When launching your own PPC agency, it is important to consider the monetary values of your PPC consulting services. How to calculate your PPC Consultant Rates? Should you charge hourly? Do you charge every client the same?
After all, how do you generate decent revenue as a professional AdWords consultant? And what about recurring revenue?
Sure, you know how to capture customers – that’s pretty much your job. But how do you keep those customers?
You want to remain competitive within the PPC marketing industry, yet if yourPPC consultant rates are too low, you will lose credibility and clients will assume low quality. However, if your rates are too high, clients might favor your competitors’ pricing.
So, how do you do it all?
How Much to Charge for a PPC Campaign and Related Services
Let’s talk money. You are about to start a PPC Management business. How do you find out how much to charge for a PPC campaign? What’s your worth?
Image courtesy of The Independent.
Though the numbers are important, your rates are all dependent upon you, your clients, and the campaign. Let’s go through some steps to guide you to some figures.
Step 1: Determine SEO / PPC Management Value
The best way to determine your rates as an SEO / PPC specialist is to look at yourself from a client’s perspective. What do you have to offer that is different from the rest? Why should they choose you? This will help you determine a good starting point for your rates.
Factors to Consider:
Clients will look for many qualities, but among the most prominent are experience, reputation, and education. The more you cater to clients’ desires, the more you can confidently raise your charges. They want the best PPC marketing strategist with a strong background to prove your capabilities.
Image courtesy of Nethernoir.
- Experience: Clients don’t want to be the guinea pig. They want to know you’ve done this before. How long have you been doing this? Are you well versed in the field, or are you a newbie just learning the ropes?
- Reputation: Your potential clients want to experience success, so they look for success. How have you exhibited success in your work? Do you have any reviews? Proof from previous clients that you are a stellar candidate for the work?
- Education: Though we live in a world where there are many self-taught entrepreneurs, your potential clients will often look for some proof of online-marketing focused education. Whether it be a certificate or a bachelor’s/master’s in a related field, any educational proof of specialization is certainly beneficial.
Assign Yourself a Number
Look back to the three qualities in the section above – experience, reputation, education. Look at each individually. Give yourself an honest score, between one and three, one being the lowest quality, 3 being the highest quality.
Rate your SEO consulting experience:
- If you consider yourself an expert, give yourself a whopping three;
- And if you consider yourself moderately knowledgeable with a little experience, give yourself a two;
- But if you have a lot to learn with hardly any experience, give yourself a one.
Rate your customer satisfaction or your reputation. Are all of your clients 100% satisfied, with great ROI’s? Give yourself a three! If you feel your clients are satisfied, but you could’ve brought them better results, give yourself a two. If you feel that you need to build your reputation significantly, or are lacking in customer satisfaction, give yourself a one.
Rate your educational background and your confidence in your capabilities:
- How familiar are you with PPC marketing?
- Do you have a formal college degree with an emphasized focus on online marketing or a certificate in PPC; do you feel you are of expert level knowledge in PPC work?
Give yourself a three. Do you have a certificate, an associate’s degree, or unrelated bachelor’s degree; do you feel you have moderate mastery of PPC and Adwords management? Assign yourself a two. And of course, if you have no formal education beyond a high school degree, or feel that you have a lot of learning to do with PPC, assign yourself a one for this category.
Now, add your self-assigned ratings together. You should have a number between 3 and 9.
If your number is below 6, you will likely have more success with charge your clients a little less. While, if your number is above 6, you will be able to get by with higher rates.
Know that these numbers can change as you grow your business, and it is not necessarily bad to be on the lower end of the scale.
Step 2: Look at Your Options
First, there are three different ways you can charge your customers. You can charge at an hourly rate, a flat rate, or an ad-spend percentage rate. Some people only charge based on performance, but this is not a recommended method of business.
Let’s break it down really quick before we dive into the nitty-gritty:
The good: your time is valuable. You get paid for the time you put into your work. Simple.
The bad: Maybe you are a fast worker. You deliver the highest quality results, but only get paid for the small amount of time you put into it. Sure, you get paid for your valuable time, but are you paid for your quality of work? Your level of education and experience?
The good: You can charge based on the project. You know what you will be getting paid as a result. There’s no guesswork for you or for the client. The original quoted fee is the cost of your work. Period.
The bad: Well, maybe the project took up a lot of your time – more time than you expected. Your time is valuable. Or, maybe you haven’t been in business very long, and need to establish credibility and reputability. Your clients may not feel comfortable paying a larger flat fee if they are unsure of the quality of your work. It’s hard to prove to prospects that your work is indeed worth that overall flat fee.
The good: This payment method charges the client a certain percentage of their ad spend. So, this is beneficial as an AdWords consultant, considering you would receive consistent payment in correlation with the cost of the ad rates. As the client spends for more advertising, you receive more income.
The bad: The problem with this method, is the client may inhibit his or her ad-spend simply because they do not want to pay the percentage additional. For example, if they are increasing their ad spend from $10,000 to $15,000, and you are charging 20 percent, they will have to jump from paying a total of $12,000 to $18,000. This may deter clients from taking things to the next level.
Among these different methods of payment, the most commonly used throughout the industry is to charge the percentage rates. Though, you can create a hybrid mix between any or all of the options to better suit your business.
But what about the startup costs and other hidden fees?
Every PPC marketing specialist knows that startup costs can be quite hefty. You can charge your clients the startup fee up front, or you can “waive it”. But how do you make a huge fee like this disappear? Prorating.
You aren’t losing any money by making these startup costs “disappear” if you prorate them. This is done by simply taking the fee, and distributing amounts throughout a few months payment.
The good: your clients aren’t thrown off by a huge startup fee. With huge start-up fees, clients tend to associate bigger initial investments with a bigger risk of loss. This scares customers away many times. Meanwhile, if you divide the extra fees throughout a contract term, your clients experience a sense of less risk and more reward. After all, nobody likes large payments.
The bad: Someone has to pay for these fees initially, and that someone is going to be you. This requires appropriate funding on your end, in addition to depending on the client to “pay you back” over the prorate term. If the client chooses to end the contract, you can either choose to charge that person for early termination (where the payment made will be applied to those initial startup fees), or you will take the loss – all dependent on your business choices.
Step 3: Pick Your Route
Determine your route of pay. If you choose a combination of two or three, that is just fine. If you choose a singular route, that is suitable too. You know what is best for your PPC business after all.
Go for a combination, disguised as a percentage of ad-spend. Your clients want simplicity. If they see a list of different payments for different purposes, they will become quickly discouraged and overwhelmed. Keep it simple for them.
You know that managing an SEO campaign is going to take up your valuable time. Your time is valuable after all. Just as your clients’ time is valuable. Though you do not have to charge hourly, do privately assess yourself and how valuable your time is. How much do you feel an hour of your time is worth?
Take that into account when figuring your fees.
What about flat rates? You know the quality of your work is one of a kind. Consider the amount you would charge if you were to be charging a flat fee for your work. After all, your work is a product.
Take that into account as well when figuring your fees.
Now. Look at the percentage of ad spend option, but think in reverse. How much do you want to make out of this project? How much is your client willing to spend on advertisements?
Step 4: Calculate Your PPC Consultant Rates
Assuming you follow the recommendation for combining all of the forms of pay to determine an ad spend percentage rate, we will go forward in calculating it.
A Point of Reference
Look at your ranking number from Step 1. Know that PPC hourly pay can range between $10 and $500. That’s a big gap. Just because you may be a 3 on the ranking scale, doesn’t mean you must charge the equivalent of $10 per hour, just as a 9 on the ranking scale shouldn’t necessarily charge the equivalent of $500 per hour. This is a large ballpark figure to just give you a reference point.
Additionally, typical PPC management consultants charge a range between 10% and 25% of ad spend. Once again, this does not mean the low end of the scale should charge exactly 10%, nor should the high end necessarily charge exactly 25%. Once again, this is a reference, not a guideline.
Meanwhile, the spectrum of flat rate charges ranges greatly, from $20 to multi-thousands. Independently, these averages are irrelevant to our purposes but give you a point of reference.
The Science of it All
So. How much do you want to get paid for your work?
Let’s do a hypothetical scenario. You self-ranked as a 6 on the ranking scale. You are a moderately experienced, self-educated PPC consultant with four and five-star ratings across the board.
Let’s say your new client wants to spend $10,000 monthly on ad spend. You predict this work will take you about 30 hours out of your first month, and about 15 hours for the rest. Let’s say you value your time at $55 an hour. It’s reasonable. Multiply $55 by 30 hours for that first month. That puts you at $1650. Multiply your hourly charge of $55 by 15 hours for every following month. That puts you at $825 monthly.
Well, because this first 30 hour month might put off clients, seeing a larger charge amount, we can prorate this as a startup fee as well. We are going to average the costs out. Take $825 and multiply it by 11 months. That gives you $9075. Now add the first month’s $1650. You’ll get $10,725. To figure the average monthly labor costs, divide your $10,725 by a 12 month contract period. You’ll get about $894 for monthly labor fees.
Now, you know this work is unique, and the quality of it must be exceptional. Tack in an additional $150 for research and quality assurance (This is putting the flat fee aspect into effect).
But what about office needs:
- You rent an office to run your business.
- Advertise for your business.
- & you have business expenses.
Let’s assume you have 40 other clients, your business bills run at $7000 monthly. Divide that by 40 clients. $175 per client per month.
Plus, your client’s campaign has a start-up fee of $3000. Divide that by a twelve-month contract. That adds a prorated amount of $250 monthly for your current client.
Now, let’s add all of these monthly amounts together.
$894 for monthly labor + $150 for quality + $175 for business expenses + $250 for startup fees
That leaves you a total monthly bill to a client of $1469.
So, to determine what to charge your client for a percentage of ad-spend, you find the percentage $1469 is the client’s ad-spend budget of $10,000. DIvide $1469 by $10,000. Then multiply your result by 100 to get your percentage. Your result is 14.69%. For simplicity, round it up to 15%, and that is what you bid to clients.
Here is a broken down formula for calculating how much to charge for a PPC campaign, assuming a 12 month contract period:
- FIND FIRST MONTH’S PAY Calculate your predicted first month hours and pay.
- (Dollar Amount per Hour x Hours Predicted = A)
- FIND REMAINING MONTHS PAY Calculate predicted monthly hours for remaining months, and pay.
- (Dollar Amount per Hour x Hours Predicted =B)
- FIND AVERAGE MONTHLY PAY FOR LABOR Calculate the average of 12 months.
- (A + 11B = Average Monthly Labor Cost)
- FIND THE ESTIMATED COST FOR BUSINESS EXPENSES Calculate an average expense paid per customer to cover your business.
- (Total cost of all expenses / Number of clients = Business Expense Fee)
- FIND PRORATED START UP COST Calculate the monthly cost for overall startup.
- (Startup cost / 12 months = Monthly Startup Fee)
- FIND ANY ADDITIONAL FLAT FEES No formula for this, just an additional addend, such as quality.
- FIND TOTAL ESTIMATED MONTHLY COST TO CLIENT Calculate the sum of it all.
- (Avg Monthly Labor Fee + Business Expense Fee + Monthly Startup Fee + Additional Flat Fees = Estimated Monthly Cost to CLient)
- FIND THE AD SPEND PERCENTAGE TO BID TO CUSTOMER Calculate the bid rate.
- (Estimated Monthly Cost to Client / Client’s Budgeted Ad Spend = Percentage for Bid)
That’s a Starting Point
Now that you know how to calculate your rates, you have a starting point. Always begin by determining your desired rates and working from there.
As you noticed, we didn’t just start with guesstimating a random percentage of ad spend, the way many people do. Using that method puts you in almost a defensive position, striving to figure if the numbers will work out for you. Instead, you must begin with the numbers you wish to see, and the numbers you need to maintain a successful business. Then work backward to figure your bid.
When calculating PPC and SEO consultant rates, you need to know that every client will have a different budget. Because of this, you need to be prepared for fluctuation in your rates.
Find the absolute minimum rate you can accept to maintain a successful business. Never bid at this rate; you want wiggle room. For clients who will have a lower budget, you can bid slightly above this bare minimum, and if they counter with a lower bid, you have room to move down to that minimum. Meanwhile, with bigger clients who have a larger budget, you can bid a lot higher, therefore, if you get into a bind while trying to get their business, you can offer a “large discount” by dropping your bid to that minimum rate.
How to Maintain & Grow Your PPC Business
Now that you know how to determine your pay, it’s time to generate recurring revenue.
Sure, with contracts binding your clients, you have a little security in recurring income. However, you want satisfied customers who not only extend their contracts but invest more money with you and recommend their friends.
Take a look at this article, Losing Clients – Top Reasons SEO Agencies Get Fired [& How to Avoid Them]. With clients in mind, you always want to ensure their satisfaction. One of the key components to running your online marketing business is to make sure your client is not paying out of pocket for your services. Yes, you read that correctly. They should not be taking any additional money out of their pockets to pay for your services. Rather, they should have such an ROI that your fees are just a small segment of their return.
Image courtesy of Search Engine Watch.
To show your clients the impact of your campaign management work, you can calculate their return on investment. The math is quite simple, subtract your cost (of entire client investment) from your profit. Then divide the final number by the cost:
(Profit – Cost) / Cost = ROI
For further calculations and in-depth ROI information, check out Search Engine Watch’s article, 3 Ways to Calculate PPC ROI.
The ROI of each client’s investment should always be at least double their initial investment. This ensures trust and sustainability.
Generate Clicks, Generate Growth
Of course, the more successful you are with your marketing work, the more your clients will be satisfied. But how do you actually grow and expand your PPC marketing business?
Capture New Clients
Capturing views, clicks, and customers is part of your job. You have this mastered. Allowing prospective clients to find you shows them that you are skilled in the online marketing realm. You’ve probably got this part down already – marketing yourself. However, what about the little things? Have you considered narrowing your prospect base?
As The Balance mentions, catering to your specific audience will work wonders. As a marketing specialist, you are probably familiar with targeting audiences for your clients; however, have you applied it in your own business? Are there different niches that you are more successful with or more passionate about? Try targeting those audiences alone, and watch your specialty catalyze your business.
Pre Existing Clients
Not only can you generate new clients, but you can also generate exponential growth from your current client base. How?
As previously mentioned, obtaining trust is vital in building a relationship with a client. This trust will take your business to the next level, guaranteed. If your clients trust you with their money, they will spend more money with you rather than leaving to find a new PPC consultant.
By maintaining quality customer service and an even better ROI, your client will most likely amp up their ad spend. The more the clients spend on their advertisements, the more profit in your pocket (especially if you use the recommended percentage route upon selecting your payment method).
Now, it’s Your Turn
ROI is key. When you create a large return on investment for your clients, you can raise your rates. When you raise your rates, you generate more income. Simple.
Determine your PPC consultant rates, your route, and your own potential. The worst that can happen is the need to make adjustments throughout your PPC business endeavors.
It all starts with starting. Jump to it. Get your PPC marketing business rolling.
This article was written by Dita Sisene. Dita is from Northern Europe. She’s a Digital Marketing junky and is obsessed with helping businesses grow through internet marketing. SEM Manager at bestppc.marketing by day & blogger by night.