As an agency owner, there’s one thing you learn quickly: It’s not necessarily how much money you make, it’s how much money you keep. And much of that has to do with having a tax strategy that works for you, your family and your agency.  

“The money that matters most is the money you get to keep and spend,” says my guest Jason Blumer. Jason is a virtual CPA who specializes in working with agencies. He challenges his clients to grow their agencies while at the same time keeping more of the money they make.

From tax strategies to employment benefit plans to the metrics that matter, Jason touches on all aspects of an agency’s financial life and some best practices for protecting what you’ve worked so hard to earn.

Join Jason and I as we dig deep into small business and agency finances with:

  • How Jason and his team got into the agency niche
  • Mistakes agencies and agency owners make regularly
  • Why going virtual doesn’t automatically save your agency money
  • How to legally save your agency money in taxes in ways that make sense for your agency
  • How to manage small business finances at your agency
  • Employment benefit plans which benefit agency owners
  • P&L and AGI numbers to know
  • Why you shouldn’t be struggling to make payroll if you have a strong value proposition
  • Why being a successful creative director doesn’t mean you should open your own agency
  • Why you need to be willing to sacrifice services, clients, and your team
  • How to know whether the metrics that you’re tracking are worth tracking
  • Things most if not all agencies should track
  • Why you should outsource your accounting
  • Jason’s recommended resources

Jason Blumer is the Chief Innovative Officer of his firm, Blumer & Associates, CPAs. The firm was one of the first to move from a traditional office to a virtual environment, where they serve digital, marketing, and design agencies. He focuses heavily on business coaching and consulting, while his team meets the technical and compliance needs of the customer.

Jason also founded the Thriveal CPA Network in 2010 as a way to help CPA firm owners connect. Since that time, Thriveal has helped many firms grow by providing an online community, coaching services, webinars, and live events.

Jason is the host of two podcasts, the Thrivecast for the CPA community and The Businessology Show for the creative community. He speaks and writes frequently for CPAs and design agencies, his firm’s chosen niche. He has been honored as one of the 40 under 40 in the profession (CPA Practice Advisor) as well as one of the Top 100 Most Influential People in Accounting (Accounting Today). Jason loves to watch documentaries on just about anything and is working on his personal bests in Crossfit several times a week. He lives in Greenville, SC with his wife and their three daughters.

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:

Table of Contents (Jump Straight to It!)

  1. How Jason Specialized His Firm
  2. When an Agency Should Hire a Full Time Bookkeeper
  3. The Tax Strategies that Will Make Your Agency More Profitable
  4. What a Healthy Cash Flow Should Look Like in a Small Business   
  5. Jason’s Advice on Running a Small Business & Being an Entrepreneur
  6. How to Manage Small Business Finances in the Agency Space
  7. The Financial Metrics Agency Owners Should Be Paying Attention To
  8. How to Better Understand Your Small Business Finances

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 money to the bottom line. Bringing his 25 plus years of expertise as both an agency owner and agency consultant to you, please welcome your host, Drew McLellan.

Drew McLellan: Hey everybody, Drew McLellan here with another episode of Build a Better Agency. One of the things that I talk to agency owners all the time about are all things financial tied to running their business better. That’s why I think you’re really going to enjoy today’s guest. Jason Blumer is the chief innovative officer of his firm Blumer and Associates and they are CPAs. The firm was one of the first to move from a traditional office to a virtual environment which many agencies are doing as well. Jason’s firm serves digital marketing and design agencies so they specialize in that kind of clientele. We’re going to dig deep into the finances of agency life. He focuses heavily on business coaching and consulting, his team also meets the technical and compliance needs of his customers.

He’s also formed a group called Thrival CPA network, he did that in 2010 to bring CPA firm owners together to connect and build their businesses so not unlike AMI does for agencies, he’s doing that in the CPA world. He helps those firms grow, and providing community coaching services, webinars, and all kinds of live events. He’s the hosts of two podcasts, one unless you’re really a numbers geek may not be for you, it’s for the CPA community but you will all love his podcast called the Businessology show. You can find that at, b-u-s-I-n-e-s-s-o-l-o-g-y dot biz, where he talks about how to manage finances better inside your business and all other things that relate to you agency owners, so you’re going to love that.

Jason has gotten a bunch of different awards and honors as you might suspect from someone who has already done all these things. He is one of 40 under 40 in his profession from the CPA practice advisors. He’s one of the top 100 most influential people in accounting, we’ll have to talk about what that means, from the folks at Accounting Today. He also in his spare time loves to watch documentaries and hang out with his wife and their three daughters and he’s a Crossfit guy, so we’ll probably get into a little bit of that as well.

Jason, welcome to the podcast.

Jason Blumer: Wow. Drew, man, that was an awesome intro, thanks for having me man, I’m pretty pumped.

Drew McLellan: You sound pretty good don’t you?

Jason Blumer: Yeah, I mean I didn’t know I was that awesome.

Drew McLellan: Now we just have to deliver on it my friend.

Jason Blumer: I know. Well I will try my best, so I’m going to give the best content I have.


How Jason Specialized His Firm

Drew McLellan: I have no doubt. So when you were thinking about specializing your firm and focusing on a niche, what made you decide on the agency community?

Jason Blumer: You know I think a lot of time niches find people, and I think that’s what happened to me, I didn’t know it at the time. We were a generalist type firm serving anybody, and then we started getting some agencies and this is when we had an office. We went virtual over four and a half years ago. We had an office but we were getting some agencies that were on the other side of the country, so we’re in South Carolina and we were getting agencies on the other side of the country and then they started referring other people that were in other parts of the country and I thought “Well, apparently they don’t care that I’m going to drive up and give them their tax return. I wonder if I could do this in a virtual way” I decided that I would give it a try. I picked a date two years out that I would close my lease on my office, shut it down, and start moving towards a niche which took me about two or three years to fully commit to and get invested in and be found in that community and we’ve just been doing it ever since. That’s kind of how we did it.

Drew McLellan: When you start working with an agency, what are some of the common mistakes you see agencies making when it comes to their finances?

Jason Blumer: Oh my gosh. I think, well a lot of these probably apply to any small business owner, so we may work with agencies between two and five million in revenue, so we’re working with small people, typically not the big guys. I think a lot of times, they do what a lot of small business owners do. The owners fail to move themselves out of the details, sometimes that creative and technical service that they started the agency doing. They don’t realize they need to move away from that over time. They don’t invest funds in a strategic financial partner, like us. We try to convince them that though there is a dollar amount that you have to invest to have us as your partner, it’s probably also, there’s some savings related to what you’re spending, because with any small business, you’re thinking, “What do you not have to go through because you have a partner watching out for you?” A lot of times, they fail to make investments early on in a coach or consultant, and keeping their financial platforms steady and stable.

Then just generally, since we consult and coach with agencies, we find them being fearful, really. I don’t know, I think the creative industries are fearful of actually making very strong, definitive decisions about growth, moving in very specific directions. They’re just fearful of, “Will it work?” So they just have what I call “accidental growth strategies”, where they grow into some model and they don’t realize how they even got there. Those are just a few of the many common things we see them doing as they’re running businesses.

Drew McLellan: As you are, I would assume that most people come to you because something’s on fire. Either they have a tax situation or something has happened. What is typically the impetus to an agency coming to you and saying, “Okay, I’m waving the white flag. I give up. I need some help.”

Jason Blumer: You know, actually, we’ve tried to structure our value proposition in a way that says, “If stuff’s on fire, we don’t want to serve you.” It’s kind of the opposite. The reason we’ve found that to be true is because people who have businesses that are on fire typically don’t have the funds to invest in that kind of putting out fire issue. The people we really love to work with are people who have a growing business, that really go, “You know what, my CPA is just not there. They’re not at the level that I need a partner to be at.” We find a lot of agencies find us, and they’re like, “You’re my next step up. You’re one of the investments I know I’ve needed to make, and we’re growing. We have some money in the bank, and I’m overwhelmed as an owner, and it’s time for us to step up.”

We want them to see that. We want them to see us as a strategic financial step up, to challenge them and grow. In fact, on our website,, if you go to the “new client” button, this is the form we have them fill out before they become a new client. We say, “This is the persona of customers that we’re best for. Please click all the boxes that apply to you.” There’s about five or six boxes, and one of them says, “I have no prior messes that you need to clean up.” They have to attest to the fact that they are not a mess, because we’re not good at fixing messes. We’re not structured that way, so we have to weed them out.


When an Agency Should Hire a Full-Time Bookkeeper

Drew McLellan: How does an agency assess whether or not they’re ready for … Most agencies, as you know, they might have somebody in house who’s doing their books day in and day out, doing their billing and accounts payable and accounts receivable, and odds are, they’re doing it in QuickBooks, or if they’re a little bigger, they might be doing it in a Workamajig or Advantage or Function Fox or one of those sort of things. Then they have a CPA who does their taxes. How does an agency know when they’re ready for a more sophisticated relationship than that?

Jason Blumer: I think typically when an agency has grown to a certain size, the owner may have made some strategic decisions to move themselves out of some of the service to the client. They’re able to commit to growth and selling, which is a part of what the owner has to do. I think what’s happening is the bookkeeper’s not feeding them reporting and metrics that gives them any kind of intelligence in running their business, and maybe they’re at a level that they’re in groups like an AMI or something like that, or an owner’s summit or something like that, and they’re like, “Hey, other people have some kind of intelligence I don’t have access to,” and they find that a bookkeeper internally is really somebody they still have to manage. Bookkeepers are okay, but an internal bookkeeper is just going to really keep transactions cleared up. They’re not going to be proactive and start feeding them any kind of strategy or going over the financials with them in any kind of strategic way. I think they just don’t have reporting or metrics that are driving any kind of behavior, and they start to see that as very important.

Drew McLellan: Yeah. What kind of reports should an agency owner be looking at on a regular basis?

Jason Blumer: Part of our philosophy as a firm is we really try to keep owners out of immense amount of detail. We really believe that strategic decisions to grow companies are made at higher levels. When they’re diving deep into the financials we know sometimes that can get them out of balance. We want to give them financials that are summarized in some way, so we want some big summaries of occupancy and rent, labor line items, paid to the owner line items, cost to goods sections like contractors and cost of service to their clients and things like that. A profit loss statement is a key, you need to be looking at that on a monthly basis if you can. I like it to be in some kind of summarized format so it’s kind of scaled down so the owner’s not getting distracted by a lot of details.

We don’t typically tell them to look at a balance sheet but that also, looking at their cash flow is a key. What we see a lot of our smaller agencies, we serve the smaller agencies, between two and five million in revenue, is they typically have some kind of project tracking spreadsheet. We see a lot of them do off accounting system tracking, through some kind of spreadsheet and that’s related to, especially those project related clients where they’re getting projects of money down 20 percent later, 30 percent at the end, they’re trying to track when that cash is going to be hitting their books and they also align it somehow with project milestones and things like that. That kind of reporting is helpful, we do have tools that we can hook into an accounting system that do a little bit of prediction forward. I would say probably the two keys are going to be some kind of historical profit based reflection of how they’ve done, and then some kind of looking forward, some kind of strategic aspect of what do I think my cash is going to be doing in the near future are both really important.

Drew McLellan: You mentioned occupancy and rent, talk a little bit about that.

Jason Blumer: Occupancy and rent. Obviously that has a lot to do with the strategy and culture of a company you’re building. I think a lot of small businesses just default to a lot of different strategies.  They’ll default to going and getting a bigger office because that’s what someone else has done or I’m going to close my office because somebody else did that and that sounds really cool and I like working from home, but those are really big cultural decisions that you’re making.

Occupancy and rent thing, there’s really no strategy to whether it’s there or not.  It’s really, is the leader able to lead a virtual team? Because that’s really hard to do. Is a leader best able to lead a team in person live, so maybe you need an office? I don’t know, I think often it’s true that people might want to go virtual to save money on the occupancy and rent but then they find themselves incurring other costs in other ways. They figure out their team that was good in person is actually a poor team in a virtual setting so now they have a lot of costs in rehiring, retraining.  So they blow all that occupancy in rent money that they save by going virtual because they screwed up hiring. There’s just a lot of strategy in that line item.  It has a lot to do with what kind of leader are you and who do you want to become in three years and why.

Drew McLellan: I think the other thing too when I think of occupancy and rent, on the flip side too do you buy your building in a separate LLC, do you become your own landlord, and is that part of your financial strategy?

Jason Blumer: So that, I see what you’re saying, that definitely can become a good tax strategy. We just got a client in Boston and they have that strategy too. They said, okay we’re spending money on rent, they’re not a virtual agency, so they’re going to pay rent to somebody. They had a condo so they upfitted it to be their office.  That is a good strategy. If you’re going to pay rent anyway, and you’re going to pay that rent to yourself, you can actually lower your salary a little bit and pay yourself more rent and you just saved some self-employment tax by playing around with that balance a little bit. That’s a great tax strategy.

Drew McLellan: And you’re building up an asset?

Jason Blumer: That’s right and you’re building up an asset. Just know that you have an asset that’s not liquid, it’s not anything that’s going to be of quick cash to you so just know, whatever you buy it with you can support that debt or you have that cash for the down payment. You just gotta be willing to get rid of that money and pour it into an asset. That’s going to be a long term commitment.


The Tax Strategies that Will Make Your Agency More Profitable

Drew McLellan: We just touched on the whole idea of tax strategy, and I would guess that a lot of clients come to you looking for, a lot of agency owners really feel like for every dollar they make it seems like they spend three dollars in taxes. They feel like they’re kind of on a hamster wheel. The more they earn the more they pay and it doesn’t really feel like at the end of the day they end up with much in their pocket. What are some of the tax strategies that you talk to your clients about?

Jason Blumer: Again, that has a lot to do with some philosophies that we believe, and I think … just some basics, let me say that service-based businesses, Drew, you know all this, service-based businesses, it’s just harder to come up with some really robust, big tax strategies because it’s just labor. There’s not a lot of things you can buy or purchase up front that are things that will save you a lot of money, but some basics are … sometimes we find there are some very profitable partnerships that should become S corporations, and you should do that at strategic times, and depending on the size of your company and your profitability you can save a lot of money. We do that a lot. We’re actually doing that with an agency right now that’s come to us, and they are very profitable, and they’re just paying through the nose in taxes because they’re this partnership structure when they really should have been an S-corp structure.

That applies a little bit of technicality and some complexity to managing your business, so you kind of need the CPA more involved managing distribution to salary balances and what’s a reasonable wage, and the CPA firm should be helping you know what that is, but if you pay somebody to do that, oftentimes in the first year and all subsequent years, the money they can save in taxes is more than what our fee is in a year.

Drew McLellan: Sure, sure.

Jason Blumer: Just an S-corp, just selecting the S-corp is a good strategy. If people are listening now, they’re like, “Cool, I’ll go do that by myself,” that’s not a good idea. Obviously, I would want them to hire a firm like ours, but hire some firm, because there’s a lot of management that you have to do, and keep it up throughout the year and keep checking that distribution to wage strategy. We do a little educational class to teach them how they’re saving money, how to calculate a strategic wage and how it’s reasonable, but also it’s not high enough so that you’re making the right amount of money.

Then some other big things that you can do, that service-based companies do, is employment benefit plans. Those can save, if you want to give some money to the employees, that can help them, but you can also structure employee benefit plans that only really help the owner. You do have to put some cash in investments, but it can save…

Drew McLellan: Tell us a little bit more about that. Define for people what an employment benefit plan is, and what that would look like as a part of our conversation on how to manage small business finances.

Jason Blumer: Yeah, so basically, if you’re a company that has grown and you have some excess cash, and you would rather spend some money on your retirement instead of giving it to the IRS, we like to tell people, “You’ve got this excess money, that’s because you have profit. You’re going to give it to somebody. You’re going to give it to the IRS, or you could give it to somebody else.” So sometimes, we can say, “Why not go ahead and give it to a retirement plan like a 401K plan that’s really just structured to benefit the owners?” Maybe you can write a 20 or even 30,000 dollar check at the end of the year. That goes into the owner’s retirement for the future, but it also becomes an expense on the books of the company, and so it lowers your profit significantly, and can save you whatever your tax rate is, 20, 30 percent in taxes, just by writing that check. It is cash that left your books, but it went to your retirement account, so starting a 401K is something you can do.

Drew McLellan: I think most agencies listening, have, I suspect, an IRA or 401K or something inside their shop.

Jason Blumer: Yeah, and then some do health insurance. Again, the thing about tax strategies which you have to balance, is they’re often cash strategies, too. You might have this tax strategy that’s going to save you a lot of money, but you also have to get rid of 30 grand in cash. I don’t know, some people don’t want to do that. You need to have a good three months’ worth of savings, probably, to just remain healthy.

There’s this balance, you know, of saving money. Sometimes, I might say, “Well, I’ll just buy a Range Rover.” Maybe that’ll save you some tax money, but you’ve also brought a depreciating asset. You just have to know if that’s what you want to do with your cash, to save the tax. Saving taxes, we say, is not often the only goal. Sometimes, you know, rich people pay a lot in taxes. I would rather, you know, focus on building wealth. Sometimes we see agencies who are paying more and more tax are actually very healthy, because they’re making more and more money, and I kind of like that strategy better than just spending money to save taxes.

Drew McLellan: Yeah. At a certain point in time, you can’t … you know, a lot of agencies try to spend down their cash at the end of the year, but if you don’t need the stuff, then what’s the point?

Jason Blumer: Right, exactly. It’s not often the best strategy just to spend money to save taxes.


What a Healthy Cash Flow Should Look Like in a Small Business

Drew McLellan: Yeah. Okay, so an owner should be looking at their PNL every month and they should be looking at cash flow, and they should be looking at projections. What does a healthy cash flow look like? Are there ratios that owners should be watching for or keeping an eye on?

Jason Blumer: Yeah, and Drew, this is stuff I know you guys know at Agency Management Institute, too. Different, depending on the types of agencies we serve. If we tell them, “Listen, if you’re doing a 15% bottom line profit margin, we consider that healthy.” This is not a growth margin, which is revenue minus your cost of goods sold. I’m talking about the bottom line number. If you’re in a 15, 20% margin, we’d consider you really, really healthy. We think a minimum goal should at least be a 10% margin.

Drew McLellan: Yeah.

Jason Blumer: Then the owner should be taking 20, 25 out, percent of that, then labor sometimes is … it just totally depends, could be in the 40% range, because that’s really your only cost in a service-based business. Those are some basic metrics we look at to assess the health of an agency. Are those about in line with what you guys teach in AMI, or are you different?

Drew McLellan: Yeah, so we talk about that the only number that really matters in an agency is adjusted gross income, that your gross billings and your cost of goods are what they are, and yes, you want to manage your cost of goods as best you can, but the money that matters is the money you get to keep and spend. You’ve got your adjusted gross income, and then our ideal ratios are that 55% of your adjusted gross income is spent on people, so loaded salaries. 25% is overhead, and 20% is profit.

Jason Blumer: Nice, I like it. Good stuff.

Drew McLellan: Yeah. How does somebody know, if they’re looking at their cash flow report, what would be a danger sign, or what would be a red flag that there’s a problem?

Jason Blumer: Yeah, that’s a good question. A lot of times, we look at the receivables strategy a lot of times, because we can actually see that on the books, a cash flow strategy might show that they’re making a good healthy margin, when really, what’s happening is receivables coming in currently are covering for losses in jobs they’re incurring. If we see somebody with some really long or big AR invoices outstanding, that’s an issue, because it’s not helping us rightly judge whether they’re profitable on a month-to-month basis. If I just look at December’s profit and loss statement, but the AR may be 60, 90 days out, whatever cash is on that December profit and loss statement might be cash that really was spent on projects a couple of months ago. I want to see a pretty healthy AR collection, or even a more strategic, healthier way to get money down and the way you bring in percentages on the projects. Those are some really important things.

But of course, you know, just some basic things. If you’re struggling to make payroll, something’s broken. It means there’s not enough value recognition in the marketplace to pay you a wage that leaves money left over, that leaves 20% leftover. That’s an issue. You need to take a hard look at that if you’re not able to make profit on a cash basis scenario.

Drew McLellan: As you work with your agency owners as clients, what are some of the things that you find from an educational point of view? You and I talked about this, I think when I was on your podcast not too long ago. I think a lot of agency owners are accidental business owners, that they either were downsized or they left a shop or they hung up a shingle, they were freelancing, and next thing they knew, they’ve got 10 employees or 20 employees and 30 employees and all of a sudden they’re going, “Oh shoot, now I have to run a business.”

Jason Blumer: That’s right.


Jason’s Advice on Running a Small Business & Being an Entrepreneur

Drew McLellan: What are some of the educational holes that you find when you start to work with an agency? What are some of the things that they need to know that they don’t really understand or know?

Jason Blumer: A lot of that has to do with running a business, just what it means to be an entrepreneur. It’s a hard lifestyle, and I want to help them understand, you’ve chosen to be an entrepreneur, and there’s something that comes with that choice. It’s not for everybody, and so you don’t necessarily need to go run your own business just because you were the creative director somewhere, at a larger agency. That does not have anything to do with you being a good business owner, because if you can grow an agency to some major size, you’re ultimately not going to be doing creative director type work anyway. You’re going to be the CEO, leading a company, and that’s totally different skills than in the creative aspects of what you’re doing.

We just want them to understand that they’re an entrepreneur now. That’s a different role. We want to talk to them about value. We want to help them make hard choices, which when they come to us and we start doing coaching, they’re probably not making a lot of the hard decisions of, you probably don’t have some of the right team in your agency. You need to be willing to let some of them go. You most certainly probably don’t have the right clients in your agency. Typically, if they haven’t had any kind of accountability through business coaching, they’ve overlooked some of those things, and they often don’t understand, “Why am I overwhelmed? Why am I struggling?” A lot of times, we see pruning is an initial thing to do to jump-start growth, and it’s so counterintuitive to an entrepreneur that pruning, often, is what leads to growth. Not always, but it is a way to sometimes jump-start or fix a company that they’ve run the wrong way or haven’t been strategic about. We want to help them think about being better business owners.

Drew McLellan: Okay, I’m going to but a pin in that for a second because I want to talk a little more about this pruning idea. First let’s take a quick break, and then we’re going to be right back.

I hope you’re finding this content really helpful. I just wanted to take a quick pause and remind you that on top of the podcast, we also do a lot of live workshops for agency owners, agency leaders and account service staff. If you’re interested in the schedule, check it out at Let’s get back to the show.

Okay we are back with my guest Jason Blumer and we were just talking about that it’s counter intuitive for many agency owners to think about pruning their business to grow their business. Can you articulate a little bit more of what you mean by that?

Jason Blumer: I always run into three sacrifices that many entrepreneurs need to make in a service based business that they’re often not willing to make if they’re trying to grow or mature or change their business model in some way.  These three sacrifices are things they often fight. One of those is be willing to sacrifice services, sometimes when you’re maturing and growing and changing, you find that services you offered in the past are not ones you should be offering in the future because they don’t have a high value, profitability to them so be willing to cut things that you should not be doing anymore as an agency.

Drew McLellan: That have become commoditized, for example.

Jason Blumer: That’s right. So stop doing things that don’t bring a lot of value to your agency or offer you a lot of growth. That’s one sacrifice that I have to fight people on often times. The second sacrifice that people may fight me on is be willing to sacrifice clients that are no longer right for you. Agency owners and small business owners in general feel really bad about outgrowing their clients. I think that’s a good sign. If you go to AMI or you go to conferences you learn things, you come back and change, you’re inevitably going to outgrow your clients. Be willing to prune the ones that are wrong. Not mash, you don’t go fire them all, but you can strategically move them out as you gain more clients that are more strategic.

That’s the second sacrifice that I feel they need to make and the third one is the hardest, but and you probably know what it is, but be willing to sacrifice your team if that’s necessary for the growth of the company, often times the owner could possibly outgrow also their team. They find they’re high value now, they offer high value services, a team has to be able to offer that high value service and support those types of clients at those high value prices. Some of those lower basic teams, those junior level people, you may outgrow them, they may not be right. Just be willing to make those hard sacrifices, and you have to be careful with all three of those sacrifices, but those are all strategies of what pruning can do to amazingly jumpstart and free up and focus and take away distraction for an agency owner to really grow and build some huge profit.

Drew McLellan: Yeah, you know, I was just with an agency that had incredible growth over the last couple years and they have a couple employees that are not junior level employees, they’re quite senior level employees and they were great for the agency when there were 15 people, but now that the agency has gotten more sophisticated and they’re about 45 people those employees’ skills and attitude and vision have not grown with the agency and to your point, they were a great employee at a time and the owner really wrestles. I think this is why you get pushback because there’s a humanity issue too. Here’s somebody who’s been loyal to the agency and been with us for a long time but the truth of the matter is they don’t bring the skills or the attitude that the agency today needs and so you’ve got to figure out a humane way to consult them out. I think you give them the opportunity to grow but if they’re not willing to grow or they don’t have the capacity to grow you have to do what’s best for your business. A lot of agency owners think of their employees as family, and they talk about that it’s family and at a certain point in time you can’t run your business like a family.

Jason Blumer: A lot of people have a rule, they won’t hire family, and we won’t either. Because we’ve hired people close to us that weren’t family, but were close to our family, and removing them from our team list was awful. It just affected your parents, your friends, and that’s like, I’m not getting into that anymore. I think those are just some hard entrepreneurial lessons that creative people when they learn, I’m a business owner now and it requires me to make hard strategic decisions that can change and really send my agency to a different level of growth. As you know, there are ceilings at different levels of growth that agencies and a lot of businesses especially service based businesses run into and you’ve got to break through these ceilings at periodic times and sometimes these pruning efforts are the things that break you through the ceiling, relieve you and really push you to a new level and act really like a different type CEO.


How to Manage Small Business Finances in the Agency Space

Drew McLellan: Yeah. What other lessons do you find that agency owners really need to learn that they have not embraced or even heard of before you start working with them? And can you share your thoughts on how to manage small business finances, for our agency owner listeners?

Jason Blumer: There’s one I’m dealing with now, and I don’t know Drew you might even disagree with me on this but I’m really super focused on helping an entrepreneur stay high level to grow their business. I know there’s probably some good amount of information in profitability and client profitability tracking and there’s probably better systems that do it then off the shelve cloud based accounting systems, but we see some agency owners get out of balance, really just searching for such immense amounts of details to try to give themselves a really true job profitability tracking. Sometimes I find them out of balance and I say what are you going to do with the information you ultimately find for all the administrative hours you spend trying to create this accurate job profitability statement, which in the end I question is it really truly accurate, did you really allocate all the overhead you should, did you spread the toilet paper costs among all clients, did you do that right, did you bill it right.

I’m bumping into that recently and I’m really struggling to balance, because I know there’s value in that knowledge but I always say track what matters. If you’re going to track something make sure it also informs your behavior and how you price in the future too, and if it’s not please question why you’re spending so much time on really allocating so many details that may or may not really allow you to stick your head, take your head out of the sand and actually look to the future and be strategic. Those details are something I want to help people balance and I’m a big proponent of teaching people and helping people to become pricers instead of billers. I know sometimes the model works on billing to, but we work with a lot of people to help them learn how to price, the art of pricing, how hard it is. It’s really not an easy thing, but if they want to make a commitment to do value pricing, how does that change their business model?

Basically, I just want these creative entrepreneurs to really question the past. Why they’ve done it that way. We often find them just copying the last agency they left, and that’s not how to be strategic. Just questioning, “Why am I doing it this way? Is there a better way?” And just committing to some type of consulting or coaching from a third party, outside, to help step in and look at their agency in a whole new way, and challenge them to grow and become a different type entrepreneur. That’s what kind of value we hope to add.

Drew McLellan: Yeah, agencies have got to get away from the bill by the hour model, and many of them have. Many of them have gone to at least project pricing or some variation of value pricing, but we cannot be profitable and make money when we bill by the hour.

Jason Blumer: No. It’s just not a really smart business decision. I think it’s just an old way everybody did things. We’re still vetting that out of fashion, you know?

Drew McLellan: Yeah.

Jason Blumer: It’s hard, when you make that change. It is a very disruptive thing to a business model. I mean, it just changes everything. They’ll often feel lost without timesheets, some of them, and I understand that, so there’s healthy way to transition to a pricing firm, but you can do it, with help.

Drew McLellan: Well, and we still tell our agencies, they still need to do timesheets. You still need to manage your assets, you need to know how many hours they’re spending that are billable and all that sort of stuff so you can manage your workforce.  It’s just you’re not billing based on the timesheet.

Jason Blumer: That’s right, and what you’ve done is you’ve taught them to separate resource management, resource planning, and project management is a different thing than creating your invoices. Those are two different things, but you know, the profession has combined them, and we’re kind of uncoupling those. Pricing is totally based upon value, but tracking your time can be a resource management, project management, internal issue, and that’s fine, but don’t go turn that into a price that you then give a client to pay you.


The Financial Metrics Agency Owners Should Be Paying Attention To

Drew McLellan: Absolutely. Hey, what metrics should an agency owner be watching? If an agency owner looks at what, can they tell that their business is financially healthy?

Jason Blumer: It’s probably the metrics we talked about earlier. It’s really the profitability of their company. I think, you know, how much savings they have in the bank, that’s a metric. Like, “Do I have three months’ worth of savings in the bank, three months’ worth of average expenses in the bank?” Maybe that’s a good metric. Maybe somebody’s a little more fearful and they want four or five months, and that’s fine. Just know that you’re tying up more resources that you can invest in a team to grow, but the number of months of average savings in the bank. Your profitability metrics, your labor metrics are really good. That’s basically your total labor divided by your revenue, that’ll give you your labor percentage that you’re spending, and you and I have said, it’s between 40, 50, 55% that you can spend on labor. Those are some of the main keys that I would look at.

Drew McLellan: So as you work with an agency over time, what is your goal for them in terms of being able to … I guess what I’m getting to is how much of the financial management should sit inside of an agency, and how much of it should be shared with a partner like you, or somebody else like you?

Jason Blumer: Yeah, that is a … man, that is a good question. Probably that would be decisions we would make with an agency, because some are going to be more fearful. They want more insight, they want more details. Some are more visionary, they don’t care. They’re more trusting. Depending on what kind of personality that owner and that leader is, we would say … I guess generally, we would say don’t build an accounting department inside your agency if you can help it. I know you’re going to need an office manager or studio manager or whatever. Administrative person that may track some of your details internally, because they’re closer to you, they can ask you what that Amex expenditure is for easier than us.

But if you can outsource your accounting department for the same price that you may pay an office manager, you know, 50 grand. You could pay us, and you get a team. You get a CPA, and we’re managing the support of the bookkeeper that’s working with the CPA. Then you get that second quality assurance or review on all tax work, then you get me, which I do some consulting and coaching with those agency owners. Sometimes building your own accounting department internally is too expensive, and then it’s this accounting person you have to manage, and they’re typically a lower level person. What that means is, they can’t think strategically, or they’re not paid to. That’s not their job, and so they’re going to harass you with, “Where do I code this?” You just don’t necessarily need to be asked those questions. Let us do that, and maybe our bookkeeper can ask our CPA, “Where do you think I should code this?”, and we’re going to know, so we can give you an accurate set of financials.

There’s a balance, and I think it depends on what people want. Certainly, the bigger you are, you’re definitely going to need some kind of financial professional internal to the agency, but between that two and three and four million dollar range, I think you could, it could be a healthy thing to outsource that to a firm like ours, that only works with agencies.

Drew McLellan: I think the challenge for a lot of small agencies is they have a single financial person in the office. That puts a lot of pressure on that one person, to be a jack of all trades, number one, and number two, if something happens to that person or they leave, that’s a lot of institutional knowledge that walks right out the door. For a lot of agency owners, they don’t love the finances. They don’t love that part of the business, that’s not why they started an agency, was so that they could go elbow-deep into financial reports and numbers.

They tend to just let their person manage all of it, and when things are good and when that person has stuck around for a while, that’s fine, but there is an implied risk in that model as well.

Jason Blumer: That’s true. A lot of times, you just have to balance that risk and what that entrepreneur, that creative entrepreneur, is willing to bear. How much they want to give up, how much they want to keep, and how fast they want to give it up. They may start with us in a small way in some compliance work, where we’ll do tax planning, tax preparation, and just review the books for their accountant or something, and then fully move into letting us manage all of it. It might take a year or two, and that’s a fine way we can work with people, too.

Drew McLellan: Yeah. When you pick up the phone and there’s an agency owner on the other line, what kind of questions are they asking you? What’s on their mind in terms of their finances and the financial health of their agency, and taxes? What are the burning questions of the day?

Jason Blumer: They typically just don’t have insight. They don’t know, they don’t know anything. Not that they don’t know anything, but they don’t know any financial picture. They may have an accountant, they just don’t know anything financial that will help them change in any way, so they’re typically looking to us to manage all of that, and start giving them some kind of insight. It’s true almost with any client that comes to a CPA firm, they typically ask for a lot of compliance type needs. All you know to do, when you call a new CPA, is go, “Will you do my taxes and accounting?” When we’re a different kind of firm. We want to offer different levels of value and coaching and consulting and insight, so we have to help them ask for their wants, not only ask for their needs. They know to ask for taxes, so we have to ask questions that tap into, what do they want?

We have to ask bigger questions like, what are you becoming? What do you hope to be in three years? Why haven’t you been able to do it on your own yet? Why do you think we’re the key to get you what you think you need? These bigger questions are things we need to ask clients to untap their brain, or at least move their brain into a new place, to start thinking strategically, or even ask them questions they can’t yet answer, to go, “Cool. At least you guys have helped me realize there are some unanswered questions, and maybe you’re the firm that can help me answer those. That’s just how we do value conversations and onboarding, so that we can find out, what do you want? What do you want to become? Then maybe we can price those things effectively, to help them become something new.


How to Better Understand Your Small Business Finances

Drew McLellan: Yeah. If you were going to offer up some financial advice to agency owners for how to manage small business finances and actually understand them, I’m mindful of our time, and we need to start wrapping up. So if an agency owner has been listening and is feeling a little out of control with their finances, short of, “Call me and hire me,” if somebody really does want to dive a little deeper into their finances and have a better … I think a lot of agency owners blissfully go along thinking, “Well, as long as there’s money in the bank I’m good,” and then all of a sudden they get the panicked call from the bookkeeper that says, “I don’t think we can make payroll,” and then everybody goes crazy.

If somebody’s listening to us and feeling like, you know what, I probably don’t know as much as I need to know, are there some resources, books, other podcasts, other things that you would recommend that someone who probably is not, doesn’t have an accounting degree, may or may not be numbers-oriented, how do they begin to understand the financial side of their business better?

Jason Blumer: Yeah. You know, I’m not one to push people to go take a QuickBooks class at a local community college. I don’t want anybody to do that, so the books I’m going to recommend are things like Robert Cialdini’s “Influence”. That’s a decades-old book on how to influence people, and it has a lot to do with selling. Blair Enns, his “Win Without Pitching Manifesto” book you may know. These are really good ways to help you understand what your value is, and what it means to price. Tim Williams’ “Positioning for Professionals” book is just a really good basic strategy book for a service-based business to understand what’s your value. It goes into all kind of value propositions and things that you should be thinking about. These all have financial aspects to them but it’s really not hardcore accounting and stuff, it’s really helping people rethink about what is my value to a marketplace and what does a price look like that’s right. Agencies that are ready to change or that know they need to change. It’s common that we know that they probably need to double their price and that’s something we kind of push them on a little bit if we get into coaching with them.

It’s not that we really believe maybe they need to double their price, it’s that we need to challenge them to figure out could perhaps your value be double in some way to justify your price also being double. Those are just good questions and struggles that I think agency owners should go through, and it is true. Often agencies can double their price. Their prices are just too low for the value that they are, or maybe there’s some hidden or locked-up value that they’re not giving, or that they’re not showing. A lot of times they do things and just throw stuff in, and there’s just so much value out there that they’re bringing to a client. We’re trying to figure out, what should the right price be for that?

Those books, “Influence” by Robert Cialdini, “Win Without Pitching Manifesto” by Blair Enns, “Positioning for Professionals” by Tim Williams, these are great books to start helping you become more of a valuable company.

Drew McLellan: One of the things that I teach agency owners is that they, when they build their estimates, even if they’re not going to bill by the hour, they at some point do some sort of mental calculation, “Oh, it’s going to take us about this long to do this and about that long to do that,” but when they do it, they base that estimate as if everything is going to go exactly right.

Jason Blumer: Right. Never.

Drew McLellan: Which, it never happens, but our estimates are based on a best-case scenario, when they’re never based on a reality, which is something’s going to go wrong, I just don’t know what it is. One of the things that we teach in our workshops is that you need to take whatever estimate you’ve got and multiply it by one point five to start with, just to be able to say, that’s probably a more accurate estimate of what it’s really going to take to get it done. That’s not even taking into account the value of what you’re delivering. That’s just, don’t sell it so short based on this fallacy that everything is going to go according to plan.

Jason Blumer: That’s good. And you know, when you do that, you bump into their fear pretty immediately, don’t you?

Drew McLellan: Right. Oh, absolutely, yeah.

Jason Blumer: This pricing thing is a place where we all have a lot of fear, and that’s just a great place to push agency owners. What fear are you realizing and dealing with, and pricing appropriately. Nothing ever goes according to that timeline you published.

Drew McLellan: Right, right.

Jason Blumer: It just doesn’t work, because clients are involved and they’re humans and they’re messed up and they’re scared too, so you’ve got all kind of dysfunction in this work, from human to human.

Drew McLellan: And yet, this is what we choose to do for a living.

Jason Blumer: I know. What’s wrong with us?

Drew McLellan: I don’t know. Okay, Jason, if folks want to be able to track you down, if they want to learn more about your firm or the work that you do, what is the best place for them to find all things Jason?

Jason Blumer: Yeah. is just a website that just lists all the things that I’m involved in, which is Thriveal on my firm. Probably the best place is BlumerCPAs, I blog very often there. Those blogs are also published on my LinkedIn profile, so I’m a LinkedIn writer, so just find Jason Blumer on LinkedIn. Of course, I’m on Twitter. Mostly I’m just publishing a lot of my content on Twitter, @JasonMBlumer, and those are just great ways to follow me and find me.

Drew McLellan: Great. Thank you so much for spending the time with us and for talking to us about how to build stronger and better and more financially sound agencies. As I say to agency owners, they are taking a huge risk. Sometimes they don’t realize the risks that they’re taking, but they sure as heck should enjoy the reward of that risk.

Jason Blumer: That’s right, yeah. You know, Ron Baker, there’s a book called “Implementing Value Pricing” by Ron Baker. You probably know it, and he says in that book that all profit comes from risk, so yeah. We make profit because we as entrepreneurs take risks, and you certainly have to get the rewards from that work, or you just can’t do it long. It’ll just stress you out if you’re not getting the reward, so I’m thankful, Drew, people like you and AMI are around to help them get that value and realize the rewards from the risks they’re taking.

Drew McLellan: And you as well. It sounds like your firm does that for a lot of agencies, so thanks again for your time, and thanks for sharing your expertise with us today.

Jason Blumer: Thanks so much, Drew, for having me. I really appreciate it.

Drew McLellan: You bet. Okay, guys, that wraps up another episode of Build a Better Agency. As you know, if you need to track me down, easiest thing is just shoot me an email at [email protected] or stop over to the website and leave a comment there. If you have not subscribed yet, and you are finding this content valuable, please go ahead and do that so you do not miss an episode. As always, we are very grateful for ratings and reviews. That’s how other folks find us, and the world about Build a Better Agency gets spread.

With that, I’m going to let you go. I will be back next week with another great guest, and in the meantime, you have a great week and I’ll talk to you soon.

That’s all for this episode of Build a Better Agency on how to manage small business finances as an agency owner. Be sure to visit to learn more about our workshops and other ways we serve small to midsize agencies. While you’re there, sign up for our e-newsletter, grab our free ebook, and check out the blog. Growing a bigger, better agency that makes more money, attracts bigger clients, and doesn’t consume your life is possible, here on Build a Better agency.