Can a Pay-Per-Performance Pricing Model Work for Your Agency?
Ever wondered if you could make money on performance-based pricing? Kyle Sulerud was a Google ads expert with many years of experience in the space. He even had a training program teaching others his Google ads methodology. That was until he was presented with the challenge of running YouTube ads. Today he runs AdLeg, an agency specialized in this niche. Kyle joins the podcast to talk about his experience with the pay-per-performance model, how it has worked for him, how he refined his criteria to work with clients that he could ensure success, and the hurdles he has found in his learning experience.
3 Golden Nuggets
- An unbelievable model. The pay-per-performance model may not be for everyone, but it has worked for our guest, whose model has evolved to charging a percentage of the profit. Clients jump at the chance of getting the service and paying only if the ads work and bring the expected results. They may not be as eager once they start sending the payments, but Kyle trusts his model and is confident that it gets the best results.
- Refine your criteria. At first, this agency didn’t necessarily know what the criteria for working in this niche had to be. They thought that working with companies that showed promise was good enough to ensure success. But with time and experience they have adjusted that to working with companies that have a certain monthly revenue from the product that they want them to advertise and have a sales team. Now clients practically audition to work with them and not the other way around.
- Maintain communication. Each client thinks about things a little differently and some may not understand why it’s better for them to pay an agency an amount that they would gladly pay to Google. To address this, Kyle and his team realized the importance of maintaining communication with them to present the progress they had made and how they stay on top of things. Hence, the email-only communication with clients turned into monthly or bimonthly meetings.
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Refine Your Client Criteria and Profit With Pay-Per-Performance Pricing
Jason: [00:00:00] Hey, what’s up everybody? Jason Swenk here and I have another amazing episode for you. An amazing guest coming up, he’s in the mastermind, Kyle. And his agency is all based on pay for performance, you know. And we’re going to talk about how you can do it. What are the benefits? What are the disadvantages?
And let’s go ahead and get into it.
Hey, Kyle. Welcome to the show.
Kyle: [00:00:29] Hey, Jason. Thanks for having me.
Jason: [00:00:31] Yeah, man. Excited to have you on. So tell us who you are and what do you do?
Kyle: [00:00:37] Yeah, so, uh, the names Kyle Sulerud and I live in the great sunny state of North Dakota. Um, and I run an agency called AdLeg. We, uh, did Google ads for a long time. About seven and a half years, um, in the space.
But for the past couple of years, I’ve really been focused on YouTube ads. And, as you mentioned in the intro, we focus on pay for performance, meaning we only get paid when our clients get paid. And, um, it’s been a great model. I’ve been able to grow the team pretty quickly with that model. So I’m excited to talk about that today.
Jason: [00:01:15] Yeah. So tell us kind of… How did you discover this model? Or why did you choose this model? Because there’s a lot of different models that, you know, you could have done, you know. What was… What attracted you to the performance model?
Kyle: [00:01:33] So, when we were just doing Google ads, it was all retainer-based. And I’d kind of always wanted to do performance-based. I’ve heard Dean Jackson talk about thinking about if you only got paid for results, what would you get paid for?
And I’ve always thought about my agency that way, but when you’re running Google ads for roofing companies, that’s, that’s pretty hard to do. Um, obviously there’s certain pay-per-lead models that can work for that, but. Um, it just never really worked out. Once I got into YouTube ads, I found that it, it could work out. For starters, because I didn’t know what the results were going to be.
And I really didn’t want to get paid for my first couple of clients unless I was bringing them results. So they knew that, they knew that I was, I was fresh with YouTube ads and they were willing to give me a shot. Um, especially since they weren’t going to have to pay me if it didn’t work. They just had to pay for their ads.
So we worked out a percentage of profit and because they are selling digital products, that was easy to track. And, um, from there it worked, the profit was there. My percentage was there. Everyone was happy. And that’s the model that I’ve stuck with.
Jason: [00:02:51] That’s awesome. Tell us kind of a couple of scenarios to watch out for, like, if you had to go back, right? And take on some clients.
Cause I’ve, I’ve seen it work extremely well, and I’ve also seen it blow up in people’s face. But it’s blown up there in their face because of certain criteria. So can you talk a little bit more about that?
Kyle: [00:03:10] Absolutely. We really refined the criteria. And that has been extremely important. And at first we didn’t necessarily know what the, what that criteria had to be. So we would take on clients that looked really promising. It looked like they had a product that was going to sell well through YouTube ads. And if we just sent traffic to that, then it would be profitable. And it didn’t work for, for a number of reasons, either their product wasn’t quite ironed out or they were in the middle of pivoting to something new, or they didn’t have the sales team in place to handle the leads.
Um, for the most part, it came down to, to newer products. People that didn’t really have something that was proven out fully. So our criteria now is you have to really be proven out. You have to have, um, we have a pretty high threshold for monthly revenue from the product that you want us to advertise. That doesn’t mean from your whole business, but from the specific product that you want us to send traffic to, you need a certain amount of monthly revenue coming in.
Um, you need a sales team in place. If you’re, if you’re selling something with sales calls and we’ve found that that’s pretty reliable. Because it’s at that point and you have a machine. It’s well-oiled and we just need to send more traffic to it and we’ll make you more profitable. And then we can, we can actually take our cut.
Jason: [00:04:46] I love it. What is the, what’s the typical kind of you think of a good percentage to have, or do you have a sliding scale? Cause a lot of people are like, well, how much should I ask? And I think sometimes people ask for too little.
Kyle: [00:05:03] Yeah. Um, that’s something else that that’s evolved. Um, the, the very first client got a really sweetheart deal.
Um, and since then I’ve learned the value that my agency can really bring and… It varies, but it goes as high as 25% right now. And maybe, maybe that can go higher, but I don’t know. I think 25% is a pretty high number. Not everyone is on that level. It kind of depends on the client. Um, but yeah, anywhere from 20 to 25% is pretty reasonable for, for this. Especially with the types of clients we have, where they already have everything going on, all we need to do is send more traffic to something that’s already working.
So it’s pure profit for the client at that point.
Jason: [00:05:52] Yeah. And, and I would, I would gather and especially, you know, from, from hearing from you in the mastermind talk about it. It it’s more like they’re auditioning for you rather than you auditioning for them. Is that true?
Kyle: [00:06:07] Yeah, it, it really is. Um, we don’t even talk to about 90% of people who apply to work with us. And, uh, once we talk to them, that’s really just our way of verifying the numbers of going really deep and making sure that it’s something that we think will work with our model and that it’s something that we want to work on.
So yeah, we, we reject far, far more people than we accept it. It really is them applying to work with us.
Jason: [00:06:41] Yeah, it’s, it’s just an unbelievable model, you know? Cause a lot of times we’re all, you know, the thing about… There’s a lot of people listening that are at a point where they’re like, and I came to this realization a little while ago of going, I remember chatting with…
There was like maybe three agency owners I chatted with in a row and they all were like, I resent my clients. And I’m like, I was like, well, you’re in the wrong business. Like, why do you resent your clients? And they couldn’t really tell me. They were just like, well, they always ask for these dumb requests, all this kind of stuff.
And I, and then I, the last person I said, you know, actually you probably have a lead, um, a lead generation problem. Because you resent your clients because you depend too much on them. And I said, if you had a ton to come in and you could pick and choose from them, that basically eliminates that. Then you’re only working with the ones that you truly want.
And they’re like, yeah, that kind of makes sense. And I love that you discovered that through this. Um, tell us the story about, I’m sure you probably had… where there’s a client that they probably keep sending you checks and you’re like crap. They’re, they’re probably like they start looking and going, how much money am I sending to Kyle?
Kyle: [00:07:55] Yeah. So the, the pay for, pay for performance model sounds really great to a client before they send you any money. You know, this, this sounds amazing. Um, this agency they’re putting their money where their mouth is and, um, great. I’ll sign up. I’ll pay them a percentage of profits.
Where that starts getting questioned is when is when a client is paying you 20 times more than they paid someone to run ads for them before, you know? Because yeah, people are out there willing to, to run ads for whatever, whatever kind of business you have.
That’s not really what we do. We don’t run ads. We partner with you. We’re, we’re in this as much as you are to try to make it as profitable as possible. Um, so yeah, once, once they start sending those, those bigger checks, five figures, multiple five figures a month. Now they’re thinking, hey, I used to pay my Facebook ad guy $2,000 a month. Um, maybe I can find someone to do it for that.
So, yeah, it, uh, I can think of a specific situation where that happened. And the client was actually very transparent with us. They said, you know, we’re, we feel like we’re paying you a lot. And we’re actually testing out a different agency right now who’s just willing to charge us on a flat retainer. And, you know, we said okay.
I’d seen that happen before where, uh, a different agency came in and results just weren’t there. And you know, that’s not to brag, but I’ve, I have a really great system here and we’re able to bring in results for YouTube ads like no other agency I’ve seen. So in this case they were testing this other agency.
Uh, they were about a month in with them. It, it wasn’t profitable with them. Uh, they were told they just need some more time, you know, need more time to optimize. That’s always the story. Um, even though we had been profitable in month one. They got a couple of months in and it still wasn’t profitable. And with the retainer they were paying the agency, they were losing money.
And, um, finally they, they said, all right, you know, we’re getting rid of this other agency. We’re just going to go with you. Um, we get it now. And that’s… think, they have to think about it like it they’re paying the money somewhere, right? A lot of people don’t think twice about doubling their ad spend and paying Google twice as much money.
But what we can do is actually save a client that money that they’re paying Google. We get some of it, they get the rest of the savings and, overall, they just are way more profitable. And once they realize that they’re happy to stay with us. So it’s very, very rare that we lose a client.
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I think too, like, it’s about the client not realizing that the time, time is more valuable, you know, especially going to a new agency. Now I want to know, and I, I hope you did, but you’re too nice of a guy, so I don’t think you did. Um, did you charge them a pain in the ass fee for coming back?
Kyle: [00:12:32] No. No, they’re actually, you know, they’re good clients. And like I said, they were, they were up front with us. They, they told us. They asked for a discount. Um, we, we stuck to what we were charging, you know? Um, yeah, well, I guess I’m too nice of a guy.
Jason: [00:12:50] I already knew the answer.
Kyle: [00:12:52] They’re still getting the same rate they were.
Jason: [00:12:54] I know I was like, I’d been like, all right, well it’s 30% now. Um, suckers. What, uh, what have you learned from them leaving that you would have been like now that you have in your head, would you recall this story to them and saying, hey, you can go try them. But look, you’re more than comfortable paying Google, but why not us? Like it’s a cer… it’s a percentage, like we never make over this percentage.
Kyle: [00:13:21] Yeah. There’s different ways to frame that. And I think each client kind of thinks about it a little differently. One thing we’ve really learned is to be just really involved in communication. Um, for a while we were rarely meeting with clients. Uh, we mostly communicate by email.
Now we’re meeting with clients once a month or once every couple months, at least just to talk about, okay here’s where you were. Here’s what we’ve done. Here’s where you are now. Here’s the plan going forward? Uh, here are some new changes that Google, um, that from Google, you know, that we’re on top of, don’t worry, we’re taking care of this kind of stuff.
And just kind of over-communicating so that they know that we’re, we’re on top of it. We’re their partner, and it would be almost silly for them to look elsewhere.
Jason: [00:14:17] What about…? I know some people are listening in are going… All right so you set up this great system on YouTube. I presume this is under your account that you control or is that under theirs?
Kyle: [00:14:30] Yeah, it’s, it’s under our account that we control and we do get some pushback on that. Uh, we’ve lost some clients, um, who probably would have started working with us if that wasn’t the case.
But it’s been really important for me. Um, partially to just preserve our system. I don’t want an outside party, even if it’s a client having access to see everything that we do. Um, and then partially just because a lot of it is in the setup, I’m sure someone could take a campaign that we’ve set up and that we’ve been running for a few months and run with it and it would do fine for a while.
So we need to really just preserve our work. Uh, we don’t require contracts, so that’s just one way that we ensure that our work is protected.
Jason: [00:15:23] Yeah. I love it. Cause I know a lot of people are thinking, well, we’ll set up everything on the client side and they have access to everything. And then like, like you were saying, a lot of the work is upfront.
And then, and I like how you overcame that objection to them as well of going I don’t want you guys going in there and messing it up. Like we got to protect what we’re doing. Rather than saying, if you leave, then you can run with it too. It’s like how you, how you frame that. Well, this has all…
Kyle: [00:15:50] Actually, we invested some money in, in building out a portal that clients have access to so they can see some data in real time.
They can see how their ads are performing in real time. It’s linked directly into the Google ads account. It’s software that I hired developers to build for me. Um, so they can see the, the data, the performance data. They just can’t see how everything is set up and how everything’s being run.
Jason: [00:16:17] I love it. I love it. Kyle, this has all been great. Is there anything I didn’t ask you that you think would benefit the audience?
Kyle: [00:16:25] Uh, no, I think we pretty much covered it. I think pay for, for performance is great. If you can work it out, there’s huge upside. It’ll probably take you a wild and some downside to kind of figure out who you want to work with, who you don’t want to work with, how much you needed to charge.
Um, but it’s, it’s been great for me. I’m definitely not going to be changing it anytime soon.
Jason: [00:16:50] Awesome. Well, thanks so much, Kyle. Um, oh, before I forget, what’s the website people can go and check you guys out?
Kyle: [00:16:58] Yeah, it’s adleg.com. That’s A D L E G.com. You can also find me on YouTube. I have a pretty active channel. Just search my name on YouTube and that’ll come up for you.
Jason: [00:17:10] Awesome. Well, thanks so much, Kyle, for coming on the show. And if you guys enjoyed this episode, make sure you take a screenshot, upload it to Instagram, tag us and say, hey, I really. The episode. Thanks so much. And we’ll give you a shout out back.
Also, too if you want to be around other amazing agency owners on a consistent basis, I’d love to invite all of you to go check out the Digital Agency Elite. This is our exclusive mastermind where we’re constantly ascending all of our members up to the top of the summit so they can get to a point where they can exit, whether it’s sell their agency or exit of doing all this stuff that they hate doing.
So make sure you go to digitalagencyelite.com. And until next time have a Swenk day.