Starting my agency was an eye-opener into how business is done… and it’s often not very 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 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 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:
- The client is now out of money and dependent upon the agency they had spent their budget with.
- 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 much effort into the web presence and is working on an arrangement where the client pays 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 master services agreement (MSA), statements of work (SOW), and any other contracts. For example, if we outsource animation to an agency, we will probably only 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’ll probably have to go back to the source agency and get another contract in place.
How to Avoid Agency Hostage Situations
A term often thrown out in the agency business is sticky. Agencies will adopt platforms and technologies that make it painful for clients to leave. While these are valid strategies for an agency to retain clients, I would deem them deceptive if they’re not adequately disclosed to you.
In digital marketing, we’d recommend you always go into a relationship with your agency knowing the following:
- Domain Name – Who owns your 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 either in their name or can easily be switched to their own account if our relationship ends.
- Third-Party Platforms – Agencies may use many platforms to assist in delivering services to you, from PPC advertising, managing your social media profiles, and monitoring your search engine ranking… to providing dashboard reporting.
- Raw Assets – design files like Photoshop, Illustrator, After Effects, Code, and other resources used to develop other media outputs are often the agency’s property unless you negotiate otherwise. When we create 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. We also subscribe to a royalty-free stock image site that allows us to delegate ownership to our clients.
Ultimately, the question comes down to this. If you decide to leave this agency, you need to understand whether you will lose critical historical data and content. If it’s an issue, you should have your own accounts, your own platforms, and your own assets, and provide access to the agency instead.
It’s important to note that many marketing and advertising platforms now offer enterprise-level features that allow the company to own the account but delegate permissions to the agency. Google properties do a fantastic job of this, for example. As you work with agencies, it would be wise to ensure the solutions they’re using have these features if leaving them will be inconvenient.
Buy Versus Lease
It all comes down to whether you’re buying and owning 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 to our clients. We’ve developed some solutions with clients where we kept the costs low by negotiating a contract where we co-owned the assets. That means we could reuse them for other clients if we wanted to but the company also owned and can leave with the code. Examples include a store location platform we built using the Google Maps API and most recently, a custom WordPress plugin that we will taking to market.
The legal speak can be difficult to read within a professional standard agreement, so make sure you know. A simple way is to ask:
- What happens if we end our business relationship? Do I own it, or do you own it?
- How will that happen if we need edits after we end our business relationship?
In this article, I’m also not pushing 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. For instance, they may invest in a significant license for software that is out of one client’s budget range because they share the cost with other clients. That’s not a negative; that’s a positive… as long as it’s disclosed.
For instance, we may price out an entire site and ownership over all media for $72k but, instead, negotiate a $5k monthly installment as long as we co-own the effort. The customer benefits by getting a site up quickly without paying all the money upfront. But my agency benefits because we’ve got a consistent revenue stream as the year goes by, and the work we accomplish can be shared across clients. If the client decides to cut the contract short and default, they may also lose the assets. Or perhaps they can negotiate a lump sum payment to purchase the assets.
We may offer multiple types of contracts with our clients, 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 wish to own the rights to the work, they’ll need to negotiate that purchase from us. Or they can leave, and we keep the work and repurpose it for another client.