Agency owners are notoriously ill-informed (and uncomfortable) when it comes to their agency’s finances. Which means they make important decisions in the dark. Not ideal and we’re trying to change that at AMI. That doesn’t mean you need to understand all the fine-grain details. But you do have to understand where you stand financially at any given time.
On episode #178, I talk with Jenn McCabe, who started out in accounting at Ogilvy and Mather but soon started her own accounting firm to help small to midsized agencies figure out their numbers.
The numbers you need to know (and if you do any AMI planning, this will sound familiar) should fit on one sheet of paper. We’re not talking about miles and miles of Excel spreadsheets. Just the key figures and concepts you need to understand your agency’s financial health.
We’ll also talk about best practices for preparing your agency for sale when the time comes.
Recently Jenn merged her company with Armanino. They provide, among many other services, outsourced accounting, finance, and HR, working primarily with agencies to create simple accounting dashboards and financial documents that allow the agency owner to make good decisions.
What You Will Learn in This Episode:
- The difference between cash accounting and accrual accounting (and why you NEED to know the difference)
- The need for accounting rather than bookkeeping
- Understanding run rate, aka your monthly “nut”
- Why you need to pay yourself as an owner
- Best practices around owner salary
- How much cash and cash equivalents to keep liquid and available
- How to be an attractive acquisition target
- Transitioning your employees to new owners
- Managing an internal agency purchase
- Why management buyouts are becoming less common
The Golden Nuggets:“Two things lower the value of an agency looking to sell: a client list with one or two gorilla clients, and a team that is iffy about staying past the acquisition.” – Jenn McCabe Click To Tweet “It’s important to set goals and let everyone in the agency know what those goals are, what the numbers mean. The clearer the target, the more focused everyone will be on hitting it.” – Jenn McCabe Click To Tweet “It is my mission in life to help people understand why they need accounting rather than bookkeeping.” – Jenn McCabe Click To Tweet “It is costly in the long run to have unprofessional accounting.” – Jenn McCabe Click To Tweet
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Ways to Contact Jenn McCabe:
- Website: armaninollp.com
- LinkedIn: https://www.linkedin.com/in/jennifer-mccabe-3766283/