Set Up to Fail, Even with Perfect Projects - Real Client Case Study, With Kristen Kelly

Points of Interest

• 00:02 – 01:49 – Introduction: Marcel welcomes Kristen back to the show and sets up another practical client case study focused on a real agency engagement.
• 01:50 – 04:00 – The flex-labor, video production agency profile: Kristen outlines the agency’s model: a small FTE core, 10–20 contractors, just under $2M in revenue, and constant cash flow stress tied to contractor payments.
• 04:01 – 06:21 – Why video production and events are so punishing for cash flow: Marcel explains how big production days and lumpy project work make earned revenue, contractor management, and cash flow especially tricky for this type of agency.
• 05:05 – 07:16 – Growth, service-line complexity, and early unprofitability signals: Kristen describes how larger clients, new service lines with tight price ceilings, shifting deadlines, and creeping unprofitability pushed the founders to hit pause and seek help.
• 06:22 – 07:25 – Becoming “exit curious” changes the stakes: Marcel notes that the owners had started thinking about selling, and viewing the business through an enterprise value lens made their efficiency and profitability issues feel more urgent.
• 07:26 – 11:05 – Spreadsheets, PM tools, and the stalled silver-bullet implementation: Kristen walks through the spreadsheets they built, the expensive all-in-one PM platform they bought, and how personnel changes left the implementation half-done and overwhelming.
• 09:06 – 13:58 – Why PM tools fail without a profitability framework: Marcel unpacks the gap between the tool’s promises and reality, highlighting how unclear definitions of cost rates, pass-through expenses, margins, and scope make it impossible to configure a PM system effectively.
• 14:52 – 18:52 – The client’s original thesis vs. the real problem: Kristen shares that the client blamed headcount, tools, and “project management issues,” while Marcel points out their weak time-tracking culture and the failure to treat producers as true delivery costs.
• 19:05 – 22:12 – Diagnosis: a business model and unit economics problem: Kristen explains how reviewing the cash-basis P&L, time data, spreadsheets, and contracts revealed that the core issue was delivery margin and pricing, not execution quality or PM discipline.
• 24:52 – 27:42 – Fixing the data: contractor classification and cash-basis adjustments: Kristen describes using Parakeeto’s decision tree to classify contractors as delivery expenses, annualizing their cost and hours, and reverse-engineering hours from invoices, while Marcel adds tips for reducing noise in cash-based books.
• 28:18 – 35:57 – Rebuilding the model: estimator tool, 70% margin, and hire-vs-contractor math: Kristen shows how the estimator tool exposed project-level unit economics and ABR targets, then explains how they improved time tracking, pricing strategy, contracts, and PM tool setup, plus modeled when it actually made sense to hire FTEs instead of using contractors.
• 36:43 – 39:01 – Key lessons and reassurance for nuanced agency models: Kristen closes by emphasizing that every agency has quirks, but a clear framework can still make it profitable, while Marcel underscores the value of external support in untangling model vs. execution problems.

Show Notes

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