Agency owners are, for the most part, some of the bravest people I know. They have put everything on the line to start/own their agency and every day, they face and move past tough decisions. But if there’s an Achilles Heel for most owners, it’s the staffing issue, especially if your agency has hit a rough spot.
It’s ironic but in a typical agency, the higher a person’s salary, the less billable client work they do. They’re running a department, doing admin work or chasing after new clients more than serving your clients. I’m not suggesting their work isn’t valuable. It just isn’t billable.
What balances that out is that most of your younger, less expensive employees are very billable. Their billable hours cover the non-billable hours of the more senior staff. If you look at all of the hours your agency employees (including the owner) works — you need to be at 60% billable overall. Most agencies struggle to get into the 50-55% range. Which is why you aren’t making the kind of money you’d like to make.
Unfortunately, many of you are out of proportion. You’re over-staffed in general and in particular, you’re top heavy. You might have a large leadership team or multiple owners. On top of that — you’ve got an employee or two (or more) who have been with you for a very long time. You’ve given them regular raises and now, if you’re honest with yourself, they’re overpaid. Odds are, their skills sets and energy aren’t really what they used to be. But you feel a loyalty to them and so they stay.
You’ve been okay with a net profit that’s nowhere near the ideal range and you’ve stayed in the black with a little bit of profit to share among the team. Or you aren’t that deep in the red.
Your need to think of your agency as a large row boat with plenty of seats. Each person in the boat has a different weight. Their weight = their salary. So the more highly compensated employees, the heavier the load in the boat.
You’ve been able to stay afloat over the years because you’ve skillfully maneuvered the boat, but you’re riding pretty low in the water. When you’ve hit rough seas in the past, some water has splashed into the boat and really caused some cash flow issues until you could bail the water back out.
But, now your business is growing in some new directions and you need some skill sets that you don’t have in house. Naturally, the solution is to hire for those new skills because the ongoing demand makes out sourcing expensive and impractical.
At a certain point — if you keep loading more bodies into the boat, you are going to sink it.
You can only ride low in the water for so long and then it forces you to make less than ideal decisions (outsource rather than hire or keep the legacy employees beyond their usefulness) that put your agency at risk. You either need to lose some of the weight in the boat or you can’t add anyone new. Which impacts your ability to win and keep clients.
Maybe you’re the rare agency that has this dialed in and your boat is riding high and all is well. But most agencies have a person or two in the boat who aren’t worth their weight. Depending on your size, you can probably carry a little extra weight. For a little while.
But sooner or later, you’re going to have to decide if you’re willing to make the difficult decisions that will allow your boat to stay afloat. You can’t keep everyone in the boat safe if you don’t mind the balance and weight inside it.
One more time when you need to be brave.