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How should I handle this?

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Aaron Cadieux
How should I handle this?
on Feb 7, 2013 at 3:57:03 pm

Hey Everyone,

Really simple.

"Ad Agency A" hires me to edit commercials for their client, which we will call "Client B". "Ad Agency A" had me work very closely with "Client B". Essentially "Ad Agency A" contributed nothing to the commercials and was a middle man. Keep in mind that "Client B" knows that I do not work for "Ad Agency A", and that I am a subcontractor. Once "Client B" approved the look of the spots, the spots were delivered. "Ad Agency A" sends "Client B" a bill. "Client B" thinks the bill is way too high. "Client B" places a phone call to me and leaves me a message. It seems they want to know what I billed "Ad Agency A" for the work that I did (which was essentially all of the work). "Client B" is convinced that "Ad Agency A" is marking up as much as 500% on the bill.

I have not returned the call yet. I don't blame "Client B" for being angry, because I would be too. Should I disclose what my bill to "Ad Agency A" was? I don't want to appear that I have anything to hide, but at the same time, I don't want to piss off "Ad Agency A".

I've never run into this before. What should I do?

Thanks in advance!

-Aaron



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Michael Hancock
Re: How should I handle this?
on Feb 7, 2013 at 4:32:20 pm

[Aaron Cadieux] "I have not returned the call yet. I don't blame "Client B" for being angry, because I would be too. Should I disclose what my bill to "Ad Agency A" was? I don't want to appear that I have anything to hide, but at the same time, I don't want to piss off "Ad Agency A".
"


No, unless you never want to work for Agency A again.

This isn't your fight - Agency A is paying you, not Agency B, right? So if Agency B has an issue with their bill from Agency A, they need to talk to Agency A. You have nothing to do with it.

----------------
Michael Hancock
Editor


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Steve Kownacki
Re: How should I handle this?
on Feb 7, 2013 at 4:35:36 pm

ABSOLUTELY do NOT call client B back to discuss money! That is none of their business. You are hired by Agency A - you only respond to them. Ethics go a long way these days. You should CALL, not email, Agency A and let them know that you were contacted outside of the scope of your production responsibilities and want to remain in good standing with them. Why lose 2 clients. You can inform Client B that it is not your place to discuss costs as you are not their direct vendor and they should contact the Agency A if they have pricing concerns.

If either A or B balk at their relationship with each other, you still come out ahead! You've kept peace with A, who should still call you, and peace with B who will come back to you directly. now you can discuss costs, not to mention you are in a better position to act as a 2 roles for them, agency and production.

Steve






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Aaron Cadieux
Re: How should I handle this?
on Feb 7, 2013 at 5:36:28 pm

I was leaning toward keeping my mouth shut and not getting involved. Thanks guys!



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Greg Ball
Re: How should I handle this?
on Feb 7, 2013 at 6:03:45 pm

I agree with Steve. You should CALL, not email, Agency A and let them know that you were contacted by Agency B, but since Agency A is your client, I would do everything in my power to keep them happy and trusting you.



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Nick Griffin
Re: How should I handle this?
on Feb 7, 2013 at 6:18:48 pm

I'm strongly with the consensus opinion on this. Go home with the one who brought you to the dance.

The problem becomes when Client B contacts you directly for their next project. For whom do you have loyalty at that point? Will Client B have already cut loose Agency A? You can work for Client B directly at that point, BUT you run the serious risk of Agency A recognizing your work on air and resenting you even though you did the right thing. Or do you simply tell Client B that since you were introduced to them by Agency A it would be unethical to accept work directly from them.

To reiterate what Steve was saying, how your ethics are viewed in the marketplace is critical and will make a difference in your success for years to come.


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Todd Terry
Re: How should I handle this?
on Feb 7, 2013 at 8:07:21 pm

All of this advice is right on the money.

I do have a problem a bit with a working realationship like this, because we also see it all the time. To ME, when an ad agency hires a production company like ours, we work for THEM and not the client (which is what everyone is used to). What we don't particular care for though, is when the agency steps back and then we end up having to do almost all of the dealings with the end client ourselves. I'm of the opinion that we end up doing a lot of the work that is the agency's job... and yep, they, in the end, mark up our work and get paid sometimes a great deal for doing little or nothing.

Fortunately most of our agency clients do things the "right" way... but a few of them don't.

Actually, similar story happened this week. We were contacted by a potential client, and we gave them some numbers on a job. Unbeknownst to us, that potential client also simultaniously contacted an agency that we frequently work for (and would have done this production for) who also gave them some numbers. Much higher numbers, as you might imagine. The potential client called us back, saying that the agency was trying to rip them off, and that they wanted to work with us directly. We immediately called the agency to let them know that... especially since we work with this agency all the time. Fortunately the agency took a "Heck if they don't trust us we don't need em" attitude and told us to feel free to do the work directly. But since the agency is a long-time client, it was definitely the first call we made.

T2

__________________________________
Todd Terry
Creative Director
Fantastic Plastic Entertainment, Inc.
fantasticplastic.com



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Ned Miller
Re: How should I handle this?
on Feb 8, 2013 at 2:32:14 am

Aaron, this is a no brainer, it's Ethics 101. You never discuss your costs with the clients, period. I can't figure out how this is even a consideration, has this business gone so far downhill that the vendors would even think of discussing prices with the end client?

As a freelance DP for 33 years I have had many end clients trying to "cut out the middleman" producer or production company that hired me. Or, they asked about what I charged because they were in the same pissing match with the client you described. When I was coming up I was taught you never even give them your business card when asked, you say you are available through the client who hired you.

I also produce now and the editors I use are in close contact with my clients and they are instructed to never discuss money with the client, contact me if the client asks for anything that will cost extra. My editors do a lot of the producing functions because I am out making better money shooting. If I ever found out my editor told the client what they billed me the police would never find his body...

Ned
http://www.nedmiller.com


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Mark Suszko
Re: How should I handle this?
on Feb 8, 2013 at 7:19:15 am

Aaron, I've watched you mature over time and feel you're on a good track now; I'm pleased you recognized the problem and that you were wise enough to ask for advice first. You are developing good instincts. If it feels wrong, it probably IS wrong.

I agree with everyone else here: you are acting as A's agent here, so you're not at liberty to discuss these matters with B directly. B is wrong to even bring it up to you. Your duty is to A until the contract is done.

And then, (and this is the trickier part), it is a no-no to ever discuss, much less negotiate, a future deal directly with someone like "B" while you are working on "A"'s time. I have found over time that this poaching issue is one of those really delicate and easy-to-mess-up issues in the biz, and if you get it wrong, you can be burned for a long time.

Generally, if a "B" courts you to work for them directly, AFTER you've worked with them thru "A', it is considered the polite thing to do, to discuss it with "A" first, since they made the introduction. Being up-front with A can only help you. Especially if they find out later that B talked to you. If this reminds you of the cliquish nonsense of junior high school friendships, that's not a coincidence. It's human nature at work, and you're asking two girls out to the same dance.

Basically, you're giving "A" the recognition that they put you two together, and that you are offering "A" a little piece of what your deal with "B" is, as a sort of commission on the deal. "B" then can either take the offer or tell you it's okay, it's all yours. Or, they might be bad sports and insist you can only work for B as an agent of A. Those are the kind of guys that force non-compete agreements in contracts.

Looking at it from A's perspective, it does seem like a back-stab to take on one of their accounts and cut them out. Offering to share some of the job with A would help smooth things over, and if you work for B a second time after that, then A should let it go and no harm done. The question you should be asking yourself is: are you in your heart being as square as possible with all parties. And you ARE asking that question, so, kudos for that.

As a side note; in case you were thinking that A is not really going to be a long-term relationship, and you might just go ahead and burn that bridge, two things:

1. The client that poached you now knows you are "poachable", that your morals have a price. They will eventually use that against you, and, they will not actually trust you, ever, knowing that you can be easily turned. What you thought was the right move actually paints you in the worst light to everyone, and in the long view, it's not productive to be a weasel or a rat. You always want to project the image of being a stand-up guy. Sometimes that means letting an easy buck go by, for the sake of preserving working relationships in the future.

2. People change jobs and companies, and stories follow them. Word gets around. Don't be surprised when you burn company "A", and then find yourself in a pitch meeting with company "C" sometime later, and into the boardroom walks a former employee or manager from "A". You're dead. Right. There.

Don't be That Guy.


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Aaron Cadieux
Re: How should I handle this?
on Feb 8, 2013 at 11:47:23 pm

Just a follow up to this whole thing.

I found out in yet another voicemail that "Agency A's" bill to "Client B" was 3 times higher than my bill to "Agency A". Now, remember, "Agency A" didn't do any work throughout this entire process. I don't have much experience subcontracting others, and when I do my markup tends to be minimal, but is a 300% markup commonplace in this business? Seems a little steep to me.

Best,

Aaron



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Mark Suszko
Re: How should I handle this?
on Feb 9, 2013 at 12:33:08 am

The "right" price is whatever you can get the guy to pay. Is A's markup egregious? I don't know enough to say. They may well have other expenses you don't know about, or old bills with this client that they are recouping from the follow-on work. There's just not enough data to make a definitive statement.

It may also be that you're under-valuing yourself as well. Clearly the client likes whatever you're doing.

Obviously "A" plays this game well. And now that you know, you might feel a bit bolder next time you raise your rates and they cry poor.


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Steve Kownacki
Re: How should I handle this?
on Feb 9, 2013 at 2:21:33 pm

Totally agree with Mark.

Could be that your pricing is too low. Seriously. Some agencies like to have a certain price range they stay in for "value of services." I've actually had one agency tell me to bill them more because they passed my direct invoice on plus their markup.... 40%. The higher my bill, the more they make.

Maybe it's time to reevaluate your price structure.

Steve






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David Roth Weiss
Re: How should I handle this?
on Feb 10, 2013 at 7:07:20 pm

Aaron, the markup you've questioned covers much more than your services. There are "carrying costs" that real businesses must consider if they want to stay in business. And, the very reason they hire freelancers is because they know they can get away without paying benefits to contractors, and thus they can keep more of the revenue generated in their own coffers. Is that exploitation, or smart business?

Below are a few examples of the carrying costs I refer to above:

1) The producer who hired you for Agency A has a salary, receives benefits, and gets a year-end bonus tied to performance and profits. Cha-ching! He/she was smart enough to hire you in the first place, and it took some time and planning by numerous employees of the agency, including management, to make that happen. Should Agency A be required to eat that time?

2) Agency A has all kinds of business insurance that covers everything from injuries on their premises to lawsuits based on sexual discrimination and even gross negligence and incompetence on your part. (Isn't it comforting to know you're probably covered in case you're personally sued by Agency B?)

C) Agency A has a real bricks and mortar office that has rent, cleaning, maintenance, phones, computers, and even more insurance, etc., etc., etc.

D) Agency A has legal counsel, a CPA, and also has to pay tax on profits.

Okay, have I made my point? Do you realize that there's a whole lot more involved in hiring you out than just your fee? Do you see how unfair it is to say Agency A "did nothing?"

David Roth Weiss
ProMax Systems
Burbank
DRW@ProMax.com

Sales | Integration | Support

David is a Creative COW contributing editor and a forum host of the Apple Final Cut Pro forum.


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Aaron Cadieux
Re: How should I handle this?
on Feb 10, 2013 at 9:23:15 pm

David,

"Agency A" is a small run-out-of-the-house 2 person operation, so i know that their operating costs are minimal. Bottom line, I got good advice from this post and my follow up post was more curiosity than anything else. Thanks for pointing out some possible reasons for their mark up.

-Aaron



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Steve Kownacki
Re: How should I handle this?
on Feb 10, 2013 at 9:30:38 pm

I know my cost to obtain a client runs anywhere from $32.50 - the person who calls with an emergency and I have a 10 minute conversation to get them on my schedule - to around $1,500.00 if I'm going to have a meeting, do some research, write a proposal, take them to a not-too-fancy dinner, have a few calls & send a few emails. If they like a $200 bottle of wine with dinner, I better be pretty darn sure I'm going to make a sale.

Steve






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Greg Ball
Re: How should I handle this?
on Feb 12, 2013 at 3:40:35 pm

Steve and Aaron. Even a small business run out of their home has expenses. There's insurance, Marketing expenses, Website expenses, advertising, networking, relationship building, office equipment, etc. All that adds to the bottom line.

It's really not your business what your client charges their client. But as others have said, perhaps it's time to re-evaluate your own rates.



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