Management fee or a percentage of spend: which way of paying a PPC agency works against you
How UK PPC agencies charge, what each model rewards, the arithmetic of a percentage of spend, what a flat fee fixes, and the questions to ask any agency.
By Daniel Stoychev, Webso Digital · 4 September 2026 · 8 min read
A percentage of spend pays the agency more when you spend more, whatever the spend brings back, so the agency's best month is your most expensive one. A flat fee pays the same whether the account spends eight hundred pounds or two thousand eight hundred, which makes it the only model where cutting waste does not cost the agency money. Neither model guarantees good work. Only one of them removes the reason for bad advice.
The three ways UK agencies charge
| Model | How the fee is set | Who it tends to suit | What it rewards |
|---|---|---|---|
| Percentage of spend | Ten to twenty per cent of the monthly ad spend, sometimes with a minimum | Large accounts where the agency's hours really do scale with the budget | Recommending more spend; keeping spend high |
| Flat monthly fee | A fixed amount, usually stepped by the size or complexity of the account | Small and mid-sized accounts where the routine is the same at £800 as at £2,800 | Keeping the client; nothing about the spend |
| Hourly or project | A day rate, or a fixed price for an audit, a build or a migration | One-off work, and businesses that run the account themselves in between | Finding work to do; fine for a defined job, poor for ongoing management |
The arithmetic of a percentage
Take an agency on fifteen per cent. At two thousand pounds a month of spend it earns three hundred. At five thousand it earns seven hundred and fifty for what is, on most accounts, the same weekly routine: the same Search Terms report, the same conversion check, the same bid review. The only thing that changed is your invoice from Google, and the agency's income rose with it. Now imagine the agency does its job well and finds that a third of the spend was going to searches nobody would buy from. Removing it cuts your spend by a third, and the agency's fee with it. The agency that does the right thing is paid less for doing it.
That is not an accusation about any particular agency. It is a description of what the contract rewards, and people respond to what they are rewarded for over time even when they mean well. The quarterly recommendation to increase budget, the reluctance to pause a campaign in a quiet month, the Performance Max campaign that reports well and spends freely: each of these is easier to propose when the proposal raises the fee.
There is a quieter version of the same problem. Some agencies bill the ad spend themselves, with the management fee inside a single monthly figure, sometimes with a mark-up on the media. You then cannot see what Google was actually paid, and the account usually sits inside the agency's own manager account, which makes leaving expensive. Ask where the money goes and whose name is on the Google Ads billing; the answer tells you most of what you need.
What a flat fee changes, and what it does not
A flat fee removes the reward for spending. The agency earns the same when your cost per lead halves and when your spend halves, so the report can contain the word reduce as easily as the word increase, and pausing a campaign in a quiet month costs the agency nothing. It also makes the fee predictable, which for a small business matters more than it sounds.
It does not fix laziness. A flat-fee agency can take the fee and do nothing, and some do; the reward for keeping a client is not the same as the reward for improving an account. The protection against that is not the fee model but the routine written into the agreement: how often the Search Terms report is read, what the monthly report contains, whether you can see the change history in your own account. A flat fee with no routine is just a subscription.
Seven questions to ask any agency
- Whose name is on the Google Ads account, and can I remove your access myself? If the answer involves their manager account and a transfer process, the account is theirs in practice.
- Where does the ad spend go? To Google on my card, or through you? If through you, at what mark-up, and can I see Google's invoice?
- How often is the Search Terms report read, and by whom? Weekly by a named person is the right answer. Monthly by a script is not.
- Can I see the change history? Every change in a Google Ads account is logged with a name and a time. An agency that discourages you from looking has a reason.
- What is in the monthly report? Cost per lead and what those leads were worth is the answer. Impressions, clicks and a graph of average position is a report about the agency's activity, not your business.
- What happens when I leave? The account, the negative lists, the conversion tracking and the landing pages should all stay. If any of them go with the agency, the fee was cheaper than it looked and the exit is dearer.
- Do you work for my competitors? An agency running two accounts in the same auction has a conflict it cannot resolve with the same person setting both bids. One business per sector and area is the honest position.
The signs the model is shaping the advice
- Every quarterly review recommends a higher budget, and the impression share report is never in the deck.
- Performance Max arrives as the answer to a question you did not ask, and its results are reported without brand exclusions.
- Broad match keywords appear in the account after a Google recommendation, and the Search Terms report gets longer and stranger.
- The report is long, colourful and about clicks. Cost per lead is on page six, if at all.
- Pausing anything is discouraged, including in the month your diary is already full.
The test is not what the agency says about its fee. It is what the account's change history and Search Terms report say about the last ninety days. Both are in your account, and both are readable in an hour.
Questions on this topic
Is a percentage of spend always wrong?
No. On a large account, where the agency's hours genuinely scale with the spend and the client has its own analyst reading the reports, it can be a fair way to price the work. The problem is the incentive on small and mid-sized accounts, where the routine is the same whatever the spend and nobody else is checking.
What is a normal percentage in the UK?
Ten to twenty per cent of ad spend is the range most UK agencies quote, often with a minimum monthly fee that makes the effective percentage much higher on a small account.
Should the fee include the ad spend?
No. Ad spend should go to Google on your own card, with your name on the billing, so you can see every invoice and keep the account if you leave. A single combined figure hides both the mark-up and the ownership.
How do I check what my agency has actually done?
Open the change history in your Google Ads account and filter to the last ninety days. It shows every change, who made it and when. Then open the Search Terms report for the same period, sort by cost, and count the searches that should have been excluded. The two together are the audit.
Does a flat fee mean the agency will not recommend more spend?
It means the recommendation, when it comes, is not paid for. A good flat-fee agency will tell you to spend more when the impression share report shows searches lost to budget at a cost per lead you would accept, and it will tell you to spend less when the opposite is true.