Episode 495
Welcome to another episode of Build a Better Agency! In this solo cast, host Drew McLellan takes center stage to discuss a critical topic that every agency owner should consider—broadening the concept of growth beyond the traditional metrics like headcount and gross billings. As an agency leader, you’ll gain fresh perspectives on how to leverage different growth strategies that go beyond the surface level.
Drew delves into the importance of enhancing your agency’s growth across various dimensions. He emphasizes the need for agencies to focus on increasing their adjusted gross income, not just through acquiring new clients but also by maximizing the potential of existing ones. Drew challenges agency owners to rethink efficiency, suggesting innovative ways to manage cost of goods and improve team structures through global talent pools and flexible work arrangements.
Listeners will also be encouraged to concentrate on retaining clients and top talent, creating a stable foundation for long-term success. Drew outlines how educating both your internal team and clients can lead to more robust relationships and, ultimately, increased agency profitability. A particularly noteworthy point is that true agency growth should translate into better compensation for owners, stressing the holistic value of growth.
Don’t miss this episode if you’re ready to explore comprehensive growth strategies that extend beyond just numbers. Drew’s insights will provide you with actionable steps to transform your agency’s approach to growth, offering a renewed sense of purpose and direction in how you develop and sustain your business.
A big thank you to our podcast’s presenting sponsor, White Label IQ. They’re an amazing resource for agencies who want to outsource their design, dev, or PPC work at wholesale prices. Check out their special offer (10 free hours!) for podcast listeners here.
What You Will Learn in This Episode:
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- Rethinking agency growth beyond headcount and gross billings
- The significance of continual learning and teaching within the agency
- Strategies for increasing adjusted gross income and profitability
- The vital role of client and team member retention in agency success
- Exploring flexible team structures and global talent for agency growth
- Developing a comprehensive plan for agency owner compensation
- Embracing new business opportunities through deeper client relationships
“None of you started your agency to work 60 plus hours a week to make less money than you could if you had a job.” - Drew McLellan Share on X
“We all learn better and faster when we learn together.” - Drew McLellan Share on X
“Headcount and gross billings are not the only or the most important ways for you to grow your agency.” - Drew McLellan Share on X
“Growth is a very holistic, multifaceted element of agency ownership and management.” - Drew McLellan Share on X
“One of the most important ways we can grow is by deepening our relationships with clients.’” - Drew McLellan Share on X
Ways to contact Drew:
- Email: drew@agencymanagementinstitute.com
- LinkedIn: www.linkedin.com/in/drewmclellan
- Website: https://agencymanagementinstitute.com/
Resources:
- AMI One-On-One Meeting Template
- BaBA Summit May 19-21, 2025: https://agencymanagementinstitute.com/babasummit/
- Book: Sell With Authority
- AMI Facebook Group: https://www.facebook.com/agencymanagementinstitute
- AMI Preferred Partners: https://agencymanagementinstitute.com/ami-preferred-partners/
- Agency Edge Research Series: https://agencymanagementinstitute.com/agency-tools/agency-edge-research-series/
- Upcoming workshops: https://agencymanagementinstitute.com/advertising-agency-training/workshop-calendar/
- Weekly Newsletter: https://agencymanagementinstitute.com/newsletter-sign-up-form/
- Agency Coaching and Consulting: https://agencymanagementinstitute.com/advertising-agency-consulting/agency-coaching-consulting/
Hey everybody, Drew McClellan here from agency Management Institute. Welcome back to another episode of Build a Better Agency. This is one of my solo casts. So no guests today, just you and me hanging out talking about something that I want to make sure is on your radar screen.
Before we do that, before I talk to you a little bit about what we’re going to talk about. We have just a little bit of paperwork to get done. So as you know, hopefully you know on every solo cast episode, so every fifth episode we give away a free seat to an agency owner who has left us a rating or review on the podcast. So a free seat to one of our workshops. So one of our live workshops here in Denver, Colorado.
So this, this month’s winner is. And Stephen, I’m going to apologize in advance that I may mispronounce your name, but Stephen von Gerlacher, that’s, I’m gonna guess that. So anyways, from Stuart. So Stephen, I will email, I will email you and let you know that you won and that I probably butchered your last name. I apologize for that.
But here’s how you get your name in the drawing. Go to wherever you download the podcast and leave a review. Leave a rating and a review. Could be a good one, could be a bad one. Doesn’t matter, just take a screenshot. I mean, obviously I hope it’s good. I hope that we’re adding value for you, but nonetheless, take a screenshot of it and email it to me@drewagencymanagementinstitute.com.
And the reason I need you to do that, we do read every review and I’m super grateful for all of your input, how much you enjoy the podcast, that you find value in it. So we do read every review. But on most review sites you use some sort of a username that does not give me any idea of who you are or how to reach you.
So Foster Fail Florida doesn’t tell me anything other than that you love Foster puppies or kittens, which makes me love you. But I don’t know how to get a hold of you and I Don’t know your name. So make sure you make take a screenshot and then email it to me and then we will put your name in the drawing.
And here’s the deal. Your name stays in the drawing until you win. And you know the number of people that listen to our podcast. You know 10, 15,000 people. A, not all of you are going to do this and B, sooner or later, most of you are going to win.
So for a five minute act, you can win a $2,000 workshop seat. All you have to do is get yourself to Denver and we will gladly welcome you into the workshop. So with that said, again, Steve, congratulations on the win. I will email you and let you know that you’ve won.
By the way, when you win a workshop seat, it’s not like you have to use it within a month or two months or it goes away. It’s a, it’s a no expiration date win. So if it takes you two years to use it, that’s fine. We’re at, we’re just happy to have you. You can also use it for the Build a Better Agency Summit.
So if you want to come to the conference rather than the workshop, you can use your seat, your free seat for that as well. So that’s all I got on that, Steve. Congratulations and thanks for listening. And thanks to all of you for listening.
So speaking of the Build a Better Agency Summit, it is coming up. We are by the time this airs at the very tail end of March, we are, you know, six, seven weeks away from the summit. Super excited. It’s our fifth one. We’re back in Denver again this year, have some killer speakers. Great, great speakers, great keynote speakers, great breakout speakers, over 30 roundtables and all of that is awesome.
And you’re going to learn from every one of those people. But I’ll tell you who you’re going to learn from the most are the other agency owners and leaders that will be in Denver on May 19, 20, 20, 20th and 21st. Because just sitting around and talking to other people who do what you do and saying, how are you doing that? Or what’s this like happening in your market or sales cycles?
Slow, faster. What are you doing? What you’re going to find is that the AMI community, the people that gather for this conference every year are some of the most generous, non competitive. Not that you’re not competitive, you’re all super competitive. You are type A competitive. And actually we’re going to talk about that today.
But in terms of the idea of there’s plenty of Opportunity for everyone. There’s plenty of sales for everyone. Our community comes together and says, you know what we believe, what AMI believes, which is we all learn better and faster when we learn together.
So I am going to generously share what I know. And so at lunch, at breakfast, in breakout sessions, at roundtables, at the networking meetings, you’re going to meet some of the most amazing agency owners and leaders that you’ve ever met. And what you’re going to find is they are interested in you and your success.
And if they have something that they can give you, a tip, a trick, a template, a proposal, format, whatever that will make your life easier and better. I think you’re going to be stunned at how often somebody says, oh, give me your email address and I’ll send that to you.
And I think you’ll be equally stunned at how often you say to someone, oh, I have that, or I have this resource, or have you ever met so and so, and all of a sudden you’re part of the learning community and you’re showing up as both a team, a teacher and a student. And that’s what makes it so magical.
So please join us. May 19th is member day, 20th and 21st is the full conference. We would love to have you. We sell out every year, so please don’t wait too long. Grab your ticket, go to the agencymanagementinstitute.com website, and in the upper left corner you’re going to see Baba Summit. Click on that navigation link and you can get right to the registration page. We would love to have you with us.
Okay. All right, so what I want to talk about, actually, ironically, given that I was just talking about how competitive you all are, most of us are pretty type A people if we’ve taken the risk to start a business. If we are entrepreneurial, we tend to be goal-oriented, we tend to be high achievers, we tend to want to really not only get hit our goals, but crush our goals. And then we set even more aggressive goals.
We love the hunt, we love the chase, we love the challenge. We want to win. And so that’s what I want to talk about today, is what winning looks like today for agencies. Because back in the day, what winning looked like, what growing looked like was more FTEs, more employees, more people under your roof, literally back then.
And so it was butts and seats. If you were a five-person agency, you felt good when you got to a seven-person agency or a 10-person agency. If you were a 50-person agency, your goal is to get to 75 people and maybe multiple locations. That was the yardstick that we measured success. That was how we knew we were growing.
But interestingly, over the last decade, and certainly over the last several years since COVID, there’s been an interesting shift. Agencies are actually getting smaller. So first of all, I want to myth-bust a little bit what a big agency is. The average agency is eight people, eight full-time people.
So that’s the average. So that’s not small, that’s middle. Right? So first of all, stop diminishing your agency size if you think you’re smaller than what you think the average should be. But secondly, one of the things that’s happening, and there’s a lot of reasons for it, which we’ll talk about in a second, many agencies are actually getting smaller.
So in 24 and now going into 25, one of the things that we have observed, a trend that we have observed, is that agencies are actually getting smaller in terms of their full-time equivalents, their full-time people, the people who get here in the States a W2 and in your country, whatever the documentation is that makes somebody a full-time employee.
Agencies are getting smaller for a couple reasons. Number one, we’ve had a couple rough years post-Covid. 20 and 2020 was crazy because that was when Covid hit for most of you. 21 was a better year, 22 was a stable year, 23 was a disaster of dumpster fire of a year for most agencies in terms of new business and new opportunities.
24 was a little better than 23, but it was not a gangbusters year for most agencies. The more niched you were, the more specialized you were, the more sought after you were, the better year you have. But for most agencies, 24 was a recovery year from 23, but it was not a break-out-the-champagne year.
25 is actually January and February. I’d say December of 24. January and February, everybody came out of the gate hot. People were reporting more sales, shorter sales cycles, and then by February, actually by President’s Day, ironically, as things were sort of heating up in the US with the new administration, all of a sudden new business came to kind of a screeching halt.
So brands are getting nervous about what all of the economic turmoil in the United States. Whether you’re in the United States or not, obviously the United States economics have global impact. So regardless of where you are in the world, companies are anxious about what may or may not happen with the economy.
There’s a lot of talk of tariffs and other things. Products and services getting more expensive. So all of a sudden we’ve seen an absolute halt in activity levels for agencies. So all of that to say is even in 23 and 24, 23, many of you downsized. 24. If you should have downsized in 23 and you didn’t, you probably downsized in 24.
We’re not seeing a lot of downsizing yet in 1Q25, but it may be around the corner. And the large agencies, the big box agencies, the holding companies, they have been shed people left and right over the last couple of years. So for us, the private independently owned agencies across the globe, that’s good news because it means that there are more and better qualified candidates in the job pool.
But at the same time, what we’re discovering is we need fewer people to do our work. And so if the litmus test or the yardstick for growth has always been more people, well, how do we measure growth and how do we know we’re a healthy agency if we’re not adding headcount?
Right. So some of you are adding headcount, but you’re adding global talent, for example. So you’re hiring more folks outside of your native land, wherever you may be. And you might be counting those as FTEs, or you might be counting those as contractors, depending on how you’re handling your accounting.
We have an opinion about that, which I’m not going to get into now, but I wrote a blog post about it. So if you want to know how we think global full-time people should be categorized in your P and L and in your accounting software. Just go and grab that from the blog.
But in general, most agencies are smaller, so what does growth actually look like for us? I think it’s interesting given what we do for a living and given that we’re idea people, big idea people. I always find it fascinating that we are so limited in the way we define growth that we automatically think of it as headcount.
And actually, I think there are some better, smarter ways for us to think about growth. And so I want to challenge you to look at some of the ways. I’m going to walk you through some of the areas where we should be growing our agencies. And I want you to go back to your leadership team and talk about which of these areas of growth are important for you.
And we can grow in a lot of ways. And I think we need to be thinking about and planning for being intentional about how we grow in ways other than headcount. So first and foremost, in my opinion, is we have to grow in terms of our own knowledge and insight and intelligence. Our industry does not tolerate lackadaisical learning.
We have got to be learners. We have to keep learning new skills, new tools, new trends. We have to learn more and more about our clients, businesses. We have to learn more and more about AI. Right now we’re coming out of the field with the 2025 Agency Edge Research, and it’s all about how clients feel about AI, how they’re using AI inside their organization, how they feel about us using AI and what they want from us in terms of AI.
And I will tell you a little preview to what we’re going to tell you when we announce all of the details, which we don’t have all the numbers crunched yet, but one of the prevailing things that’s already starting to come out of the preliminary data is that they want more from us. They want us to be smarter about AI. They want us to be their teachers.
And so again, we can’t be anybody’s teacher about new things if we’re not learning it. I’m a firm believer that the best way to learn more about something is to teach it. So you learn it at a base level, you start teaching it, you keep learning more, you keep teaching better. I think that’s a really great way to keep leveling up.
So if you don’t have inside your agency, not just for you, the owner, and by the way, you also have to get smarter about all these things. You can’t just have your team get smarter about all of them. But if your agency doesn’t have an internal growth track, if you’re not having your employees set quarterly growth goals, if you don’t have educational processes and systems woven through your agency, so that if I learn something at a conference, there’s a natural and easy and expected way for me to bring that back and teach the rest of the team.
If you don’t have that sort of infrastructure, you need to get it, you need to increase your growth in terms of learning and internal teaching. So leveling everybody up to be better and smarter. So that’s number one.
I’m guessing when I said there are more ways to grow than just headcount, the very first thing your brain went to, which is not a bad place to go, is that we need to grow our AGI. We need to sell more, we need to sell what we do for more money. We need to bring more money in the door. Absolutely. That is a place for us to grow.
And it’s not necessarily that we are selling more to new people. One of the most important ways that we as agencies can grow our AGI is to grow the book of business that we have with existing clients. This is an underserved opportunity. In almost every agency that we come across, 95% of you are not growing your existing clients at the level that you could or should.
So every AE’s book of business should grow by 10% a year. So you should be able to grow the existing AGI that you have by 10% year over year. So if you’re a million-dollar agency, without a doubt, you should be a $1.1 million agency. At the end of the year, you should be able to upsell your clients at least 10%, and in many cases more than that.
So that’s another really important way to grow is how are we growing in AGI? And in some ways it’s not about selling, it’s just about doing what we do more efficiently, more effectively, with fewer people.
So in some cases I’m doing more of it with a global workforce. In other cases I’m using technology, whether it’s AI or something else, to get some things done. In other cases, we were doing things internally that actually a partner can do more efficiently and effectively than we could. And it’s actually more profitable for us to do it with a partner than do it ourselves.
So growing AGI doesn’t necessarily mean selling more. That’s certainly one way to grow AGI. But part of the other ways to grow AGI are to upsell current clients and to do work more efficiently and effectively with fewer people, so that more of the AGI drops down to the bottom line as opposed to being spent on people.
All right, so another place where I think all of us should be able to grow more is our definition of how we build a team. So I’ve said already that many of you have embraced the idea of global talent. Absolutely. One way to grow your team.
Another way you can grow your team is by being even more flexible and thinking about how employees engage with you in a wider range of sort of viewpoints. So it used to be everybody worked full-time Monday through Friday, same hours. That was just everybody worked the exact same shift, if you will.
And then I can remember, gosh, 20 years ago, we started talking about back then, what we called mother’s hours. You know, we had some team members who would come in about 10, nine or 10, and they would leave by two or three, and basically they were working while their kids were in school. Then we had interns who obviously were part-time.
But now today, and I think some of this is, some of this was happening pre-Covid, but a lot of it Covid just sort of blew apart which was. Now we’re looking at the way we build our team in a variety of ways. So we are using international talent. We are having full-time and part-time employees. We are having job sharing where two people might both work 20 hours and share a full-time job.
We have some agencies that are sharing employees across two agencies. I’ve got somebody on my team that I can’t fully deploy, but I don’t want to lose them. You need 15 hours of their skill set. So we’re sharing that employee.
So one of the ways we can grow is just by broadening our perspective, our horizon, about what employment looks like with our agency. So we’re thinking differently about our team. That’s another way we can grow.
Yes, we can grow. In thinking in terms of remote employees versus local, a lot of you have sort of wrestled that problem down to the ground. But there’s a lot of areas of growth around how we think differently about our team structure and how we get the work done, both in terms of the human beings and the tools that we use.
Another great thing to think about in terms of growth, which I think often doesn’t get the attention that it deserves, is retention. And I mean retention in a twofold way. Retention with clients and retention with team members.
There is nothing better than having a long-term client that has been with you for a long time, that you continue to add increased value. You know their business inside and out. You have earned their confidence and trust. A, we get to do great work. When we have that kind of relationship with a client, B, it is much easier to figure out how we can be even more helpful to that client because we know their business better.
And when we are more helpful to them, we make more money. And the more we know them, the more we know their team, the more we know their products, their services, our competitors, the more efficient and effective our work can be. So again, there’s more room for profit in that.
So client retention is a critical thing. Many of you survived 2023 by focusing on client retention. But there’s something about us, and I think it’s part of our sort of hunter mentality, entrepreneurial mentality, is when we think about growth, we always think about new, new clients going to find that new big win as opposed to really thinking about that.
One of the most important ways we can grow is by deepening our relationships with clients. So if you don’t have an initiative inside your organization about how do we get even closer to our clients, how do we add even more value to our clients? Not to get something in return, but just simply because it’s the way you want to do business, then that is something you need to be thinking about.
And the same thing is true on the team side. We all know that when you have a stable, consistent team that has worked together for a period of time, the work is simply better that assuming that those people have followed growth item number one, which is they keep growing.
So they’re not somebody who’s just stuck around year after year, and we don’t have the courage to encourage them to grow or get out. But assuming that the team that we have is growing and getting better individually and they’re getting better together, there is nothing that impacts the profitability of an agency more than that consistent, quality team.
And we all know how hard it is to find great employees who not only have the skills and knowledge we need, but also fit our culture and then how long it takes for them to get up to speed, get to know the clients, earn the client’s trust, earn the team’s trust.
So it goes without saying that it’s incredibly valuable financially and otherwise to have a stable team and a lot of retention when it comes to your team members. So that’s another way to have even more areas of growth for you.
But first, we’re going to take a quick break. I’ll be right back.
Hey, everybody, just want to remind you before we get back to the show that we have a very engaged Facebook group. It’s a private group just for podcast listeners and agency owners that are in the AMI community.
And to find it, if you’re not a member, head over to facebook.com/groups/podcast. So again, facebook.com/groups/babpodcast. All you have to do is answer a few questions to make sure that you are an actual agency owner or leader.
And we will let you right in. And you can join over 1700 other agency owners and leaders. And I’m telling you, there’s probably 10 or 15 conversations that are started every day that are going to be of value to you. So come join us.
All right, welcome back. We are talking in this solo cast about all the ways we should be thinking about growth and focusing on growth. That in the good old days, whether they were good or not, but in the old days of agency life, the way we measured if an agency was growing was really twofold. It was butts in seats, which implied.
Wasn’t always true, but implied greater billings. And you, at a certain point in time, you couldn’t deliver on greater billings with more people, without more people. And so those two kind of went hand in hand today. They don’t go hand in hand.
And as I was saying at the top of the episode, most agencies have gotten smaller rather than bigger, even though they may be increasing their billings and increasing their growth in other areas. But I think that it is surface level to only think about growth in terms of either your head count or your gross billings.
So another way to think about your growth is that mix between gross billings and AGI. So just a reminder, gross billings is everything. We bill a client, we subtract all our cost of goods, including contractors, and what’s left is our adjusted gross income. And that’s the money that we get to spend on running the business.
We use AGI to pay for people, we use AGI to cover our overhead, and we use AGI, hopefully to make some profit. So one way to grow is even if your gross billings don’t change, if you can manage your cost of goods differently so that more money drops down to the AGI level, now all of a sudden, that’s growth.
Why? Because now you have more money for your people to cover overhead and to be more profitable. So that’s another way for us to think about growth is how can we manage our cost of goods differently?
A lot of times when an agency is doing really well, we behave in sort of a fat and happy way, meaning we’re not really paying as close attention because everything’s going just fine. So we don’t worry about counting our pennies.
I think one of the healthiest things, and this sounds counterintuitive, but I think sometimes one of the healthiest things for an agency to go through is a tough time where you really do have to count your pennies. Where you do have to look at, why do we have so many subscriptions to a software that we don’t even use anymore that you’re really drilling down into your expenses, whether they’re cost of goods or overhead expenses, because you have to.
The trick is, how can we be better at that without the crisis of a financial downturn or tightening? So that we are always paying attention to how do we manage our cost of goods so that we have more AGI to spend on people, overhead and profit.
So that’s another way you can grow.
Of course, one of the best ways to grow is profitability. So what am I doing differently in my agency to have more of the money that comes in at the top drop all the way down to that bottom line? So I should be looking at profitability and have a plan for growing profitability.
Remember, the gold standard is agencies should be able to drop before taxes 20% of their AGI down to the profit line. So 55% of your AGI should be spent on people. That’s salary and benefits, 25% on overhead and 20% drop down to profitability.
There is no reason why any agency of any size cannot be 20% profitable before taxes. No reason at all other than choices we make. So if the choices we make influence the profitability, then we absolutely should have a plan in place for how to increase our profitability.
We should be looking at profitability three ways and trying to grow that profitability percentage three ways. Number one, overall profitability. Number two, profitability by client. So a lot of times our profitability problem isn’t an overarching problem, but it might be a specific client.
Oftentimes it’s our guerrilla client. If we have a client that’s more than 25% of our AGI, we often, out of fear to keep them, give away our profit to keep them, which when you think about it, makes no sense whatsoever. And the third way to be looking at profit is by deliverable.
So if you are delivering 27 different things to clients, everything from a logo to a PPC campaign to you’re writing a speech for them, whatever it is that your agency does, looking at those deliverables and making sure that you’re getting 20% profit per deliverable or better is another way to slice and dice the question of why aren’t we more profitable.
So all of those are ways to look at profitability differently. But overall, when you’re looking at it from those different lenses, you’re going to be able to diagnose why you’re not putting 20% of profit to the bottom line and what you need to do to fix it.
So what we’ve talked about so far is yes, you can absolutely grow by adding more people and maybe you’re adding more headcount, but maybe it’s not all full-time people, maybe it’s global people, maybe it is part-timers, maybe it’s job sharers.
There’s lots of ways for you to think about your team and growing them and that’s one way to think about growth, but it is a very surface level of growth. You can also think about gross billings and again, a very surface level.
I’m not saying it’s a bad way to grow. Don’t misunderstand me. What I’m saying is loud and clear in this episode is headcount and gross billings are not the only or the most important ways for you to grow your agency.
So underneath those surface level growths, I want you to think about how do we get smarter? How do we grow our skill set, our knowledge base, our insights, our ability to teach each other what we know so that the entire team gets smarter?
And then how do we increase how do we grow our ability to teach our clients what they need to know so that we become their teacher, we become their coach, we become their Sherpa, we are their guide. How do we do that then?
I want you to think about and smarter by the way, is not just about AI, but it certainly is one of the things is AI. So how do we get smarter in all aspects of our clients business, of marketing, of trends, of socioeconomic truths, whatever it may be, that helps us be even more of a great guide to our clients.
Then we need to be thinking about. All right, so how do I grow my team, but in unique ways. Like I said, it might be a mix of people from your country, it might be a mix of folks from outside of your country, part time, full time contractors.
There’s a lot of ways for us to serve clients today and a lot of ways for us to build out talent pool. And so thinking about that not only from dollars and cents point of view, but also from an availability point of view, from a skill set point of view, from a diversity point of view, lots of ways for us to think about how we grow our team.
From there, thinking about growth in terms of retention, both clients and our team members, how do we deliver that kind of value to our agency and our clients? By keeping clients around longer and keeping a strong, stable team together for longer.
Then we talked about all the different ways to look at profitability, profitability in general, profitability by client, by deliverable. But all of those add up to what I think for you as an agency owner should be the most important growth metric that you are thinking about. And that’s your compensation.
So last year, so remember we see the financials of about 200, 225 of our agencies every year. When we look at, when I think about just the AMI agencies, most AMI agencies take an excess of 350 to $400,000 out of their business every year, minimum.
You’re not doing that. And by the way, these are big agencies and small agencies. This could be an agency of three people or an agency of 300 people. So it’s not about I have to get bigger headcount wise before I can make that kind of money. That is not true. That is a, that is a falsehood.
But if agency owners, the 225 agency owners whose financials I my eyeballs are on are taking home 350, $400,000 minimum a year and you’re not doing that, then that’s the growth metric I really want you to focus on is how do I think about growth in all of these other ways we’ve talked about today so that I can pay myself better.
Remember, the way you get money out of the agency is fivefold. So you’re going to get your paycheck, whatever that is. In the US it’s your W2 income. In other countries it’s going to be however you control and report salary.
So it’s your salary and it’s dividends or distribution. So the profits of the business that come to you throughout the year. The third way is going to be your retirement contribution. So you’re in the U.S., simple IRA, 401k and other countries, your version of that.
The fourth one is going to be pass-throughs. What post-tax dollar expenses can you run through the business as a legitimate business expense using pre-tax dollars? That’s another way you compensate yourself.
And then the last way is for some of you, you would be wise at least here in the States to look at having some sort of a defined benefits program or a private pension that you can overfund for yourself. So through all of those, if you’re not taking 350 or $400,000 minimum a year, that’s the growth goal I want you to focus on.
However, you can’t take more money out of the business if there’s not more money. Which means that before you can focus on owner compensation and growing that pot, you do have to think about growing in the other ways that I’ve already talked about today.
So growth is a very holistic, multifaceted element of agency ownership and management. And the best owners, the most sophisticated owners, have programs in play, have initiatives in place, have team members that are owning all of these different kinds of growth initiatives that I’ve been talking about in this episode.
It is something that they measure, it is something that they set goals on. It’s something that they spend time thinking about how they are going to get that growth. It doesn’t happen by accident. It doesn’t happen just because it happens because you are a smart business operator and you have a plan and you’re working the plan.
So again, growth in how in your headcount and what that headcount looks like. How do you build a team today and what does that look like? Certainly it’s growth in gross billings, but more importantly than gross billings, growth in AGI.
So that might mean gross billings are going up, therefore AGI goes up. But it might also mean gross billings aren’t going up, but you’re being smarter and better about managing your cost of goods so that more of that gross billings drops down to AGI.
It is about you getting smarter and your team getting smarter and making sure that that’s not a one-off activity, that it’s happening on a regular basis in a systemized process. It’s also about growing and holding steady on client retention and team retention so that the best of the best stick with you for longer.
It’s profitability. And when all of those pieces are working, that’s when you can increase your owner compensation, which is the most important growth metric of all. None of you started your agency to be a nonprofit.
None of you started your agency to work 60 plus hours a week to make less money than you could if you had a job. So be thinking about growth very holistically in all of these ways.
Take, take this list back to your leadership team and say, you know what, we need to set metrics. We need to be measuring against these metrics every month, every quarter to make sure we are growing in all of these important ways.
Yes, it’s, it is awesome to sell more to new people and to grow our gross billings and the list of clients. Absolutely. That’s just the surface. Don’t stay on the surface when it comes to growth.
Drill down and grow in all of the ways so that you can grow in the ultimate way, which is your own compensation.
Okay. All right. That’s what I have for you today. Thanks for hanging out with me. I’ll be back next week with a guest and I’ll be back in five weeks, just you and me again.
And that actually will be our 500th episode. I will tell you that. I’m pondering like what’s. What topic is worthy of a 500 episode topic. That’s. That is no small feat. I’m proud of the fact that we’ve been hanging out together for that many episodes and I want to do it justice.
So I’m still working on what we’re going to talk about, but I promise you it’ll be something special before I let you go. Of course, a huge shout out and thank you to our friends at White Label IQ.
They are the presenting sponsor of the podcast so they do White Label design, dev and PPC for agencies all across the globe. They’re wonderful, wonderful people. They’re born out of an agency, so they know how to price their services in a way that allows you to make a profit, that allows you to delight the client, and allows you not to have to staff up for those skill sets if it’s not something that you do all day every day.
So head over to whitelabeliq.com/ami to learn more about them.
Okay? All right. I’ll be back next week. I hope you will too. Thanks for listening.