Maximizing Agency Valuation with Ben Gaddis

Drew McLellan [00:00:01]: 

Hey everybody Drew McLellan here with another episode of build a better agency and this is going to be a good one we are going to dig right in and we’re going to talk about what makes an agency valuable and and how do potential buyers of agencies look at us and determine the worth and the value of what we offer and the likelihood that that we would be acquired someday so we’re going to get into that in a minute i’ll tell you a little bit more about our guest but before we do that i want to give out a huge shout out and thank you to our friends at white label iq the presenting sponsor of the podcast and also the build a better agency summit every may you know one of the things that really impresses me about white label iq is that they don’t just crank out code they can actually take your idea and turn it into something real so a great example is a project called collage so this actually started as an idea inside huebner marketing when white label was still part of that agency but the white label team built it out into a full blown commercial web app that ended up getting sold to a third party and remember this is what they do every day for agencies here in the us whether it’s design dev or paid media they know how to take the idea off the whiteboard and make it real and i love that because at the end of the day agencies are always brimming with ideas and sometimes you need a partner to help you take that intellectual property and bring it to life and white label does that so check them out at whitelabeliq dot com ami all right so let me tell you a little bit about our guest so ben gaddis has owned agencies successfully sold his agency and then interestingly decided he wanted to create a venture capital company to invest in agencies and so he’s going to have a really great sort of three hundred sixty degree view of the agency landscape what it takes to get sold to an outside buyer it’s very different than if you’re selling to an employee and what we can do today to make our agencies worth more tomorrow so without any further ado let’s meet ben ben welcome to the podcast thanks for joining us thanks for having. 

Ben Gaddis [00:02:49]: 

Hi Drew great to see you too. 

Drew McLellan [00:02:51]: 

Give everybody a little sense of your background you have a you have a unique set of experiences i think that will really lend itself to the kind conversation so kind of tee that up. 

Ben Gaddis [00:03:00]: 

For everybody yeah so i’ve been an agency guy my kind of my whole life started at the big holding companies i was at ipg and then went over to omnicom and then kind of did my own thing had a business in austin called t three and we were a digital agency back in the day when you know making a website was a new thing and business really took off when we started building mobile apps and that kind of became our shtick and then we started building a lot more complex software and the business grew we got to about fifty million of revenue and i sold it to this thing called private equity that i had no idea was actually even a thing or a whole industry we went out and we did a bunch of m and a and got the business we grew it a lot and then sold it again and so i learned a ton along the way but i’ve always thought about myself as an operator and was trying to figure out what to do next and so i actually started a private equity firm with colleague of mine and now all we do is invest in agencies and tech services businesses so it’s been kind of fun to to take what i learned on the operator side and now just through a different lens still get to do that and you know grow people based businesses that i’m really passionate about but do it from more of an investor. 

Drew McLellan [00:04:18]: 

Side so i’m curious put some dates to when you were actively running your own agency when was that what season. 

Ben Gaddis [00:04:26]: 

Was that yeah i’d say it’s like two thousand eight to twenty twenty two okay two thousand yeah like twenty three and so we went through a number of different shifts there social became a thing and then mobile became a thing and for context the business went from just nothing to three hundred ish people so a pretty interesting journey and then after we sold to private equity i think when i left it was about two thousand people so it was a hell of a run but lots and lots of different phases of growth and lots of gray hair that came with it so it was a pretty wild. 

Drew McLellan [00:05:09]: 

Ride so when you think back to when you started it to the point where you exited from your perspective now as a buyer as an investor how has the business changed well i don’t. 

Ben Gaddis [00:05:21]: 

Think it could be more different i mean back in the day being a digital agency was kind of a unique thing and we rode a lot of different waves of technology but there was always this scarcity there were just a few people who could do that type of work and clients would come find you in some cases because of that i think now the model has shifted so much in my view just over the last twelve months and i hear on your podcast and everyone’s talking about ai and all of those things but for the first time the ability to scale people to deliver more services it’s just that model is going out the window and so we’re seeing a shift from growing headcount as a way to grow revenue to the more nimble the leaner and the more productized you can be the better and those are the firms now that i think are going to drive just completely different types of. 

Drew McLellan [00:06:23]: 

Valuations yeah so back i think it’s episode one hundred which we’re on i think you’re going to be at about episode five hundred forty or so so that tells you how long ago i talked about this variance of agencies and the vernacular i use the analogy i used is some agencies are wonder bread factories right we make white bread we make wheat bread we do it super efficiently and you don’t get to decide you want half a loaf or you know you want rye or whatever like this is what it is and then others are sort of this artisanal bakery where somebody comes in and goes i want a boba fett birthday cake and even though you’ve never made a boba fett birthday cake before you know you have the skills to do it so you say yes and then you figure out how to price it and then how to make the cake even though you may never make the cake again or or who knows maybe you’ll make ten of them a year but that’s it and i feel like the world is getting more bifurcated into our world is getting more bifurcated into you have to sort of choose one of those models right either you’re the wonder bread factory kind of this productized thing that you’re talking about or the sort of more bespoke traditional creative shop that frankly a lot of people listening that’s why they started their agency because they love that work and they love that creativity so i’m curious from your perspective a does that align with your observation first. 

Ben Gaddis [00:07:46]: 

I’Ll start there absolutely that bifurcation is happening and we’re seeing it i think the thing that and maybe this is where the next question goes is does that mean that productization is the opposite of creativity and big idea and that’s kind of an interesting thing that we’re seeing play out where a lot of people are saying well i i have to choose you know the artisanal loaf or the the wonder bread and what some of these tools are doing is actually maybe making you have the ability to do some of both by leveraging technology and leveraging kind of a new working model but we can talk about that you’re spot on i mean that is there is like we call it a barbell you know there’s a lot on this side a lot on this side and i think being in the middle is pretty dangerous yeah so what. 

Drew McLellan [00:08:37]: 

Would you say to the agency owner that says i don’t want to be a technology driven agency i don’t want to create the same two things over and over again i love branding a new business and everything is bespoke from start to like that that’s that’s what makes me happy professionally is there a place for that kind of agency in your perspective as a buyer maybe that you would never buy it but as you look out over the landscape is there a place for that or are agency owners sort of being forced down a path which is if you want to be viable in x number of years there are certain choices that you’re going to have to make yeah so. 

Ben Gaddis [00:09:21]: 

I believe that you can make the choice to focus on creativity and big ideas like you don’t have to move away from that but to say that you’re not going to be technology driven i would definitely not bet on that agency and i would not recommend that as the path forward i think that you have to figure out how you can leverage technology to be more creative to do that at scale and i just don’t see how there’s a role for a company like that but it hurts me a little bit to say that right because i don’t think that means creative agencies go away there’s still big ideas i mean there’s some amazing agencies out there doing big breakthrough work and the problem with ai is it’s pretty bad at creative honestly it’s just watered down it’s just like milk toast it’s so if everyone has the same tools then everything will look the same but if you can figure out how to use those tools to focus more time on the unique nature of your creativity and you can figure out just a small lane that’s different i think there’s a role for that agency and and i think we’ll see some of that continue for sure so the other. 

Drew McLellan [00:10:31]: 

Question i have is so we have some agency owners who are like you know what i’ve run a bigger shop i’ve run a smaller shop i don’t i don’t want a big shop i don’t i don’t want to be fifty million dollars i don’t i don’t want to build the factory i like knowing our clients i like having those more intimate relationships is there a place do you think in the world today and down the road for an agency that doesn’t want to scale i know for you as a buyer you’re all about can the agency scale but is there a place do you think in the marketplace to not scale there is for. 

Ben Gaddis [00:11:08]: 

Sure and some people refer to those as lifestyle businesses and they say that in a pejorative way that’s a great business i know lots of people who have agencies that are three people five people twenty people and they love it and they love they know everybody they can create an amazing culture now those companies are going to continue to have to evolve to stay relevant and to provide that lifestyle but i think those i think you can actually have a smaller agency today and play in a larger pond or win bigger clients because of that and so that’s a positive if you’re in that space now the question i would say is what do you want to do and i know you help companies a lot with this what do you want to do with that in five years or twenty years and is there value associated with it you could give it to your employees you could do an esop you could sell it but i do think that buyers you know the number one correlation to value that we see is organic growth and so if you’re not growing it’s hard to command a multiple right. 

Drew McLellan [00:12:11]: 

Well and if you’re not growing not by new sales so one of the metrics that we are always talking about is you know that an agency should be shooting for sixty to seventy percent of their net new revenue should come from existing clients which very few agencies at least when they come into our world are anywhere near that i think historically agency owners have focused on going and finding the new client as opposed to having a system or process in place to grow and groom the existing. 

Ben Gaddis [00:12:39]: 

Client i think that’s probably the biggest unlock that we see when companies start to take off so we look at when we look at buying a new company we look at net revenue retention and how much of your sales next year are going to come from clients that you had this year and a great business is doing ninety five or one hundred percent most of their revenue is staying there from organic account growth and the companies who do that and we saw this at t three so one of the things is our accounts our best accounts grew on accident not on purpose it is because we had really great account people on them and they naturally did just the things that account people do but i didn’t know what those were and so if that person wasn’t available i couldn’t put them on the new account and that account didn’t grow and so when we really unlocked growth was when we built what we called it the account operating system it’s just just a methodology right and we said each account we’re going to segment it is this a growth account is this a net new account that could grow is it a core account and then every one of those accounts had a plan and we went through and we just said okay this person is an amazing account person everything we put them on grows what did they do and you know usually they knew their client’s business they could talk in their own terms they tied everything we did back to value um they were proactively bringing ideas and we just turned those into a checklist and we made sure that every single account had that checklist we had timing we had an owner with it and all of a sudden we started seeing those accounts scale and that gave us the flexibility to then be more discerning with the net new business we went after which meant we didn’t take every deal which means we didn’t drag all our best resources onto a bad deal and it became a little bit virtuous and so i think you’re absolutely right there that if you don’t have sixty to seventy percent becomes a rat race and hamster wheel. 

Drew McLellan [00:14:45]: 

Well and i think a lot of agency leaders and owners feel this incredible pressure to go get new clients all the time and they really undervalue and under focus on that growth so you talked about an operating system for growing your accounts were there some key elements that were always a part of that system that when you sort of dissected what your best account people did you know yes they understand the client’s business they are able to talk business conversations with their clients but what else was part of that what else was a given in that operating system for you. 

Ben Gaddis [00:15:21]: 

Guys so one thing was we realized we couldn’t actually because we everything was so artisanal we couldn’t actually tell you what each client was buying just like oh they’re a client they bought digital or they bought some what did they buy did they buy crm did they do loyalty work was it email was it mobile what was it so we started breaking down the services that we provide and then tagging those by client and all of a sudden we said you know what look every client who buys a loyalty program from us the best ones would then buy crm so what if we packaged those two things together and we stopped trying to sell them separately and we sold them as a package or just always offered that to the client and an account person who just thought that way would naturally connect the dots there sure right but some some people they come in net new they didn’t even know that we offered you know amazon web hosting services or something like that they didn’t know that we could do branding they didn’t know and so what we did is we built kind of a service matrix and every client we would tag those services and then we’d say okay this is a new client we think it has a lot of growth potential let’s look at the last clients who had that growth potential that did well and these are the services we sold them and in the first ninety days one hundred eighty days we’re going to make sure that we go not only tell them about those services we’re going to do some sort of presentation we’re going to do a lunch and learn we’re going to talk to them in an educational way about what those things could do for their business and clients loved it and they’d invite us to meet some other group or some other department or you know another brand in the portfolio so that that was a huge that was a huge part of it the other thing is we didn’t have targets and i now as a i hate to say a pe guy because i don’t actually feel that way it kind of sounds dirty you know but if i see a company not having targets for the next year and then not having targets for their clients right you’re just guessing we would just say oh yeah they should just grow next year well are they going to grow ten percent they’re going to go twenty percent if you’re going to go thirty percent where is that thirty percent going to come from is it going to come from the same services a net new service and you almost have to then back into the initiatives by name by person by date of when you have to sell those things into the client and that becomes a huge part. 

Drew McLellan [00:17:45]: 

Of it so how did you prevent because i think a lot of targeting is lick the finger put it in the air feel the wind and go ten percent right yeah yeah so how did you actually do the math to know what a client’s potential was and therefore what you could think about trying to sell them or help them with. 

Ben Gaddis [00:18:09]: 

So when we work with a new company i think that’s one of the biggest things to overcome because it’s either it’s way too complicated we can’t do it or hey it should just be twenty percent right yeah and there’s something in the middle but oftentimes it’s like let’s take weeks and let’s figure this out i believe if you get the right people in a room in an hour you can go through on a whiteboard and get ninety five percent of the way there and you start to just name okay do i know the client’s biggest challenges do i understand the politics happening inside the organization do we understand any big initiatives that they’re working on next year and if you don’t you got to go back you got to ask those questions but if you do you could say okay well can we retain the existing business is there anything that would just keep on what are the big initiatives that they have let’s put a rough dollar amount alongside that and then what’s something new that we want to go sell them and you start to get to some sort of quantum that’s hey look this looks like it’s going to be about the same it’s going to be twenty percent or a lot of clients like we could double the size of this business just by selling them one more project and you put that on the whiteboard it’s usually pretty close and i found that if you go spend two weeks on it or if you spend one purposeful hour on it you get to about the same place yeah so it’s. 

Drew McLellan [00:19:31]: 

Interesting you were saying you know agencies can get smaller and sort of scale and that’s certainly what we’re seeing you know we’re actually seeing most agencies are headcount wise smaller than they were a year ago or two years ago and i do think that’s a trend that i can remember when i got into the business and probably when you got into the business the way an agency measured success was you had more headcount a year afterwards it was really like we’re at ten people now we want to be at twenty or we’re at one hundred fifty now we want to be at two hundred twenty five whatever it was but that was the definition of success and so it’s an interesting mental shift i think particularly people for people who’ve been in the business for a while to recognize that bigger is not better in this current environment it’s. 

Ben Gaddis [00:20:23]: 

So true and i learned that i remember being at a conference and people would ask you how big is your agency i’d say it’s one hundred fifty people i had said and i thought that was cool you know and maybe we’d you know like we’re going to hire ten more people next year so maybe we’re one hundred sixty you know and clients that’s how we would pitch to clients right and somebody told me i can’t remember who was one time like it’s not cool to have more people it’s cool to have more revenue and if that means more people then that’s great and now when i think about looking at an agency or a services firm i think about revenue i think that’s the first thing and and i honestly we see companies who have a huge team in india they might have six hundred people and thirty million of revenue and then we might see somebody who has thirty million of revenue and they might have fifty people in the us it all comes down to your cost structure it all comes down to your delivery model and how you charge clients and really you know your margin profile and so i think that’s a trend you’re going to see a lot more of i also think you’re going to see a lot more flexibility in staff the world is getting a lot bigger and your ability to have a global team i mean the the quality we see right now in latin america in india and eastern europe almost every business that’s growing really fast has some sort of global team and so that just changes the math in terms of how many people you can have you add on some sort of like systems and some ai onto that and it’s not crazy to think that you might have a ten person agency that’s doing ten million dollars that’s pretty cool. 

Drew McLellan [00:22:01]: 

Yeah yeah it’s a crazy concept i want to take a quick break and then i want to talk about sort of how i’m guessing that a lot of times when you invest in an agency or you buy an agency they are bloated people wise and i want to ask you a little bit about how you decide not necessarily culture wise skill wise but what does a core team need to look like today and what can be easily outsourced from your perspective from a money point of view so let’s take a quick break and then we’ll we’ll jump into that when we come back are you tired of juggling multiple tools to manage your agency meet dell tech workbook the all in one solution for marketing and communications agencies streamline your projects resources and finances all in one place with real time dashboards and reporting you’ll have full project visibility you can plan team capacity weeks ahead to avoid bottlenecks and keep your budgets on track to maximize profitability it’s perfect for both agencies and in house marketing teams looking to work more efficiently pci is a certified dell tech partner offering expert implementation and support to ensure your success if you’re ready to transform your operations visit pci us podcast for a free consultation today 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 schedule at agencymanagementinstitute dot com 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 cfo’s 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 we are back with ben gaddis and we’re talking about from his perspective of he was looked and sounded a lot like all of you started an agency grew an agency sold the agency and now is on the investing side of putting venture capital into agencies and so before the break i had said we were talking about the fact that we scale down now and that agency size isn’t necessarily a measure of success anymore and in fact we’re seeing agencies do more with fewer people and it’s a mix so it’s full time employees it’s part time employees it’s global employees it’s contractors it’s contract partners it’s an interesting blend and mix which back in the day i can remember agency owners saying if they’re not under my roof that are not touching my projects and you know that has completely gone away certainly over the last twenty some years so i’m curious from your perspective when you come in first of all do you find that as you’re looking at agencies to invest in are they overstaffed and b how do you help them evaluate what needs to stay in house versus some sort of contractual relationship well. 

Ben Gaddis [00:25:20]: 

I would say that it’s not always that they’re overstaffed i think that what we’ll often find is that they’re staffed in the wrong places so it might be the allocation of staff and as i think about where the world is headed what about your team is truly differentiated and what can be augmented by systems process repeatability and i hate to harp on ai but i think if we’re not talking about it then right we’re talking about the wrong thing so i saw something that scared the hell out of me yesterday just because i kind of thought of myself as back in my t three days but there was a prompt and somebody was talking about for their agency whenever they’re doing a brief right now they build an agent that’s an agency owner they build an agent that’s a creative director they build an agent that’s a senior copywriter and these agents are working together handing off work and literally working against the brief and in a matter of minutes delivering you know fifty percent of the work in terms of quality but getting through some of those hoops stuff that used to take us two three weeks like right that’s pretty interesting now does that replace the team i don’t think so i think what it does is it augments unfortunately for a lot of our junior resources i think more senior people who can be in the room who can build relationships with clients who can guide them through the right decisions that they need to make to drive their business and then i think it’s really like we used to call them like ten x engineers it’s who are the people that are just wired to deliver bigger and better outcomes and you’re investing in those people and you’re surrounding them maybe with less support staff and more support agents resources technology and then your point is great if you’re thinking about only your w two employees you’re missing out on all of the opportunities out there you know we say like if it’s a core capability it needs to be you need to buy it if it’s a scale thing you can rent that and so you know this pig in a python i’ve got a big project you should have a set of trusted partners that can come in and help you act like a fifty million dollars agency and then you go back to your core ten and that can be really profitable and today i think it can be done with a. 

Drew McLellan [00:27:43]: 

Lot of quality yeah we’re certainly seeing a broadening of a acceptability but also success with you know a very hybrid model for sure so from your perspective as you as your if you’re going shopping for an agency what’s the checklist look like like what would put any somebody on your consideration set of yeah i would invest i would invest in. 

Ben Gaddis [00:28:10]: 

That business well so right now i mean we’re focused on mostly tech services firms and i say that as a you know these are agency models right but i we look for companies that are riding the tailwinds of typically technology platforms or multiple technology platforms inside a really fast growing segment so a great way for us to make an investment is say well what are the areas that are growing fastest it’s going to be data and ai it’s going to be cloud engineering it’s e commerce there’s really like five to ten sectors automation that are growing at twenty to thirty percent almost everything else is flat if you look at creative services not really growing very fast you look at media services it’s not really growing very fast so that makes it really challenging because i have to outpace the market right so i am looking for a space where the market is growing and in order to grow what we need a firm to do is just to pace the market if they can outpace the market and gain share then they’re growing like thirty forty fifty percent so we start there and i think that’s a really interesting place for agency owners to do work today because oftentimes they’re thinking about what is the core model not where is the growth going to be and a lot of that data is publicly available you can go out and you find it and you can build offerings around that that makes it easier i think the second thing then is we’re looking for founders who have a vision and so if you’re that creative agency owner that we were just talking about who says i’m focused on big ideas and i you know i don’t want to change well that’s kind of a vision but is that vision differentiated and can they stand out and do they really look different than someone else in the market and there are i mean what are there like fifty thousand agencies i don’t know if that’s still the case that’s what we used to say right but it’s it’s hard to differentiate and i think the biggest challenge to differentiation is a founder’s vision and if they don’t have that then it’s really not that interesting for us so we look at that and then from there is there something that they’re doing that is proprietary and unique do they have a vertical expertise do they have a deep technology expertise can they maybe you know connect those two things and so that’s kind of where we start and if we can check the boxes on all of those then we’re going to go into like the actual metrics you know do they sure do they have the right you know but like that’s like the that’s the core of what we’re looking for in a business. 

Drew McLellan [00:30:42]: 

Right now when you’re looking at visions talk a little bit more about that that founder’s vision because i think a lot of agency owners struggle with this like what is the vision that i have for my agency and a lot of it’s just i want to grow i want to double in size in three years or whatever it may be it’s often very financially dr but i don’t get a sense that that’s what. 

Ben Gaddis [00:31:02]: 

You’Re talking about no it’s not and i’m going to i’m going to focus on the parts that i think are kind of unique i think vision has a lot to do with culture and let’s just like put that one aside a little bit and assume you got to attract the best talent to do that that’s a given but a lot of people can say that and it’s easier to say and not frankly that differentiated we have a founder that we work with who i believe has a really strong vision he said you know what i’ve been working in the b two b e commerce space forever and i think it’s really challenging for the leaders in this space to overcome a lot of the legacy decisions they’ve made in technology as it relates to customer acquisition to marketing and to their software and it is the space that needs to transform the most and it’s actually the farthest behind and so we’re going to focus on helping b two b manufacturers and distributors revolutionize their tech stack to deliver a better customer experience to sell more products online and we’re going to do that by combining the back office and the front office and here’s how we’re going to do it and he can walk you through here’s the five things that you need to go change to make that happen it’s repeatable it’s focused there’s a specific target with that when he gets in the room there is no one more credible than him and it becomes a pretty it’s not an easy sell but it’s easy to communicate that vision which means creating content creating product size offerings they sort of just happen much more naturally than you know i just want to create an agency that grows by twenty percent because we know where to start we know what to go work with that to me is kind of the idea of a vision and then he says you know we’re going to do that by attracting the best talent here’s the culture that we’re going to create but it all sort of services that idea if that makes sense it does but. 

Drew McLellan [00:32:59]: 

That doesn’t sound like an agency right it sounds like a consultancy yeah well. 

Ben Gaddis [00:33:05]: 

That’S where the question you know back to you is like what is an agency right right and should you be if should you be an agency if agency means completely artisanal with no vision i don’t think that’s what you know we’re advocating for or so i don’t know that i don’t know that there’s a difference between this if you call it a consultancy a tech services firm an agency you know whatever you want to you still have to solve the business problems you still have to know where you’re uniquely positioned to have a right to win and if you can do that and you put all that together and you can communicate that i think that’s a vision right i do. 

Drew McLellan [00:33:45]: 

But i think this is one of the biggest challenges facing our industry today is is the redefinition of who and what we and so and we’ve been seeing this for a long time the commoditization of making the stuff is not new it’s not ai’s fault this has been you know ever since fiverr came around and somebody could whip up or ninety nine designs came along and could whip up a logo that was good enough i mean do we those of us in the industry find it appalling sure but does it mean the business goes out of business if they use the ninety nine design logo no it doesn’t so i think the commoditization of the making of the things is a long time in coming and i think there’s a lot of agency owners that struggle with the idea of with all of these other places tools other people how do i add value in the equation and i think particularly with ai what is it that we humans can do that is unique and so i think the push to be more strategic and to be that business strategy partner has been bearing its weight on the agency space for a long time and some agencies have embraced that more than others but your example is a great one to make people think about okay well nowhere in there did you say and then we made the things that helped them sell more stuff now that may be further down that may be further down the path of that relationship but you don’t even get to have the relationship if you don’t have the to your point the mindset of you know what you’re doing everything in a very nineteen seventy five way we can help you get into the twenty first and twenty second century which actually will create a better experience for your customers it’ll be more efficient more effective yada yada yada oh and by the way we can also do the ads that help you with e commerce that’s a very different conversation than the way many agencies have historically approached those initial conversations. 

Ben Gaddis [00:35:51]: 

I could not agree more i mean we say control the roadmap right so if you’re working if you’re helping clients make their hardest decisions and then building a roadmap and that doesn’t mean technology that just means you’re building a path forward and a set of discrete initiatives to show them how they should move forward if you do that you’re in the driver’s seat and whether you actually do the technology build or not we added a strategy group and now we try to do this in every business that we have when we added a strategy group everyone was very worried about is this strategist going to be busy and what are we going to do with them and then are we going to build a whole shadow organization of like fifty strategists and match every i think we ended up with maybe like five or six strategists in a three hundred person agency but every time they walked into the room even if they only had three or four slides they reframed the conversation to be not about the tactic or about the ask from the client but about their business and about where it could go and it just positioned us in a completely different light and when that happened that flip happened it just unlocked so many other things and we made a lot of money on doing the nine thousandth email but we didn’t talk to people about that that wasn’t why they came to us they came to us for that first moment that that fact that we guided them on it and then the rest of it was sort of like if you can do this hard problem you can get all the execution work and so i think clients right now need to be focused on how do they get into that conversation how do they get into you know sorry agencies how do they get into that right now and if they do they’ll figure out ways to get the rest of the work to get the quality or. 

Drew McLellan [00:37:35]: 

Not and maybe that’s okay too right yeah yeah so in many agencies one of the challenges is and i’m guessing as you were scaling this was probably a challenge for you as well it’s almost always the agency owner that is the most strategic it’s just how they’re wired it’s their entrepreneurial they understand business because they own one they took the risk of starting a business or buying a business so they’re just different than the average employee but they then become the bottlenecks so when you started looking for strategists either in your own firm or now in firms that you’re investing in where did you go to look for good strategists and what was it what were some symbols or signs or signals for you that someone had the chops to do that work because to your point they have to be really impactful in a very small window of time and so they really have to be at the top of their game which is not something you can always grow from within your agency yeah it’s. 

Ben Gaddis [00:38:40]: 

Strategy was maybe one of the hardest hires we’ve made it was that in biz dev because both of them have a ton of bs and you can’t really figure that out until maybe sometimes it’s too late so i think with strategy the people it was less about a degree or where they came from it was really around could someone do a great job of framing the problem and sometimes that would come from like we had a creative director who was the most strategic person i’ve ever met but his title was creative director put him as the strategy lead on every project because he just quickly went there and got the rest of the team there in other cases it was a young person and there was just something about the market that they knew and they were able to take that unique knowledge and then apply almost like a common sense strategy and so they came at it from more ground level but the commonality between those two is that it was actionable the strategy that never works in my mind is the high level i called it kind of like you know and no offense to our friends across the pond but like the high level british account planner who would come in and say you know essence is and then there was this one word and what do you do with that and we toward we tended to lean more towards quick insightful and actionable in our strategists and wherever we saw that we would just kind of try to pluck that person and put them in that role and see what happens. 

Drew McLellan [00:40:14]: 

Were there any commonalities as people are listening and they’re saying yep i want more of that were there any commonalities in either if you did assessments or where you found them or their background or was it really just a we have to stumble upon these people and sort of kick their tires to see if they actually can do what you. 

Ben Gaddis [00:40:37]: 

Just described when we were hiring there were there were some schools that were that were doing a really good job of it and they had some programs i feel like vcu maybe had a program and it’s been a while and so that that was helpful but we often looked for folks who were like in this case it was like three to five years out who had been in a really complex and new space so when social came out a lot of these folks had to sort of figure out the space the business opportunity the client and the technology and the ones who did really well and got promoted were the ones who just kind of had to put all of that together and that was like a nice shortcut for being strategic but the we would open it we would be pretty broad the thing that we always did and i would advocate for this in any role that is well we do it almost everywhere is we would give them an assignment and we would ask them to present yeah and they would have to be able to walk senior people no matter what level they were through this assignment and even if the even if it was wrong like do you want this person to be up there like do you want to hear more from them do you want to give them feedback on how this could be right and if they and if you didn’t get that it was really clear they’re not strategic and they’re not. 

Drew McLellan [00:42:02]: 

The person yeah i am a firm believer that we don’t test enough in our hiring and we certainly should have people presenting to us you learn so much about the power of a person by how they can or cannot command. 

Ben Gaddis [00:42:18]: 

A room we did there’s a few things in tech services when you’re hiring a lot of engineers there’s actually great tools out there now where you can give people a coding test and it’s sort of black or white like you did or you didn’t it’ll record their screen you know there’s lots of ways around it with ai but you sort of quickly say this person can do what they want or not in the agency business that was a lot harder to do because it was abstract and so projects do that but we actually did that at super step we were hiring someone on our ops team and we put out an ad and we got seven hundred applications it’s amazing for one like what do we do with these people so we asked them put together a two minute video and here’s a specific thing that we want you to talk through a case study of something that you worked on that was similar to this and number one the amount of people who didn’t know how to do a video the amount of people who didn’t want to do a video yeah and then the difference between some of those videos of who put time and effort into it we got one person who gives a twenty four minute video and the prompt was two that’s not going to work and so there’s some simple tools that you can use to get to who are your core people and give you a much better understanding of what they’re going to act like when they’re actually on the. 

Drew McLellan [00:43:35]: 

Job yeah i think so too okay one last question and then i will let you get back to your day but how are you viewing the way agencies sell today and again as you’re looking at you know you’ve talked a lot about scale and repeatability and all of that but you’ve also talked about differentiation and strategy which are not things that are just rote and off you know that everybody gets to see the same thing so when you’re looking at an agency and you’re considering whether or not you want to invest in them what are you looking for from a. 

Ben Gaddis [00:44:08]: 

Sales perspective there’s a few things is it just the founder selling everything and that’s really hard to scale hiring a biz dev person i think the numbers i’ve seen is like it’s twenty seven percent success rate something like that terrible it’s terrible so have they proven that someone else can sell a lot of times we’re seeing now like portfolio leaders or general managers or managing directors who might have a book of business and we like to see that because usually that means they can kind of scale that business on their own but then we really get into the go to market and how are they pricing and are they selling tactics or are they selling something larger in value and i got to give you a plug here drew and i heard a podcast you were talking to a guy named blair enns yep this is probably twenty sixteen i don’t i don’t know it was a long time ago and i heard this podcast and you were talking with him and it just said i i gotta talk to this guy and we went out and we actually i just hired him for the fifth time for my fifth agency and what what we learned in that process and what i learned from your podcast was when you start to talk about the value that you’re providing to a client and you price the value it becomes transformative and you get out of the day to day selling a person but you get the confidence to guide a client in that manner and in what they need and the companies who have that or who have we can see a clear path to that are the ones that are standing out right now and that’s a huge part of what we look for in their go to market can you can you transform something from project oriented because their clients love them we bought a business that had three percent recurring revenue but their clients they had one hundred percent referenceable clients they had a hundred percent success rate on projects and every client i talked to said i absolutely love them and i would do anything with them they just weren’t asking for the second order and they made it kind of hard and so now we said well what if you just sold three year deals would clients buy that no they would never buy that we started selling three year deals and fifty percent of the bookings in q one were recurring because they just offered that as an offering so i think about things like that and if you can sort of shift to value that’s probably you know one of the quickest paths to go to market success. 

Drew McLellan [00:46:34]: 

It’S interesting i think so often agencies talk themselves out of doing the smart things because they think the employee will say no the client will say no the market will say no but they decide all of that in their head before they even try it and it. 

Ben Gaddis [00:46:53]: 

Prevents them so i looked back after that podcast i went back and we started doing some investigation and i wonder why haven’t we sold we’ve never sold a five million dollars deal why have we not sold a five million dollars deal and i looked through all our services and i number one reason we hadn’t sold a five million dollars deal is we’d never proposed a five million dollars deal it’s very hard to sell a deal that you’ve never proposed so we just started making sure that in every proposal we gave clients options and we put a lot of five million dollars deals out there and guess what we sold one and then we had never sold a ten million dollars deal so we started putting ten million dollars deals out there and maybe one out of every ten or fifteen clients because it was well thought through it wasn’t just a flyer it was really documented well and delivered a lot of value they’d buy it and so now we start to track things like that how many proposals have you getting you know putting out put out there that are over five hundred thousand or a million or a million and a half and when you do that with confidence and you don’t sell yourself out of the deal in your own head it’s pretty awesome to see what can happen yeah. 

Drew McLellan [00:47:58]: 

That’S fascinating the psychology of all of it is fascinating and the business is changing so rapidly so i’m sure a lot of people are listening to this and going to want to make sure that they continue to stay in touch they follow what you’re putting out the information you’re putting out so how how do people track you down ben so. 

Ben Gaddis [00:48:20]: 

We post a lot of content on our super step capital page my linkedin bengadis g a d d i s on linkedin and then i have bengadis dot com where we have all of our thinking some some stuff that we’re updating almost every week so contact info’s there and i’m always too much of a nerd about this i always love talking to any and all agency founders just it’s a unique group and you know proud to have have played a small part in growing an agency and whenever we can help people do that it’s a lot of fun yeah this. 

Drew McLellan [00:48:55]: 

Has been a great conversation thanks for thanks for coming on the show thanks for sharing sort of the journey that you’ve been on from own investor it’s it’s been fascinating and i i think your perspective is super valuable in this time of continual and constant change so i’m i’m grateful that you took the time to be on the show thank. 

Ben Gaddis [00:49:14]: 

You well thank you drew i really appreciate it it’s great to be here. 

Drew McLellan [00:49:17]: 

You bet all right guys so some really interesting things to think about and i here’s here’s my recommendation you know i always like to give homework i would pick one concept that ben and i talked about it could be staffing it could be pricing could be new business it could be how you lead how your strategy forward versus tactic forwards whatever it is but make it a conversation for your next planning session with your leadership team start thinking about how do we start moving in directions that maybe we’ve dismissed as not for us or we’re not ready for or whatever to ben’s point sometimes the reason that you haven’t gotten there yet is because you haven’t made the effort to get there yet so take the risk have the conversations put a plan in place and start to think about what evolution looks like for you and it’s just a reminder it’s your business so if you want it to be a lifestyle business and you don’t ever want it to be more than ten people and you are happy at you know fifteen twenty percent profit year over year and a little bit of growth nothing wrong with that i just want you to be intentional about it and make conscious decisions and then build the business that those decisions tend to lead you into making so do that homework for me and i would love to hear more about what you’re thinking and how you’re approaching that so before i let you go of course i want to say thanks to our friends at white label iq as you know they are the presenting sponsor of the podcast so born from an agency just like you they had to solve a big thorny problem couldn’t find a solution and so they built a solution which turned out to be a whole separate sister business so check them out they do white label design dev and ppc for agencies just like yours so head over to white labeliq dot com ami to learn a little bit more about how they can help you and your agency’s scale okay all right i’ll be back next week i hope you will too talk to you then that’s a wrap for this week’s episode of build a better agency visit agency management institution to check out our workshops coaching and consulting packages and all the other ways we serve agencies just like yours thanks for listening.