/month, depending on who you are and what industry you specialize in. Some marketing businesses have charged over $10,000/month for their services!
The best thing about this pricing model is that you can be as open or secretive about it as you won’t – remember to give your clients all the details during the early stages of your relationship.
Generating Invoices and Collecting Payments
What’s the point in setting up a great marketing agency if you don’t know how to bill your clients? It might seem like common sense, but you’d be surprised at the number of agencies who neglect to take care of this vital process.
The first step would be setting up an account with PayPal (or whatever payment processor you use). You’ll need different types of invoices to send out depending on how much work has been completed.
You should also be ready to answer any questions your clients might have about billing or payment terms. This is important because it can make or break a deal!
Choosing the Right Tool to Manage Payments
As an agency owner, you’ll probably want to keep track of all your invoices and how much money you’ve sent/received from various clients. There are plenty of tools out there that let small businesses create professional invoices quickly and easily (i.e., no design skills required). Some popular ones include Freshbooks, Wave, Xero, etc.
These tools are excellent for managing regular marketing services, but they won’t work well for agencies that take on several different types of projects/clients quickly. If that’s the case, you might need something a little more complex.
Here are some tools to consider:
- Client reports and financial dashboards – Crunch, Xamtium, SumAll, etc.
- Collaborative project management – Asana, Basecamp 3, Trello, Slack
- Tracking sales leads – Close.io, SalesforceIQ, PipelineDeals
- Invoice generation – Bill4time
Finding the right tool to manage your agency can be tricky, but it doesn’t have to be! It only takes a few seconds to test drive several different types of software until you find one that works well with your agency’s needs.
Conclusion
Setting up an agency is all about providing your clients with the best marketing services that you can. Some agencies rely on hourly rates, while others charge a flat rate or use a retainer system.
No matter what strategy you choose, it’s crucial to have all your billing needs covered so that you can spend more time doing the work and less time worrying about invoices!
