how does an advertising agency price their work and bill hours?
Do ad agencies work by estimating the number of hours a project will take to complete, and then multiplying that by their hourly rate?
What is the standard rate in the advertising business? (im not talking about the Saachi and BBDO’s of the world, more like a smaller agency)
thanks
There are no hard and fast rules but there are two basic methods for charging clients: commission and fee.
The commission method will be a straight percentage of the media budget. The standard commission is 15% but the rate will vary depending on the depth of services provided and the size of the media budget. Very large advertisers will negotiate lower commission rates. Smaller advertisers will pay full rates. Any hard costs, such as studio time, talent, photography, printing and travel will be additional and may or may not be marked up.
For the fee model, the agency will estimate the hours required for a project and multiply by their blended hourly rate. They will then charge a monthly retainer fee at one twelfth of the estimated amount. The more efficient will provide periodic updates and highlight any variations from the original estimate that may result in adjustments.
There are no hard and fast rules but there are two basic methods for charging clients: commission and fee.
The commission method will be a straight percentage of the media budget. The standard commission is 15% but the rate will vary depending on the depth of services provided and the size of the media budget. Very large advertisers will negotiate lower commission rates. Smaller advertisers will pay full rates. Any hard costs, such as studio time, talent, photography, printing and travel will be additional and may or may not be marked up.
For the fee model, the agency will estimate the hours required for a project and multiply by their blended hourly rate. They will then charge a monthly retainer fee at one twelfth of the estimated amount. The more efficient will provide periodic updates and highlight any variations from the original estimate that may result in adjustments.
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