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Profit-Sharing for SEO: A Price For The New Economy

Posted By Amy On May 6, 2009 @ 8:24 am In Pricing Models for SEO,SEO Management | 3 Comments

In the past few weeks we’ve talked about various well and lesser known SEO pricing models [1] and how each can help marketers and SEOs adapt budgets and billing to cope with strained budgets. But, not everyone is cutting back to deal with the difficult economy—many brave entrepreneurs are using this as an opportunity to get their companies off the ground. Who would start a business in this economy you wonder? Smart people.

The internet offers businesses the chance to get off the ground with very little overhead—just a website, a product/service, and a dream. And, with manufacturers and distributors feeling the crunch, many are offering lower prices, discounts and other incentives in order to move inventory when sales are slowing. If you can meet a demand, you can succeed in starting a business even now. As these new businesses find their niche and need to get the word out online, the SEO professionals of the world need to be there to help them steer their marketing budgets. Wait, what marketing budgets? Exactly.

With a profit-sharing pricing structure, SEOs can capture this new recession-thwarting client. You create a relationship akin to a partnership where both SEO and client are driven to increase profits and both are rewarded for success.

What is Profit-Sharing Pricing?

For SEOs, profit sharing [2] means you make money when your client makes money. Your payment for work completed is a portion of your client’s profits—which for SEO and other online marketing, is limited to a portion to revenue from online efforts rather than gross profit. This pricing model can be a real motivator for SEOs—the better your work performs, the more you get paid. But, don’t expect to retire off of one job. These agreements will typically include specifics such as time limits, caps on compensation and other contingencies so that your SEO doesn’t become a permanent expense.

Although it seems similar, this is not pay-for-performance [3]. With pay-for-performance pricing, SEOs receive payment for their work when a certain search-related goal is achieved. For instance, a lump sum payment is made when traffic to client’s website has increase 40%. With profit-sharing, an SEO’s work focuses on the end result—sales. The SEO professional gets paid when their work results in increased sales for the client. The more profit that results from the newly optimized site, the greater the SEO’s payment. And, these payments can continue over an extended period of time which means long-term, reliable income.

What does profit-sharing pricing mean to SEOs?

First and foremost, this means motivation. With profit-sharing, you and your clients essentially act as partners, both mutually focused on the end results. If you’ve established a mutual reliability and trustworthiness, you can earn based on the quality and performance of your SEO work. Think of this as pay-for-performance in reverse. Pay-for-performance favors the client in the sense that you only get paid when certain measurable goals are met. With profit-sharing, you are rewarded for every level of success achieved—your payment is commensurate with the client’s success.

Profit-sharing also has the added benefit of budget-friendliness in today’s economy. Clients will pay you based on their income—which means they can be assured they will have the cash on hand to pay. Companies taking advantage of start-up opportunities and growth potential now can reap the rewards of SEO without risking their budgets with a hefty investment with no evidence of pay-off. It also means that clients can afford your quality work—use this as a selling point. There is no need to use the less-than-savory $39.95 guys who promise twenty to rank you number one in Google in days. Deep down we all know those guys are a bust, but when budgets are tight (or don’t exist), the “something rather than nothing” mentality takes over. With profit-sharing, you can help clients avoid the bargain basement SEO trap.

What does profit-sharing pricing mean to SEO clients?

For the right SEO client, profit-sharing can be the difference between SEO and no SEO. Whether you’re a startup or looking to grow your online business during this recession, profit-sharing pricing for SEO can allow you to reap the rewards of SEO without a large upfront investment. With an SEO you trust, you can share the risk and share the reward.

Just remember that there is a premium to pay for this shared risk. If you could afford to make the upfront investment for quality SEO, you may end up paying much less than you would pay over time with profit-sharing. Structure agreements carefully and remember to budget marketing and all other expenses accordingly. Plan for success with your SEO and account for the profit-sharing distributions to your SEO when creating other budgets and projections.

The upside…

The upsides to profit-sharing are quite simple. For SEOs, you get paid based on results and your benefit increases as results improve and profit grows. Clients, you know that you and your SEO are focused on the same goal—profit. Working together can be much easier when there is a feeling of partnership and a vested interest in the outcome of the SEO work. And, this can be an affordable pricing model even for startups and companies new to e-commerce.

The downside…

This one is pretty easy, too. First, you have to have very specific tracking capabilities to track some online transactions through to offline profits—specifically lead based sites with long sales cycles. It’s not impossible, just make sure there are analytics and tracking methods that exists and that both client and SEO are confident in their accuracy. As with any agreement, a profit-sharing agreement requires attention to detail [4]. Include dollar amount caps for SEOs share of profits and include minimum payments so that SEOs will see a reliable base-level return even in slow times.

What to remember if you use profit-sharing…

  • SEOs, remember to make sure that your clients have accurate methods of tracking online leads and transactions to offline sales. Your payment is based on profit derived from the web so you need to be confident in the analytics. Lead-based businesses can be tricky, so double check the tracking methods and think about using alternative profit-sharing measurements such as a percentage of increase in online sales for a current online business, or a percentage of increase in overall sales for a client just starting out online.
  • Clients, as always, trust your SEO professional. If they don’t use profit-sharing pricing, it’s a decision that is based on experience. Feel free to open up the discussion of pricing models but don’t write off an experienced SEO because they don’t offer a pricing model that you think is right for your business. Ask about the benefits of their preferred pricing models and how they might work for your budget and situation.

Check back next week for our discussion on monthly retainer pricing for SEO. And, as always, if you have comments, questions, or input, please feel free to leave a comment!

Article printed from The Adventures of SEO Boy®: http://www.seoboy.com

URL to article: http://www.seoboy.com/profitsharing-for-seo-a-price-for-the-new-economy/

URLs in this post:

[1] various well and lesser known SEO pricing models: http://www.seoboy.com/seo-pricing-models-sometimes-its-the-how-rather-than-the-how-much-that-matters/

[2] profit sharing: http://www.scribd.com/doc/2405746/SEO-Pricing-Comparison-Guide

[3] pay-for-performance: http://www.seoboy.com/pay-for-performance-seo-pricing-that-goes-after-results/

[4] -sharing agreement requires attention to detail: http://www.bockinfo.com/greatsite/incentive.htm

[5] Hourly Consulting Pricing in SEO: Flexibility Comes at a Price: http://www.seoboy.com/hourly-consulting-pricing-in-seo-flexibility-comes-at-a-price/

[6] SEO Project-Based Pricing Risks vs. Rewards: http://www.seoboy.com/seo-project-based-pricing-risks-vs-rewards/

[7] SEO PRICING BULLETIN: Coke Pushes for Pay-for-Performance Model: http://www.seoboy.com/seo-pricing-bulletin-coke-pushes-for-pay-for-performance-model/

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