There has been a strong trend over the last 18 months to really simplify the way agencies charge clients for additional overheads and disbursements such as local travel, phones, faxes, communications, lasers, presentation materials, PDF’s and all of those little bits and bobs that make up an agency estimate.
A brief history
Around 1998, mainly due to the introduction of marketing procurement divisions and hence the level of accountability required, agencies started to break down their estimates in real detail in an effort to be transparent. This was a good thing in some ways but created bigger issues as clients would sometimes be overwhelmed by the multiple charging codes and start to pick them apart- seeing the breakout of fees as petty and irritating. 10 years later and the trend is moving in a different direction. Agencies are now starting to adopt a much simpler and effective charging method for overheads such as listed above. The common trend now is to list a one line charge on the estimate called “disbursements” and calculate that as a fee of the overall agency charges (not external costs like printing, media or any type of out-sourced production). This fee is calculated between the ranges of 5 – 10%, with 7% being most common. Clients are overall very excepting of this charge as they do understand the overheads agencies face and it is an easy to understand wrapped up fee that does not fight with the creative conceptual charges which, to be honest, are really the important fees on the estimate. The bigger fees do not end up killing a client relationship. Most often it is the smaller “nit picking” fees that clients feel are sneaking on to the estimate that ends up being the link to an argument – breaking down the overall trust between agency and client.
Using a disbursement fee as a way of charging a client mirrors a job well in the sense that if you are doing more artwork or authors changes on any type of job, the estimate is revised to account for this – hence followed automatically by the % disbursement charge. It is simple, automated and worth it. It achieves two core things than an agency strives to achieve; it captures those overheads charges properly so that an agency does not leak revenue as well as building and maintaining a better level of trust with clients (hence a strong partnership) as those small overheads are not creating irritation and ongoing day to day frustrating arguments.
One last thing to remember is to be clear about what is included in the disbursement fee. Ensure items like interstate travel, major presentations or other large and costly based items are not lumped into this fee as this could really eat into revenue. Be clear about the inclusions – our suggestion would be to list them automatically at the bottom of every agency estimate within the template so they always appear like contractual T&C’s.
If you want to get even better at estimating jobs, we also have a series of estimating templates that outline what charge codes you should be including on different media types.
For more help and advise contact the Tick Boxer team.