The Different Types of Google Ads Management Fee Structures

➡️ A percentage of spend. This is one of the more common ways agencies structure their management fees. The agency benefits from increasing the amount of money you spend each month on Google Ads. There are 3 variations to this pricing model. I’ve listed them in order of most common to least common. 

1. A percentage of spend plus a flat monthly fee. 
2. A flat monthly fee or a percentage of spend whichever is higher
3. A flat fee percentage based on the amount you spend every month

This pricing model doesn’t benefit the business owner. Sure, an increase in the monthly budget could mean an increase in sales, but not always. Depending on how well the account is being managed you could lose money. Also, agencies tend to want 15% on average of monthly advertising costs. That could be a hefty fee if you're spending hundreds of thousands of dollars per month.

➡️ Flat monthly rate. This works best for lead generation websites and smaller businesses that have smaller budgets. This allows you to know exactly what you’re paying every month. This is by far my favorite option as your management fees are predictable. Great for businesses on a budget. However, if you spend less on advertising any given month or your revenue is lower than expected your management fee doesn’t change.

➡️ Percentage of revenue. This pricing model works well for eCommerce businesses that tend to spend a large amount of money per month. A flat rate for large budgets can be high and at a 15% of your advertising spend, it may not be an option.

There are 3 common ways agencies will charge based on revenue.

1. Charge you between 1% - 5% of revenue generated through Google Ads
2. Charge you a flat rate plus a percentage of revenue
3. A flat rate or a percentage of revenue. Whichever is higher. 

The options above are common and in some cases, you can negotiate how large of a percentage of revenue you’re willing to give up.

Avoid Very Low Management Fees

In my experience companies that are charging little or no setup fees and not taking the time to thoroughly research your niche. They are in most cases throwing broad terms into one or several ad groups. This in the end results in poor performance.

I’ve found that companies that charge less than $400 a month for management aren’t doing much management in accounts. (You can review what is being done in your account by viewing the change history.) This is most likely because they are getting paid so little that it’s not really worth their time to manage the account and spend more time on larger accounts. They probably figure that if you’re paying so little you won’t expect much.

Google Ads Set Up Costs

In most cases, there will be an initial setup fee and cost. This is typical when creating a new Google ads account. You will want to create your own Google ads account and grant the agency or manager access. Never let anyone else create an account for you. 

The initial set up may include;

• Competitive research
• Keyword research
• Campaign creation
• Ad group creation
• Ad creation & design
• Setting up conversion tracking

This is typically billed in addition to your first month of management and can range anywhere from $500 - $3,000+ depending on the size of the account. 

You may also be charged a “revamp” or “restructuring” fee. This is typical if the current account setup is poor and needs a fair amount of work or it needs to be built from scratch. 

Work With An Ethical Company

I review between 50 - 75 accounts per year. Approximately 35% of them are accounts I wouldn’t take on as a client. Some agencies will take anyone as a client even if they aren’t spending much on Google Ads. 

This is because they are working on volume. Their business model is to get as many ad accounts as possible. You end up being a number on a spreadsheet and not a valuable client. That not only wastes your time but your money. What good will come from an account that most managers should know won’t be successful on its small budget? An unethical one!

I would never charge a client who is spending $500 a month on Google Ads a $650 management fee. It doesn’t make sense to spend more on management than you are on Google. Yet large agencies do it all the time. Business owners think because an agency lists all the awards they’ve won it’s a trustworthy company. Clients think a larger company will take care of them. That’s not always the case. 

I want my clients to be successful and my job is to manage their expectations. If you’re spending $20 or less a day on Google I would turn down the work. Why?

Your budget is too small. You’ll run through your advertising budget before the day is over. The account would get 1 – 3 clicks a day and then cease to run the rest of the day. Your account will never provide me with enough data to make the informed decisions required to get it to generate business. 

You should have enough money to advertise your keywords 24/7 for at least 30 days if not longer. Once there is enough data collected in the account I can take the appropriate actions to improve performance. 

Business owners who typically have small ad budgets tend to fail. They typically comment “Google Ads doesn’t work for my business”. It’s not that it doesn’t work. It was your expectation that a $10 a day budget was sufficient enough money to run a test and I am here to tell you it’s not. 

When potential clients have small budgets, I tell them to either focus on fewer terms and products or save money until there is enough budget to run ads 24 hours a day 7 days a week for 2 months. 

The Cost Of Ongoing Monthly Management

Ongoing management is very important. You can’t have an account running even on an automated strategy without someone overseeing it. A poorly managed account is the leading cause of wasted ad spend. If you think you can just pay for a build-out of a campaign is enough to be successful – you will not. 

When working with a management company you’ll want to ask them;

• What does monthly management look like?
• How often will changes be made within the account
• Who will manage the account? 
• One person? What’s their seniority? 
• A team of more than one person working on your account? 
• The same person(s) every time?
• What type of changes will be made?
• What does monthly reporting entail?
• Is the account managed by a human or software? Or both?
• How easy will it be to get in charge of the account manager(s)
• Is there a review with you and them or just a report?

You want to ensure that the management you are getting is in line with what you expect. Obviously, the agency won’t be able to give you an immediate or specific answer to all of these questions. However, they should still provide you with ballpark figures. If you can try and get more accurate numbers before signing a contract. 

The person selling you on management services is rarely the person doing the work. There can be a big disconnect with the results you’re being sold in relation to what actually can be done with your budget in your industry. 

It’s important to make note of the size of your account. As an ads manager, I look at the size of the account when deciding how to bid out a project. If your budget is large but only has 100 keywords it may take me less time to manage than an account with 10,000 keywords.

Other Services That May or May Not Be Included

Depending on your needs there are additional costs that you need to consider. Your PPC management fees could include additional charges based on;

• Whether you need call tracking
• If you need landing pages created
• Design services for display, retargeting ads, etc.
• You’re also running ads on Bing & Yahoo
  

Which Google Ads Pricing Structure Should You Choose?

You should choose a fee structure that works best for your business. If you’re running on lead generation and expect your budget to remain mostly flat then a flat monthly fee structure makes sense. 

If you’re selling tens of thousands to 100s of thousands of dollars a month you may want to tie performance to payment. This way the agency gets paid more if they are able to generate more revenue. 

You should have a conversation with your management company to work out a deal that benefits you both. However, I would avoid going with a percentage of advertising spend. 

If you still need help you can reach out to me directly for an audit of your account.