SEO agencies are often coming forth with ridiculous offers promising the world while delivering crap.
I know from first hand experience in Germany. I’m not sure agencies in other countries get away with that level of over-promising too but here are some questions you need to ask before you sign that obligatory one year contract.

Who is actually doing the work?

The sales rep in the fancy suit from Armani or the well known SEO guru aka agency owner won’t be the one who does the work. In most cases it will be not only someone else but a person very low in the hierarchy of the company. Often the entry-level practitioners who just completed a three-month SEO course will do the hands-on work.
In the best case these people will be at least physically in the same office building as the guru and the sales rep but even that doesn’t mean much.
The agency owners usually travel the world to speak at conferences and spend their time at meetings with other decision makers. In reality they often don’t work in SEO themselves anymore, they are just managing or overseeing other people at best.
What you need to do upfront is to ask for the person who will be actually responsible for your project. Make sure not only to ask for the name and address but also for the credentials. Ensure that there is know-how needed even in the lowest ranks of the agency. Otherwise you may be surprised at the (lack of) results.

Will I be able to talk to those responsible?

Knowing who will perform the actual tasks is only the start. Of course you also need to know their mail address and phone number to be able to reach them. Usually you will be only able to talk to a project manager or supervisor. At a small agency you will talk to the boss or agency owner who will just make you feel good without saying anything substantial.
Do you know the game of “broken telephone” where a line of people purport a message from one to another person until at the end only something funny or incomprehensible comes out?
SEO is complex and difficult to grasp by itself. Now imagine the confusion when you are trying to convince your agency representative that you need this or that to change and the message spreads accordingly down the hierarchy. The same or worse happens the other way around when the SEO at the bottom tries to shout his message up the hierarchy ladder.
When the sleazy sales rep or wealthy agency owner who never seems to work refuses to give you the contact data of the person responsible you should become suspicious of the set up of this company.

Where does the money go to exactly?

As you can imagine the SEO agency hierarchy is built on transferring funds earned at the ground level to the top dogs. The agency owner will make a lot and the agency will spend a lot of money on everything else but your project. Their expensive offices in the prestigious city center, their latest website relaunch and their Google ads for “seo company” among others.
The travels of the agency owner to conferences overseas aren’t cheap either especially as he doesn’t earn any money while traveling either – it’s not just the costs of plane tickets, hotel rooms and fancy restaurants. The others who stay at their desks have to do even more work. They may be overworked and distracted too because of that.
The agency I worked for charged for example 2000 Euros a day plus a link building budget (for renting paid links). I got like 350 Euros of that sum.
They had their offices in the middle of the capital where even cemeteries were turned into real estate because of the extremely high rents. Many people think that lavish offices, expensive cars and always available CEOs are a good sign of a profitable business it seems.
In the SEO world it just means that your money gets spend on other things than your project. That’s why you don’t get the mail address of the people who actually work for you. Otherwise you could cut out the middleman and work with them directly for a fraction of the money spent.

How many clients and projects are you working for at the same time?

Your project may be just one of numerous they have to handle at the same time so that the few practitioners at ground level doing the work may be overwhelmed. Large agencies love to brag about their Fortune 500 clients or large portfolio but when you count the people who implement the strategy you may find out that they have a 12 or more of other projects to keep track of and contribute to.
Sometimes the work also gets largely automated so that teams of a few people manage dozens or hundreds.
This works well for Google ads but is known to backfire on organic search projects. As a freelancer I don’t take upon more than a few clients at a time. The day has only 24 hours and I have a life too. With agencies it’s more difficult to find out about the time and resources available. That’s why you have to ask whether you are one of 10, 100 or 1000 clients
While the SEO company specific questions above will determine whether they are worth the money you also need to ask some general questions on the work involved in your site optimization. Personally I answer most of them even without getting asked right in my initial offer. After viewing many offers by companies competing with me I concluded that you can’t take those insights for granted. You have to actively ask for the basics.

What techniques will be used?

Agencies will usually send you a copy and paste offer with very a general SEO explanation and many meaningless words. They will write that they will “acquire links” for you but now how. Sadly you have always to assume the worst case. Acquire most probably just means to buy links or to plug you in into their link farms. The largest German SEO agencies have worked like that until recently.

How will success be defined and tracked?

Many agencies are often still very old school. Not only will they use questionable techniques that used to work in the past but often backfire by now they will also assume that success is about traffic and rankings. Some modern and more trustworthy ones will also mention conversions and sales but seemingly none of them will ask you for your goals. They will assume that they know better than you.

How much of the work will be automated?

As noted above some SEO agencies automate client work as far as possible. That may mean that your get plugged into a link network and the only thing that happens aside of that is that the agency has randomizes the times the links are added so that it doesn’t look suspicious. Remember that SEO companies are extremely short on educated staff so that smaller clients – that is those with only a thousand or two Dollars/Euros budget a month won’t get even a human ascribed to their project.

What will be done by the agency vs by the client?

SEO is not about magic ticks. You have to think of it as hard work affecting all kinds of your website elements and beyond. When potential clients approach me I’m always quick to ask whether they have a team to implement the changes. They I repeatedly tell them what kind of experts the need to make the SEO work on their sites. I mention
  • content creators
  • editors
  • Web developers
  • graphic designers
  • photographers
to name just the more obvious ones. Even despite that I sometimes get surprised reactions saying something like “I didn’t know that we need to do everything ourselves!”. That’s usually after they receive the 10 pages SEO audit outlining the actual tasks. When they ask me to implement them they are surprised by the price tag.
SEO agencies won’t tell you that much. They will just provide you with “SEO tips” you have to implement and assume that you never expected something else. Thus it is indispensable that you ask beforehand what parts of the optimization process you will be responsible for as a client. You can’t just sit back and assume that the SEO is something external having nothing to do with your areas of expertise.
I’m not implying that all SEO agencies are a waste of money. I know some international companies that match my high standards. I also understand that independent consultants or SEO freelancers are not prefect for every job, especially when it comes to the largest ones. Just make sure you aren’t dealing with overhyped or generic SEO XYZ companies and don’t even know who works for you let alone what the company does behind the scenes. I will tell you right away, others may be a lot less forthcoming even today.

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