Facing the fears of agency ownership head-on 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 McLellan.

Drew McLellan:

Hey, everybody. Drew McClellan here from Agency Management Institute. A bit of a twist today with the podcast. So, first I want to remind you about something and then I’ll tell you a little bit about the twist. So, next week is my solo cast. As you know, every fifth episode, if you’re a regular listener, is a solo cast. It’s just me chatting with you about something that is on my mind, and at every solo cast, we give away a free seat at one of our workshops. So, those seats, depending on if you’re a member or non-member, range from about 1700 to $2,000. So we’re giving away a $2,000 prize, all you have to do is get to the workshop and our workshops are all in Denver or Orlando. Orlando in the winter, and Denver in the spring, summer and fall. Anyway, the way you qualify to win one of these free workshops is, you need to go wherever you leave ratings and reviews for podcasts and leave a rating and review for this podcast.

And then, what I need you to do is, I need you to take a screenshot of your review and email it to me at [email protected]. And the reason I need you to do that is because, most of you have some sort of a username like Biker Chick 203 for your podcast accounts. Depending on where you download them, it might be your Gmail account address or it might be something more interesting about you personally, but whatever it is, I don’t know what agency you’re at and I don’t know how to associate those reviews and ratings with an email address. So I don’t know it’s you and I can’t notify you if you’ve won. So again, go wherever you go. So, Apple, Podcast, Google, iHeartRadio, wherever you download this podcast from, just go and leave a rating and review, take a screenshot of it, email it to me at my email address, again, drew @ agency management institute.com, and you are eligible for the drawing.

So if you do it this week, because I draw right before I record the podcast and I’m not going to do that until probably, the weekend. So, you have a whole five or six days to do that and then you’ll be in line. You’ll be in the drawing for this very next win. If you’ve already done it, you don’t need to do it again. Your name stays in the pot until you win. But if you haven’t done it, this is a great time to do it because it’s going to get you in right before we do the drawing.

All right. So, with that, let me tell you a little bit about this podcast. So, on October 20th, I was the guest host at a predictive ROI event called Cocktails and Collaboration. And what they do is, once a month, they basically have a very informal, you could call it a webinar, but it’s really just a virtual gathering of agency owners and they just talk about whatever’s, sort of, on their mind. And this event is led by Megan and Hannah, who are both on the predictive team, and for the most part it’s sort of a free for all, just a conversation about what’s on people’s minds, what are they working on, what are they worried about? And people enjoy either a cocktail or a mocktail or whatever they want, while they’re chatting because it’s at the end of the day.

But anyways, so what they decided is, they wanted to have a guest on their October event and they themed it all around agency owner fears. And so they asked me if I would host, which I was obviously pleased to do and we had a really great, probably 60 to 75 minute conversation. The first 20 minutes or so, are me talking about common fears that agency owners have or worries that they have and how I think they should tackle those fears and worries.

And then it was really a Q and A around all kinds of fears and other agency topics. So, I think you’re going to enjoy listening in on the conversation. I think you will find it packed with good actionable items for you to put into play. And I hope you’ll enjoy it too because it was also entertaining. I happened to be in London that week and so, it was 10 or 11 o’clock pm my time and it was sort of crazy because I didn’t have a great internet connection in our room.

And so, you’re going to see people walking behind me because I was in the members only section of the hotel, which was closed but people could still come up and grab things out of the refrigerator. So you’re going to see people walking behind me to grab a soda. I think at some point in time Danielle brings me a cocktail. So, it’s a little more informal than normal, but I think you’ll find the content itself super valuable and I’m happy to be able to share it with you. And I’m grateful to the folks at Predictive that they allowed us to record it and to share it with you, my audience, as well. All right, let’s get to Cocktails and Collaboration. All right?

Megan:

So, I just want to welcome everyone to Collabs and Cocktails. Hannah and I host this once a month and we alternate choosing topics that we feel passionate about and today, we have a special guest that’s helping us. But I just want to say that we hope this becomes an open community where you feel heard, supported, and most importantly, we have fun. And I’ll hand it over to Hannah.

Hannah:

Yes, and for those of you that this is your first time, obviously, this is our Halloween edition, so we don’t typically wear these things but we could if it’s popular so it’s still up in the air.

Drew McLellan:

I like that.

Hannah:

Yes, thank you Megan. So yes, Collabs and Cocktails. We do this once a month, as she said. And we do have our special guest, Drew McClellan from Agency Management Institute. I’m sure I don’t really need to do much introduction because all of you are familiar with him at this point, but he is here blessing us with his presence because he is all the way in London right now, where it is actually 10:06 PM.

So, thank you Drew, again, for being here. We asked him to do our special Halloween edition of Collabs and Cocktails because he talks with agency owners every day, all day, right Drew? Pretty much all the time.

Drew McLellan:

Every day, all day. I was just texting with someone. Yep.

Hannah:

Yes. So, he has really great insights on some of the fears that you guys face, some of the hurdles that people have overcome. So, he is here to talk about that with us today. So, we’re super excited that he’s here.

Drew McLellan:

Thank you. So, a couple housekeeping rules.

Number one, I am in London and if you just came on, our hotel room is at the very end of a hallway where the internet connection is like dial-up in the late 90s so, I’m sitting in the members only club that they’re letting me use that’s closed but you’re going to see people coming behind me because behind me, is all the free booze that their members are allowed to have. So I don’t know who’s going to show up so we’ll just let them do that.

Feel free to ask whatever questions and just because we’re recording this, seriously, don’t pay any attention to that at all. Let’s just talk like we would normally talk. So, I was thinking about this topic, fears, and I think I would bucket the fears that most agencies have, into three or four buckets.

The first one is money fears. When you start out, it’s, “Do I have enough money to make payroll? Am I going to be able to pay myself? God, I could have made more money bagging groceries than I am doing this.” All of those sort of fears. And then the fears get more complicated as you get a little bigger, and you start thinking about whether or not you are charging enough, whether or not you are paying your people well, whether or not you’re going to have enough money to make payroll every month, are you profitable as you should be? I’m going to tell you the buckets and then we’ll go back and talk briefly about some solutions to those buckets and then, we’ll just open it wide up and we can talk about whatever fears that you’re experiencing as an agency owner or leader. And we’ll try and shoot as many of them down as we can.

So, the first one’s money. The second fear is around people. A lot of you haven’t managed people before. Managing people in the best of times is challenging. I think right now, with the pressures around salary and people being stolen from you day in and day out and the poaching, that gets really, really hard. And most agency owners just bust a hump to create this amazing culture and environment for their people, and we take it personally, when somebody leaves us for somebody else. I think going hybrid or virtual, if you were a brick and mortar agency before the pandemic, creates a whole bunch of new fears around culture and the stickiness of employees. So, I think that’s the second bucket. I think the third bucket is the biz-dev bucket, which is, “How are we getting clients? Are we doing this the right way? Hey, you know what, we live on referrals and word of mouth. Gosh, the phone isn’t ringing, that makes me anxious. How do I get the phone to ring?”

As you know, Steven and I spent a lot of time writing the books all with authority around the way that you don’t have to sit around and wait for the phone to ring, that you can actually generate leads. Right fit leads for your business by being a thought leader and holding yourself out and being super helpful all the time and doing things like that. And then the last bucket is actually, I think the biggest bucket. And I call it the… I’m sorry, I’m making you anxious. I’m seeing the comments. Crap. Everyone breathe. We all have these fears. It’s okay, we’re going to do a big group hug. Yeah, somebody said take a drink. That’s right. I’m all about that. The fourth bucket, I think, is the biggest bucket. And I think it’s the bucket that actually is the one that’s most haunting to people, which I call the, “When you look in the mirror” bucket and that’s when imposter syndrome comes in, that’s when you think somebody’s going to find out, “I don’t actually know what I’m talking about.”

That’s what it is. That’s what it is when you feel like they’re going to figure out, “I’m actually winging it,” whether it’s the employees or the clients or the prospects. “Do I have enough? Can I give enough? Am I spending my time?” You just self doubt yourself to death. And I think that actually, is where most of the most onerous fears live, is in that bucket, but all four buckets are legit. And you may have categorized your worries in a different way, but those are, I think, the four buckets. Really quickly, I’m just going to talk for two minutes about each bucket and how I would resolve some of those fears. And then, I want to just open it up and let you guys chat at me. Megan and Hannah, I am not watching the chat unless something pops up so if somebody wants to stop me, you guys will have to interrupt me.

So, the first one, the money bucket.

You know what, I’ve been doing this for a long time now. My own agency is almost 30 years old and I’ve been running and leading AMI for 15 years and I will tell you this, that the minute you understand agency math and you understand how to think about your gross billings minus your cost of goods equals AGI, and that’s the number that matters to you. And how you start to monitor and manage to those numbers, every agency on the planet can be profitable at 20%. I’ve seen it during the great recession, I’ve seen it during the pandemic, I’ve seen it during the quiet resignation, I’ve seen it through all of the seasons, good and bad. And it really is about understanding the numbers and it is about monitoring your business by the numbers. So, at AMI, we collect everybody’s finances.

I’ve see everybody’s P and L and balance sheet and all the secrets. And our agency’s year end 2021, averaged almost 18% profit. Not because they’re a part of AMI, not because of me, but because they know the numbers and they are forced, with love and respect by me, to manage their business by the numbers. And so, I will tell you whether you have one full-time person, whether you’re a single entrepreneur, whether you have 300 people, you absolutely, if you run your business by the numbers, can eliminate 99% of your fears because you’d know, in five minutes, if there’s trouble and then you dig into the number that’s not right and then you figure out where the trouble is. So, a lot of the money fears are out of ignorance. We teach this workshop called Money Matters every December and people will walk up to me and will say, “Well, I’ve owned my agency for 20 years, I didn’t know any of these numbers.”

These aren’t things you’re going to learn in an MBA program. They’re not things you’re going to learn as an employee of most agencies, but they are the critical numbers. And there’s probably five or six metrics that, when those metrics all line up, everything is in good shape. And then you can sort of go, “Okay, I can put those fears away, I can look at the data and know that we have enough money in the bank, we’re going to be able to make payroll, I’m saving for taxes so I don’t get creamed at the end of the year.” All the things. So, that’s how I would deal with the money problems is, it’s factual, it’s really data driven and you just need to know it.

The people issue, I will tell you, is a communication issue. I don’t care how much you talk to your employees or what you tell them, they crave more from you. So, when we teach the AE bootcamp, one thing that we’ll hear from the AE’s is, “I really want to help the owner achieve all of the goals that they are shooting for, I just don’t know what they are and I don’t know how to help.” Or you have these vague conversations, “Hey, everything’s fine,” or whatever the conversation is but you don’t give them any raw data, you don’t give them any facts to chew on, you don’t give them metrics to help you move.

You’re not teaching them how to run a business well, which honestly, is going to serve both your clients and your agency. So, number one is that, and number two, I think the reality is, we have unrealistic expectations for our employees. They’re not all going to stay forever. And so, we have to get over the hurt of that, as much as it is painful, but they stay longer when they feel like you actually understand them, know them as human beings, connect with them, care about something more than their work output. So, that their mom was sick or their grandma summer or winters in Florida or they got a new puppy or whatever it is. When you connect like you do with people in the rest of your world, that matters.

And I’ll tell you the key to that in our one on one meetings. So, meeting with every employee… And might not be, might have a big enough agency that direct reports are going to do this. So, meeting with your direct reports, whether that’s your leadership team, whether that’s your entire agency, whatever it is, meeting with them once every couple weeks and following a format that’s not a traffic meeting, that’s not about the work, but it’s really about what they need from you, what they’re worried about, what red flags they’re seeing either with your staff or with clients, what they aspire to, what they’re trying to learn, how you can help them learn. Those kind of conversations are magic because they’re very human to human. They’re very much about you as a leader, letting them own that meeting and talk to you.

And when they know that they have your attention for 20 or 30 minutes, guaranteed, every other week so much… I have never had an agency owner start one to one meetings that didn’t call me and say, or text me or email me and say, “You know what? This was a game changer for me. I had no idea. I had no idea she was worried about that or that he needed my help around that.” So, they’re just really, really great for creating connections that are sticky because every one of your employees, even if they suck, every one of your employees is being poached today. Every single one of them is getting messages on LinkedIn and other things.

So, you can’t worry about, “Is my person going to be poached?” Because I’m telling you, they’re being poached. The question is, “What am I giving them that makes them turn down more money or something different? Am I giving them more opportunity? Am I giving them more leadership role? Am I giving them more mentorship? What am I giving them besides a job and a paycheck that’s going to make them stick around?”

Megan:

Would you recommend that owners know the love languages of their employees to try and keep them?

Drew McLellan:

Yeah, except for the physical touch one, we’re not allowed to do that.

Megan:

That one translates to something [inaudible 00:16:29]

Drew McLellan:

Right, right. I’m just saying. Yeah, yeah, yeah. I think it’s great to know how your employees… Some employees, if you praise them in front of the entire team, they would crawl under their desk and die. Other people are like, “They have not mentioned my name in five minutes, what’s going on?” So, I think understanding who your employee is and how they like to be recognized, for sure. But I will tell you, every employee, whether it’s their primary love language in their other relationships or not, words of affirmation from you is huge. You catching them doing things right and acknowledging it, again, based on their personality, privately or publicly, is a huge deal. And you know what? I think it’s even harder in the environment that many of you are working in today, with this Zoom and scattered and dispersed employee base but you’ve got to know. So, in my age, this is not my gift.

I have a hard time knowing what I’m doing, let alone what everybody else on my team is doing. So, I have spies in my agency and in my company because, I guess, they do both things now. I have spies in my company, I say, “You know what? I hardly ever work with so and so, when they do something great, I need you to tell me so that I can acknowledge it.” There’s nothing wrong with cheating, but you need somebody feeding you the information if you’re not working with them every day and you’re not hearing it. So that’s people. And then there’s biz-dev and Steven and I can beat this horse to death, but I will tell you that referrals and word of mouth is not a way to grow a business because what that means is, whatever swims in your net, we use this analogy all the time, when you wait for companies to come to you that you don’t know of and that they’d heard from you from someone else or whatever, and you don’t have a position of authority, you’re a generalist.

Basically, it’s like casting a net out in the ocean and you just know, whatever swims in the net is what you’re going to eat that day. And sometimes it’s great. Sometimes it’s a salmon or a tuna, but sometimes it’s a boot. And because you need to make payroll, you just take that boot and you try and cook it and you eat it. When you create a position of authority, when you are amazingly helpful and you have an area of expertise, you can be dumb as a box of rocks about everything else. But when you have an area of expertise and you are great at that thing, and you generously share that through all of the things we talk about with content and showing up at things like this as a participant and being an active participant, and helping the other people in the room, all of those things, it doesn’t have to be your meeting, you can be helpful in somebody else’s meeting or whatever it is.

But the minute you start doing that, what happens is, you begin to build a reputation. And that reputation is [inaudible 00:19:01] two things. One, he or she is super smart about this thing, and two, they’ll help me with it even though I’m not giving them money yet. And notice the word yet, because what happens is, after a while, they just start going, “Oh, I love this. This is a human being that I trust. This is a human being that shows up and is super generous all the time. I wonder how I could work with them.” And it really does happen just like that. So, the sales cycle takes about a year, 18 months sometimes, to establish that position of authority. So, we’ll have agencies that started and like, “Hey, my phone is not ringing.” I’m like, “You’ve been putting out content for two weeks, you need to chill.” But 12 to 18 months and all of a sudden, right fit clients are knocking on their door because they did it well and they did it right and they did it consistently.

So, for a lot of you, sales is not your favorite thing or it’s not your thing at all. That’s the beautiful thing about this methodology is, you don’t have to sell. And in fact, what you will do eventually is, you’ll make it hard for people to buy from you so they have to really prove to you they want to give you money, before you take them on as a client. And that’s a lovely position to be in. So, that’s the people.

And the last one is that sort of imposter syndrome bucket that I look in the mirror and I think, “Oh my God, they’re going to figure out I don’t know it all, I’m faking it. Do I have enough energy? Can I earn the trust of, fill in the blank?” And I hate to tell you, but every human being on the planet looks in the mirror and has that thought. So, everybody’s faking it a little bit. Everybody is winging it. Nobody has all the answers. And when you are clear about who you serve and how you serve them, if you are trustworthy and transparent with your team and with your clients, honestly, you don’t have to know it all.

And you could even say to a client, “You know what, we’ve never done that before, but we’re willing to do that experiment with you. We’re going to fill that out,” whatever that is, you’re going to figure that out. And so, the other thing is, and I think a lot of times people are like, “How do I keep up? How do I keep learning?” It’s things like this. You don’t have to do this in a vacuum.

You don’t have to feel like you can’t talk to other agency owners without sharing all your secrets. I hate to tell you, but you don’t have any secrets. And so, coming together and sharing and collaborating with each other and supporting each other, that’s one of the things because somebody’s going to say you, “You know what? I’m not happy with our SEO reporting.” And someone else is going to say, “Well, we have a pretty good SEO report, I’d send it to you.” That’s what happens in communities like this. I see it happen every day in AMI. I know it happens every day in the Predictive community, as well. And so, all of a sudden you don’t have to be the smartest person in the room, you just have to be one of the smart people in the room. And the more you share, the more other people share with you, and all of a sudden you have this collaborative space where you get smarter every day just by being able to absorb the smarts of other people that you like and that you trust.

And so, I think you have to cut yourself a little bit of slack. Nobody has all the answers. Nobody has figured this whole thing out yet. And even if you figured it out yesterday, it’s a moving target. So something’s going to change tomorrow that you have to figure out again and so, why not do it in a space where you don’t have to figure it all out all by yourself and you only have to contribute a little bit to the solution because everybody else is contributing too. But you’re smarter than you think you are, and you’ve been doing this for a while and you have been able to feed your family and pay your people so you have to stop diminishing what you already do know and think and believe in what you can figure out. But also, I think the twin to that is, don’t do it by yourself.

That’s stupid. Why would you? I mean that’s working twice as hard to get half the result that doesn’t make no sense to me. You’re smarter than that. And so, you got to stick your toe in the water and you have to find people that are like you, that do work like you do, that can inspire you and support you and commiserate with you and collaborate with you, just like you guys do on these calls, and the Q and A’s, if you’re part of the AMI community, what we do in the peer groups and other things that we do, it just makes the load a lot lighter to carry. But everybody knows that nobody knows it all.

And so, you have to get over yourself about that, honestly. And somebody said to me the other day, they said, “You know, speak in front of all these people on these big stages. I wish I wasn’t nervous like you.” And I was like, “What are you talking about? I’m nervous before I get on any stage. I’m nervous before I talk to five people or whatever.” And I’m nervous… I actually take it as a good thing. So, I was a competitive athlete all through high school and college and I was a pitcher in baseball and it was my day to pitch. I had butterflies and that was because I wanted to do a great job and I was anxious about really delivering for my team.

Same thing if I’m talking to a client or I’m talking to a bunch of people at a conference, I’m nervous but it’s not a bad nervous, it’s a, “I want to bring my A game and I want to make sure I do that,” so, I welcome a little bit of nerves because it just means I care about it and I’m committed to doing a great job. So, you know, you have to cut yourself some slack. None of this is going to be comfortable forever, and that’s okay. All right, I’m done talking.

Hannah:

I love that Drew. And I love that you just said that because obviously, I’m pretty new to agency life and I still get very nervous even though we’ve done a couple Collabs and Cocktails now. I have a couple drinks, I still get nervous. So, I love that perspective that you just want to do a good job. It doesn’t mean you’re less than or that you have imposter syndrome or that you don’t know [inaudible 00:24:24] so I love that perspective. Thank you.

Drew McLellan:

And honestly Hannah, I’d be anxious if I stopped getting nervous because then what it means is, I’m phoning it in and I don’t care anymore.

Megan:

And then, when we are uncomfortable and we force ourselves to be in situations where it’s just not comfortable, you grow, that’s how you grow. You’re too comfortable, you’ll never grow.

Hannah:

Yeah.

Drew McLellan:

That’s right.

Speaker 5:

I saw this really cool quote this morning, and it popped in a feed and I went, “Oh my gosh.” And it said, “You can’t be an expert in something unless you’ve at least tried it.” And I don’t know, it’s so simple, but it was like, “Oh my gosh, I didn’t even think about how many times I stopped short and think, well I’m not really an expert in that.” But it’s like you’re never going to get to that point unless you just get in there and start doing it.

Drew McLellan:

That’s a great point. Think about all the things you know and how you help clients. And a lot of them, we figured out because when we tried it the first time with a client five years ago, 10 years ago, 20 years ago, it didn’t work. And we had to figure out how to make it work. Well, if we had never failed in that first attempt, we would’ve never figured out how to do it better and better and better. I mean, I think that’s true about life in general. I mean you can sit on your hands and not take risks or you can say, “You know what? I have a shot at this and I’m going to take it.” And I think that’s one of the things that makes people entrepreneurs is, the willingness to take the risk, of putting your name on a door and taking the risk of being responsible for your own income and knowing that you got to pay everybody else first before you, and you’re still willing to do it. There’s a spirit to that that we have to not forget.

Hannah:

I love that. So Melinda just said, “[inaudible 00:26:07] Drew’s talk about [inaudible 00:26:08] this year sure helped me get back out on the ocean.” I love that talk about staying in the safe harbor sometimes, is a lot more dangerous than if you get back out there.

Megan:

Drew had everyone crying in the…

Hannah:

Yes. I’ve listened, he also has a podcast on it, which we can link in the chat, but I have listened that several times.

Drew McLellan:

So, you talk about being afraid. So, any of you that were at the summit, which is the conference AMI does every year, most of you know that a day before, two days before… Long story, don’t need to get into it but I had a concussion. I didn’t know I had a concussion but I felt horrible. I stayed in bed for two days. If I didn’t have to be on stage, I was in bed. So, I had never given that speech in its entirety before I gave it in front of all of you.

Hannah:

Wow.

Drew McLellan:

Because I felt too lousy to practice. And so, I had written it and I had been writing it for months and I’d been fine tuning it for months so I knew it, but it’s different than standing on a stage and delivering it in front of 300 people who matter to you the way my audience matters to me.

We were walking down to the conference room because I was the first keynote of the day and I said to Danielle, I said, “I don’t know if I can do this. I don’t know… I have no idea how this is going to be.” And she said, “You know what, just get up there and talk to them. Even if it’s not the speech that you wrote, just get up there and talk to them and talk to them from your heart.” And fortunately, it was the speech and I’m sure if I compared the script to what I actually said, they’re not exactly the same because I just didn’t know it that well. So, even at your own event, when you’re supposed to have it all dialed in, you don’t. And so, you have to cut yourself some slack.

Megan:

Yeah, Melinda said that’s why it was so real and so good because it came from your heart.

Drew McLellan:

And I was concussed. That’s now going to be my trick before every big speech is, I’m going to have somebody hit me in the back of the head.

Jamie:

No, I have a question about the people. So, you talked about the one on ones and in my company, we have two ends of the spectrum. It’s those of us who have been working for many years and for other people and then, brand new to the workforce just from college. So, I started my one on ones and those of us… If you work for a while, they’re very smooth, we get a lot accomplished, we’re very open. But when it comes to the younger employees, it’s like pulling teeth and it’s a five minute conversation because when I go through the questions and try to open end it, its like, “No, no, I don’t really have anything. No, everything’s good.”

Drew McLellan:

So, a couple things Jamie. Number one, they have to prep for that meeting. They have to bring you the sheet filled out. They have to have thought about it. And so, if there’s a blank thing say… One of the questions is, I can’t even think of them now. “What are some red flags?” And if they go, “Nope, I don’t have any,” Say, “When I was your age, I wasn’t sure what a red flag was but here’s some of the things that I learned early in my career. Some things I ignored, that I shouldn’t have ignored. I had this spidey sense about a coworker or a client or whatever.” So, teach them by teaching them, teach them by mentoring, share with them what you… Melinda, it is episode 10 or 15, I think it’s 15 of the podcast, way back in the day. I walk you through how to do a one-on-one and then there’s the sheet you can download.

Jamie:

Oh, thank you. I don’t know it either.

Drew McLellan:

Yeah, yeah. So, you don’t have to even listen to it. You just go to the archives and download the doc.

Jamie:

Oh great.

Drew McLellan:

And actually, Hannah and Megan, if you don’t have it, remind me, I’ll send it to you and you guys can stick it in whatever, however you post communicate after this. But anyway, if they don’t… Because sometimes, they don’t know how to answer the question. So, if you model how you would’ve answered the question and then say, “So, what I’m hoping is, over the next few weeks, as we’re continuing to do this, that you start paying more attention to your spidey sense.” Because by the way, they have imposter syndrome too. They think they don’t know anything, they think that they shouldn’t trust their instincts, they think they should just follow the rule book, which is the most annoying thing of all. We want employees that actually bring their brain to work as opposed to following the checklist.

So we have to make it okay for them to do that. And this is one of the ways you can do that, is by saying… Even if it’s something weird that you’re like, “I just noticed that Mary Beth, on the line, is acting weird or she’s coming in late every day, I’m wondering what’s going on with her personally or whatever.” That’s what this part of the conversation is about. I want you to be observant. I want you to, number one, care about the people we serve and the people we work side by side with every day. I want you to care enough that you notice when something’s weird or wrong. Number two, this is a place for… If you mishandle a conversation, this is a place where you and I can sort of triage that and we can say, “Okay, you know what? You’re right. That was not the coolest way for you to ask somebody to stay late and help you with thing. Let’s talk about how you make amends with that person and then how you would do it.”

So, I would just use it, even if you’re talking in the beginning of the meetings, I wouldn’t let it end in five minutes. I would make them sit with you for 30 minutes, whether they want to or not. And I would just keep talking to them from your perspective until… And then what’s going to happen is, you’re going to notice that, all of a sudden, they’re starting to bring more intuitive conversations to that meeting because you did it first. You were vulnerable first, you admitted you didn’t know something or you made a mistake. When my daughter was little, we used to… It was just her and I and so, every night at dinner, she hated it.

We had to share what we learned and I tried really hard what my learning thing was for the day was a mistake I made and how I fixed it because I wanted her to realize I make mistakes every single day. I don’t do it right and well, but if you recognize your mistake and you fix it, usually, that mitigates the problem. So, my learning was often, oh I had to go back and apologize to an employee today because I was kind of a jerk and I would just tell her the story and it didn’t matter what I was teaching her, but I was trying to set the example that I didn’t know at all and that I was still learning and that, that was okay, and I think we can do the same thing with our employees.

Megan:

It makes you more relatable.

Drew McLellan:

Yeah.

Megan:

That’s so helpful. Thank you. I wouldn’t have thought just to continue the meeting for the 30 minutes. That makes sense though. You get to bond and get to know each other.

Jamie:

I didn’t even think of having the sheet or questions beforehand. I laid out a format just totally forgetting this stuff has to be taught because I didn’t… We learned it too, but you just don’t think of it.

Drew McLellan:

Yeah.

Jamie:

So, it’s great.

Drew McLellan:

So, the sheet we’ve done, and feel free to modify it all to beat the band, the very first question is, what is your quarterly growth goal? What are you learning this quarter? So that alone, starts a great conversation and they might say, “Well, I want to get SEO certified,” or, “I want to get this,” or, “I’m trying to learn more about negotiating with a client,” or, “I’m trying to learn more about my craft. I’m trying to be a better writer,” or whatever it is. And be like, “Okay, great. How can I help with that? Is there a class you want to take?” So, all of a sudden you’re immediately invested and then at the end of the quarter, it’s like, “Okay, how are you measuring yourself? Did you learn it? How are you using it? How can we use more of that in the agency? How can we take advantage of the fact that you learnt that?”

Because one of the things your employees all want is, they all want a promotion and a raise. And the conversation I always have with employees is, “That is awesome. I want to give you more money too but, what are you giving to me and the agency to earn more money? Cause, no offense Steven, but I’m not paying more for a banana than I did yesterday, just because it’s a day later.” So, you don’t get more money just because you stuck around, you get more money because you add more value. I want to help you add more value. So, let’s think about the things you can learn so you can earn a promotion and a raise and all of those things. So that alone will take five, 10 minutes out of your one to one, right? You’re right, I would pay more for a holy banana. That is probably true.

Hannah:

It’s a blessed banana.

Drew McLellan:

Okay people, talk to me.

Jamie:

So, the big question is, when are you going to do a session on parenting? Drew.

Drew McLellan:

I have been asked that many times, actually. I have to wait for Kelsey to be old enough that all the stories I would tell, she wouldn’t kill me for. So, I have to wait a little longer. I think once she’s a mom, then she’ll be like, “Oh yeah, you can tell the story of the first time this happened or that happened and I called you and I shouldn’t have ever asked you that question and you went into a bathroom later and breathed into a paper bag.” But not yet. Soon, soon.

Jamie:

Soon.

Hannah:

So Drew, I have a question. Obviously, you know that we talked to a lot of agency owners as well, and one of the things that we consistently hear, and this is going back to you preaching on, “Know your agency math, know your agency math.” A lot of times when we push our clients to that, they come back to us and they say, “Oh, I’ve done this and it turns out only 10% of our clients are actually profitable.” And so, it’s always a lot of fear when we kind of push them or guide them to raise their pricing so that they know their actual value and what they’re offering. So, how do you talk to agency owners or how do you advise them on knowing their worth and knowing the value of what they’re offering?

Drew McLellan:

Yeah, I think when we think about knowing your worth… So, when we put it on ourselves, “I have to be worth this amount of money.” It’s humbling to think that you’re going to charge what you’re going to charge. I can remember one time, Kelsey said to me, my daughter said to me, “Can’t believe people pay you to talk.” And I think we say that to ourselves a lot where it’s like, “Why would somebody pay me to do this? Or maybe I don’t know it as well,” but here, it’s a math question. So, every agency on this call has a client where you, literally, are losing money. You are paying money for the privilege of working for that client. So, you have to understand the math, you have to look at it and you have to realize that for every dollar you bill a client, it actually costs you a dollar 20 to do the work.

So you’re taking money out of your pocket, out of your kids’ college fund, out of the bonus fund for your employees. You’re taking money out of all of those pockets to pay the client so you can do the work. That’s just stupid. I mean, when you look at just the math, that just doesn’t make sense. So, you really do have to understand the profitability of every client and then you have to look at every client that is not profitable, and by the way, if a client’s less than 10% profitable, you have a problem. So, you should be able to at least make 10% profit on any client. And remember, our goal is 20% so that means you have to be really profitable in some other places. But anybody that’s below 10%, you have to put together a plan, and the plan is, “How can I move them to at least 10% profitable,” or, “How do I, very gently and kindly, move them to someone else who wants to pay for the privilege of doing the work.”

So it’s not even about… It is partially about the value you bring, but honestly, you can distill it down to the math and you can say, “Look, it’s just impractical to do something for free or to pay someone…” That’s like me coming to your house and saying, “Hey, I’m running a carwash and I’m going around the neighborhood. I’d like to pay you $5 to wash your car.” That doesn’t make any sense. And by the way, I’m not coming to your neighborhood to do that.

Hannah:

I mean I would take it.

Drew McLellan:

Of course, you would. But that’s what we do every day when we don’t understand the math and so, you have to of look at it and say, “I’m only going to work with people who value what we do enough that it can be profitable.” And I’m not talking outrageously profitable, I’m talking reasonably profitable, 10 to 20%.

And so, then I think it’s a matter of, and this is a great exercise to do with your account execs, if you have them, or account managers. “Okay, three of your clients, we’re paying for the privilege of doing work for them. Let’s sit down and figure out what do we have to do to make them more profitable.” Cause it might be on you, it might be that you are over servicing them to death. It might be that you haven’t changed your rates with them in 20 years. It might be that you let them do change orders to beat the band, no matter what the scope of work is.

So, it could be your fault that you’re not profitable and no client is going to go, “No, no, give me less. No, no I’m fine.” So, you have to really dig into the, why they’re unprofitable and then figure it out because then it takes it off of, “Am I worth it or not?” Then it’s just a math equation. Cause I think, Hannah, to your point, that’s uncomfortable to think, “Well, am I really worth X number of dollars an hour?” It’s not the question.

Hannah:

Right.

Megan:

Thanks Drew. And then Shannon has a question, too.

Drew McLellan:

Fire away.

Shannon:

Question regarding clarity in roles and whether or not you or this collective community… I’m very grateful to be here, been a rough week here, of just like clarity in rate using Racy, what are people’s thoughts on that? Yours Drew, obviously, and any of the collective community, but what we’re feeling here at Collabo is, we’re in year 17, we are now through a pandemic. Best years last two years, hiring, investing in people because having a 36% profit margin when you don’t have enough staff and then getting burned out is not the way to grow.

Drew McLellan:

Nope.

Shannon:

So now, we’re putting money into people investing in hiring. However, we’re starting to realize that there seems to be a need of role clarity because there’s some blurred lines and also we’re kind of reevaluating our organizational structure, whether it’s a flat organizational or not. So, kind of couple different questions but all related into clarity of roles, job descriptions, racy, et cetera.

Drew McLellan:

Okay, I will answer your question in a second. So, quick question. Rough week, how?

Shannon:

Role clarity. I created the agency in 2005, have had a lot of different roles. I have really invested in some smart directors. About two years ago, after a very rough two years, we’ve all felt as founders, I decided I wanted to hang my hat up on the CEO title and to create succession plans with some other people in the organization, so I could actually pick up my chief creative hat, which is where it brings me joy.

And so, it’s been a year of being able to be in that space, but I’m sensing some friction between people who knew me as a different role. So, there’s a little bit of that hard week for me. I feel like some of my collaborating peers are getting very territorial and doing some of their strategy work in a vessel, versus inviting me to be part of it because I think they know me as a certain role before. So, it’s a little bit of shedding. And then, I think there’s also just… Been a rough week of just feeling seen in the business because we’re in Q4 and we’re down about three quarters of a million that we have to find if we want to pay out the same bonuses that we did last year. Sorry, it’s a lot of vulnerability though. I’m good at that. I’m an over-sharer.

Drew McLellan:

Okay, so a couple things. Number one, I think it’s really challenging, as an owner, to shift your role in the business and have people just forget how you used to show up. And so, next week, I’d bring those people together and say, “You know what? Last week was really hard for me and let me tell you why, and here’s some of the things that I saw.” And here’s the deal, you can be the chief creative officer all you want, but you also still own the joint and you’re their boss. So you have to also acknowledge that you don’t have the privilege of just being the chief creative officer.

So, you’re going to have to say, “Okay, as an owner, here are my roles and responsibilities and here’s how I’m going to show up as the owner, but I’m also your collaborator as the chief creative officer,” whatever your title is, “And here’s how I want to show up in all of that. And I need your help because I want to make sure I’m swimming in my own lanes and I think that I, maybe, am giving off signals that is confusing all of you about your roles. First of all, I want you to know that last week was really hard for me and here’s why. And here’s how I want to show up in each of these roles. I acknowledge that I cannot, not own the joint, I cannot, not be your boss, I cannot, not all the things,” even if that’s stuff you don’t like. I can’t. Until you people buy it or however that’s working, I own it. And I have fiscal responsibility and I have all these things and I’m worried about the three quarters of a million dollars because I want to make sure we bonus everybody. And so, the chief creative officer in a typical agency wouldn’t worry about that crap.

But you know what? When you also wear the owner hat, you do. And so, I need to acknowledge that I swim in two different lanes and I need to be careful about how those lanes cross. Which leads me then, to… “Let’s talk about some of the other ways our lanes didn’t cross well over the last week.” And I would talk about specific things where maybe, their confusion about your role or them assuming more responsibility, maybe, than you’ve given them authority to have, caused a muck-up, right? And I would just be super vulnerable about that. That off to the side.

And then, when you talk about clarity of roles, honestly, it’s fine to have a job description but nobody pulls those out and looks at them. So, you have to keep referencing them all the time in meetings like, “Hey, you guys, I’m putting on my chief creative officer hat today and I’m noticing that we’re doing a lot of brainstorming that you’re not bringing the creative department in. As the head of that department, that’s concerning to me because I know that we need that voice in the room.” Or,

“Hey, you guys. You know what? We as a leadership team need to talk about the fact that we are three quarters of a million dollars down and we have to have a strategy and a plan for how to do that. And while that is not my day to day responsibility because biz dev girl or biz dev boy, that’s your responsibility or account service director. We need more recurring revenue from existing client,” whatever it is, as the owner of the business, I now have to step into that lane and we need to have that conversation. So I think for you, because you’re changing lanes… I’m now imposing my opinion, but it sounds like you want to get away from the owner lane. That’s not the lane you love. Sorry, it’s like broccoli and asparagus. We got to eat it, right?

Until you sell your agency, you are the owner and you do have certain responsibilities. So, I would just be really clear about which hat you’re putting on in any moment of the meeting so that they understand what lane you’re coming from so that they’re not confused, because that will help them start to use that language when they’re talking about their role and when you’re talking to them about their role. So yes, great detailed job descriptions. Awesome, great start, but it really is about the conversations you have in everyday meetings that really defines those roles and the clarity around them.

Shannon:

That’s awesome.

Drew McLellan:

Because my guess is, “No, brussel sprouts are gross, Steven. I’m not eating those. Even as an adult, I’m not eating them.”

Megan:

I love brussel sprouts.

Drew McLellan:

They’re yucky. Really yucky. Seriously, next time you eat brussels sprouts, you try and feed one of those to the dog under the table. Even a dog will not eat a brussel sprout. So I am not touching it.

Hannah:

Megan loves them.

Drew McLellan:

They’re yucky. If you start talking about the roles, they’ll be comfortable talking about the roles. So again, one of the themes throughout this is, all the things that you fear, the more you just own those fears in front of your people and with your people, the quicker the fears get dissipated. Hopefully that was helpful.

Shannon:

No, very much is. I like analogies cause I think I’m a highly visual person. So when I hear the analogy of changing lanes, it’s super important. And I also think that I want to make sure people in the organization realize that I’m not trying to be territorial with taking this chief executive role and taking away the fun out of their roles.

I think that’s where I’m also trying to figure out is that distinction between… I believe in the collaborative community of creativity and I think strategists sometimes, get very hyper logical and that’s where I think some of the rub is. I think it’s about really breathing in some of our culture, as well. But thank you.

Drew McLellan:

But you also have to remember, their chief creative officer also can fire them. So there’s some reality to that, right? You have to just acknowledge that. I know it’s hard to collaborate… It’s different to collaborate with me than it was whoever was in the role before because I still own the joint. And so, I acknowledge that that makes this harder and that maybe it’s harder to push back on. Or if I give you a creative idea that you don’t like, it might be uncomfortable to go, “That’s crap. I’m not taking that to the client.” It’s like, “Oh, she owns the joint so I’m going to give it to the client.” So that may be part of where that friction is and you just need to acknowledge that, you know, you wear multiple hats in the agency and you always will.

Shannon:

Right. I like the fact you said I can’t get rid of that hat. It is what it is.

Drew McLellan:

Right.

Shannon:

[inaudible 00:46:53].

Drew McLellan:

No.

Shannon:

Okay, cool. Thank you everybody.

Speaker 8:

All right. I have a question. I came to Build A Better Agency, loved it, made a note, need to come to Money Matters. However, it overlaps with trip that I already have planned to Disney with my family. So got to go to that.

Drew McLellan:

Wait, wait, wait, wait, wait. You’re already going to be at Disney World. So just come hang out with us for a couple days. Let somebody else take the kids to the park.

Speaker 8:

My husband would not go for that. My kids are in the background. No.

Drew McLellan:

We don’t want dad. Dad is not the fun one.

Speaker 8:

Exactly. What can I do to get some of that Money Matters content. Get my hands on it. I’m a new agency, we’re two and a half years old. I’m finally getting to the point where I’m like, “Oh, we’re making it.” But I want to be smart about figuring out, are we really making it or am I just like, “Hey, I can pay all my bills. Winning!”

Drew McLellan:

Right, I have money in the checking account. Everything must be great. Yeah. Well, you have a couple options. So, we only teach that workshop once a year. So, you can block it on your calendar for 2023 because it’s almost always that first week in December. Or plan the family vacation like right after because then, by the way, it’s tax deductible. The trip is, because you already are down there for a workshop so you bring the kids, right?

We do have a virtual online version of it. I taught it, so it’s me teaching it so I think it’s dandy. But what you miss in our virtual courses is this, it’s the collaboration, it’s hearing other people ask questions. It’s talking to other agency owners over lunch going, “How do you do that?” And all of that. For me, the virtual classes are for people who just can’t make it live, but there is no substitute for the live course and all the conversations that you have there. So, maybe you take the online course.

We have a couple eBooks on the website that will help you around the mistakes agency owners make. So, every fifth podcast of mine is a solo cast, and so it’s really me teaching. So if you scroll through, there’s an archive list of all of the solo cast, if you scroll through them and you look at all the ones that are money or number related, and just listen to those, honestly, that’ll give you a lot of it until you get to the course. Or we do have a workshop in March, I think, called Running Your Agency for Growth and Profit, and we talk a lot about money there, too, we just don’t talk about it all day for two days. T.

Hat would be a fine substitute for Money Matters. It’s not as intense, but we cover some of the basic key metrics the same. So, if I have my druthers, if you can wait until March, I’d listen to the solo cast about numbers, I’d register for the Running Your Agency for Growth and Profit, which will be in Denver. And then, I think the combination of those two will put you in pretty good shape. But then, you should still plan on coming to Money Matters next December and bring the kids.

Shannon:

Yeah. Awesome. Thank you.

Drew McLellan:

Sure.

Hannah:

Anybody else have any questions? This is your free time, so please think of all these things. Anything.

Drew McLellan:

This is like a Q and A with Sharon, where you get to talk to a lawyer for free. That’s a beautiful, beautiful thing.

Hannah:

It never happens.

Megan:

I’m ready to chime in.

Shannon:

I have another question but I don’t want to hog air time.

Hannah:

No, go for it.

Drew McLellan:

Ask it.

Hannah:

There’s no hogging air time.

Shannon:

Another question, again, with my week. So then, one was that. The other has just been in regards to value pricing and just, in general, of how many people adopt that and if you do kind of a combination of both project pricing based on run rates and value pricing and if there’s a positive or negative adopting both options.

Drew McLellan:

Yeah, so if you read books about value pricing, it’s basically that you say to a client, “If we were to build this website and it was a conduit to new business, what would it be worth to you?” And I will say, the naive belief is that the client’s going to go, “That’s worth a half a million dollars, so I’m going to pay you a quarter of a million dollars.” No client is ever going to say that. Never going to come out of their mouth. They’re going to be like, “Yeah, it’ll be helpful.” I still want to only pay $5,000. So, I am not a fan of the purist model of value pricing cause I don’t think clients want to participate in making things more expensive for themselves.

Shannon:

Makes sense.

Drew McLellan:

But I do think that… So, here’s the problem with when agencies do estimates. So, we go around the table and we go, “Megan, you’re going to write it, how many hours does it take you to do that? Steven, you’re going to be the art director, it’s going to take you how many hours? Hey, account person, blah blah blah.” And we add up all the hours, we multiply it by our blended billable rate, which by the way, most of you is at 150 and it needs to go up to 175, but you multiply that billable rate and you go, “Oh, here’s the number.”

The problem is that, when we do that in a vacuum, we don’t take into account all of the realities of doing that work. When somebody says to me, “Hey Drew, how long is it going to take you to write that?” I’m like, “Oh, I can do that in two hours, if I’ve had eight hours of sleep,” which I don’t think I’ve had actually, since I was 12. If I’m not interrupted, if I’m not worried about my kid getting kicked out of school, if my mom’s not texting me all the time about Sunday dinner, if, if, if… And if, by the way, if there’s not people in my door all the time.

So, we grossly underestimate how much time everything takes. So, one of the things we teach in all of our financial workshops, so Money Matters, Run Your Agency For Growth and Profit, is what I call the Drew Hack. Which is, do that, figure out how many hours everybody says, multiply it by your billable rate, then multiply it by 1.3. And that’s the estimate you give to a client. And honestly, that’s almost always spot on about what it’s going to take. We’re off by about a third, is a general rule. And if you have more guys in the mix than women, 1.5 cause men are much worse at estimating than women.

Shannon:

Interesting. That’s great. Love it. Thanks.

Drew McLellan:

So then, you’re kind of value pricing. You’re actually going to get paid what you’re worth but you’re not saying to the client, “Hey, participate with me in setting the price for this,” because I think they’re going to go, “Do you have a coupon?” So I don’t think that works.

Hannah:

Bob said, “Or 1.33 if they’re going to make payments with credit cards.”

Drew McLellan:

Right. That’s right.

Hannah:

Not really credit card.

Drew McLellan:

You want to factor that in. Yeah. Bob, everything we do at AMI is paid for by credit card so I don’t even look at that line item anymore. It’s just a cost of doing business but if you can bake it into your pricing…

Sharon:

Please stop suggesting terms, I got to figure out a way to get into your contracts. Please. For the love of God. I’m asking you…

Drew McLellan:

I am Sharon’s nightmare client. It’s okay, you can say it.

Sharon:

I’m going to have a client call me and they’re going to say, “So, I was talking to Drew and he said that we should…”

Drew McLellan:

You know what, if there’s a lawyer on the planet that’s going to figure it out for all of us and make us benefit from it, Sharon, it’s you. So, I will continue to profess what I profess and know that you are so good at what you do, you will figure out how to protect our asses.

Sharon:

I think that’s called damning with faint praise but thanks. I appreciate it.

Hannah:

I thought that was a great spin. Really well done.

Drew McLellan:

Marketing.

Sharon:

So, I have a quick question. If no one else does, I’d love to ask… Cause we haven’t had a chance to really talk about this Drew. We just did a Q and A session on agencies building new revenue streams using IP. That’s not the only way you can do it, but that’s a big way to do it. I’m just curious, are you seeing any agencies out there, actually devoting some of their bandwidth to using their knowledge base or their talents or their capacities in a different, maybe more packaged way, so that they can build that revenue alongside the service work that they’re doing all the time? Because I’m always looking for new use cases and I’m just wondering if you’ve seen any of your clients go through the process.

Drew McLellan:

Well, I think that gets back to the theme of the conversation, which is, I think a lot of our fears are actually based in our own insecurities. And so, I think a lot of people don’t really recognize that they actually do know something that is worth protecting and selling as a package.

We dismiss what we know. So, my short answer to you Sharon, is, I don’t see people doing it as often as they should. Whether it’s creating courses or writing books or creating custom software that is beneficial in some way. And honestly, I think part of it is, it doesn’t even occur to them that they could productize what they know and sell it in a different way. I think one of the reasons why I think the work that you do and the content you create is so valuable is because, it gets us thinking differently about what we know and it gets us thinking like, “Oh, I could turn that into a course or I could copyright or protect that or I could… Whatever.”

I don’t think agency owners… I think if they grew up in an agency, what we’re used to selling, is time and material. We sell our stuff and now, we’ve evolved to selling our thinking but we don’t really think about packaging it. So no, I don’t see as much of that as I would like to see. So you have to keep doing what you’re doing to get more people thinking about it.

Sharon:

I appreciate that and I realize the question’s a little self-serving, but I really…

Drew McLellan:

No, no, no.

Sharon:

I’m genuinely looking for different ways to encourage agencies to take what they already have and know and do, and double time it on the income. And so, I’m always excited to hear about… I actually got called out on the carpet at my own Q and A, by one of my clients who reminded me of the example of how he did it and I had not included on my example slide. So, that was a little…

Drew McLellan:

Damn clients!

Sharon:

Fun. I was actually so glad he did it. I wasn’t even embarrassed because of course, I should have included it. But I’m always looking for new ways to be encouraging to agencies about this and so, if any of you know these stories or have tried it, I would love to hear your story just so that I can learn from your examples too, honestly.

Drew McLellan:

Actually, that would be a great podcast topic. Like, you just coming out and talking through the examples of how people have thought differently about what they know and turned it into IP. I know you’ve been on the show a bunch of times, but we normally talk really pragmatically about legal stuff. This would be an interesting twist, so we should do that.

Sharon:

Yeah. Okay, let’s do it.

Drew McLellan:

Okay.

Speaker 10:

I will say, Sharon, you’re our first stop whenever we’re about to create something new because we’re trying to think about the IP first.

Sharon:

Thanks. Well, I mean, I want everybody on this call to make more money and I’d rather have you do it with stuff you already have. So I’m always looking for your stories.

Hannah:

Sharon, I’m going to ask too, and this is something we should have done at the beginning of the call, but do you mind putting your contact info in chat just for anybody that wants to reach out and talk more with you about that. That would be awesome.

Drew McLellan:

Yeah, if some of you don’t know Sharon… Sharon, when people go, “Hey, I need an attorney that understands agencies,” I’m like, “Oh, I have the person.” And Sharon is my go-to, my own attorney for all things. So, if you’re not familiar with her and her work… I mean, you think about the people you trust and it’s your tax guy and your lawyer, right? And so, Sharon has my deep devotion and trust and so if you don’t know her work or don’t listen to her podcast or any of those things, you should, because it’s super beneficial. So focused on agency, she gets our world, she lives in our world with us, she celebrates our world and I would not make a move without her counsel even though, oftentimes, I make it hard for her.

Sharon:

Let’s talk about something else now because I’m getting [inaudible 00:59:11]

Drew McLellan:

I thought you were going to start talking about all the ways I make it hard for you to do your job.

Sharon:

No, no. Thank you for all the kind words. I really appreciate it and I honestly would love to hear your stories if any of you have examples in the real world of how you’re doing this because I want to celebrate you and cheer you on. So…

Drew McLellan:

What else do you guys got for me?

Megan:

[inaudible 00:59:33] has a question but she also said that her kid asked why is that man in a banana?

Darnel:

That’s the question.

Speaker 10:

Halloween.

Megan:

He could not get past it.

Hannah:

I was going to ask that one as well.

Drew McLellan:

I just have to tell you this makes me so happy.

Sharon:

He was very…

Megan:

Do you want to ask your question?

Darnel:

Yeah, please. Thank you for allowing time. Drew, I always love to hear… I think everybody changes up their profitability formula a little bit differently and I’m just really curious, I’m sure I can find it out there, I apologize, I don’t have a link directly to it. But what is your profitability formula when you’re bringing it down specifically to client?

Drew McLellan:

So, I don’t want any of you to change up your profitability formula. It’s super simple. It’s that you need to be shooting for 20% profit with every client. So, the math is really simple. So, you have what you’re going to bill the client, minus your cost of goods, whatever that is. So, it might be media, photography, contract labor, which by the way, should always be a cost of goods because you don’t just give them money, they’re not an employee. So, when you subtract all of those cost of goods out, what you’re left with is adjusted gross income and that’s the money you actually get to keep to run the agency. And when you think about that money, 55 to 60% of that money should be spent on the people who do the work, so loaded salaries. 20 to 25% should be the load of overhead that project our client carries and the project or client should deliver 20% profit.

So, that’s the math. And depending on what accounting software you use, a lot of that can be very automated for you. But one of the challenges, I think, of running an agency, is that we are running at such a pace that we go, go, go and so, the minute we finish a project, we’re onto the next project. We don’t stop and do the math and look at that project, if that project or that client is profitable. So, once a quarter, you’ve got to be looking at profitability by client, at least. And when a client is less than 10% profee, you have to drill down into the project level and figure out what projects were and weren’t. So, is it that this client just isn’t profitable or was it, for example, for a lot of agencies, the sea of death is a web project. So, they’re normally profitable but we did a website for them and we lost our shirt.

So it’s a one time thing. How do we make that better for the next client? But you’ve got to do postmortems on clients at least once a quarter, and any client that’s not delivering profitability, overall as a client, depending on how many projects they’re doing, you’ve got to drill down to the individual project and figure out, was it a fluke or is this client really not profitable, as a general rule?

But you should be shooting… So, you need to subtract all your people costs. You need to figure out, “Okay, we’ve got X number of employees, they’ve got 1,980 hours or so of billable, potential billable time. I’m going to look at my overhead costs, I’m going to figure out what a billable hour, what the burden of overhead is for that and then, what’s the profit left over. Does that help?

Darnel:

Absolutely. Honestly, it was one of those… Like, really is the formula that’s simple. So, I just wanted to make sure I wasn’t missing something in what I was [inaudible 01:03:00]

Drew McLellan:

So, here’s the deal. Most of us who own agencies, we did not get an MBA. We are not accounting majors. So, the whole goal of AMI is to keep the math super simple. A, because I can teach super simple and B, because agency owners can wrap their arms around super simple.

Darnel:

Thank you.

Drew McLellan:

Sure. What else you guys got?

Brian:

I got a question and I apologize if it’s noisy. So, I work both on the client side of the agency so often, and I see this problem the same way. When the staff is talking to clients, we’re dealing with a lot of complex ideas and they’re really getting into the complexity of the marketing and the strategy but the people we’re talking to, who own the business, they’re business people. They understand business talk, business strategy and they don’t necessarily understand marketing. That’s why they’re hiring others to provide these complex deliverables. How do I work with the staff to be able to relate to them on a business level, to talk their language instead of talking another language that, in some ways, they don’t care about. They just want to know that we’re taking care of [inaudible 01:04:09].

Drew McLellan:

Well, I mean the reality is, no client’s excited about spending marketing dollars. They’re not. It’s an expense. So, what they want to know and what they care about is, “I’m going to give you a dollar, what do I get back?” So, I think part of the coaching, Brian, that you can do is, when you’re helping them prep for meetings, say, “Okay, let’s think about this from so and so’s perspective.” They don’t care about this or that or the other thing that we care about, because we know this results in something. It’s the results that they care about so let’s talk about it in that context. So, what I would do is, I would say to them, as they’re starting to prep for a meeting, “Why does this number matter? Why does this metric matter? What does this actually tell them about their business? Have we shortened the sales cycle? Have we increased leads? Have we increased sales?”

Cause those are the numbers that they care about. They care about business metrics. So we have to translate part of our job, I think, is we’re translators. So, we got to look at all this marketing data and all these marketing strategies, but the reality is, clients don’t care if you’re running Facebook ads or doing this or doing that. What they care about is, “Is the cash register ringing? Am I keeping clients longer?” Whatever their goal is. So, I think it really is about result outcomes. And so, I think you have to teach your people how to translate and they have to translate in their prep because otherwise, what happens is, they have to translate on the fly when the client goes, “Well, what does that mean?” And then your people are caught, sort of, flat footed and then they’re like, “Well, it means this.”

But if they do their homework ahead of time and say, “All right, I have to boil this down to the metrics that the client cares about. So that’s why I think it’s really important to define success metrics with a client on the front end of a project. This project will be successful if what happens? Cause it’s never going to be marketing metrics, it’s going to be, more people filled out the form or we had more sales calls or whatever the thing is, that they care about. And when you define those success metrics on the front end, then your people know what they have to be able to talk to and about in their presentations with clients. And by the way, it makes them smarter in terms of advisors to clients because now they’re thinking like a business person rather than a marketing person.

Brian:

I also find in that same context of defining success, I know we want to be successful at every point, but when there’s different sizes and there’s different types of projects forward… We’re not always profitable on every project, but in working with clients and working with that relationship over time, and as you [inaudible 01:06:38] client over a certain period of time, the staff also gets very hung up on a specific project. Whether this one was not profitable, that one was not profitable. So, I may be answering my own question, and you’ve already said, but it’s hard to get people to focus on that bigger picture when they’re very so in the [inaudible 01:06:57] and down, and I just wonder if there’s any kind of [inaudible 01:07:00].

Drew McLellan:

What I would say is, if a client’s 10% profitable or more, we don’t have to look any deeper than that. If it’s less than 10, then we have to figure out why. And so, I would just pull them up to that level or when they go, “Oh, this project wasn’t profitable.” Great, what is the client overall? They’re 15% profitable. Then let it go. Every time you get to bat, you do not hit a home run and you don’t even get on base. So, that’s true for us too. We are not going to make money on every single thing we do for a client because we’re working with human beings and we’re working in a very fluid environment. But the goal is, is the client profitable? And if they’re profitable at 10 plus percent, we’re good and we don’t have to worry about it. So, your account people, what I say is, your job is to make sure the client’s profitable.

If they’re profitable… And you can set your own metric. 10 doesn’t have to be your metric. It could be 15, it could be whatever number you want. But if they’re profitable at that level, then, we don’t have to drill down. We need to spend… Part of it’s a resource issue. We don’t have time to look at every single project for every single client. So, if a client overall, is profitable, we don’t have to drill down to every project, we’re good. Let’s spend our time smarter and look at the client that’s 3% profitable and why is that happening?

Brian:

So, in that regard too, in some of the workshops where we talk about being helpful, maybe being helpful to the point of a restraining order, there’s a lot of investment that goes into each individual client and that has to resolve over a period of time. Those are kind of loss leader types of approaches, which sometimes work and sometimes don’t. So, there’s also a lot of discussion in my agency in how and when to invest.

Drew McLellan:

Right. Don’t misunderstand being helpful with giving stuff away for free. Being helpful is a broader context. We have a podcast, we put out eBooks, we have resources that help the masses. We are constantly teaching and helping. It doesn’t mean you have to give away stuff for free to individual clients. So yeah, we’re always going to over service every client a little bit, there’s no doubt about that. But we have to monitor and measure how much we over service a client, and there is a threshold where we can’t do that. So, being helpful is not… I got an email from somebody who’s an associate member, which means basically, they spent a couple hundred dollars to get a bunch of discounts and they were like, “Hey, I want to be able to email you and ask you questions all the time and have you answer it.” And I was like, “There are 500 of you. If I spent all day, every day, answering questions for free, I would actually not make any money and the dogs and cats would starve to death.”

So, I put out lots of content for everybody but if you want that kind of individual attention, then here’s a coaching package, here’s a consulting package. So you have to be really careful about that very clear line of what you will and won’t do for free and who you’ll do it for. If you have a client that’s worth a couple million dollars to your agency, yeah, you’re going to give them some free stuff. If you have a client that comes in once a year to do their annual report and it’s $10,000, they don’t get a lot of free stuff from you. So, treat everyone fairly but not equally.

Hannah:

We had to dress Steven in a banana costume to get Drew here, so that was our fee.

Drew McLellan:

Here’s the deal, I will do your Q and As, I’ll do your other things, but I always get to pick Steven’s outfit.

Hannah:

I love that.

Drew McLellan:

I will do that for free all day long.

Hannah:

So in Predictive, we have level one decisions. I’m making that level one decision. I’m saying yes.

Drew McLellan:

And by the way, I just want to be really clear, he didn’t even have to buy the banana costume. I sent it to him as a gift. So, I am willing to continue to gift outfits to Steven to wear on our Zoom calls.

Steven:

And then you conspired with my lovely bride to make this thing.

Brian:

I’ll second that one.

Drew McLellan:

And you know what? You should not have given me her cell phone number.

Hannah:

I think that ship has long sailed, probably.

Drew McLellan:

Yep. What else can I tell you guys?

Hannah:

Guys, I also want to be respectful. Drew’s been gracious enough to join us. As I said before, he’s in London right now, which, it’s very late. I think it’s now 11:15, his time. So we’re a little bit over. So, we maybe have time for one or two more questions, but I want to be respectful of his time.

Drew McLellan:

You know me, this is my bewitching hour. This is when I start to work.

Hannah:

I know, but I’m sure you have a full plate of work you still need to do. So, I don’t want to take any more of your time.

Drew McLellan:

Little bit, yeah. What else can I tell you?

Shannon:

I had one more. It was kind of along the hinge of Brian, as you were talking about business development.

We’ve historically been a project based agency and I don’t think we’ve come to the admitting that, in the past six years, we are now running accounts. And so, we’ve had project managers as the relationship manager and I believe we need to grow up a little bit and get some account managers. And I was just curious if you believe that project managers are account managers or if those are two different [inaudible 01:12:15].

Drew McLellan:

So, is your definition of a project manager, a junior account person? A younger, less experienced account… So, in agency worlds today, the word project manager becomes all these different things. Some people, they use that for their traffic manager and that’s a super senior position where they’re trafficking all the work. Other agencies will use it as a substitute for an associate account executive. So here’s what I will tell you is, a project manager, what I would call a junior woodchuck, right? So, junior woodchuck in the account service department. They’re great at getting details and running projects, but what they’re not great at, is having business conversations with clients and understanding the nuances of the business of clients. So, if you are now taking on retainer work or ongoing work for clients, where you’re really being held to business metrics, you probably do need somebody a little more senior because what you want is, you want that person to be able to have business conversations with your clients where they become their thinking partner.

And it’s pretty tough for a 23 or 24 year old kid, who’s two years out of college to have that kind of conversation with a client. So yes, you probably do need to think about the stratosphere of your account service and you’re going to need some more senior people to have more strategic conversations with your clients as opposed to, “Hey, we need the logo, and here’s the timeline and here’s what we’re doing.” Because that’s what it sounds like your project managers do, is they move the project from start to finish. So, they’re great and they’re valuable, but they’re not thinking partners to clients and that’s what you really want.

Shannon:

Very well. Thank you.

Drew McLellan:

Sure.

Hannah:

All right guys, one more question if we have time, or if anybody has one more question? I think that’s… Anybody? Closing thoughts?

Drew McLellan:

I’m wondering what the people who are not on video, what is your costume that you do not want to…

Hannah:

I know, right?

Drew McLellan:

Yeah, I’m just saying. Emma, I’m wondering, right now.

Hannah:

Emma had a little crown on earlier. I saw it.

Drew McLellan:

Yeah. Yeah. I’m just saying. Makes me suspicious.

Sharon:

Steven’s adjusting his crown.

Hannah:

Yeah.

Drew McLellan:

What else can I tell you guys?

Speaker 14:

There it is.

Drew McLellan:

There you go. Thank you. I didn’t mean to call you out, but I kind of did, so…

Emma:

No, it’s okay.

Steven:

Yes, he did.

Brian:

Yes he did.

Drew McLellan:

Yeah, I know. I said I’m not sorry about it.

Brian:

When you stay late after school.

Hannah:

Well, if no one else has any questions, I do have a question.

Drew McLellan:

Okay.

Hannah:

Anybody else? No? Drew, I know that you’ve traveled to all the different continents with Kelsey, right?

Drew McLellan:

Yeah.

Hannah:

So, which one was your favorite and why?

Drew McLellan:

Africa, for sure. Yeah. Being in the middle of a reserve and realizing that you are seriously in the food chain and you are not at the top of the food chain anymore.

Brian:

You’re not the top of the food anymore.

Drew McLellan:

It’s a very humbling and, sort of, getting you in the right place in the universe kind of an experience. I mean, it’s beautiful and it’s raw and it’s just… It’s spectacular. Actually, Danielle and I are headed back next September, I think. So this coming up September.

Hannah:

I thought you were going to say next week because that’s how your travel [inaudible 01:15:24]

Drew McLellan:

No. Well, we’re home for two weeks. It’s going to be very weird.

Hannah:

What?

Steven:

Hang on a second. You got to tell the elephant story.

Hannah:

Oh, you can only take…

Drew McLellan:

Which elephant story.

Steven:

The elephant story when you’re like, for days trying to track them down and then they came out of the woodline.

Drew McLellan:

Oh my God. Right. So, we’re on this safari and we’re like… In Africa, it’s like, you want to see the big five of animals. It’s a lion, it’s an elephant. And we had not seen an elephant. And these are large animals, you would think you would’ve bumped into one when you’re out there in the woods and we couldn’t see it and couldn’t see it, but you could hear them in the brush, you could hear them. And so, we knew we were close. So, when you’re on a safari, you’re in a big open Jeep, and all of a sudden, this elephant comes out of the bush and starts walking towards the truck.

And I swear to God, he was five times the size of the Jeep we were in. He was ginormous. And he’s just walking towards us and I’m taking pictures, at the same time I’m thinking, “He’s just going to keep walking. He’s going to walk over our Jeep. I am going to kill my daughter and that’s going to be the end of the Africa story.” So, it was an amazing experience until he kept walking, walking, then all of a sudden, the guide’s like backing up and backing up the Jeep because the elephants getting closer and closer and closer. So, it was awesome.

Megan:

That is so awesome.

Hannah:

That sounds awesome, but also terrifying when you were saying, “We could hear them, but we couldn’t see them.” That kind of made me a little…

Brian:

It’s amazing with animals that big, how quiet they are in the wild.

Hannah:

Yeah.

Brian:

It really is.

Hannah:

Like modern day dinosaurs. It’s crazy.

Drew McLellan:

Yeah, yeah. They’re all kind of quiet, actually. I mean, that’s how they survive, right? All of a sudden a lion pops out or a whatever, so you never know. But anyway, that’s my favorite of the continents. That’s my favorite. Yeah.

Hannah:

Yeah. Well thank you for answering and thank you for joining us for Collabs and Cocktails, Halloween edition. Thank you, Steven, for actually wearing your costume. We appreciate you guys.

Drew McLellan:

It was fun. Thank you guys.

Hannah:

We’ll send out an email with some of the resources we mentioned as well as some contact information. So, thank you guys for joining us. And again, if this is your first time here, I hope you enjoyed it. If not, give us some feedback. We’re always open to feedback. So yeah, just thank you. Thank you.

Drew McLellan:

It was awesome. Thanks you guys. Good seeing you all.

Hannah:

Thank you.

Sharon:

Bye y’all.

Drew McLellan:

All right. That’s it. That wraps up that. It was really a fun conversation. As you all know, I really love just chatting with agency owners and problem solving and commiserating and supporting and celebrating. So, that was a blast for me to do. And again, thanks to the Predictive folks for inviting me and for allowing me to use the recording. Couple quick things before I let you go. Number one, of course, want to thank our friends at White Label IQ, they’re the presenting sponsor of the podcast and they do White Label, PPC Dev and Design and our heroes to many AMI agencies. So, feel free to check them out at whitelabeliq.com slash AMI, where they have a special deal for you if you’re a first time client. Also want to remind you, we have some great workshops coming up in January and I want to particularly underline the workshop that Mercer Island Group has put together for us.

It’s a brand new workshop. It’s all about the written pieces that we use in biz dev, and how we can make them better so we can increase our win rate. You know, you can’t win if you don’t get in the room, and you don’t get to be one of the final three or you don’t get the final consideration. And the way we get to that final stage is through the written word. Might be case studies, cover letters, proposals, recommendations, RFP responses, whatever it is. But they’ve built a two day workshop helping us get better at all of that. So, whether you never answer an RFP or you’re only RFP based. Whether you are a small shop and you send very simple proposals and cover letters, or you’re a large agency and you’re competing against big, big shops for big pieces of business, I promise you, this content is going to change how you win in 2023.

So, that workshop is, I think it’s the last Tuesday and Wednesday of January, in Orlando. It’s on the Agency Management Institute website. So, go check that out and register before we sell out because it’s going to be killer content, it’s brand new and I think all of you are going to really benefit from it so, don’t miss this one.

All right. As always, thanks for listening. Thanks for hanging with me for this hour and I will see you next week.

That’s a wrap for this week’s episode of Build a Better Agency. Visit Agency Management Institute.com to check out our workshops, coaching packages, and all the other ways we serve agencies just like yours. Thanks for listening.