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How does most agency charge? Hourly? Project based? Pros and cons?

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Multiply by 8-10 what you make by the hour and that’s how they charge clients. E.g. $100/hour for you ➡️ $800-1,000/hour for the client. (Anyone feel free to correct me if this is not accurate) If client is a sexy brand, agencies charge way less to have the opp to work for them and get a portfolio piece out of it that will attract new biz. The more unsexy/soul-sucking the work is, the more they charge. (E.g. bank, insurance, telco)

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My agency charges clients about 3x our salary. My understanding is this yields them 15-20% profit for the agency after covering overheads etc.

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Costs the agency needs to cover in a “client bill rate” are things like: Salary of billable staff hours Salary for non client hours (ie admin, vaca, sick) etc) Salary of back office staff (finance, legal, hr, executive, Admins, new business, etc) Benefits, payroll taxes, 401k matches etc for everyone Rent for office space Cost of the facility (lights, heat etc) Business equip (laptops, phones, etc) Taxes Etc Etc = All the above add up to the agency’s total cost of doing business Subtract above from the agency fees to client = what’s left is profit. Most agency make 15-25% profit. To make approx that profit agencies charge a client approx 3x the salary of the client billable people’s billable hours. That gives enough to pay for the rest of the things listed. I’m sure I’ve left out costs but just giving examples of the big ticket stuff.

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One comment/revisión to these: agencies charge a higher amount vs salary on junior staff - because they can - to generate an hourly rate of say $175/hr to clients. For senior staff they can’t change the same multiple as rates might max out at $400/hr or so. Said another way: the executive creative director definitely makes 4-5x the junior staffer - but clients won’t pay what that billing rate would be for the senior staff. Junior staff hourly rates and billability subsidize the senior staff high costs.

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It’s retainer, project-based, or some combination there of.

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Most of the time, there is a “blended rate,” meaning they charge the amount no matter who works on it. That’s why so often you’ll see really junior teams working day and night, and CDs sitting around with nothing to do.

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One has to keep in mind that you cost more than just your salary to the agency. We typically add 30% to the salary to cover ‘social charges’. So, if you make $60k, the agency adds $18k, so your cost is $78k. Now, the agency needs to charge the client 3x that to make a profit. This is because not everyone in the agency is billable and their costs need to be covered too.

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you mean for freelance or how they charge clients?

How they charge clients : )

Paid by the hour. More hours = more $$.

I’ve never seen anyone billed out higher than $650/hr. That’s pretty steep in our market but quite low for say a consultant or lawyer

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