Episode 240

podcast photo thumbnail



The panic around COVID lockdown is plateauing. The storm has certainly not passed, but we’ve navigated out of the panic stage and now everyone is realizing they need to get back to business. Whether you live someplace that is still sheltering in place or you are figuring out how to get back to the office — we have to sustain our business through this and come out on the other side. If we do it well, we can not only come out on the other side but we can come on stronger and better than ever.

In this episode of Build a Better Agency, we walk through the five mini plans that I’ve been talking about in our weekly newsletter. I want to help you build them out.

They are:

  • Operational/financial plan (how will you get the work done on time and on budget? Then, determine the minimum acceptable profit margin for your agency and use agency math to manage your way to never dipping below it)
  • Team plan (how will you keep them motivated, efficient, profitable, and striving to serve each other and your clients)
  • Client plan (you need to proactively guide each client into a position of readiness so that when they can step back in — they’re ready and more prepared than their competitors)
  • Prospect plan (what can you talk about that will be valuable — based on what your prospects are ready to hear at any given moment in time)
  • Vision of the future plan (what parts of normal are worth rushing back to and what could/should be different?)

The danger to every agency right now is that we get stuck in place and don’t shake the panic phase. If you and your team work through these plans it will propel you past the paralysis and into a future with a solid foundation. Don’t wait – get working on these plans today!

A big thank you to our podcast’s presenting sponsor, White Label IQ. They’re an amazing resource for agencies who want to outsource their design, dev or PPC work at wholesale prices. Check out their special offer (10 free hours!) for podcast listeners here: https://www.whitelabeliq.com/ami/

Agency Leaders | 5 mini plans agency leaders can use to thrive through covid

What You Will Learn in This Episode:

  • How to build out an operational plan that enables you to continue completing work on-time and under budget
  • Financial metrics that agency leaders should be paying attention to
  • How to keep your team motivated, efficient, and profitable moving forward
  • How to proactively guide each client into a position of readiness so they are more prepared than their competitors
  • How to create a solid biz dev plan for your agency’s resurgence
  • How to make difficult staffing decisions in times of crisis
  • Different ways that agencies are successfully managing their teams
  • How agencies are landing new clients in these difficult times

The Golden Nuggets:

“As we rush back to normal, I want you to think about what parts of normal are worth rushing back to.” @DrewMcLellan Click To Tweet “If we don’t talk about planning when things are calm, it is difficult to make decisions when we are in crisis.” @DrewMcLellan Click To Tweet “Agencies usually fail because they run out of cash, not because they are bad agencies. Having accurate cash flow metrics is critical right now.” @DrewMcLellan Click To Tweet “You should be hard to surprise at this point—that’s the kind of financial and operational plan I want you to have.” @DrewMcLellan Click To Tweet “The best agency leaders have not stopped investing in new learning and skills development.” @DrewMcLellan Click To Tweet “The more you serve others together, the healthier and stronger your team gets.” @DrewMcLellan Click To Tweet “With C-19 going on, you have to be the best version of a leader that you can possibly be. But on an equal level, you have to hold your employees accountable and to a very high standard.” @DrewMcLellan Click To Tweet “You have more access to your clients’ C-suite than ever before. How are you capitalizing on that?” @DrewMcLellan Click To Tweet “Don’t let what’s happening now make the decisions for you. Use what’s happening now to start asking the right questions.” @DrewMcLellan Click To Tweet

AMI works with agency owners by:

  • Leading agency owner peer groups
  • Offering workshops for agency owners and their leadership teams
  • Offering AE Bootcamps
  • Conducting individual agency owner coaching
  • Doing on-site consulting
  • Offering online courses in agency new business and account service

Because he works with over 250+ agencies every year, Drew has the unique opportunity to see the patterns and the habits (both good and bad) that happen over and over again. He has also written several books, including Sell With Authority (2020) and been featured in The New York Times, Forbes, Entrepreneur Magazine, and Fortune Small Business. The Wall Street Journal called his blog “One of 10 blogs every entrepreneur should read.”

Subscribe to Build A Better Agency!

Itunes Logo Stitcher button

Ways to contact Drew McLellan:


Speaker 1:

Welcome to the Agency Management Institute community, where you’ll learn how to grow and scale your business, attract and retain the best talent, make more money and keep more of what you make. The Build A Better Agency Podcast presented by White Label IQ is packed with insights on how small to mid-size agencies survive and thrive in today’s market. 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. This is one of my solo casts. So as you know, every fifth episode, no guests, just you and me talking about something that … Odds are I’ve been talking to a lot of agency owner about, or it’s something that I know I need to talk to a lot of agency owners about. And so I am gathering us together to have this conversation.

I am recording this on May 5th of 2020. For those of you who are listening to this real time, you know that we are in the midst of sort of the wind down of the COVID lockdown. Many states are starting to open up any other states are experimenting with the idea of opening up, and for many of us throughout North America, throughout Europe, throughout Australia, New Zealand, we are on the tail end of sort of what I think of as the panic phase, and we are moving into a more of a containment phase.

Not so much that we have contained the disease because certainly that issue is separate and still going on, but the containment of the sheer panic that business owners and leaders have been in for the last really two months, and now everybody is sort of saying, “Oh, shoot. I have to save my business. I have to get back to business, or I’m so busy, I don’t know what to do. I need to control the business and really manage it through this crisis.”

So regardless of where everyone is at in terms of businesses, so clients, prospects, even us as agency owners, wherever we are on the spectrum of how badly our business has been impacted by COVID, and we are now sort of waking up from the paralysis of panic and realizing that we got to get to work, that we have got to sustain our business through this and come out on the other side. As I have said all along, we’re in the middle of a storm, we have to get our ship to the other side back to calm waters. And that’s the situation that you’re in right now, is also the situation that your clients are in right now.

And so I think what I’d like to do today is I would like to talk about the five mini plans that I’ve been talking about in our weekly e-newsletter and how you can sort of start to build those out. But before that, I want to do a couple of quick announcements. Number one, many of you have heard me talk about it. We have created a Facebook group for podcasts listeners. We just had a really great conversation yesterday, last night with an agency owner who is struggling with a lot of demand in their agency right now, and they’re struggling with getting proposals out quickly enough. And so we had a very interesting conversation about how to manage that demand and how to not give away your thinking for free.

So those are the kinds of conversations I want to have there. I’m not particularly inclined to just throw topics out and have you guys chat at me about them. I really want it to be a place where we can answer your questions and we can help you triage what’s going on inside your shop. So A, do not hesitate to join us. You have to answer three simple questions. Do you actually own an agency? What do you want to talk about inside this group? And will you be nice? That’s it. If you don’t answer the questions, I cannot let you in. The way the group is set up is, without the questions being answered you cannot be admitted into the group.

So please answer the questions, please join us, and then please use it as a forum to share ideas with other agency owners, to bounce ideas off of us and AMI. we’re happy to participate in those conversations. All right. The second thing I want to tell you about is the Build A Better Agency summit is happening. As you know, I am not fan of launching your first conference ever during a pandemic I don’t recommend it, but we did it and we had to move it. So we were supposed to be meeting in mid-May, instead now we’re meeting November 11th and 12th, still in Chicago, same hotel, we are working with them.

As you might imagine, all the hotels are putting into practice social distancing and new cleanliness standards and things like that. So I promise you will be very safe. But by November you are going to be hungry to be around other agency owners and learning from them and sharing your war stories and celebrating the fact that we have survived the virus and that our businesses are intact and that we are moving forward, and we have a game plan for 2021, and we’d like to help you put together that game plan.

So amazing speakers on topics ranging anything from biz dev to how to have multiple streams of revenue coming into your business, which would be a beautiful thing right now during COVID, to how do you prepare your agency to get it ready to sell if that’s what you were inclined to do, or what to look for if you have cash in the bank and you’re lucky to acquire an agency. We’re going to have all kinds of conversations around legal issues, research, new tools, trip campaigns, how to build a sales funnel, all kinds of things, how to step out and be an authority and the expertise that you have. So I would love for you to join us. We have about 100 tickets left.

So head over to agencymanagementinstitute.com, click on the Build A Better Agency Summit navigation button in the upper corner of the navbar, and you can read more about the conference, you can register, and you can come join us in Chicago to celebrate that we have survived this. Okay. All right. So here’s what I want to talk to you about today. So a few weeks ago in our e-newsletter, I was talking about that everybody coming out of this sort of paralysis and this panic stage that we’ve all been in, needs to start thinking about some plan stuff. And so the first one is an operational or a financial plan. So how are you going to get the work done on time and on budget, because that still is critical for us? I don’t care if you’re working from home, working from the office, working from the [inaudible 00:06:53], it doesn’t really matter.

And then also what are you willing to settle for in terms of profits? So I absolutely believe a 100% that you should not go into the red because of COVID. You’ve got to manage your business by the numbers. But I also believe that perhaps this is the year that you don’t hold yourself to a 20% profit like we normally do in the AMI world. So I’m going to walk you through some financial metrics that I want you to be paying attention to, and we’re going to talk about how to put together that plan. Then you need to have a plan for your team. So how do you keep them motivated, efficient, profitable, striving to serve each other and your clients, but also, how do you look at your team critically? Because now is the time for you to decide, boy, when I get to the calm waters, who performed during the storm and who didn’t, who showed up and how did they show up, and are these the people that I want on my ship moving forward as we continue the journey?

The next plan I want you to think about is the team or the client plan. So how are you going to proactively guide each client into not only a position of readiness right now, how do they get back into the marketplace if they’ve paused, or how do they capitalize on the fact that they haven’t paused, but what do they do to make sure that they are ready and more prepared than their competitors, and how can you be a part of that with them? The next one is a prospecting plan or a biz dev plan. So right now the question is who should you be talking to, and what should you be talking to them about? And I’ll walk you through some of that.

And then the last plan, and maybe the most important plan is, when you close your eyes and you picture your agency a year from now, what does it look like? So a few … I don’t know, maybe I think it was my last solo cast. I quoted this line that really has struck with me which is, as we rush back to normal, what parts of normal are worth rushing back to? So I think it’s an opportunity for you to look at how you’ve been running the agency, the kind of clients you serve, the size of your team, how you work, how you work as the owner or leader, and really rejigger all of that. I think this is the global reset button, and we all get a chance to sort of really think about how we come to market with our business and how we want to do that in the future. So we’ll talk about all of that as well. All right.

So I’m the financials, I’m going to walk you through some key metrics, but you need to have a plan. And what I mean by that is, I want you to be watching these metrics very carefully, and I want you to have trigger points. So when metric A it’s X then Y happens. So for example, if our AGI projections dropped to $50,000 a month, we need to reduce our staff by one and that person is [Babbette 00:09:46]. If our cash reserves dip below a $100,000 and it’s a result of a slow pay, then we’re going to do A. If our cash reserve is stable at $100,000 for two months, then we have to do A and B.

So I want you to have a plan. So I’m going to walk you through the metrics, but you’re going to have to decide, you’re going to have to look at your own numbers and decide what are the sort of crisis plans, what are the growth plans, both of them. So, if our AGI grows to X or AGI projections grow to X, we need to hire someone and we need to hire someone in this position. So this is not all bad news or are hard things to do. It could be happy news and good things to do as well. But I’m going to tell you that if you don’t decide this in advance, and if you don’t communicate this with your leadership team or your number two, or if you’re the number two, communicate it and come to an agreement with the owner.

If you don’t talk about this when things are calm, it gets much harder to make these decisions when you’re in crisis. And so here’s what I’ve observed over and over and over again in the last couple of months, which by the way is exactly what I’ve observed over and over and over again, even when there is no COVID. You guys struggle to make hard decisions, especially hard decisions around your people. And you often will make decisions that put the agency at risk, because you don’t want to let Babbette go, or you don’t want to furlough so-and-so. You don’t have that luxury right now.

There’s there’s too much going on. We are in the middle of what, no doubt is going to be a recession. That’s going to stick around for a while. You don’t have the bandwidth and the wiggle room and the safety net that is big enough to allow you to not make the hard right decisions for the right reasons. So you’ve got to really sort of stiffen up your spine a little bit. And again, as I always will say, I am not suggesting you should do this without heart. I am not suggesting that this is not a difficult decision, because I know it is and it should be, or messing with somebody’s life, but you’re not their mom, you’re not their dad.

And I talked to an agency owner just this week who said, “Well, I know I need to let Babbette go, and I know she’s in some credit card debt, or I know that she’s busy taking care of her mom who has Alzheimer’s, or I know that she’s got three kids in college, or I know …” And all of that is true and I love how compassionate you are, but at the end of the day you cannot protect Babbette and put the entire agency at risk. And given the storm that is around us and everything that we’re going through, that’s what you do when you stay overstaffed. You absolutely. Right now, can I stay overstaffed? For most of you, your people are by far the most expensive thing on your P and L, and you’ve got to manage that number very, very carefully. Okay.

All right. So let me walk you through some of the financial things that I want you to be thinking about. First, I’m going to go through these kind of quickly, because for any of you in the AMI ecosystem these are going to sound familiar to you. It’s also why I will tell you that I believe that AMI agencies are faring through this better than the average agency owner I’m talking to. And the reason why is because AMI agency owners have been sort of trained to pay attention to some of these metrics. So when they come to their peer group meetings, they have to talk about these metrics. They are filling out reports that have these metrics in them, and they’re running their business based on these metrics.

So whether you’re inside AMI or not, I would highly recommend it. I am watching this experiment unfold. The agencies that really do run their agency by these numbers that I’m about to give you are the agencies that are thriving and doing better than just surviving with their head barely above water through this crisis. So, all right, let’s talk about that. So the first thing I think you need to understand is sort of where you’re at as an agency. So if you are an agency of two or three people, your decisions are going to be different than if you’re an agency of 50 people. And right now I think it’s actually more difficult to navigate the storm when you’re smaller, because you have less bandwidth to sort of slide down the scale. If you’re 50 people, you can go down to 40 people and still be a very viable agency. If you’re three people and you have to go down to just the owner, that’s a whole different ball game.

So as I’m going through these numbers with you to sort of be mindful of where you’re at in all of that, right? So the first thing I want to talk to you about is AGI, which I have talked to you about before, but let me again just give you the very quick overview of that. So gross billings are vanity number. So we see in Ad Age and AdWeek and all of that, all of the gross billings, but that includes all of the expenses that we take on, on behalf of a client that we just that money just goes right back out the door.

So the only real number that matters to an independent agency owner is AGI. So you take your gross billings, you subtract all of your cost of goods, including your 1099 employees, and what’s left is your AGI, and your AGI is them dollars that you use and you use those dollars to cover three big buckets. Loaded salaries, so salaries and benefits, your overhead and profit. That’s what comes out of AGI, those three things. And ideally you would follow this metric. 55% of your AGI would be for loaded salaries, salaries and benefits, 25%t is for overhead, and 20% is for profit.

Now, many of you as soon as you got a whiff that COVID was coming to the States or coming to your country, you very quickly started to manage your overhead costs. So you renegotiated rent, you cut down on other expenses. And so for most of you, your overhead is very managed right now. In fact, many of you are at a various steer level of your overhead expenses. But what you haven’t done or most of you have not done yet is adjust the 55 parts. So what I want you to do is I want you to go and I want you to look at your AGI by month, and I want you to track it every month, and I want you to be looking at where you’re at in relation to your staffing.

So right now I’m going to say that for some of you, this is going to be a banner year. And then absolutely, if your clients haven’t slowed down, if you’ve landed new business, you absolutely should be in the vein by the 55, 25, 20, and you should be pushing for 20% profit. But if you are like most agencies and your AGI has been impacted, typically for most of you is between 10 and 20%, then 20% may not be realistic. And it may be that you believe that you’re going to come back out of this, you’re going to be back in demand and you need to keep your team. And so you may be willing to carry the salary and benefits and the overhead expense at 85% and only have 15% profit or 90% and have 10% profit. That’s a decision that you have to make, but I do want you to make that decision.

And so what’s important to me is that you are managing to a number that is in the black. So if 5% for 2020 is comfortable for you, that’s fine. But I want you to know what that number is and I want you to manage your AGI to that number. Okay? So that’s number one. And then the employee metrics, here’s where you’re going to make it or break it. So typically when we’re not fighting a virus, you should have $150,000 of AGI for every FTE. But if you’re in a small market, that may not be the case. So the combination of two metrics