Cash flow Archives - Agency Management Institute

The One-Time-Only Rule (OTO)

I have never met an agency owner who believes they don't leave money on the table when it comes to a change order request. No agency is great at change orders and most -- are abismal. You have to get a mindset when you are working with changes. When the work has been approved by the client and he/she has signed off, you can move to the next step. Inevitably, somewhere along the way, there will be changes which impact the budget, the amount of time/effort put into the work, potentially out of pocket costs like printing, and the delivery timeframe. The only way -- let me repeat that -- the only way to maintain the same level of profit that you budgeted for at the outset is to create a change order request. If the client wants to change the work, you need to prepare a change order that is the authorization to modify the budget (and potentially the timeline) for the change/work. Once the work is approved, going back and re-doing the work is a billable situation. Imagine that you are remodeling your bathroom. The original plan that you signed calls for one sink. After you see the single-sink you decide you’d really like two sinks. Does the contractor say, “Hey! No problem. We’ll get right at that and put in the second sink”? Well, partially correct. He will agree to make the change, but you’re going to have to pay additional dollars to take out the new-old single sink and install a new countertop with two sinks. And, you can bet your life on it, a good contractor will have you sign for the additional work and funds required before he resumes [...]

Should my advertising agency take on debt?

All debt is not bad debt -- the question you need to ask yourself is 'should my advertising agency take on debt?" Every business faces the issues surrounding cash flow and keeping the money moving in and back out the door. Advertising agencies are no exception. Until I actually owned my own agency, I didn't really wrap my head around the differences between how much income a business generated and the daily cash flow issues. As many of you have experienced -- you can have incredible billings but that doesn't mean you have enough money to make payroll. Sooner or later an agency owner is going to be faced with the question -- should I borrow some money? Here are some reasons NOT to borrow money: Work is slow and you're over staffed. Billings won't cover payroll but you don't want to lay anyone off. Your computers are a few years old and the creatives are starting to complain. You've had to toe the line for the past couples years and not bonus yourself. Your husband is making not so subtle hints about Hawaii. In other words -- don't borrow to avoid tough decisions, to keep staff the business does not warrant, to pay for disposable items (sadly computers now fall into that category) or to line your own pockets. Those are emotional, short term feel good decisions that you will regret. Over and over. On the flip side, there are times when borrowing makes sense. None of these are absolutes of course. To buy a building that will house your agency for years and appreciate in value over time. (Do it as a separate LLC) To invest in an opportunity that could pay off [...]