Owning my agency has been an eye-opener into how business is done… and it's not pretty. I don't want this post to be an agency bashing post since I empathize with many agencies and the difficult decisions they have to make. When I first started, I was idealistic that I didn't want to be that agency – one of those agencies that nickeled and dimed clients, pushed to upsell them every day, baited and switched, or charged more on a retainer when they screwed up.
We've had a very loose contract that enabled clients to leave when they wanted to, but it's backfired on us too – many times. Instead of it being used as an out when things weren't working, we've had several clients sign up under our flat rate system, push aggressively to get a ton more work done than we promised, and then quit to avoid paying for it down the road. That's cost us a lot of time and money.
That said, we still hate getting emails like this:
This causes two huge problems. First, the client is now out of money and dependent upon the agency they spent their budget with. Second, the client is now upset with the agency, and the chances of things turning around aren't good. That means they may need to walk away and start over. An expensive process that they may be unable to afford.
Depending upon the contract with the agency, the agency may also be in the right. Perhaps the agency put a ton of effort into the web presence and are working on a contract where the client is paying on an installment plan. The site may take a while to rank well (although I'm surprised an SEO consultant would take on competing clients). It may not be a hostage situation at all.
If you think that the agency is wrong no matter what, you may want to check your contracts. As an example, if we outsource animation to an agency, we're probably only going to get the output video back. Most agencies don't provide the raw After Effects files unless that's part of the agreement. If you want to get an edit to the animation, you're probably going to have to go back to the source agency and get another contract in place.
How to Avoid Agency Hostage Situations
In digital marketing, we'd recommend you always go into a relationship with your agency knowing the following:
- Domain Name – who owns the domain name? You'd be surprised at how many agencies register the domain name for the client, then keep it. We always make our clients register and own the domain.
- Hosting – if you cut ties with your agency, do you need to relocate your site to another host or can you remain with them? We often purchase hosting for our clients, but it's always in their name so if they leave us, they can just remove our access.
- Raw Assets – design files like Photoshop, Illustrator, After Effects, Code and other resources used to develop other media outputs are often the property of the agency unless you negotiate otherwise. When we develop infographics, for example, we give back the Illustrator files so our clients can repurpose them and maximize their value. You'd be surprised at how many don't, though.
Buy versus Lease
It all comes down to whether you're buying and own the rights to everything your agency does, or if they retain some of the rights to the work they're doing. We always make this clear with our clients. We've developed a couple of solutions with clients where we kept the costs low by negotiating a contract where we co-owned the assets. That means we could re-use them for other clients if we wanted to. An example is a store location platform we built years ago using Google Maps.
The legal speak can be difficult to read within a professional standard agreement so make sure you know. A simple way is just to ask:
- What happens if we end our business relationship? Do I own it or do you own it?
- If we need edits after we end our business relationship, how will that happen?
I'm also not pushing in this article that you should always negotiate ownership over the agency. Often, you can get very competitive pricing from agencies because they've already done the groundwork and own the assets and tools to accomplish tasks. This is more of a lease or installment agreement and can work to your benefit if you wish to save money.
For instance, we may price out a full site and all media for $60k but negotiate a $5k per month installment. The customer benefits by getting a site up quickly without having to pay all the money up front. But the agency benefits because as the year goes by, they've got a consistent revenue stream. If the client decides to cut the contract short and default, they may also lose the assets along with it. Or perhaps they can negotiate a lump sum payment to purchase the assets.
We are working with our attorneys now on better defining this offering for clients. We may offer three different contracts, including pure consulting with no assets, execution where we retain the rights of the work at a lower rate, and execution where our clients retain the rights of the work at a higher rate.
This way, companies who believe we may be too highly priced can work with us at a lower rate… but if we're successful, and they wish to own the rights to the work, they'll need to negotiate that purchase from us. Or they can just leave, and we keep the work so that we can repurpose it for another client.