Flat Rate vs. Percentage: The $47,000 PPC Management Fee Decision

Same results. Two pricing models. One could cost you $47,000 more per year. Here's the math.

The Two PPC Management Pricing Models

When hiring a Google Ads management agency, you'll encounter two primary pricing structures. Each has distinct advantages, disadvantages, and hidden incentive problems that affect your bottom line.

Model 1: Percentage of Ad Spend (Most Common)

The agency charges 10-20% of your monthly advertising budget. For example:

• $10,000/month ad spend at 15% = $1,500 management fee
• $50,000/month ad spend at 15% = $7,500 management fee

Pros:

• Lower fees for small budgets
• Scales with your growth
• Common industry practice

Cons:

• Agency makes more money when you spend more (incentive misalignment)
• Can become very expensive as budgets scale
• No incentive to improve efficiency

Model 2: Flat Monthly Rate (Less Common)

A fixed monthly fee regardless of your ad spend. For example:

• $2,500/month whether you spend $10K or $50K on ads

Pros:

• Predictable, transparent costs
• Agency incentivized to improve efficiency, not increase spending
• Significant savings at higher ad spends

Cons:

• Higher upfront cost for small budgets
• Less common (harder to find reputable agencies)

The $47,000 Difference: Real Math

Let's compare both models using real scenarios:

Scenario 1: $30,000/Month Ad Spend

Scenario 2: $50,000/Month Ad Spend

When Percentage Model Makes Sense

Despite the higher long-term costs, percentage-based pricing is appropriate in certain situations:

• Ad spend under $5,000/month: At this level, a flat rate of $1,500+ may represent 30%+ of your budget, making percentage pricing more affordable.
• Testing new channels: If you're testing Google Ads for the first time with a small budget, percentage pricing reduces upfront risk.
• Seasonal businesses: If your ad spend fluctuates dramatically by season, percentage pricing scales with your needs.
• Variable monthly budgets: Businesses with unpredictable cash flow benefit from fees that scale with spending.

When Flat Rate Makes Sense

Flat-rate pricing delivers the best value and incentive alignment for:

• Ad spend over $15,000/month: The break-even point where flat rates become more economical.
• Consistent monthly budgets: Predictable spending benefits from predictable management fees.
• Established campaigns: If your campaigns are past the testing phase, flat rates incentivize optimization over spending.
• Focus on efficiency over spend: When your goal is to reduce CPA, not increase ad spend, flat rates align incentives.

The Hidden Incentive Problem with Percentage Pricing

Here's the uncomfortable truth about percentage-based pricing:

Agency Question: "How can we make more money?"

• Percentage Model Answer: "Get the client to spend more on ads."
• Flat Rate Answer: "Get the client better results so they stay longer."

This fundamental incentive difference shapes every decision the agency makes:

Scenario	Percentage Model Incentive	Flat Rate Incentive
Reduce CPA by 30%	Neutral (doesn't increase fee)	Positive (happy client stays longer)
Increase ad spend by 50%	Strongly positive (+50% fee)	Neutral (fee stays same)
Pause underperforming campaigns	Negative (reduces fee)	Positive (improves overall ROI)

Stratagem's Hybrid Approach

We use a tiered flat-rate structure that balances affordability for smaller budgets with savings for larger ones:

• $0-$10K monthly ad spend: $1,500/month flat rate
• $10K-$30K monthly ad spend: $2,500/month flat rate
• $30K-$50K monthly ad spend: $3,500/month flat rate
• $50K+ monthly ad spend: Custom pricing (typically $5K-$8K flat rate)

Why this approach works: We're incentivized to make your ads MORE efficient, not MORE expensive. Our fee doesn't increase if we convince you to double your ad spend—it increases if we deliver results that make you want to expand services.

5 Questions to Ask Your PPC Agency

Before committing to a pricing model, ask these critical questions:

1. "Do you make more money when I spend more?" If yes, understand how that incentive might influence recommendations.
2. "What's your incentive to reduce my CPA?" The answer reveals whether optimization or spending drives their profit.
3. "Can you guarantee you won't suggest increasing spend unnecessarily?" Percentage agencies can't honestly guarantee this.
4. "Would flat-rate pricing work for my spend level?" Some agencies offer both—ask which they recommend and why.
5. "What happens to your fee if I cut my budget in half?" Their answer reveals flexibility and alignment with your interests.

Calculate Your Potential Savings

Use this simple calculator to estimate your annual savings with flat-rate pricing:

See If Flat Rate Saves You Money

Ready to find out how much you could save with flat-rate PPC management? We'll provide:

• A detailed cost comparison based on your current ad spend
• Analysis of your current agency's pricing structure
• 5-year cost projection for both models
• Free account audit ($500 value)

Request your free cost comparison or learn more about our Google Ads management services.