I run performance deals. If we don't hit your goals, you don't pay.
So believe me when I tell you: most of what gets sold as "performance based marketing" is either a hedge dressed up as a guarantee, or a trap.
This is the post I'd want to read before signing one. Not the sales-page version. The version from someone who actually carries the risk.
Why most agencies won't touch performance deals
It's not because they're lazy. It's because a performance deal means the agency gets paid based on things it doesn't control.
Think about what has to go right for a marketing dollar to turn into collected revenue:
- The ad has to generate a lead. The agency controls that.
- Someone has to answer the phone fast. The agency doesn't control that.
- The lead has to get quoted and closed. That's your close rate, not theirs.
- You need capacity to actually do the work. Booked-solid-for-six-weeks kills ROI just as dead as no leads at all.
- Your pricing has to leave margin. If you're underpriced, no lead volume saves you.
An agency that ties its paycheck to your outcome is betting on your close rate, your capacity, and your unit economics. Most agencies have been burned by exactly that bet, so they retreat to the safe model: flat retainer, get paid whether it works or not.
I get why. I just think it produces lazy marketing. When the check clears either way, the pressure to perform quietly disappears.
The flip side: anyone who guarantees results to everyone is lying to someone
Here's the part that should make you nervous.
If an agency offers a performance guarantee to every business that walks in the door, without knowing your close rate, your capacity, or your margins, they're not confident. They're pricing failure in.
The math is simple. If they guarantee outcomes to ten businesses and only four hit, the fees from the four winners have to cover the six losers. So the price is inflated for everyone, the "guarantee" is often riddled with exit clauses, and the agency's real skill is contract writing, not marketing.
An honest performance agency says no a lot. That's the tell. The willingness to walk away from a deal they can't win is the strongest signal they intend to win the ones they take.
What a legit performance deal actually requires
Four things. If any one is missing, nobody can honestly guarantee you an outcome. Not me, not anyone.
1. A proven offer
Proven means the numbers already exist. You know roughly what percentage of quotes you close. You know your average ticket. You know your cost to deliver. The offer has sold before, repeatedly, at a price that leaves margin.
My line on this hasn't changed: if your offer is proven, bottom-line returns can be guaranteed. If not, an honest agency works with you until you're ready, instead of guaranteeing something neither of you can predict.
Anyone who skips this step and guarantees anyway is doing the pricing-failure-in math from the last section.
2. Real tracking
A performance deal is settled with numbers, so the numbers have to be trustworthy before dollar one gets spent. At minimum that means knowing which channel made the phone ring, which is a smaller lift than it sounds. I wrote up the minimum viable version in call tracking for small business.
If an agency proposes performance terms without proposing tracking, run. They're planning to argue about attribution later, and they'll win that argument, because you'll have no data.
3. A defined outcome
"Growth" is not an outcome. "More visibility" is not an outcome. A real deal names the number: booked appointments, collected revenue against ad spend, whatever fits the business. It also names the timeframe.
We scope engagements to outcomes and run them in 90-day sprints, because 90 days is long enough to prove something and short enough that nobody gets to hide.
4. Both sides committed
This is the one nobody puts on the sales page. In a performance deal, you have obligations too.
If leads come in and sit unanswered for four hours, the deal is dead and it isn't the agency's fault. If you can't take on the volume, or you change pricing mid-sprint, same thing. A serious performance agreement spells out what the business owner has to do, because the agency is betting its paycheck on you doing it.
If the contract you're reading puts zero obligations on you, that's not generosity. That's an agency that has already priced in losing.
How we structure ours
So you can see what this looks like in practice, here's our model at Kung Pow.
Every engagement is scoped to an outcome and run as a 90-day sprint. For a limited number of proven offers, we go further: performance terms. If we don't hit your goals, you don't pay.
Note the words "limited" and "proven." We can't offer that to everyone, for all the reasons above. When an offer isn't proven yet, we don't fake a guarantee. We work with you until you're ready, and then we put our fee where our mouth is.
Since 2021 we've run this playbook for 63+ service businesses at a 3.7x average ROAS. The deal I point to most is a home-services client who went from a standing start to 654 booked appointments in 90 days, at 5.4x ROAS by day 60. That result was only guaranteeable because the offer was proven and the tracking was in place before launch. The structure did the work.
The buyer's checklist for any "performance" pitch
Sitting across from an agency waving a guarantee at you? Run their pitch through this list.
- Did they ask about your close rate, capacity, and margins before offering terms? If they guaranteed first and asked questions later, they guarantee everyone. You know what that means now.
- Is the outcome a specific number with a deadline? Vague outcomes are unenforceable outcomes.
- What exactly happens if they miss? Read this clause twice. "We'll keep working for free" is very different from "you don't pay." And check for escape hatches that blame you for everything.
- Who verifies the numbers, and how? If the answer is "our dashboard," ask what feeds it. You want call tracking and a shared definition of a lead, agreed in writing before launch.
- What do they require from you? A real performance agency will have demands: answer leads fast, hold pricing, keep capacity available. No demands means no confidence.
- Will they say no? Ask directly: "What kind of business would you refuse this deal to?" An honest agency answers instantly. A pretender says everyone qualifies.
- Do you own your accounts? Ad account, Google Business Profile, tracking numbers. If the agency owns them, your "performance deal" doubles as a hostage situation the day you try to leave.
That last one trips up more owners than any other, and it's just one of the traps a few pointed questions expose. I put the full interrogation script in questions to ask a marketing agency.
The bottom line
Performance based marketing isn't a pricing model. It's a filter.
It filters agencies, because only the ones who can actually produce outcomes survive tying their income to them. And it filters offers, because it forces an honest conversation about whether your business is ready to scale before anyone spends your money pretending it is.
If an agency offers you a guarantee without earning the right to make it, walk. If your offer isn't proven yet, fix that first, with or without us.
And if you want to talk through whether your offer qualifies for performance terms, that conversation is free.