Agency Math

Hey everybody, Drew McLellan here from Agency Management Institute, this week coming to you from Chicago. I just spent the last two days teaching our advanced AE bootcamp. So I got to hang out with a lot of very seasoned AEs and one of the first things I do is I ask them what is in the way of them being successful at their job? What problems can we solve over the next two days that will help them do their job better? And one of the things that comes up, honestly, every time I teach this workshop but it certainly came up this week, was that advanced AEs, so these are account directors, senior account people, these are people who've got years of experience in your shop, and one of the things that they find super frustrating, which is good news for you is they get very frustrated that they can't seem to figure out how to make a client more profitable. They struggle with write-offs and they struggle with understanding how they can deliver a better bottom line to the agency. Which is wonderful, it's fantastic that they care about that, that they're aware of it, but here's the deal. In this workshop, one of the things I teach them is how agencies make money, I teach them about AGI and profitability, and I teach them all of the metrics that you as agency owners should be looking at on a regular basis to decide how profitable each client is, each project is and your agency is.

And you know what I find? Out of a room of 40 AEs, maybe two have even heard about AGI or know how to figure out the AGI of a project? So here's the deal. Your responsibility as an agency owner is to make sure that your team understands what I call agency math. That they understand the gross billing minus cost of goods, what's left is AGI, and that's the money we get to run the agency with, et cetera, et cetera, et cetera. The metrics that you're using every single day, your AEs are not familiar with it, they certainly are not fluent in it, which means that they're not really thinking through from an AGI perspective when they're putting together estimates, when they're trying to decide whether or not to trigger a change order. So you're sort of hampering, their ability to help you run a profitable agency, because they're not as well informed as you need them to be. Now granted, those 40 AEs got to hear that this week and they know it, but hearing it once isn't enough, it needs to be baked into conversation that they're having with you, the agency owner, needs to be baked into the reports that they're doing in terms of tracking profitability by client, by project.

Most of your accounting software will give them a lot of that data, but they didn't even know to ask for the data. So I guess here's my message for you. Your AEs want to help you run a more profitable agency, but they have to have the right tools. And one of them is a clear understanding of agency math, about the power of AGI, about how you figure out profitability and they need access to that data for their clients. Do that and let them run free, and you're going to find that you have a better run department, better run accounts more profitable accounts, and honestly, you're going to know which AEs are contributing to the bottom line. All of that is good for you and the agency. So don't hold back, make sure they understand agency math and that you are walking it through with them on a regular basis until they really get fluent in it. It's best for your business. And honestly, they want to deliver that for you, so let them. All right, I'll be back next week with another tip, see you then.