Agency Management

Hey agency owner — measure what matters

Want more money in your pocket -- measure what matters. Many agency owners want their agency to be more stable, more profitable and more predictable.  The truth is -- you can have all of that but it doesn't happen by accident.  You've heard the expression "if you want it to matter, measure it" and that's absolutely true. Here are some metrics you should consider tracking on a consistent basis as you grow your agency. Weekly: Timesheets completed (all time, billable and non-billable): Your goal should be 95% or better.  This means yours too, agency owner. Monthly: Gross billings: No specific metric but measure it against your annual goals. AGI: No specific metric but measure it against your annual goals. AGI ratios: Your AGI should be spent in this approximate ratio 55-60% People (all expenses tied to your staff. Salaries, benefits, payroll taxes etc.) 20-25% Overhead (Day to day operating expenses like rent, travel, professional fees, etc.) 20% Profit (EBITA) Profitability by client (It’s reasonable to shoot for a 10% minimum) AGI/FTE (your goal is $150K in AGI for every FTE) Write up/offs (are you adding profit to jobs or writing off time. Track both) Billable % (Overall staff billability should be 75% or higher) Utilization – what you actually billed (Overall staff utilization should be 60% or higher) Quarterly: Employee Satisfaction (On a scale of 1-10, how likely are you to recommend working at the agency to a friend?) New revenue ratios (70% of new revenue should come from current clients) New clients/sales: No specific metric but measure it against your annual goals. Average spend per client (you should set a minimum acceptable quarterly spend) Annually: Client retention (Goal should be 80% or higher) Employee [...]

Hey Agency Owner — Do You Have a Handle on Your Agency’s Financial Picture?

Do you have a reliable, regular handle on your agency's future and agency financial picture? On any given day – agency ownership is akin to riding a roller coaster – the highs are exhilarating and the lows are terrifying. While the highs and lows are triggered by a variety of factors (clients, technology, employees, etc.) the net result of those highs and lows are almost always financial. It’s pretty tough to be excited about owning/running a business that isn’t making any money. And yet, many agency owners I meet don’t really have a handle on their company’s financial picture. As the results from Hubspot’s Agency Pricing & Financials Survey show, 15% of respondents don’t even know what their average profit margin is, which means they’re out there, operating in the dark. I’m equally concerned about the agencies that reported 41-51+% profitability. I see the financials of over 250 agencies (from 1 FTE to 300 FTEs) a year and I’ve never seen an agency’s profitability exceed the low 30s. My guess is that either those respondents don’t understand the term profit margin or their books are a mess. Bottom line – there are some metrics that every agency owner needs to understand and track. It’s how you know when you hire, if you’re prices are appropriate and if you’re making any money. Every month, you should be tracking: AGI (Gross billings minus cost of goods sold) How the AGI is being spent (Between loaded salaries, overhead and profit) Profitability by client (are you paying for the privilege of working for some clients) AGI per FTE (Goal should be $150K per FTE, anything less than 100K is serious trouble) Estimates to actuals – how accurate are your [...]

Hey Agency Owner — Are Your Prices Competitive?

How does your pricing align with other agencies? What KPIs are other agency owners tracking? What should my profit margin be? How many clients do I need to make $X per year? What sources generate the best leads? These are conversations we have in the AMI network meetings all of the time.  They're not just about curiosity -- it's about best practices and making sure you aren't missing an important insight or leaving money on the table. Whether you're a part of an AMI network or not -- this is information you need to know.  To help agencies better understand how to price, manage, sell, market, and deliver to clients, HubSpot conducted a survey with more than 750 agency executives responding to our questions. This data, along with industry expertise from Tim Williams, Karl Sakas, Jason Swenk, myself, Peter Levitan, and Lee McKnight, Jr., was combined in their first agency-focused research report: The Agency Pricing & Financials Report. (download it here). I think you'll find it very eye-opening.  I was not surprised to learn how many agency owners aren't tracking the financial metrics that need to be on their radar screen every month.  Take a look and let me know what you found most surprising.

The 4 Most Common Financial Mistakes that are Costing Your Agency Money

Whether you like it or not, there are several financial mistakes being made in your agency today that are costing you money. You’re in business to make money, so every step you can take to prevent these mistakes is worth it’s weight in gold, literally.  Most of these mistakes happen slowly over time and just eat away at your profits little by little.   This solocast is all about these money draining mistakes and what you can do to plug any holes you may have. In this solocast I will cover:     Gross Billings vs. Adjusted Gross Income How agencies lose money when pricing Why scope creep leads to little or no profit Why your agency needs to issue change orders and how to turn this into a process Why you need to use the one page business plan How to know if you need a better new business plan (hint: you probably do) Why you need a tax advisor not a tax preparer Drew McLellan is the Top Dog at Agency Management Institute. He has also owned and operated his own agency over the last 20-years. And all through the year, he straddles the fence of working in his agency and working with 250+ small- to mid-size agencies in a variety of ways. He works with agency owners in peer network groups, teaches workshops for owners and their leadership teams, teaches AE bootcamps, and does a lot of consulting. Because he works with a lot of agencies every year — he has the unique opportunity to see the patterns and the habits (both good and bad) that happen over and over again. He has also written two books and been featured in The New York [...]

Agency Best Practices: Cover your agency in case your client pulls the plug

One of the most annoying and expensive aspects of running an agency is when you do a lot of groundwork on a project and then the client pulls the plug before you've been paid. The phrase is actually an American idiom which originated in the 19th century.  Back in 19th century America, toilets had plugs so to flush a toilet, you needed to pull the plug. And that's sort of what it feels like when you get that call from the client, saying that something has changed and the project (or the project's budget) is going away.  You can almost see your profits going right down the toilet.  But it doesn't have to be that way.  Not if your contract/scope of work protects you. For most agencies, we invest a significant amount of time/energy on the front end of a project, knowing we'll recoup our time/costs by the time the work is complete.  That works great when there no complications.  But there's almost always a complication! There are some things you can do to protect your agency but the time to do them is before you start the work. First — be sure you are getting 50% of the project fee up front.  Build payment milestones by date, not by deliverable (otherwise, they can stall on approvals etc. to delay payment).  In addition, here’s some language you should consider incorporating into your contracts/scope of work documents: Most of the work we do on your behalf is front-loaded, which simply means we do the lion’s share of the work on the front end of the project and recoup that investment throughout the billing milestones. We know it would put a strain on your budget to require you to [...]

Agency best practices — the new overtime law (2016)

The Department of Labor has finally decided how/when they’re going to roll out the new overtime law which is going to have a huge impact on agencies. And it’s not just agencies. It’s estimated that the preparation and management to stay compliance with this new law will cost US businesses $592.7 million and over there will be a $1.4 billion net transfer to employees. The 4As estimate that 25% of agency employees will now be eligible for overtime pay for every hour over 40 that they work. At AMI, we believe it’s closer to 40%, given that the agencies we work with are smaller (1-300 employees) and privately held. This is a complicated issue and there are no easy answers. As an agency owner, you’ve got to use the the time you have between now and December 1st to prepare for this huge change. Today, if an employee makes less than $23,660 and works over 40 hours, they are eligible for overtime pay. As of December 1st, the new salary threshold goes up to $47,476. Any employee who is not a manager/supervisor will now need to be paid overtime for anything over 40 hours. The $47,476 will increase every 3 years, so know this is going to be an ongoing problem for agencies. Given the way we work today, you can see how this is quickly going to be a problem. Your employees don’t work traditional work weeks or hours. Think about the time they spend in client meetings or traveling with clients at trade shows or other events. How about the time they spend traveling on behalf of the client. Even the plane time, if they’re working, need to be counted against the 40 hour threshold. [...]

New Business Development for Agencies with Jami Oetting

My guest, Jami Oetting has seen both sides of agency life and is with me on this podcast to discuss new business development for agencies. She worked as a strategist at a full-service agency before deciding that she really liked reporting on what agencies are up to more than living it day-to-day. As the editor of Hubspot’s Agency Post, she gets a front row seat to what is going on in shops all over the nation and boy does she have some perspective.   In this podcast, she gives us her take on a wide array of topics from how agencies need to differentiate themselves to tips for how agencies can consistently create content. The conversation also digs into new business development for agencies in this digital age. Some highlights include: Solely relying on referrals doesn’t make sense anymore. There’s a whole world out there with clients looking for specialists. Attract the right clients and repel the wrong ones. We discuss why it’s so much better to be upfront about who you are as an agency, and who you are not. Consider what your agency would look like in five years if you started specializing today, versus what it would look like if you didn’t. People will pay more for specialized expertise. Stay on track with your content creation. Understanding formulas and blocking time to write will allow agencies to create better content in a more efficient and consistent way. Create your niche from your client profile and develop a plan to generate leads from that. Jami Oetting is the editor of Hubspot’s Agency Post, which is a blog for advertising and marketing agency professionals. She led the launch of the publication in 2011 and [...]

How to Develop a Compelling Value Proposition and Differentiate Your Agency from Others

A potential client asks you to describe your agency. How do you communicate your compelling value proposition to the client and differentiate your agency from others? Quick – what makes you stand out in the agency crowd? Do you find yourself using words like full service, strategic, creative? Or maybe you say, “We partner with our clients.” “We've been here for X number of years.” “We’re not a traditional agency.” “We don't do digital, we are digital.” Unfortunately, the truth is, whether you like it or not, you sound just like every other agency out there. Even if we think we're standing out in a crowd, we tend to sound very much the same. We all believe that we sound distinct but the truth is our words all blur with the same phrases that every other agency uses. So how do you truly develop a compelling value proposition and differentiate your shop when the competition is getting tougher and tougher and we sound and look more and more alike? By clearly defining your mission, vision and values. In this solocast, I help you flesh that out by exploring: How to communicate a compelling value proposition to your clients by telling your own story via content. How to put a stake in the ground and say this is what we do and how and why we do it. How to answer the following big questions: Why do you do this work? What is your why? What would happen to the world if your agency simply faded from existence? How to specifically define your mission, your vision, and your compelling values. Drew McLellan is the Top Dog at Agency Management Institute. He has also owned and operated [...]

Implementing Efficient Business Processes and Systems with Brian Shea

Business processes and systems. Most business owners flinch at these words but the truth is that your agency cannot grow/scale without both. Processes and systems actually increase the ability to be creative by freeing your team from re-inventing the wheel every time they’re trying to get something done. That’s exactly what my podcast guest, Brian Shea brings to the table.  Brian and his firm, Shea Consulting take process and systems to the next level by helping agencies customize them so they can grow and scale efficiently. Through the use of systems and processes, they minimize the stuff you don't want to do so you have more time and energy to do the stuff you want to do.    In this podcast, Brian covers: How implementing systems is vital to successfully scaling a business. How looking at a business’s current processes can help business owners structure the company in a way that allows them to focus on the creative and strategic work, and delegate more tasks to employees, thus developing the employee’s abilities. How to dig deep and get to the actual cause of why processes, systems and software fail. The consequences an agency may face if they do not implement processes and systems. Great, easy to implement ideas for helping agencies connect with their dream clients. Brian Shea is the founder of Shea Consulting, where he helps companies become more proficient with their business development systems so they can enjoy consistent, sustainable success. To listen – you can visit the Build A Better Agency site ( and grab either the iTunes or Stitcher files or just listen to it from the web. If you’d rather just read the conversation, the transcript is below: If you're [...]

Managing Business Growth to Create a Sustainable Business with Trent Dyrsmid

There’s no topic that is not more top of mind for an agency owner than growing your agency so it is stronger, more profitable and more sustainable.  In a recent podcast with Trent Dyrsmid, we talked scaling your agency and managing business growth. Trent built, scaled and sold an agency and I wanted him to tell us how. In this podcast, Trent discusses innovative techniques to managing and growing your agency:  Among other things, he covers: picking a niche for your agency giving you power in pricing and increased traction becoming aware of your capacity as an agency - being busy doesn’t mean higher profits why you need social media for lead generation, no matter your agency’s niche finding the right balance in workload for your team how to implement new systems into the agency. Before Trent Dyrsmid started a digital agency called Groove, he founded Dyrand Systems, a managed IT service provider that was recognized twice as one of Canada’s PROFIT Magazine’s 100 fastest growing companies. In addition to overseeing Groove, Trent is also the host of the Bright Ideas podcast, where he regularly publishes interviews with some of today’s brightest entrepreneurs from around the globe. To listen – you can visit the Build A Better Agency site ( and grab either the itunes or Stitcher files or just listen to it from the web.   If you’d rather just read the conversation, the transcript is below. If you're going to take the risk of running an agency, shouldn't you get the benefits too? Welcome to Build a Better Agency where we show you how to build an agency that can scale and grow with better clients, invested employees, and best of all, more [...]