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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 [...]

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How to Work with and Manage a Network of Freelancers with Bram Warshafsky

If you were going to build an agency from the ground up today, what would it look like?  For my guest Bram Warshafsky, it was an agency with a lot of technology and a workforce that was almost all contract labor. Bram and his team at 5Crowd don’t concern themselves too much with driving big brand strategy. They use their team of freelancers to take the brand strategy that already exists and find the best way to execute it. Most agencies have augmented their team with some freelancers but many struggle with managing those resources and vetting the potential partners to find the right ones. In this podcast episode, Bram shares his experiences, the trial and errors and his eventual successes and insights that makes it work so well today. Find the best freelance fit for you as Bram and I discuss: Why Bram started his agency, and why he went with the freelancer model What Bram’s internal team is like and how to work with freelancers to offset those positions Why 5Crowd focuses on production rather than strategy What a strong freelancer vetting process looks like Why 5Crowd needed to build their own software How being a production based agency has led to high client retention for 5Crowd What good marketing looks like Why you need to tell the story of how you save your clients money The three questions 5Crowd asks to figure out if they will take on a project Why 5Crowd has freelancers set the price How 5Crowd picks what freelancer to use for the right project Why you need to fully embrace technology to succeed How to get started with freelancers Recently named one of the Top 30 Under 30 [...]

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How to Streamline Business Processes and Improve Workflow Efficiency with Chris Wilson

A lot of agencies want to grow and scale but it really gets to be a problem when they lack the proper workflow and systems and are unsure how to streamline business processes. Agency owners can sometimes need help learning how to manage workflow in office. Many agency owners bristle when they hear these words but without a shared workflow process, it is impossible to deliver quality or consistency throughout your entire agency.   This often shows up as: A constant cash flow crunch and you don't know why Not knowing if a project is profitable or worse, if a client is profitable A stressed staff who keeps re-inventing the wheel Everyone has their own way of getting work through the agency These can all be warning signs that perhaps your workflow could use some improvement. Chris Wilson helps agencies of all sizes address their workflow issues so they can move forward, scale and grow. He has an extensive understanding of the operation, management and workflow processes of agencies.   Chris joins me on Build A Better Agency and we talk systems and workflow.  I promise, it’s better than it sounds! We cover: The typical reasons that agencies decide they need to get better systems in place What Chris’ company Function Point does Mistakes that agencies make when it comes to starting to think about workflow and using a tool like Function Point How to figure out if your workflow process needs improving How to streamline business processes and workflow within your agency Why workflow allows people to put their brain flow in the right place Why systems have to be easy to use Why timesheets are absolutely necessary and why agency owners can’t be exempt from [...]

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Systemizing Your Agency Using Documented Processes with Andrew Dymski

“We were kind of just flying by the seat of our pants, to be honest. We weren't operating off of a tight scope. We were just out there creating stuff that we knew we should be making, but there was no structure or order to it at all. We aren’t sure how to streamline processes at work.”   Sound familiar?   That sounds like an agency in need of some processes and systems. My podcast guest Andrew Dymski was describing his own agency in the quote above. Fortunately, he realized that they had to stop reinventing the wheel with every new project or client. What he discovered is that by creating documented processes for each step of the client journey, they were able to become more focused and much more profitable. So many agencies know they need to systematize their agency but it’s a daunting task so the excuses are easier. As Andrew put it during our conversation, “you’ve got to put a firm date on the calendar when you're going to step back, pop the hood, and look at the agency and the way it's running.” Follow Andrew and I on his journey down the process and systemizing your agency rabbit hole and how his agency came out on the other side:   How Andrew and his business partner Gray MacKenzie started their agency while they were still in college and the transformation that GuavaBox has undergone since then How Michael Gerber’s “The E Myth” transformed how Andrew’s agency was ran Using blogging as a method for separating yourself Why clients will leave if communication is poor — even when you’re doing great work DoInbound: a tool for creating templates that power the delivery of services just [...]

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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 [...]

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How to Price Digital Marketing Services

Are you struggling to determine how to price digital marketing services? Do you find yourself asking 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. What You Need to Know About Pricing Your Services 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. Learn More About Agency Money Management If you’re looking for even more guidance on how to price digital marketing services, sign up for our Money Matters workshop. If you’re already an AMI member - register for our money matters workshop with your discount here.  Not a member? Learn more here.

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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 [...]

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What Does Scope of Work Mean?

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 that originated in the 19th century.  Back in 19th century America, toilets had plugs so to flush a toilet, you needed to pull the plug. To avoid this issue, agencies need to be clear about their scope of work upfront. But, what does scope of work mean? The toilet idiom shows 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 are 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. How to Determine Your Scope of Work First — be sure you are getting 50% of the project fee upfront.  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 [...]

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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. [...]

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How to Prospect for Clients 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 on how to prospect for clients. 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. How to prospect for clients and 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. spot works with about 2,500 agency partners and about 15,000 customers worldwide. Now, Jami’s blog is one of the largest blogs for agency professionals. It [...]

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