Putting systems and processes into your agency with David Jenyns

Speaker 1:

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Bringing his 25-plus years of experience as both an agency owner and agency consultant, please welcome your host, Drew McLellan.

Drew McLellan:

Hey everybody, Drew McLellan here from Agency Management Institute. Welcome to another episode of Build a Better Agency. As you know, not only do I run Agency Management Institute, but I still run my own agency. And as of 2020 we are 25 years old. And so knock on wood, it seems to be working.

I can remember when I started the business, they never said it, but I know my parents thought I was insane for jumping out and starting a business on my own when I had a perfectly good job, but it seems to be working just fine.

And I think probably I was always meant to be a business owner. And I know that because even when I was an employee, I wasn’t awesome at following systems and rules. I kind of wanted to do it my own way. And I was brilliant at the workarounds.

And so today’s topic is particularly interesting to me, because I had to learn this the hard way. And so what we’re going to talk about today is putting systems and processes inside your agency. And I know, I knew this from my own agency, and I certainly have seen it over, and over, and over again with the agencies that we work with, that oftentimes, the biggest barrier to an agency being able to be sustainable and scalable, is you, is the agency owner.

And it’s not because you don’t want it to be sustainable, or scalable, or sellable down the road. But when you stay in the middle of things, and when you allow everyone to do things their own way, so David has a way, and Mary has a way, and [Babet 00:02:27] has a way, and as long as the outcome is fine you’re okay with everybody getting there on their own path, as long as that is the norm for your agency, there is a ceiling for how much you can grow and how much you can scale. And the savior of that is sort of systemizing or putting process around the way the work gets done.

It’s not Babet’s way, but it’s the agency’s way. And everyone inside the agency, including the owner, follows that. And so many years ago in my agency, I realized, I read The E-Myth, I read Traction, I did all of that. I understand that we needed to have sort of an operating system in which we worked.

And of course, the greatest deterrent to making that happen was me, because I of course kept end running around the system, just like I did when I was an employee. And the challenge with that is, of course, that doesn’t work. If the owner doesn’t adopt it, then nobody adopts it.

And so when I learned about David Jennings, who’s my guest today, and what he did with his agency, and he got so good at it with his own agency that he’s now written a book called SYSTEMology that is coming out shortly if you’re listening to things in realtime, where he teaches us exactly how to think through, and build, and implement systems and processes inside our agency, just like he did in his shop. I knew I had to have him on the show, and I knew we had to pick his brain to find out what he knew and how we could adopt it into our shops.

And so I would love to just jump right into the conversation, introduce you to David and ask him all the questions that I know you have, because they’re the same questions that I had as I was sabotaging my own agency’s efforts to systemize. So let’s jump into it.

So David, welcome to the podcast. Thanks for joining us.

David Jennings:

Pleasure. Thank you for the invite.

Drew McLellan:

As I said in my introduction, we’re going to talk about one of the, one of what I think of as the cuss words of agencies, which are process and systems. And you know as an agency owner, and I know as an agency owner, I’ve had my shop for 25 years, that we are just not wired as a general rule, to welcome restrictions and boundaries. That’s just not who we are as people. And yet we all know that after an agency gets to a certain size, if there aren’t normal, ordinary, the way we all do things, and instead David does it his way, and Drew does it his way, and Babet does it her way, that can cause chaos and a loss of profit inside the agency.

Intellectually I think we get it, but I think the actual application of system and process is challenging for a lot of agency owners. One of the reasons why I wanted to have you on the show is because you have seemed to have mastered that. So tell us a little bit about your shop and how you came to the realization that systems and process actually could be to your benefit.

David Jennings:

Well, we run a digital agency in Melbourne Australia called Melbourne SEO Services. And I’ve owned that company for 13 years. And there was, at the beginning, I resisted systems and processes for a good amount of time, even though I was familiar with things like The E-Myth, and Traction, and Scaling Up. There’s plenty of great books that talk about systems and processes, but I always felt like, “Yeah, but a digital agency is a bit different because it’s quite creative, it’s dynamic.” The online landscape changes so frequently, if I write a process, it’s going to very quickly be out of date. And even if I got a system in place, my team members probably won’t follow them because they’re creative people.

So I was carrying a lot of this baggage for years, and it kept me trapped in the agency for a good 10 years. I was very much the center cog in that machine. I was handling all of the issues. I had a small team around me. I still had a team of 10 that were full-time and part-time employees, and then a handful of contractors that we were working with. But the defining moment happened for me is when we fell pregnant with our first child. And I just had that realization that if I kept on going at it the way that I was, I would just never really be present for the kids as they were growing up. I’d be that dad who was always too busy and couldn’t find the time because I was working in the evenings, I was doing the weekends, I was getting up early, really just running that agency life.

That was kind of where that turning point happened where I said, “Well, I’ve got to do something.” And I can see there are agencies out there that are running, where the business owner isn’t running front and center in the machine, and they are able to step in and out of the operations. So I thought, “Well, if it can be done, I’m going to do it.”

That’s when I kind of got started on that journey and that’s really what, I suppose, set the dominoes off.

Drew McLellan:

How many people at that point did you have inside your shop?

David Jennings:

Yeah, so we had 10 team members that were either full-time, I think there was about six of us full-time, four of us part-time. And then we had probably about another five to 10 contractors that we would pick up and work with on Upwork, or just on more of an as-needed basis.

Drew McLellan:

Okay, so you come to this, you have this epiphany, you’ve got to systemize your business, despite your reticence and perhaps your disbelief that it could happen. How did you move from deciding you needed to do it, to actually implementing, beginning to implement it inside your agency? How did you even know what systems and processes you needed to create? And today, what do you believe are the mandatory systems and processes for all agencies, whether they’re traditional, or digital, or whatever they may be?

David Jennings:

Yeah, well I think the first thing that happened is I started to retest a lot of the assumptions that I’d made around systems and processes. Things like systems and processes remove creativity. That the business owner needs to be the person who creates the systems. That I’m going to need a truck load of systems. That I’m going to need some sort of complex solution. Or this needs to have some special software that manages it.

I started to think through this and go, “Well, is that really true?” And I had built up a video-production business along the digital agency. So we started off offering SEO services, then we expanded out to offering paid AdWords and Facebook ads. And something that kept on coming up was, “Can you help us with content?” And then we ended up opening up a second arm of the business called Melbourne Video Production.

Now, I couldn’t turn on a camera if it needed to save my life, or maybe I could turn it on, but I definitely couldn’t use it, and I definitely couldn’t do any editing or anything like that. So that part of the business, that section, it was a strange part of the business, because it was the only part of the business that I didn’t know from the get go, how to hop on the tools. And that actually ended up being the biggest blessing. Because I didn’t know how to hop on the tools, that entire part of the business had to be built without me in it.

I found a videographer who came in, and I worked with him, and I started to take the pieces of the business that … Because he used to run his own freelance business, and when he came on board as an employee I said, “Well, you handle all the operations. You handle chatting with the clients, lining up the shoots, doing the pre-production, production, post-production stuff and let me handle the business side of things.” Because we had the infrastructure in place with the bookkeeper, and the sales team, and the admin and all those sorts of things.

And it was that, I kind of just kept on looking back at that part of the business to see, “Well, what did I do to make that bit work?” Because that almost worked as a silo. And then I started cherry picking out the best bets from that segment, and dragging it across to the other part of the business, and really just started to push myself out, and realized if the delivery of the product or service was dependent on me, then it was never going to scale, and it was broken. So I needed to get very clear on how can I deliver something of value to clients, that I was not involved in that delivery?

And then it started me on this journey, and the first thing that we did to identify those mission-critical things, I developed a method I call the Critical Client Flow, or the CCF. And it really is just a one-pager that you list out from the top, how do you get customers? How do you answer that inquiry? How do you sell them? How do you on-board them? How do you deliver your product or service? And how do you get them to come back?

You literally just map that out. And right there is the first 10 to 15 systems that you start with. And some are going to be in more detail than others, like the operations or the on-boarding might have a lot more steps to it than some of the other ones, like answering a phone call. But you can still start high level. It’s always if something appears too big or too complex, just do an overview system.

What are the main key steps? You don’t have to make everything super granular or detailed like you’d expect the McDonald’s menu to be where they list out line by line exactly how to flip a hamburger. The chances are, and it was the same with us, we had great staff. They could make an average system work really, really well because they were great staff. So I just kind of focused on, even if we just have an average system, and then we get some consistency, that’s infinitely better than no system. And we just kept on getting better and better from there.

Drew McLellan:

So as you were building out the systems, because I can see how an agency could build out the systems, but still leave the owner in the middle of it, so how did you build out a system that, in essence, the work that your company was used to doing meant David was in the middle of it? So now you have to build a system where David doesn’t exist really, in it, right?

David Jennings:

Yeah.

Drew McLellan:

So how did you do that?

David Jennings:

The first step is to think about one primary product that, imagine it is the gateway to your business. If someone has never done work with you before, and what is one of the first products or services that you might offer to them where they get to know you? Now, that product or service, you want to make sure that it has good margin, attracts the right people in, it can be delivered without the business owner. And you go through that thinking, and you just start off with one product first.

Because sometimes if you’re a full-service agency, you’ve got six, or 10, or 20 different products or services that you offer, and they’re all going to keep happening. Your business is kind of already functioning, so just let that keep going, just focus on the one first. Focus on something that you know can be delivered without you and start there. Because what that does is, if you can get to a point where at least something within your business, and if it’s the first product, and if that can be delivered without you, then that becomes a huge amount of power for the business, because they can go out and sell this product. And it almost can then become like a screening process for whether or not you want to work with clients ongoing. At the end of that engagement, whether or not you go ahead and introduce your other products and services.

For our digital agency, one of the first things that we did was actually a web build. We identified the target market of selling websites through to franchisors here in Australia. And we went through and mapped out the process for the way that we do a web build. And that we found was great to start them there before we introduced our paid services, or SEO, or AdWords.

And so we had two things. It was either a web build or an SEO starter pack. They were the two products that we heavily systemized.

As far as to answer question, some other distinctions on how to make sure that the business owner is out of this, and it depends on what team members are around you. Sometimes, just start off systemizing, if you’re really having a challenge to say, “I don’t know if I can get someone to do this creative piece.” Well systemize the heck of everything around that. Everything from the way that the client is on-boarded, to the way that you’re sending out your weekly or monthly reports, to the way that you’re closing out projects, or the way that you’re setting up staging servers. Systemize everything that you can that’s easy, because that least gets it off the plate of the business owner, which then gives them more space. And then their involvement is getting less, and less, and less.

Oftentimes it’s more in the head of the business owner, and you have to break this habit. It’s a bad habit because what’s happened is, the business owner started the business. The business grew to a certain size. And it grew to that size because the business owner was great at doing everything and they would win clients, and they’d solve problems, and whenever staff have an issue, the business owner would step in. But this creates this cycle of dependence for business, for the team to then rely on the business owner to become the knight in the shining armor.

Drew McLellan:

Right, absolutely. And I think that’s why a lot of agencies get stuck at a certain size. It’s the capacity of the owner that is really keeping them from growing any larger.

David Jennings:

That’s why systems and processes, and it’s not just with agencies, because we work with a lot of different businesses, I find that is a common roadblock, and one of the biggest roadblocks I see for small business. The business owner starts the business because they have an idea, they see a problem in the world, they want to create a product or service to meet that and solve that problem. They get started. This is classic E-Myth stuff, the entrepreneurial myth is that because I’m a technician, and I know how to do the thing, that I then know how to run the business.

But it is very different from doing the thing and running the business. There are a lot of other components and that’s that stumbling block. And it’s actually very hard to bridge that gap, because the other thing is, a lot of business owners, they are big-picture people, they are visionaries, they think of things at the macro level. But to bridge through the gap, you need to be more of a micro-thinker.

Drew McLellan:

Absolutely right, detail oriented.

David Jennings:

Yeah, a details person.

Drew McLellan:

Yeah, and most visionaries aren’t that.

David Jennings:

Exactly. That’s one of the secrets as well, depending on what size you get to, but it’s to find the Yin to your Yang. As someone running a business, who could be that operations person? Who could be the detail person? Who could manage the team? That’s another key bit that actually enabled me to step out, was to find that person.

Drew McLellan:

Yeah, so in Traction language, you were the visionary and they were the integrator, right?

David Jennings:

100%, nailed it.

Drew McLellan:

Yeah, so I know you believe there are certain systems that every agency should have in place.

David Jennings:

Yes.

Drew McLellan:

What are those?

David Jennings:

It goes in, effectively there are three waves that you go through. The first wave is the critical client flow, which is, we talked about it a little bit earlier. And it’s all about the core of how can the business make money? You want to systemize the way that the business can make money, so the business can make money without person dependency. That’s the first one.

Then once you move past that, you move into the second wave, which then deals with all of the systems that fall outside of the critical client flow that are required for growth. And usually that focuses on, I always start on the finance department first. So you think about finance systems around paying wages, paying expenses. You might think, making sure that you’re doing the monthly P&Ls and meeting your accounting and tax requirements and things like that. You might have a bookkeeper, you might have an accountant, they might be handling some of this. You might have gone, “Oh, I’ve already got that outsourced.” If that’s the case, you still want to get at high level, even bullet points, so you understand what is happening, when it’s happening and how it’s getting reported through to you. Finance is usually the first one.

The one after that I usually look at is HR. And HR is about how you hire staff, how you on-board them, and the way that you manage and keep them. And it’s all about thinking, in that space, “I want to embed systems thinking, and this is the way that we do things from day one.” To the point where you run a job ad, and in the job ad you say, “Here are three systems that you will be doing as part of your job day in and day out.” And that shows them right up front that you’re a systems-run organization. Because the biggest challenge you’ll find, and with the resistance to systems and processes in agency-land are your existing staff, because they’ve always done it this way, “Why do I need to change?”

But if you hire someone from day one, and teach them that, “This is the way that we do things. This is a process that you will be following. Here is how you set up every project in the project management. Here are the 10 things that you need to get before you start with a client, and that’s just the way we do things.” And they see that from day one, “Well okay, that’s just how we do things here. And if you don’t like it, then you’re not a good fit.” So that HR piece is an important one.

And then the last one is the management piece. And you’ve mentioned Traction, Traction’s great. It really doesn’t matter what framework you have, as long as you have some form of meeting cadence and rhythm. It’s all about finding which departments are meeting when, and it’ll depend on the size of your team. But you need to have a sales meeting. You need to have, potentially, sales and marketing might get joined together. You might have a finance meeting that happens weekly. And you might have a management meeting that happens fortnightly. Again, it will depend on the business how frequently, and the size of the team.

But then you start to get almost like I say, it’s a system for that meeting. It’s really just an agenda. What are the few things that you talk about? Well, in my finance meeting, every single week we look at our cashflow coming in and we have a spreadsheet that we look about, and we talk about that, and how are we looking. Are we on track? Is there anything we need to address? And then you maybe have a monthly meeting where you review your P&L, and what’s coming up.

Again, it’s about figuring out what that looks like, getting it on the calendar. And when you kind of combine all the this together, it’s the minimum viable product for running your business, those core systems. It’s not about systemizing everything. You don’t need to worry about, “How do I systemize taking out the trash?” That’s not going to add to your bottom line. You systemize … It’s the 80/20. The 20% of the business that drives 80% of the results, just get those systems down first.

Drew McLellan:

Yeah, makes sense. I want to take a break. Then when we come back, I want to talk about those existing employees and the resistance that they have towards being systemized, and all of the objections, and all the things that we hear about, and how to overcome those. Let’s take a quick break and then we’ll come back and we’ll talk about that.

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All right, we are back with David, and we are talking about systems and processes inside your agency. And if you’re still with us, bless you for sticking it out, because I know that this is a horrific and scary topic for you. But I will also tell you, we work with about 250 agencies a year, and the agencies that grow year over year are the agencies where they have figured out the appropriate place for the agency owner to be, and to apply his or her talent. But they’re not in the middle of client-service delivery. And they’re not in the middle of creative production and all of that, because they have built process and system around how to get that work done. And so that’s really the topic for today.

David, before we went on break, one of the things you said is, boy, when you hire a new employee, they actually embrace the new systems because they’re excited to know how to do their job, and it’s a relief to them to have some expectations clearly delivered, and some steps of how to deliver quality work so that they become a great contributor to the agency. But oftentimes, in an agency that has not had a lot of systems, and the agency owner listens to this podcast, or reads your book, or figures out how they’re going to learn about systems or process, and it is the existing employees that are like, “Why are we changing things up? Everything’s working just fine.” Or they’ll say, “You know what? I think it is a great idea for us to have more systems. I think the creative department absolutely should have systems, but we in the account service department, we’re good. We don’t really need that, right?”

So what is it that causes that disconnect for existing employees? And how do we help them? How do we address that? And how do we help them embrace and become appreciative of the systems or process.

David Jennings:

There’s a couple points probably to touch on there. And the first one is that oftentimes the business owner is projecting their thoughts and feelings around systems and processes. They feel like, “Well, I’m not a systems and processes person, therefore my staff won’t be and they’re not going to follow it if I have it in place.”

Drew McLellan:

Or the agency owner’s like, “We are absolutely going to have systems and process, but I’m going to violate them every single day, because I own the joint so I can.”

David Jennings:

100%, that’s a really good one as well. Let’s dive straight into that one. I had, when Melissa, she’s our CEO, she took over. I put her in as our CEO. She started running the team. She started to put some guide rails in place. When Tasks came in we moved out of using email. We were no longer allowed to assign our tasks through email, it needed to be done through our project management, we used Asana. We jump in there and we assign it to the relevant supervisor, and they assess the workload and figure out who is the best team member to pass that work through.

Now, as the business owner, for a period at the start as she was taking over, I was undermining her by, “I agreed to this.” And I said, “Yeah, I’m putting you in charge. The buck stops with you, because I don’t want this stuff coming back to me and having to have the discussion.” But I would still hop in, whether it was through email, or sometimes inside the project management, I would assign something directly to a team member, because I felt like, “Well, anything that I’m working on is the most important thing, so I’m going to assign it to the team member and then set-”

Drew McLellan:

I’m sure none of our listeners recognize themselves in that description.

David Jennings:

And then I would set a due date, typically by the end of the week or within the next 24 hours, because I needed it straight away.

Drew McLellan:

Right, super important, yeah.

David Jennings:

Oh of course. And I did that once or twice, and Melissa gave me some feedback that that was not the way to do it, and what we’d agreed to. And then on the third time, she posted a big message in Asana, in the notice board, and on our Slack channel for everybody, “If David reaches out to you and gives you a task, and says it’s urgent, and it must be completed, ignore him. Do not listen to his request.” And it was quite ballsy of her, for lack of a better word.

Drew McLellan:

I’d say, yeah. Right.

David Jennings:

To do that, but it was the right thing to do. And it let the team know that no-one was above the rules. We had a way of doing things, and I needed to follow that process as well.

And I have some extra things that I get as the visionary. I have an executive assistant who gets assigned to me. And when I’m outside of the agency and I’m working in my own little bubble, she lets me work however I want. I email my executive assistant, I say something needs to be done urgently, I do it at all hours during the day. Sometimes it’s in email, sometimes it’s Asana. And that’s okay, because it’s outside.

But anytime that I come into the agency, she wants me to, effectively, for the metaphor, take off my shoes, wipe my feet at the door, walk in, be respectful and follow the rules when I’m inside there. She’s also said that because of the way that I work with my executive assistant, I effectively break them. We’ve tried two or three times when someone’s been with me as my executive assistant to then merge them in with the rest of the team. And we can’t do it. They don’t fit into the structure very well, because I’ve taught them all of these bad habits.

It’s a matter of learning what you’re great at, and the way that you work as the business owner. Create the structure around you so you can do your best work. But understanding that over in the agency that’s now how best work gets done, and those guide rails.

When I’m in the house, I’ll take my shoes off and dust my feet. But I can be a little bit more crazy when I’m working on this harebrained idea I came up for this latest funnel that I want to work on. That was one of the key things. No-one is above the law.

To go back to something I touched on, that idea of projection, the fact is, a lot of A-players really like systems and process because it outlines for them how they can excel in their role. If you can explain to them what winning looks like, it’s much easier for them to win.

Now, you also need to find the right balance, particularly in the agency. There’s certain areas, and the video-production business I ran was a great example of this, when it comes to the creative side of things, and making a video, they’re works of art, so it’s very hard to get that down to a system or process. Step one, look at these five logos to get inspiration, that inspiration should take 23 minutes before moving on to step number two. Like that-

Drew McLellan:

Right, that’s hard to do. Right, yeah.

David Jennings:

But what you can do is, in certain spaces, you create guide rails. And you say, “Okay, well this first phase, you need to plan out the basic structure of the video. You’ve got a four hour block or half a day to do that particular thing.” If it starts to edge up to that four hours, or goes beyond that four hours, that’s when you need to just become aware that, “Hang on, there’s the risk that this is going to blow out and we’re going to go outside of scope and outside of budget.” Again, it’s about putting some of these guide rails in place. And some things will have more detail than others. That’s one thing.

And then I suppose the last point, because you’ll probably want some distinctions, was around this idea that, then how do you meet the resistance? Now, obviously new team members, it’s easier. When it’s your existing staff you’ve got two things you need to think about.

The first one is position, when you introduce systems and processes, what is the benefit to them, not to the business. No-one likes going and taking a week-long holiday and needing to continue to do work, and check in while they’re on holiday because they need to keep projects moving. Or no-one likes to go on holiday and then find that their inbox explodes, and by the time they get back they’ve got 6,000 emails and they spend the next month or two catching up for their one-week holiday. But systems and processes enables them to delegate tasks and have projects continue to move, and so there’s a real benefit for them that they can disconnect because people can step in.

And the other thing is, systems and processes allows certain team members to move up in the ranks. If they can systemize their role, delegate it down to lower-cost labor, that then makes them more valuable, because they can work on higher-quality stuff.

Some people, it’s all about thinking about the individual, because everybody’s different. And a great manager, that operations person should be able, or your HR person, should be able to understand, “Well, what is important to the team member? And how can I present this for what’s important to them?” And let them know that this is the way that we’re doing things moving forward.

And then the last point on that as well, for existing staff, and I learned this lesson when I was eight years old. My dad came out with this thing called the sheet. And the sheet was a thing for my brother and I to basically earn our pocket money. And it listed out all of these things that we could earn points for. Things like being good to our brother, brushing our teeth, cleaning out the bird cage. It even had times for when we went to bed, and we’d earn different points. Then at the end of the week, he would tally up all of these points. That points system then had a legend, like a scale, where depending on what bracket we landed in would depend on how much pocket money we got.

Drew McLellan:

Very ingenious of your father, yeah.

David Jennings:

Yeah, he was the original systems thinker. And he even had an extra little bonus thing. If you got above four weeks of more than 600 points, you would then get an extra payout for your pocket money, because you got a winning streak. I loved the sheet. I played the sheet incredibly well. I figured out how it all worked. I dialed in incredibly well. And every week, I got maximum payout of cash, to the point where dad said, “I’m going to have to change the scoring system here because …” He said, “You’re going to bleed me dry.” Adjusting the points system.

Now, that was me. I embraced this idea. I understood the rules of the game and I did whatever I could to leverage it. My brother on the other hand, he hated the sheet. He loathed the sheet. He didn’t want to take part. He didn’t give a sheet about the sheet. He just didn’t want to participate.

What that taught me early on is that there are some people who just won’t follow systems and processes no matter what you do or how good the incentive is. And if you think about systems thinking up front, because you know this is going to do well for your agency, you can recruit correctly and you can find the right people who fit in. But for people who are already in the agency, you might’ve invited in people that just won’t get this, no matter what you do.

And you may reach that conclusion, “Well, okay maybe you helped me get to where I am, but you’re not going to help me get to where I want because you’re going to be that person who leaves their boots on and muddy, and who walks through the house and doesn’t follow rules or process.” You may reach that. But I find they’re not as common as you might think.

A lot of people, particularly now, in the world of COVID, now is the best time to introduce systems and process. Because everybody is experiencing a world of change. They know they have to change the way that they’re doing things, because the world is changing. So the least amount of resistance you will ever get to introducing systems and processes is right now.

Drew McLellan:

Yeah, such a great point. For you, part of your solution was you hired someone to sort of lead this charge, because I’m guessing you recognized that you were a typical agency owner and you were not particularly hardwired to be the person to develop the systems.

Whether the listeners are going to go out and find someone to drive the system development inside their agency, or they’re going to look amongst their current rank and file to find the person who is best suited to help develop the systems. A, I’m assuming you believe, and you would recommend that the agency owner is rarely the right person for this. And B, what should we be looking for? What traits? What characteristics? What personality types should we be looking for as we look for our system or process champion?

David Jennings:

Perfect, you took the words out of the SYSTEMology book there. We call them systems champions-

Drew McLellan:

Oh, look at that.

David Jennings:

That’s who they are.

Drew McLellan:

Okay.

David Jennings:

You’re exactly right. I recruited from within. Sometimes you are lucky, and they’re within the agency and you can groom them up into the position. And the great thing about that is, you do that, oftentimes they understand the business, they can be most cost effective, because you groom them into the position rather than having to go out, headhunt someone and then pay premium dollar for them. If they’re inside, that’s fantastic.

The characteristics that you want to look for are, there’s a few things. And depending on if you want them to take the CEO role, or just drive the systems forward. If you want them to take the CEO role, and be the person who oversees and manages that part of the business, generally speaking, I want to … I love people who’ve been business owners in the past, but maybe have been burnt out. They’ve experienced the hardships and the failures, and now they’re kind of coming back maybe to working for someone because they didn’t want that extra stress, or they wanted a little bit more security and comfort. They’re great, because then they already understand the importance of cashflow, and making hard decisions, and the way that all of the pieces work in the departments, so they’re a great person.

The other thing I like to look for, for that CEO role is you want someone who’s a great people person. I actually like, generally speaking and to generalize, I find females have a better understanding of that. And sometimes they even feel like maybe they’ve got more to prove. So I find, I’ve had some great success with strong female CEOs. And I think they work really, really well, so that’s another thing I’d think about.

I think from a CEO, you just need to have multiple disciplines. You don’t want someone … I would avoid someone who is heavily on the tools. For that CEO person, in fact you really don’t want them to be an SEO or a web person, because it’s too easy for them to slip into, “Well, I’ll just do it myself.” If you recruit someone that can’t up front, and Melissa who runs our agency, she didn’t know how to do any SEO or anything like that beforehand. She kind of came in and then we kind of groomed her up on all of these other things, so I think that’s another strong trait. That’s the CEO role, that one is the hardest role to recruit for.

Drew McLellan:

Sure, absolutely.

David Jennings:

That one is, it may take some time. The distinction between that role, and maybe a systems champion, the systems champion who will be the person who drives forward the initiative of systemizing. And they might help out with the documentation, the liaising with the different team members, the organizing of those systems and processes, the reminder of following systems and processes. That one can be a little bit different.

I like return-to-work mom or dads, because they are oftentimes, they might have worked in corporate, but now they can’t work in corporate because they need something a bit more flexible and part-time, and they might want to work from home. So you can find maybe a return-to-work mom or dad working 15 to 20 hours a week, who might come in and do this initiative for you.

And you want detail orientated, someone who’s almost OCD in the way that they like things organized. You want a list person. Very detail orientated, who thinks about process and likes to see things through and get the outcome. Those are some of the traits I’d look for there.

I think a systems champion is easier to find, and I’d start potentially there first to break off pieces of this important project, systemizing the business that you’re going to undertake. The key is to get the business owner out of it, because the business owner knows it’s important, but it’s not urgent, so they’ll never make time for it. It’ll sit on the to-do list for a million years. You really need someone else to drive it, otherwise it’s not going to happen.

Drew McLellan:

Yeah, so you have now accomplished all of this inside your agency, right? So you’re not in the day-to-day anymore, so give us a picture. People are listening and they’re saying, “Yeah, sounds pretty good.” But give them a picture of what their life could be like. Right now, how has the agency grown? How have profits changed? How many people do you have now? How do you get to spend your day now? What’s the outcome benefit to them of embracing this? What is your world like now? Because you’ve done what you’re advocating other agencies do. So now for you, what’s the sunny upside of all of this?

David Jennings:

The first, biggest thing that ends up happening is your perspective changes the way that you look at business. When you step out of it, and then you start looking from the outside in, and you start to think about, “Yeah, let’s create this dashboard. I’ll jump in for my weekly meetings and we’ll look at the numbers.” And then I can focus in and say, “Why is this, this way?” Or, “How are we tracking here?” Or this … It’s much more strategic in the work that I do, do. That’s probably the first thing. A real change in the way that you look at business. It’s literally like you morph and evolve into something else who looks at business.

Business is just a collection of systems, so you start to see the system and where they interconnect. And you identify problems, and then you solve that problem with a system or a process, and you do your best work then. Business owners are great at solving problems. The problem is they often get stuck solving the same problems over, and over, and over.

Where the business owner, it reignites them in their passion for their business. Sometimes if you’re on that treadmill and you’re doing the same thing over and over, it starts to drain the entrepreneurial life force out of you. By moving out, you will be amazed at what it does to reinvigorate you as a business person. And you’ll start to see opportunities that were there previously that you just couldn’t see because you were in it. You start to spot the big opportunities, “Oh wow, we need to be heading in that direction over there, because I can see this huge pot of gold over here, and now I can actually take advantage of that and steer us in the right direction.”

I think sometimes people think it’s about going and lying on a beach, and kicking back, and just sipping your pina coladas while money gets deposited into your bank account with little or no work. And I don’t necessarily think that’s the case. I think for a lot of business owners, they enjoy what they do. It’s part of their identity, so what it’s about, or was for me, it was redefining the work that I was doing and starting to level up.

I also have been a bit more reasonable with the hours that I’m putting in. There is a time, when you’re getting started, where you burn the candle at both ends, and you work a truckload of hours. And that’s like a rite of passage. You kind of go through that to get to that certain point. But then, yeah it can change.

I think systems at least gives you the freedom to choose. So then you can kind of go choose, well, what am I working on? Do I want to now work on higher quality stuff? Do I want to think about my health more? Do I spend more family time? That’s completely up to the individual, but at least have the choices. Because most business owners don’t get a choice. They’re in the thick of it, they’re working 80 hours a week, and that’s just the way it is because that’s the machine that they’ve built.

Drew McLellan:

Yeah, so did you solve your scale problem?

David Jennings:

When you say solve the scale problem-

Drew McLellan:

Yeah, when you got out of the middle, were you able to scale the business? Is it more profitable? Is it bigger? Is it …

David Jennings:

We focused on our profit, so what we ended up doing was, I can’t help myself, as the entrepreneur I had another great idea, so I started up a SaaS company. And that became my startup. So I moved on to a new startup. Melissa was running this other business. The SaaS startup which is systemHUB, that’s all around my passion of systems and processes. And I started kind of working over there while Melissa really focused in the agency around profit. So I started to look at things as a business owner.

Previously, where I was thinking, “Hey, I’m drawing my wage because I’m an employee.” I was not longer an employee really in there. I was more a board of directors, plus as the owner of the agency, I then wanted to see the profit. So the discussions started to change, so I put pressure on her to get our profit right.

Then she looked at what product lines were making the least margin, and we started killing some of those. We looked at which team members did we need, that were essential, and where were expenses that needed to be cut? And how could we improve efficiency? What I started to watch is our gross revenue, it didn’t really grow, but I saw the bottom-line profits, I started now pulling money out and taking as a distribution. Every quarter now, I do a distribution to me as the business owner, as the profit from the business.

Drew McLellan:

So you did scale the business, but you scaled it in the way you got to decide what you scaled?

David Jennings:

Yes.

Drew McLellan:

You decided you wanted to scale profit?

David Jennings:

Yeah-

Drew McLellan:

Right, absolutely yeah.

David Jennings:

Yeah.

Drew McLellan:

There are a lot of ways to grow a business that don’t require more employees or a bigger top line. It really is ultimately always about the bottom line.

David Jennings:

Yes. And it was having that insight to go, there’s two ways that you … There’s actually three ways that you should be getting paid as an owner. When you’re working in it, you should be getting a wage. And also you get a profit, because you own it. And then the last way to profit is when you sell the business as well. We probably won’t talk about that last one just at the moment, but at least those first two.

When you step out and you’re working in those operations, then yeah you focus in on the profit. And you want to just make sure that you’re getting paid in both of those ways. Because I know some people, their books are a little bit messy, and they’re trying to draw their wage by pulling it out of the profit. They’re not treating themselves as a normal employee. And that’s not fair on the business. It creates a cloud around it for lack of visibility, because here you are working 80 hours a workweek, and you’re taking an average wage. But now, if you wanted to replace yourself, you’re going to have to hire two people at a regular wage, so you’re giving the business this extra false sense of security that … The truth is if the business doesn’t work without you, then the business is broken. You should be looking at business that way.

Drew McLellan:

But that gets to the third way you should take money out of the business. An agency that wants to sell, where the agency owner is still in the heart of the business and still delivering client services or has to be the only one who’s doing some aspect of the business, the factor, the multiplier for that business in terms of its value to an outside buyer is significantly less. The other way you scaled up your business was by pulling yourself out of the day-to-day operations. And you being more of a, sitting in a leadership role, but not being essential to delivering what you guys sell to clients, that actually added value.

When you look at selling the business, you’re going to have a higher multiplier for that agency, because you’re not essential to the business. Another way you scaled the business in terms of its value as an asset is by removing yourself as a detriment to the multiplier.

David Jennings:

100%. Whenever anyone’s buying a business, one of the first things that they look at is, “How do I de-risk this deal? There’s a huge risk if I buy this business, the business owner is central and then the business owner leaves.”

Drew McLellan:

Absolutely.

David Jennings:

One of the biggest de-riskers is to go, “Is this business person independent.” We worked with a lady through systemHUB, her name is Jeanette and she runs a company called [Diggiddy Doggiddy 00:50:21] Daycare. It was a doggy daycare center.

Drew McLellan:

Wow, okay.

David Jennings:

And she worked in that business for about 10 years before she decided she wanted to sell it. She worked with us for about two years, focused on systemizing the business, and then ended up selling it to a larger corporate that cited two things when they bought it. The first one they cited was the financials. They said, “This is really solid, and we believe that this can be franchised around Australia. You’ve created our franchise prototype.” And the second thing were the systems. They said, “You’ve systemized everything to the point where we can plug in team members and effectively it is our franchisee and franchisor manuals already done.” So they bought the business on that.

She got a very high multiple, much higher than industry standard. I need to double check exactly what the number was. It was either six or seven times earnings for that space, because they saw the opportunity there. And that was all heavily de-risked for them. And she did incredibly well because of systems.

So it’s yeah, definitely on the exit, systems are absolutely key to getting top dollar. And even whether or not the business owner sells or not. Some people just aren’t in the mind frame of selling. But if you build a business as though it were saleable, it is infinitely more profitable, efficient, it’s just a better business if it runs as though it were saleable. That’s where all the opportunities are. That’s where all the magic happens.

Drew McLellan:

Absolutely. This was a great conversation. Thank you for making the time to be with us. If people want to learn more about your work and follow you, what are the best places for them to track you down?

David Jennings:

Yeah, best place is just to head over to systemology.com/book. I’ve got a book called SYSTEMology, which teaches my seven steps for systemizing a business. And depending on when you’re listening to this audio, we’re launching it in the middle of this year, so you can go either sign up to the pre-notification, or once we’re live just grab it on Amazon or something like that. But it distills a lot, and it’s particularly interesting and useful for agency owners, because I built an agency, so all of the IP and the way that I developed SYSTEMology was thinking around an agency. So I think your listeners will get a lot of value from that. It’s systemology.com/book.

Drew McLellan:

Awesome. Thank you so much for being with us. I appreciate you sharing your story, and maybe getting people to be a little less afraid of the S-word, so thank you.

David Jennings:

Pleasure.

Drew McLellan:

All right guys, this wraps up another episode of Build a Better Agency, thanks for listening. I’m hoping that David got you to look at systems and processes a little different, sort of recognize that they’re actually an asset inside your business. Just like you build a safety net financially in other things, it’s really a safety net for you to be able to step in and out of the business as you choose, to be able to scale beyond the number of hours that you’re physically capable of working, and certainly to build a sustainable business that if you decide you want to sell it someday down the road, it’s ready for that.

Check out his book, but just give this some thought. And this is a great conversation to have with your leadership team. And as David said early on in the conversation, pick a system and just begin to slowly play around with the idea of systemizing it. And I think what you’re going to find, in my experience for agencies that have gone through this exercise, is that it’s not as hard or as horrifying as you think that it might be. So give that a shot.

All right, a couple quick reminders as we wrap up. Number one, remember that every month we give away a seat at either one of our live workshops or our on-demand courses, value, about $2,000. Every month we’re giving that away. And all you have to do to be in the drawing is go to wherever you download our podcast, leave a rating and review, take a screenshot, because I can’t tell my your user name if you’re Disneylover104, I don’t know who that is, and I don’t know what agency you’re from, so take a screenshot, shoot it to me by email. Just email it to [email protected] and you are in the drawing for a free workshop seat. Happy to have you join us, either live or online if you’re a winner there.

And also, a big thank-you to our friends at White Label IQ, they are the presenting sponsor of this podcast, make it possible for us to come and bring folks like David to you week after week. Many thanks to them. If you are looking for someone to white label your PPC, your dev or your design, they are absolutely a great solution for you. Head over to whitelableiq.com/ami because they have a special deal just for you as podcast listeners.

All right. I’ll be back next week. In the meantime, you know how to track me down. Just head over to agencymanagementinstitute.com. Otherwise, I will see you in a week. Thanks for listening.

Thanks for spending some time with us. Visit our website to learn about our workshops, owner peer groups, and download our salary and benefits survey. Be sure you also sign up for our free podcast giveaways at agencymanagementinstitute.com/podcastgiveaway.