Agency Operations

Small business advice: Surviving Spiking Health Insurance Costs

Small business owners have a lot to consider when it comes to employee benefits. Health insurance costs have been rising steadily, and with the implementation of the Affordable Care Act, many small firms may see a further increase in their premiums. Nevertheless, employers know that robust benefits packages are a huge draw for talented workers and a key component of employee retention. To prevent larger organizations from poaching their best people, small business owners are looking for more affordable ways to take care of their employees — and it isn’t all about health care. So how can small firms compete? The solution may lie in customization. Employee needs vary by generation These days, one-size-fits-all benefits packages simply don’t make sense, especially for small employers. Consider the multigenerational nature of most workforces, with each subsequent generation demanding different perks: • Maturists (born before 1945): For this group, stability is key. A lifetime job, homeownership, and a comfortable retirement mean everything. They’re looking for a hefty retirement plan and solid financial counseling. • Baby Boomers (born 1945-1960): Boomers want the job security that will allow them to live large, both before and after retirement. They want retirement plans, time off for vacations and hobbies, wellness programs, and long-term health insurance. • Generation X (born 1961-1980): This generation is focused on achieving work/life balance, and a bigger paycheck will offset the loss of certain benefits. They enjoy companies that allow flextime and remote work and seek benefits that serve them outside the workplace, such as pet insurance or adoption cost benefits. • Generation Y (born 1981-1995): The first digitally native generation craves freedom and flexibility. Most will not stay in their current jobs for the long haul, so they [...]

‘Helpfulness’ May Have a Delayed ROI, But Hang in There Anyway

About five years ago, a business owner requested a meeting with my team to help rebrand his company. When we met, he set down a three-ring binder filled with copies of my weekly marketing column and said, “I’ve been reading you and saving your columns for three years. I’m finally in a position to hire you. I don’t want to work with anyone else.” So, instead of obsessing over immediate ROI, solve problems by teaching, sharing and being helpful in your content. Some readers may never be ready to buy, but their trust in you may lead to valuable referrals, recommendations and introductions. The lesson here is that being helpful doesn’t immediately translate to sales, but it does earn trust. Most people hitting the web for information are in the early stages of the sales funnel. But sharing content on your website that makes them smarter -- via podcasts and newsletters -- will keep potential customers coming back. Eventually, if and when they’re in the market to buy, they’ll choose the person they trust. Case in point: The client who collected my weekly columns has remained our customer for more than five years and brought in nearly half a million dollars since that first project. In short, invest in the long term. Time is a limited commodity, and it could take years to create a bank of helpful content that draws new clients. But in our case, it’s been worth it. Since launching our agency blog in 2007, we’ve brought in more than a million dollars in billings from the readers we’ve helped. Here are five of our strategies: 1. Share your knowledge. Content comes in many forms: podcasts, ebooks, webinars, blog posts, newsletters. Employing a variety of mediums [...]

How to Differentiate Your Agency From All the Rest

Despite their best efforts to stand out, nearly every agency looks, sounds, and acts just like every other one. We all think we have figured out how to differentiate ourselves using catchy taglines and clever techniques, but from the outside looking in, it’s hard to tell the difference from one to the next. Don’t believe me? See whether any of these phrases ring a bell: “We are a full-service integrated marketing agency.” “We partner with our clients.” “We’ve been in business for X years and have more than X years of experience.” Sound familiar? These phrases might sound like good differentiators, but in reality, they just muddy the waters and make it more difficult to discern what makes one agency better than another. Don’t Please Everyone All the Time Looking across the landscape of agencies we work with, the ones that struggle to stay afloat are the generalists. I know how scary it can be to neglect part of what looks like an appealing market, but agencies today must find and attack specific niches to survive. New avenues of competition are part of the reason for this. Agencies are now commodities competing with freelancers and others who take advantage of low barriers to entry. Differentiating your agency from the masses requires clearly defined areas of expertise. Clients want specialists, not indistinguishable, cookie-cutter generalists. According to our research, one of the biggest factors for clients choosing an agency is industry-specific expertise, which they define as having 25-50% of the agency’s business in one industry. Differentiate Your Agency (For Real) Although most agencies struggle to stand out, differentiating isn’t as hard as it seems. These four strategies help the most successful agencies split from the pack and [...]

Embrace the 50-20-30 Rule

What would happen to your agency if you were abducted by aliens? It seems like a silly question, but bear with me. If you were captive on another planet with no way to reach your team, would your company survive? If the answer is no, then I've got bad news for you. You built a company so you could give yourself a job. When you're caught up in the day-to-day operations of running an agency, it's hard to step back and imagine that the company could ever run without you. But if your absence would cause the agency's AGI to drop massively, you're doing something wrong. Agency owners who stay involved in client work long after they have a strong staff to manage those relationships end up working in their businesses indefinitely. Instead of lifting their heads up to focus on long-term strategies and expansion, they fill their days with client calls and customer service. Maybe you think working on client accounts demonstrates how committed you are to their needs. But what kind of example does this set for employees? You can't grow your company when you're micromanaging client accounts. You're just signaling that you don't trust your team. The more involved you are in client work, the less likely you are to build an agency that someone will want to buy. As the organization stagnates, staff members will leave for agencies where they see growth potential. As an agency owner, you must focus on cultivating big-picture opportunities. You do that by organizing your time around the business's top priorities. The 50-20-30 rule Agency owners should apply the 50-20-30 rule to how they spend their time. Start by allotting 50 percent of your time to [...]

Scope Creep Is Killing Your Bottom Line: Here’s How to Prevent It

Picture this all-too-common scenario: You're 12 revisions into a client project, when you promised only four. You've now spent almost triple the time you intended on the project, which gives you less time (and energy) to devote to other clients. It's a frustrating situation, for sure, but the damage goes beyond that -- it's also hurting your bottom line. Scope creep is the ever-lurking monster under the bed for marketing agencies. A recent Deltek study on agency workflows, for instance, found that nearly 40 percent of agencies exceed their budgets because of scope creep. It whittles away at your profitability, and when you're constantly handing out a dozen or more revisions, it also sets unrealistic expectations for your clients. If left unchecked, it can mean less time for your agency to grow its business. Of course, there's a fine line between providing good service to your clients -- which sometimes does require going above and beyond -- and flat-out giving away your services for free. I'm not suggesting you nickel-and-dime clients to death, but it is essential to set strict limitations on what you will (and won't) do and stick to them. Otherwise, your profits will continue to seep out of the hole you've failed to block up at the bottom of your boat. Scope Creep Starts with Vague Proposal Documents It's easy to blame clients for scope creep, but truthfully the blame sits right at your feet. At the end of the day, it's your responsibility to serve as the gatekeeper of your agency's services. Scope creep is entirely yours -- not your client's -- to control. Vague proposal documents are the number one culprit when it comes to this problem.They lead to over-servicing your [...]

The Nuanced Art Of Pricing Agency Services

Pricing agency services is a nuanced art. Priced too high, your target customers won’t be able to afford you. Priced too low, you’ll leave money on the table with each new client or — even worse — run your business into the ground. Many agencies struggle with pricing. Their biggest mistake? Providing only one option, which encourages clients to push back and negotiate. It doesn’t matter how accurate your rate is. If you offer only one price, your client will assume there must be a better deal. The best pricing strategies include multiple tiers. Three is the ideal number and will give the biggest boost to your bottom line. With two tiers, clients will go for the cheaper option without considering the premium one. But when you include three options, the majority of clients will select the middle choice. The trick is to strategically price your middle tier to represent your ideal scenario. A Simple Method for Pricing Agency Services Smartly Building a three-tiered pricing strategy isn’t complicated. Start with the middle tier. This package should take into account a combination of what’s ideal for your business and your client. Charge exactly what you want to earn for providing the best blend of your services. Essentially, the middle tier should reflect what you would charge if you were only offering one option. From there, you’ll be building two packages that exist for the purpose of directing your client to this middle option. Next, create a stripped-down version of your middle tier. This will be option one. It should remove some of your deliverables and offer something basic but still valuable. Price this level between 20 and 25 percent lower than your middle option. Finally, build your premium option by [...]

5 Overlooked Metrics Your Agency Needs to Measure for a Profitable 2017

Running a business takes everything you have. Entrepreneurs pour their creativity, passion, effort, savings -- their everything -- into their work. And five years after they start, half of them are out of business. A decade later, two-thirds have called it quits. But why? For marketing firms, I believe it comes down to a lack of diligent measurement. Sure, measuring and tracking may not be the sexiest part of running an agency, but it's the only way to ensure you're not throwing money away. Commit to tracking these five things in 2017, and you'll have your most profitable year yet. 5 Metrics Your Agency Should Measure in 2017 1) Adjusted Gross Income per Full-Time Equivalent Employee Determining your number of full-time equivalent employees (FTE) is a convenient way to measure labor. To do this, denominate employees into 40-hour-a-week units. A full-time employee is equal to one FTE. A 20-hour-a-week employee is 0.5 FTE. Your target should be $150,000 of adjusted gross income (AGI) for every FTE. That amount should cover salaries, benefits, and overhead while leaving enough profit to reinvest in the business or offer bonuses to high-achieving team members. Years ago, the target AGI for each FTE was $100,000. Inflation accounts for some of the increase, but marketing agencies are also hiring expensive people to fill positions on growing digital teams. In short, the world has changed. It's gotten more expensive. Many marketing agencies haven't adjusted their billing rates to keep up -- and that's a big problem. If you're only earning $100,000 per FTE, your agency likely isn't very profitable. Those thin margins carry extra risk when an unexpected tax bill comes due, equipment breaks down, or you need a retention bonus for [...]

Five Ways Agencies Can Prove Their Value

To agencies operating in the “Mad Men” era, marketing today would be almost unrecognizable. Agencies used to sell media, giving away all their best ideas — even producing ads for free! — in exchange for media commissions. The end goal of that culture was creating the best creative content, regardless of how much time it took. That business model would now sink an agency within a month. As computers became commonplace, even non-marketers started to fancy themselves publishers, leaving professionals to wonder what really made them valuable. Modern marketers must realize that their value doesn’t lie in the commoditized pieces they produce. It lies in their ability to think strategically, understand audiences, create messaging and personas, and help clients gain outside perspective. Billing rates for agency executives have plummeted, but it’s not because they don’t do good work. Rather, it’s because they don’t know how to demonstrate to clients why their services are worth top dollar. Getting in Position To charge a premium rate for high-quality services, agencies must position themselves in a way that makes it obvious to clients why their services are so valuable. Client companies are usually made up of three parts: sales, marketing, and customer service. Agencies that understand the relationship among these three segments and can communicate to clients how they move prospects from marketing into the sales funnel and beyond create a significant advantage for themselves. The more an agency can directly tie its services to the client’s bottom line, the more willing a client will be to pay an appropriate rate. Understanding these relationships is just the first step, however. Agencies that work directly with sales teams to help clients streamline their funnels and track progress after the sale [...]

The Key to Agency Profitability? Good Old-Fashioned Time Sheets

Did you complete your time sheets today? Did your employees? If your answer is “no,” your agency is missing out on a crucial opportunity to increase agency profitability and productivity. There are consultants out there who think agency folks shouldn’t have to do time sheets, but they’re wrong. People are your biggest asset and your biggest resource, but they’re also your biggest expense. Consistent use of time sheets is the only way to know how your employees are spending their time and whether that time is well spent. Without the use of time sheets, you cannot evaluate the performance of your business — both how your assets and resources are being applied and how profitable your clients are with respect to your time investment. More Data, Better Decisions The data you collect through time sheets will make evident what you’re doing well, and it will also demonstrate where there’s room for improvement. Most importantly, it will reveal the profitability of each client by illustrating the time spent on every project. That being said, everyone needs to get on the time sheet train. Yes, that includes you. Every person in your office should be completing a daily time sheet so you can get the best and most accurate picture of your agency. Regardless of whether you’ve never used time sheets or you’ve just gotten lax about completing them, here are a few steps to get the process back on track: 1. Acknowledge It’s Your Fault. This step is the least fun, so we’ll get it out of the way first. Take responsibility for the fact that you’ve allowed the maintenance of time sheets to become sloppy or disappear altogether. It’s now up to you to lead the charge. [...]

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 [...]