If you’re an agency that charges $10K to $40K a month or is on rev-share, you may find it’s getting more and more difficult to get your clients to happily pay those large agency fees.
Even if you’re doing a great job for them.
The solution is to help fix your client’s cash flow. The key to getting paid on time is to make sure your clients have the credit cards, the capital, and the cash in place before you even begin working with them.
That they won’t come to you in 60 or 90 days after scaling them up saying they don’t have the cash to pay your big invoice.
If you’re an agency who’s already having these conversations, you have a competitive advantage in retaining clients. If you’re ignoring these conversations and hitting your head against the wall wondering why your clients are complaining, cancelling, or churning -- you better start having them.
That’s what we talked about in a recent Rich Ad Poor Ad podcast discussion with Nick Shackleford, co-founder of structuredsocial.com, Geek Out Education, and KEEPARE.
1- Prevent end-of-the-month sticker shock with beginning-of-the-month check ins.
“We do the traditional model of percentage of spend or minimum, right? We do a lot of the invoicing about seven to 14 days. So we let delayed attribution kind of catch up because a lot of our success is based upon the metrics that we hit at certain spend levels.
So we spend X, it falls between the success metric or the next success metric. That's what we're able to build upon. And that was agreed upon a contract prior, if a brand isn't savvy to whether they're agreeing to what they're spending on, they're going to get this bill $20K $30K, $40K.
They're going to be like, ‘Holy, I'm not paying this’. So we're currently in talks with other partners, even we've been trying to do as ourselves. We have drawn a perfect solution outside of using just a Google dashboard and adding in a percentage and then doing our own custom doesn't correlate with custom metrics there. I don't think it's perfect. It will improve.
But we're wanting brands, at the beginning of each month, talking through it. And this has been something we've been doing forever, but now it's more of a transparent, updated rather than being manually in the team, doing it on a Wednesday and Friday. It's every dollar we're spending. There's obviously a percentage that we are, we're making on that depending on the success metric of that day. And it's not really on a daily level, you can't do it as much because there's so much nuance and change every two weeks to have.”
2- Easing your clients’ cash flow helps ease yours.
“We're building the dashboard that will highlight what you’re spending monthly as you're spending. Here's what you expect to spend and your bill is for Facebook. And then that margin above it is the percentage that we're taking on the ad spend at the success metric. So now that they're able to log in, see, okay, this is what I'm spending on a pacing ad. This is what my true ROI is because this is what the agency fee is on top of it.
And I can expect my build in a must to be somewhere around this area. And that way they have no excuse other than like, Oh, I haven't checked my, my, my dashboard. I haven't checked the updates in so long.
And now, when they get that check, they can either be like, ‘Hey, let's do a payment plan, because obviously we're in a time of COVID’ and yes, there are some brands that are doing fantastic. There are some brands that are like, ‘I would love to break up these payments. What are these terms? Can I get to 30 days?’At the end of the day, it's our job as partners to make sure that they have the cash flow to spend. So that we're usually the most expensive bill for them at anybody that produces any, any high spend. And so that conversation is a very intimate one.”
3- How to overcome the psychologically scary Rule of Large Numbers.
“So we have on all launches, we're having to stagger them (invoices). It's cash flow for us is very, very important because of how big the team is and pay periods. Right? Everybody has to deal with this stuff. The brands will pay anywhere between seven to even sometimes 30 days, depending on how large it is and what I've seen.
If you have a brand that's back to back, you're saying them back-to-back checks above $20K. You're going to get questions, right? Like their, their CFO, their, whoever is checking the founder. That's looking at that check. They're going like, let's just, can we go analyze, like, is this money worth being expensive? You're going to get looked at.
So what we've been having to do is if we start seeing, and we have a trigger on our, on our dock to two months back to back above $20K, that triggers us to reach out to the brand and be like, ‘Hey, we're going to make unique creatives for you pro bono’, because that's, that's tangible.
And it's mutually beneficial because the brand's going to go, ‘Thank you’. We already know we're investing in that. Let's, let's get that. We already make ads as well, but that's just like the above and beyond for them to be, have a little bit of peace of mind of this check is going for not just the management and the growth.It is sad to say that we have to defend the bill that we have earned, but that's just the nature of the business we're in.”
Use financial products like AdCapital to get more control over ad spend and agency fee.
So Nick really nailed it. E-commerce is struggling with cash flow just as much as the ad agencies themselves. These guys are just beg, borrowing and stealing, trying to get every single financial product that exists. They're tapping into Shopify Capital, Clear Banc and Brex. So incorporating some of these financial products into the entire ad spend and agency fee is really how you can have a lot more control over it.
I see a potential for this in the space where all this is bundled together through a financial product like FunnelDash AdCapital where you basically say …
‘Hey, we're going to fund your ads. We're going to manage your ads. And we're going to take maybe not 10% of spend, but we're going to do all of this for 15% to 20% of your spend. And then in terms of repayment, we're going to automatically take 10% of your revenue until the principal I E the entire ad spend, plus the agency fees and the financing fee get paid back.”That could take three to six months. But getting paid back daily over that three to six month period is just as good, if not more consistent than like having to wait 60, even 75 days or worst case scenario, 90 days to just get that one big check.
Hey, I could go on and on about this (and I do in this podcast) so if you want to hear the full thing go listen to it now. And if you’re interested in finding out more about FunnelDash AdCapital funding, click the link below to get started.
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And you’ve got a funding option that you definitely need to consider if you’re spending $10k a month on ads or more