Notes for owners · Business growth
Retainer, project or performance fee: which pricing model suits you
A plain comparison of what a retainer, a project fee and a performance fee each pay for, where each goes wrong for a small buyer, and a rule for choosing between them.
The GullySales team · Updated 17 Oct 2026 · 5 min read
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You have been offered a monthly retainer, a fixed project fee and, by a third agency, "we only charge when you get leads". All three sound reasonable. Each pays for something different, and each fails in its own way for a small buyer. A retainer pays for people's time over a period, a project fee pays for a defined piece of work, and a performance fee pays when something you both counted happens. Choose by how clear the job is, not by which sounds safest.
What each model pays for, and how it fails
| Model | You pay for | It works when | It goes wrong when |
|---|---|---|---|
| Retainer | A team's time for an agreed period | The work is ongoing and changes as you learn | Nobody says what the time must produce, so hours are spent and little is shown |
| Project fee | A defined deliverable: a site, a campaign, a sales process | You can say what "done" is before you start | The scope is vague and every change becomes an extra |
| Performance fee | A payment tied to a counted result | The result is countable and the agency controls most of what causes it | The agency chases what is easy to count, or the result depends on your own follow-up |
Media spend sits outside all three. It is paid to the platform or seller and not to the agency.
How do you choose?
Use these questions in order and stop at the first yes.
- Can you describe the finished thing in a paragraph? Buy it as a project.
- Is the work ongoing, such as running channels and learning from results? Take a retainer, with a first review date and the right to leave on stated notice.
- Is there a countable result that the agency mostly controls, and do you hold records to verify it? Then a performance element can sit alongside a smaller fixed fee.
If the first two are both no, you do not yet know what you are buying. Write the brief first.
When is a performance fee a poor idea?
Often, for a small buyer. If you pay per lead, you get leads, including people who never meant to buy. If you pay per order, the agency will want control of your pricing and your calling, which you may not give. If the result is a ranking, nobody can honestly sell it.
A performance fee works best when the countable thing is narrow and visible to both sides, such as a booked appointment recorded in a shared sheet. Write the definition into the agreement, and say who audits the sheet. Check also whether the result depends on you. If your team answers the phone late, the agency may deliver and still miss its number, and a dispute follows.
For example: a masala brand in Kozhikode
This is an invented case. The owner wants distributors in Karnataka and Tamil Nadu. An agency offers a retainer for "general digital marketing". The owner accepts, receives long decks and cannot connect any of them to a distributor enquiry. At review, the agency says things are going well and the owner has no way to answer.
The mistake was to buy time without a stated output. The repair has two steps. First, a short project: set up a dedicated number, a simple enquiry form and a sheet in which each distributor enquiry is logged, so a baseline exists. Then a retainer to run the channels, with a review date at which the agency shows distributor enquiries against that baseline, and notice terms the owner chose.
The model did not change the outcome. The baseline and the review date did. The repair also cost something: the project fee was paid for work that produced no enquiry on its own, and the owner lost a few weeks. Had a pure performance fee been tried instead, the agency would have paid attention to the cheapest enquiries, and the owner would have been billed for sample-seekers.
What is true in every model
Get five things in writing before any money moves. What is delivered? How long does it run? How does either side end it? Who owns accounts and files? How are results judged against your own earlier records? If any is missing, fix the agreement before you argue about the model. For a sheet to compare several quotes on these points, use the cost of a bad quote.
Our own practice, for reference: fee and term are put in writing after we have read your requirements brief, with no default twelve-month period, and the fee is split into our time, your media spend and any production costs.
What should a review clause say?
A retainer without a review clause drifts. Put one in plain words, something like this:
On the review date, the agency shows enquiries, replies and orders from [source list] against the baseline sheet dated [date]. If the three agreed deliverables are not in place, the client may end the retainer on [notice period] and keeps all accounts, logins and files.
Fill in the brackets with your own dates and notice. Three agreed deliverables, named as nouns, give the review something to look at. "Improved presence" gives it nothing.
When to skip the project step
Starting with a project is a sensible order for many small buyers, as the questions above suggest. Skip it when the work is plainly ongoing from day one, such as managing a live ad account, where a project would only create a handover.
For the size of the whole budget, read how much an SME should spend on marketing.
Write the brief, then pick the model
Describe the finished thing, or the ongoing work, in a paragraph. Decide whether a result can be counted from your own records. The model usually becomes obvious. The pricing page says how our own quotes are built. When the model is still not clear, marketing budget optimisation is the service nearest to the question, and you can tell us what you need.
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