When an agency shows a profit, one of the first inclinations of the agency owner is to pay a bonus to the staff. I applaud that instinct. But I don’t think you should do it simply because you have a little extra money. I believe you should have a bonus program that serves your agency every single day, whether you pay out any money or not. I think there are several elements of a successful bonus program: They should not be an end of the year thing. They should influence the employees to behave in ways that serve the agency year-round It needs to be simple and explained over and over (every month/quarter) It should be used to teach employees to think like agency owners (focused on the same metrics you do) It should be based on one or two metrics that accurately measure the financial health of the agency The metrics should be measured/achieved or not every month The metrics should be set in a way that your team hits the goal more often than misses (should be a stretch but a reasonable stretch...ideally they’d hit the metrics at least 7 or 8 months of the year) Bonuses should be paid quarterly (with most of the $ accumulated for an end of the year payout) to keep everyone motivated/focused The owners should hold an all agency meeting every month to report on financials/success on bonus program for the month/YTD At AMI, we have a specific bonus program that we teach in our workshops, owner peer networks etc. It’s based on two metrics. The big number in our opinion in terms of an agency’s health is AGI (Adjusted gross income — Look here for more [...]
You've probably heard me say it a million times, but timesheets are the source of foundational data that you need to to run your agency in a fiscally responsible way. They may have nothing to do with billing. You can value price, project price or sell your work for chickens...that is not my point nor is it the reason timesheets matter. They matter because they are a measure of the efficiency and effectiveness of your team. Your people (W2 people) are your most expensive resource. If you do not know if you're using your resources well, if they are performing at a high level, or if/when you need to add more resources -- then you are operating your business in the dark. I totally get that no one likes timesheets. I have never met an agency employee or owner who does. But without them -- I promise you, you are leaving money on the table. Every month. Timesheets that are not done daily are 67% less accurate than daily timesheets. So let's assume (humor me) that you've decided that daily timesheets are a mission critical focus for the agency. You want to be able to use all of the other agency metrics that are based, at least in part, on timesheet data. But, your folks don't do their timesheets every day. Maybe they don't do them at all. Or, if you are like most agencies, most people do them once a week or so. But you always have some stragglers who are a few weeks out. How do you change the culture? I have seen many agencies from from zero to hero in this arena in 2-3 months using the carrot and stick combo I [...]
I had a great conversation (podcast) with Stephen Woessner, the host of Onward Nation about the value of podcasting, how my podcast Build A Better Agency has served my business and why I think it’s a strategy worth considering for any agency owner who is trying to establish a sustainable new business effort. Take a listen here. In the podcast, I talk about how podcasting creates a position of thought leadership and gives you a chance to connect with your prospects in ways you haven’t even imagined. It’s also killer for content creation. If it’s crossed your mind, the episode might be worth a listen. FYI — The AE bootcamp that we’re doing on September 24/25th won’t be offered again until 2020. So if you’d like your newer (5 years experience or less) AEs to actually understand their role in helping the agency and their clients make money and learn how to make that happen consistently — sign them up before we fill up! Register them today here!
It’s annoying and expensive when clients pull the plug on a project before you can recoup all of your upfront investment. And yet it happens all the time. So much of our work requires a huge investment on our part on the front end and when a client stalls or does a 360 and cancels the work — we often get left holding the bag. I wrote a blog post about this challenge and offered some language you can include in your contracts and/or scope of work documents that will help protect you from losing money in this situation. Check it out and let me know what you think. Our September AE bootcamp is getting pretty full. If you want to send some of your crew — it would be good to get them registered soon.
In my mind, as you read that sentence, you were thinking “Are you kidding? I just paid THIS year’s taxes. Why are we talking about 2019 taxes already?” Which of course is my point. If you’d like to pay less tax than you did this past year, you can’t wait to until late December to put some strategies in place. I find that most agency owners have very conservative tax preparers. They’re much more concerned about making it easy for them than they are in actually giving you good advice about how to structure your business in the most tax advantageous way. I had a CPA like that and paid through the nose for years. Fortunately, I realized the mistake I was making about a decade ago and have cut my tax liability to a fraction of what I used to pay. There’s no reason why you can’t do that too. We will talk tax strategies in our owner workshop this fall (October) if that’s of interest. Whether you join us or not — it’s time to evaluate your tax prep pro. If he/she isn’t actively meeting with you every quarter to review your financials and look for ways for you to protect yourself from unnecessary taxes, it’s time to go shopping. We all have to pay taxes but it shouldn’t add up to more than we need to pay.
Most agencies use the the accrual basis method of accounting because it aligns more closely with how our businesses actually run and gives the agency owner more realistic numbers and metrics, so their decisions are better informed throughout the year. In the cash method of accounting – the day a business gets a check or cash from the client, it recognizes the revenue. This works well in a retail world. I walk into the grocery store. I pick up milk and bread and give the cashier some money. At that point, they have actually earned that money. Our transaction is complete. But in our world – in many cases, when a client gives us money, we haven’t actually earned that money. If the client asked for the retainer or the media pre-payment back, we have to return the money because it’s not ours yet. We haven’t done the work. But in the accrual model of accounting, transactions are accounted for when the transaction occurs or is earned, regardless of when the cash is paid or received. (Note: most agencies convert to cash for tax purposes.) Let’s play this out. You send a client an invoice for $30,000 which is 50% of a project’s fee, after they sign the scope of work. They send you a check. Your bookkeeper should book that $30,000 as a liability. Again – if they ask for the money back the next day, you owe them the $30,000. If your bookkeeper books that as a sale or revenue (like they would in the cash method) it would tell a lie. It would say that you did $30,000 worth of work in that month and you can spend that money without risk [...]
Voice controlled devices (VCDs) like Alexa, Google Home, and Siri are exploding in the marketplace. There is no sign that the trend toward voice search and assistance is slowing down, and I’m here to assert that this trend can be advantageous to agency business development. As a matter of fact, I believe strongly that voice represents that next opportunity, that next patch of fertile ground where you can plant your flag. The opportunity for business development with voice controlled devices is big—huge even. Let’s do a quick dive into the data on VCD usage and where it’s headed. Then I will share what I consider the four top new business development strategies around voice. These are great to use in building your own business, and also strategies you can easily employ with clients. Voice is Getting Louder The market for VCDs is exploding. Echo and Echo dot were the best selling items last year for Amazon, which makes them the biggest seller on the biggest online retail platform. That’s big. In addition, once purchased, these items are frequently used. Google did a study that found 72 percent of people who own a voice-activated speaker or a smart speaker report that the devices are a regular part of their daily routine. Voice Controlled Devices are Doing More Last I checked, the Alexa Library is 30,000 skills, so 30,000 pieces of software that you can install into your Echo and then ask Alexa to do certain things for you. Google Home's library is less than 1,000. So in the assistance space, Alexa wins. But obviously, just like everywhere else, Google dominates voice search. Even more to the point, voice is on its way to becoming the default [...]
If your advertising agency culture sits on either end of two extremes, you don’t need an engagement survey or a high-priced consultant to confirm your reality. You can feel the energy when things are amazing, and you can smell the stench when things are rotting away in your business. But what if things are somewhere in between? What if you’re unsure if things are heading in the right direction? Or what if you’re confident they’re really good, but you want a heads-up before you suddenly realize you’re whiffing six-day old cod? You might need that engagement survey, and you may need that consultant. In the meantime, here are three danger signs that will tell you if your advertising agency culture is in trouble: YOU’RE EXPERIENCING "MEGO" A journalist friend once had an editor who routinely rejected poorly written copy because it produced what he called MEGO – My Eyes Glaze Over. In other words, it was boring. Are your organization’s vision, mission, and values creating MEGO? When you read the statements to employees, do they say, “Yes! That describes us so well!”? Or do they roll their eyes and say, “Yeah, right. That’d be nice.”? It’s great to have statements that set the bar high, but most employees have a pretty sophisticated BS meter. If you acknowledge the gaps between where your advertising agency culture is and where you and others want to take it, most employees will help you make it happen. If you’re trying to prop up your culture with $10 words, however, you’ll lose respect and trust. YOU’RE BEGGING FOR RECRUITS When your culture is strong, healthy, and vibrant, your employees become your best recruiters. They sing the company’s praises every chance [...]
Pause for a few seconds and make a mental note of the five-to-ten most recent examples of how you are rewarding agency employees within your organization. In other words, who got a raise, a bonus, a promotion, an award or some other form of recognition for a job well done? In many organizations, perhaps even most, those honors go to people who achieved some tangible, measurable result. They hit their sales goals, signed a new client, or found some way to save the organization a few buckets of money. That’s all good, but it might not always connect in a positive way back to the organization’s stated values. When rewarding agency employees doesn't factor in the means that lead to the ends, they actually can become culture killers rather than culture builders. Tae Hea Hahm, the managing director of the venture capital firm Storm Ventures, once pointed out that “real culture” is defined by “compensation, promotions and terminations. Basically, people seeing who succeeds and fails in the company defines culture. The people who succeed become role models for what is valued in the organization, and that defines culture.” Performance is vital to success and growth, but values are foundational to organizational health. So, the challenge for Extreme Leaders is to increase the real value of things that are critical but hard to measure. Here are a few tips for doing that: ALIGN ON YOUR VALUES People often define their values based on their personal experiences and expectations. Your definition sustainability, for instance, might not be the same as someone else’s definition. So, it’s not enough to publish a list of things that are important to your leadership and your culture. Go a step further and [...]
Change—some thrive on it, while others resist it. Why is it that two individuals can look at the same thing and think totally different thoughts? Some see change as essential, while others fear the worst. "Half full" versus "half empty"—possibilities versus consequences. We have a few ideas on managing change in your business. Here’s our basic behavioral profile—we’re optimists; we enjoy interacting with others, have a high trust level, sometimes talk too much, are generally quick to accept meaningful change and at times too direct. We share these behaviors with about half of the population. Our natural tendencies are to quickly accept change. Keep in mind that over one-third the population is naturally reserved about accepting change and there’s an additional 14% who flatly resist change. (Figures based on DISC Behavior population norms.) While sometimes we control change, most of the time we are impacted by change and are expected by employers, clients, boards of directors or the government to accept change and support it. But if our natural tendencies are to be reserved or resistant, is it a fair expectation? Our answer, setting aside our personal tendencies, is “no.” Even for change “embracers” like ourselves, skepticism may set in if a change effort is poorly managed. For “change” to take place we need a large segment of the work force to accept, believe and support the change. Change needs to be accepted and ultimately viewed positively. If change isn’t accepted, it will become the kryptonite that brings an organization to its knees. The real questions are “Where?,” “Why?” and “How?” will an organization make critical changes. and "What are the implications if changes are not implemented?" Here is a change process designed to engage the [...]