Expert: Peter Gabany - 9/25/2008

Question
The company I work at has interest in signing with a representative agency that will represent all of our media by pitching clients our media kit and so forth.

Unfortunately, I was placed in charge of negotiating with this representation agency and am not to sure about the fee section within their contract.

It states --

Fees For their Services " 30% of all net dollars of advertising sold. Payable when received or distributed when collected. "

I'm assuming they will not be tacking on an additional 30% to each of the rates we provided them rather they will be taking 30% from us? Correct? It just seems like a lot of money.

Can I have some advise? Should we jack our prices up just for this client considering the fees associated to doing business with them?

A response ASAP WOULD BE AMAZING!

Thanks

Answer
Sorry to have taken so long to respond. The fee is pretty standard and they way that you have stated the fees it simply says 30% of the overall NET fees. So, typically an agency will make 15% (17.65) and they wish to take 30% of that fee. It is a tad high and I would have a tendency of negotiating 20% - this will leave your agency $12.00 for every $100.00 sold.

This may have you settling for 25% but at least you negotiated.

Your leverage is this - they will already be profiling your media kits to a vast audience and yours will account for one of many (unless you have exclusivity. No if you have a decided niche then you can ask for exclusivity. For instance: you are a Dog and Cat publication and they guarantee never to represent any other dog or cat publication.

Most media buying agencies take 3% of gross or 20% of net but will negotiate to 30% for small accounts. If you have a decidedly popular media product (online advertising, print publications, transit in large market) then the amount of opportunity for them is greater as is the overall pie so commission can be set less.

I would go in and play a bit of hardball and let them know that 30% is too rich for your bosses and they will have to do decidedly better than that. Recommend 20% - if they want your business, they will take it BUT don't think that you won on price. You must nail the service. Ask first what they will do  for the 30% then negotiate the same for 20%

I hope that this helps and gives you the confidence to go forward. i would be most pleased if you would report back to me and let me know how you make out.

Cheers,

Pete