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I’ve been asked many times about how to structure marketing consulting engagements. While there’s no right answer necessarily, each consulting type has its own advantages and disadvantages.
If you’re a freelancer or agency, you need to consider the pros and cons of the different models so that you can effectively plan for your lead generation and contract needs in advance.
If you are hiring a marketing provider (we can help), then you need to understand the different ways that projects can be structured so that you can find the right one for your business. Many businesses, in my experience, start off wanting to make a quick decision and wanting an audit when sometimes that is not the right direction. Sometimes it is, but you need to think through each one carefully.
Many of these lessons come from this post by Jason Fried of BaseCamp.
Table of Contents
Hourly
Many freelancers, especially ones doing freelance work on the side, do hourly engagements. This is how I structured my engagements as a freelancer. As someone freelancing for the first time, hourly can make sense for the following reasons:
- It’s easy to track
- You don’t underprice yourself because you underestimate how long a job will take.
However, a client will often say “Let’s do a max of X hours and I’ll pay you $XX per hour.” Unfortunately that $XX per hour tends to be under what you should be paid, but you accept it because you want the work. A year and a half ago, I made this decision and that client ended up taking a LOT more of my time. The downsides of charging hourly include, but are not limited to:
- If you work faster, you make less money;
- Hourly rates tend to be lower than rates you can charge on a project basis;
- You’re beholden to a certain number of hours each week or month, which will most likely mean you can take on fewer clients than with other pricing structures.
Even if the client does not try to undercut your price (they almost always will in my experience), charging hourly can inadvertently penalize you for working smarter, not longer. Jason Fried says it well in this classic post on Inc:
Before I launched 37signals, I worked as a freelance Web designer. I charged clients by the hour. I work quickly. But I soon realized that charging hourly penalizes efficiency. If I can finish something in an hour that might take someone else three or four hours, why should I be penalized? So when we launched 37signals in 1999, we charged clients by the project.
In our experience, hourly engagements are rarely successful if you want the person to do more than task-based work. Hourly people don’t do creative work because they are not invested in your company – they’re being paid to do a job. Also, creative work is hard to gauge and it will be hard to stay on budget.
Hourly is great for consistent regular tasks, but not for strategic work.
By the project
The next structure for a consulting engagement is to organize it by the project.
For outside providers
Feedback I’ve often heard is “[client] is scared to pull the trigger because it’s a lot of money”.
Think about the psychology behind a big purchase like a car or house. When you’re buying a car, you go as many places as possible to find reviews and what people are saying about the car. Then you go to the dealership and take the care for a test drive. You might then go to another dealership and take another one for a test drive. You might even get your mechanic friend to check it out.
Selling marketing is no different. Sales is all about psychology, and an outside provider needs to make the potential client feel comfortable. At the very least have a testimonials page on your website (Distilled has an example), and even better have case studies.
Then, sell the first project. If the client desires an audit before they engage with you for ongoing link building or content, then sell that audit (at a price that gives you a good hourly rate). Be sure to build into the contract (contracts are another topic for another time) the possibility for continuing work assuming the first project is up to their standards. Also, make sure you and the client agree on how quality will be assessed, such as timeliness, accuracy, revisions needed, etc.
As Jason says:
Instead of doing long, expensive projects, we’d do short, affordable ones. Instead of billing $50,000 for a 15-page website redesign that would take three months, we’d charge $3,500 per page and offer to complete the page in a week. If you want another page, it’s another $3,500 and another week.
Project pricing isn’t without deficiencies though, which include:
- Lack of security for ongoing work with the client, which necessitates needing more potential leads for future months;
- Increased overhead in selling the next project to the client
As you can tell, though, project pricing has many upsides:
- Gets past the “scared to pull the trigger” mentality from the client;
- Ability to price at a higher hourly rate;
- Potential for ongoing work with the same client.
For clients
If you are the one doing the hiring and trying to pick the right provider to work with, consider an initial project to build trust and at minimum get a strategy from which you can go and hire experts to work on specific parts of your business.
Many businesses we speak with here at Credo are not quite sure what they need to do or what channels to invest in. Even if you know what marketing channel to invest in, you might not know what your opportunity is and where to put your budget!
If this is you, I advise you to engage with an outside provider on an initial project to define your opportunity, understand what your competitors are doing, and be able to make informed choices about where to invest your budget. Then, go and decide how to get it done.
But if you’re not sure what you need, don’t sign an ongoing retainer contract. Learn what you need (pay someone for it!) and from there make the right decisions.
Hourly and monthly are not the only pricing models though. A final idea is a monthly retainer.
Monthly Retainer
Monthly retainers are awesome for both sides of the consulting equation if:
- The client understands the strategy and needs more hands on deck;
- The consultant/provider is set up to consistently deliver value month on month on month.
Here’s how to think about them.
For providers/consultants
Monthly retainers are the holy grail of consulting, in my opinion. A monthly engagement, and especially an indefinitely continuing monthly engagement, enables you to:
- Have security in your future months where income will come from;
- Sell less and bill more;
- Plan for the future instead of just for the next project.
A monthly retainer is the best way to see success with a client because you’re able to plan for the future and track success over time, which can lead to the best case studies (which we’ll cover in a future post). In my experience, three to six months is usually required before you have a solid relationship built with your client to have enough buy-in to try new initiatives on their site. The first months are, honestly, a discovery period, which is why you conduct keyword research, an audit, etc to get a full idea of what is needed on the site and what will move the needle.
An ongoing monthly retainer has its downsides though, mainly:
- Need to plan a longterm strategy early on in the project;
- Plan for resources further out to be sure you can fulfill your work.
You can’t do this with a project-based or hourly engagement:
Check out this guide to selling consulting retainers if you want more strategies.
For clients
Signing a retainer with an agency or consultant can be scary, but it can be the right move for you in certain circumstances.
If you have a clearly defined strategy or have taken a channel as far as you can take it, then working on a retainer with a provider whose core competencies are what you need is one of the best things you can do.
The advantage of working with an agency is additional hands on deck to get things done fast. You can’t hire a whole team in-house nearly as fast as you can bring on an agency and get them up to speed. Even if you plan to hire a team internally, an agency on a retainer can be a great stop-gap as you hire a team, and they can even stick around and continue to support your new team to make them more successful as well.
But before you sign an ongoing retainer, ask yourself these questions:
- Do I have a clearly defined strategy?
- Do I need more people quickly than I can hire internally?
- Have I taken this channel as far as I can take it, and thus need someone to grow it?
Retainers can be amazing for you because it lets you build long-term trust and not have to rehire time and time again after a project ends. You keep paying them well, they keep doing good work, and everyone is happy.
All this said, I am rarely in favor of signing a long term retainer off the bat.
Instead, ask to sign a 3 or 6 month contract and then go month to month after that. Of course, you plan to keep working with them but by structuring it this way you:
- Have an out if you need it;
- Give it enough time to start working (marketing rarely works quickly);
- Can retain them ongoing if you like without having to sign a new contract!
What should be included in a consulting agreement?
Please note that we are not lawyers here at Credo and as such the below advice is given as general guidance. Before signing an agreement, you should always consult with legal counsel.
A consulting agreement is a formal document that outlines the important parts of the project, including:
- The scope of work (what will be done and when).
- The timeline for work and what effort is involved by both the agency and the client.
- Who owns intellectual property.
- What is needed from the client for a successful project.
- Terms of payment (what will be charged and when).
A consulting agreement document should always be created and signed by both parties, with both parties retaining a signed copy. This will be the place to start should any disputes arise during the engagement.
Hiring a marketing firm?
Finally, if you are looking to hire a marketing provider to help you grow your company you can find the right one on Credo. Whether SEO, PPC, Facebook Ads, content marketing, or even conversion optimization, the best providers are on Credo.
