Episode 110:

Drew McLellan is the CEO at Agency Management Institute. For the past 23+ years, he has also owned and operated his own agency. Drew’s unique vantage point as being both an active agency owner and working with 250+ small- to mid-size agencies throughout the year gives him a unique perspective on running an agency today.

AMI works with agency owners by:

  • Leading agency owner peer groups
  • Offering workshops for owners and their leadership teams
  • Offering AE bootcamps
  • Conducting individual agency owner coaching
  • Doing on-site consulting
  • Offering online courses in agency new business and account service

Because he works with those 250+ agencies every year — he has the unique opportunity to see the patterns and the habits (both good and bad) that happen over and over again. He has also written two books and been featured in The New York Times, Entrepreneur Magazine, and Fortune Small Business. The Wall Street Journal called his blog “One of 10 blogs every entrepreneur should read.”

 

 

What you’ll learn about in this episode:

  • Why all agencies weren’t made to grow to the same size (and why that’s okay)
  • Why agency owners have to work extremely hard when they’re at 0-5 employees and why all the employees in an agency that size have to wear multiple hats
  • The bench strength problem for agencies with 5-12 employees and why there might only be one employee with a certain skill and no one to back them up
  • Why the systems in processes must change for an agency once it hits 12 employees
  • The change around 15 employees that takes an agency from being a family to being a team
  • The decision-making process: why decisions are made collectively before agencies reach 12 employees and why agency owners need to take more autonomy at times as the agency grows
  • Why around 35 employees is a great size for agencies in terms of cash flow (and why a gorilla client can be very dangerous at this point)
  • Bigger, better clients and bigger, better employees: why 35-65 employees is the point where agencies “level up”
  • Why bigger doesn’t equal more profitable for agencies anymore

 

The Golden Nugget:

“In the Mad Men days, bigger was always better for agencies. That’s not true anymore.” – @DrewMcLellan Click To Tweet

 

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Ways to contact Drew McLellan:

We’re proud to announce that Hubspot is now the presenting sponsor of the Build A Better Agency podcast! Many thanks to them for their support!

Speaker 1: If you’re going to take the risk of running an agency, shouldn’t you get the benefits too. Welcome to Agency Management Institute, Build A Better Agency podcast presented by HubSpot. We’ll show you how to build an agency that can scale and grow with better clients, invested employees, and best of all, more money to the bottom line. Bringing his 25 plus years of experience as both an agency owner, an agency consultant to you, please welcome your host, Drew McLellan.

 

Drew McLellan: Hey everybody. Welcome back to another episode of Build A Better Agency. So today’s episode is one of my solo casts. So rather than having a guest with me, this is just going to be you and I having a conversation typically around a topic that has come up with a lot of agency owners in the recent days. And it’s just something I want to make sure that I put on your radar screen and that you’re thinking about. So today what I want to talk about is I want to talk about the challenges that agencies have as they grow.

 

  And one of the things that is true as an agency of five people is different than an agency of 250 people. But every agency of 250 people started as an agency of five people. And they went through a transition in certain stages and they made conscious choices and they made trade-offs, there’s pros and cons in every sized agency.

 

  And what I want to do is I want to walk you through what I think are sort of the breaking points, where you have to change and fix some things, or you’re going to be stuck at that certain size. What are the breaking points? And what is the evolution look like from being a small agency to something much larger? And what are the trade-offs of an agency like that?

 

  And then that way you can start to recognize the signs of, oh, oh, we’re getting close to that breaking point. I need to be thinking about how we need to pivot the agents here, change the agency to evolve into this next stage. So if we’re going from caterpillar to butterfly, what does that look like? And what are the trade offs of that? Maybe I want to stay a caterpillar. And that’s certainly a choice that you can and should be consciously making at each breaking point.

 

  So I just want to walk you through those and tell you a little bit about them. So all agencies are not created or grown to be equal. And again, depending on why you started your agency if you’re the owner or why your owner started the agency, if you’re on the leadership team. That’s going to dictate what size is the right size to stop. So I’m going to walk you through each phase and then hopefully that’ll give you some things to think about as you approach 2018 and you start thinking about your one year and maybe your three-year plan, so you can be ready for those changes when they come.

 

  So, all right, let’s start with a brand new agency. So typically for most of you if you’ve been around for awhile, you can remember back to the days when you started your shop and you were probably, maybe it was just you, maybe you had an employee or an intern. Maybe you had a business partner, but you were certainly from in the zero to five employee range.

 

  And for those of you that are listening, that are new to the agent’s business, this may still be where you’re at today. So here’s the deal when you are at the zero to five employee range. In this case, pretty much everybody who works at the agency is about the same. They all look and sound the same. And the reason that is, is because they are doing a variety of things every day, lots and lots of hats. And so everybody is just trying to scramble to take care of the clients. And oftentimes what that means is that you’re all doing a little bit of everything. So there’s no specialty. Everyone is just pitching in where they can. From the owner’s perspective, the owner is truly the butcher, the baker, and the candlestick maker in a zero to five agency.

 

  So they’re typically working with clients all day and then they’re doing administrative work like billing at night. So this is the time when an agency owner is working super long hours and they’re not only directing their own activity, but they’re directing everybody’s activity. So everyone is getting their go-to instructions from the agency owner. The owner is sort of quarterbacking all the activity. And odds are the team is very young and inexperienced. Why? Because the agency just started and the owner doesn’t have a lot of money in most cases. Sometimes there’s exceptions, but for the most of you, if you think back to when you started, you didn’t have two pennies to rub together. You certainly were not hiring a senior person unless somebody was coming on as a partner. But otherwise your first employee odds are, was a kid right out of college. Maybe they were still an intern. You were paying them little to nothing. And by the way, you had no training for them.

 

  So it was really a baptism by fire, just come on in, come into the kitchen, put on an apron and get to work, right? In terms of operations, an agency that’s zero to five, depending on how tech savvy the agency owner is. But mostly you guys are reinventing the wheel every day. You might have some Excel spreadsheets, Google docs, but you’re constantly reinventing the wheel. And for every client, everything is custom and you are saying yes to anybody who’s got a box here. You are not only stressed super thin, but you’re not doing anything with enough consistency or frequency to have any sort of efficiency in the agency. The other interesting thing about an agency this size is that most decisions inside the agency are made as a collective whole.

 

  So every decision is sort of a weed decision and the owner is basically running a big democracy and everybody pitches in and everybody has to say. In terms of finances, an agency from zero to five people is very hand to mouth. So it’s a feast or famine. When we get money in it’s great, everybody gets to be paid or fed. But there’s these dry spells and maybe everybody else gets paid, but oftentimes the owner goes hungry, the owner doesn’t take a paycheck. Lots of cashflow challenges in the zero to five space. Because a lot of times you’re working with smaller clients. They try and stretch up their bills. It’s just a challenging time as a young agent to kind of climb out of that. In terms of marketing and sales and new business, really at this point, your prospects, anybody the agency owner knows.

 

  So they’re going to network meetings. They’re talking to their buddies. They might be talking to somebody at church, but they’re pretty much trying to get anybody and everybody to give them a chance to prove to them that they can take care of their marketing and advertising.

 

  Oftentimes, what this means is that the client mix at this size is completely random, literally I butcher, baker, and candlestick maker because whoever has money and says, yes, they’re our client. All right. So let’s look at the agency that goes from five to 12 employees. So now all of a sudden we’ve got, when you’re five, six, seven, we’ve got to put skeleton process in place. A lot of the knowledge is tribal knowledge. So the employees that were there back when it was five and a lot about the client, typically there are not a lot of processes yet to record all that information. So everything is verbally passed out from employee to employee to employee.

 

  But we’re beginning to see the skeleton of a team at the five to 12 mark. Oftentimes at this stage, the owner’s role is that they are client [inaudible]. So they are doing a lot of strategy work for our client, but they’re also still really in the weeds. They’re taking a lot of calls, all the hands are doing a lot of work. They’re working a lot in the business. They’re also trying to drum up sales, but they’re so busy that it’s hard with client work. It’s really hard for them to carve out the time to do sales. And they still have a lot of administrative duties. Until you get to that eight, nine, 10, 11, 12 stage. So in the early phase of this category of agencies, you’re not really hiring anybody who’s not billable.

 

  As you get closer to that 12 mark, odds are you’re adding either an office manager or a billing clerk or an accountant, perhaps, but most of you have probably not that much money, right? But somebody to help you with the admin. And oftentimes it’s one person who is doing the office management, all the HR paperwork, and is also doing all of the accounting functions in terms of AR and AP and paying bills and that sort of thing. Still the owner is thinking of everyone as a collective. And many, many of the decisions are a we decision. Every once in a while, the owner will surprise everyone by making a decision on his or on her own. But for the most part, it’s still very much a democracy. In terms of leadership, everyone is being directed by the owner, but by now, especially at the 10, 11, 12 sides, there might be a couple of senior people who have been hired. Who are A, little more self-directed and B, maybe taking some of the less experienced people under their wing.

 

  The team though is very, very thin still, and everybody is still wearing a lot of hats. And oftentimes you have one person who has a skill, but no one else in the shop has that skill. So you don’t have a lot of bench straight. You don’t have a lot of backup. And so when the agency gets busier, it’s really a crunch time on the team because everyone may have a specific skill or expertise, but multiple people don’t have that same skill or expertise. At this stage also, a lot of times the agency is fleshing out the team with contract labor or freelancers.

 

  The operations and the systems at an agency in the five to 12 range are very basic. Maybe you’re using Basecamp or Trello. Odds are for accounting you’re using something like QuickBooks. You have no onboarding of staff or clients, right? On the client side it’s like, sign this document, give us some money. We’re off to the races for work. But there’s no sort of getting them indoctrinated into how you work or the processes inside your agency around billing or approval processes or anything like that.

 

  And the same thing is true as you add staff, it’s pretty much a so glad you’re here, here’s your desk. By the way, you have a client meeting at 10 go. But not a lot of formal onboarding or training. Really the only systems that are in place are what I call the survival system. You have some basic accounting systems. You might have some basic job and project tracking systems, but nothing sophisticated yet odds are at this stage. Now on the finance side, by now especially as you’re getting close to the 10 or 11 or 12 employees, this agency has started to enjoy some financial success, but it’s very feast or famine.

 

  So you have really high highs, but you also have some low lows. So the agency’s finances are ebbing and flowing pretty erotically at this stage, especially if you have a gorilla client who is dominating the billing. Because when they are slow to pay or they disagree with the bill, everything kind of clamps down. Cash flow is a huge issue at this size. So again, you’ve got more people on staff, so your overhead, your expenses are getting higher. Your fixed expenses are getting more robust between the staff and your office space or whatever you have, your overhead expenses. But you’re still running pretty thin on clients and client billing. And so when someone doesn’t pay on time, it really pushes you into a crunch. In terms of marketing and sales at this stage, again, the owner’s doing some networking, but really what’s happening at this stage is by now the agency has some awareness of the marketplace that employees are out and about.

 

  Maybe they’re going to AMI meetings or BMI meetings or something, but they’re out and about a little bit. They might be sitting on a board and you’ve cast this net and whenever fish swim into the net, that’s what you eat in terms of new business. So again, the client mix is pretty erratic because whatever swims into the net, if they have money and they have a need, we go, yes, of course we can solve that problem for you. And so your client mix is going to be maybe if you’re lucky, 50%, what I call on-purpose. So in a niche or in a specialty area, and the other 50 is going to be outside of those niches and really is anybody that walks in the door. And with that, it seems like a really great time to take a brief pause and then we will get right back to the show.

 

  If you’ve been enjoying the podcast and you find that you’re nodding your head and taking some notes and maybe even taking some action based on some of the things we talk about, you might be interested in doing a deeper dive. One of the options you have is the AMI remote coaching. So that’s a monthly phone call with a homework in between. We start off by setting some goals and prioritizing those goals and we just work together to get through them. It’s a little bit of coaching. It’s a little bit of best practice teaching and sharing. It’s a little bit of cheerleading sometimes. On occasion you’re going to feel our boot on your rear end, whatever it takes to help you make sure that you hit the goals that you set. If you would like more information about that, check out agencymanagementinstitute.com/coaching. Okay, let’s get back to the show.

 

  So now it gets really interesting. So the next point and the point that really is the breaking point where everything that you’ve done from zero employees to 12 employees, you’ve done some minor modifications, but you’ve really just sort of layered on a little more process, a little more tribal knowledge, more senior people who are able to do things. So maybe some of that stuff comes off the owner’s plate. And at about 12 employees, everything breaks down if you keep working the way you’ve been working. So remember this is everybody doing a lot of different tasks. The departments roles are very fuzzy at best. A lot of account people are also screening in a creative role. But now at 12 or 15 people that gets pretty uncomfortable. So that’s the equivalent of you wearing clothes as a kid that fit in three years ago, but don’t fit anymore.

 

  So everything’s being very constricted at the 12 to 15 mark, and that’s really it’s time to really choose sides. So this is the time when the agency for the first time has to define a new normal with great intention. This is the first time that the agency really will break. If you don’t refuse new process and system to acknowledge your larger size. So the agency owner’s biggest role is defining the new normal with intention. They’re spending more time on BizDev, but they also have probably decided that at certain point in time, everyone needs to fall into departments. So all of a sudden we’re getting much more prescriptive about the kind of work that someone is doing on behalf of the agents. So odds are you’re not a copy contact person anymore. You’re either going to choose the creative department, or you’re going to choose accounts service. Odds are somebody who is doing web dev and also graphic design is going to choose between those roles.

 

  Everyone’s going to kind of fall into a box if you will, and don’t get me wrong. This is still an agency that is small enough that everybody is bleeding out of their box, but for the most part, they are living inside their box. So you’re still wearing multiple hats at 12 or 15 or 18 employees, but it’s getting more defined. All of a sudden, you may have some hierarchy in the department. So now the agency owner is also assigning and growing department heads. The owner is spending more time with clients on high-level strategy, and hopefully as an account team that can take over some of that day-to-day work that the owner have been doing. This is also an interesting time for owners in terms of sort of emotion and also an interesting time for the team emotionally. So where someone has been on staff from the time you were three or four employees, and they’ve grown up with the agency and now it’s 12 or 15.

 

  And for the owner obviously who’s been there the whole time, one of the shifts that happens at about 15 or 18 is we go from being a family, a small, intact family to being more of a team. And for a lot of owners is challenging to not know what everybody’s up to all of the time. I’m not touching all of the clients all the time. I’m not in the meetings anymore. I actually feel a little out of the loop as an owner at this stage. And so for a lot of owners, there’s a sadness to this that they feel a little more disconnected from the team. And so don’t be surprised if you’re entering into this stage, that you’re feeling a little bit of that. So it’s exciting to be growing and to have more structure in your agency, but it’s also hard to acknowledge that things are changing.

 

  The decision-making at this agency size also starts to change. So at the 12 to the 20 stage of the 12 to 35 range, now, all of a sudden the agency owner is introducing… And by the way, this is hard for owners. Is introducing what I call the one, two, three level of decisions. And what that means is level one decisions are, hey, everybody, we have a decision to make, gather round I’m going to describe the decision to you. We’re going to vote and whatever choice wins democratically amongst us all, that’s going to be what we go with. That’s a level one decision. A level two decision is, hey, I have a decision to make, I want everyone’s input, but I’m going then make the final decision. And a level three decision is, hey, you guys, I made a decision that I want to tell you about it.

 

  So at 12 and smaller, almost every decision is a level one decision. Let’s make it as a family. Let’s make a democratically, but at this stage, especially as you get closer to 20 people or larger. Now, maybe 10% or 15% of the decisions are really a level one decision. There’s a lot of level two decisions, and there’s probably another 20% of decisions that are level three decisions. By the way, guys, I made a decision, I want to tell you about it. So this is often a shifting culture for an agency, and it’s good to talk about it as you’re going through it so that everybody knows what to expect. Because the first time an agency owner comes back and says, hey, I made a decision. And the team is like, well, we didn’t even know that decision was on the table and I have an opinion about that and I want to talk about it.

 

  That’s annoying to the owner. And it’s frustrating to the employees because the game has changed, but no one announced that there was a change in the game. That’s certainly your privilege as an owner to change the way you make decisions. And in fact, you have to do that at this stage, but it’s also something you should talk about.

 

  So on the leadership level, again, we probably have department heads. We certainly have probably someone who is heading up either officially or just because they’re the most senior person, account service. We probably have somebody over creative services. Depending on the kind of work you do, you might have somebody who’s the head of a media department or a web dev department or something like that. But there’s now a little bit of structure and you guys are not perfectly flat where everyone is equal anymore.

 

  The agency is now beginning to structure itself for efficiency and scale. Up to this point, up to the 12 employee mark. And by the way, I’m not suggesting that these numbers are absolute, I’m talking ballpark-ish, right? So for some of you, you may have felt these growing pains at 10 and others you may not feel them until you get to 18. But anyway, at some point in time, the 12 and under structure, everyone’s flat, everyone has a vote, everyone just pitches in and does what they want. That doesn’t scale, and that’s not efficient. So at this stage, in this 12 to 35 stage, this is where all of a sudden the agency needs to retool itself so that you are beginning to structure for efficiency and scale as you keep growing. The team now is more about being a specialist. It’s about having a discipline, staying in your lane.

 

  So if you’re an account service person, that’s what you do. Yeah. You might dabble in some art or some copy, but for the most part, you are staying in your lane and everything is divided by discipline. There’s probably a little bit of more age and experience diversity on the team, but this is also a stage where an agency can experience more turnover as the agency whethers some of these growing pains. This going from family to team can be really challenging for some people. And you’re also probably weaving in more accountability as you have these layers and people are reporting into someone other than the owner. And so for some people that accountability is uncomfortable. So you want to brace yourself for a little bit of turnover. In terms of the operations and the systems, this is a stage that needs a complete overhaul. Really for the first time, you have to almost scrap what you’ve done and start over because now it’s about serious business.

 

  Now, no one can remember it all anymore. It cannot be tribal knowledge. We have to have systems and processes to make sure that we don’t drop the ball on works that needs to get done. In many cases, it’s about now 15 or 20 employees, when an agency goes, you know what? We need a sheriff, we need a traffic manager or production manager to manage the way work goes through the agency and they need to enforce the system and process. And so for an agency, that’s sort of been self-regulated and then everybody has done it their own way. This also can be an uncomfortable time for an agency as they begin to kind of grow up and put on their big boy or big girl pants, and somebody is holding them accountable for doing the work that they said they would do.

 

  So again, this is an exciting time for an agency. It’s really financially a great time for an agency. This is a stage where agencies are really probably kicking it in terms of growth. So they have more consistent business. They have more regular clients, whether it’s retainer or project. There’s more abundance of cash at this size probably than most other sizes. So we’ll talk about what happens after 35 in a minute. If you have a gorilla, now you still have some cash flow problems because now you’ve really got some over head, and now you really have a pretty decent sized salary. And so if you’re a big gorilla, client holds you out and is not paying their bills on time. Now, you’re really feeling a cash crunch. Also, this is the stage where if you’re a generalist, in other words, if you are working mostly with clients in a region, because you’re working with a local bank or a furniture store or the hospital, and you don’t have a specialty, you haven’t niched into an industry that allows you to supersede geography.

 

  So if most of your clients within a few hour drive of you, now you’re probably feeling the pinch fairy to compete on price. Because by the time you’re 15 or 20 or 25 people, you probably are commanded a decent price for the work that you do. But a lot of your local competitors are smaller than you. And they’re able to nickel and dime down your prices. And the clients are choosing someone for price rather than the expertise that you bring. If you are niched and balanced, you don’t have a gorilla and you have some niches, there is good money to be made in the segment. So that’s why a lot of agencies live in this 12 to 35 size for a really long time. There are expenses, we’ll talk about it in a minute. And the other consequences that come with being closer to 50 or over 50, that you get to skate by at the 12 to 35 mark. In terms of marketing, if you’re a generalist at this stage, you’re probably chasing after whatever the biggest fish are in your local or regional pond.

 

  So you’re looking at a book of lists and places like that, and trying to level up the size of clients you have. But again, you’re basically geographically bound. And odds are you have to recognize that this is the last stage for you. If you truly are a generalist getting beyond the 12 to 35 range is probably not likely. This is only going to happen if you have a specialty that is a deliverable dependence. If you’re a PPC shop or you do digital media buying, then you can be a generalist and get bigger. But if you are truly marketing a full service integrated marketing agency, which is how most of you describe yourself, this is probably about as big as you could hope to get without niching yourself. So the client mix fits if you’re a generalist, it’s the big local. And if it’s a niche now you’ve got some clients that are out of market.

 

  You’re big enough that they will consider hiring you if you’re not in their backyard. And ideally you’ve built out two or three verticals. So the legs of your stool, if you’ve heard me talk about that before are more stable.

 

  All right. So what happens at 35 to 65 employees? This is really the leveling upstage. This is about trading up bigger, better clients, and often bigger, better employees. So the owner at this stage, so 35 employees to 65. The owner is pretty out of touch with the day to day. They are not in the weeds like they were even at the 12 to 35 stage. And mostly they’re focused on BizDev and finance. So their responsibility in terms of clients is really creating what I call C-level connections. So they are hanging out with clients C-level people to make sure that the agency is serving them well, and they may be going golfing with them, or they may be sitting on a board with them, but they’re not usually in the grind of the work anymore.

 

  In fact, at the 35 to 65 stage, a fair amount of the decisions in the agency are made without the owner being a part of that, because the department heads are driving a lot of the day-to-day decisions. In fact, by now at the leadership level, you probably have department heads but they’re probably vice presidents. So you’ve escalated them to vice presidents because you have layers of more skilled and senior people underneath them. Your team is made up of more senior people. You’ve got more diversity in their backgrounds and expertise. And the team is also being held accountable to more metrics and KPIs. So the team is really pushing towards metrics as opposed to the more generic client satisfaction, client retention. Not that those aren’t important, but now we’re really being driven by the numbers. And in fact, oftentimes at this stage, this 35 to 65 stage there’s incentive pay typically in a bonus program that is tied to those KPIs for the team, or at least the leadership level of the team.

 

  So they’re very conscious cognizant of the metrics because they’re being motivated by their own potential gain, depending on how the company does against those metrics. The operations at 35 to 65 people are very structured. There are not a lot of work workarounds. It’s not everybody diverting the system because they’re trying to do a work around. The sheriff is really holding people accountable to living by the system. And it really is almost factory like in some ways, in terms of how jobs come in, how they’re trafficked, how they’re assigned people, there’s still plenty of creativity. There’s still plenty of uniqueness to the work, but the process of assigning the work and onboarding the work and getting the work done. So it’s on time and on budget is very systematized. And finances at this size, now the gorilla brings some serious risk, right? So again, if you’re 65 people, you have a heck of a payroll nut and you’ve got some pretty big overhead.

 

  And so now the more you have gorillas, the risk gets greater. So as you can see, a gorilla is never a great thing, but the bigger the agency gets and the more obligations monthly fixed cost obligations the agency has, the more of a risk the gorilla becomes. The agency also is less tolerant of mediocre performers. So before in the smaller size 35 and less, a lot of agencies keep employees that are not horrible, but not great a lot longer than they will at this stage. At this stage, based on the numbers, if you’re not hitting your numbers, you have to go. So it’s a very different decision-making set around the employees. Cash flows great at this size, but because of the size of your average client, if you lose a client, you have to be very quick to cut staff, to make sure that the ratio’s max.

 

  So again, I pay more attention to metrics, I pay more attention to KPIs. So if we lose a big client, I’ve got to adjust quickly to make sure that I’m continuing to honor those KPIs. The marketing for an agency in the 35 to 65 range is very targeted and niched. I’m only going after really big clients that live inside my vertical. So again, remember odds are, you’re not going to get to the size of your generalist or agencies that are 35 to 65 people, adds niches or some verticals or some areas of expertise that they have clearly carved out. They have great case studies, they have great tech client testimonials, and they’re going after more clients in those categories. So again, they’re very targeted and niched.

 

  Interestingly, at this stage, the client mix ends up being two tiers of clients, so an A client. So this is the 20% of your clients that drive 80% of your revenue. And a B client, that’s the other 80% of your clients that are responsible for 20% of your net profit. And you cannot be a generalist anymore. So you’re really looking at trading up the B clients. You want to swap out a B client for an A client. And just like the mediocre performers on the staff you also must swap out a B employee for an A employee. So this set of agencies, this 35 to 65 is all about leveling up.

 

  And then the last group we’re going to talk about is the 65 to about 125. So these are businesses that happen to do marketing. These agencies run very differently from a five person or a 12 person or a 20 person shop. So the owner in a 65 to 125 person agency is very out of touch with the day to day. They are probably dealing with the A-level clients, but there are a lot of clients in the agency that the owner has never met at that B level.

 

  So the owner is very focused on BizDev and finance, still doing some C-level level connections with those eight clients, but now a good 50% of the decisions are being made at the department level and the owner is out of that. So typically the VP level department heads are serving on a leadership team, and that’s where they’re informing the owner about the decisions that they’ve made over the course of the week or the month. But a lot of times the discussion with the owner about the decision is happening post decision. Not always, it depends on how active the owner is. It depends on if you have more than one owner, but in many cases, this is what’s happening on a lower level. Lots of layers underneath, the team, super senior, super diverse.

 

  You have more coming and going of staff. So again, less tolerance for someone who stop performing. And at this stage, there’s very structured training for the agency. There’s a career path, it’s outlined, and the employees know exactly what they need to, to keep leveling up inside the organization. And there is structured training provided for them to be able to do that. Also at this stage, typically inside the departments there are some departments. So let’s say in the account service department, there might be a set of account people who have an expertise in gaming. And another group inside the account team, you might have an expertise in children’s museums. And the third vertical that you might have an entire set of account team. So everyone from the account supervisor level down to the account coordinator level, they might be non-profits. So even in the departments, there is a further division inside the department that specializes.

 

  So you have specialists within your specialty areas. The operations and systems, as you can imagine is super-structured. So the sheriff now is deputies and the sheriff and deputies are running a tight ship. They’re documenting processes for everything. And finance wise, there’s a CFO on board and they’re really responsible. They probably have a couple bookkeeper kind of people working for them, but they’re super responsible for like cash and money management strategies. They’re at a much higher level than the AP and AR stuff. They’ve got someone working for them who’s doing that,

 

  Again, like the smaller group, the 65 group, the 65 to 125 group, the targeted marketing they’re doing. The targeted sales efforts they’re doing is really about landing a level A client through place, maybe two level B clients. These clients take a long time to land. So it may be a multi-year effort, but really the agency only needs to win one or two a year and they’re golden.

 

  Again, they’re still at that client mix of the A and B clients. There’s no way an agency this size is a generalist and now they’re all specialists. So the interesting thing I want you to think about around this is, as I was talking through all of this, I’m hoping that it’s a point you’re like, yes, that’s what we are now. And B, oh, okay, that’s where we’re headed next. And probably for most of you at some point in the discussion, you were like, I don’t want to be that, that does not sound fun at all. Does sound like the reason why I started the agency in the first place. And that’s where I want you to be thinking, I want you to really reflect on why did I start this business? How will this business serve me and my family? How will it serve me and my team?

 

  How will it’s me and our clients, the community? How do I want to show up in all of that, which of those owners roles, if you’re an owner appeals to me? Which of that leadership role level, if you’re a leader inside your organization appeals to you? And now you get to make a conscious decision.

 

  So if you’re an agency owner, there is nothing wrong with saying, based on what you just said I don’t ever want to be more than 12 or 15 people. I don’t want that. I don’t want to not be able to work with my local community. I don’t want to be, have to choose a niche. I want to be a generalist, not my vote for you in most cases, as you know, but certainly a choice you can make. Or some of you may say, I want to be big, I want this thing to run like a machine and I want to be 65 people.

 

  And I want to be out of the day-to-day. And I want to only be thinking about big level strategy and building thought leadership for agency, whatever that may be. Both of those decisions are the right decisions for somebody who’s listening to this. Both of those decisions are the gone decision for somebody who’s listening to this. What I want to do with this solo cast is get you thinking about why you have an agency and what you are building towards?

 

  Back in the day, back in the mad men days certainly, bigger was always more impressive and better. And that was how agencies signaled success and wealth. That is not the case today. Remember, I see the financials of all my agencies and some of the most profitable agencies where the agency owner’s taking home the biggest net profit or the biggest advantages gains of owning a business.

 

  Because remember, it’s not just about the money, it’s about lifestyle and it’s about flexibility and all those other things. Some of the smallest agencies are kicking it. And some of the big agents are struggling. On the flip side I also have big agencies that are killing it. So you can make a good living and you can build a great business, no matter what size.

 

  So let’s say you want to sell the agents. Well, that’s a whole different topic, and I’m going to write about that. And we’re going to talk about it because each of those sizes appeals to a different kind of buyer. So I’m not going to tie that up in today’s podcast because I’ve talked long enough, but I promise you we’ll come back to you and talk about that. So you can marry the idea of what size agency do I want to build and what is my exit strategy and how do I connect those dots and make sure that the agency I’m building allows me to exit the way I want to? Or I can accept the fact that based on the decision I’ve made around what size my agency is, I may have fewer options or not the option I was thinking of in terms of my exit strategy. It doesn’t mean you can’t have an exit strategy, but it may mean that you have to choose a different one than you’re thinking about.

 

  Believe it or not, that wraps up another episode of Build A Better Agency. Man, the time goes by quick. Love sharing this content with you. And I love spending the time with you. So thanks so much for listening and sticking all the way to the very end. And for those of you that stick around to the end, I’ve got a special new twist for you. So many of our podcast guests have books or other things that really expand upon the information and knowledge that they share with us during the podcast. And so we’ve reached out to them and we’ve asked them if they would like to give away some of their books or whatever classes, whatever it may be. And we’re going to throw some AMI things in there as well. We’re going to have some AMI swag and we’re going to actually give away some workshops.

 

  So all you have to do to be in all of the drawings, you only have to do this once is go to agencymanagementinstitute.com/podcastgiveaway. So again, agencymanagementinstitute.com/podcastgiveaway. Give us your email address and your mailing address. And every week you will be eligible for whatever drawing we’re doing and we’re going to change it up every week. So we’re going to have a lot of variety and we will pop an email to you. If you are the lucky winner, you can also go back to that page and see who won last week and what they won. So you can see what you’re in the run for. So if you have any questions about that or anything agency related, you can reach me at drewatagencymanagementinstitute.com, and I will talk to you next week. Thanks.

 

Speaker 1: That’s all for this episode of AMI’s Build A Better Agency, brought to you by HubSpot. Be sure to visit agencymanagementinstitute.com to learn more about our workshops, online courses, and other ways we serve small to midsize agencies. Don’t miss an episode as we help you build the agency you’ve always dreamed of owning.