About Drew McLellan

CEO of Agency Management Institute, serving 250+ agencies to help the owners build profitable agencies that evolve and scale.

Agency Owner/leader questions from the mail bag

From our question bag (okay -- from my inbox but you get the reference!).  I've cleaned it up a little to protect the privacy of the agency asking the question. Q: I am trying to understand what makes up the COGS number in order to calculate our AGI. We are a public relations agency. From listening to your webinar on Financial Matters, my takeaway is the one of the items to include in COGS is the cost of freelance contractors. I'm assuming there are other costs like annual subscriptions to services which are used in doing our work for clients should also be included. A: Anything you use or pay to create in service of clients (freelancers, online tools, reference books, printing, photographers, postage, shipping, media placement, mileage to client meetings, influencer fees, etc.) are all COGS.  They are COGS whether you bill the client for them or not.   A way to test this is ask yourself this question.  If we didn't have client XYZ, would we still incur this cost.  If the answer is no -- then it is a COG. The things that should not be included in COGS are agency expenses (w2 people, benefits for those people, auto allowances, lawyer and accountant fees, rent, supplies, professional development, travel (unless it is client related) Q: We also want to look at account level profitability. To calculate the cost per employee, I am including salary/wages, insurance and 401(k) benefits, cost of PTO/company holidays. My research into what percentage to use for overhead markup resulted in a wide range of figures - 80% on the high end; 50% on the low end. Do you have a recommended overhead percentage? A: Well, as you know, this [...]

By |September 4th, 2018|

How To Find New Clients That Fit Your Agency Perfectly

Vetting new clients is a lot like choosing who you’re going to marry. No one gets married after a handful of dates, and no company makes a strong client connection after one meeting. Just like jumping into a marriage can lead to disaster, moving too fast with a prospect can also spell trouble for a business. Unfortunately, because many businesspeople are Type A personalities, the patience needed to grow relationships with prospects is lacking. We’re aggressive and competitive, always pushing for the win. Sometimes, that’s a great thing. But too often, we can jump the gun. To prospect smarter, agencies should focus on the four Ts: teach, trust, told apart and timing. Agencies that follow these strategies should have no issues securing new clients who are a perfect fit. 1. Teach: Use provocation-based selling as a learning experience. Too many agencies continue selling long after they’ve secured a new client. Selling is necessary at the beginning, but it becomes overkill after a certain point. Once you’ve started working together and you’re investing in the relationship, it’s time to switch gears. No one enjoys being constantly sold to, but everyone loves learning. Teaching clients something new builds relationships. It shows you’re passionate about their brand and want them to grow. You don’t need a doctorate degree to educate, but you do need to do your homework. When you go to trade shows or conferences, soak up insights, trends and case studies clients might be interested in. Even better, use that information to provoke problems they didn’t even know they had. Shining a light on things your agency can help with is essentially selling, but it doesn’t feel that way. It comes off as helpful and informative, which builds trust between [...]

By |August 1st, 2018|

Speaking Engagements: Every Agency Owner’s Ace in the Hole

Stereotypically, speaking engagements may seem reserved for high-profile authors, nationally recognized experts, and former presidents. And while not as obvious, marketing professionals should seriously consider how securing the right speaking opportunities will not only elevate brands but they also hold the key to developing successful business opportunities. A common misconception about speaking engagements is they only serve to build a personal brand for thought leaders or authors. As an agency owner, your goal is to establish credibility with your audience. And by presenting at a conference or trade show with an audience of prospective clients and referral sources, you can successfully demonstrate your insights and expertise. In today’s world, when a single tweet, post, or video shows your brand to the rest of the world, booking the perfect speaking gig has never been so invaluable. Securing Multiple Speaking Engagements There’s no one right formula for securing the ideal speaking engagement. There are several different tactics to try, with speakers’ bureaus being a great resource. And most big conferences have an open call for speakers. So you can pitch yourself as someone with something an audience is hungry to hear. Aside from these more straightforward methods, do everything you can to prove your expertise and give people a reason to book you for their event. I’ve written a weekly column for Iowa’s business journal for more than a decade, and my weekly podcast has passed its two-year mark and shows no signs of stopping. Both serve as evidence to conference planners: Not only do I have relevant content, but I can also knit thoughts together in a coherent way to teach and inform. The key is to establish your credibility so you’re invited to do the same thing on [...]

By |July 25th, 2018|

Hey agency owner — are you noticing the signs?

I’m writing this note from South Africa, where I am on a photo safari vacation with my daughter. We’ve spent the better part of a week in the bush, coming face to face with prides of lions, serene giraffe, wild dogs right after a kill and even some mating leopards! (And yes...that elephant is THAT much bigger than that Land Cruiser!) I’ve been fascinated to watch how our rangers and trackers scan the dirt for tracks, examine the foliage to look for breaks and even test the temperature of dung to determine what animals are nearby and how long ago they came through.   The clues are so subtle that it’s amazing when they spot them. But the rewards that come from that attention to minute detail is the difference between an incredible game drive (or survival in different circumstances) or it being just a lovely drive in the woods. It made me think about our own business and all of the subtle clues that our clients, prospects, and employees give off.  I wonder how many of them we blindly walk by, about to enter into a danger zone we’re not expecting?  I think most agency owners are very astute at picking up the signs — unless we’re moving too quickly and are too distracted to be present.  Which is pretty much every day. So what are we missing? One of the traits of the tracker and ranger that took me some time to get used to is the speed at which they work.  Slowly.  Sometimes painstakingly slowly.  As a Type A kind of guy, I was pretty antsy in the beginning.  But then I began to understand the method to their madness and saw [...]

By |July 24th, 2018|

Applying The Right ‘Golden Handcuffs’ To Retain Key Employees

If there is one universal problem facing agencies today, it’s talent recruitment and retention. Agencies of all sizes are experiencing more employee churn than they’ve seen in a long time. In fact, agencies report an average 20% turnover per year. Agencies want to retain key employees, and great employees want reasons to stay. So why are so many agencies still seeing their best employees walk? Many agency owners are offering their key employees cars, vacations and hefty bonuses, yet people are still leaving. Unfortunately, many agencies, clients and corporations are offering employees the same perks, so someone can easily leave their current agency and get the same benefits somewhere else. Fortunately, with a little creativity and some honest conversations, agency owners can avoid this inevitable talent drain. How Agencies Keep Stars Unfortunately, money talks and most employees don’t take the time to do their homework. They don’t calculate the value of all of the perks, flexibility and benefits their current employer offers. Instead, in today’s competitive hiring environment, great employees get poached by companies that offer the most money. As a defensive strategy, some agency owners offer equity to retain key employees, hoping it entices them to stay and contribute to long-term growth. Sometimes that works, but when it doesn’t, the backlash hurts. Giving an employee equity doesn’t cost anything at first. However, if that person decides to leave, the equity leaves, too. When that happens, the agency loses control of both a star employee and a chunk of its ownership. The agency could always buy out the departed employee, but no one wants to send a big check to a person who just left the building -- especially if the company gave the equity away for free. Agencies that decide [...]

By |July 11th, 2018|

Best books for marketers (client and agency side)

I was recently asked by CEO Library to share my thoughts about reading, specific books and how being a reader has changed the trajectory of my career.  Which, no doubt it has.  I've always loved to read and can't imagine not doing it consistently. How about you?  Are you a reader? Has how you consume books changed? (My habits sure have!) Here's a peek at what I was asked and my answers:  1. What’s your favorite book and why? Business and non-business, if possible. Favorite business book — Radical Leap by Steve Farber Favorite non-business book that I would argue can teach you a ton about business leadership — The Harry Potter series by JK Rowling 2. Was there a moment, specifically, when something you read in a book helped you? Can you tell me about it? I’ve always been a voracious reader.  I read to learn.  I read to relax.  I read to cleanse my palette so I can be creative.  I read to find perspective. I read to entertain myself.  I loved reading to my daughter when she was little and as she got older -- reading the same book together. So books have helped me do everything from learn about my mom’s dementia, to keep current with trends that impact my clients, to cope with loss, to raise a daughter to find some balance in my life and by helping me fall in love with characters, places and ideas. 3. What books had the biggest impact on you? Perhaps changed the way you see things or dramatically changed your career path. I would argue that my favorite books (which I re-read every year or so) in question #1 have had the biggest [...]

By |July 7th, 2018|

Clients Long for Brave Agencies: 3 Fears to Conquer

Launching an agency means challenges are bound to arise, and these challenges often revolve around money and perspective. When the two collide, that’s when most brave agencies stumble a bit. As soon as the words “revenue” and “loss” appear in the same sentence, many brave agencies understandably freeze with fear. It’s easy to lose objectivity and the ability to stay focused on the big picture. That often leads to an agency scrambling to take on new clients, regardless of their suitability. This “any port in a storm” mentality can really jeopardize an agency’s ability to create stability and profitability. It also leads to brave agencies being less willing to stand their ground and advocate for what they know is the best solution for their clients. It’s easy to capitulate when you’re worried about making payroll. But when clients search for brave agencies, they’re looking for that outside perspective. They don’t need a “yes” man; they need objectivity and an outside viewpoint they can’t find internally. This difference in opinion won’t always have you seeing eye to eye, but that’s usually what sparks the big idea—that collaborative, 360-degree viewpoint. If you’re challenging one another, ideas get better. And it’s the co-creation of those ideas where trust is earned. The bottom line: Your agency must have the confidence—or dare I say, the bravery—to find your voice and speak up. That’s the value you bring to your clients, which in turn is what creates value for you as a business. How you go about finding your voice and solidifying those bonds with clients is entirely up to you, but it often starts with mustering the courage to do the following: 1. Hold Strong Opinions To be treated as [...]

By |June 27th, 2018|

Seven Steps in the Agency New Business Development Process

Agencies know what it’s like to do new business development, but do they know how organizations think during their search for an agency? When a company decides it needs help, what does that process look like? And what can agencies do to earn new business? Agency owners don’t like to hear it, but business leaders don’t pay much attention to which agency is doing what, nor do they search for agency blogs to find a right fit. Instead, the people running those businesses think about the problems they face and wonder how an agency could help alleviate their burdens. Unfortunately, business leaders rarely have time to conduct a thorough search for a solution on their own. Higher-ups usually delegate the task to a mid-level manager who searches for an hour or two. Agencies have a limited window of time to get noticed and appeal to a prospect who’s typically a junior employee reporting to the ultimate decision maker. It’s not easy, but it’s achievable. Delegated searchers look for content, list placement, and prospect-friendly websites. People should be able to find your agency easily and decide for themselves whether you offer what they need. There are thousands of articles about how to attract that web traffic—but this isn’t one of them. Instead, let’s discuss what comes next: the first meeting. The First Meeting: Differentiation Whether you go with a formal presentation or an informal coffee meet-up, the truth is that all the business development process presentations look the same. Steve Boehler, a founding partner at Mercer Island Group, recently joined my podcast to talk about what businesses experience during the search for an agency. Steve told me: When we’re briefing the client to get them ready, we tell [...]

By |June 20th, 2018|

Your clients are still struggling with ROI from existing customers

Despite a mandate to drive growth, chief marketers are still stuck in a decade-long rut that has yet to see them fully optimize the lifetime value of existing customers. In 2008, when asked if brands were fully realizing the revenue potential of customers, 76 percent said no. Ten years later, 77 percent of respondents to the same question in a new Chief Marketing Officer (CMO) Council audit still say no, and 10 percent say they are not even sure. This is why you and your AEs need to understand the math of a lifetime customer.  We talk about/teach this is all of our AE bootcamps (live and on-demand) and I'm always surprised at how few of the attendees have been exposed to the idea of calculating, monitoring and monetizing the lifetime value of a customer. This failure to capitalize on customer revenue potential does not come as a surprise as the majority of marketers are missing an opportunity to leverage opt-in, triggered communications, including transactional email, to further relationships with customers. According to the latest study by the CMO Council and communication management platform Sendwithus, just 36 percent of respondents are leveraging transactional emails as an opportunity to further the value of relationships. While 30 percent believe they are engaging through triggered emails, it is only to reaffirm or acknowledge a past transaction, not to intentionally develop a more meaningful customer relationship. This occurs despite 94 percent of respondents’ belief that delivery of personalized communications across all customer touchpoints is critical to achieving profitable customer experiences. The new report, titled “Gaining Traction With Every Digital Interaction,” reveals that collaboration around the channels of choice for the customer is critical to turning an automated touchpoint into a [...]

By |May 15th, 2018|

You Must Treat Your Agency Like A Client To Truly Define It

In a saturated market of lookalikes, potential clients don’t want to hire the same agency everyone else is hiring; they want something different. To stand out and provide that experience to its clientele, an agency's leaders must identify what makes their point of view special and then use that differentiator to win new business. When our agency first began this process, we looked back to past experiences with clients and the common threads of those interactions. We discovered that we often helped clients optimize their marketing spend and focus on a different target audience than they thought they needed. The more we realized how effective this approach had become, the more we learned to match our clients’ return on investment to it. Eventually, that unique point of view led to our new tagline, "Create a love affair with your customer," which tells clients exactly how we can help in ways no one else can. Dare to be different. Agencies might provide similar services, but no two agencies are interchangeable. Consider this: If your agency exchanged logos with another, would anyone notice the difference? If not, you probably haven’t established the right point of view, which could be costing your new business clients -- as well as preventing your agency from owning its niche. None of us want to compete on price alone, however. “The cheap agency” is not a differentiator anyone covets. To provide the best service for a fair price, agencies must take a stand on what they do well and what they believe in. Sometimes, that means placing clients’ needs ahead of yours. No agency can serve every client equally well. By developing a standout point of view, agencies will naturally put off [...]

By |April 25th, 2018|