How Much Does it Cost to Hire an Agency?
The cost of hiring an agency can vary with surprising extremes depending on a myriad of factors including company size, reputation, and even geographic location. There are two primary ways most agencies will bill: hourly or project.
Agencies will often have different hourly rates for services, for instance, project management, graphic design, illustration, programming, creative direction, content creation, or strategy development. The rates will often vary based on what the market rates and the skill or experience of the person performing the task. The demand is typically high for senior level staff, and their talent will come will a higher hourly rate. Project billing takes into consideration all of the different rates, skill sets, etc. to get the project done and provides one flat fee. It puts the burden on the agency to work efficiently to ensure they meet their deadlines and their profit goals.
By and large, firms continue to bill by the hour, similar to lawyers or CPA’s. Large creative agencies in New York typically average over $600+ per hour while $300+ per hour is considered standard in most other regions (according to the American Association of Advertising Agencies). In smaller regions or markets, you can expect to pay anywhere from $95-$225 per hour depending on the service and the skill of the person supplying that service. More and more agencies have gone to a “blended rate” — a rough average rate for all services and skill levels. This keeps the accounting simple, and with smaller agencies, it can work in favor of the client since they will get even senior level staff involvement at an average rate.
Quoting work on the whole project instead of per hour is the most challenging for agencies. They have to be very accurate in their estimation of the time it will take their staff to complete the job, and they are betting on little to no issues arising. As mentioned before with flat project rates if the agency wants to make a profit on the project they have to make sure their staff are working efficiently and on point. Because unless the scope of the project changes, it doesn’t matter how much time the agency spends on your project, you only pay the one flat fee.
Project rates are helpful to many businesses because they know what they are going to pay and it can help when you are on a tight marketing budget. But when accepting a project bid, make sure you pay particular attention to the scope of the project. The project scope should be very specific and explain in detail what the price covers and does not cover. Beware of vague project scopes that leave a lot to the imagination of the agency. This could give them room to unnecessarily up-charge as the project moves forward.
With the emergence of Inbound Marketing, everything in the advertising agency world is changing, and the introduction of a new paradigm in the billing world has a huge benefit for the client. Revolving billing brings in the best of the project world, with the advantages of a long-term agency relationship. At Beacon, like most Inbound Marketing agencies, we base our prices around the marketing needs of our clients. We have three levels of packages, each with the capacity to adapt as needed. These packages allow us to provide consistency in monthly billing since it is not resting on monthly hourly billing. Our clients know which services they get each month and how much they are going to pay for them. This can be a tremendous asset to a company when they are planning out their yearly marketing budget.
Keeping your budget under control is always crucial, especially for small and growing companies. We have a few tips/ideas for doing just that.
- Match your company up with an agency that is similar in size. As we mentioned before, typically the larger the firm, the more they will charge. So if you are a small business, match yourself up with an agency that is smaller. Same with medium or large businesses. Not only will the costs usually be in a reasonable range but often the agency will have a better understanding of where you are at as a company, your goals, and even your struggles.
- If you are a micro business or just getting started and you have a very limited budget, you will most often get the most bang for your dollar by seeking out a freelancer.
- Have an open and honest conversation with your agency about your budget, and it’s limitations. Most often, this does not result in the agency spending the entirety of the budget, but instead, it gives them the ability to make the most of what you have to spend.
- Establish benchmarks for the project based on results and only increase the budget as the marketing increases your bottom line as a company.
- Another option is to commit to a long-term relationship with an agency. Often they will extend special pricing to companies willing to commit to working with them for a length of time.
A critical item to keep in mind in the search for the perfect agency for you is fit. The right fit isn’t always about financials, in fact, the money part is really one piece of the puzzle. It is important to evaluate based on experience, creative approach, company values, business procedures, and the skill set of the agency. Have a conversation with potential agencies upfront about budget expectations. Know what to expect when you interview an agency and check out the chart. Decide what is most important to you and let the agency know what you need.
This article was originally published in September 2015 and has been edited with updated information.