Rev Share for Agencies: Like Getting Married on a First Date

Because we work with startups a lot-and enjoy it-we're often asked about doing revenue sharing or equity-for-work deals.

The short answer: We don't do it, unless we've had a long-standing relationship. Here's why.

Different Objectives:

We believe your company or project will be a success, or we won't take your business. If you fail, it reflects on us, too!

But..

We are selling picks and shovels to you, the miners, not panning for gold ourselves. Because we're a service business and not a tech startup, we have a different approach entirely to risk, as well as a very different cost structure.

Of course cash flow is life to any young company, but this is especially true for a services business at our nascent stage. Since TimeShareCMO was founded by a Cornell MBA who majored in finance, and who was also herself a former startup founder, we're all too aware of the risk/reward tradeoff, and we're comfortable with the risk of lower upside in exchange for more stable cash flows.

Some agencies will always charge as much as the market will bear, and we know what those prices are, having been a marketers on the buy side for 13 years at both big companies and startups.

But because we love to work with startups we work hard to keep our costs low, so we can stay affordable to you. We know our prices are incredibly fair for the value we delivered. The net result is that leaves us no room for cash flow risk.

Asymmetrical Risk:

In a rev share agreement the agency is taking on ALL the risk upfront, paying for work in the hopes the business will grow. There is a risk that a startup will go bankrupt, or that the product or company underperforms for reasons not related to marketing (which are in our experience far more likely than those related to marketing).

In addition, the rewards are not commensurate to the risk. For example, a full time in house CMO receives a much higher equity stake than that offered to agencies, so in the end the math doesn't work for any of us on a personal level, either.

Lastly, Agencies are at a company's mercy in terms of true financial statements; and in the worst case scenario for us, startups have actually done some dastardly deeds to agencies right before the rev-share payments are due. While we're sure none of you would ever do that, we think you can now understand why we are not prepared to accept that risk with people we do not know well, hence why we would only consider it after a longer term good relationship.

How We ARE Aligned With You

We keep our engagements tightly scoped and short term so you can exit quickly if you are unhappy, which mitigates your risk, but also adds to our own, and this is what aligns us without a rev share. Few agencies offer that flexibility, because of that exact risk.

As a small company, we're also keenly aware of the importance of our reptuation and your good word about us. That alone is a powerful incentive that aligns us to your success. Through our reputation and performance only, with no outbound marketing, we've built a successful small company; with 100% of our clients doing multiple engagements. Typically a rev-share deal is done by a company trying to make its way in the world to offset the risk of the unknown.

Alternatives

You might want to look into the affiliate networks like Commission Junction since those folks are truly pay for performance; and their financial models are set up accordingly.

As a startup founder, your questions are understandable. You're right to maximize every dollar you spend. We also know that there are bad agencies too. Our hope is that you can trust us to perform the scope of work we set out and that you should be confident that that work we do for you is going to provide a meaningful change in your business. If neither of these are true, it's a clear a sign we shouldn't be in business together. There's nothing wrong with that, at all.

Please contact us at any time to talk about scope and timing for an engagement to accommodate your needs and concerns.

No matter what, we'll be cheering you on.