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Employee versus contractor — where do they live in your P&L?

This may be one of the hottest debated topics when it comes to agency math.  Many generalist accountants want to include ALL labor expenses in your cost of goods.  Others, want to just include your billable staff in cost of goods and count your non-producers as overhead. All of them are wrong when it comes to agency math.  This is why you absolutely need an accountant who has lots of experience in working with agencies. Before we dissect this… let’s review. Gross billings is everything that shows up on all of your invoices to clients. Cost of goods (COGS) are those expenses you incur on behalf of a client (media, printing, photography, influencer fees, contractors/freelancers, etc.  The key to this is… if you didn’t have a particular client or weren’t working on a particular project – you would not just buy these things or give these people money. Adjusted gross income (AGI) is what’s left after you subtract the cost of goods from your gross billings.  AGI is the money you get to keep to run your agency.  You use that money for your loaded payroll/people expenses, overhead expenses and hopefully, there’s some left over for profit. ANY employee (not a contractor or freelancer) falls below the line and is part of your adjusted gross income calculations.  It’s the only way that all of the financial metrics/KPIs specific to agencies will work.  But what about contractors? It used to be very simple.  All contractors, except for outsourced admin resources like an accountant or attorney, were coded as cost of goods. This will be easier to understand if we get specific.  So, let’s create a cast of characters. Babette is a W2 (in the US) employee [...]

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Demystifying Business Systemization: Figure out which systems will create the biggest impact in 20 minutes or less.

If you've been in the business world long enough, you know of systems. Perhaps you've read The E-Myth, Traction or another book and are fired up about them. But HOW? Where should you start? You're busy and so enmeshed in everything your business does that even thinking about which processes to systemise first is overwhelming.  Through my work helping hundreds of business owners free themselves from daily operations, I realised that systemising doesn't have to be stressful or overwhelming. In fact, in just 20 minutes, any small business owner in any industry can identify the 10-15 systems that make the biggest impact. In this article, I'll walk you through this — well, system — mapping out your Critical Client Flow (CCF) step-by-step.  The following is an excerpt from chapter one of my book, SYSTEMology. There, I share the method that has transformed hundreds of small businesses from owner-dependent, zero-systems businesses to finely tuned assets. Step-by-step, I show you how to create the systems you identify here (without you) and how to get your employees excited about systems, too. The Critical Client Flow (CCF) is the first step in the SYSTEMology method, a breakthrough system for creating systems. All you need is a pen and paper. You can also go to systemology.com/resources to print out a plug-and-play CCF worksheet. We'll fill it out together.  It looks like this:  How to Create Your Critical Client Flow (CCF) In the CCF, you'll map out the core of how your business works.  You'll identify the minimum viable systems required to consistently bring in new business, convert those leads to clients and then deliver your product/service.  You’ll also see the 'holes' within your business, and it will help you develop [...]

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The Mental Health Crisis: What Agency Leaders Can Do To Support Employees

We’re facing a mental health crisis in America. In the last week of June, nearly 11% of over 5,400 U.S. adults surveyed said they had seriously considered suicide within the previous 30 days. If those numbers reflect the larger population, then it’s likely that two or three people on your 25-person team have had similar thoughts. It’s easy to assume that your employees are fine, but some of them may not be — and it’s your job to support them. In this piece I recently contributed to Forbes.com, I discuss what you can do as a leader to support employees’ mental health by actively listening, opening up, sharing resources, taking charge of conversations and volunteering. We will get through this crisis together, and it’s important for your employees to understand that — even in our crazy agency world.  

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Who are you?

I’ve been thinking a lot about origin stories lately. Each of us us a sum of the people and experiences that shaped us early on. It’s that combination of influences that create something unique. I’m a sarcastic, single malt Scotch drinking, Disney lover because of my Dad. I’m a music loving, bear hugging teacher because of my Mom. I’m a voracious reader because of an early teacher, Mrs. Vandiver. All of those (and many other) truths add up to make a one of a kind human being. A person I can’t really deny or hide. It’s just who I am. The more boldly I own that — the more authentic and unique I am to others. That’s true for our agencies as well. When we stop using the generic (full service, integrated agency) language that makes us sound like everyone else and really hone in on what makes us unique — we stand out. Every agency has a well-earned point of view that influences how they work and who they serve best. Unfortunately, many agencies don’t drill down deep enough to discover that point of view or unique position. I wrote a story for Forbes on how an agency can define what makes them different from all of their competitors. What’s keeping you from taking a stand? Why not embrace what your agency is truly all about? This was originally published in the weekly AMI newsletter.  To subscribe, click here.

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What does growth actually mean?

I very rarely meet an agency owner who doesn’t want to grow their agency. And of course, we translate that in our heads to mean more people and more money. But growth is much more diverse than that — and the other aspects rarely get as much attention or thought until those demands and/or opportunities are right in front of us. I haven’t touched a garden since I was a kid and my mom would make me weed for her — but I do know this. If you want the best yield, you prepare the ground and give it all the advantages you can. (My mom grew a zucchini so big the local TV station did a story on it.) It was as embarrassing as you are imagining, but clearly, I have earned that garden analogy. I was part of the Squash Squad.) Our agencies are the same way. If we want them to grow — we need to prepare the soil. Forbes invited me to write an article identifying some of the aspects of growth that you may not have thought of and what it takes to be prepared for it and as always, I’d welcome your feedback. And by the way — growing doesn’t have to correlate with size. We have several AMI agencies that grew by reducing their staff in half. Others have been the same size, in terms of FTEs for years, but continue to outpace the previous year’s performance. Not everyone’s cup of tea for sure but don’t think adding more bodies is the only way. This was originally published in the weekly AMI newsletter.  To subscribe, click here.

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Your agency’s evolution

I don’t believe there is an ideal size for an agency. But there’s probably an ideal size for your agency, based on your goals, ambitions, age, client mix, and the role you want to play in your own shop. Whether you want to have no employees and just use contractors or you want an agency of 100+ FTEs — your structure needs to support the machine. As you grow your agency — the processes, systems, and roles that got you to that size will not survive the next evolution. Many agencies make the mistake of outgrowing their work systems without anticipating that they’re going to need to make changes as the headcount increases. I tackled this subject for Forbes and I’m hoping the article is useful to you. Be careful that you don’t equate growing your agency with growing the number of bodies in your shop. That’s certainly one way to grow. But, growth doesn’t have to mean more people. It can be about better efficiency, better profitability, or new services. So no matter how you grow, recognize that things need to change to support the shift. Otherwise, things break down. It’s like being a teenager and going through a growth spurt but trying to squeeze into your elementary school clothes. Pretty soon, the seams can’t take it anymore and embarrassing things happen. The same is true for your agency. You don’t want your hard work to accidentally result in a faux pas that costs you money, a team member, or a client.

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How To Establish A Work-Life Balance When You’re Working Yourself To Death

As a result of the coronavirus, many employees are still working from home, and some will likely continue to do so until next year. It might have been easy to "temporarily" switch up your schedule and push through at first, but it's been months. When your world has been turned upside down, how do you prioritize your mental health? I personally reached my limit about two months into quarantine. I'd been staying so positive, helping others and working through loss after loss. But then, one Friday, I just fell apart. The pressure and pace of everything got to me, and I completely broke down. My mental health was shot; I was running on empty. After my rock-bottom moment, things started to look up because I realized that my breakdown was the sign of a larger problem at hand. My friend and colleague actually told me he was surprised that it took me so long to cap out. "You have to rethink how to build your day to better protect yourself," he told me, "and to be able to sustain the effectiveness you want." He was right. It's OK To Be Overwhelmed. In this piece I recently contributed to Forbes, I talk about a few techniques I've employed to assist in creating a work-life balance amongst the new "normal" we're experiencing.

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You can crush those internal goals

In the last couple weeks, two agencies I’ve been working with onsite, every quarter wrapped up our first year together. As part of their homework, they had to prepare a PPT deck of every goal that they had crushed as a leadership team. I have to tell you — it was impressive. I take no credit for their efforts other than holding them as capable and accountable. They did all the hard work. I promise you, if I’d shown either agency owner the list of what they presented a year ago and promised them they’d get all of those items done (and done well) they would have laughed out loud. They’d never achieved so much in a mere 52 weeks before. So what was different? Their intentions. They entered into this year-long experiment by making a commitment to each other that they would not drop the ball or let each other off the hook. And they didn’t. Here’s what else made their efforts so successful. They didn’t over commit. One single focus per quarter and they weren’t allowed to chase any squirrels until their original commitment was complete. Regular accountability meetings. They met and reported on their progress. There was no tolerance for excuses, evasion, or the usual “well, we know you’ve been busy....” Measure what matters. We set up a list of metrics and they measured themselves against them every week. They were never surprised and they found that they anticipated shifts faster and better. They decided together which needs should get priority attention. There were no lone rangers, not even the owner. They worked in concert to assess what the agency needed most and what was needed to get it done. They stopped [...]

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How to Strengthen Your Agency’s Hiring Process During a Pandemic

Attracting and retaining talent is likely a challenge in this unprecedented time. The coronavirus pandemic forced agencies around the globe to go fully remote whether they were ready to or not. Only 16% of HR professionals say they were ready to go 100% digital. Right now, it’s imperative to control what you can, and when it comes to hiring, you still hold the cards. By shoring up your hiring process now, you’ll strengthen your talent recruitment and onboarding processes in a way that sets you and future employees up for success. I recently wrote an article for Business 2 Community about this very topic. I hope you take the time to read through it and let me know what you think. I look forward to hearing back from you!

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Getting it all done

I can remember early in my career I was bemoaning the fact that I couldn’t seem to get it all done. My boss started laughing. Like belly, starting to cry laughing. At me. When he finally caught his breath, he said, “Drew, it’s never all done. This isn’t a 9-5, leave when the work is complete sort of job. You need to learn how to work smart but also not let the inbox (back then it was a literal inbox) get in your head. When you can get it all done, there’s a problem.” I’ve spent my entire career, as I imagine you have, trying to define and refine my own work habits to be as effective as possible. I have a much better sense of how I work, when I am most effective at certain tasks, and how to cleanse my palette so I stay fresh throughout the day. But, there are some days, like when I’m on planes all day (pre-COVID), that work has to get done and the time is now. Much of my job requires writing and I can’t wait for quiet, a muse, or inspiration. It’s due and it’s due now. Thrive Global asked me to share how I pack my plane trips with productivity and while my specific circumstance is probably not yours — I’m hoping these tricks and tools will be helpful in your quest to make the most of your workday. Being more effective and efficient is a key component (among many) in our Advanced AE and AE bootcamps (Sept 1-2, 3-4) as well. An AE needs to get the most not only from their own day but in how they frame up the work for the [...]

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5 Mistakes that cost agency owners money.

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