Jamie Smith, CEO of EngineReady -- a search marketing company with several Fortune 500 clients -- has a bad beat story that is a cautionary tale for consultants in the search industry. His company became responsible for hundreds of thousands of dollars in AdWords spend.
Smith had worked with this company for more than three years and billed them for PPC spends without problems. But when the company suddenly went out of business, Smith's company, which had been paying Google directly and billing the client, found themselves liable for the money spent.
- Use the client's credit cards or have Google invoice them directly. Set up your client and make sure their payment information is listed, not yours.
- Consider structuring a deal where most of the payment is upfront.
- Request a significant down payment to make sure risk is shared between the two parties at the outset.
- Factor in credit card billing processing fees. Over time, this charge adds up.
This question of how consultants should structure pay for PPC spends by their clients has a number of caveats.
When you use the client's credit cards to pay for PPC spends, Google will hand over the accounts to the clients regardless of any money they may owe the consultant. Given much of the work on a PPC campaign is done in the beginning, consultants who spread the payments through a contracted period of time can find a client leave and take over the account when this work is completed and not be fully compensated for the efforts.
I asked a number of well-respected people in the PPC space how they deal with pay and got some great insights.
Andrew Goodman, CEO of Page Zero and author of "Winning Results with Google AdWords," said he typically uses the client's cards or has Google invoice them directly. In the few cases where Google invoices his company, the clients prepay the expected spend.
"In terms of our service fee, technically it is always possible for someone to leave early on our contract. Depending on the terms of the contract, that might or might not mean they are in breach. We hope it does not come to that, and it rarely does. It's important that business deals like this operate on good faith as well as on the basis of contracts," Goodman said.
Lauren Vaccarello, of LV Logic, said she sets up a client and makes sure their payment information is listed.
"I don't want to be responsible for paying their PPC bill and hope they pay me," Vaccarello said. "Too much can go wrong in that scenario."
SEW Expert Melissa Mackey, search marketing manager at Fluency Media, who also writes Beyond The Paid, said this: "We generally charge a set-up fee and set up client accounts under our MCC." The MCC is Google's AdWords interface for dealing with multiple clients and/or campaigns
Sometimes, however, clients just stop paying for the services and take over the campaigns themselves, which they have every right to, but this leaves no redress for the consultants to get paid any monies owed.
"Luckily, we've never had a client try to take over their account. When clients leave, it's usually on good terms and we either release their account from the MCC, or do a download to Excel from AdWords Editor and send it to them," Mackey said.
Vaccarello also pointed out that, as a consultant, "you need to do what you can to minimize risk."
SEOBook's Aaron Wall, who also does limited client work, said he has structured a number of deals where most of the payment was upfront.
"In some cases, we have also used the client's credit cards, but billed them separately for our hours," Wall said. "I don't really see it as a problem if the client wants to own their own data. Ideally the consultant should be able to add value through maintenance and improvements if they want recurring fees."
Goodman said that, in terms of clients "taking over" their own accounts, this is generally their prerogative.
"We find our renewal rate is very high and that the vast majority of clients want us to see the service through to the end," Goodman said. "There has to be value there -- search marketing is certainly not the only industry subject to the build-or-buy, in-house-or-outsource, dilemma. If external providers didn't provide value, you'd see every company setting up their own mini ad agency in-house. That has never happened, as it doesn't make economic sense."
Wall recommends that "all consultants and agencies request a significant down payment to make sure the risk is fairly shared between the two parties coming to an arrangement at the outset. On the client side it is not readily apparent how disruptive it can be to have a project terminate early; agencies may have turned away other business to work with that client."
Smith also passed along another caveat with credit card billing that many companies may overlook: when clients pay using credit cards, the consultant has to pay the processing fees. Over time, this 3 to 4 percent charge adds up unless factored in to the equation.
It should be particularly noted when a client pays for money the consultant has paid to the engines using a credit card. Unless the fees are added upfront, the consultant is out that money for every spend, which adds up when monthly spends are in the tens or hundreds of thousands.
"Client retention and fair play that we see might also be due to our experience in spotting red flags of clients who talk a certain short-term language of 'quick setup' and exhibit certain signs of not intending to pay in full," Goodman said. "I will say, though, it is impossible to expect/predict bad behavior if a major brand or a well-known management team turns out to be rotten."
Beware of bad beats. Take steps to minimize your exposure.