Five Opportunities for Agency Evolution with Drew McLellan

Danyel McLellan [00:00:01]:

It doesn’t matter what kind of agency you run, traditional digital media, buying, web dev, PR or brand, whatever your focus, you still need to run a profitable business. The Build a Better Agency podcast presented by White Label iq will expose you to the best practices that drive growth, client and employee retention and profitability. Bringing his 25 plus years of experience as both an agency owner and agency consultant, please welcome your host, Drew McClell. Drew McLellan.

Drew McLellan [00:00:37]:

Hey everybody, Drew McLellan here and I am back with another episode of Build a Better Agency. And I am super excited to spend this time with you. This is one of my solo casts, so if you’re new to the podcast, a solo cast comes every five episodes and in the fifth episode of the cycle, it’s just me, no guest, just talking to you about something that probably I’ve been having a lot of conversations with other agency owners about, or it’s just something that’s on my mind that maybe we haven’t been talking about yet, but we need to. In this case, we’re absolutely talking about this already, but just want to hang with you. I want to give you some things to think about, to chew on, maybe a little bit of homework, but we’re going to, we’re going to get through the next hour or so together exploring a topic that I think is super important. I’ll tell you a little more about it in a minute, but before I do that, a couple of things.

First and foremost, I want to thank our friends at White Label iq. They’re the presenting sponsor of the podcast and they also are the presenting sponsor of the Build a Better Agency Summit. So we are super grateful for their support. They allow us to bring you probably two of the most important cornerstone pieces of content that AMI has to offer this weekly podcast where we get to bring on all these amazing guests and also the, the once a year large gathering, the Build a Better Agency Summit is coming up May 18th through 20th. The 18th is member day, so if you’re a member, you get to attend for some really great content that is only for you. We’re going to have Mercer Island Group with us for 90 minutes. Susan Byer and I are going to spend about 90 minutes walking you through the new agency, Edge Research, which is an absolute blueprint of where your agency needs to go this year. So that’s going to be fascinating. And then we all gather for cocktails and a reception after that. And then the conference starts on the 19th.

Right now you can get a ticket for a couple more days. You can get a ticket for Free if you become a Summit associate member of ami. So not only do you get all the benefits of membership, but you get a free ticket. So all you have to do is head over to the Agency Management Institute website. Up in the upper left corner it says Baba Summit. Click on that and you can register. Or better yet, click on on the Nav bar membership. Buy a Summit membership and you get all the benefits, including a free coaching call with Danielle or I, which is a retail value of 750 bucks and a ticket to the Summit, all for less than the price of the Summit ticket is right now. So I don’t know why you wouldn’t do that, but as I was saying to you, our friends at White Label, what they do is they work alongside agencies all over the world and they do white label design, dev and paid media and they’ve got an entire team of people who are dedicated to working with you at a price point where you can make great money, delight a client and have a partner who helps you think things through.

The other thing they’re doing right now is they are investing a ton of time and energy in helping agencies build out AI applications, connectors to create automations. They’re doing it for the agencies internally and also for their clients and the client work they’re doing. So check them out@white labeliq.com AMI and if nothing else, please ping them and thank them for their sponsorship because they make two of the most important things we do possible. So we’re super grateful to them.

Second thing I want to do before I jump into the solo cast is I want to remind you that in every solo cast, we give away a free seat to an AMI workshop or the Build a Better Agency Summit. And all you have to do to be eligible to win is go to wherever you download this podcast and leave a rating and review. And then what I need you to do is I need you to take a screenshot of it and email it to me. So send it to [email protected] or send it to Admin at. Either way it’ll get to me. And then you get thrown in the drawing and you stay in the drawing until you win. So sooner or later you’re going to win a $2,000 or more valued seat at one of our workshops in Denver or the Build a Better Agency Summit in Denver for leaving a review that seems like a pretty good return on investment. So this month the winner is Rob Betts from Marketing Options. Rob, congratulations. Will reach out to you and let you know how you can redeem your ticket either for the summit or one of our workshops. But congratulations to you and thanks for the review.

Okay, let’s dig into this week’s content.

Okay, so the truth of the matter is I think a lot of agency owners and you know Danielle and I talk to you every day of the week. I, I’m recording this on a Sunday and I’ve been texting with agency owners who are in the middle of either acquisitions or a problem. So literally we talk to you seven days a week. And I know that a lot of you are super nervous. I know that you are anxious about the future. It’s really why we have themed the entire summit. How do you future proof your agency? Because we know that there’s so many changes going on that you are wondering, what is my agency going to look like? What, what are we going to offer? What are we going to sell? What’s AI going to do to us? All of those things. And that’s what I want to talk about today.

Because I believe you are standing at the front edge of the best decade to own an independent agency. Probably not the safest decade, maybe not the easiest decade, but absolutely the best one for an owner who is willing to evolve. The next three to five years will not be business as usual. That’s a given. And that’s exactly why there is so much money on the table for agency owners who are are willing to rethink how they will run their shop, how they will create value, and how they will show up as leaders.

So let’s be honest, it looks ugly until it doesn’t. If you just skim the headlines, it feels a little like we’re Chicken Little and the sky is falling. Trust in institutions is in the gutter. Economic anxiety is cranking to an 11 and a whole lot of people are convinced that AI is coming for their livelihood, not to make life easier. In our world, the giants are gobbling each other up. There’s been trillions of dollars spent in M and A holding. Companies are morphing from the big six into the big few. And CMOs are quietly wondering if this restructuring is going to hurt them more than. It helps if you stop the story right there, it’s pretty terrifying.

But here’s the thing. If you read the same data, like an independent agency owner instead of a helpless bystander, the story flips. When giants stumble, they create cracks. And those cracks are exactly where elite focused, founder led boutiques step in. Mid market brands are feeling neglected. They’re getting a B team. There’s slow responses from the holding companies. They have generic platform approved answers and they’re actively looking for shops like yours. This isn’t the end of agencies, you it’s the end of one kind of agency and the birth of another.

So let me tee up our whole conversation with one question. If all of the chaos you’re seeing, AI consolidation, economic jitters, wasn’t a threat, but instead it was an invitation, what would it be inviting you to build?

Let’s look at that. The truth is, work is changing, whether we like it or not. In his really brilliant book Rethinking Work, Baba Summit keynote speaker Rashad Tabakawala makes a simple but important distinction. Jobs and work are no longer the same thing. Jobs are the boxes on an org chart and titles on LinkedIn. Work is the actual value that we create, the problems we solve and the trust that we earn. And we are moving into a world where where work gets done by a blend of full timers, part timers, contractors, fractional leaders, specialists and AI agents all snapping together around outcomes instead of rigid roles. That’s not a future state. That is happening right now. Danielle and I see it every single day.

Also, we’re moving into a world where organizations look less like factories and more like jazz ensembles. Talent and tools coming together around a chart and improvising and then recombining for that next song. We’re also seeing power shifting towards the individual. People expect flexibility, meaning mastery and community, not just a paycheck.

So here’s the truth. If you are clinging to the old model, fixed jobs, rigid hierarchy, control through butts and seats, you’re going to lose your best people and your best clients. Future ready leaders keep learning. They build cultures of trust and autonomy. And they use technology to amplify human strengths, not squeeze people into machine like efficiency.

Overlay that with the AMI trends data that we will be unveiling at the BABA summit next month. So it’s the 2026 agency Edge Research and what we’re all feeling day to day and the chaos starts to show a pattern. Independent agencies aren’t misfits in this new world. You’re the prototype of it.

But the trends are really saying to you, and we’re going to dig into this in deep detail at the summit is number one, trust is breaking and dumping in your lap. People don’t trust government, media, big business, or anyone waving the AI flag without guardrails. We see this in study after study. Not only our own study, but the Edelman Trust Barometer and others. And yet business is the only institution seen as both competent and ethical. And interestingly, my employer is the single most trusted entity in most people’s lives. I want to repeat that for you. My employer, you are the single most trusted entity in most people’s lives. Employees want their leaders to promote shared identity, to build diverse teams that can actually talk to each other and teach constructive language. Bottom line, the world is saying I don’t trust much, but I do trust who I work for and people like me. And I’d love some help making sense of this.

Independent agencies sit right at that crossroads of trust. You employ people who are predisposed to trust you. You advise brands that desperately need honest communication, and you live in communities where your reputation is built one relationship at a time. That’s not just a burden, that’s a competitive advantage for agencies who are willing to lead with radical transparency, clear value and genuine care.

Next trend, consolidation is happening and it’s cracking the door wide open for us. The big networks are merging, rebranding, building platforms and managing debt. From the outside that can look like a strength, like they’re a behemoth that we can’t possibly beat. But from inside client organizations, it often feels like bureaucracy and sameness. CMOs have very clearly expressed their worry that the restructuring will actually hurt their business. And a huge percentage of leaders are planning media agency reviews and other kind of agency reviews. We’re going to see a huge shift in business in 2026 and beyond as CMOs move away from the big networks to something and to partnerships where they actually feel valued and seen.

So in that neglected middle brands that are too big for a tiny independent, but way too small for a holding company, there’s a vacuum niche and dependents are stepping into that space and regularly reporting margins to 10 to 20 points higher than generalist shops without necessarily having to having bigger top line revenue. So I want you to hear several words in that sentence. Number one, niche. Number two, independent. Number three, margins. 10 to 20 points higher than generalist shops. I do believe we are at the end of the story for agencies who, who try and do everything for anybody and everybody. If you’re serving the local butcher, baker and candlestick maker, you have to figure out what makes you different. So that’s the difference between I’m exhausted and trapped and I’m well paid and building something sellable. That’s the decision you need to make today so that you can move into the future. This is your shot. The giants aren’t going away, but they’re distracted and they’re getting so big that they’re falling all over themselves.

One of the other trends that we have to pay attention to is and recognize the truth in this is AI is not replacing you, but it is rearranging the work. And here’s where the fear lives for many agency owners. AI can write, design, edit, analyze and even plan chunks of media. Big consulting firms have thousands of AI agents doing research and modeling. And yet consulting is growing, not shrinking. Why? Because most organizations still can’t on their own pick the right problems for AI redesign workflows, govern AI responsibly and integrate tech with culture and incentives. Only a very small minority of in house teams are using generative AI in a meaningful way. And by the way, that’s a tiny little number. While the majority of agencies are and executives are planning to increase their AI budgets while worrying about lawsuits and value destruction from doing it wrong.

So this AI story for agencies is yes, low value production is getting commoditized. And if your value proposition is we make stuff, you’re going to get squeezed if you’re not already getting squeezed. But demand explodes for high value guidance, strategy, orchestration, governance, measurement and change management. And AI lets small shops play at a sophistication level that used to require an army inside a holding company. All of this is to your advantage. We’re already seeing agencies chop off 30 to 40% off production time and improving analytics, automating biz dev and pushing their AGI per FTE from about $175,000 per FTE towards 225 or higher simply by changing how the work gets done. That’s real money created not by hiring more people, but by redesigning the machine. In fact, most agencies are smaller in terms of headcount than they were two years ago. But they’re performing at the same level of profitability, AGI and even gross billings.

The other trend that we need to accept and actually take advantage of is that your clients are changing how they find and hire you. The way clients buy agencies has shifted under our feet. Search driven leads have more than doubled in a few years while networking and the friend of friends referrals are way down. Younger buyers are doing almost all of their decision making before they ever reach out. Using AI augmented search to build shortlists by niche and proof, not by proximity. If you’re a member or you’re a newsletter subscriber, you know I’ve been talking about this need to have buying proof to reassure your prospects that you are the safest choice. With all kinds of evidence that’s what they want? What they want is they want specialists with obvious external validation. External validation. Not you telling them you’re an expert, but the world, their world telling them you’re an expert. They want strategic partners, not order taking account service. They want shorter, more flexible engagements with faster time to value. RFPs are fewer and the winners are the ones who respond to fewer, better fit opportunities with deep customization and vertical understanding. Volume is out and precision is in.

The fifth trend that I want you paying attention to as we think about how we’re going to evolve your agency in the next three to five years is that your team is asking you to level up inside your agency. The ground is shifting as well. Employees believe whether you agree with them or not, employees believe that you owe them both a well paid job and future ready skills. They believe that is your obligation and I’m using that word very carefully. Turnover has dropped from brutal levels to something more manageable. So a lot of agency owners think that thing, everybody’s happy. But honestly, the fact that that turnover has dropped is more out of fear than joy. People feel stuck, not secure, unless you are giving them both that well paid job and the future ready skills. Burnout is still super high, especially among the Gen Xers and parents of school age kids. But at the same time, those employees who are still there are asking for development, flexibility and meaning. The workforce is reshaping around fewer FTEs and more variety of structure, more part timers, deeper use of contractors. And there’s a tension between those who want more in person connection and those who still need remote flexibility. We have to solve all of these problems.

Read all of what I just said one way and that’s just a list of headaches. But read it another way and it’s a set of clues. Your people want to get better. They’re hungry to add more value. They want to think more strategically, they want to learn AI. They want to deepen their business acumen and be part of something that matters. And when you upskill your account folks into true strategic advisors, everybody wins. Clients, team and you. We have two sessions dedicated just to that. How do I level up my account service people so that they are guides or Sherpas to clients? Rather than taking meeting minutes and passing along deadlines.

I want you to look at consulting if you want to see what your future looks like. If you want a crystal ball for agencies, watch the consulting world. They were supposed to get crushed by AI. Instead they’re growing and spinning up entire service lines around AI value realization. Measuring actual impact, not just we used a tool. A few patterns should sound really familiar to you. They’re quietly trimming low value repeatable work while investing heavily in high value advisory around transformation, risk and culture. They treat AI as mostly a people and process issue, not just an algorithm problem. And really, clients are not paying for AI usage, they’re paying for outcomes is what we’ve always wanted. They’re paying for faster decisions, resilience, new revenue, reduced risk and organizational learning.

The independent agencies that are moving quickly to their future are on the same path. You’re going to automate and shed low value production. You’re going to grow by leaning into that advisory, orchestration and change, especially around AI measurement and trust building. Brand building is going to have a whole new resurgence because trust is so fragmented and fragile right now. You’re going to win not by shouting we use cutting edge tools, but by showing how you’ll redesign a client’s marketing ecosystem to drive business outcomes with AI data and human insight all working together. The big takeaway is AI doesn’t eliminate the need for trusted advisors, it amplifies it, but only for those who are willing to evolve.

So I want to talk about your opportunity map for the next three, five, ten years. But first let’s take a quick break.

As we take a quick pause from our conversation, I want to talk about something that I see agencies struggle with. Hiring mistakes are expensive, especially when you’re expanding your team or thinking about hiring internationally. When agency owners ask me who helps them slow down, get clear and avoid these mistakes, we often point them to jobrack. We trust Noel and jobrack and their approach. I’ve seen how he thinks about hiring and AMI agencies working with him have strong, positive experiences. Because of that, we were happy to welcome Noel and jobrack as a paid sponsor of this show. If you want a smart place to start before your next hire, Noel’s hiring playbook is [email protected] again that’s jobrack.com ami

Hey everybody, thanks for listening today. Before I get back to the interview, I just want to remind you that we are always offering some really amazing workshops and you can see the whole [email protected] on the navigation head to how we help. Scroll down and you’ll see workshops and you can see the whole list there with descriptions of each workshop. They are all in Denver and we’ve got them throughout the year for agency owners, account Execs, agency leaders, CFOs. We have a little something for everybody. No matter what it is that you’re struggling with people, new business, money, all of those things we’ve got covered. So check them out and come join us. All right, let’s get back to the show.

All right, welcome back. So let’s talk about your opportunity map for the next decade. So where’s the real upside? Let’s put five big plays on the table.

Opportunity number one, be the strategic advisor, not the vendor. Clients are done with project managers with better manners. They want advisors who who understand the business, connect activity to outcomes and help navigate complex change. Is that more sophisticated? Yes. Is it harder? Maybe. Is it more profitable? Absolutely. Agencies that make this shift will enjoy premium pricing, stickier relationships, and a real seat at the table where strategy and budgets are decided. Honestly, I think about the conversations that I have had with all of you over the last decade or more, and what I hear all the time is we don’t want to be treated like a vendor. I want to be a partner. I want a seat at the table. This is your opportunity. You can have everything you want if you’re willing to evolve your agency. This demands that you stop hoarding strategy. You have to teach your team to ask better questions, read financials, interpret data and speak the language of CFOs and COOs, not just CMOs.

The second opportunity is to specialize and make yourself findable. The data is crystal clear. Generalist agencies have lower margins and more fragile pipelines. Niche agencies are consistently 10 to 20 points healthier, positioned by vertical, by audience or by problem. And let your marketing, your IP and your story revolve around that lane. Meanwhile, search driven discovery keeps rising and younger buyers are using AI and search to vet you before you ever know that they’re looking. If you are not clearly positioned and producing visible proof, content case studies again, please read the book that Steven Wessner and I wrote, Sell with Authority. Happy to send you a free copy. All you have to do is email me and we will get it in the mail to you. But if you don’t clearly position yourself and you’re not producing visible proof again, content, case studies, all of that, then you are invisible even to your own referrals.

Opportunity number three, you need to monetize AI in the right way way. Clients don’t want to pay you for hours, especially now that they know AI exists. They expect you to use the tools to be faster and better. The agencies that will win will use AI aggressively inside their shop, price around outcomes and capabilities, and sell advisory and implementation around AI, governance, analytics and automation. We’re already seeing six figure scopes for AI policy training and quality control work, not just campaigns. You can either be the agency that is quietly shrinking in AI shadow or you can be the one that the board calls when AI risk and opportunity hit the agenda.

Opportunity number four for your agency of the future. You can ride the in house reversal. For years clients have been taking work in house and it always has been an existential threat. Now a lot of big brands and medium sized brands are unwinding portions of those teams because they can’t keep up with AI, specialized channels or the cost of talent. This is a once in a decade chance to win budgets that were off market for years. AI enabled specialist strategic agencies, especially those serving that neglected Middle east are already stepping into that space and you can too.

Opportunity number five I want you to build a business, not just a job Inside the AMI community, the pattern is clear. Owners who are implementing the fundamentals positioning systems, profitability, discipline, investing in people and tech almost double their take home compared to the broader industry, often on similar top line revenue. They move from owner hero firefighting to systems and scalability, raising their AGI per FTE from 175 to 225 and beyond. And they’re investing in their people in professional development and leadership capability. They’re building something that pays them well now and they can legitimately sell later. You did not work this hard to just own a stressful job. You worked this hard to own an asset.

All of this is exactly where the Build a Better Agency Summit comes in. You don’t need more noise or spicy LinkedIn hot takes. You need clarity, benchmark proven plays and a community that leads with love, is generous in sharing with what they know and believes that we get better when we learn with and from each other. So over May 18th to 20th we’re going to walk the key trends as decisions you must make. We’re going to dig into what it means to behave like a consulting firm in terms of advisory and AI work. We’re going to unpack how to build a jazz ensemble agency that’s both flexible and a stable home for your team. We’re going to share real examples. In fact, a lot of the breakouts are being led by agency owners using AI and automation to boost profitability and create new offerings. And we’re going to be honest about the we broke it so you don’t have to stories as well. We will work through how to upskill your account people into true strategic advisors and how to reposition to ride the in house reversal and that neglected middle Most important, you won’t be doing any of this alone. You’ll be surrounded by owners who are just as tired, just as anxious sometimes, and, and just as determined to build something better for themselves, for their teams and their clients. We are going to honor this work and the fact that it is hard and often lonely. And then we’re going to make it less lonely, less chaotic and more profitable. Really want you to join us at the summit so we can continue this conversation.

Let’s be honest, the worst strategy you can run over the next three to five years is denial. Denial sounds like, well, we’re just going to wait for AI to settle or we’ve always been full service or my clients aren’t asking for this yet. By the time it’s obvious, it’s going to be too late. The owners who will tell a very different story five years from now are the ones who are really making learning a habit, who are picking a lane and sticking to it, who are embracing AI as a lever, who are rebuilding around advisory and outcomes and are putting themselves in rooms like the summit where people are solving the same problems and sharing the answers.

This is not about becoming a different kind of person. It’s about becoming a more intentional version of the owner that you already are. You’ve already proved that you can do hard things. You’ve kept an agency alive through pandemics, social upheaval and economic roller coasters. Now the question is, will you let this next wave happen to you or will you ride it?

If you’re willing to learn to experiment and evolve, the data is squarely in your corner. Independent, specialized, system driven, AI literate, trust led agencies can make more money than ever while building places where people are proud to work. That is your future, that is your opportunity, and that is my call to you. Are you willing to evolve or is it time to sell your agency? Because the truth of the matter is, if you don’t evolve, the value proposition gets darker and darker.

I have complete confidence in you. I don’t care if you’re two people or 200 people. I have complete confidence in you. Whether you are in South Africa or you are in South Carolina, I have complete confidence that we together can ride this wave, evolve our agencies and build businesses that are actually more profitable, more sellable, and more in demand than ever before. This is your moment. This is the greatest opportunity you have ever been presented since the day you opened the door at your agency. The question is, are you willing to walk through the door? I hope you are and I hope you’ll let us help you.

Okay? All right. That’s what I have for you today. Lots to chew on before I let you go again. Thank you to our friends at White Label IQ, the presenting sponsor, whitelabeliq.com AMI and I do not take for granted that we get to hang out together. I am grateful that you spend this time with me and that we can learn and grow together. So thanks for listening. I’ll be back next week. I hope you will too.

Danyel McLellan [00:33:27]:

Come back next week for another episode designed to help you build a stronger, more stable and sustainable agency. Check out our workshops, coaching and consulting packages and other professional development [email protected].