Episode 330: How to grow your book of business with Drew McLellan

podcast photo thumbnail
1x
-15
+60

00:00

00:00

View this episode on:

itunes
spotify
stitcher
google_play

How to grow your book of business and equip your AEs. When your AEs make informed decisions, they can grow your book of business successfully.

Agency business development has to consider many things when setting goals for how to grow your book of business. There is new business to be found, existing business to expand, and lost business to make up for. It can be difficult to juggle all of this information as the agency owner, but it can be challenging for an agency’s AEs who aren’t clear on how to best leverage their position when growing their book of business.

Today’s episode continues the series dedicated to improving your business development efforts. The first three episodes were focused on you as the business owner, but here in Part 4, we shift the focus to your AEs to help them better understand how to grow your book of business and your agency’s bottom line at the same time.

There are many ways AEs can be better equipped, and it starts with giving them a stronger toolbox. Their outside perspective is a huge asset that is often overlooked, but they first need to understand “agency math” and exactly what you need from them. Their book of business is key to your agency’s success, and only by clarifying, training, and mentoring can they make the most of it. When they are given the tools and the space to make informed decisions, you set them–and your agency–up for success.

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.

How to grow your book of business

What you will learn about how to grow your book of business in this episode:

  • What agency owners get wrong when thinking through how to grow their book of business
  • How to plan for attrition within your book of business
  • Understanding “agency math” when calculating how much new business you really need
  • Tips for helping AEs grow their book of business
  • How to utilize your AEs outside perspectives
  • The agency owner’s role in helping AEs better understand how to grow your book of business
“In the best run agencies, 60-70% of their net new revenue comes from growing existing clients.” @DrewMcLellan Click To Tweet “You can’t be thoughtful about how to grow someone’s business or how to help a client if you don’t have room to think.” @DrewMcLellan Click To Tweet “You have to figure out your agency’s way of thinking about your clients’ businesses and how you can help them grow.” @DrewMcLellan Click To Tweet “Your AEs greatest advantage is their outside perspective.” @DrewMcLellan Click To Tweet “Part of our job as an agency is to help our clients be better at their job.” @DrewMcLellan Click To Tweet “While your AEs are working at it from the bottom or the side — you need to work at it from the top.” @DrewMcLellan Click To Tweet “In a lot of cases, how we can help a client is by just having an idea, or making an observation, or asking a great question.” @DrewMcLellan Click To Tweet

Ways to contact Drew McLellan:

Tools & Resources for how to grow your book of business:

About the Author: Drew McLellan

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.

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

Because he works with over 250+ agencies every year, Drew has the unique opportunity to see the patterns and the habits (both good and bad) that happen over and over again. He has also written several books, including Sell With Authority (2020), and has been featured in The New York Times, Forbes, Entrepreneur Magazine, and Fortune Small Business. The Wall Street Journal called his blog “One of 10 blogs every entrepreneur should read.”

Transcript: How to grow your book of business

Welcome to the Agency Management Institute Community, where you’ll learn how to grow and scale your business, attract and retain the best talent, make more money and keep more of what you make. The Build a Better Agency Podcast, presented by White Label IQ, is packed with insights on how small to mid-size agencies survive and thrive in today’s market. Bringing his 25+ years of experience as both an agency owner and agency consultant, please welcome your host, Drew McLellan.

Hey, everybody, Drew McLellan here with another episode of Build a Better Agency. As you know, if you’ve been following along in real-time, I’m in the middle of a series that I just decided on a whim to start. Normally the podcast goes for four guests and then a solocast for me and then four guests and then a solocast for me. But 2022 for me, is the year of challenging the status quo. Really asking myself, even if something’s going really well, could I do it differently or better? As I was asking myself that question around the podcast, I was thinking about really the holiday hibernation that most agencies go into either from Thanksgiving or Christmas on, where you’re literally going four to six, sometimes eight weeks into the middle of January with very little biz dev activity, and the pipeline gets super dry. That’s always concerning for me, and I know it’s concerning for you when you have a slow or a flat first quarter.

So I decided that I would do something different, that I would kick off the year with a series of podcasts just with me talking about a specific topic, and this topic is biz dev — and more specifically for this episode — how to grow your book of business. We’ve already done three episodes. I think there are probably another three coming up, and then we’ll get back to our normal cadence. So this episode hopefully will give you a little bit of relief. Biz dev — and growing the book of business — is for the primary part for most agencies, it is the primary job function of the agency owner. Unless you have a sales team, you are the person who’s going to be doing most of the sales, and so 50% of your time should be spent on biz dev.

I’ve been pounding that home for the last couple of episodes. I thought I would give you a little bit of a break and talk about an aspect of biz dev that really isn’t so much on your shoulders, although you’re going to have to guide it, but it really is not your core part of your job but still a critical part of biz dev.

So before I tell you what that is, let me tell you a little bit about a workshop we have coming up in mid-March. It’s called Running Your Agency for Growth and Profit. What we did was we took all the best practices of all the operational areas of the agency, so basically all of the back of the house stuff … So money, HR, operations, process, hiring, biz dev, all of those things, leadership growth, leadership teams, took all of those and put together a two-day workshop on the best practices that cover all of those topics. So it really is sort of a primer on how to run your agency well and growing it.

I think that folks that attend that workshop, they leave with a notebook full of ideas of things to do, things to stop doing, things to think about. One agency owner said to me, he said, “This was awesome, but it was like drinking from a fire hose. It was so much information.” So I guess that’s my promise and my warning is there’ll be a ton of information for you. I’ve had agency owners attend this workshop after they’ve run their agency for 20 years and they still found a lot of best practices or things they hadn’t heard of. So whether you’re a novice at running your agency or you’ve been doing this for a long time, I think we have something to offer, and we would love to have you join us. I think it’s March 14th and 15th. Don’t trust me on that, check. But head over to agency managementinstitute.com under the how we help tab, scroll down to workshops, and you’ll find Running Your Agency for Growth and Profit. So we’d love to have you there.

Learn more about how to grow your book of business by attending the Build a Better Agency Summit — go here for details.

Not on the Agency Owner’s Shoulders: How to Grow Your Book of Business

All right. So let’s talk about this aspect of biz dev that is not on the agency owner’s shoulders. One of the things I find many agencies don’t think about or factor in when they’re setting their new business goals … There’s two things they don’t factor in when they’re setting their new business goals. The first one is, so let’s say you’re a $4 million agency, and I pick this because it’s easy math for me. So you’re a $4 million agency and you want to grow by 25%. So you want to add another million dollars to the bottom line by the end of the year. How much of that million should come from existing clients? How much of that net new income should come from existing clients? That’s the number one thing that most agencies don’t factor in when they’re figuring this out.

When they say we want to grow by a million dollars, they think they have to go get a million dollars, and actually that’s not true. In the best-run agencies, 60 to 70% of their net new revenue comes from existing clients. Let me say that again. In the best-run agencies, agencies that are really cooking with gas, that really have great relationships with clients, have well-trained AEs, have a plan which we’ll get into in a minute, they grow their book of business significantly, and 60 to 70% of their net new revenue year over year comes from existing clients. So that’s the number one thing that we don’t factor in when setting our growth goals or our new business goals.

The second thing we don’t factor in when thinking how to grow your book of business is attrition. The reality is that even the best of agencies is going to lose a client now and then. So a healthy agency is going to lose 10% to 15% of their AGI on average year over year. So again, 10% to 15% of your AGI lost year over year, even if you’re doing it all right. It happens for a million reasons. It happens because there might be a merger or your client contact takes a different job or gets fired. You have a lot of changes internally on your side and that freaks the client out. There are a lot of reasons why we lose business. During COVID there were certain industries that didn’t advertise or didn’t market because A, nobody was buying from them or B, everybody was buying for them and they didn’t need to market. Know that attrition doesn’t mean you’re doing something wrong. It just means that’s the reality.

All right. So if we don’t factor in those two things, if we don’t factor in that we should be growing our own existing clients’ book of business by 60 to 70% of the net new revenue should come from existing clients … I’ll talk about what the book of business should look like in a minute … And attrition, you can see how our new business goal numbers are immediately wrong. So what I want to cover today is what’s reasonable in terms of growing your existing clients, how do AEs grow their book of business, what are some things that you can talk to your AE team about so that they can grow their clients, and what’s your role as an agency owner or leader in growing your client’s AGI. That’s what I want to cover today.

Learn more about how to grow your book of business by attending the Build a Better Agency Summit — go here for details.

Biz Dev Math: How to Grow Your Book of Business

Your AEs should look at their book of business, so all the clients they serve, and they should add up all the AGI or your CFO should do this for them. So let’s say you have an AE that is managing $400,000 of AGI. It’s very reasonable for them to grow their book of business, their entire AGI that they manage by at least 10%. So they can go from 400 to 440. Every AE should be able to do that. It doesn’t mean that all the clients that under that AE’s watch are going to grow by 10%. That would be lovely, but it’s not realistic. Some are going to slide backwards, some are going to grow by 20%. But what you want your AEs concentrating on is, “I started January 2022 with $400,000 of AGI on the books. My job is to grow that 400,000 to at least 440,000, whatever that looks like. It doesn’t matter which client it comes from or if it comes from just one client. But my goal is to try and grow all of the clients so that I have put at least another 10% to the bottom line.”

But I’ll tell you that does not happen without a plant. Sometimes it happens through serendipity, but that’s the rarity, not the norm. It’s certainly not going to happen year over year if you don’t have a plan. So as you are setting your new business goals, again, I want you to keep in mind two things. Number one, attrition. So again, if you’re a $4 million agency and you want to grow by 25%, that’s a million dollars. By the way, 25% is a very aggressive goal, so I’m not encouraging you to do that. I think it’s too aggressive, and I’m going to show you why in a minute.

So the $400,000, if you want a million dollars in net new income, the first thing you have to do is figure out attrition. So at $4 million, 10% is 400,000, 15% is 600,000. So now your go-get is now 1.4 to 1.6. You’ve almost doubled your go-get, which means that 25% becomes a much larger percentage. So again, I want you to be mindful of when you set these goals that you factor in attrition. But you also need to say to yourself, “Okay, so if I want to get a million dollars new business, I have to replace the 400,000 I’m going to lose if I’m being optimistic and saying we’re only going to lose 10%. So now I have a $1.4 million go-get. 60 to 70% of that should come from my existing clients.” So again, more than half of the 1.4 million that I think I have to go get should come from existing clients. This makes how to grow your book of business easier and more effective long-term.

So again, that’s not going to happen if we don’t have a plan, and your AEs won’t know what to do to grow that. What do your AEs need to know or need to know how to do to grow their book of business? First of all, they have to understand how agencies make money. They have to understand what I call agency math, and they have to understand that gross revenue is meaningless. They have to understand how to subtract the cost of goods to get to the AGI and then understand how they manage to the AGIs and their goal is to get 20% profit to the bottom line of that AGI. By the way, you’re going to have to tell them this stuff more than once. This is not a teach at once, this is a rinse and repeat kind of teaching. So they have to know agency math, but they also have to know the AGI of their current book of business, and they need to get real time updates in order to best understand how to grow your book of business as a whole.

So what that means is at least every month, for sure every quarter, they need to be told, “Okay, your book of business in January was $400,000. We know you’re pushing to a 440 at the year end. Right now, you’re on pace to get to $320,000. You really need to kick up the paces in how you grow your book of business,” or, “Based on the orders and the projects we already have booked, you’re already at $500,000. You’ve already accomplished your goal,” whatever it is. They need to know their AGI and they need real-time updates so they can manage their book of business as effectively as possible.

Learn more about how to grow your book of business by attending the Build a Better Agency Summit — go here for details.

How to Help Setup Your AEs for Success

One of the other things, and I think this is really hard in our environment today is they … And you know this … You can’t be thoughtful about how to grow your book of business or how to help a client if you don’t have room to think. So when your AEs are super overburdened and all they’re doing is putting out fires and taking orders, it’s really hard for them to think about their client’s business and for them to invest time in learning more about the business or in writing a plan of how to they’re going to grow the book of business. They need time. They need room to think about those things. You’ve got to figure out a way to give them that time and also to give them some structure around how to do it because most of your AEs don’t know how to do it.

They also need a documented and measured plan that someone is holding them accountable to in terms of working for the client. So you need to give them time to think about their client’s business, you need to give them time to learn more about the client’s business, to ask better questions, to go on a site tour, to do all the things they need to do to get really well-versed in the client’s business. But then you also need to give them a process, a planning process. For each of you, this may be different, but you have to figure out what’s your agency’s way of thinking about your client’s business and how to grow it, and then make sure your AEs are well-trained in that methodology or that thinking.

Then at the end of the day, what they need to come back to you with or back to their supervisor with is a documented plan that you can measure and that someone’s going to hold them accountable for how to grow your book of business. They’ve got to have a plan, and they’ve got to have a timeline and all the things because otherwise it just is not going to happen. Your AEs, we talk about this in the AE Bootcamp, but your AEs, their greatest advantage is their outside perspective. They bring a fresh eye. No matter how long they’ve worked on the account, they’re to just not inside the organization, and so they bring a fresh eye to your client’s business and they can ask questions that are different.

They need to be a student of the client’s industry. They need to be studying trends and tracking what competitors are doing and things like that. But there’s no substitute for what I think of as sort of firsthand observation. So touring a factory plant, doing ride-alongs with sales people, hanging out in trade show booths and listening to the conversations that happen, secret shopping your clients. There’s lots of different ways for your AEs to get firsthand, get their hands dirty sort of observations about your client’s business. But they, again need to have permission. They need to have room in their schedule. They need to have time. They need to probably have a little bit of coaching about how to do it. But these are the kinds of things that they need to be doing if they’re really going to grow that book of business.

One of the other things that your AEs need to do, and I love this insight, your AEs need to know how their client contact, the person they deal with every day, how that person is being evaluated. So when we understand that our clients get a bonus or get a raise or get accolades when something happens inside the work that we do together, it’s easier for us to make sure that thing happens and to say to the client, “Hey, look, I know that you get a bonus if you don’t spend all of your budget. So we’re going to make sure that we never exceed your budget and we never spend all of the budget. We might spend most of it. But I know that it’s important to you personally for us to leave a little money in the kitty, because that’s when you get your bonus.”

Your AE needs to say to the client, “You know what, we’re working on this new campaign or the marketing plan or whatever it is, and it occurred to me. I don’t really know how you are evaluated at your work. What goals are being set for you? How do you get a raise or a bonus or a promotion? How do you get pats on the back from your boss?” Because we’re going to want to make sure that our plan helps make those things happen.

The beautiful thing about that is your client will tell you, number one, so you can actually help make those things happen. But number two, what you’re saying to the client is, “Yes, we represent the brand, but we also care about you and your own personal growth and reward. We want to make sure that we are a great partner to you, not just in helping you do your job, but also helping you get rewarded for doing your job.” I’m telling you, nobody asks them this and you have to be careful, but you have to also ask the question.

The other thing that your AEs need to do, and aga