Marketing agencies should work on full commission, not retainers

Executive overview

Most marketing agencies charge retainers or upfront fees, shifting all risk onto the client. If an agency can't cover its own costs and ad spend from a revenue share, it can't prove ROI.

Any agency worth hiring should know customer acquisition cost, lifetime value, and the cash conversion cycle well enough to operate on pure commission.

A retainer-based agency is one that can't guarantee returns — a commission-only deal is the only true partnership.

Why commission-only is the right model

• Fixed fees plus a percentage puts all risk on the client
• A capable agency can calculate the revenue share needed to cover ad costs and fees
• Enough margin must remain after the agency's cut for the client to service overhead
• If an agency can't make commission-only work, it can't generate ROI for the client

How to structure the deal

• Agree on a revenue percentage that covers the agency's ad spend and fees
• Ensure enough gross margin remains for the client after the agency's share
• Treat it as a pure revenue share — no retainer, no upfront payment
• Commission-only agencies exist; finding one is a competitive advantage