The Agency Profit Podcast

About Keith:Keith Perhac is the founder of SegMetrics.io, a Saas company helping course authors, product creators, and self-funded businesses increase their revenue from their existing traffic.Unlike most marketers, Keith is also a developer, which facilitated his transition from DevelopYourMarketing.com to “the dark side” (AKA SaaS). This gives him an innate understanding of two key things: the marketing strategies required to grow, and how to implement said strategies for your business.Currently, his online software helps marketers and agency owners get 100% clarity on where their leads come from, how they act, and how much their marketing is really worth.In his spare time, you can find Keith buried in Dungeons & Dragons.SegMetrics.io and How it StartedLike all good software solutions, it was born from an itch that needed scratching.Keith started out as an agency owner, and had been doing funnel optimization and campaign optimization for a number of digital marketers. As his client base grew, so did the time spent on pulling the required numbers for the reporting process.“Pulling numbers is not what I got into marketing for… Understanding what to do with those numbers is why I got into marketing.”Numbers are vitally important to any business, particularly marketing, yet Keith and his colleagues were finding it to be a “huge time suck.” Being developers by nature, they committed to finding a more functional way forward.So, they built the first version internally, based on the premise of “Hey, can we drop these numbers into adatabase and then calculate them automatically?” As it turns out, you can! The Importance of Client Communication and ReportingThink about it… a client comes to work with you because they need guidance in a certain area. The more communication you have with a client, the more you can alleviate any lurking fears regarding your expertise in your field.“The number one thing I’ve found working with agencies, and things that we did internally, was to create a process. The stronger the communication process, the more confidence a client has in your agency.”Conversely, it’s worth bearing in mind that over-communication can have the opposite effect. It indicates a lack of structure and a certain malleability. When a client feels they should take control of a project, you’re in danger of losing your cache – that being your expertise.There are other pitfalls leading from that. For example, you could find yourself dealing with items that aren’t in the project scope; fixing up “little things” that need tweaking, and – as Keith attests – “suddenly, you’re a development shop instead of a marketing agency.”So, a set process is key to working well with clients from the offset. You can start this by ensuring…Every step is documented for both partiesEach step is part of a set process, showcasing how things are progressing/improvingEvery step then has a subsequent actionThis way, the client never feels in the dark, constantly wondering ‘What’s going on next?!’ Value Communication During COVID-19Right now, it’s more critical than ever to be communicating value to clients. It can actually be bad for your clients to cut you right now if you’re driving results for them, particularly online.“If you can keep revenue the same, or keep it from tanking, that’s your agency fee paid for right there. That’s the value you need to show and that’s what we try to do with our funnel optimizations.”You need to show them you’re not a cost, but an investment and a value-add, and you do that through your concise communication and reporting process.“Look, here’s what we did this last month, here’s where you would have been without us, and here’s where you are with us. We’re only taking 5% of all the improvements we’ve made; so we’re definitely worth keeping on.”Set processes creates clarity, continuously reinforcing the value the client is getting. This, in turn, creates client confidence that you’re producing results. Streamlining Your Client Communication ProcessKeeping that pertinent word in mind (value), how should agencies think about setting up a process for communicating with clients that’s going to be efficient, streamlined and not take up a ton of their time?Depending on how much the client is paying you, create a cadence of a weekly call and/or email that updates them on where the stats are.When Keith signed a new client via his first company, he would follow a set schedule – core for clients that turned out to be a good fit.“They got a packet, a list saying, ‘go do this now. Go do this, go do this. This is going to give us all the information for our kickoff call…’ Then, give them a list of everything you’re going to do in that first six weeks – because it’s a process, right?!”A simple example of such a process should go a little something like this…Schedule weekly calls to review results, plus the next steps requiredHost meetings every six weeks to discuss strategy, and roadmap for the subsequent six weeksEnsure there’s a meeting two weeks before the renewal of the contractNever underestimate the importance of inserting yourself into the strategic decision-making process Automating Streamlined ReportingWhen should you consider automating the processes that feel like they might be quite tricky to streamline? According to Keith, there is one golden rule:“Never try to use software to automate the first time around, it is such a bad idea.”Instead, implement the below process before attempting to automate:Start with a paper and/or checklist of the Standard Operating ProceduresGive that SOP to someone who preferably hasn’t undertaken this process before; their different POV should be able to highlight any holes and redundancies (plus it means you’re delegating and possibly putting your time towards something more valuable!)Once that SOP is solid and proven, then you can work on automating parts that are consistently the same Your Take-Away…By way of summary, find ways of building more value into your relationships with your clients during COVID-19. Now is as good a time as any, according to Keith…“You are going to see a decline in revenue, that’s a given; don’t panic, take that extra time to make your business stronger… Now is the time.”So, take the imminent lull in customer interaction to refine your processes and, in turn, improve your value to both your existing and future clients.Go plug those holes! That way, you’ll be better prepared for whatever lies ahead… Want to see more of Keith? Follow him @…Twitter @harisenbon79LinkedIn – Keith’s personal pageLinkedIn – SegMetrics company pageSegMetrics.io Did you learn anything new from this episode? If so, let us know in the comments below – we value your feedback! Our next instalment of #APP, on June 10th, will see us chat with John Doherty. To view our previous blog with Alex Glenn, make your way here… Agency Profitability Tool KitIf you’re looking for more resources to help you improve your agency’s profitability, then check out the Agency Profitability Tool Kit – it’s full of the same templates and checklists we’ve used with consulting clients to help them improve their profitability by over 100% in under 60 days.Download the Agency Profitability Toolkit!Get the same templates & guides we use with consulting clients to get them results fast.DOWNLOAD FREE   

Explaining Partnerprograms.ioTheir aim is ensuring that software and agencies can connect and become more successful together.The overall mission is just better partnerships; more connection, more interaction inside of the ecosystem, while optimizing communication and clarity, and therefore a faster turnaround for the client. Core Tenets of Good PartnershipsSo, what’s at the core of a partnership between a software company and an agency? According to Alex, partnerships can really help you define your operating procedures, helping you get more organized as a team… “Those partnerships can help you really streamline and optimize the services that you offer as an agency, which means higher ticket value, because customer retention is higher.” What should you be aware of in terms of how partnerships ought to be structured? Below are some pointers; there’s more info on the podcast at the 2:10 mark…Co-marketing or co-selling opportunities can help the software company enable their clientsSometimes, you may look for tools to help you run more efficiently, thus optimizing service delivery on top of back-end systemsAlways go through the partnerships funnel on a website, not the regular sign-up formFeature roadmap inclusion and early accessSeek a dedicated phone number, or support channel, for agency partners to receive priority supportRemember: referral fees are not the foundation of a successful partnership, they are generally not going to be the primary value of the partnershipFeature sets, enabling agencies to onboard new clients and build-out services on top of it – like white-labeling, client portals etc.Look for partners who have training – and systems – on how to build and sell services on top of their software Partnership Opportunities Agencies Should SeekAssuming you’re an agency looking to build out some services on top of software solution, let’s address some signals indicating a great partner you can really trust – and grow with – going forward.For instance, if you’re more of a creative agency and don’t sell services on top of tools, look for co-marketing opportunities to add value to software companies that serve the same customer as you. An example would be Wistia’s partnership with Sandwich VideoIf you’re more of a digital or marketing shop, and have a process for how you deliver value to customers, look at the funnel and process that you use consistently. Then, look for partnership opportunities at each step of said funnel or process. An example of this would be using CallRail in a PPC campaign. While you’re growing, try to stay vertical and use the partnership to increase revenue and margin; this is achieved by going deeper into a single vertical service offering – before you try to go too wide. “Tech-Enabled” and “Tech-Stacked” Partnership ServicesProductizing your services allows you to have a streamlined, scalable workflow, thus building out extremely deep relationships with your partnerships and support teams.This can develop some awesome co-marketing opportunities to reach more clients.Speed to value is key for both SaaS and agencies. Great SaaS partnerships should enable you, as an agency, to get your clients the outcome they want much faster – with higher margins and less work. The SaaS company is incentivized to help you do that, and your clients will get additional value from reaching their desired outcome faster. In some cases, you can essentially charge more for something that takes less time because the value of getting the outcome faster of high importance to your client.Some SaaS companies actually NEED agencies to scale. For example…Activation and retention are some of the most important metrics for SaaS companiesAgencies can be essential in helping clients get complex tools set-up and implemented in their workflows so they can get successful  Understand that, as an agency, you can bring a lot of value to a SaaS company by helping them make their clients successful, sticking around in the long-term, and building case studies for the value of their product. How to Start Adding Partnership Services to Your BusinessHow do you start evaluating partners? Where should you go? How do you start selling this to my clients? What’s the roadmap here?!What Alex recommends you do is: look at tools you can create from those replicable stacks.For example, Alex works with a partner called The.com, an awesome new tool that allows you – in your backend – to spin up. Using a very simple editor that’s database driven, you can give a client access to the backend so they populate it with all sorts of cool stuff. “You can create these templates for lawyers, you can create these templates for real estate agents; when you have a new client, not only do you immediately load them with an amazing SEO driven website, you can add on tools and snippets on top of those websites. “ For instance, you can launch a cookie cutter website that’s optimized already, that has chat already, and uses Smith.ai. Building Recurring, High Margin Services Via PartnershipsIf an agency is looking to find some good opportunities to build recurring, high-margin services into their agency through partnerships – where should they go? This is exactly what partnerprograms.io helps agencies figure out! As Alex says… “Just look for partnerships. Don’t look at this as a vendorship. Don’t look at this as, you know, I’m just going to be asked to refer business all day long. Find a partnership. You have to grow with this company. Just like any partnership, it has to be mutually beneficial.” Take a look at all the steps in your service delivery process. Start identifying opportunities to streamline each step of the process with software, and then evaluate the partner programs for each of those software solutions.This will help you create a very predictable scope of work, so you can give clear pricing to your clients, as well as a clear process, plus a commitment to getting a solution to them in a timely manner! Want to see more of Alex? Follow him @…Twitter @Right2RevenueLinkedInPartnered 2020 Podcastpartnerprograms.io/resources-for-agencies/For more information on all the partner programmes mentioned in the podcast, make your way here…

About Marcus: A recognized instructor and speaker at LinkedIn, Marcus Murphy cares deeply about the flourishing of fellow sales experts and entrepreneurs.Currently, he’s Head of Partnerships at DigitalMarketer.com, which arms its ‘insiders’ with strategic insights from industry experts, while also providing templates, tools and swipe files to help you become a better marketer.Marcus previously worked for Yelp in San Francisco, going from start-up to multi-billion dollar giant. He’s also honed his expertise at Infusionsoft as Global Partner Development Manager. There, he developed and broadened new international markets through strategic partnerships.When not at work, he’s either spending quality time with wife, Gina, and his daughters – or he’s working out!So, Why LinkedIn…? What makes LinkedIn such a unique opportunity right now? The answer to that is – basically – there are 675 million people on the platform.Additionally, organic reach across other social platforms is essentially dead, while LinkedIn still excels at this. Why? Because its algorithm loves engagement.Start having conversations on there to up your engagement, and the platform will show these posts to more people. This, in turn, motivates yet more users to get involved in your conversation.If your content is not starting the right conversations with potential connections, then it’s just noise, a distraction, a therefore a waste of your time.In short… content is King. Optimize your LinkedIn Profile to Start ConversationsThe three initial motivators for people to connect with you and your brand on LinkedIn are: your profile picture, your header image, and your byline/title. So, make them count.You have a unique opportunity in your profile photo right away. If possible, invest $50 in the headshot. Do it 60% of the frame against a clean background.More importantly, Marcus says…“Make sure you’re not Catfishing people with your 1989 headshot… It’s tough to have integrity built and trust built into that.”If potential connections see your photo and what you have positioned yourself as – plus, if you ask a question in your ‘Summary‘ – then there’s your conversation starter.Always remember…Everything on your profile should be driven to start conversationsGet a good professional headshot that takes up 60% of the frameOptimize your headline to start a conversation – and be specificUse your Summary to hook the visitor; sell your story, share what you’re about / what your mission isPut a call to action in your Summary, invite people to join your journey If you do those things, then you’re better prepared to be part of the massive growth that’s happening on LinkedIn right now. Personal LinkedIn Profile and Brand Page RelationshipChances are, if you’re an agency owner on LinkedIn, you have both a personal profile and a business page. Now, how can you actually leverage and create momentum by using both? As Marcus says…“You gotta have a business page, you have to have a showcase page, and you have to have a website as a business – because everybody wants to see that you are who you say you are. They want to have those integrity pieces and something to anchor to.”Below is a strategy behind utilizing those assets together.Use your business page as the anchorThe business page is designed to inform what your business is aboutPost content and updates, but don’t expect it to drive organic growthPay to boost content that is doing well organicallyYour personal page will drive the growth of your business pageYour personal page should be used to generate ‘reach’, while your business page will provide conversion (i.e. website visits) and build buyer confidence.Optimizing Content for Organic Reach on LinkedInLet’s talk core strategies to consider when trying to optimize the content you’re posting on LinkedIn to obtain organic reach / drive results.Every piece of content Marcus generates is put through the lens of who Digital Marketer is as an organization. You need to create a ‘Character Diamond’ highlighting what your agency excels at, and then what balances that. Or, to put it another way…“No one would like Superman if there was no Kryptonite and he wasn’t a nerd – because none of us can fly, and we’d think he’s an asshole – ‘Oh, he’s flying again, well, screw that guy!’ We are marketing savants at Digital Marketer, but we are also highly irreverent and that’s a good balance; it helps people to go ‘Oh, these guys are really smart – but they’re human beings’.”In order to optimize your content for organic reach on LinkedIn, and therefore boost your ‘connections’ above 500 and beyond…Be authentic with your content; don’t be too staunch on LinkedInBuild a Character Diamond for yourself and your personal brandAsk yourself how your content can start conversations…Comments trump ‘likes’, and are heavily weighed in organic reachResponding to comments is tremendously importantConsistency and quality content is keyEngage and comment on posts written by people who have a big followingAgain, it’s advantageous to have more (and more) people engage with, and comment on, the post as it takes it so much further. Specific LinkedIn Tips for the Agency OwnerSo, you’re running an agency, you’ve got a small team, and looking at LinkedIn as the next channel you want to double down on. What’s the execution plan?Have a client profile. Who’s your ideal? Ask yourself where they live, what do they care about?Ensure clarity about who your audience is and what kind of content they would get value fromTry decipher/preempt the issues that ‘your people’ are trying to solve, then go create content to resolve said issuesNail your strategy for LinkedIn, and then productize that strategy for your clients – do it for themAs an agency owner, you should be exceptional at this so you can advise your clientsBy way of summary; it’s great to be professional on LinkedIn, but also bring it down to a human level.Take a “buyer first” approach and simply try to be helpful; the million dollar question for a potential client is usually something simple like “What can I help you with right now?”Lastly, don’t be afraid to connect them to someone who may be a better fit! Want to see more of Marcus? Follow him @…LinkedInTwitterdigitalmarketer.com/Did you learn anything new from this episode? If so, let us know in the comments below – we value your feedback! Our next instalment of #APP, on May 27th, will see us chat with Alex Glenn. To view our previous blog with Chris Badget, make your way here… Agency Profitability Tool KitIf you’re looking for more resources to help you improve your agency’s profitability, then check out the Agency Profitability Tool Kit – it’s full of the same templates and checklists we’ve used with consulting clients to help them improve their profitability by over 100% in under 60 days.

By way of background; LifterLMS encompasses the needs of modern membership course creators, allowing you to create an integrated membership site.Chances are, you have a productized service option lurking within your current agency resources; this could be launched quickly, thus opening up a new, easier revenue source.About Chris:A natural and authentic teacher, Chris uses his innate ability to hone every business he’s started or mentored. Creating a Learning Management System for WordPress, he helps online course creators launch, and scale. The LifterLMS community includes agencies who build learning management systems, membership sites, and courses for clients.When he’s not working in his cabin, or homeschooling his kids, you can find Chris on his organic farm spending time in nature, and wowing his family with magic tricks.Points of Interest...Maintaining cash-flow to fund products 3:35Sustaining your product over time 6:34Deciding when to start productizing services 10:04Measuring the impact 11:38Tips for agencies transitioning to productized services 12:07 Maintaining Cash-flow to Fund Products Once you’ve built out your SaaS product, complete with making the often necessary concessions on profit, there are other ways to maintain cash flow.For example, Chris has a knack at talent scouting; investing in someone who may be less experienced, but has the potential to become a leader if given the opportunity to grow while making mistakes. This is the foundation of an economical team engine.Additional ways to maintain cash-flow as discussed by Chris include…Move up-market, ensuring good payment termsGet used to pre-selling and receiving cash upfrontLive below your means where possible, ensuring you survive any dips Sustaining Your ProductIt’s one thing transitioning from an agency to a software company, but – once there – how can you (frankly) survive that transition and ease some of the cash-flow constraints?In short, it’s worth reminding yourself (often) that moving to productizing services is a “process not an event”. As it happens, this is a mantra Chris uses frequently…“I say that about a lot of different things, but transitioning from an agency to a software company was definitely a multi-year process, not an event – like, it happened on Tuesday on this date…”Therefore, it’s necessary to get good at scoping projects and forecasting cash-flow.Based on his experience in delivering high-end, custom web dev solutions for membership sites, Chris also challenged himself to create and productize, while “using mostly our tool, plus some templated sites, with limited customization”, that still delivered ALL the value and a medium price point. Deciding When to Start Productizing ServicesGiven price points vary across the board, your productized service is likely going to be the customer. Bear in mind, the ideal customer or client is going to have different attributes than your custom high-end work.Five years ago, Chris’s process included some of the below…Firstly, he considered how to improve upon scope control, plus drive-up marginsThen, he experimented for a yearHe learned that clients for productized services are going to be very different to high-end clients, with “productized services, sort of a halfway point between agency and product”He also referenced the work of Brian Castle (generally considered a leader in terms of creating productized services out of an agency) and Mandi Ellefson, the mind behind the Hands-Off CEO programme Measuring The ImpactRealizing he was a product person and packaging services that way made sense, it aided a shift in thinking from services to the product – on the way to SaaS.“When you really get clear on productized service offerings, you don’t have to put your best people on it.”Indeed, productized services don’t tend to require a number of high-talent staff. You may need their help to develop the templates, processes and to brainstorm, but in a standard operating procedures way of implementation, resulting in value for the client that feels customized and bespoke.Additionally, Chris was able to price on value and create great margins, plus he realised productized services brought far less stress.Regarding the resulting data and reporting, plus profitability, gross margin, and PR from the product; there was a lot of iteration to get to Product/Market fit. Oh, and margins flipped from 20% to 80%… Result. Tips for Transitioning to Productized ServicesSo, if you’re reading this at home – with a few ideas ruminating and therefore “product curious” – here are some points to consider if you’re pondering a similar move.Do a deep dive into your soulGet better at running a profitable agency so you can afford to invest in the productFigure out how you’re going to bridge that gapBe open to challenging your assumptions about what the product is, versus what it needs to beThat’s the key to unlocking value in a really good offer; don’t get too attached to your assumptions, instead help your clients and your customers uncover their own cause. Want to see more of Chris? Follow him online @LifterLMS.comChris’s LinkedInChris’s FacebookChris’s Twitter

In Episode 31, Jennifer and Marcel address three potential time traps: superfluous meetings, email distraction, and issues around functional silos.Buckle up as we do a deep dive on making communication more efficient; how to map processes so they work optimally; plus how to implement them so they become part of your agency’s long-term process.About Jennifer Kikkert:Jennifer  is a seasoned process facilitator and energizing public speaker, with 15 years of experience in process improvement and optimization, culture change, and operational excellence.Having spent 12 years working in the public sector, and then transitioning to the private sector, Jen has a wealth of experience in knowledge and service industries – where processes are hard to visualise. Hence the birth of her company Visualiiz Management Consulting Inc, which helps organizations ‘see’ opportunities for improvement that often go unnoticed. Points of interest…Below are some notable time stamps you can fast track to. There’s more information in our blog notes beneath the video.Principle of time efficient meetings 10:46Defining SLA around communication 15:22Utilizing your least productive time 22:16Cross function process mapping 24:27Common mistakes made when writing processes 28:08Implementing process mapping within your business 37:38  Principles of Time Efficient MeetingsOver the last decade, Jennifer has noticed a similar pattern emerging across the knowledge, services, manufacturing industries she’s worked with… inefficient meetings.By way of example; Harvard Business Review recently revealed that – in the last 10 years – meetings have increased by 65%. In short, some people favour talking over doing.To this point, Jennifer gets her clients to visualise the following scenario: “What if you had to run your meeting like the NBA or the NFL in a 62nd time out? What if you only had 60 seconds to get your point across, to have everyone discuss the issue, to come up with a solution, and have everyone to know exactly what they need to do, and then go back to work… Would you be able to do it?”So, what is the checklist to ensure more time efficient meetings?Do not run a meeting without an agendaMeetings should only be held to answer questions, not define questionsUpdate meetings should be omittedAsk meeting attendees not to bring phones; firstly, they won’t be distracted by their devices, secondly, they will be more inclined wrap a meeting efficiently to return to their phones!Use 5-10 minute (virtual) huddles at the start and/or end of each day, this can eliminate the need for a lot of additional meetings We don’t need everyone to sit for two hours and have everyone “go around the room.” It’s not a good use of people’s time. Time is our number one resource. Defining SLA Around CommunicationDuring our chat, Jennifer mentions that the “majority of workers check their email 77 times a day” and “can spend up to two-and-a-half hours just reading and sorting through email.” Sadly, the likelihood of this time adding any value to the client’s end product is limited.People are literally drowning in their inbox, however, there are proven strategies to help. The most notable one is simply “turn off all notifications.” Those who constantly succumb to the pinging and buzzing claim they’re “multitasking”. One could argue they’re not doing anything very efficiently because of continuous distraction.Every interruption leads to a loss of production, with it taking “seven-to-15-minutes to get back to where you were.” By disabling notifications, you control when you see your email, not the other way around.If possible, give yourself set times to check mail, ideally three times a day. For example, Jennifer tends to her inbox at 8:30am in the morning, then 11:45am, and lastly 4pm before the usual COB. You can give anyone emailing you a heads up by stating in your signature that your inbox is checked at these specific times. That way, you’re setting expectations. Within your organization, have an SLA around communication:Let those in the channel know when to expect a responseDefine what is an acceptable response time; within 12, 24, 48 hours?Have an escalation process in place if something is importantTime is precious, so people shouldn’t feel obligated to be at the behest of every communication channel fighting for our attention. Utilizing Your Least Productive TimeIn his book The Scientific Secrets of Perfect Timing, author Dan Pink states the two most unproductive hours of your entire day occur between 2pm and 4pm.Research shows that productivity, mental alertness and judgement lags at this time, so important work between those hours should be avoided. If you have the luxury of choice, perhaps use those hours to catch up on those emails! Cross Function Process MappingMost organizations evolve over time. Due to vertical silos, all of our deadlines and priorities are also vertical. However, work generally flows horizontally.This can potentially lead to the following issues:Duplication/reworkingMiscommunicationIncreased errorsWasted time/energyWays of tackling functional silos include simply getting representatives from each department – working across said horizontal process – together to visually map the process. It should chronicle the process, from request for service to service delivered, for all to see.Only then can everyone see where the issues are. Common Mistakes When Writing ProcessesOne of the biggest mistakes made by organizations is failing to physically map their process out, instead going by “what’s in their head.” While it’s easier for manufacturers to deal with potential issues on an assembly line situation, the same can’t be said for service and knowledge industries.Assumptions will be made unless the process is visually mapped with the people who actually do the work. Only then can the root of an issue be thoroughly investigated.I see this a lot in the creative space; people rejecting the idea that there’s even a process behind what they do under the veil of it being too creative…. there’s still a set of steps requiring accomplishment, or at least a set of outcomes that need to be met in order to get a product to the client.The more we embrace that, then the more we can start to understand our specific process to being more efficient. Implementing Process Mapping Within your BusinessFirstly, you don’t need to improve on your process if it’s not an issue. If it’s not a critical thing that needs immediate attention, then mapping all of your processes just for the sake of mapping it is in itself inefficient and unproductive. Focus on what’s going to make an impact.Secondly, directly involve the people undertaking the work. When people are given the autonomy to say how they think work should be done – in the most efficient and productive way for the customer – they’ll own it as they helped create it.Get the team involved in measuring the results afterwards. Don’t just set it and forget it. Thirdly, daily management is key. Not the extensive, overbearing performance management type thing, more a daily check in that is visual. Have quick (virtual) huddles to discuss your project in terms of:What got in the way of it not working?What was the impact?Should any process amendments be made at that time?Make sure you have a process leader, and monitor/measure the results and make sure you capture modifications. Have a management cadence to harden the process after you launch it.Remember, we’re not performance managing the people involved; rather the process involved. Want to see more from Jennifer? Follow her online via…Visualiiz.cajen@vizualiiz.comJennifer’s LinkedIn Did you learn anything new from this episode? If so, let us know in the comments below – we value your feedback! Our next instalment of the Agency Profit Podcast, on April 29th, will see us chat with Chris Badgett, CEO at LifterLMS. To see our previous blog, make your way here…Agency Profitability Tool KitIf you’re looking for more resources to help you improve your agency’s profitability, then check out the Agency Profitability Tool Kit – it’s full of the same templates and checklists we’ve used with consulting clients to help them improve their profitability by over 100% in under 60 days.

About Marcel:Marcel Petitpas is co-founder and CEO of Parakeeto. Indeed you do recognize him from The Agency Profit Podcast!In addition to being an agency profitability consultant – specializing in helping agencies get a handle on their gains – Marcel is also a renowned keynote/virtual speaker and podcaster. Time Stamps: points of interest• Intro     0:00• Behind The Agency Profit Podcast     3:35• Focusing on the numbers     6:37• Where should your focus be right now?     9:42• Implementing and utilizing changes    10:55• Identifying goals     13:27• Importance of both internal and billable time     16:17• Cost performance indexing     18:57• Increasing efficiency and profitability     22:15• Helpful tools!     25:00• Outro    30:30 Blog: Today’s episode of the Agency Profit Podcast is a bit different for you guys. Since we’re living in very uncertain times due to COVID-19, I decided to pause the usual podcast (on't worry; we've content in the can for the next few months!) and personally address how this outbreak impacts our lives – as well as all the agencies and businesses out there.  Whether you're an agency that had an office and had to send everybody home, or you were already a remote agency, this is probably impacting you and/or your clients. I want to discuss some of the things I've addressed with our clients in the midst of this COVID-19 crisis. There are three really particular opportunities that exist around this situation, especially if you're in a position where you’re having to make a lot of changes to the way that your team operates. First, I want to talk about how to increase your focus on numbers; the opportunity to implement new changes in your agency; and how to make your business more efficient. Behind The Agency Profit Podcast  Before we dive into the things, I want to share a few things: I am an agency profitability consultant, specializing in helping agencies essentially get a handle on their basic numbers.  Most of our income as a company has been from consulting revenue, public speaking, appearing on other people's podcasts and speaking in virtual events.  If you’re an avid listener to our bi-monthly APP, you probably know I always have a guest on the show to discuss how they've honed their business into a profitable agency and tackled potential pitfalls along the way. Focussing on the Numbers   If you've been a frequent listener of the Agency Profit Podcast, you know the topic of increasing number focus is a hot topic. The three key foundations of the economic model of an agency are capacity, utilization, and average billable rates.  • Capacity is defined as the amount of time your team could contribute towards doing billable work in any given time period. It’s determined by how many people you have access to on your team – from, freelancers or contractors – as well as how much of that time you expect them to work. This can quantify it in terms of dollars using an average billable rate. Essentially, if I know I've got 10,000 hours of billable time this year which I can sell, then that's good. You must invest time to earn revenue. It’s important to know what your capacity is and how much revenue you could potentially earn in a given time period.  • Utilization is how much time your agency actually uses for things that result in payment from clients. This is the true and straightforward definition of the term. We'll discuss how there are a couple of different definitions of utilization that get used in the industry, and how to best use those with your team to avoid complications. • Average bill rate is basically every hour that my team invests working on projects for the agency or their client/s. When you have a really good handle on capacity, utilization, and average bill rate, it's easy to start modeling things such as: What are our best clients or services?How much revenue could we potentially earn in a given time period?What kind of revenue are we looking to earn in the future? Always remember; as an agency, the moment you sell a project, you have to start earning the revenue as there's already a gap due to liability. Interestingly, a lot of agency owners forget about this principle.  Then, there's the cost of earning revenue; where you have to invest time and resources to earn said revenue. As much as possible, you must shorten that latency of when you close the revenue (when contract or bookings happened), and when you actually earn the revenue. You want to decrease that cost as much as possible. This should be the objective of your operational model when it comes to delivery. Gross profit or gross margin, for most people, is going to be a bit more challenging to follow accurately. Depending on how your systems are set up, generally you're going to want to do that via accounting software, or by spreadsheets. However, undertaking this exactly is usually more expensive than tracking the average bill rate, which is a super simple number to pinpoint.  Where Should Your Focus be Right Now?Well, your focus really should be on utilization. This is probably the biggest and most important number, especially in this current economic downturn. Whether you're losing clients or experiencing a massive influx of clients due to the pandemic, then your focus should be actually on your average bill rate and your capacity. Another important note for agency owners; ensure you actually have enough people to service the work that's coming in. Make sure you're not causing your business indigestion: losing out on potential cash flow and profit by taking on projects you're not going to be able to earn efficiently from. That's where you, as an agency owner, should be focused on your average below rate and your capacity, because your utilization is going to be high – or low – depending on your company’s working schedule, whether it's busy or not. However, it’s very important to keep your rate of utilization as high as possible. This means taking on as much work possible and ensuring you adjust capacity to keep your utilization high. Unfortunately, this could mean potential layoffs. You may need to cut back on the hours for contractors you've been working with for a while. Implementing and Utilizing ChangesImplementing and utilizing necessary changes, while obviously tough, can bring a sense of opportunity and excitement. In fact, a mentor of mine – Dan – has a great exercise he made us do in his coaching program; he basically sits us down and says, “I want you to write down everybody that's on your team. Now, imagine you have a blank slate and you're hiring everybody back.” If you're not excited to hire somebody back on the list, then you need to think really long and hard about whether they should still be on the team. Who, in the back of your mind, do you know isn't the right fit...This is an opportunity to potentially save the people you see yourself working with while providing those – who may not be such a good fit – the opportunity to find somewhere better suited for them. In essence, that's really the focus if you're in the situation of utilization. Now, I want to address the pure definition of utilization and how much of my team’s time is being used working on clients. The reason for its hard definition is because of the context of how we're using it on the operational side. Therefore, it's really useful to know:How much of our available time is being used to serve clients?What does that number look like on average?What has that number been previously? We can use this data to assess whether your agency is ready to have a new and improved operational process set up! Through this assessment, you can also estimate your maximum utilization, which must be around 80% or 85%. We require our team to take a certain amount of time off, to sit in certain internal meetings, work on certain internal projects, and so on. However, I observe a lot of agencies inflating utilization to make their team feel good.  Personally speaking, we need to take a step back to consider utilization and the context of how we're sharing it with our team. Identifying GoalsTime tracking compliance is an excellent tool for assessing or adjusting utilizations. It's perfectly fine to be holding your team accountable. In fact, it's encouraged for time tracking. Compliance shows agency owners the time you're investing through the week and where it's going. All of your employees must be honest about that. Hold people to a billable utilization goal; if we do that without also holding them to project profitability or average billable rate goal, it can become a bad habit. Your team may start logging extra billable hours against unnecessary projects just to hit a billable utilization goal. It's also going to distort your time tracking data, making it seem like it takes a lot longer to earn revenue than it actually does. It's important to protect the quality and reliability of our data. Whether you're transitioning your business model to a new one, or if you're starting to expose more numbers to your team, I wouldn't encourage you to hold people accountable for a billable utilization goal rate without having full transparency about project profitability – or, at the very least, average billable rate.  The reason being, at least those two things will counterbalance themselves. However, if you simply say, “Hey, I need you to hit 65% billable utilization at the end of the week.” 99% of the time, if they're not able to hit that goal, it's not their fault. It's yours. As an agency owner, you are responsible for giving your employees enough work to do and provide enough clarity.  A good example is when your team is supposed to work for 40 hours a week. You must instruct them to track those 40 hours a week, even if two of those are vacation days. It is also very helpful to build transparency amongst your team. Ask them to leave notes in the time tracking system so that you have a good, clean, reliable time tracking data. That is one of the most valuable resources for your agency as it relates to your visibility as a management team. In order to make it more profitable. you're going to start holding your team accountable, which translates to increased visibility.  Importance of Both Internal and Billable Time     The importance of internal time and billable time stems from questions such as:Where did your time go? In order for you to make informed decisions about how to reprioritize.Why did this go well?What didn't go well, and why? Agency owners can ensure people are aligned with what their priorities are as a business, and have the necessary data to back it up. If you're trying to get your team onto utilization, do not hold them exclusively to an arbitrary Billable Utilization Goal. Once you have a clean time tracking data, first,  you can use it to get an understanding of where your team's time is going. Based on that information, you can have conversations with your team leaders or your project managers. You can really glean an understanding of what internal projects are important to your agency at any given moment. It's important to use your clean and reliable time tracking data to indicate the risk of a potential project. This helps you and your management team understand where best to invest time and energy. In a remote environment, one of the biggest keys to success is being very intentional about conversations because you can't just wheel your chair down to somebody's office and have a quick chat, or just call an impromptu meeting. You're now dealing with other people's calendars and they're moving around. You need to have an agenda, and you need to schedule it. Intent becomes very important around where you focus on energy as a manager or owner. Cost Performance Indexing    You take a piece of work, and the amount of time you're expecting it will take. Then, when you compare that to the amount of time that's been invested thus far, you then give that project 8% of the complete number. As an agency owner, you might ask whoever's leading the project to report on progress or roadblocks.  Let's say you had 400 hours tracked, and you were expecting 800 hours to get the project done; that gets you to 50% of the project. Then, it's like, okay: do we feel we're ahead or behind at this 50% benchmark? They might report that said project may be a little bit behind, currently at 45%.  In this instance, what we would essentially do is divide the total amount of time we're expecting the project to take by the delta between the amount of time you used and the percentage completed. That gives us a projection of how many hours we think it's actually gonna take to get a certain project done.  In such a case, it's going to be about a 5% increase. Then we can look at what that does to our average billable rate. We can do this for all of our projects very quickly. This helps us get informed as a management team on where we should focus and who needs our help, plus where we might need to make some investments and catch fires before they start burning too hot.  Increasing Efficiency and ProfitabilityIn a time like this, it's beneficial for us agency owners, and project leaders of organizations, to get our team involved in helping us become more efficient. This means having regularly scheduled cadences to review the profitability of projects and our project management process. Since you’re already implementing new tools and procedures, this is an opportunity for you to ask your team:What's working?What's not working?Where can we improve? Urge them to provide feedback. Their input provides an opportunity to implement more efficient practices.  If we don't do a good job of scoping initially, the protection of project profitability can become tricky. It can be difficult to make sure we are planning our resources well – that's how we own business situations where our team is working overtime. For example, if I’m noticing that all of our current website projects are going over budget, or have the potential to go over budget, we can surface that on our next team meeting. When reviewing project profitability, we ask ourselves: Why do we think this might be happening?Is it that we didn't do a great job of scoping from the offset?Did something unexpected arise while doing this project?Are we having trouble handing things off from one department to another?Are we aware of potential challenges? From that conversation, a lot of feedback can surface and will help you understand what your company needs to do to make a certain project more efficient, more profitable, more streamlined, and easier for our team to undertake. As your team is already primed for things being in flux, they're going to be more receptive to changes because that's what they're expecting. This is an opportunity to change employee habits, and I believe getting them involved in the conversation – and therefore bringing ideas to the table – you're really just facilitating and managing who is going to take the lead going forward. It's important to build a foundation for your numbers and I highly encourage you to get a time tracking tool in place – if you don't already have one. If you do have one in place, the best way for us to have visibility into how well the business is running is for everyone to be proficient at tracking their time.  Then, use that information to decipher what's going well in terms of projects; where people’s time is going; and use that data to inform us how we can improve as a business, making our processes more efficient. Helpful Tools We Use  We at Parakeeto have been a remote-first company since day zero. Our team is scattered right now between, Edmonton, Alberta, Monkton Canada, and Harlem, New York. We also have people in the Philippines, Ireland, as well as South Africa. In short, the team is all over the place! We coordinate across multiple time zones, so there are few important tools enabling us to function productively in this way. The first is Zoom. I use Zoom every single day – for many, many hours – and I think they're doing a lot right now to make Zoom more accessible to teams that haven't used it before. Video conferencing is an important part and plays a major role in communicating with my team.  We also use Acuity Scheduling, which is how I do all of my external scheduling. You might find yourself scheduling a lot of meetings right now, and some people on the team are also using X.AI – a virtual assistant AI bot, which works incredibly well. So, if you're looking for better solutions for scheduling meetings, within your team or with clients, definitely check those out. For documentation and knowledge-base tools, we're using Notion, which I'm a very big fan of. For collaboration and running meetings, especially our solution design meetings that we do for product management, and for our executive brainstorming and an offsite type of work we use Miro. We use it feverishly – Lee and I highly recommend it. We use Google Drive, and use Harvest for time tracking. We use QuickBooks online extensively to see where our expenses are going, plus track the profitability of our clients and projects. And of course, we use Parakeeto!  Want to See More of Marcel? Follow him online via…ParakeetoAgency Profit PodcastMarcel’s LinkedInParakeeto’s LinkedInParakeeto’s TwitterAgency Profitability Tool KitIf you're looking for more resources to help you improve your agency's profitability, then check out the Agency Profitability Tool Kit - it's full of the same templates and checklists we've used with consulting clients to help them improve their profitability by over 100% in under 60 days. 

About Keith:Keith Scandone is co-founder and CEO of O3 World, a 15-year-old Digital Product Agency. Additionally, he’s co-founder of O3 Ventures – a spin-off of O3 World dedicated to investing in, and partnering with, existing Digital Product companies, aiding them to accelerate their businesses.As well as being a busy go-getter, Keith is co-founder of the Forge Conference, a 300 person UX and Design seminar. If that wasn’t enough, he’s co-founder of 1682; an invite-only Business of Innovation Conference, which they hosted this year. Wait, there’s more!Last, but certainly not least, he co-founded the Philadelphia chapter of the Awesome Foundation, and has sat on countless boards and committees, most notably the Philadelphia Global Identity Project, helping Philadelphia's global position.Time Stamps: points of interest• Intro   0:00• Keith’s unorthodox beginnings   2:43• O3 World’s business culture and their services   7:00• Identifying and overcoming the agency ‘growing pains’   12:00• Importance of managing cash-flow  16:20• Knowing your strengths   19:27• Understanding the competition   24:05• Decision making plus executing strategic changes   30:01• Scaling your agency    35:12• Outro    47:22Blog:Keith Scandone is proof you don’t need a degree to start a string of businesses. A successful partner of O3 World and co-founder of 1682, Keith shares his humble start; the many challenges the ’08 recession brought the company; and how they overcame it. Most importantly, he pinpoints how to understand your company’s strong points while building a niche market.Before Keith found business success, acting was his passion. He was cast in a play while attending Loyola University, Maryland, and was swiftly bitten by ‘the bug', resulting in a move to Los Angeles. However, after seven years in showbiz, Keith realized he preferred working behind the scenes. Packing his bags once more, he headed to Philadelphia, whereupon he was hired as a marketing consultant for an online entertainment city guide. His soon-to-be business partners were freelancing at the same company…While their employers weren’t keen on working for bigger clients, Keith and Co knew they could do more. Spotting a gap in the market regarding client expansion, he and his partners set up O3 World 15 years ago, and haven’t looked back.Being involved in a tech-related industry means having to adapt to a continuously changing environment – a challenge for any tech agency owner. Humbled by his company’s tenacity, Keith reflects on how some of the businesses he used to aspire to no longer exist.O3 World’s Business Culture and ServicesO3 World currently has in the region of 50 full-time in-house employees, with Keith saying the company’s culture and collaborative nature plays a massive role in producing quality work. With innovation at its core, O3 World adapts to new technological changes and career opportunities.Constantly pushes boundaries with regards to new business and opportunities, Keith and his team ensure they’re astride their game when providing their range of services, including…• Brand Communications• Identity Development• API Development• Custom Integration• Account Strategy• Digital Content StrategyA go-getting and detail-oriented office culture is important, with Keith saying: “We don’t really like working project to project. We want to have more impact and influence on the work that we do…”It’s well documented that acquiring new clients tends to be more expensive than retaining existing ones (unless, of course, you’ve been letting 'scope creep' kill your margins that entire time).Another important consideration is that a mix of long-term or recurring income is critical to bolstering an agency’s valuation, and creating a strong foundation for cash-flow long-term. So, how are you going to extend the relationship with a new client once the project is over? Great question! Keith says you should reach out to your current client/s to consult with them on their future needs.With this in mind, O3 World honed an account strategy layer, selling on to clients, which turned out to be a successful venture.Identifying and Overcoming ‘Growing Pains’Unfortunately, there are no shortcuts in life. I can’t think of an agency that hasn’t encountered challenges. In fact, facing difficulties in your business is normal – the result actually depends on how you handle these issues. In Keith’s case, his biggest challenge was going through a recession.He recalls 2008 and 2009 as one of the toughest periods in his career  – when he almost went out of business. Like many business owners at the time, he remembers sitting down with his partners, looking at each other, and having no idea how they were going to make payroll.It’s tough enough building a business, but it’s obviously more challenging during a global recession. Not only will there be difficulty in finding new investors or clients, but it’s also tough risking whatever money you may have in your business.Luckily, while one of Keith’s partners was looking into their bank account, an unexpected deposit of $5,000.00 landed. This turned out to be a referral fee they had no idea was coming. According to Keith, it was the “closest we’ve ever come to being out of business.”When building a business, people usually play to their strengths – whether they’re a great writer, a great designer, or a great developer – while finding the right talent they’re comfortable working with. And that’s just for starters.As Keith puts it: “Most people don’t realize that running a business is a lot of the things you don’t like doing.”There are lots of operational pieces, the most obvious being finance. Managing finances appropriately – in conjunction with legal documents, and staff benefits – is paramount. Plus, you need to understand the 'scope creep' every agency deals with.Keith adds: “The only way you get better at managing your agency is by getting burned by it a bunch of times.”Another beneficial point; it’s worth investing time, energy, and money ensuring the right people are in place for non-billable roles – it's something too many agencies procrastinate on. One of the more imperative moves is hiring a project manager to help you keep track of your business progress.Importance of Managing Cash-flowHaving a successful agency means taking smart risks while managing cash flow. Being critical and objective when working with clients is necessary to fulfill a job successfully. Therefore, try putting realistic budgets on certain projects, while maintaining it in line with a client’s usual work process.Additionally, manage your resources appropriately and strategize ahead to have solutions available if/when the project experiences setbacks. Fluctuation in business is normal, but it’s best to try avoiding potential layoffs by having enough runway!It’s important to hire someone who has a background in finance and operations, so you can properly elaborate on various strategies that will work within your agency.  Again, an agency owners’ goal is not solely to make money and pay money; there are a lot of metrics associated with knowing when you should hire people, when you may have to lay off people.Knowing Your Strengths…Being completely honest with yourself when recognizing your strengths or weaknesses it key, says Keith. All too often, businesses avoid being honest with clients as they fear losing business, that’s not the case, however. Learn how to communicate and define your remit, as simply saying ‘YES’ to everything may result in unrealistic client expectations. Keith wants to dig in on that point specifically, as he’s currently going through this with an agency: “I’m on our next call and planning to sit the team down and give them the feedback; ‘You guys are doing an amazing job over here. But, you really shouldn’t be doing these other two things, cause I’ve had to rewrite the copy you wrote and I had to find a designer to fix the designs that you did. But, you’re doing really good on this stuff over here. I would still pay you the same amount of money if you didn’t do this other stuff’."From an operational perspective, this is not a good look for your brand... You say 'yes', you can do the job and get it done, but you may not have a process for it and, all of a sudden, the scope on that goes out of whack.You may not make a profit on this particular project because it ties up your team, taking their time away from working on other things that actually make more money or gross margin.Understanding The CompetitionFinding the right balance in scoping or scaling your agency can be tedious. Did you know that being open to working with other agencies will help you find that balance?Keith says they partner with many complimentary agencies, so they can work on things they’re not as experienced in. He and his team have no problem being brought in to work with different agencies as long as there’s a level of respect and a clear understanding of who’s doing what developmentally.Remarking on this, Keith says that “It’s very, very helpful for them and helpful for us, and vice versa. There’s also an aspect of not being greedy. Sometimes we’re okay coming in and not having to be the only agency. As long as we’re respectful of one another.”He adds, “In general, it’s important to be friendly with a lot of agency owners in town and actually outside of town, and be open with one another.”Keith has his own 'leadership philosophy' but admits he’s still inexperienced – in life and business. Therefore, meeting with other industry minds inspires him, and – by extension – builds the company's existing skillset and burgeoning ideas.Having spoken to a lot of people from the same field, it’s great to cultivate conversations and connections, so you can navigate your niche. Through this, you will be able to further understand your strength and use it to your advantage.As time goes by, your company will evolve as will your competitors. Therefore, it’s very important to adapt to new technologies and advances – while still being open to 'the competition.'Decision Making, Plus Executing Strategic ChangesAn agency owner must implement strategic changes or decision making on an ongoing basis. On this point, Keith says:“I don’t think there should just be like the end of the year thing that you focus on. It should be ongoing… Everybody should be curious. They should be curious about how they can do things better, things differently, how they could make their clients happier, and how they can make each other happier.”Before you start implementing changes it is important that business or agency owners are mindful with regards to the following... “Everybody should be curious. They should be curious about how they can do things better, how they can do things differently, how they could make their clients happier, and how they can make each other happier.”Before you start implementing changes it is important that business or agency owners are mindful with regards to:Client engagement: communication is key; ask if they’re satisfied with the end-product of your collaboration?Revenue: were you able to bring in additional revenue? Do I need to hire a person who has a great background in finance?Employee satisfaction: do your employees still enjoy working with you and your company?Employee and company performance: did your company deliver on your client’s expectations? Do you need to hire additional experts in certain fields? Do you need to acquire new technology – such as software, tools, or machinery? Do your employees require additional training?Answering these questions will help in deciding the next step your agency must take.A combination of teamwork, keeping eyes and ears on the ground, and being aware of what’s happening within your organization can contribute to radical change. Be mindful of what’s happening with your clients, and what’s happening across the industry.Keep your curiosity going! Want to See More of Keith? Follow him online via…O3 WorldO3 VenturesKeith’s LinkedInkeith@o3world.comAgency Profitability Tool KitIf you're looking for more resources to help you improve your agency's profitability, then check out the Agency Profitability Tool Kit - it's full of the same templates and checklists we've used with consulting clients to help them improve their profitability by over 100% in under 60 days. 

About Chip:Chip Griffin is dubbed as “The Agency Whisper” in the industry. He’s the host of the Agency Leadership Podcast and Chats with Chip and helps PR and marketing agencies reach their goals and increase their efficiency. Chip became the CEO of Townhall.com when he was in his early twenties. And since that time he has built and sold several companies, both in tech, and he started and sold several agencies and consultancies. Today he spends his time educating, coaching, consulting, and speaking to agency owners on how to run and scale their agencies. Want to see more of Chip? Follow him online:ChipGriffin.comChip’s LinkedInChip’s TwitterChip’s InstagramThe Agency Biz PodcastsResourcesThe Agency BizThe Agency Leadership AdvisorsChipGriffin.comChip’s LinkedInGuide to Agency Project BudgetingAgency Business CheckupThe Agency Biz PodcastsLink to project budgeting template Timestamps:Intro   0:00How did Chip go from Building and Selling Businesses to Coaching Businesses?   3:28How to Properly Scope Projects and Create your Budgets   6:04When Should an Agency Evaluate the Cost Aspect of a Project   8:35Scoping and creating accurate budgets inside your agency?   11:59Expenses that Agencies Must Watch Out For    13:57Contingency Reserves Based on People’s Risk    14:52How to Reduce the Amount of Scope Creep Once the Projects Gets Underway   24:08Gross Profit Margin Target for Agencies   25:11Core Principles to Remember in Managing Relationship with a Client   36:55Outro   44:21How to Scope Projects & Protect Profits with Chip Griffin - Episode 28The foundation of running a successful agency lies in charging more money to clients than it takes for us to deliver outcomes to them. Ideally, we’re consistently achieving 50-70% gross margins on projects, which sets us up to have reasonable overhead and continue to cash-flow our growth.Unfortunately, we’ve all found ourselves losing our shirts and in some cases even spending money to work with a client. Most often, the culprit is a combination of poor scoping and scope creep leading to a dumpster fire of a project that leaves us with lots of work to do and very little profit to show for it.For some of us, this still happens more often than we’d like to admit.That’s why I decided to invite my friend Chip Griffin onto the show to share his knowledge and experiences in scoping projects and protecting profits. He didn’t disappoint, as he broke down what he’s learned from years of running and scaling his own agencies to multiple exits, and helping clients do the same.How to Properly Scope Projects and Create Your BudgetsThere are a lot of factors that play in when properly scoping projects and creating budgets. It’s a complex process that often requires some analytical savvy.According to Chip “The agency community is filled with really creative people who are fantastic at client service, but a lot of them just don't have a lot of business experience.”It comes as no surprise that many of the agencies I speak to have a difficult time getting a handle on scoping, and spend most of their careers feeling like they’ve never found a reliable way to do it accurately.When it comes to getting a handle on estimate, Chip states that agency owners must create a project plan with their clients that will be beneficial for both parties. From billing clients based on an hourly rate, flat-rate pricing, or value-based pricing; there are a lot more factors that you, as an agency owner must take into consideration. So it becomes increasingly important to get really good at figuring out how much or how long will it take to deliver the project with our desired outcome to our clients while making sure to stay within the budget and submitting them on-time. This means tracking actuals against estimates over time to feed that information back to whatever supporting data/documents you might use to create estimates in the first place.With that being said is it important to answer these questions before signing a contract to a client:How long will this project take?Do I need to hire new people?How much will all these expenses cost?Have we done this kind of work before? How much uncertainty exists around what the client is asking of us?What’s our gut-feel on the client, and how demanding they might become?Do I need to travel to meet up with my clients or remote employees?Are we importing assets / materials from the client?Will I be able to deliver and accomplish my clients’ expectations?What type of billing method is most beneficial for my agency and the client?etc.Being thorough in the discovery process and really assessing the risk of a project is key in establishing the right level of contingency and padding in your estimation.Chip is also a big fan of doing paid discovery, giving you the ability to get compensated for the time it takes to properly assess your client’s needs. Project Budgeting for Accurate ProfitabilityIf you want an overall profitable business, you need to sit down and take note of all the expenses and other factors into consideration before pricing a project. This will drastically help in determining how much it will cost because as I’ve stated earlier it can’t just be about dollars and cents. It is more about coming up with the scope and if you’re putting together a budget that will help you think about the scope and what you’re going to deliver to your clients.According to Chip, he has seen a lot of agencies that start doing value-based pricing or they start doing flat-rate pricing and then since they do not have any use for timesheets when billing their clients they throw them away. Often, they also abandon the idea of actually assessing the client’s needs thoroughly in the sales process.For example, a client is willing to pay us $100,000 to build their website, and they have certain expectations, of course, like they want the website to look or function a certain way or they want the website to be up and running on this specific date.But, based on the client’s expectations and factor in the cost and time to deliver their expectations, will this project still be profitable for my business? Chip states that it’s important to dig deeper into what point their agency should start to evaluate the cost aspect of a project. At what point in that sales cycle should they start to have that conversation, and who should generally be involved in that conversation to make sure that the estimate is actually realistic, accurate, and transparent to all the stakeholders.When Should an Agency Evaluate the Cost Aspect of a Project?Chip advised that agency owners need to do a thorough cost evaluation of a project before giving the client a price. And based on his experience, a lot of agencies don't go about building a budget for their projects, and if they do, they do it after they've already submitted the proposal, the scope, and the price.And, when you've got the contract in place, but it turns out the fund is not sufficient to be able to run the project successfully can be a tad bit stressful to deal with. So you really need to have it in advance. “I'm not saying that you should take the budget and price solely based on it, instead the budget should be used to establish the minimum or maximum amount that you can charge for this project in order to be profitable.” he says“hat doesn't mean that you shouldn't charge more than that, because you also want to charge for the value that you're delivering. It's a very popular way to do agency pricing now, but you need to know what that bottom line is, that you just simply can't go below without.” It is extremely important that you involve the people who are going to manage the project in the budgeting process. This way, you will be sure that everyone understands the scope of a certain project and how they can be more efficient to be able to work on another project.It's also important to get those different ideas out on the table so that you can try to figure out what is a reasonable expectation for this particular piece of work or this particular process that this project needs to be successful. Creating Accurate Budgets Inside Your AgencyAccording to Chip Griffin, the first thing agency owners need to do is to start creating these budgets. They also need to make sure that they are closely monitoring and collaborating with their project managers to determine the factors that block their progress. And to create an accurate agency budget you must consider these factors:Cost of Labor, you’ll be surprised that agencies miscalculate the cost of labor. Quite frankly, labor is by far the largest expense for just about every agency out there. And estimating your agency’s labor time is challenging, and you need to consistently ask and get feedback to improve. Click here for our blog post on calculating Labor Cost-Per-Hour.Pass-Through, Production & Travel Costs, Of course, it’s also critical to factor in the more obvious costs to delivering a project. Things like contractors, equipment rental, material costs, ad spend, etc. One of the things that a lot of business owners forget to put in a budget is the travel costs related to client work, and particularly as more agencies are virtual and more people are having clients who are not just a car to drive away. Chip recalls a specific example: “I had a client who would pay me $75,000 annually with a condition to fly to Australia on a bi-monthly basis, but when I started digging in and it turned out that I was spending $15,00 to $20,000 a year on travels alone. And, all of a sudden, there’s  10% or so of the revenue being eaten up just by travel costs.”Make sure you’re thinking about all the costs of delivering outcomes to the client, and maintaining your relationship with them.Contingency Reserves Based on People’s RiskChip has seen a lot of agencies estimate with their rose colored glasses on. He says the first thing you need to do is create a budget without being wildly optimistic about how quickly you can get things done. It’s more important to be realistic, instead of conceptualizing an “ideal word scenario” where everything goes as planned.As we all know, they rarely do.Chip recommends having contingency factored into estimates based on the level of uncertainty around the work. Often, this will come down to how many times it’s been done in the past, and how consistent it was in scope. The objective should be to get estimates within 10% of reality over time. This is why having a cadence in place allows you to monitor how much time did it actually take to complete the project versus how long did you estimate the project is going to take and adjust estimating processes & documents accordingly.Another thing that you need to consider is building your agency’s culture and the rules on defining your initial scope of work. There's a wide range of agency approaches to this. And, in general, there's a lot of over-servicing that takes place. I personally believe in the importance of time tracking inside of an agency, because you will be able to get insights as to whether you are doing well or not, which can be challenging to estimate when you’re using a flat-rate or value-based pricing. And then that brings me to another point, which is the way that you structure your projects or deliverables or tasks within a time tracking software is important because it's like setting up your chart of accounts inside of your agency. Because, you need to track cost, not with a blended rate.Chip stated that “I know it's really popular in the agency world to charge clients a blended rate, and that's fine, but from a budgeting perspective, you need to make sure that you've got at least several bands. I'm not saying you need to go in and figure out each employee's individual costs and all that, but have at least three bands so that you can appropriately account for the different types of workers that you'll have on a project because it'll make a huge difference in your pricing and profitability.”If you want to make sure that it's not leaving money on the table. Make sure you do that piece of it.Core Principles to Remember in Managing Relationship with a ClientThe core principles that are really important when it comes to managing that relationship with your client:Having a backbone with a client that sometimes has a little too much power from an economic perspective in their business. Start by thinking about how you're structuring your client base and making sure what type of clients you've got. It's generally better to have a bunch of clients all in the same range than have small ones and big ones mixed together. Because that tends to create an imbalance.You need to be creating a culture in which the team is comfortable withdrawing the line with clients. Often, over-servicing occurs when the client asks a team member to do something directly, and they do it without ever running it up the chain of command for approval.Establish an organized and easy-to-follow way of time tracking.Use resource planning to make sure you’ve got the right people protected for the right amount of time to deliver expected outcomes to the client.Establish a clear process for communicating and approving changes in scope, and processing requests from clients for changes/additional work.The point of all of this is to learn how to create better systems in your business to become more efficient. To create processes that can scale, that can be repeatable, that can protect your margins, protect your team's time, and ultimately give you a business that is sustainable in the long term. And ultimately this all comes back to communication. It's ironic that in an industry where communication and collaboration is the key to success, communication tends to be the place where things break down. You need to have good communication amongst your team members and between your agency and the client. And the more of this communication that you have, the more accurate your budgets are going to be, the more accurate your scopes of work are going to be. The better your profitability is going to be.Agency Profitability Tool KitIf you're looking for more resources to help you improve your agency's profitability, then check out the Agency Profitability Tool Kit - it's full of the same templates and checklists we've used with consulting clients to help them improve their profitability by over 100% in under 60 days.

About Chris Hervocohon:Chris Hervochon is often referred to as the Michael Jordan of accounting. A graduate from Elon University with a degree in Accounting and minor in Finance. He is a Certified Public Accountant (CPA) in South Carolina and Pennsylvania, and also holds the Certified Valuation Analyst (CVA) certification. A Certified QuickBooks Online ProAdvisor, and have earned the Data Analytics Executive Certificate from the AICPA.In 2018, he was one of only 41 CPAs honored by the AICPA as a member of the Leadership Academy’s tenth graduating class. In 2019, I was named as one of CPA Practice Advisor's "40 Under 40" in the accounting profession.He started his firm called Better Way CPA, where he helps creative, digital marketing agencies, and service-based businesses with intelligent, actionable accounting.Follow Chris Online:WebsiteFacebookInstagramChris’ TwitterYouTube ChannelResources:From Freelancer to Agency Ebook WayfinderAbout PageMy YouTube ChannelTimestamps:Intro 0:00Who is Chris 01:00How Chris Started in the Service Business Industry 2:20What Makes Accounting Service Businesses Unique 4:48Why is it Important for Agencies to Have a Clean Accounting Data 8:58Common Mistakes Agencies Commit in Terms of Accounting 10:04Why Service Businesses Must Use Accrual Basis 13:53Revenue Recognition for Accrual Accounting 17:25Benefits of Cloud-Based Accounting 19:48Cash Reserves for Agency’s Survival 22:30The Right Corporate Entity for Your Business 28:10Biggest Problem for Service Agencies’ Chart of Accounts 30:35Freelancers Vs. Full-Time Employees 35:00Allocating Your Salaries 39:48Gross Profit Vs. Net Profit 41:50Maximizing Profit: Pricing and Operating Perspective 45:50Outro 50:00 Often, we base an agency’s success on its profitability. However, we tend to forget the financial aspect of things. And, why agencies need to understand the importance of accounting. And so there's just so many things that I want to talk to you about. And, I want you to ask yourselves why you chose to run or work on a service business.And according to Chris Hervechon:“Marketing agencies are a lot like accounting firms. How they operate. It’s a different service. Sure, it’s more creative, generally speaking. But they’re both service-based businesses.”What Makes Accounting for Service Businesses UniqueAccording to Chris Hervochon, there’s a lot of agency owners that do not realize that running a service business when it comes to accounting, which is very different than almost every other service business.And, its main difference happens above the margin. So your margin is your gross revenue minus all the variable costs that go into generating that gross revenue.If you think about a retail store that tends to have lower margins, your gross revenue is gonna be all the stuff that you sell. Let’s say you sold a television for $850, then that’s already your gross revenue. If it cost you $500 to buy the television, including taxes and licenses, then your gross profit is $350.On the other hand, service-based businesses tend to have higher margins. There is not much variable cost going into generating the revenue. It is solely based on human capital, on the amount of effort agency owners and their employees put into to generate profits.Why is it Important for Agencies to Have a Clean Accounting Data?The entire purpose of accounting is so that you can ask questions about your business and get accurate and reliable answers.According to Chris, you must ask yourselves these questions while also knowing how to answer them to see whether your business/es are properly tracked and documented:Is this project profitable?Is this service profitable?Is this niche profitable?What are the fixed expenses?Where can I cut costs to be more profitable?What's too expensive?What's not expensive enough?Am I spending enough or too much on my marketing?Through these questions, you will be able to know your agency’s trajectory and what to expect.Common Mistakes Agencies Commit in Terms of AccountingYou will be surprised at how agencies commit the same mistakes.Let's start with how often you sit down with your accountant. Agency owners are usually the creative type who is good at marketing and promotion. However, it is important that you, as an agency owner know to hire someone who has proven knowledge in accounting.Not having organized and systematic documentation of your expenses and revenue. Make sure that you keep track of the inflows and outflows of your money.They did not start using the accrual basis. From an accrual accounting perspective. I've got somebody who comes and goes. My clients come every week on a Monday, we hope, but they come every week nonetheless. That's a real base accounting. It's matching the activity with the expense of the revenue when it happened.Why Service Businesses Must Use Accrual BasisLooking at things on an accrual basis is certainly a change for a lot of people, especially small businesses. But it's something that you need to do. Because there's no way to forecast cash accurately. And, it will answer the questions:How is my business doing?How is it looking for next month?In a service-based business, accrual accounting is important because it's reflective of the business model. It's reflective of the way that value is earned and value is actually accrued over time. So if you run a service-based business, you should be doing your books and you're counting on an accrual basis so that you can get accurate insights into your business.Accrual-based accounting is more time-intensive. It does require more expertise and so to do it is more expensive. But there is a line where the business is big enough.Revenue Recognition for Accrual AccountingChris said that before anyone starts with what accounting method they’re going to use, you must start with what your contract stipulates. If the contract says that it's going to be based on specific deliverables, then you base your revenue recognition on those specific deliverables.If the contract says it's gonna be there's one deliverable and you're doing it over some time. If it were me, I would allocate it based on the amount of time it's been spent on that particular project. But, to get down to the real nitty-gritty. Look at the contract for the contract is going to dictate it and then go to some sort of another allocation method.Benefits of Cloud-Based AccountingChris states that as an agency owner, you need actual accounting software, you need applications that play well with that software, and most importantly your accounting software should be cloud-based instead not desktop based.The reason being is if you have an accountant who's halfway across the country, you could be looking at the same numbers in real-time while doing the same thingAnd, what you can effectively do with cloud-based accounting systems is offload the security to somebody who's probably a lot better at it than you are. You must protect your business information and there has been a lot of hackers targeting these hosted type platforms like QuickBooks.The third thing is that cloud-based accounting systems make it easier to plug-in other applications. Whether it’s a bill pay system or an expense tracking system or maybe it's just other marketing data that you can then combine with your financial data to make it leverage data.Non-financial data equals leverage data. When you can combine these two things, you can get greater insights out of it. That's near and dear to your heart as well.Cash Reserves for Agency’s SurvivalChris Hervochon recommends that agencies must set aside between two to six months’ worth of fixed expenses before investing in a new venture or offering new services. Fixed expenses are expenses that are going to exist in the business, whether or not you generate revenue for the whole month.Earlier we talked about margins, on how they’re a variable. Your revenue variable is the uncertainty of earning revenue for tomorrow. And the expenses to generate that revenue which are expenses that bring down to a margin. Because if you don't have the revenue, you're not going to have those expenses. So fixed expenses are all that inevitable expenses that come along with the operation of your business.Biggest Problem for Service Agencies’ Chart of AccountsThe chard of accounts is the foundation on which the insights that you get from your accounting data is built, or from which you get to the insights that you want to build. This is something that a lot of people don't think about a whole lot when they're setting up books for the first time or if they're hiring an accountant that doesn't know a lot about service businesses.Chris mentioned to try and answer the questions that they want to answer, they've got to sift through a ton of data and do a bunch of math. So when it comes to setting up your chart of accounts as a service business where some of the best practices we want to make sure we're keeping an eye on the inflows and outflows of our businesses.The biggest problem Chris generally sees is what we would refer to as a sprawling chart of accounts where you've got a separate account. When we say account, what we need is a bucket, a bucket where you would put activity. So in other words, it goes in a rent bucket and where a rent account and the chart of accounts is the total listing of all of the accounts that you have for your business.That said, the biggest mistake is a sprawling chart of accounts where you've got one account for every little transaction. So if you have accounts that you know, on a very regular basis have one transaction per month or one transaction per year, you've got way too many accounts.Charter accounts make it very difficult to manage. It makes it very difficult to do the accounting because now you're splitting hairs on how you're going to classify this transaction of that transaction.The two biggest things, according to Chris Hervochon are:You've got to be able to get to a good margin. And we talked about that a little bit earlier. The gross profit margin is everything variable. Revenue is variable, Revenue is variable and all the expenses that need to achieve that gross margin.You’ve got to break out your salaries and wages.And, make sure that your chart of accounts isn't enormous because it is going to be impossible to manage.Freelancers Vs. Full-Time EmployeesFreelancers, generally speaking, are going to go above the line because you're only going to bring them on for certain projects, certain clients, certain services, whatever it is. They're 100% variable because you've already generated some sort of revenue or you think that you're going to generate revenue because you have a signed contract. So there should be some sort of a contract labor line in your chart of accounts to get you to that gross profit number.Chris said that a lot of people are tied up with the idea of the relationship or the contractual relationship they have with an individual as it relates to “Are they an employee? Or are they a contractor?”There are four components that you must ask yourself to determine if they’re an employee or a contractor:Are they fixed or are they variable?Are they contractors or are they employees?Are you controlling when and where they do the work?Are you providing them with tools or software?This is an important point that you're making about the relationship that that person has with variability. If you have a person that isn't technically an employee of the company, but you pay them $2000 a month which is going to be more of a fixed cost.And, this is how you classify people between contractors and employees. If you control how, when and why they do their work and you provide training and you provide the equipment and the software and all of that stuff, they’re an employee. If they can do the work unsupervised, they're going to provide you a deliverable. You're not controlling where they work or when they work. Then they're a contractor.Most businesses want more contractors because contractors are cheaper. And the reason that they're cheaper is that you don't have to pay benefits. You don't have to pay employee-employer taxes. You've got to be careful because that's a really good way to get yourself in trouble.Allocating Your SalariesAccording to Chris, time tracking will help you accurately allocate salaries within your agency. You can either ask your freelancer or contractors to either track time or give an estimate on how much time they need to complete the project or how much will that certain project costs, whichever works.There's no data-based way to go and allocate it aside from using a time tracker. At the end of the day, it's cost accounting and then you could allocate anything based on any model that you come up with. But if it's gonna be a data-driven approach, if it's gonna be based on reality.Chris mentioned that you’ve got to make sure that when you're allocating those expenses that you're allocating the fully loaded expenses which include salaries, benefits, and taxes. The full cost of having that employee is what you want to allocate. You can't just allocate the salary.Gross Profit Vs. Net ProfitIt's important to define what is gross profit and what is net profit because I think a lot of agencies now are starting to look at gross profits on projects I think is a good thing. But then a lot of them are not clear on what that means and what should and shouldn't be factored into that.So gross profit is gross revenue while net profit is gross revenue minus all of the variable costs that go into generating that revenue to revenue or so expenses that you would not generate otherwise if it were not for generating that revenue.Maximizing Profit: Pricing and Operating PerspectiveAgencies should be pricing not based on the time that they spend, they should be pricing based on the value that they deliver. And that's different for the different forms of agencies.Chris mentioned a really good example is a digital direct marketing agency that is running ads. “You should be charging higher if your ads are more effective than the next agency down the street. You should be pricing based on the value that you deliver and you should not need to be measurable.”As an example, while not all 20 of those industries are going to be profitable and you can't take the products or the service that you delivered for “Industry 1” and then apply that to “Industry 10.” Every age or every industry is different. You need to know about the business.And being diligent and paying close attention to the expenses in your business because they can get out of control quickly, especially in a software-heavy society that we have now. By being vigilant about where all those numbers go and that gets back to the point, you need to be looking at your finances with somebody qualified to walk you through and tell you the status on a very regular basis.From making sure that you're sitting down with your accountant regularly, reviewing these things, managing your expenses, the value-based pricing, which I think for most agencies need to do is probably a great way to increase the amount of money that you make for the amount of time that your team has to invest and the number of costs that you get.There you have it, folks! I hope you’re getting so much value from this episode. And, if you’re looking for more checkout our Agency Profitability Tool Kit, and find awesome resources such as downloadable spreadsheet templates, KPI cheat sheets, benchmarks, and other awesome stuff you need in running a profitable agency.And, we have Parakeeto, our software product which helps you keep track of all of your most important metrics in real-time without changing your software and processes. Things like bill rates, utilization, profitability capacity across your whole business, and even let you run simulations to help you gauge and understand business decisions before making them. All you have to do is request an early process to start earning more profits!

About Erik: Erik Huberman is the Founder & CEO of Hawke Media, a full-service Outsourced CMO based in Santa Monica, CA that launched in 2014 and has been valued at $80 million. In just 5 years, Hawke Media has grown from 7 to over 120 employees and has serviced 400+ brands including Raden, BeautyCon, The Ridge Wallet, Buscemi, Red Bull, Evite, Verizon Wireless, HP. Want to See More of Erik? Follow him Online:Hawke Media WebsiteErik’s LinkedInErik’s InstagramErik’s TwitterErik’s FacebookTime Stamps:Useful insights and questions from this episode:Introduction 0:00Who is Erik Huberman?     2:12Starting Hawke Media     3:01Challenges in Growing an Agency    4:17How Important is Understanding the Cash Flow of Your Agency    8:05Figuring Out Your Business Goals     10:43How to Increase the Value of Your Agency     12:23How to Know the Right Time to Offer More Services to Your Clients     16:38Process of Adding New Services to the Agency     18:06How to Manage Employee’s Capacity     19:24Ensuring Your Team’s Well-Being     21:27Different Tools and Systems to Ensure the Performance of Your Business     23:02Convenient Automated Profitability Software     24:29What are the Important Core Metrics in an Agency     26:12Advice to Start-Up Agency Owners     28:14Blog: Hawke Media is one of the Top 20 Most Promising Digital Marketing Solution Providers in 2017 and was named at the Top Inc 5,000 fastest growing companies in 2017 as well. Hawke Media has worked with over 400+ brands including Evite, Red Bull, Verizon, HP. Today, Hawke Media continuously provides exceptional marketing services to the business owner along with their team of top tier experts that helps the different aspects of a business.Erik began consulting and advising and it was organic when he started an agency. He first sought out help, hired people, until it grew into an agency with over 170 people and is continuously growing up to this day. Understanding a niche that is completely under-served and needed help drove Erik into building the agency that is now Hawke Media.Despite being offered to sell the company quite a few times, Erik liked the idea of continuing. He loves the idea of working with different companies, helping entrepreneurs, and most importantly he is truly passionate about what he does. What are the Challenges in Growing an Agency? It’s not always smooth sailing when it comes to running an agency. And, according to Erik, here are the challenges he faced while growing his company:People are volatile and emotional. People have different personalities, wants, goals, and needs. Even though their payroll is similar to their monthly revenue five years ago, there are times where they get thin on cash wherein it took a while to catch up with the revenue to make money for the team.He also shared a challenging experience when they had a $400,000 payroll and $800,000 for a month while having only $13,000 in the bank. Entrepreneurs also said that it could happen again so he better get ready for his business. “That is very rare that you when you're growing a business like this and you don't have a ton of outside funding and you're not publicly traded, you’ll have so much cash that you're never gonna get thin.”Erik added, “Don't just let your money sit on the bank, invest it.”How Important is Understanding the Cash Flow of Your AgencyThe very first model Erik used to start his business was paying the flat base salary then giving 30% of what they get paid by the clients.On the next batch of talented individuals he hired, Erik said that they followed the same payroll model of which they give 30% of what they made in addition to their agreed flat rate. Erik found out that his employees are reactive. Erik added that they also looked at their amount of expenses on their first year to see how much they spent on overhead, advertisements, payroll, etc. He had a profit of 40% in the first year and from then, he knew it wasn’t sustainable. And, from the data which they have gathered, Erik and his team decided to change their business model, and see which works best for them.Figuring Our Your Business GoalsThe team experienced hitting their benchmark early so they had to find ways to maintain it. Erik's original plan was to get into 10 million in revenue. He didn't have a grandiose plan and now he has a multinational, multi-billion-dollar company plan.According to Erik, “I had a very clear path to 10 million, very clear what was going to take. In my head. We're going to do it. It's going to take four years. And that's what happened. And then two years, almost two years ago, we hit it.”It is really important to be objective, innovative, and realistic when you’re still figuring out your goals for your business. It’s not enough to conceptualize, and you have to actually put your time and effort into it. How to Increase the Value of Your AgencyLuckily, Erik is married to a person who is in private equity. His partner gives him constructive advice on how he can make his business more profitable.  Now, here are the ways on how to increase the value of your agency according to Erik Huberman:1. Long Term ContractsLong term contracts value consistency and reliability. And, it is a must that the moment you sign an agreement you are fully aware of what you’re getting yourself into. Make sure that you create appealing contracts for your stakeholders which you both can benefit from. Having long term contracts with your clients not only guarantees profits but it is also a gateway to meeting and attracting more clients and investors. 2. Client ConcentrationIt is important that you have multiple revenue sources, meaning you have a good amount of investors who are taking a chance on your product or you have multiple businesses where you earn profits from. And, as the saying goes, “Do not put all the eggs in one basket.”’”3. Recurring RevenueRecurring revenue shows how much investors or consumers are sticking around your business model and of course, the business’s capacity to be profitable.4. Profitability and Gross MarginThese are both massive and important. These factors, play-in with profitability too. Everybody knows that if you run an agency and you own the whole entity. There are a lot of expenses that aren't necessarily needed but somehow, they are essential to keep your agency up and running. Erik also stated that profitability and growth rate are the kind of equation that you need to see and carefully analyze. Erik said that in order to consider a business profitable, it needs to have at least a 40% increase in profit. How to Know the Right Time to Offer More Services to Your ClientsThe person running an agency needs to understand how to build a brand in their business. Thus, he or she must also understand what his or her client needs.1. Know the Clients NeedsThe reason why Hawke Media is on top of their game because they truly understand what their clients need. However, before they venture into new services and offerings, they carefully analyze the risk of the said venture while making sure that their level of profitability is at least at a 40% margin. And of course, they also need to know how much or how little they’re going to charge in their new services to make sure that it will be profitable. 2. Take Risks"We'll take some risk." Says Erik. "It doesn't have to be perfect at the beginning of the scale. It is what you have to get better at to achieve perfection on those margins. And that's how we build it out. So it's finding that expert that we can build a team around finding someone that's amazing in that field."As an agency owner. You must know when and how to take risks. And, make sure that you are doing it the “smarter” way. Hiring and finding the right people is very essential, but never forget to learn, teach, and adapt to new trends and techniques that are essential to improve your business and profitability. This way your employees will be more efficient.How to Manage Employee’s Capacity Now, Erik's team has four full-time recruiters so they always have people on deck. They're constantly interviewing and ready to hire whether they have to replace people or bring in people as quickly as possible. They also have a full-training onboarding system that they've built so people can ramp up pretty quickly.According to Erik, it is important to establish your team’s and the individual’s strength and weaknesses. Through this process, you will be able to determine:Who you are going to hire?When do you need to hire?When do you need to train them?Who can take-up more tasks/roles?Ensuring Your Team's Well-Being One of the things that we agree on is making sure you are not burning your team. Erik ensures that his agency is a fun place to work."People feel very at home here, which is super fun and that’s what we want. I think that's part of the culture.”"If we want this to be a place people want to work and we want this to be a place that my partner calls it as “people want to be from” where it's like if Hawke Media is on a rabid resumé, you're known as a badass and that's something we felt we get." He added.Different Tools and Systems to Ensure the Performance of Your BusinessErik uses real-time reporting on all his business matters. They built their own ERP system that pulls everything from their CRM to their project management, to their timesheets. They don't charge for the time but they track time allocation on QuickBooks to their client data where they can log in. These will consistently create processes around the time when they are not retaining clients and clients who are performing well.Convenient Automated Profitability Software Everyone who owns an agency knows that it is difficult to keep track of their agency’s profitability, growth, risks, losses, and even productivity. Granted that some of our data are spread out on different tools, files, and platforms, and it’s almost impossible to keep track. This is why I started Parakeeto, to makes transactions within agencies in just one place. What are the Important Core Metrics in an AgencyThe important core metrics are sales and marketing. Even lead generation. On the services side, it's retaining clients, it's upselling their growth that they are getting as well as what they are returning. Erik keeps it simple as possible within his five departments:Sales - New monthly recurrent business.Marketing - New leads.Accounting and Finance - Keeping track of growth and profitability.H.R. - Employee retention and sentiment.Erik said that his job is to visualize and predict the things that the company is lacking which hinders it from being profitable and whether they’re leaders of innovation of not.The second part is promotional. Speaking, doing podcasts, trying to keep the brand out there and keeping it top of mind. And third is expansion. Advice to Start-Up Agency Owners Erik's advance is pretty simple when it comes to start-up agency owners."Either find that person, be that person or partner with that person, basically."Pretty straight-forward. But, if you’re planning to start an agency or expand your agency you must be genuinely passionate about it, make sure to hire the right people for the job and treat them the way you would want to be treated. And, always remember to take risks wisely!