Which is cheaper, $2,000 flat or 15% of ad spend?

Question

One shop wants $2,000 a month flat and says ad spend is separate, I pay Google directly. The other wants 15% of ad spend with a $5,000 monthly minimum spend, and their proposal says they'll set up and manage "the account." When I asked whose name the Google Ads account is in, the second one said they run everything through their agency account so the billing is simpler.

I'm not buying anything yet, I'm planning a first purchase and thinking about whether paid seller leads are even something I should be near. But I'd like to understand what I'm comparing before I get further in. Flat $2,000 versus 15% of $5,000 is $2,000 versus $750, so the second one looks cheaper, and that gap makes me think I'm missing something.

Rena Guide · Accepted Answer

You're comparing two different fee shapes, and the sticker numbers don't line up because one of them scales with your spend.

A flat retainer is a fixed monthly management fee. $2,000 a month whether you spend $1,000 or $20,000 on ads. A percentage-of-spend fee is a management fee calculated as a share of what you put into the ad platforms. At $5,000 spend, 15% is $750. At $20,000 spend, it's $3,000. So the second proposal is cheaper today and more expensive the moment the campaign scales, which is the point at which most people are happiest with their agency and least likely to renegotiate.

Ad spend is the money that goes to Google or Meta. That's not the agency's revenue, it's the cost of the clicks. So your true monthly outlay in the second case is $5,000 plus $750, not $750.

The account ownership answer matters more than either fee. If the Google Ads account sits inside the agency's own account and you leave, you can lose the campaign history, the conversion data, and the negative keyword list you paid months to build. Platforms let an agency manage an account you own, through a manager account link, with billing still on your card. Ask for that in writing before signing, along with a clean statement that the landing pages, the phone numbers, and the lead data are yours on exit. Agencies that say no to this are telling you something.

joe_delgado5 · Answer

The 15% deal is the one that bites. I've watched people go from $5k spend to $25k spend inside a year because the campaign was working, and suddenly the management fee is $3,750 for roughly the same amount of work the agency was doing at $750. Flat fee gets ugly the other direction, at $1,500 total spend you're paying more in fees than in clicks.

monica_tran3 · Answer

Run five years of a service business and you learn that percentage-of-spend changes whose interest is whose, without anyone announcing it. I'll say it plainly instead: the agency's revenue goes up when your budget goes up, and there's no built-in reason for them to tell you the ninth thousand dollars converts worse than the first. Flat fee at least keeps that conversation neutral. Ask either of them what happens to the fee if they recommend cutting spend in half.

angela_burke · Answer

On the phone numbers @rena-guide mentioned, get specific about the call tracking numbers too. If they're provisioned inside the agency's CallRail or similar, those numbers go with them, and any of your marketing that's already out in the world pointing at that number goes dead. Porting is possible but it's a two week hassle at exactly the worst moment. We keep client numbers in client-owned subaccounts for this reason.

angela_burke · Answer

Also worth asking quill's second agency what the $5,000 minimum spend buys in your specific market. In a metro where seller-intent clicks run $30 to $60, $5,000 is somewhere around 100 clicks a month. That's a small sample to judge anyone on.

Which is cheaper, $2,000 flat or 15% of ad spend?

5 replies