In an AMI network meeting last week, the big topic was employee recruitment and retention. If your agency isn’t struggling with this issue, consider yourself one of the lucky few. Agencies (and it seems all businesses) are fighting tooth and nail to find and keep productive, committed employees. Many of you are looking for so long that you end up compromising just to get someone in place. And we all know how well that usually works. Overall, agency owners are incredibly generous with benefits and flexibility. But there’s a new benefit that I want to make sure you’ve got on your radar screen because it may be worth considering as a recruiting tool. One of the things we talk about in our Managing Millennials workshop is that all employees (but particularly millennials) love to have “brag-worthy” benefits and this one is definitely brag-worthy. The benefit is student loan repayment. You can read more about it in this Forbes article and see some examples of how it is being positioned and packaged. Employee recruiting and retention will be a major discussion at our owner’s workshop (Best Management Practices of Agency Owners) this coming March in Chicago. Registration is open if you’d like to hear how other agency owners are reducing their workweek, actually getting to their family events and putting more profit on the bottom line.
I know there are agency consultants who will tell you that timesheets aren’t necessary. Unfortunately, they’re wrong. I totally get it. No one likes doing them. But they are an important management tool for you as you run your agency. It has nothing to do with how you bill clients or if you’re still billing by the hour (which I hope most of you are not doing) or project versus retainer billing. It’s about resource management. Your agency may be profitable and everything seems to be running smoothly but the truth is — you don’t know. You don’t know if a few superstars are carrying the weight of a handful of slackers. You don’t know if someone is putting 50% more billable time on jobs than the estimate calls for. You don’t know if you’re over-servicing clients or if one of your employees is struggling with some aspect of their job. You are in the dark. Timesheets illuminate what’s really going on in your business. Marketing Agency Insider asked me to write an article about timesheets, how to get your squad to do them and how important they are to the success of your agency. I don’t want hate mail but I would love to hear your thoughts. Be gentle — remember, I am just the messenger! If you’d like a healthier, heartier bottom line — timesheets are not optional.
Before the recession (we when utter that phrase, I suspect we look like old men in overalls, smoking a corncob pipe and rocking on our porches but...) there were many agency owners who swore that they would never work with outside contractors. They believed that the quality and integrity of their work relied on having all of the work done by employees that toiled under their roof. Today -- I know very few agencies who still cling to that belief. Most agencies today have a stable of contractors that help them augment their offerings and skill sets. (Not to mention remote employees, etc.) The truth is, and our research shows this, that when an agency of 10 or 20 or 50 employees calls themselves a "full-service, integrated agency" their prospects do not believe them. The prospects know how complicated and specialized marketing has become and they know that it's pretty challenging to have every discipline under our roof and to deliver against all of those needs at the highest levels. The great news is -- there are plenty of freelancers, strategic partners, and solopreneurs that we can hire to help us serve clients better. The rub is when we walk the thin line of are they really an employee or are they a contractor. Should they legally be getting a W2 or a 1099 (in the US) from you at the end of the year? Independent contractors are generally outside the coverage of various laws that apply to the employer-employee relationship. Which means that it's easy to get into trouble if you do this wrong. This is especially important when it comes to issues like pensions and retirement accounts, workers compensation, and wage and hour [...]
When I started my own agency is 1995 I was about 30 and the perfect combination of arrogant and ignorant. “How hard could running an agency be? If you knocked it out of the park for your clients and delivered results, everything fell into place, right?” As you might imagine, that blissfully ignorant attitude got a very fast course correction. I learned very quickly that being an agency person and running an agency were two very different things and I’d better learn how to run a business if I wanted to survive. One of the truths that quickly became apparent was that whether you are a one-man-band or have 500 employees, the numbers matter. Most of you are probably tracking the basics like gross billings and hopefully AGI. I’ve previously talked about the AGI ratios and how that money should be divided amongst your people expenses, overhead and profit. If you’re not monitoring those — get on it and get on it now. But those metrics are not enough. There are some other indicators that will tell you very quickly how healthy your agency is/isn’t and what you need to do to get back on track. An article I wrote on this topic for Hubspot’s blog back in 2016 is as relevant today as it was three years ago. In that article, I identified 5 overlooked metrics that every agency owner should be monitoring. By the way, you shouldn’t be the only one watching these metrics. Your Account Execs should play a role too. At our AE boot camps, we help your AEs understand how they can help the agency get stronger, more profitable and understand what you need from them every day. We’ve got [...]
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 [...]