Digging into the data with Hubspot’s Tim Dearlove

announcer:

If you’re going to take the risk of running an agency, shouldn’t you get the benefits too. Welcome to agency Management Institute’s 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 and agency consultant, please welcome your host, Drew McLellan.

Drew McLellan:

Hey, everybody. Welcome back to another episode of Build a Better Agency. This is going to be a fascinating conversation. So Tim Dearlove from HubSpot was one of the key team members in doing a huge research project, and talking to agencies about a lot of different topics around new business, around the challenges they have. We participated, we helped them with providing a few questions, and then some analysis on some of the things that came back in the research.

And so I asked Tim to come on the show, because I wanted to do a couple things. Number one, I wanted to expose you to the research. This research is mostly based in North America, and then they’re going to do a more worldwide, a more global view piece of research before the beginning of summer. So we’ll probably see the results of that by the end of summer, and Tim and I’ll talk a little bit about that, I’m hoping.

But what I wanted to do with this conversation is, A, I wanted to have him unpack the research for you, and sort of pull out some of the more salient points that are relevant for you. Obviously, in the show notes, we’ll have a link to the research and all of the data, so you can soak in all of it to your heart’s content.

But I also wanted to talk to him about some of the implications. So the research is really more here are the facts of what we learned, but I wanted to dig into a little bit more of the implications. And as you know, HubSpot works with a lot of agencies. And so I wanted to sort of step also away from the research, and for both Tim and I, to reflect on what we thought the data meant and how it was most relevant to you.

So I’m anticipating that this conversation is going to hop all around a little bit because the research was pretty wide in its focus. So I’m going to try and cherry pick some of the things that I think are most critical, but it may feel a little bit like we’re hopping around topic wise. But, overall, what I’m hoping will happen is, I’m hoping that the conversation will give you, A, a little piece of mind that you’re not out there alone. That a lot of the things you are experiencing, many other agencies are experiencing.

Then, B, where I really want to dive in a little deeper with Tim is, what do we do about all of this? And how do we move forward with some of this insight? And how do we differentiate ourselves in terms of not being quagmired in some of the problems that some of the other agencies are going to identify in the research that they’re challenged with, that I know lots of us are challenged with as well? So how do we step out of that and away from that?

So I’m really excited to have this conversation. Tim is very knowledgeable, talks to agencies every day, just like I do. So without further ado, let’s just jump right it in.

All right, so without further ado, Tim, welcome to the podcast.

Tim Dearlove:

Thanks for having me very exciting.

Drew McLellan:

So give everybody a little bit of a sense of the survey, who you surveyed? How many people? Give us some of the stats around the survey, before we dig into the findings.

Tim Dearlove:

Sure thing. So this survey was opened at the end of 2017 and into 2018. We ended up getting over 1900 responses for the whole global survey. Some of the data we’re going to talk about today will focus on just a certain segment of those 1900, so we’re going to look at the US, Australia, Ireland, the UK, we’re going to look at that segment. But we had 1900 people start the survey, and around 1200 people that finished the survey.

In terms of a breakdown, most of the folks who filled the survey out were CEOs, vice presidents, directors, and above. And then we had a smaller amount of agency employees, people like managers, team leaders fill the survey out as well. All different countries, again, we’re going to talk today, mainly, looking at that smaller segment. But when we look at the whole of all of the responses, we had responses from tons of different countries, a bunch of different geographical regions.

Drew McLellan:

And everybody, the commonality of all those countries is that they’re English speaking, but you guys are also doing a study for countries where English is not the primary language, right?

Tim Dearlove:

Yeah. The first research report we filed was in English only and focus on countries where English is the predominant language. We’re going to have another report come out in May that’s going to be translated into Spanish, French, and German. And that’s going to look at more of the survey responders. We have a lot more data from Latin America and from Western Europe that will, hopefully, make the report a little bit more helpful. We’ll do some cuts to show here’s how your regions stacks up to another region. But the first report we did was looking at English speaking countries only.

Drew McLellan:

Yeah. Okay. So for our conversation today, we’re going to focus on those countries. And then, when you get the more global one, maybe, we’ll have you come back and we’ll talk about the… because I’m sure there’ll be some interesting differences.

Tim Dearlove:

Yeah. Yeah. So far things line up pretty closely, but there are some interesting differences. Especially when you start to do those cuts between regions, and then you start to see some really interesting data around how different regions are answering some of these questions.

Drew McLellan:

So one of the things that I think is most valuable about research like this is, I think, and we talk about this at AMI all the time that, it’s a little lonely to run an agency, you don’t always know if what you are experiencing is what other people are experiencing. And I think one of the values that research like this provides is that, even if the news is not great, it’s reassuring to know that it’s not your news alone. So your challenges aren’t the only challenges.

So for me, I think one of the insightful things about this research, and you and I were talking about it before we hit the record button, was the idea that, what your data shows is exactly what agencies are talking about every day, when I’m hanging out with them. So there is a lot of validity to what everybody told you in this survey. And one of the interesting things is, and we’ve talked about this before, this is not a new trend, but one of the more interesting things that came out of the study was this idea that agencies are really not in the driver’s seat, when it comes to their relationship with clients anymore, are they?

Tim Dearlove:

Yeah. That’s one of the larger themes that is, to your point, something that I think you could talk to any agency owner off the street, and they would probably nod their head and say, “Yeah, we’ve noticed that.” But the data really highlights that in a couple different ways, and sometimes you need to connect the dots between different answers and it starts to come to light.

But since I’ve been working with agencies, which has been, as I mentioned around six years now, either consulting with them or in my newer role, marketing to them and trying to do a little bit more of this research, that’s been very evident. And it’s very evident within our own HubSpot community as well. But even as soon as I go outside of the community, that’s sort of been the general feeling. And we could get into specific data points that I think highlight this point, but that is very evident in the research report that, if it wasn’t already clear, agencies are sort of always trying to play catch up to clients demands.

Drew McLellan:

Talk to us a little bit about some of the data points that you think are particularly significant around that.

Tim Dearlove:

Well, sometimes, when you’re doing analysis of this research, you’re looking for controversial things. You’re looking for like, oh, this question had 50% and 50%, but I actually think some of the more telling data in this report that just the lack of control that agencies have, are some of the overwhelming responses.

So some of them were related to how agencies price and then deliver their services. So we asked a question on, do you customize your pricing to fit into your client’s demands? And the overwhelming response was, yes. And then we asked a question, do you customize your services to meet the demands of your clients? And that was overwhelmingly, yes, as well.

On one hand, that makes quite a bit of sense, because you’re in a creative industry, you’re a creative agency. The last thing you want to do is offer the same package, the same pricing, the same services to each individual client that you’re trying to sell. But on the other hand, I sort of take a different look at that, which is, clients, or agencies, excuse me, constantly need to customize what they’re doing for each individual client. And I think each individual client believes that they should be treated like a special one-off situation.

I think that puts a lot of pressure, and I think that actually affects a lot of other things that we see in this research report in terms of profitability, cash flow responses from clients, getting work done on time, the use of freelancers. I think those two questions are really telling, in terms of, they make sense on the outset, but I think it shows some underlying issues in terms of the dynamics between clients and agencies.

Drew McLellan:

Well, I think one of the challenges is, one of the ways clients demonstrate their control is that they’re very reticent to share budgets. So when they ask an agency to do something and the agency says, “Well, what is your budget?” And the client says, “Well, just show me what you think we should do.”

Tim Dearlove:

Yeah. It’s all chicken or egg, yeah.

Drew McLellan:

It puts the agency in a really uncomfortable position, because they have to basically guess. And so, one of the mistakes I see agencies make around that is they go in with a proposal, with a single price, and the client goes, “$50,000? I don’t have $50,000. I only have 35.” And then the agency makes a huge mistake, and lots of agencies do this, where they go, “Okay, we can do it for 35.” And so, what you’ve now taught that client is that there is no integrity in your pricing and that you would’ve gladly taken $15,000 more than apparently it’s worth, because you’re willing to do it for 35 rather than 50.

And so, one of the things we talk about is going in with a set of three options, which immediately says to the client, “Look, you can spend 20,000 to 50,000, and here’s the range of things you get for that money. And we can add or subtract things to get to whatever dollar point you want to. But there is integrity in the pricing, because I won’t give you the $50,000 package for $20,000. You can have the $20,000 package.”

But that takes more work and that’s harder to think through. And so again, I think the client sort of jerking the strings of the agency, and the agency is struggling to keep up and to respond quickly, but also in a way that protects and benefits their agency.

Tim Dearlove:

Absolutely. And there’s something that’s not mentioned in this report, which is the power the client has, in terms of saying, “Well, I can just work with another agency.” So we didn’t cover that in this report, but I think all trends show that there’s more investment in established agencies, adopting digital and focusing on the online aspects of working with clients. And then there are just more agencies starting. There’s more new agencies coming in into the world.

So the supply and demand, I think, is slightly off as well, in terms of, you’re competing against a really large pool of other agencies. And we can get into agency specialization and all of that later.

But I completely agree. And actually, there’s another point in there that’s really interesting, which is, you said, “Okay, we go in with a $50,000 ask, and then we immediately recede once the client pushes back.” Something I’ve been fairly passionate about is, whoever is in charge at the agency of dealing with that, putting proposal together, and then talking to the client, that person should be taking a Harvard extension class on negotiation or some sort of negotiation class.

Because we see that all of the time with our agency, which is, they’re amazing at so many things, if you are not a great negotiator, and I know this from firsthand experience, I’m a terrible negotiator and I’ll just pay whatever price is asked of me. It drives my wife insane, but-

Drew McLellan:

The car dealer loves to see you coming.

Tim Dearlove:

Oh yeah. Oh yeah. Whatever price it is, just I want to end this transaction as quickly as possible. But agencies, I really think that’s valuable. If you’re a small agency, invest in just a negotiation workshop, invest in figuring out what your anchors are. Your point about sort of splitting up pricing into three different options, that’s a very normal negotiation tactic. That all can have great repercussions on your agency. And that’s something that is within your power to do is invest in some personal training. Because I think that process makes agency owners incredibly uncomfortable, and it doesn’t need to be conflict, there’s some tactics you can use to get better at that.

Drew McLellan:

Yeah. Yeah. Most agency owners I think are uncomfortable with the money discussion. And so I think-

Tim Dearlove:

Yeah, absolutely.

Drew McLellan:

… to your point, they just want to get it over with, and they want the business, they want the cash, they want to keep all their people employed. And so in their mind, I’d rather do it for 35 than not do it at all. But what they don’t think about is the precedent that they’re setting and the psychology between them and the client. And, also, the other thing that I worry about when an agency sort of rolls over very quickly on pricing is, what it says to the client is, “I’m desperate for your work.”

And I think there is something very powerful about playing a little hard to get, and being able to say, “Well, if you only have 35, I can take away these three things and we can do that. But if that doesn’t work for you, then we perhaps we’re not the right agency for you.” There’s amazing power in that. And I’ve talked to lot of agency owners, who, the more they say no, the more the client chases after them, right?

Tim Dearlove:

Right. For[crosstalk 00:00:14:42]-

Drew McLellan:

Yeah. I just talked to an agency owner the other day who had gotten an RFP request, and they’re super busy, and they didn’t have time to respond. So she picked up the phone, and called the client or the prospect, and said, “Hey, we just don’t have time to do this. This is a really elaborate RFP.” And the person was like, “Well, you’re kind of the perfect fit and we really want you, so could you write a letter or could…” So all of a sudden the client is chasing them, rather… But we don’t play hard to get very often. And that, also, I think is a negotiation tactic and skill that agency owners really need to get better at.

Tim Dearlove:

Yeah. It’s always on the back foot, always defensive. I think there’s an element of shortsightedness there as well. Agencies, especially the ones that I with, are always dealing with the immediate. I immediately need to fill in revenue. I immediately need to hire someone new. But I think that’s a super valuable point about having confidence in your work. I completely understand why a lot of our agencies that we both talk to feel that general level of insecurity, and it causes-

Drew McLellan:

Sure.

Tim Dearlove:

… them to do things like, slave over RFPs and slash their pricing. But there is a general sense of, if you had a little bit more confidence, if you were willing to say no a little bit more, that’s going to have positive repercussions for you. Again, it’s thinking about things in the long term and not the short term. And that’s really very difficult to do. It’s not an easy role to be in.

Drew McLellan:

Right. Right. Well, and I think, again, agency owners are worried about the next payroll. That’s what they’re concerned about. And I’m not suggesting that every agency is losing a client away from having to let a bunch of people go, but cash flow is a challenge for a lot of agencies. And so, they do end up making what, I agree with you, are better short-term decisions than they are long-term decisions.

The other thing you said that I thought was interesting is that there’s this influx of agencies. And right now there seems to be more agencies than clients. And I think one of the challenges with that is the barriers to entry to become an agency are pretty much own a computer, and so-

Tim Dearlove:

Yep. And create a website. Yep.

Drew McLellan:

Yeah. Right. Anybody can say they’re an agency. So I think one of the other things agencies can do to differentiate themselves, is to really market themselves the way they would market a client, talk about their longevity, have testimonials and case studies.

And I know these are things that you guys at HubSpot are preaching all the time, too. And I hear the cobbler children have no shoes every single day. And you know what, you have no choice anymore. The competition is so vast. And frankly, there are a lot of really good agencies out there. So there’re good, and there are a lot of them. And if you cannot invest in your own agency’s marketing, you are going to have to keep differentiating yourself by being cheaper. And that is not, as you said, a long-term strategy that is going to serve the agency.

And they all want the silver bullet, how can… Well, whatever, there is no silver bullet. You just have to do the hard work of promoting your agency and marketing it and having a point of view. And we’ll get into all of that a little bit later. But agencies have to just accept the fact that referrals and friends and family aren’t enough to build and grow own agency anymore.

Tim Dearlove:

Yeah. I’d love to talk a little bit more about creative ways agencies can start to market themselves, because I think there’s a general idea of you have to hire a full-time sales and marketing person, and they need to start blogging every single day. And I just don’t have the time for that. I actually think there are more creative ways that agencies can approach that issue.

But you are right on a couple levels there. There’s no easy solution. Everything is hard. It’s why, if you’re willing to do the hard work, that usually will mean that you can rise to the top. But that hard work needs to be applied in the right way. And I think a lot of agencies that do good work, that work really hard, sometimes invest in some dead end type of work, like maybe, slaving over a single proposal that’s going to be $50,000, and then you’re going to slash it to $35,000. That agency might be really good, but they’re just investing their attention into the wrong details.

I’d, also, just mentioned, before we maybe get into some of those creative marketing tactics, I have some stories from our own community that I think are helpful there, but right at the beginning, you mentioned cash flow. And just a quick plug for the research here is, the points you raised about cash flow are absolutely legitimate. We asked two questions in the report on cash flow. One is, how did you get your initial cash flow? And 77% of the responses were, we bootstrapped it, you know?

Drew McLellan:

Right.

Tim Dearlove:

So you’re raising money from yourself, like you said, you start with the computer, but there’s no outside investment coming into these agencies. And then we ask, how many months do you have available in cash flow? And the majority of answers there were less than two months of cash flow. So you’re starting off with nothing, and then you’re always sort of on that brink of, potentially, running out of revenue. And if you lose a big client, that can have a big impact.

So we keep going back to, you should think long-term. There’s all these long term solutions, but then that finance aspect really puts a tricky situation onto agency owners, in terms of making them think short-term.

Drew McLellan:

Yeah. It’s interesting, sometimes I think agency owners, the pendulum swings the other way. So I will bump into or be working with a lot of agencies that have six or eight months of cash flow in the business, and that’s equally dangerous to the business. Because what happens is, when you have a lot of money in the bank, then you make easy, what I call, lazy decisions. So if you-

Tim Dearlove:

Interesting.

Drew McLellan:

… lose a big client and you only have two months of cash flow in your bank account, it’s easier to understand why you need to cut staff appropriately.

Tim Dearlove:

Ah, okay.

Drew McLellan:

So keep in mind that the money in the bank account, is money that is mine, as the agency owner, that I’ve already paid taxes on. And now I really should have taken it out and put it into my own personal… And I’ll tell you in a second, what I think you should do with that.

So I should keep two months inside the business, cash. Then I should get the rest out of my business, give it to me, because that’s actually already my money. I’ve paid tax on it. So what I don’t want to do is, I don’t want to leave it inside my business, so that I make sloppy decisions. Because rather than laying off somebody I really like, I keep them for another month or two. And I just dig myself deeper and deeper in the hole.

What I really need to do, is I need to get it out of my business, but I need to keep it into a liquid account that I could loan back into my agency if I need to.

Tim Dearlove:

Interesting.

Drew McLellan:

Because it’s really interesting, the mental exercise of, okay, I know I should lay Bobby off, but we have money in the bank, so I’m just going to let it float for another month. Because, you know what, we’re talking to this prospect in a couple weeks, and that might turn into something, and agency owners can justify anything. As opposed to the thought process of, okay, I really should lay Bobby off, or I need to write a check from my bank account back to the agency for $10,000 to float Bobby for another month. That’s money that I could use to put my kids through college that I could redo my kitchen. I could pay off my parents’ house, whatever.

So in other words, I can invest it in my family, because I’ve earned it. I’ve taken the risks. I’m the owner. Or I can take money from my family and take care of Bobby. Now, all of a sudden, the mental gymnastics that happens in that agency owner’s mind are very different.

So I’m a firm believer that you should have four months of cash-

Tim Dearlove:

Gotcha.

Drew McLellan:

… to back yourself up. But I think two of it should be inside the agency. And two of it should be in the owner’s back pocket, in a liquid place, where they could lend in if they need to. But they make very different decisions when that’s the way it’s set up.

Tim Dearlove:

It’s forcing agencies to make those hard decisions that we talked about, but it’s forcing them to do it. You’re making it as hard as possible to make you actually really, really think-

Drew McLellan:

Or at least you have to really think it through, right?

Tim Dearlove:

Right.

Drew McLellan:

Because it’s not automatic that the money’s in the bank. But you’re right, a lot of agencies don’t have the luxury of having that extra two months outside of the business, and they are, literally, sometimes going paycheck to paycheck.

Tim Dearlove:

Yeah. And that leads to that immediacy that we touched on earlier, which is, I lose an employee, I immediately have to fill the exact same employee that I had before. I lose a client, and I need to refill that exact revenue. When I think it would behoove a lot of agency owners to, if those things happen, if they’re really low on cash flow, to really start rethinking a lot of their strategy, marketing, sales, positioning, all of that.

And actually, we asked a question like, what is the biggest pain point that you have? And not surprisingly, the top answer was, just generating new business. But the second most popular answer was, as agency owner, just not having time to think about my business strategically. Time to put back into my business, to think about these very important, but high level, not day-to-day type of things and type of strategies.

So I think agency owners tend to be a little bit stressed out when it comes to their time. But if you can think long-term, if you can look at the issue six months down the line, you might be able to make some harder, but, but a bigger payoff type of change for your agency. But, again, it’s thinking long-term and not short-term in those capacities.

Drew McLellan:

Well, and for many agencies, the reason why they don’t have that time is because they’re too entrenched in the client work. So every day I hear the owner saying, “Well, I’m the only one who can do is level of strategy, or I can do this level of thing. I don’t have anyone else on my team that can do it, so I have to do this day in and day out.” Or, “I’m the woobie for this big client, our gorilla client, and so I have to be accessible to them seven days a week, when they text or ping or whatever.”

One of the conversations I have with them, and this gets to your point about rethinking the strategy, is, “Well, what if you, and I don’t mean it this in a bad way, but what if you dumb down the kind of clients you chase after?

Tim Dearlove:

Interesting.

Drew McLellan:

Rather than going after clients, that only you are smart enough to service, and you cannot find anyone else in your community or in your country, if you’re a virtual agency, to service that client. Maybe instead of having a client that’s a sophistication level of a nine, maybe you need to notch down to a seven, where some of your more senior people could absolutely handle the strategic needs and the marketing ideas and conversations that need to happen with that client.”

So, to your point, I think sometimes agency owners box themselves into a corner by attracting and going after clients that, A, they love to service, because they love that challenge. But, B, they’re the only ones who can do it. And if you’re stuck in the day-to-day, you are not running your agency, you are inside the agency, and you’re basically just an employee. And that’s when, basically, everything is short-term, because you don’t have time to think long-term.

Tim Dearlove:

Yeah. It makes a lot of sense. And I think some agency owners like being stuck in the day-to-day, that is what [crosstalk 00:26:23]-

Drew McLellan:

But that’s the-

Tim Dearlove:

… adrenaline.

Drew McLellan:

Well, that’s the work that they love to do. I think a lot of agency owners, well, I think most agency owners, are accidental business owners. That they loved some aspect of agency life, whether they were a copywriter, an art director, an account person or whatever. And all of a sudden they’re like, “Oh crap, I own an agency now.” And you’re right, many of them don’t really want to do the work that an agency owner has to do. They want to do the work that they did when they were the creative director or the account supervisor, whatever it is.

So you’re right, the pull is, this is something I’m good at, and that for me is easy. As opposed to like financials and biz dev and all of that, which I do not like, and it’s hard. So it really does require, either a lot of discipline to make the shift, or acknowledging that you have to hire… If you don’t want to run your agency, someone has to. So either you have to do it or you have to hire someone to do it.

Tim Dearlove:

Yeah. Actually, that’s a good segue. I was going to ask you a question. When I’m working with a small agency and they’re talking about, either maybe making their first hire or bringing someone on staff, I tend to be very wary of hiring someone that’s going to be a larger salary. Someone maybe that’s going to be in the C-suite right away.

We’ve seen a lot of horror stories where agencies invest in a six figure salary for a COO or a CMO or some something along those lines. And it tends to go very bad, just because those people, as well meaning as they could be, tend to not move the needle as much as you’d like, and as much as you’re paying them for.

But if you are that type of agency, where you love being in the weeds and you do need to make that hire for someone to focus on operations and high level strategy, and the aspects of agencies, what are your thoughts on, one of the first hires should be someone like a COO, someone to focus on the high level stuff in the operations? Should that be a co-founder? Or should that be your first hire? How would you approach that if you were running an agency?

Drew McLellan:

Yeah. I think part of it is, you have to be of a certain size to be able to afford another, non-billable human being, right?

Tim Dearlove:

Right.

Drew McLellan:

So for every non-billable human being, so whether it’s the bookkeeper or the front desk person, or you, the agency owner, if you’re not doing a lot billable work, you have to have five or six, at a minimum, billable, what I think of as, worker bees. People who are billable at 70 to 80%, to pay for the non-billable person.

So you have to be of a certain size, I think, for an agency to even consider hiring a COO. Because that person, for the most part, is going to be unbillable, and unbillable, to your point, at either a high five or a six figure salary. So now you’ve got the owner, who’s probably making high fives or low six figure salary, and even if they’re super billable, that’s a challenging mix. For me, an agency, any smaller than 15, can’t really afford somebody at the C-suite level, that is going to just run the agency, while the owner does what they love to do.

And quite honestly, sometimes this is a really difficult conversation to have with an owner, which is, “Look, if you really want to be an account supervisor, maybe being an agency owner is not the right thing for you. Maybe this is not the right fit, because either you’re going to work 80 hours a week, because you have to do two jobs. Or you’re going to have to give up some of the client work, and train and attract the right talent to do that client work. Because there are things that you are uniquely qualified to do.

And that’s biz dev, that’s kind of loving on the clients, in terms of nurturing those relationships, and that’s going golfing with them and hanging out with them, and sitting in their board meetings and things like that. But it’s not doing the day-to-day work, and it’s mentoring the team, growing your team up. That’s where an agency owner should be spending their time.

And the fourth thing is actually running the mechanics of the agency, which is, the financial metrics and all that sort of stuff. Nowhere in there is the day to day work of client work, unfortunately.

Tim Dearlove:

And I think that’s just a matter of agency owners being honest with who they are, and how much they’re willing to change. And I think this was on our notes of things to talk about, but we asked a question, in the report, around, have you thought about any of these ideas over the last year closing your agency down, hiring someone? And around a quarter of the responses said that agency owners had considered merging with another agency over the last year.

And I think that’s a really interesting idea, if you’re an agency owner and you just have not been able to do exactly what you said, which is step away from the day-to-day stuff, I think looking at a merger is a really interesting option. It’s something we’ve seen. We’ve seen a little bit of consolidation within our own community. I don’t really know if that’s a trend for the larger industry.

But, if you’re an agency that’s great on client delivery, but terrible on maybe sales or managing the operations, there is probably another agency out there that you could, potentially, merge with where you could still make your salary, still feel like you’re a key component of the agency, but not, ultimately, be the owner. And you could keep all your staff, you could keep working with the clients that you currently work with. But you’re not in charge anymore.

So that’s a really interesting data point that we saw on the report, and is one possible solution for that agency owner that might feel stuck. Not being able to totally change who they are, but also not willing to give up their existing business.

Drew McLellan:

Well, and like all choices, there are consequences to that choice. So I’ve seen a lot of agencies who’ve tried to do that, and, honestly, maybe 20% work. And the reason they don’t work isn’t that they don’t have compatible skillsets. It’s two things, one is that the cultures don’t blend well together. And two, it’s a little like having a baby and then letting your next door neighbor raise the baby, while you have to watch them raise the baby.

Tim Dearlove:

Yeah.

Drew McLellan:

Right? So-

Tim Dearlove:

Yeah. Kind of like, “Are you sure you want to do that? Are you sure you want to do that? I did it a little differently.”

Drew McLellan:

Most agency owners, I think, were not great employees to begin with, because they’re opinionated, they want to do it their own way.

Tim Dearlove:

Creators.

Drew McLellan:

All the things that make them great owners and leaders are the things that made them not so awesome employees. But I think they would be even worse employees today, because they’ve had the taste of being in control. So I think it takes an owner who really has a deep understanding of themselves and are willing to make the compromise of letting someone else raise their baby. Or taking on a partner, and all of a sudden, it’s like being single for a long time and then getting married and someone else moves into your house, and goes, “I don’t like the couch there. And why are…” And all of a sudden you’re like-

Tim Dearlove:

You have to be willing to change [crosstalk 00:33:22]-

Drew McLellan:

… “Whoa, whoa, whoa.” Right?

Tim Dearlove:

Yeah.

Drew McLellan:

You have to be willing to compromise. And my other fear with that strategy is, oftentimes, agencies are drawn to that when they’re in trouble. And so they’re sort of already-

Tim Dearlove:

Position of weakness.

Drew McLellan:

… down on their knees, and so they don’t negotiate well, back to our earlier conversation, and they agree to things that, if they were healthy, they would never agree to. So I think a couple things, one, if you’re considering that, really take your time and date for a long time, do projects together, do other things to make sure that you’re compatible before you move in together. And do not discount the culture factor. Because otherwise, some of your best people in both shops will go away, if there’s a culture clash.

And number two, ask yourself, if I had all the money in the world, would I agree to this? And if the answer is, no, then understand that when you come together and you get healthier, you are not going to love it. And so you may want to have an exit strategy, like, I’m going to do this for three years and then I’m going to stay step out, and let him or her take over the agency.

Whatever it is, but this is not something to jump into. And it’s more psychology than it is math. And you need to really have somebody, maybe, walk alongside you, and there are a lot of folks that do that, to help you really think through how this merger is going to impact the employees, the clients, but mostly the two owners? And how are they going to work well together? And you want to test drive that for a while before you jump in.

Tim Dearlove:

It’s a good plug for agency consultants, for business coaches to help you think about things that maybe you didn’t consider, before you jump [crosstalk 00:34:59]-

Drew McLellan:

Anybody who can give you an outside perspective, a third party perspective that can ask you the hard questions that maybe you’re not thinking about, because your backs against the wall, right?

Tim Dearlove:

Yep. And in our case, with our community, I think the successful mergers have been, to your point, mergers that came about due to years of groundwork. So agencies that met at the first INBOUND conference, or one of our INBOUND conferences in 2012, they got along, they went out after INBOUND, personality wise, they found out, hey, I enjoy hanging out with this other agency owner and their employees. And then, when it came time to think about, what are we going to do for that next step? Okay. It actually makes sense for us to approach this.

So it’s a good point, in general, with everything we’re talking about so far, immediate concerns will often lead you down path of mistakes or setting yourself up for mistakes. If you can think about these things, years ahead of time, you’re going to be in a much better position. And one of the reasons why we love research like this is not because we think you should read it and then make an immediate change, although there are certain things in here that I think should lead you to make immediate change, but really to put this stuff on your mind, like, hey, other agencies consider mergers, you should consider it too. Don’t consider it right now, to all of your really, really helpful points on that, but start thinking about it now, because-

Drew McLellan:

But be open to the idea.

Tim Dearlove:

Yeah. Because maybe in three years, this will make sense for you. And as you’re sitting down to map out the next year of your agency, this is one potential for path. But, if you’re not sitting down to do those paths and to think about the future of your agency, then no matter what you do, merger, no merger, hiring someone or not hiring someone, it’s going to be very tricky for you.

Drew McLellan:

Yep. I want to get back to your comment about some of the biz dev ideas, but first let’s take a quick break, and then we’ll, we’ll come right back to that.

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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.

All right, we are back. So before the break, actually, about 15 minutes ago into our conversation, you had mentioned that you’ve seen some agencies do some creative things around biz dev, and sort of positioning themselves in thought leadership positions and things like that. So I wanted to make sure I didn’t forget to come back to you and say, tell us a little bit about some of what you’re seeing.

Tim Dearlove:

Right. I think we can talk a little bit here about agency specialization and how agencies are differentiating themselves. But one of the first things I wanted to talk a little bit about is, how agencies should think about marketing and in sales. So you mentioned earlier the cobbler’s kids add no shoes, right?

Drew McLellan:

Right.

Tim Dearlove:

So I think a lot of the times when I would be working with agencies, what they would do is say, “Okay, I’m going to treat myself like my own client,” which is really admirable. “We’re going to have hours dedicated to just my own agency.” I tended to think that was a mistake at the time, and it’s not always a mistake, sometimes it did work. I’ve seen lots of success with agencies being able to start successful blogs and content machines, and sort of the same motions that they would do for their clients, would work for them.

But oftentimes, I think, the problem is, they weren’t really thinking about themselves as this unique business that’s totally separate from the clients they were selling to, and that is the case. The agencies are very different. Your competitive industry is very different. Your competitors are very different. If you think about working with like an industrial maker of metals or something along those lines, if three years ago you were going to invest in content creation for that type of industry, for that type of client, that would be hugely successful, in terms of standing out from their competition.

But all agencies, in some way, are usually investing in content marketing. They’re all really good, maybe, at social media or some of these digital aspects. So I would work with agencies and they would sort of do the same things that they would do for their clients, except, they would spend a little bit less time on it, and they would give a little bit less time to bear fruits, and then they would get frustrated.

So I would just encourage agency owners to think about their businesses differently. And one of those ways is, and this is something that’s a little near and dear to my heart, but how agencies sort of look at marketplaces. So this is going to be very HubSpot focused, but there’s a marketplace for HubSpot agencies.

And a couple years ago, a couple agencies really focused on getting reviews for their position in the marketplace, in the HubSpot marketplace. And what that meant is they built a motion, they got good at that level of marketing. Which is, we service a client, that goes really well, we get that client to leave a review, either in the HubSpot marketplace or maybe on G2 Crowd, wher