Part 5 – Performance Only Agencies

It sounds appealing, right? Everyone loves the idea of getting something for free, without any strings attached.

In an ideal world, you could have your entire team paid based on performance while you watch the profits roll in. Wage-free experts, minimal overheads, the ability to fire them on a whim, and then roll in the next one and the next.

Why maintain a sales team when you could just line up a bunch of affiliates eager to work solely for you? Why pay for traffic when there are thousands of influencers on TikTok dying to promote your product?

However, as you know, the world doesn’t operate this way. As a business owner, you are paid based on performance; you take all the risks and reap the rewards.

Employees are different for a reason—they aren’t entrepreneurs like you. They may seek stability and predictability in their income, which doesn’t align with a performance-only compensation model.

Starting with a performance-based model, particularly one like “improve your business in 30 days or you pay nothing,” it’s crucial to ask detailed questions to understand exactly what you’re signing up for.

Here’s a set of questions you can use to assess the reliability and fit of such a model for your business needs:

  • Model History: Were you always a performance model? If not, what prompted the change?
  • Compensation Structure: Are your team members paid only on performance, or do they receive a regular wage?
  • Success Rate: What is the success rate of this model? Can you provide specific numbers or statistics?
  • Client Onboarding: How many clients have you onboarded in the last month?
  • Team and Client Ratio: How many clients do you currently manage and how many account managers do you have?
  • Contract Terms: What are the terms of the contract? Are there options for 1, 3, 6, or 12 months?
  • Post-Trial Performance: After the first month, how does the performance-based agreement work? Is this specified in the contract?
  • Ad Spend: Do I need to increase my ad spend, or will you work to improve results within the current budget?
  • Onboarding Process: How long does it take to onboard a new client?
  • Campaign Strategy: Do you migrate existing campaigns over, or do you start from scratch?
  • Listing Optimization: Are you also optimizing the product listings?
  • Testing and Adjustments: How are you testing the changes made? What methodology is used to measure success?

What do these questions teach you?

These questions will help you gauge not only the effectiveness and transparency of the performance-based model but also the agency’s commitment to genuinely improving your business without requiring heavy upfront financial commitment.

This approach ensures you understand both the potential benefits and limitations before entering into an agreement.

There is a lot to unpack here, so let’s get into it.

Performance-only models are a numbers game. You filter out the losers and double down on the winners.

They need some volume here and must move as quickly as possible because if they are paying the team properly, the burn rate will catch up with them very quickly. They need to secure as many quick wins as possible to stay ahead of the curve (remember, the 30-day clock is ticking).

You should ask whether they have recently switched to this model because they are the second coming of Steve Jobs, or because they are losing customers, their pipeline has dried up, and it’s a last-ditch effort.

Remember, this can work out, but you need to mitigate the downside. We will cover this a bit later, looking at examples where it can work very well.

Let’s continue.

Firstly, no one will ever know your business as well as you do—be it a third-party software, an agency, or a performance-only team. If they have a 30-day window, they will need to conduct extensive research during the onboarding phase to ensure you are a fit.

Then, with that information, if they are optimizing your listings before starting your PPC, they must decide whether to go for a no-data implementation or to run an Amazon Experiment in parallel with either cold start PPC campaigns or they optimize and take over your current campaigns manually to avoid killing your sales.

Ok, let’s break this out a bit further.

They have 30 days.

In terms of workload and speed, if they minimize the time spent on the onboarding process, perform a quick-fix listing optimization, and push the changes without running an Amazon experiment, then start all the PPC campaigns from scratch without a transition, they can quickly move to the next customer in the funnel. Of course, this is if they have the capacity, because at some point, capacity will max out if you have a deep funnel.

On the flip side,

If they are taking their time and carefully and diligently going through the process during onboarding, then they are running the listing changes until they reach statistical significance while carefully rotating your old campaigns with the new to minimize the disruption to your business. Then, that 30-day runway will quickly evaporate.

You cannot rush statistical significance; it takes the time it needs.

Regarding ad spend, are you required to significantly increase what you are currently spending? Calculate this; if you are, then that additional ad spend is coming out of your pocket and is a business cost.

Ok, let’s look at the end of the 30-day window.

At the end of the 30-day window, if the performance is good and you are ready to enter into the contract, consider the length of the contract—is it 30, 60, 90 days, 6 months, 12 months? What are the monthly fees; is there a percentage of ad spend? Run the math and make sure the numbers work for you and your business.

Is the contract tied to further performance — meaning you improve in the first 30 days — leaving a question mark over what happens after the quick wins of month one?

What if there are no additional performance improvements; is the 30, 60, 90-day, six-month, or twelve-month contract still valid? After all, this is a performance-based deal you are signing.

Zero-Sum Game

What happens if the first month doesn’t work out, and you fall into the non-winners’ bucket? Have you calculated the switching costs (most people don’t), and do you have a backup plan to reset?

At the end of the day, as a sovereign individual, you are smart and articulate. But you still need to weigh the pros and cons and do what is best for your business.

Let’s say, for instance, you get to the end of the thirty days and it does not work out. The agency can just say, “We gave it our best shot, it didn’t work out,” and then double down on the winners.

At the end of the day, you can’t really complain, as they invested time and resources – but you need to manage your position here and mitigate your downside.

Strike Rate

professional baseball players

This is why the strike rate is important.

Let’s say it’s based on the 80/20 rule. You need to find how you can be in the two out of ten that succeed.

This is why you need to ask how many clients they have onboarded in the last thirty days, how many clients they currently have, and how many account managers there are. What you don’t want to enter is a free-for-all; it is about playing the odds against the clock.

However, if they are smart about it, they will probably have a good lead pool (everyone loves a no-strings-attached deal) and have a high rejection rate. They can then pick only the ripest fruit and reject the rest. This is good for you, but you should also get an insight from the rejection.

This will help your business on the stuff you cannot see or have missed. Then you can apply that to your business.

If they have seen dozens (if not hundreds) of accounts, they are in a far better position if you have only seen inside your own Seller Central account. If they say they cannot speak with you or book you in for next month, this is a good sign; it means they are at capacity and need to focus on their current onboarding.

Two other good reasons why this can work

If the performance team is not highly diligent and it’s a numbers game.

Option 1

You may be in a place where you are deciding to call it a day; maybe you’re low on cash and have tried many things that have not worked. Then, you have nothing to lose because you have exercised all your other options and tried everything else.

You won’t have any regrets because you tried everything to make the business work. Also, they may see / find what you have been missing all along. This is a stretch, but you still have to look at giving it a shot.

Option 2

You are starting a new brand and have been around the block. You are too early to think about using an agency, you don’t want the pain of hiring and building out an internal department, or micro-managing some VAs.

You may want to spend all your time on the most important function of the business: the product pipeline and development.

Again, there is no perfect agency, perfect client, perfect product, perfect software, or perfect strategy. The correct solution is the one works best for you and your business.

And you need to find it as quickly as possible.

AGENCY RED FLAGS

Agency red Flags Seller Sessions
Crystal Balls Seller Sessions
Overselling, software, sales teams Seller Sessions
Full servide agency seller sessions
performance agency Seller Sessions
agency to avoid seller sessions
product problem
quick wins seller sessions
Premium priced products
Everything in house Seller Sessions
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Table of Contents

Agency Red Flags

Agency red Flags Seller Sessions
Agency Red Flags - On Both Sides of the Table
Crystal Balls Seller Sessions
Part 2 - Crystal Balls, Case Studies and Magical Strategies
Overselling, software, sales teams Seller Sessions
Part 3 - Overselling, Software, Sales Teams & Churn Rate
Full servide agency seller sessions
Part 4 - Full-Service Agency
performance agency Seller Sessions
Part 5 - Performance Only Agencies
agency to avoid seller sessions
Part 6 - Types of sellers agencies look to avoid
product problem
Part 7 - You have a product problem, not a visibility problem
quick wins seller sessions
Part 8 - Scattered Attention and Quick Wins
Premium priced products
Part 9 - Premium Priced Products
Everything in house Seller Sessions
Part 10 - Everything In-house
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