Commission-Only Deals Put Your Agency at Risk

When I first started running my agency, I was tempted by every new opportunity. My speciality at the time? Anything for money. I was desperate and took what I could get. 

On Reddit recently, someone in the interior design niche asked if they should abandon their flat service fee for a prospect and take on a commission-based deal instead. It’s a question every agency owner faces at some point. My answer was patently clear: don’t do it.

On more than one occasion, a client would dangle the idea of commission-based pay, and I’d start doing some advanced calculus. “If I deliver X leads, and they close Y percent, I’ll make way more than my normal fee.”

Other times, I'd be offered "sweat equity". Translation: I'd do all the work and theoretically own something like 5% of their company. That only mattered if they happened to get off their butt and somehow happened to sell something, and somehow managed to make a profit, then, maybe, I'd get a 5% cut of their earnings.

Long story, short. It was a trap. I never made a penny from these kinds of deals.

 When you do a deal like this, you put yourself at high risk of not being paid. Typically, the client flakes out and never upholds their end of the agreement. 

Maybe they claim the leads are no good.

Maybe they don’t answer the hot leads you send.

Maybe they’re terrible at follow-up, don’t provide quality service, or “forget” to report sales. 

Even if they do all those things, they may burn through so much cash that there's never any bottom-line profits. 

All of those factors are completely outside of your control. Even if you do everything right, you'll probably be left with nothing. 

That’s why I always advise agency owners to avoid tying pay directly to client revenue. If you’re going to negotiate, stick to models you can control: MRR, flat fees, per-lead pricing, or a combination. 

Commission-based deals often come from clients who aren’t serious or are fishing for free work. When you’re just starting out, it can feel like you don’t have leverage, but the leverage you do have is your time. 

Protect it. Get paid for your work instead of hoping your client knows how to run a legit business.

I hope that helps.

~ Erik