If you and your agency aren’t working towards the same goal, the relationship will fail. It doesn’t matter what you’re paying them, how they structure their fees, or whether you’re on a retainer, a percentage of spend, or some hybrid of both. Without a shared objective, every pricing model eventually produces the same result: suspicion, friction, and a breakup that wastes months of momentum.
What follows is how to fix that. Not by finding the perfect fee structure, but by solving the alignment problem that makes every fee structure feel broken.
Service Providers vs Partners
This is where it starts. The vast majority of agency relationships are structured as service provider arrangements. The client buys a defined scope of work. The agency delivers against that scope. Both parties measure the relationship through the lens of “what am I getting for what I’m paying?”
That framing poisons everything.
When you engage an agency as a service provider, the conversation orbits around activity. What are they doing? How many hours are they putting in? What’s included in the retainer? Are they doing enough? The client starts monitoring inputs. The agency starts justifying its time. And very quickly, nobody’s talking about the thing that actually matters, which is whether the business is growing.
A partnership looks completely different. Both parties agree on a shared objective before the work begins. Not a vague aspiration, but a specific, measurable goal. In our world, that’s usually return on ad spend. One number. Clear. Visible in the data. Non-negotiable as the thing you’re both working towards.
That single shared goal changes everything that follows. It changes how you communicate. It changes what gets reported on. It changes how decisions get made about budget, channels, and creative. And yes, it changes how you structure the fees. But the fees are the last thing, not the first.
How Misalignment Actually Shows Up
If you’ve worked with agencies before, you’ll recognise these patterns. They’re all symptoms of the same underlying problem.
You start questioning the reporting. When there’s no shared objective, the agency reports on whatever makes them look good. Impressions, clicks, traffic. Vanity metrics that tell you activity is happening but nothing about whether that activity is producing value. You get a monthly deck full of graphs going up and to the right, and you still can’t answer the question “is this working?” Your PPC reports are hiding the numbers that matter because nobody agreed upfront on which numbers actually do.
You start questioning agendas. Without alignment, every recommendation from the agency feels like it might be self-serving. They suggest increasing budget. Is that because the data supports it, or because their fees scale with spend? They recommend expanding to a new platform. Is that because there’s a genuine opportunity, or because more platforms mean more management fees? This suspicion isn’t irrational. It’s the natural consequence of two parties whose incentives aren’t pointing in the same direction.
You start questioning trust. And this is where relationships die. Once trust erodes, every conversation becomes adversarial. The client scrutinises. The agency defends. Both sides start keeping score. I’ve inherited clients who’ve been through three or four agencies in as many years, and by the time they reach us, the trust is so damaged that rebuilding it takes more effort than starting from scratch.
All of this looks like a pricing problem from the outside. But it’s not. It’s an alignment problem that expresses itself through pricing friction.
Why I Got This Wrong for 15 Years
I should be honest here, because I made the same mistake. For 15 years, I treated pricing as the thing to fix. I saw agencies abusing percentage-of-spend models (inflating budgets because more spend meant more revenue) and concluded that the model itself was broken. So we moved to fixed fees. Scope the work, agree a monthly retainer, no link between our fees and how much budget is in play.
It was principled. It was transparent. And it worked well enough for a long time. But fixed fees have their own problems, and they all trace back to the same root cause.
They can’t scale. Clients don’t operate in straight lines. There’s seasonality, product launches, aggressive growth phases, promotions that come out of nowhere. When a client’s campaign activity fluctuates outside anyone’s control, a fixed fee can’t move with it. Some months you’re billing an amount that feels disproportionate to the work because the client has scaled back. Other months you’re significantly under-resourced for what’s needed because activity has ramped up. The only fix is to renegotiate, and constant renegotiation kills momentum. It pulls both parties out of execution and back into contracts at exactly the point where focus matters most.
They can’t account for risk. A client allocating a modest monthly budget to paid media has a fundamentally different risk profile from one allocating ten times that. The complexity scales. The seniority required to manage it scales. The consequences of getting it wrong scale. But the fixed fee doesn’t. You can try to negotiate a premium for higher-risk accounts, but clients rarely accept paying more for the same “scope” just because the stakes are higher, even though it’s entirely rational. Internally, higher budgets mean more senior people on the account. That cost is real, even if the client never sees it. As an agency owner, you’re very conscious of where your risk exposure sits and how you allocate finite human resources. Even now, with AI augmenting much of what we do, no client would trust a machine to manage their budget without senior human oversight. We’re not there yet.
They stifle innovation. This is the one that frustrated me most. You can technically scope innovation into a fixed retainer. But in practice, testing a new platform or channel requires dedicated resource, and the seniority of that resource depends on both the complexity of the innovation and the size of the budget at risk. You’re not just asking the client to allocate test budget to an unproven channel. You’re asking them to accept additional fees for the work involved in testing it. That conversation creates friction. It slows progress. And in many cases, it simply doesn’t happen. Opportunities get missed because the pricing model couldn’t accommodate them.
Each of these problems looks like a pricing issue on the surface. But they’re not. They’re all consequences of the same thing: the absence of a shared goal that both parties are working towards. I spent 15 years optimising the fee structure when the fee structure was never the real issue.
The North Star Fix
Charlie Munger put it simply: “Show me the incentives and I’ll show you the outcome.” The reason most agency relationships drift into dysfunction is that the incentive structures are pointing in different directions. Fix the incentives, and the rest follows.
In practice, this means agreeing on a single KPI before you discuss scope, fees, or anything else. For us, that’s return on ad spend. It could be a different metric depending on the business, but the principle is the same. One number. Shared. Visible. The thing that governs every decision both parties make.
That metric becomes the guardrail for everything. If spend increases and the return holds, the investment is working. If spend increases and the return drops without an agreed reason (such as testing a new channel, which you’ve discussed in advance), there’s a conversation to be had. Not an argument. Not a renegotiation. An adult conversation between two parties who are looking at the same number and working out what to do next.
With that alignment in place, the pricing conversation becomes almost trivially simple. Percentage of ad spend becomes the natural model, because it scales proportionately with effort, risk, and complexity. It flexes with seasonality. It accommodates growth. And it creates room for innovation, because testing a new channel is just an agreed allocation of budget that both parties are watching against the same return target.
The percentage model that caused all the trust problems in the first place becomes the right answer. But only because alignment came first.
What You’re Actually Buying
There’s one more piece to this that I think matters. When alignment is absent, people default to measuring agency relationships by time. How many hours did they work? What’s the hourly rate? Am I getting enough time for my money?
We’ve fuelled that ourselves, to be fair, by billing retainers that implicitly map to time. But time is the wrong lens. If cost per hour becomes the metric you choose an agency by, you’ll end up with the cheapest input. And the cheapest input, ironically, often leads to the most costly outcome. The lowest hourly rate gets you the least experienced team. The least experienced team managing your budget means wasted spend, low returns, and failed campaigns. You optimised for the smallest number on the invoice and paid for it in everything that followed.
What you’re actually buying from a specialist agency is pattern recognition. The cumulative experience of managing campaigns across dozens of similar accounts, spotting patterns that no in-house team could see because they haven’t been exposed to enough variation. Whether that comes from the agency’s team or from their AI-augmented systems that carry the context of thousands of decisions, it’s the same thing. Insight built on breadth of experience, and it has nothing to do with hours.
The second thing you’re buying is stewardship. The responsibility of managing significant sums of your money across complex, fast-moving platforms. You can put an inexperienced person on it for more hours and get a worse result than a senior strategist who knows exactly where to look. If you were choosing someone to manage your savings, you wouldn’t ask what their hourly rate is. You’d ask about their track record, their judgement, and whether you trusted them. That’s what good management actually looks like, and it has very little to do with timesheets.
When you’re aligned on a shared goal, this becomes obvious. You stop counting hours and start measuring outcomes. The agency’s value becomes self-evident in the data, not in a timesheet.
Start with the Goal
If there’s one thing to take from this, it’s this: don’t start with the price. Start with the goal.
Before you negotiate fees, before you discuss scope, before you even ask for a proposal, get clear on the single metric that will define success for both you and the agency. Make it specific. Make it measurable. Make it the thing you’re both accountable to.
Once that’s in place, the right metrics to track become obvious. The pricing model becomes a practical decision rather than a political one. The reporting becomes useful rather than performative. And the relationship becomes a partnership rather than a procurement exercise.
Most agency problems aren’t about money. They’re about two parties pulling in different directions and wondering why nothing works. Align the direction first. Everything else follows.
