Ask five agencies how much PPC management costs and you'll get five different numbers, calculated five different ways, with five different things included. That's not because the industry is dishonest - mostly - it's because there's no standard model, and each model quietly shapes how the agency behaves once you've signed.

Understanding the models is more useful than comparing the headline numbers. Here's how the common ones work, what each one incentivises, and the questions that cut through the sales conversation.

Percentage of ad spend

The traditional model: the agency charges a percentage of your monthly media budget, commonly somewhere between 10% and 20%, often with a minimum fee.

What it incentivises: spending more. If the fee rises with the budget, the agency benefits from recommending a bigger budget whether or not the account can use it efficiently. Good agencies manage this conflict honestly. Not all agencies are good.

Where it makes sense: large, growing accounts where management effort does genuinely scale with spend, and where the business is comfortable with the incentive.

Ask: what's the minimum fee, what happens to the fee if we cut budget in a quiet month, and does the percentage drop at higher spend levels?

Flat monthly retainer

A fixed fee each month regardless of spend, usually agreed based on the scope - number of platforms, campaigns, reporting cadence, strategy involvement.

What it incentivises: efficiency, in both directions. The agency has no reason to inflate your budget, which is good. It also has no direct financial reason to do more work than the scope requires, which means scope needs to be clear.

Where it makes sense: most small and mid-sized businesses. It's predictable, it's easy to budget for, and the conversation about results stays focused on results rather than spend.

Ask: exactly what's included, what counts as out of scope, and how often the retainer is reviewed.

Performance-based

The agency is paid based on outcomes - a percentage of revenue, a fee per lead, or a bonus for beating a target. Sometimes combined with a reduced base fee.

What it incentivises: whatever the metric is. That's the point, and the problem. Pay per lead and you'll get leads - quality is your problem. Pay on revenue and brand search, which would have converted anyway, suddenly becomes very attractive to the agency. Pay on ROAS and you may find budgets never grow because growth usually means a lower ratio.

Where it makes sense: when the metric is genuinely the thing you care about, it's measured accurately and independently, and the agency has real control over it. That's a narrower set of situations than the pitch suggests. It can work well in structures where the agency is rewarded for performance above an agreed baseline, so the easy wins aren't paid for twice.

Ask: how is the metric measured, who owns the tracking, what's excluded, and what happens when the market moves for reasons neither of us controls?

Hourly or day rate

You pay for time. Common for consulting, audits, training and short projects rather than ongoing management.

What it incentivises: hours. Fine for defined pieces of work; awkward for ongoing management, where you don't want to be worrying about whether a twenty-minute check-in is being billed.

Where it makes sense: consulting and training, one-off audits, in-house team support, or situations where the scope is genuinely unpredictable.

Hybrid models

Most real-world arrangements are some combination: a flat fee for the core management plus a performance element, or a percentage of spend with a floor and a ceiling. Hybrids can balance the incentives nicely. They can also become so complicated that nobody can tell what they're paying. If you can't explain your agency's fee in one sentence, that's a sign.

What should be included, whatever the model

Regardless of how the number is calculated, you should know exactly what you're getting. At minimum, clarity on:

  • Which platforms and how many campaigns
  • How often the account is actively worked on - daily, weekly, "when something breaks"
  • Who is actually doing the work, and how senior they are
  • Reporting - what, how often, in what format, with how much commentary
  • Strategy calls and reviews - how often, with whom
  • Whether landing page input, tracking setup and creative are included or extra
  • Contract length, notice period, and - critically - who owns the ad accounts and the data

That last point deserves its own article, but in short: the accounts should be yours. If an agency insists on running your campaigns inside their own accounts, you're renting your own performance history and you'll lose it when you leave.

Red flags

  • Guaranteed results. Nobody controls the auction, the competition or the economy.
  • Long lock-in contracts with no performance exit. Twelve months with no way out is a confidence problem, not a commitment.
  • Fees that are vague about what's in scope. Ambiguity always costs the client.
  • Reluctance to give you full admin access to your own accounts.
  • Reporting that leads with impressions and clicks rather than outcomes.
  • A pitch that discusses budget size before it discusses your business goals.

How to compare proposals properly

Don't compare the fee. Compare the fee against the scope, the seniority of who's doing the work, the incentive the model creates, and how the agency talks about outcomes. A cheaper retainer where a junior checks the account monthly is more expensive than a higher one where someone experienced works it weekly - you just pay the difference in wasted media rather than in fees.

For what it's worth, I keep things simple: packages built around your goals, your spend and how involved you need me to be, agreed up front, with no lock-in. If you'd like to see what that looks like for your business, get in touch and I'll tell you plainly - including if I think you don't need an agency at all.

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