Your agency in the post-COVID world with 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 McClellan.

Drew McClellan:

Hey everybody, Drew McLellan here with another episode of Build a Better Agency, welcome back. If you’re a regular listener, thanks for joining us. If this is your first time, this is episode 255. And if you are a seasoned Build a Better Agency veteran, you know that all of the fives and the zeros mean solo-cast. So every fifth episode, I forego the guest and it’s just you and me hanging out, talking about something that I want to make sure you’re thinking about, that I’m talking to a lot of other agency owners about and something that oftentimes is on my mind as well. And this episode is no exception, it checks all of those boxes, definitely something that I suspect you’ve already been wondering about and thinking about. And I want you to think about it some more, I want you to prepare and plan. And I’ll tell you in a minute what that’s all about.

But I just want to reflect for a minute. It’s summer, I’m recording this in August of 2020. So if you’re listening in real time, you’ll be listening to this the week of the 20th or so, I think. And you know what, we have been here in the US anyway, we have been under COVID’s reign for a long time since March. And if you’re listening to this from another country, odds are you joined in the COVID battle about the same time we did unless you are in Asia, then of course you are a little ahead of us.

But what I want to talk about today is the fact that while we feel in some ways like we’re stuck in this, at least here in the US that we’re stuck in this going back to normal, but can’t really go back to normal. Many of you are still working from home, many of you have not been on a plane since the spring. So for many of you life is different, but it feels like you’re pulling the wagon up the mountain to try and get back to some semblance of normal. And I think we all want that, I think we all want to get back to something that feels pre-COVID life in some way.

Even though we acknowledge that certainly there are some things that are going to be different. And that’s what I want to talk to you about in today’s episode. Is I want to talk to you about the ways that I think COVID is going to change your agency, that your agency is going to change, that your agency has already changed is a given. And so what I want to do is I want to plant some seeds. And for each of you, the things that we’re going to talk about, these changes in your business. For some of you, all of these are going to be dramatic. For others of you, some are going to be a minor player and others are going to be huge. So I’m not suggesting that any agency or all agencies are a one size fits all situation.

But I do believe there are some things that as we come out of the crisis part of COVID anyway, certainly, in many parts of the world, you’re beyond the crisis part and you’ve gotten back to, you’re moving towards at least back to something that looks like normal life. Here in the States, we’re a little behind. Because we haven’t found the way to contain the infections and the contamination like other countries have, but certainly, hopefully we too we’ll get there.

But for all of us I think we are dragging what feels like a really heavy weight up a mountain, trying to get to see over that mountain to what is on the other side. And that’s what I want to talk about today. If you remember back in episode 235, I think it was, I started talking about COVID back then. So that would have been early, early in the spring. And we were talking about how we were going to survive COVID. And I don’t think any of us back then would have thought that we would still be in the situation that we’re in today. I think we all thought we would be through it after a month or two. And I talked about the fact that you are as the agency owner, or somebody on the leadership team that you’re really the captain of the ship and the ship is the agency and your job was to protect the ship. You’re job was at all cost to protect the ship, get it through the storm and get it back to calm waters.

And the truth is that for many of you, you’ve done a brilliant job of doing that, you have navigated the worst of COVID, you have survived clients just pulling the plug on work and not having any work or very little work for a couple months. You clawed your way back, you have landed new clients, many of you have landed some great clients. I have some agency clients who have landed the biggest piece of business in their agency’s history. So one of these days I’m going to do a podcast, a solo-cast on if you can sell during a pandemic, you can sell any time. But that is not the discussion for today, or at least not all of the discussion for today.

My point is though, I think for most of you, you are feeling like the waters are not as rocky as they were. That while you still aren’t sure what’s around the corner and certainly the recession, and those sort of things are still playing havoc with your agency, that for many of you, you feel like now the water is starting to get a little more calm. And we can start looking ahead at what’s next. And I think that’s true for most of you.

And so as our ships get through that storm and they get to the calmer waters, granted, I don’t think we’re all the way to happy days are here again. But I think we’re in a much better place than we were six months ago. So as our ships arrive at this new world, I think the reality is we have to recognize that things are going to be different. And so there are some things that we’re going to have to discover and other things that we’re going to have to rediscover, I think there are some lessons that we probably should have learned earlier or maybe lessons that we learned in the last recession, and then let go, that we have to rediscover now as we come out of the COVID storm.

And I think there are also some things that are going to be new for us to talk about. So I think there’s one given and here’s the given, every agency is going to change because of COVID. There is no exception to that rule, all of us are going to see our agencies evolve in some way because of what we’ve gone through over the last six months. And honestly, what we’re going to go through probably for the rest of 2020. And so I think some of those changes are short-term, I think some of those changes are more long-term. And I think there’s a third factor in there, which I’m calling things we already knew but we ignored. And COVID is forcing us to look at them, even though we have been throw a blinders on about them in the past. I think now, this season for many of us, we can’t ignore it anymore. And so we’re going to have to figure out how to deal with some of those things.

So let’s look at some of the changes that I think are coming. And again, I want you to look at these through your own lens. So depending on where you are in the world, depending on the maturity of your agency, the size of your agency, the work you do, the clients you serve, if you’re virtual, if you’re a brick and mortar. There’s so many variations of you out there, I am not suggesting in any way shape and form, that all of these changes are going to happen uniformly to everyone. But I do think we’re all going to feel the ripples of these. And in some cases, the ripples are going to be pretty big. So let me walk you through these changes. And just listen and filter what I’m saying against what you know about your agency. And what my hope is with this episode is, I’m hoping that this can serve as an early warning beacon.

In some cases, some of these changes may be already starting to happen in your agency. But some of them may be around the corner, and hopefully I can give you a heads up at what is potentially around that corner. And in other cases, we can talk a little bit about how you can mitigate these changes. And by the way, all of these changes aren’t bad. There are actually some really incredible silver linings that have come out of COVID for us as agency owners. So it’s not all bad news, it’s a blend of good and bad news, like life hits, right?

Okay, so let’s talk about some of those. So, one of the first short-term changes that I think a lot of agencies are already experiencing is the cash crunch. So without exception, every time there is an economic downturn, one of the things that happens to agencies is that clients start to slow pay. They start to sit on their cash, they are much more reluctant to give it to us even when they owe it to us. And so if you are used to clients paying within 30 to 45 days, which is the norm for small to mid-sized agencies, you may find that those numbers double, that you’re not getting paid for 60 to 90 days.

And it doesn’t mean your clients aren’t going to pay you, but it does mean you’re going to have a cash crunch. And so cash flow is going to be really critical. So the importance of this is that I don’t want you to let your cash reserves get so skinny that if a client holds out on you for a couple months or a quarter, that you are stuck, that your back is against the wall and you can’t make payroll or you can’t pay your rent or whatever it is. But I want you to make sure you have enough money in the bank that you can in essence flow through this slow period.

So I want you to be thinking about how can you build up a cash reserves. So many of you if you have attended our Money Matters workshop or some of the other things that we teach, many of you know that I am a huge proponent of you keeping two months of operating expenses. So that’s loaded salaries and all of your overhead expenses, that even if you have no profit, that’s money that goes out the door every month just to operate your business. I want you to have at least two months of operating expense inside the business. And then I’d like you to have another two months, ideally, outside the business and you’ve paid yourself, and then you have ready to loan back into the agency.

But for sure, if you have not built up the coffers to have at least two months worth of expenses covered, you need to do that. And by the way, if you had that money, and then COVID washed it away because all of your clients hit the pause button. I need you to think about how are you going to build that back up. And I want you to think about how are you going to build that back up in a way that is consistent and deliberate, and that you don’t let other things get in the way of that. So if you can’t start to build that back up, my guess is maybe you’re hanging on to stuff people that you shouldn’t or some other thing, that the money is going somewhere else. You should be able to put away a little bit of money every month to begin to build a cushion.

And yes, for many of you, you have a line of credit or many of you have gotten the EIDL loan here in the US or some other government aid. And I’m not saying that that’s not a great cushion, but that’s not a cushion that you get to just have and not pay back. So I’d like you to have it in a liquid account, like a savings account or a money market account so you can use the money if you need to without incurring more debt, okay?

So one of the other short-term changes, and when I say short-term, I’m thinking a year or two years. One of the other short-term changes, and this is a great short term-change is, all of a sudden there are a ton of really talented people on the street looking for jobs. So for the last two or three years one of the biggest challenges for agencies is that you really were struggling to find and keep great talent, and you were having to overpay for it because there was such a shortage of people available.

That if you wanted to fill a spot, a lot of times you ended up having to pay a salary that was higher than you originally wanted to or that made sense for you to pay. But you were between a rock and a hard place. Well, the good news is you’re not between a rock, you’re nowhere near a rock or hard place right now. It is just a wide open ocean of incredible talent that is out there. I think that’s going to happen, I think that’s going to be available for a while. I think that’s going to solve our problem for a couple years.

And by the way, this is not a new trend. This happens every time there’s a recession. So if you had your agency during what apparently we call the Great Recession, the 07/08 recession, you saw the exact same thing. You were struggling for talent in 06, all of a sudden the recession came and a lot of in-house departments and bigger agencies started cutting people. And so all of a sudden there was a ton of talent available to you. That does not mean by the way, that you shouldn’t be just as careful about hiring as ever. And in fact, I want to remind you that oftentimes hiring people who have only worked on the client side is not a good decision.

Oftentimes, they struggle with the pace of agency work, they struggle with juggling multiple clients because that’s just not been the life that they’ve led professionally. And so be really careful about hiring but you certainly have more candidates out there to choose from. So if you want to trade up talent, if it’s time for you to replace a mediocre employee that you were hanging on to simply because you couldn’t find someone else to fill their spot. If you need to add a new skill or build up your team in some way. Many of you are hiring people right now because business is good. Or if you have some employees who are not going to come back to work, they’ve decided for whatever reason they’re going to stay home and homeschool their kids or whatever it may be. There’s a lot of talent out there, so that is certainly one of the silver linings of COVID. And I think we will reap the benefit of that change for at least a year. So be thinking about your team and where you might make some improvements or some additions because now’s a great time to do it.

On the long-term side, I think there are also a couple changes we need to be thinking about. One of them is I think that the work-week as we know, it is never going to look quite the same. So prior to COVID, there were still a lot of agency owners who were adamant, that everybody be in the office from 8:00 to 5:00 and, not that they made people clock in, but in essence, they made people clock in. And that everybody had to be under the roof, and it has to be super collaborative. And I think the last six months have proven that in a crisis, we can work from home.

I also think in the last six months, the working from home has proven to be both a benefit and a problem. A lot of agency owners are telling me that their folks have never been more productive. And I want to remind all of you that that is true. But remember, A, they were afraid they were going to lose their job. B, there were no other jobs out there for them to have. C, they didn’t have anything else to do. They couldn’t leave their house, they couldn’t go have lunch with friends, they couldn’t go to a yoga class, they couldn’t go mow the lawn in the middle of the day. They were stuck at home and all they could do is think about work and keeping their job. And so of course, they were overproductive.

And so while that is awesome, we’re quickly moving into a place where for most places in the world things are opening up, people are able to get out and about and they are able to go back to restaurants and into the gym and all of those things. And the pressure is different. So some of your employees will be rock stars whether they work at home or in the office. Other folks, that’s not the ideal environment for them. However, I think it’s really going to be hard for us to make the argument that everybody has to be at work all day, every day.

And when you have big companies like Google and Microsoft and other places coming out and saying, “Well, we might not come back to the office ever at all.” Or, “We might not come back until 2022.” Is difficult to make the argument that everyone has to be under one roof five days a week. So I think what’s going to happen is, I think many agencies, this is my prediction, I think many agencies are going to move to a hybrid model. But I think the smart hybrid model says, “Okay, we’re going to mix working from home and working at the office, but we’re going to mix it in a way that we’re doing it together.”

So one of the reasons why work from home and worked during COVID close downs was because everybody was working from home. And so everyone was on in essence a shared platform, everyone was working in the same way. Agencies that have already gone back to the office and some people are working from home still, because maybe they have a compromised immune system. They’re reporting that is a very different game. When some people are in the conference room and other people are on the Zoom call, it doesn’t feel the same and it doesn’t work as well. It’s clunkier, it’s less collaborative, people feel left out. They sometimes forget to include people who aren’t in the office.

So I think there are all kinds of challenges around this hybrid model. Here’s the way it works, is if everybody for example, I’m hearing a lot of people say that they’re going to do work from home Wednesday, I don’t know what it is about us agency people, but we love alliteration. So a lot of agencies are moving to a four days in the office one day work from home and that day when you work from home, it’s a no meeting day. So it’s actually just about being productive and getting work done. And for some reason, Wednesday makes sense. I totally get why it’s up Monday or Friday.

Other agencies are doing, “We’re going to work from the office Monday, Tuesday. We’re going to work from home, Wednesday and Thursday, and then come back to the office on Friday.” But I think you’re going to see A, that the work-week is different. I think clients are going to be a little less freaked out about agencies that don’t have a brick and mortar location. I think that clients are going to be a little more tolerant of the cat walking in front of the monitor as you’re in the middle of a Zoom call and some of those things which we have all experienced with each other since COVID hit.

But I do think that I think in by, let’s call it first quarter of 2021. So by March, I think most agencies will be back in the office most days of the week. And that agencies that are experimenting with this hybrid thing are going to very quickly move to a, we either all going to be at the office or we either all are going to be at home. And this doesn’t take into account exceptions like, “Hey, I’m going to work from home because my refrigerator is being delivered.” It’s not that, it’s like deliberate planned work from home, like every Wednesday and Thursday we work from home.

I think you’re going to see a lot of agencies moving in that direction. And you may be thinking about it as well. I just want to also remind you though, especially around this work from home thing, because I’m also hearing agencies say, “You know what, my lease is up, I’m not going to go back to it, this is working great.” Understand that this is this weird moment in time. It’s not forever and it’s not normal. And so be really careful about making permanent decisions in this moment of chaos, in this moment of change, in this moment of flux.

I wrote a newsletter article a couple weeks ago, and what I was saying was that I’m worried that a lot of agency owners are making big unilateral decisions. And right now, honestly, they have grief brain. I learned when I lost my parents how real that was. And that a lot of people said to me, “Drew, don’t make big decisions within X number of months after losing someone because you really are in this fog of grief.” And honestly, and I’ve talked to you about this, I think we’re all grieving because of COVID, we’re grieving the amazing year we were going to have. Many of you came out of the gate into 2020 with the best of January and February in the agency’s history. So I think we’re grieving the loss of that momentum. I think we’re grieving the loss of business in some cases or team members. Certainly, we’re grieving the loss of our own personal freedom.

Many of us have suffered personal losses. So you’ve got this grief fog around you, whether you recognize it or not. So just be careful about making permanent decisions about the way you’re going to work. I would caveat everything like this is an experiment, we’re going to try this for 30 days or 60 days or 90 days, but be really careful about making sweeping decisions that are difficult to unravel if you find out that it wasn’t really a decision you wanted to make. So long-term, I think the work-week is going to change.

Another long-term change is I think we are seeing a level of mental health issues, depression. People just struggling to get through this in a way that we as a world have never seen. I don’t think we’ve had this widespread despair, and anger and frustration. There’s just all these emotions bubbling under everybody, every one of us, I certainly know I’m experiencing all of those emotions. And I think some people are having a really hard time keeping those emotions in check. And I think the outcome of that is going to be at this long-term, which is some of the people that have been on your team for a long time or maybe you’ve hired in the last couple of years. But some of the people that you thought were really ready to climb up the mountain with you, and we’re ready to take on the next challenge I think they’re going to nope out. Do you think that they are just going to say, “You know what, I just can’t do it. I don’t have the stamina, I don’t have the energy, I can’t keep going.”

So for some of them, it’s going to be mental health issues. For some of them, it’s going to be paralyzing fear that they just don’t want to leave their house, they’re afraid to be in any work environment. They don’t want to be in a closed building with other people. And they’re not going to be able to shake that fear even when the worry and the need for that fear goes away. I think some of them are just could have been at home for so long that that becomes the new habit. Whether it’s with the kids, whatever it may be, I think COVID is going to cost you employees. And so you need to be watching your team carefully for signs of who’s struggling and who’s going to make it and be thinking about if somebody doesn’t make it, if somebody just gets to the base of the mountain and says, “I just can’t climb this mountain with you anymore.” Then you need to be ready to replace them very quickly.

And so I think that is going to be a big change for many of you. I’m seeing a lot of older employees who have been doing this for a while that just don’t have enough gas in the tank after COVID and so they’re retiring early. I also see in young people who are really freaked out about this, keep in mind for most people under 30 this is the first real crisis they’ve ever faced as an adult. And this is a doozy, a global pandemic. To cut your teeth on grown up decisions and life suck sometimes. Reality is, this is a heck of one for those kids to cut their teeth on. And so for some of them, they are going to have the coping skills and some of them are not. So be mindful that your team is going to change. I think there’ll be very few agencies that come through COVID unscathed, where they don’t have any employee changes at all. Whether that’s because you made the change because of AGI ratios or because they just decided they just couldn’t fight another fight.

Another long-term reality is that our clients are skittish, and they’re going to be skittish for a while. They are very concerned about losing their job, they’re very concerned about making a mistake that’s going to make them look bad in front of the C-suite. And so I think a lot of clients are going to make the safe choice when it comes to choosing an agency. So what I think that means for us is, we have to become the safe choice. And one way to become the safe choice is to lead with your subject matter expertise. So if you have a depth of expertise in a specific industry or with a certain audience, I think you are going to be a much safer choice for a lot of clients than a generalist agency. And so if you do have a niche or niches, now would be a great time to accentuate those on your website, in your talking points when you’re out selling, whatever it may be. I think you want to position yourself as an expert not only in marketing, but in the clients industry or with the audience that they care about. So that they feel like they’re getting a double whammy that feels like a lot safer choice for them right now.

The other thing is, I think this is going to be and for many of you, this is good news, because most small to midsize agencies lean this way anyway. But I think this is going to be the season for agencies that their first foot forward is strategy, not creative. I think a lot of clients while they love gray creative and they love winning the awards and all of that stuff, what they really need now, right now is they need to ring the cash register, whatever that means for them. Butts in seats or sales or whatever donations, whatever it may be, they need to demonstrate ROI. And so they’re going to be looking for agencies that have the business acumen to help them move the needle. And that’s going to be much more important to them than groundbreaking or award winning creative, at least for the next year or so I think.

And tied to that, another long-term result and change for us because of COVID is that sales are sexy, that is going to be the metric for most clients right now. They just like all of us, they went through a period of two, three, four months where their income was dramatically impacted, unless they were a grocery store. There are certain industries that have made a lot of money during COVID. But most businesses B2B and B2C, most businesses, that was not the case. They were stagnant or worse, they went in the hole for at least a quarter. And so now they are trying to make up for lost time. And so what they really care about, they care about sales.

And so agencies that are good at connecting the dots between marketing and sales, and bringing those two efforts together, those agencies are going to earn their clients confidence and trust very quickly. And going to earn more money, more opportunity with those clients because if you can prove to your clients that you can make the cash register ring, I think you have an unlimited access to their wallet. Because right now that’s what’s going to save their job is ringing that cash register.

So whether their sales and marketing departments are distinct and you have to help them come together, or whether it’s a sales and marketing department, and you’re working both on top of the funnel stuff, but you’re also doing sales enablement, training, lead gen, lead scoring, all of those things. That’s going to be a critical skill for you as an agency to prove that for every dollar they give you, you can give them $3 back in sales. That skill, the ability to do attribution for your efforts and tie it to sales or trials or something that gets them close to a sale is going to be critical for you to retain that client long-term.

Right, so before I tell you about some of the things that I think we already knew, but we were just trying to ignore. Before we do that, I want to just take a quick break, and I’ll be right back.

Hey there, do you have an up and comer inside your agency who’s become like your right hand person? How are you investing in them? Who are they surrounding themselves with and who are they learning from? You might be interested in taking a look at our key executive network. It’s built to help you groom the leaders in your agency. It’s designed to surround them with other AMI taught agency leaders and it’s facilitated by one of my top coaches Craig Barnes. They meet twice a year and they stay connected in between meetings with calls, Zoom get togethers and email. AMI agency owners call it one of the best professional development investments they’ve ever made. Head over to agencymanagementinstitute.com and look under the membership tab for key executive network. All right, let’s get back to the interview.

Hey, welcome back. Before I get back into the changes that I believe COVID is going to rain upon our agencies good and bad, I wanted to remind you that every month we give away a free seat in either one of our live workshops or our on demand workshops. And so this month’s winner is Julianne McCullum from Yellow Duck Marketing. S