How much of your social media fee is agency profit?

Key takeaways

Most of a social media agency fee pays for people's time, then tools, overheads and the time no client pays for, such as sales and admin. Profit is what remains, and it varies widely by agency. A healthy margin is in your interest: it keeps good staff and keeps the agency around. Judge value on hours and results, not on margin.

• Staff time is the largest part of any fee.
• Tools and overheads take a further share.
• Unbilled sales and admin time must be covered too.
• Margin keeps good staff; judge value, not margin.

Where does a social media fee go?

A retainer pays for the hours of the people on your account, plus employer costs such as National Insurance and pensions, the software they use, premises, management, sales time spent winning clients, holidays and sickness, and finally profit. Only part of each employee's week can be billed to clients.

• Social media agency pricing in the UK
• How social media agencies set their prices

Why is the hourly rate higher than a salary?

Illustratively, a £35,000 employee costs about £40,363 a year, or £23.20 per worked hour. Not every worked hour can be billed, and the agency must also pay for tools, managers and premises. That is why a blended agency rate of £75–£100 an hour sits well above the salary.

• Employee cost: about £23.20 an hour on £35,000.
• Billable share: less than every worked hour.
• Tools, managers and premises: on top.
• Blended agency rate: £75–£100 an hour.

• Social media agency hourly rates in the UK

Why should you want your agency to make a profit?

An agency that underprices burns out its staff, cuts corners or closes. A sustainable margin pays for experienced people, training and time to think about your account. Very cheap quotes often mean the margin is being taken from the hours spent on you.

When is the margin too high?

You cannot see an agency's margin, but you can see signs: a senior pitch team then a junior who never appears, little time on your account, and a fee that stays fixed while work shrinks. Ask for hours by role and compare outputs over time.

• Who works on your account for the fee?

What does this look like in practice?

A pattern we see: a buyer pushes an agency's fee down hard, and the account is quietly handed to the most junior person. Agreeing the hours and seniority in writing usually protects quality better than negotiating the headline fee.

• See client work
• Social Media Marketing for UK businesses

Fee breakdown checklist

• Ask for hours by role each month.
• Check who actually works on your account.
• Compare the hourly rate across quotes.
• Be wary of quotes far below others.
• Judge on results and output, not margin.

• Are social media agency prices going up in the UK?
• Does supplying your own content cut agency fees?

Next step

Divide your monthly fee by the hours your agency says it spends. If you cannot, ask for the hours.