How Does Performance Based Ad Agency Pricing Work?
By Saif Haroon, founder of SureSocial Last reviewed
Performance based pricing ties part of the agency's fee to results instead of to how much you spend. SureSocial offers it as one of three ads management plans: $2,000 a month plus a share of revenue above 3x ROAS only, and nothing extra below 3x, with a minimum 3x ROAS agreed before launch. The other two are flat fees of $1,500 or $2,000 a month.
What are the main ways ad agencies charge?
Most agencies use one of three models. The difference is what each one rewards the agency for.
| Model | How the agency earns | What it rewards | The catch for you |
|---|---|---|---|
| Percentage of ad spend | A cut of every dollar you spend on ads | Bigger budgets | The fee rises even when ROAS falls |
| Fixed monthly fee | The same amount every month | Doing the agreed work | The fee is the same in good and bad months |
| Retainer plus share above 3x (a SureSocial plan) | A retainer, plus a share of revenue above 3x ROAS | Revenue above the floor | None below 3x: the share is zero there |
What does performance pricing look like in numbers?
Here is a worked example with a $10,000 monthly ad spend, where 3x ROAS means $30,000 of revenue. If the store records $40,000, the performance share applies to the $10,000 above the floor; if it records $27,000, the share is zero.
| Example month | Ad spend | Store revenue | ROAS | Revenue above 3x |
|---|---|---|---|---|
| Above the floor | $10,000 | $40,000 | 4.0x | $10,000 |
| At the floor | $10,000 | $30,000 | 3.0x | $0 |
| Below the floor | $10,000 | $27,000 | 2.7x | $0 |
Why does charging on ad spend cause problems?
Because it pays the agency for spending, not for selling. If spend doubles from $10,000 to $20,000 while revenue stays at $30,000, ROAS falls from 3x to 1.5x, yet a percentage of spend fee doubles.
How is the 3x floor agreed?
On the fee plus share plan, the floor is set before launch from your margins and offer, and written into the plan. These are the steps.
- Free 30 minute strategy call with your ad account open.
- Free performance audit of ads, funnel, tracking and creative, delivered within 1 day of read only access to your ad account.
- Custom 90 day growth plan with the floor agreed and written down.
- Launch and scale: test daily, scale weekly, report on store revenue.
What else do people ask?
Is the performance share percentage published?
No. It is agreed with each client and written into the agreement before launch.
What do creative and landing pages cost?
Each has its own retainer, quoted after the free strategy call once we know the scope.
Is there a minimum ad budget?
We work with businesses spending, or ready to spend, at least $2,000 a month on ads. The full agency service suits businesses doing $30,000 or more a month.