From the course: Hiring a Marketing Agency

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How to compensate the agency

How to compensate the agency

From the course: Hiring a Marketing Agency

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How to compensate the agency

- Next, let me help you understand how compensation works from the agency's perspective and some of the most common compensation models. Since the agency business is a service business, about 50% of the compensation goes to labor, such as agency employees salary and bonuses. I think this is good. You want the bulk of your compensation to go to the agency talent. About 30% goes to the agencies operating expenses like equipment, payroll expenses such as benefits, or travel expenses. And that leaves about a 20% profit margin. Remember, agencies are for-profit businesses and they're entitled and expected to make a profit margin, just like many of your businesses. As far as compensation models go, there are many of them and they continue to evolve. Let's discuss the four most common models. One, the commission-based model. This was most popular years ago, but it's used less and less today. Media commission is a percentage of…

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