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Performance based or flat fee: who carries the risk

Paying for results sounds like the fairest deal on the table. You pay when it works. It is rare in practice for a reason that has nothing to do with greed: the agency does not control the thing it is being paid on, so the arrangement quietly becomes something else. A percentage. A floor nobody mentioned. An argument about what counts.

Performance pricing moves risk. It does not delete it.

Risk does not vanish when you shift it. It gets priced. An agency carrying delivery risk charges for carrying it, in the rate, in the length of the commitment, or in a floor underneath the variable part. The honest versions of this model are explicit about that. The rest advertise the upside and bury the floor.

There is a second effect that is easier to miss. Whoever carries the risk chooses the work. An agency paid on a result will do the work most likely to produce that result this month, which is not always the work your business needs this year.

A percentage of ad spend is the one to watch

The most common variable structure in paid media is a percentage of what you spend. The incentive runs backwards and it is worth saying out loud. The agency earns more when you spend more, and the one recommendation that cannot comfortably be made inside that model is spend less.

We never take a percentage of ad spend. Not a reduced one, not a sliding one, not a performance bonus dressed as one.

Ad budget goes directly to Meta, never through us, and we never take a percentage of it. The management fee is from $2,500 a month. We recommend a minimum of $1,000 a month in budget on top of that for the data to mean anything.

Which means telling you to cut a budget, pause a campaign or stop running ads this quarter costs us nothing. That is the only condition under which the advice is worth hearing.

Cost per lead is objective until you define a lead

Paying per lead sounds measurable, and it is, right up to the definition. Is a form fill a lead? A form fill with a real phone number on it? A call that lasts longer than a wrong number? A quote request from inside the service area, in a category you actually serve, from somebody who answers when you call back?

Every dispute in a cost per lead arrangement is a definition dispute, and the side that wrote the definition starts ahead. If you buy this way, write the definition yourself, write the disqualifiers, and agree how a disputed lead gets reviewed before the first invoice rather than after it.

Revenue share needs your books

Revenue share is the cleanest version in theory and the most invasive in practice. It needs attribution both sides trust, visibility into your sales data, and a rule for the deals that would have closed anyway. It also sends your bill up in your best month, which is the month you least want a cost tied to a percentage of it.

When paying for results is the right answer

This is a real category and some of the people in it are very good at it. The model works where the measurement is clean: ecommerce with reliable tracking, one conversion event that actually matters, enough order volume for the numbers to be stable, and a known margin per unit. Affiliate arrangements and pure media buying fit the same shape.

It is also the right answer when a flat fee is the thing stopping you. A smaller arrangement you will genuinely commit to beats a better one you cancel in month two because the invoice frightened you. If that is where you are, buy the variable deal and get started.

What it does not fit is a local service business with phone leads, a long sales cycle, offline closing and a website that has to be built before any of it works. There the measurement is too noisy to pay on, and the structures that try anyway end up pricing the noise.

Why we charge a flat fee

Because it is the only structure in which we can tell you to spend less, pause a campaign, kill a page or end the engagement without the advice costing us money. That is the whole argument, and we are not going to dress it up as generosity.

90 day initial term, then month to month at the same price. The industry asks for 6 to 12 months. The term does the job a performance clause is usually there to do. It gives you a defined point at which you judge the work and leave if it is not paying for itself.

If you are shopping for a performance based marketing agency, that is a legitimate thing to want and this page should help you buy one properly. Ask what the floor is. Ask who writes the definition. Ask what the structure makes it hard for them to recommend. Then ask a flat fee agency that same last question.