As agency owners and leaders, we have 90 days to put 2020 to bed and get ready for 2021. To help you prepare, I’ve created a To Do list for every agency owner to work through in the 4th quarter. Use this checklist to dodge the landmines and give your agency a leg up for the new year.
In this episode of Build A Better Agency, I’ll walk you through the To Do list I’ve built out based on what I call the four critical components of a profitable and growing agency. They are leadership, biz dev, getting it done and managing the money.
With some focus in each of these four areas, you can go into the new year with confidence that your agency is ready. The To Dos won’t cost you a dime, but they will cost you some time and attention. Don’t wait until December to start executing on this list. Start 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/
What You Will Learn in This Episode:
- What agency owners should be doing between now and the end of the year
- The four critical components of a profitable and growing agency
- What we can do to replenish ourselves and our teams after all that has happened since March
- Why this crisis is a great opportunity to level-up our teams
- How to get our finances in check so our agencies are profitable going into 2021
- What we can do to improve our project and client management processes
- How to incorporate our new biz dev tactics as permanent pieces of our biz dev strategy
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!
Ways to contact Drew McLellan:
- Email: [email protected]
- LinkedIn: www.linkedin.com/in/drewmclellan
- Website: https://agencymanagementinstitute.com/
Tools & Resources (if needed):
- Agency Owners To Do List for 4th Quarter 2020
- Racial equity report card
- Sell with Authority (buy Drew’s book)
- Facebook Group for the Build a Better Agency Podcast
If you’re going to take the risk of running an agency, shouldn’t you get the benefits, too? Welcome to Agency Management Institute’s Build a Better Agency podcast, presented by White Label IQ. Tune in every week for insights on home small-to-mid-sized agencies are surviving and thriving in today’s market. We’ll show you how to make more money and keep more of what you make. We want to help you build an agency that is sustainable, scalable, and if you want down the road, sellable.
With 25-plus years of experience as both an agency owner and agency consultant, please welcome your host Drew McLellan.
Hey, everybody, Drew McLellan here with another episode of Build a Better Agency. Thanks for coming back if you are a regular listener, and if this is your first episode, buckle up, because we have a lot to talk about.
I am with you alone today, so this is one of my solo-cast episodes. Normally, as you know, we have a guest in the studio, as it were. Wonder if that expression will go away, since nobody does this in the studio anymore. But anyway, normally we have a guest with us, and my job is to pick their brain on your behalf. But every fifth episode is a solo-cast, and that’s where you and I just chat about something that I think needs to be on your radar screen, and I have a lot for us to chat about today.
So I’m going to get to it pretty quickly. But first, a couple reminders: number one, this spring, actually, it was probably this summer, as the Black Lives Matter movement made all of us more aware of some of the racial inequality in the world and certainly in our industry, one of the things that we did to try and be helpful was we created a racial equity report card. My purpose in doing that was to give you a tool that you could either privately, just amongst yourselves in the agency, or publicly, grade your agency in terms of how you’re doing on bringing equity inside the agency.
So my recommendation is that you grade yourself every quarter, and some agencies are choosing to make this public on their website just to demonstrate to the world that they are paying attention to this issue, and others are keeping it as an internal document. I think either way is just fine, I think that’s about your brand and your culture and how you want to do that. But what I do want you to be doing is thinking about how we can bring more equality inside our shop.
So if you haven’t downloaded that report card, if you go to AgencyManagementInstitute.com/RacialEquity, so not equality, equity. Slash racial equity, you can download that PDF and use it to your heart’s content. If you look at it and you add something or you think there’s something that could be done to enhance that report card, I would love to hear about it. It is certainly a work in progress, I don’t claim that it is the best tool on the planet. I did run it by several experts in the racial equity space and got their input before we put it out into the world, but I would love your input as well. So go grab that and use it however it makes sense to serve your agency.
Also, one of the things I do on the solo-cast is, almost every week I am reminding you that I would love it if you would us a rating or review on the podcast wherever you download podcasts. What I ask you to do is leave the rating and review and then take a screenshot of it, because a lot of you, your usernames or your logins for your podcast software, especially if you use iTunes, or I guess that’s Apple Podcasts now. Your username may not match your name, and it certainly doesn’t tell me what your agency is. So take a screenshot of it and shoot me an email with that attachment, and that’s it, you’re done.
And then your name goes in a drawing, and then every month when we do the solo-cast, we draw a name and we give that lucky winner access to either one of our live workshops or one of our on-demand workshops. So agency owner or leader leaves a rating or review and then wins a $2,000 course, how awesome is that? So this month’s winner is Megan Peterson from the DeForest Group, so Megan, I am going to be shooting you an email as well, in case you are not listening to this in real time. But congratulations, you can choose one of our workshops to attend; we have some great ones coming up in December and January. We also have the on-demand courses that are available any time.
All right, so, with the administrative duties done, let’s talk a little bit about this podcast episode. So I am, as I’m sure you are as well, I am very aware that we are coming up on the last quarter of the year, and there are some things I want to make sure you’re thinking about and doing to get yourself ready to launch into 2021, but also to wrap up 2020 in as tight a bundle as you can.
So what I’m going to give you, in essence, is a checklist of things I want you to consider doing before the end of 2021, and some of these things are going to be monthly and some of them may just be once before the end of the year. But I just want to give you a to-do list, if you will, worthy of consideration. I’m not suggesting all of you will do all of them, but these are the things I think you need to really be focusing on between now and the end of the year.
And I’ve categorized them in what I consider the four critical components of agency management, so those critical components are leadership, getting it done, money and biz dev. If you think about it sort of in a circular fashion, it starts with leadership, and if you don’t have your ducks in a row and if your team doesn’t have their ducks in a row, doesn’t really matter what else you do. From there, you have to win some clients; after that, you actually have to do, so that’s the biz dev part. Then after that, you have to actually get the work done, so that’s all about process and systems and quality work, the marketing savvy that you bring to the work that you do.
And then last, but certainly not least, it is about the money. How do you price appropriately, how do you build our proposals, how do you make sure that you make the right amount of money, you’re making good financial decisions based on the metrics that we teach, and then how do you make more money and keep more of the money you make?
Those, to me, are sort of the big, if you will, the big core things that we as agency owners and leaders need to be thinking about every day. So what I’ve done is I’ve sort of organized my to-do list in those four categories.
So let’s stalk … let’s not stalk. Never stalk, stalking is bad. Let’s talk about leadership first. The first thing I want you to do is I want you to be, I want you to take stock in where you are at, personally and professionally, mentally and emotionally, because I think we have a hard slog going into the tail end of 2020. I think not only do we have the COVID stuff, but here in the United States we have a very contentious election, we have all kinds of crazy things happening because of the Supreme Court, and I think we still have racial protests. So I’m sure, in lots of places on the planet, there’s other things other than COVID that are creating unrest, and I certainly know that that’s happening in the U.S.
So if you’re like me, you have been running full-tilt since March, and you have been running full-tilt trying to keep your work family and your personal family okay and healthy and focused on where you are trying to get them to go. It’s exhausting, I know that I … I don’t think I’ve ever been this tired. I don’t think I have ever been, I’ve never felt quite the weight on my shoulders that I have felt in the last six months, and I’m sure that you are feeling the same.
I certainly have gone through some really tough times, like I’m sure all of you have, in the past that had nothing to do with COVID. But I think it’s the accumulative effect, the lack of relief, and the fact that, for most of us, this is all-encompassing. So I think you need to really do a gut check about where you’re at, and I think it’s super-important that you spend some time figuring out, in this environment, whatever that environment is for you, in this environment, how are you going to replenish yourself? How are you refilling your bucket? Because I think for a lot of leaders, we’ve been running so hard and so fast, and with such urgency, that we have not been doing a great job of taking care of ourselves and sort of being aware of where we were at mentally, physically, spiritually.
I don’t think we can go much longer without figuring that out. I think you’ve got to have a plan for refilling your bucket. And I think you have to carve out time to do that. Many of you have taken vacations, maybe they have not been the vacations of your dreams, this summer to spend more time with family and to sort of get away from things. Some of you are indulging in more reading for fun, some of you are stepping up your exercise game. I think a lot of us, perhaps, were drinking a little more this spring than we normally did. I don’t know about you, but I had to really put that in check. I don’t drink at home alone very often, and I found that I was and realized that was really not a healthy choice for me.
So I am sure you have been doing some coping things, but what I want you to do is I actually want you to sit down and spend some time thinking about what it is that gives you peace, that gives you respite, and make sure that you are baking that into your week. And I also want you to give yourself the gift of something to look forward to. So even if it’s a year away, I want you to find something that you’re excited about.
I have a friend who signed up for an Iron Man late in 2021. I am going on a trip, I’ve got a friend, we figured out it’s our 50th anniversary of our friendship, we met in grade school, so we are planning a trip to Ireland and Scotland to do a bunch of distillery tours. And I can’t wait to do that, and we’re talking about it and we’re planning it and we’re picking where we’re going to go. So whatever it may be for you, give yourself something to look forward to. Give yourself some joy that is out there in the distance that you can kind of keep looking at and keep pushing towards. Take care of yourself, that’s number one.
Number two is I want you to do the same thing around your team. You’ve got to find out where your team is at, how they are taking care of themselves, how they are coping. And I know for some of you, that’s a weird line to cross over. But these are weird times, and you’ve got to know that your team is mentally healthy. And if they’re not, you need to help them find their solutions, whether that’s a therapist, which, by the way, is a fine solution for us as well. Whether that’s a therapist or, again, it’s getting them in a running program or whatever it is you can support and help them to do is, I believe, a critical leadership skill for us right now.
We cannot just be about business right now, can’t. Our personal lives and our professional lives, I believe, have always been pretty melded together, and I think it’s a façade to think that you have sort of Work Drew at At-Home Drew. I think you just got Drew, right? And I think that’s true today more than ever before as work intrudes on people’s personal lives, people’s personal space, if you’re still not back at the office. So I think you really need to check in with your people and make sure that you have a really good understanding of where they’re at.
If you’re a larger agency, by all means, dispatch this out to your leadership team, and everybody divvy up the employees. But everybody should have a good check-in and help them create a plan for how they’re going to get through these last three months and then get into winter, which for some people is a point of depression all in itself.
Especially your younger employees; one of the things that I’ve been thinking a lot about is that for employees that are 30 or younger, or early 30s and younger, this is really the first crisis they’ve navigated as an adult. And man, this is a doozy of a crisis to cut your teeth on. I think you have to be extra diligent in taking care of them. I think that’s the right thing to do for the business, I think it’s the right thing to do as a human being, but on the same side, I also want you to be paying a ton of attention to how your team has shown up in the last six months.
I believe one of the silver linings of COVID is that your employees have shown you exactly who they are. When we are faced with crisis, and that can be a death in the family, it can be an illness, people’s façades move away pretty quickly, and you get to see exactly who they are and what they’re all about. Many of you have talked to me about employees that have surprised you by really showing up, or surprised you by really not showing up. So I want you to pay a lot of attention to how they’ve shown up over the last six months.
Yes, cut them some slack in terms of acknowledging that this is difficult times and that you know that they’re struggling just like everybody else is. However, you now know who your rock stars are and who your yabba-dabba-doers are. This is the time for you to be thinking about, can I trade up? Just like in baseball, I think we sort of have a trading deadline, and I think the trading deadline is now, I think there are a lot of great employees out looking for jobs right now, a lot of agencies, a lot of brands have let go of marketing people, so I know a lot of agencies that I work with every day are hiring because they’re having a great year.
The talent is out there. They’re able to find some really amazing talent, so while I want you to be a compassionate human being and I want you to care about your employees, I also want you to recognize if you’ve got some B or C players, particularly C players that you don’t believe you can coach up to being a B player, now is the time to beat the trade deadline and trade up that employee. So be thinking about that, be thinking about leveling up your team.
I had a great conversation with an agency on here yesterday, and we were talking about sort of her vision of the future, and so we reworked an org chart for the agency she wants to build, and I said, okay, so now, assuming you’re interviewing for all those positions. Which of your full-time employees would you want to interview for one of those positions and then hire for one of those positions? Oh, and by the way, at a 10% increase in salary. That was really eye-opening for her, and she ended up deciding that a good half of her employees would not be offered jobs. So go through that mental exercise for yourself and think about your team. Now is a great time for you to level up your team.
Then, the other thing I want you to be thinking about in terms of the leadership is I want you to be thinking about, really, what do you want your agency to look like in a year? And a lot of this is around whether or not you continue to work from home, if you have not gone back to the office, if you want to be a brick-and-mortar agency, if you want to go virtual, how big do you want to be? And you’ve gotten some insights into who you should be serving, the kind of work that you do best. A lot of you really push the pedal on biz dev, so what were the things that you offered, or to what industries that you offered it to, did you really have a lot of traction?
I want you to think about, and I think this is the perfect time, as we go into planning mode, which for me is always fourth quarter. What is the agency of 2021 look like for you? And by the way, when it comes to being back in the office or not, the number-one determinant of whether or not your agency is back in the office, honestly, as I’m looking out over the 250 or 300 agencies that we serve on a pretty consistent basis, the number-one indicator of whether or not you are back in the office is you. It is about your attitude about COVID, it’s your attitude about how safe it is to be in a small group of people, it really is … I can’t think of an exception.
Without exception, every agency that is back in the office is because the agency owner didn’t poll the team, didn’t get everyone’s weigh-in on whether or not it would be easier or harder to work from home or work in the office. But at some point in time, the agency owner said, look, we’re losing productivity, we’re losing collaboration. I can feel the drain of energy and morale that is happening because we’re not physically in the same place, we are going back to the office, and here’s the plan.
So if you’re not back in the office and you want to get back in the office, this is not a committee decision. This is not a group decision, this ultimately is something that you have to make happen. And again, that’s completely up to you, it’s your shop, but understand that you are abdicating your responsibility by making it a group decision, because what you’re going to end up with is indecision, every time.
So the agencies that are not back and the owner wants to be back, or the owner wishes they had put their foot down about going back, they’re stuck now in this quagmire of, when do we go back, are we ever going back? And again, you may choose never to go back. That’s okay, too. But it’s your business and it’s your decision to make. So be mindful of that.
So that’s some things I want you to think about in the leadership realm. The other thing I want you to think about is one of the ways many of you have wisely used this COVID time is to really ask your people to step up their learning. So whether it’s getting certifications, whether it’s taking courses, whether it’s going to workshops online or in person, to the extent that they’re available, whatever it is, many of you have done a great job of really helping your team get better. And I think the fourth quarter is great time to continue that trend.
We did both of our AE boot camps in September, and we did them virtually, and we had a ton of people in those courses. I’m telling you, those employees are hungry to get better and to contribute more. So look for opportunities to grow your employees. If you’ve got some A and B employees, and even some C employees that you think could level up to a B, you shouldn’t be thinking about your D and F employees, you should be replacing them. But if you’re going to keep an employee, then you absolutely need to invest in them, right? What is that old expression: what does it cost me if I invest in an employee, and then they leave and they take that knowledge with them? The counterargument to that is, what does it cost you if you don’t invest in them and they stay?
We can’t afford in our industry to not keep getting better and not keep getting smarter. And there’s all kinds of ways to do that, so be looking for opportunities to invest in your folks and help them get better, all right?
So let’s talk a little bit about the money section of my four critical components. Here are some things I want you to do around money this fourth quarter that I think are critical: number one, I want you to start tracking your cash flow if you’re already not doing it, and be projecting out for 90 days. If you have not already experienced it, you are going to experience the slow-down of pay from clients as they continue to hoard cash. I expect the election here in the United States will have a trickle effect throughout the world, but certainly here in the U.S., whatever happens in the election, there is going to be an economic response to that election.
As most people are predicting, for the first time in our country’s history, we’re going to have an election that isn’t decided on Election Night, it’s going to be contested and it’s going to be a big, hot mess. There’s nothing the market hates more than uncertainty, and we’re about to give it a bunch of uncertainty, I think. So as a result, our clients are going to be financially fearful, and they’re going to hoard cash. So make sure you’re projecting your cashflow, make sure you have enough cash to really weather clients slowing down their payments. And if not, right now you’ve got to figure out how you’re going to solve that cash problem.
You absolutely have to have a solution in place to do that, so number one is tracking cashflow and projecting out 90 days. Number two, and if you’re an AMI agency, this is going to be old news to you, but if you are not, it’s critical for you to be paying attention to your adjusted gross income. So very briefly, you’ve got your gross billings, everything you bill a client, you’re going to subtract your cost of goods, including any 1099s or contractors that you have. I will argue that on a different podcast, but I don’t care what your accountant says, your contractors are a cost of goods.
The only exception to that is, let’s say you have an outsourced CFO or something that they do no billable work whatsoever. That’s fine, you can count them as an overhead expense. But anybody you’re paying to do client work is a cost of goods if they’re a contractor. So you’ve got your gross billings minus your cost of goods, and what’s left is your adjusted gross income. That money is the money you have to run your agency.
I want you to be paying attention and make sure that the AGI is broken up into three buckets: loaded salaries, overhead, and then profit before taxes. Your goal is for your loaded salaries to be at about 55% of your AGI, your overhead to be 25% or less of your AGI, which would leave you 20% for profit before taxes. I want you to be tracking that every month, and I want you to know exactly where you’re at so you can make great decisions about staffing, about expenses, whatever it may be. Not knowing that set of numbers means you’re operating your agency wrong, and I have beat this drum before, many of you have already heard it. But I was chatting with a guy the other day who has been listening to the podcast since almost its inception five years ago, and that was kind of news to him. I want you to pay attention to the 55-25-20.
And by the way, just a side note because I just said it, October of 2020 is our fifth anniversary of the podcast, so if I have not said it, I know I said it upfront, I will say it now in the middle: thank you so much for listening and hanging out with me for the last five years. I promise we’re going to keep doing this. It’s sort of startling to me when I think, gosh, I’ve been doing this for five years. Anyway, that was a little aside, so 55-25-20, your AGI, critical.
Then what I want you to think about is, a lot of you are thinking, 20% profit? There’s no way I’m going to have that in 2020 with COVID and all the crazy. So here’s what I also want you to do in the money quadrant of the four critical components: I want you to decide what profit percentage is acceptable for you. How much profit are you okay about having at the end of the year? Note I did not say decide whether or not you are profitable, that is not an option. You absolutely need to finish in the black, even if that means making some tough decisions around employees or other expenses. I absolutely want you to finish in the black.
But you are going to decide … so I’m a big proponent of the 55-25-20, but of all the years where the rules may have to be modified, it is 2020. So maybe you’re okay with ending the year with 5% profit or 8% profit or 12% profit. You need to decide what’s acceptable for you as a business owner, for the agency, for you and your family personally, to cover your taxes, lots of things to roll into that decision.
But I want you to decide what is an acceptable profit percentage for you to end up with at the end of 2020, and I want you to manage the business for the last three months of the year to make sure that you hit or exceed that profit percentage. It’s critical. No one can decide to stay in the red, you have got to manage the business. Even if you’ve been avoiding making some really difficult decisions, you’ve got to make those difficult decisions and make sure that you end the year in the black.
You just can’t go into 2021 limping, you just cannot do it. You’ve got to go in strong, and that means that you’re running a profitable, well-run, financially sound business. Every one of you needs to do that, regardless of what decisions have to be made to get you there, okay? This year, I’m giving you the Drew Rule of you get a magic card that says you get to decide the profitability. If 55-25-20 works for you and your shop, that’s awesome. But in 2020, if the first two numbers are big and you only end up with 3% profit and you’re okay with that, that’s okay. But I don’t want you to be surprised at the end of the year, I want you to decide how you’re going to end the year, and then manage the business to make sure you get there, okay?
Then here’s another thing I want you to do: this is just for those of you in the U.S. If you got PPP funds, you know that that is going to be considered taxable income. So I want you, if you have not done this already, I want you to pick up the phone as soon as you are done listening to this podcast, or shoot an email to your tax advisor and get on their calendar. You need a strategy for managing the PPP funds as income inside your business. Do not wait until the end of the year to figure this out, because for many of you, the PPP funds were a big chunk of change.
I want you to have a great tax strategy to deal with the PPP liability on your taxes, so again, as soon as you’re done listening to this, you have a conversation with your tax person. Get on the calendar and have a strategy for how you’re going to mitigate the tax exposure that you have because of the PPP funds, all right? So again, that’s just for the folks in the U.S.
The other thing I want you to think about, and now we’re back to all of you, is I want you to make a commitment to yourself that you are not going to go unpaid for any pay period through the end of the year. So some of you, because of COVID, because of business pause or loss, some of you have hit the pause button on your own paychecks. You got to stop that. I understand doing it every once in a while for a moment, but you cannot do it for a period of time. All that means is that you are not running your business well, and you are artificially inflating your numbers because you don’t want to make difficult decisions. But the reality is the business can’t afford all of the people you have on payroll or all of the expenses you have if you don’t get paid.
If you want to take a shave on your pay for a little while, which many of you have done, I think that’s acceptable. But you not getting paid a paycheck at all, you at least not getting paid enough that you can fund your retirement account or do the things that you need to do, that’s not acceptable. All that means is you’re masking the problems of your business by infusing your money, your salary, back into the business. I get that you did it for a while, I get that you might’ve done it in March and April when this whole thing blew up, but you’ve had six months now, seven months, to manage this new normal. And one of the things you have to be able to manage is that you get paid.
Do not allow yourself to go unpaid, don’t delay the difficult decisions, and do not put yourself into a hole. This gets back to my finish in the black, not the red. You cannot afford to go into 2021 in the red, and I mean that both professionally, meaning your agency, but I also mean it personally. We need to take care of our own families, we need to take care of ourselves, and of all of the people who work at your agency that don’t deserve not to get paid, it’s you. So do not go unpaid through the end of the year. If you have trimmed your paycheck, fine, but make sure you’re taking money home just like everybody else is every pay period.
And if you’re having a good year, which by the way, many of you are. If you’re having a good year, then what I want you to do with that excess cash is I want you to do two things: one, I want you to clean up any debt that you have. Again, depending on what happens in the world, how much longer COVID lasts, what happens in the U.S. elections, the economic situation we’re in may stay where it’s at, it may even get worse. So I want you to clean up debt so that you’re not carrying that and you’re not trying to service that debt, and I want you to build up a nest egg.
Remember, best practice is that you’re going to have two months of operating expenses inside the business. If you don’t have that now, I would like you to build up towards that so that you have that cushion that will allow you to weather the cashflow issues and some of the other things like that. All right?
So we’ve gotten through two of the four quadrants. I want to take a quick break, and then we will talk about biz dev and getting the work done. Okay? I’ll be right back.
When it comes to conducting a client satisfaction survey, your agency has three choices: the first one is adopt a don’t ask, don’t tell policy and just roll the dice. Your second option is to do the study in-house, and the third option is to use a third party to conduct your client satisfaction survey. If you decide that you’re ready to invest in protecting your client relationships and improving your win-and-keep ratios, we believe there are some benefits of using AMI as your third-party research partner.
Number one, we know emphatically that your clients will tell us things that they just won’t tell you. The reality is they’re going to speak more freely if they’re not talking to you directly. They don’t want to hurt your feelings, and they don’t want to get into a big conversation about it. So a third party is a safe place for them to share their real feedback. The second is that, at AMI, we don’t have a bias about any particular client. We don’t know if you like them, don’t like them, if they’re a pain, if they’re your favorite. So because we understand the agency business, but we don’t come into those conversations with any preconceived notions, we can absolutely give you unbiased and unfiltered information based on what your clients tell us.
And you know what? We know agency clients. We can hear what they’re saying, and we know which threads to pull on as we’re talking to them to get more information for you and more insight. Your clients will be comfortable talking to us because we speak their language. If you’re interested in having AMI do your customer satisfaction survey, head over to AgencyManagementInstitute.com and look under the How We Help section of the website to learn more. All right, let’s get back to the show.
All right, welcome back. Let’s talk about the last two quadrants that I think are critical to running an agency. Again, those four quadrants are leadership, biz dev, getting the work done, and the money side of it. So think of it as that sort of happens in order, right? I’m not going in that order today, but that’s sort of how it happens in agency life.
All right, so let’s talk about getting it done. There are three things that I want you to start measuring to assess whether or not you’re getting it done well. The very first one is, I want you to implement daily time sheets. We’ve talked about it ad nauseum, I’m not going to argue with you about it, I am telling you that I don’t care what other consultants say, I know we don’t like doing them, I know it’s the equivalent of having to exercise every day, but if you don’t know how your people are spending their time and you don’t know if you are spending too much time on a job, if somebody maybe needs more training to actually do their job, cannot tell you all the things that come with the knowledge that comes with doing daily time sheets.
Time sheets are 67% less accurate when you don’t do them every day, they’re not perfectly accurate to begin with, so why make them more inaccurate? I just wrote a blog post on how to implement daily time sheets in kind of a carrot-and-stick approach to encouraging time sheets. But I don’t want to take up too much time in this podcast, just hear me loud and clear: I know that they suck, but I also know that they’re critical. They are a foundational piece of information that you need to run your business well. So implement daily time sheets if you haven’t done it.
Then from that data, you’ll be able to get these next two pieces of data, which are critical. The next one is I want you to measure and track the billability of your team, meaning how much of their time is spent on billable tasks and the utilization, which means how much of their time is actually charged to a client. I don’t care if you bill by the hour or not, that doesn’t matter, you can figure that out. The two numbers are billability, how much of Drew’s time is actually spent on billable tasks versus non-billable things, and utilization, how much of Drew’s time actually shows up on a client’s invoice?
Those two pieces of information are critical, so your billability for your entire agency, whether they are billable or not. Let’s say you have 12 employees, a few are non-billable, you have a CFO and you have you, and neither of you are billable at 50% or more. But you need to take all 12 employees and look at their time. 60% of that aggregate time has to be spent on billable tasks. Most of you are going to be horrified to find out you’re somewhere in the 40s, and when you start measuring this you’ll start to move the needle on it.
But you’ve got to be at 60%, which means that some of your employees have to be at 80% to cover for the people who are not billable. This tells you a whole bunch of important facts that … sorry, that’s your utilization number. 60% of your time needs to actually be billed to clients. It’s really early in the morning here, and my brain doesn’t work as early in the morning. So billability, you need to be probably in the 70% range, and utilization, you need to be in the 60% range. And you’re probably in the 40s. So, critical elements for you, billability and utilization.
Then what I want you to start doing, the other thing I want you to start measuring and the getting it done is I want you to start looking project-by-project, and most accounting softwares will give you this information. Are we delivering it on time? Your project management software will tell you that. And are we delivering it on budget? So in other words, are we writing time off? I want you to track how much time, on an aggregate, you’re writing off.
If you are delivering your projects on time and you are delivering them on budget, meaning you’re not writing a bunch of time off, and the agency’s billability and utilization metrics are in line, now you know that your agency is healthy. And when any of those ratios are out of whack, what that tells you is you need to dig in. Is it an estimating problem? Is it an employee skill problem? Is it a clarity of information, so are our creative briefs or our marketing briefs lousy, which means the production team ends up having to do things over and over, because the AE looks at it and goes, oh no, that’s not right, they didn’t include the information in the marketing brief?
When your ratios are off, when you’re on time and on budget, billability and utilization, when any of those four numbers are off, there could be a lot of places where you are broken and you need to fix it. But think of these as your check-engine-light indicators. When those four numbers are … when you’re 55-25-20 and those four numbers, on time, on budget, billability and utilization, when those numbers are all sort of in the green zone, if you’re thinking about a dashboard on your car, your agency is healthy.
Any of these four indicators, on time, on budget, billability, utilization, any of those are out of whack, number one, your 55-25-20’s going to be out of whack, but number two, that’s going to give you clues as to where to pay attention to figure out what’s broken. So this is your early warning system to tell you that’s something is not working the way it’s supposed to, and that you are leaking money and time somewhere.
And you know what, for most agencies, it is the leaking of money, it’s the leaking of time that costs you money, or the leaking of money, if it’s a bad estimate problem. That is the root cause for the financial troubles you have when you are struggling to make payroll. It really just shows up in a million places inside your shop. So I want you, this month, October, I think you’ll actually hear this in late September, but I’ll give you till October 1.
I want you to implement daily time sheets, and then I want you to track these four check-engine-light indicators: our billability, so as a team, what is our billability? How much of our time, as an aggregate whole, are we spending on billable tasks? And then our utilization, how much of that time is showing up on a client’s invoice? Even if it’s a retainer, I’m not talking about that you bill by the hour, I’m just talking about how much of that time are you actually getting paid for, right? And then are our projects on time and on budget? Critical. Those are your early warning indicators, and I want you to be tracking those very carefully and making whatever adjustments you need to in 2020 so that we can kick off into 2021 super-strong.
All right, and then the last of the four critical components is biz dev. One of the great things about COVID, and there weren’t a lot of them, but one of the great things about COVID was many of you got really serious about biz dev in a hurry. Granted, it was panic-induced, but many of you really ramped up your biz dev efforts, and I want you to look back on what you were doing in March, April, May and June, and figure out what you were doing and what worked. Because for a lot of you, it really worked. I mean, I have a lot of agencies that have landed the largest client in their agency’s history during COVID.
Many of you, and again, I’m seeing everybody’s financials as we go into the fall, many of you have really upped your game when it comes to biz dev, and so the question is, what’s working and how do I make this not a crisis reaction, but a habit that our agency stays in as we go into 2021? So what did we do that worked, how do I sustain that for the long haul, what do I need to do to build out that as a permanent part of our biz dev plan? What worked, and how do you maintain or replicate it? Absolutely.
And the other thing I want you to be thinking about is, you know what, while being findable is great, if I can find you and 50 other agencies that look just like you, not so great. If you have not spent the time to really think about how to differentiate your agency and how to talk about yourself in a way … by the way, “We’re a full-service integrated marketing agency” is not differentiating. That you have all the talent under your roof, not differentiating. That you don’t have all the talent … all of those are table stakes, and too many agencies can say the exact same thing and do say the exact same thing.
It really is about who you can serve better than anybody else, what you know what not everybody else knows, and how you do the work you do that makes you unique. You’ve got to figure out that equation. And as many of you know, I am a huge proponent of nicheing down and specialization, so much a huge proponent of it that Stephen Woessner and I wrote a book about it. And by the way, I’ve made this offer before, but if you … I want all of you to read this book, I don’t care if you disagree with it or agree with it, I want all of you to read it. If you can’t afford it to buy it, send me an email and I will gladly send you a PDF of it or a hard copy of it.
I have literally sent this book all over the world, so if you haven’t read it yet and things are tight right now, no judgment, I’m not going to ask you any questions, I’m not going to ask to see your P&L. If you want me to send you a copy of this book, send me an email at [email protected], and I will gladly send you a copy of Sell With Authority so you can understand not only why I think this is so important that you niche down and you have a specialization, but I think the power of that.
One of the most powerful things of nicheing down is you go from being findable to be sought after. And that is a huge distinction. So what you were doing in the spring and summer of 2020 to get clients I know was amazing, because I know that many of you had some remarkable results. I’m hoping part of what you were doing is leaning in to where you naturally are a specialist or already niched already. I want you to move into that even deeper so that you can be a sought-after authority or expert. I want you to really think about that this fall, and again, please, please, please read the book.
I’m saying that because, A, I think it’s right, but B, I think we’ve spelled out exactly how to do it. And C, it doesn’t have to cost you a dime. Again, I will happily send you a version of the book for free. I want you to have that knowledge, and I want you to spend the next quarter building out your authority position, all right? And I want you to be thinking about, from a biz dev point of view, if I said to you, what is your one-to-many approach?
Many of you, for example, use public speaking as one of your biz dev strategies, which I love, and that’s a one-to-many strategy, which is you go to a trade show within your area of expertise, you are held up by a third party as a credible resource and an expert, you walk up on that stage, you share your smarts, you help them be better at their job, and as a result of that position of authority, that one-to-many experience of you talking to a room of 50 or 100 or 1,000 people, all of whom are prospects, now you get the opportunity to have some conversations, maybe to submit a proposal, or just to start on a project.
That’s what I want you to be thinking about: what is your one-to-many approach to biz dev? I don’t mean writing generic marketing blog articles, I don’t mean that. I mean, how do you get in a room of 100 people, and all 100 of those people are your perfect prospect? I want you to think about that.
How do you literally or figuratively get in that room and be held up as an authority so that you can sort of shotgun-approach your knowledge, and you know that some subset of them, and you never know when you walk in the room, are unhappy with their agency, ready to hire an agency, have a big project, are opening a new store, whatever it is. But you are now in front of this big group, again, literally or figuratively, so that that is a cornerstone of how you build out your biz dev programs so that it’s scalable?
I want you to be thinking about that. And if it’s not that you’re going to sell from a position of authority, then what is it? How are you going to get in front of that audience, and how are you going to stand out as someone they can trust and that they want to talk to and that they want to work with? Those are your biz dev to-dos for this last quarter.
All right, I have given you a lot to think about, and I have given you a lot to do. But these are the critical things that I want you to accomplish in the next 90 days so that you can start 2021 strong and fresh and on a great foundation so that we can leave 2020 behind and we can have an amazing 2021, all right? I know I’ve given you a lot to think about. I’m going to argue that this is not stuff you should cherry-pick; these are all things that you have to be thinking about and getting done in the next 90 days. So consider this your homework. I promise, my next solo-cast won’t come with a bunch of homework, but this one did.
I will make sure that, in our show notes, we have a PDF that you can download that just has this list. It’s not going to be pretty, but I will make sure that it is there so you can check it off, so you didn’t have to … if you’re on the treadmill or walking the dog, you are not thinking, oh, shoot, I got to go back and listen to this again and write it all down. We’ll have a PDF for you to download tied to the show notes. But please get started on these things. These are all mission-critical elements for you to have a remarkable 2021, and you know that that’s what I want for you. I want you to have an agency that sustains you from a money point of view, from a holistic spirit point of view, from a creativity point of view, from a joy point of view.
These are the to-dos that get you closer to having that. Still a job, you’re never going to love all of it, but when it’s running well, when your team is humming, when there’s money in the bank, when people are calling you and asking you to come talk to them about their business, when all of those things are working right, it’s pretty awesome. And it can be a really great way for you to survive the rest of what’s happening in the world, is when your business is going well, you’re taking good care of your people, you’re taking good care of clients.
So let’s make sure that you’re teed up to do that for 2021, okay? Just a reminder, we have moved the Build A Better Agency summit, so of course I picked 2020 to launch my very first international conference. It was supposed to be in May, and then it was supposed to be in November. The hotel’s not going to be ready for us in November, so we’ve moved it to August of 2021. Would love to have you there, we’re about 50% sold out, so we still have some tickets. Now I have plenty of time to sell the rest of those tickets.
Our speakers are hanging in there, our sponsors are hanging in there, we’ve added a diversity speaker to the mix to help us understand how to bring more equality and equity into our agency. And specifically, what she’s going to talk about is how do we have those difficult conversations we need to have? I’m excited about the conference, I’m sad that we have to wait till August of ’21 to be together, but I would love for you to join us.
So head over to AgencyManagementInstitute.com, and in the upper left of Navigation, you’re going to see BABA Summit. Click on it, and you can read all about what’s going to happen there, grab your ticket. Maybe that’s one of the things that you look forward to in 2021. I would love for our conference to be one of the things you’re excited about, that keeps you going through all of this craziness, and you’re just excited to hang out with 250 agency owners, learning, connecting, networking. And I would love to meet you in person, if we haven’t met in person.
All right? With that, I’m going to let you go. As always, a huge thank you to our friends at White Label IQ, they are now on year two of sponsoring this podcast. They’re also the presenting sponsor of the Build A Better Agency summit, so I’m super-grateful for their support. What I’m even more grateful for is how they help AMI agencies, how they … if you’re looking for White Label PPC, dev or design, they’re your guys. Head over to WhiteLabelIQ.com/AMI, and they’ve got a special offer for you. They are knocking it out of the park for AMI agencies, and I know they can do that for you as well, and I am grateful for their support and their friendship.
I will see you next week with another episode, I’ll be back with a guest. In the meantime, if you need me, if you want a free copy of the book or you need something else, you know how to reach me. You can head over to AgencyManagementInstitute.com and fill out the Contact form, or just shoot me an email at [email protected]
All right, hang in there. I’ll talk to you soon. Bye.
That’s all for this episode of AMI’s Build a Better Agency podcast. Be sure to visit AgencyManagementInstitute.com to learn more about our workshops, online courses and other ways we serve small-to-mid-sized agencies. Don’t forget to subscribe today so you don’t miss an episode.