When shopping for communications support, most people are focused on beautifully executed campaigns and award-winning materials that magically convert prospects into customers. However, if your eyes glaze over when it comes to project estimates, billable hours and timely invoices, you're not alone.
Whether you’re actively seeking a new agency or are simply evaluating the vendor you’ve got, the questions below are key to helping you weigh vendor strengths.
1. What types of payment options are possible?
The three most common ways of paying for marketing and design services are by the hour, by the project and by the month. Few agencies offer all options, so it’s important to know what’s right for you before shopping.
Hourly – For smaller projects or if you if want to “try before you buy” with a new vendor, an hourly rate may be a reasonable starting point. However, be sure to set some thresholds. For instance, you may require the agency to seek your approval before exceeding a certain number of hours each month. You also should request to see an accounting of all billable hours, but review this with the understanding that creative work takes time.
Project Basis – If you don’t anticipate much ongoing work, paying by the project can be a good choice. Work that often falls under this category includes product brochures, trade show booths, one-off content creation and signage. Just know that when you deviate from the original scope of work, your overall project cost will likely change. Make sure the agreement specifies that you must approve all cost increases before the work is performed.
Monthly Fee – If your work is ongoing, a monthly fee will be the most economical and efficient route. By discussing your needs with the vendor, a monthly rate will be set that covers an average month. Sometimes there will be a little more work to be done and sometimes there will be a little less, but remember, you’re shooting for a monthly average. Also keep in mind that the first few months can be more labor-intensive, so a 3-month start-up period with more billable hours is a great way to supercharge the account. After the groundwork has been laid and your account team become efficient, the monthly hours can be dialed back.
2. What agreements are needed to get the relationship off on the right foot?
Our main advice about agreements is that if you need a lawyer to interpret them, RUN! Seriously, it is important to think through the elements that are important to you like the effective and end date (or "evergreen" agreement), scope of work, cost estimate, approval requirements, billing process, etc. Depending upon the agency’s practices, these details may be contained in one or more documents like the contract, letter of intent and/or cost estimate.
3. What happens when the scope of work changes?
Imagine you’re an architect and the client has approved the blueprint for a new house. Midway through construction, consider what happens to your timeline and budget should the client suddenly request an additional bathroom. The same holds true with most marketing projects. As the client, you can request as many changes as you like, keeping in mind that it almost always will impact the agency’s ability to meet the deadline and remain within budget.
When approving the initial scope of work, be very clear how many revisions you are allowed without incurring an extra expense. You also should protect yourself by ensuring that when changes affect the price, the agency is very clear they must obtain your written approval before proceeding or risk not being paid for the extra work.
4. How are third party expenses handled?
The cost estimate should outline what expenses may be included in the invoice without seeking prior client approval. These typically include items like stock photography, color comps and mileage. As the client, however, you can negotiate how big-ticket items like printing and media purchases are handled. If the agency fronts the money for a third party expense and you pay for it on a single bill, you’ll typically pay a 15-20% markup for the handling. If the bill is sent directly to you for payment, there’s an instant savings.
5. How are billable hours tracked and reported?
Most agencies will provide a monthly report outlining all time spent on your account that is typically tracked by the quarter hour. You may be wondering why anyone would pay for 15 minutes of time when you were only on the phone for 5 minutes. However, stop and consider what that interruption means to the person on the other end of the call… They stop what they’re doing, shift gears, take the call, handle a follow-up task such as writing a note, log their time and spend about 20 minutes after hanging up trying to get back on task. Or, in most cases, they simply don’t even record the 2-minute call or lump it in with other admin tasks.
The point here is to not get too wrapped up with each line item or you’ll drive yourself (and your agency) crazy. Rather, focus on the results and look for trends on the time report that consistently seem out of line. Time tracking is tricky business, which is why some agencies have moved to results-based work where they don’t track any time at all.
6. When will I be invoiced?
There are many ways to handle invoicing clients. Many agencies invoice during the first week of the month for time worked the previous month. Some bill the monthly fee prior to the month beginning, then work off of that fee throughout the month. And others send progress bills, which are partial payment invoices for long-term projects that span multiple billing cycles. If you have a preferred payment plan in mind, it never hurts to have that discussion prior to account startup.
7. Is there an out clause should either party wish to discontinue the relationship?
Each agency is different when it comes to cancelling a contract. Some require clients to pay the remaining portion of the contracted time period, some want 60 days written notice and some are okay with a few days. Whatever the arrangement, keep in mind that a number of factors out of your control may lead to the need to discontinue an agency relationship. In fact, everything may be great, but someone from above can come along and slash the marketing budget, leaving you to sort through the fine print. As a result, most agencies that care about repeat business and industry referrals have become very flexible with their cancellation policies.
It’s the nature of this business to focus on the shiny new marketing and design products. However, the account management details are very important to a successful long-term collaboration. Walking in with the right questions about money matters will definitely help start the relationship off right.
If you're interested in learning more about this topic or discussing what Phillips & Marek can do for you, let's talk! Simply send us a message below and we'll book a time that's convenient for you.
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