Episode 385

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One of the most common traps we fall into as agency owners is making decisions based on our fears. Every day we have to make hard choices, and it’s easy to fall victim to a fear-based narrative when trying to make everyone happy while keeping a business afloat.

But fear not — I have some advice for you that will help you see the bigger picture of where you are likely making fear-based decisions for your agency. This week, my goal is to help you identify the most common fear-based business decisions, understand why this happens almost universally, and learn some tricks to rewire our thinking around these decisions.

As you listen to this episode, take stock of when you’ve made decisions out of fear. Fear of losing a good employee, fear of losing money, fear of missing out on a good project or client — and see if you can find a better approach to tackling even just one of these examples.

For 30+ years, Drew McLellan has been in the advertising industry. He started his career at Y&R, worked in boutique-sized agencies, and then started his own (which he still owns and runs) agency in 1995. Additionally, Drew owns and leads the Agency Management Institute, which advises hundreds of small to mid-sized agencies on how to grow their agency and its profitability through agency owner peer groups, consulting, coaching, workshops and more.

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.
fear-based decisions

What You Will Learn in This Episode:

  • The biggest, worst fear-based decision agency owners often make
  • Acknowledging the truths behind our fears and putting action behind them
  • Financial decisions (and mistakes) we make when we’re afraid
  • How we hand over control to our clients when we’re acting out of fear
  • The vital role of client and employee satisfaction surveys
  • The psychology behind fear-based decisions
  • Why you should step away from a problem and ask for help
  • How to rewire our thinking around decisions and get out of the fear narrative

“You're trying to avert a disaster by making the fear-based decision, but instead, you just create a whole new disaster.” @DrewMcLellan Click To Tweet
“When you leave too much money in the business out of fear, you end up burning through your personal money, which should be out of the business and building wealth somewhere other than inside the agency.” @DrewMcLellan Click To Tweet
“At the end of the day, let's remember that our number one job is to run our business profitably enough that it survives until tomorrow.” @DrewMcLellan Click To Tweet
“It turns out we are hardwired to make our decisions based on fear. So we have to know how to come around that with logic and with other coping techniques.” @DrewMcLellan Click To Tweet
“There are all kinds of reasons why we allow a fear to help us make a bad decision, or we allow fear to cripple us and not make a decision at all, and we shouldn't be beating ourselves up about it.” @DrewMcLellan Click To Tweet

Ways to contact Drew McLellan:

Resources:



Speaker 1:

It doesn’t matter what kind of an agency you run, traditional, digital, media buying, web dev, PR, whatever your focus, you still need to run a profitable business. The Build A Better Agency Podcast, presented by White Label IQ, will show you how to make more money and keep more of what you make. Let us help you build an agency that is sustainable, scalable, and, if you want, down the road, sellable. Bringing his 25-plus years of experience as both an agency owner and agency consultant, please welcome your host, Drew McLellan.

Drew McLellan:

Hey everybody. Drew McLellan here with Agency Management Institute back with another podcast, another episode of Build a Better Agency. This is a solocast. So for those of you who are regular listeners, you know that a solocast is when I come out and I am all by myself, just you and me hanging out together, talking about something that is either on your mind or maybe on my mind that I want to put on your mind.

No guests this time. So just us chatting about something that I think will be of value to you and is important. I have teed up quite the topic for that today.

But before we get into that, a couple of things. Number one, as you know, at every solocast, we give away a free workshop. The way you win a free workshop is you leave a rating or review for this podcast wherever you download the podcast. So that might be Apple Podcasts, it might be iHeartRadio, it might be Google, wherever you find us, I know we’re in all kinds of places.

So wherever you do that, you leave a review about the podcast. Then what I need you to do is I need you to take a screenshot of the review, because you have some sort of username that allows you to have an account where you download the podcast. But I love horses more than men. 32 doesn’t tell me who you are. It tells me something about you for sure, but it doesn’t allow me to match you up with your name or your agency.

So take a screenshot, shoot me an email with the screenshot at [email protected], and then we will enter you in the drawing. You stay in the drawing until you win a free workshop. So our workshops are about $2,000 a piece. And so, it is a worthy prize for a three-minute exercise of leaving a review.

I promise you, I actually read all the reviews. I find them informative, valuable, gratifying. So I see you out there leaving the reviews, and I am appreciative of it. So if you’ve already left a review, you don’t need to do it again because you’re already in the drawing. But let’s say you used to listen on Apple Podcasts and now you’re listening on Google or somewhere else, feel free to leave another review on a different podcast site, and then send me the screenshot. Your name will go back in the hat again. But we never empty the hat. So sooner or later you will win. You will win a workshop.

All right, so this solocast winner, actually from 2021 … So again been in the hat for about a year and a half now … is Sharon Petry from Vision Creative Group. So, Sharon, I’m going to reach out to you and let you know that you won the workshop. You can choose whichever one you would like to join us at and we will be glad to have you there.

All right, so everybody else, get your name in the hat, leave a rating and review. It doesn’t even have to be nice. I mean obviously I’m hoping it’s nice, and if you’re a regular listener, I’m hoping there are reasons why you come back. But honest review is an honest review, and I promise no matter what you say, we will put your name in the hat.

So the other thing I want to do is I have been kicking off every podcast telling you about some of the speakers that we have coming at the Build a Better Agency Summit, which, of course, as you know by now, is May 16th and 17th. If you are an AMI member, silver, gold, platinum, virtual peer group, key exec group, live peer group, then you are welcome to Family Day on the 15th. That’s when we’ll start right after lunch, we’ll have three speakers, and then we’re all going to head out for dinner together.

But if you’re not a member, but you want to come to the main conference, that is Tuesday, May 16th, and Wednesday, May 17th. We have a killer lineup of speakers.

And so, one of the guys who’s going to be doing a breakout session about hiring is a guy named Noel Andrews. Noel actually owns a company called jobrack.eu. So Noel’s whole career has been about hiring and managing people. So he’s done it in large corporations, startups, and in his own businesses.

JobRack allows him to help American-based companies hire as employees, not as 1099s, hire employees who live in Eastern Europe. And so, he and his team have placed … They only work with agencies. They have hired more than a thousand team members and placing people who have high levels of skill, a lot of programmers, digital folks, things like that, coming out of Eastern Europe with a great command of English language. I’ve talked to some of the people who have used Noel. I’ve talked to him. He actually was a guest on the podcast a while back. It’s really a great model.

But, anyway, he’s going to be onsite at the summit talking about how you can explore hiring people from other countries and what you need to think about and know about, because everybody’s struggling to find good people here in the States. So this may be a very viable option for you.

It’s obviously, as you might imagine, a financial advantage to hire someone in another country because you can help them make a very good living at a fraction of what that same skillset would cost in the United States.

So all kinds of good reasons to think about that as an option for your hiring, but another reason to show up at the summit to meet Noel and to hear from him how that’s done and best practices around that. So anyway, he’s a great guy. You will be delighted to meet him. Really enjoyed getting to know him.

All right. So let’s talk about what I want to talk about today. It’s not really, I don’t know, an upbeat topic, but I think it’s a really important one. One of the things that I observe on a pretty regular basis … And we do a lot of coaching with agency owners and agency leaders. I’ve spoken to the other folks who coach like Danielle. There’s a common theme and we see it in our succession work and all kinds of other places.

But there’s a common theme that I think happens without us paying very much attention to it and without us really recognizing what we’re doing, and that is decisions based in fear. It shows up in all kinds of places in your business. This may not be you. You may be a go big or go home person. You may not ever find yourself worrying about the business, worrying about your people, worrying about biz dev, worrying about finances.

But, honestly, if that’s you, you are a rarity in our business. I think for the rest of us, there’s some worry and there’s some stress around making good decisions and making the right decision. Oftentimes I see folks making decisions based in fear.

What made me think about this was a conversation I had with an agency owner who wanted to offer an employee stock in the company. They wanted to give them an equity position in the company, not a big position, 1%, 2%, but they wanted, number one, to give it to them, which if you have heard me ever say this before, I’ll say it again, is never a good idea. It never works out well. I can tell you all kinds of horror stories, but not on today’s episode.

But, anyway, he wanted to give this person some equity because he was afraid, underline, that this person was highly sought after. A lot of people had been trying to poach this employee and he was afraid he was going to lose this employee. And so, his solution was to lock up this employee with equity.

First of all, it doesn’t work that way. If you give somebody 1% or 2%, they’re happy to quit and have you buy their stock back. So, number one, that’s not a great solution. But, number two, more importantly, I said, “Well, is this somebody that you would really want as a business partner? Remember, if you give them equity, they have access to the finances. They get to sit in board meetings or leadership-level meetings.”

We started talking about what it meant to actually have them as a partner. He was like, “Well, I’m not sure that I want them as a partner, but I don’t want them to leave. And so, I’m willing to take them on as a partner to keep them from leaving.”

That, my friends, is foolish. That is fear-based decision-making. You all know, if you’ve ever made a decision based in fear … Sorry. If you’re watching the video, we have three cats and a dog, and we’ve been fostering puppies this week. So I just plucked some dog hair off my shoulder.

But you all have made decisions based in fear. You know what they are. You know the consequences of those. You know that very often the decision based in fear was one of those decisions that you knew was not actually a good or right decision. We’re going to talk about some of the places where that fear-based decision-making really shows up.

But all of you can think of, I suspect, one decision you made based in fear. It might have been to take a client that you had no business taking. It might have been to hire someone or fire someone or offer someone equity. I’m going to talk about some of the ways I see it showing up in all of you.

But you also know that very, very, very rarely does that decision work out. Fear-based decisions are typically a disaster that is just around the corner and you’re trying to avert a disaster by making the fear-based decision, but you just create a whole new disaster.

So here are some of the places where I see decisions that are not in the best interest of the agency, not in the best interest of the agency owner, not in the best interest of the employees, but they’re based in fear.

I will say the biggest one is giving and/or selling shares of stock to someone who you know is not going to be either, a, a good partner or, b, able to run the business if you step away, or, c, able to ever keep buying stocks that are stuck in this weird minority position because you’re not going to give them the rest of the company.

Setting a hook in someone out of fear and giving them things that you don’t really want to give them, whether it’s equity or benefits or a raise, or whatever it may be, very seldom works out for you. Typically how that works out is if they’re going to leave, they’re going to leave anyway. There’s really nothing we can do other than create an amazing work environment with great opportunities, with fair compensation, with flexible benefits, with a recognition of people wanting to keep getting better at their craft and supporting them in that, seeing them as whole human beings and understanding how the rest of their life impacts their work and how work impacts the rest of their life. That’s the best shot you have at, if you will, setting the hook in an employee.

But the truth of the matter is that I see a lot of employment decisions around, “I’m afraid they’re going to quit,” or, “I’m afraid they’re going to quit. So you know what? I can’t have a conversation with them about their behavior, or about their tone of voice, or about how other employees don’t enjoy working with them because they don’t do their fair share of the work,” or whatever it is. We make all kinds of fear-based decisions around the fear of losing people.

I think one of the truths for all of us is, sooner or later, just about every employee we have is going to move on to something else. Yes, you will have some lifers. If you have an agency for a long time, you’ll have a handful of people that stick it out with you for 10, 15, 20 years. But the lion’s share of your employees are going to leave.

Your job is to create an environment that is so enriching and so engaging and so supportive, but also there’s a lot of candor and honesty and coaching and mentoring. Coaching and mentoring only comes when you have honest conversations, when you have candid, hard conversations. So you can’t be afraid of doing those things. It actually diminishes what you’re trying to do, which is create an environment where people want to stay. So we make all kinds of people decisions based in fear that end up biting us in the rear end sooner or later.

We also make a ton of finance decisions when we are afraid. So we might overpay someone because we are afraid they’re going to leave us, or we might overstaff because we’re concerned that the rest of the team is going to get burnt out and leave, even though the data shows us that they’re not working more than 40 hours and that they are not putting in overtime or working on the weekends or working at night.

We sometimes make decisions based on wanting to be … We’re afraid we’re not going to stand up to our peers. We see that sometimes in the peer groups where people will make decisions or spend money in a way that is the business equivalent of keeping up with the Joneses. You know what, only you know your full finances and only you know if you can afford that thing, whatever it is, or that new person, or the move, or the new office, or whatever it may be. Only you know that.

It doesn’t matter what other people think about how you spend your money. As long as you’re paying attention to the financial KPIs and the ratios that we teach, it doesn’t matter what anybody else thinks.

I also see people having a fear of not having enough. So one of the mistakes actually that many agency owners make, and we’ve talked about this several times on the podcast, is that you keep too much money in the business. You are so afraid that the big gorilla client’s going to leave or something else is going to happen, something catastrophic is going to happen. And so, you need to have months and months and months and months and months of money in the bank. That’s just not accurate.

So if you have no gorilla client, we’ve talked about this before, but you have no client that’s more than 20% of your AGI, you need to keep two months of operating expense. So loaded salaries and all your overhead expenses, two months of operating expense in the business. Then I want you to keep another two months out of the business. So put it in your personal name. It’s already your money. You’ve already paid tax on it. You leave it in the business, you’re going to waste it. You’re basically giving away your own money.

So get it out of the business, put it in a money market account or something else that’s super liquid . If you have to, lend it back into the business. So now you have a four-month runway. The only reason why you’d need more than four months of runway is because you’re not brave enough, hence another fear-based decision, to let people go if something bad happens to the agency and you have to downsize, you have to manage expenses.

So financial fear-based decisions sometimes are spending too much, but they are just as often, and maybe even more often, there you keeping too much in the business and then making foolish decisions because you feel so fat and happy about how much money you have in the bank that you don’t do the things you should do like laying somebody off or cutting expenses or putting a check on travel expenses, or whatever it may be.

But when you leave too much money in the business out of fear, what you end up doing is you end up burning through your own personal money, which should be out of the business and building wealth somewhere other than inside the agency.

So we have a lot of fear-based decisions around people, around finance. We also see it around biz development. So in terms of finding new clients, a lot of fear-based decisions get made around which clients to take.

So you’ve been in a dry spell, you haven’t won anything for a while, you are perhaps a little overstaffed because you’ve really been chasing after some new clients for a while and haven’t won, and a client comes along, a prospect comes along, and they are not a good fit. You know you get that weird spidey sense, that weird gut message telling you this is not a good fit for us, but you want to make payroll, and you don’t want to have to lay anyone off, and you don’t have to make big cuts. So you take on that piece of work and you take it on knowing at some level that this is not going to work out well.

Usually what happens is you can’t make them happy, you overservice them to make them happy, they fire you anyway, you didn’t make any profit on the job, and you burned out your people because you exposed them to a bad client, or you take somebody outside your niche or you take somebody that just really doesn’t help you stay on the course with your goals and your vision for the agency. You do that because you are afraid of making hard decisions inside your business.

Another thing you’ll do is you will have a prospect, you will have a proposal in front of them, they hem and haw about the price, and you capitulate on price because you don’t want to lose the opportunity. But now what you’ve done is you’ve just bought a non-profitable client and you’re going to service them for as long as that project takes. From the very get-go, there’s no way you could make money. But it was easier than not winning somehow, and it was easier than not having the cash flow of their money even though it’s really, at the end of the day, a negative cash flow because you are spending more money to earn the money than the money’s actually worth. So lots of fear-based decisions around biz dev.

Another one that I see all the time is when you do have a gorilla client, you allow that client to lead you around by the nose. Whatever they want you to do or they want you to offer or how they want you to price, then you do it.

So we were with a client the other day, an agency, and they had just been called to a big corporate meeting. They have a piece of business with a large international brand. The international brand called all of the agencies together and said, “We are ready to give you your 2023 contracts, but we need you to reduce your hourly rate to X.” X was less than what the agencies were getting paid in 2022 by about 20%, and that was the only way that they were going to get the contract.

What was really interesting about this story was how the agencies reacted to this declaration of here’s your new billable rate, take it or leave it. Some agencies tried to negotiate, other agencies said absolutely not. A few agencies said, “Yup. Thank you very much. We’ll do that,” knowing full well that they were not going to be able to be profitable at that billable rate. But they wanted that big gorilla client either for marquee value, for the name, for cash flow, whatever.

But at the end of the day, let’s remember that our job, our number one job, is to run our business profitably enough that it survives until tomorrow, so we can keep everybody employed, we can take care of our clients, we can take care of our families. If we continually run our own business in the red, then what we do is basically we work ourselves out of a job. We have to let everybody else go. We have to tell our clients they have to find someone else because we were not mindful of the fact that we have an obligation to run a profitable business. I see that all the time, that fear-based decision around clients and biz dev.

Another place where we see a lot of fear-based decisions is in offering new services. So I was on a coaching call with a client and he’s in a business that … They did a very smart thing. He offers a very clear deliverable and they defined an industry that they could serve with great knowledge and incredible service and just really having a depth of understanding about that business. So not only what they do, but who they do it for are both niched.