[Hey!

I will be posting some scripts from a book I am working on, this one is aimed at owners of agencies in particular.

Please be aware that these texts are raw and unedited, I am sharing them to test ideas, and to give you some ideas that you can implement in your business.

I appreciate your time and engagement.

Tobias]

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Did you know that agencies make less than 10% in net profit nowadays, down from around 30% a few decades ago. Why is that? In my experience, this is the result of agency owners replicating an already difficult model and a set of sloppy practices. In essence, everybody is doing what everyone else is doing, and what everyone else is doing only works for a few exceptional companies.

The good news is that the theory of building a highly profitable seven-figure agency is pretty simple, when you keep things simple. Before we get into it properly, let’s first start by exploring the most common mistakes, so at least you know what not to do. After all, a good strategy is as much about what you don’t do as it is what you do.

How most struggling agencies operate their business

What do the far majority of agency owners do, and why do they struggle? Here are a few mindsets and behaviors that tend to cause problems;

1. Serving anyone who shows up

Struggling agencies serve almost any client that will buy from them, and they happily create unique proposals for any prospect that approaches them. They then spend a lot of time researching, planning, and presenting unique proposals to specific, unique client problems, constantly customizing all parts of their business. This causes a huge hidden cost that owners are usually unaware of.

2. Being positioned too broadly 

Struggling agency owners have a service offering is broad and very similar to what almost any other agency in their space offers, making them a mere service provider (not a strategic partner) in the eyes of their clients. When you are positioned too broadly, it becomes almost impossible to be seen as the only viable choice for clients. So yes, the ”full-service agency” is a bad idea, and no such thing actually exists.

3. Relying only on random referrals for new business

These agencies rely on ”random referrals” for new business, meaning they have almost no predictability in their business. When you rely on random referrals, you have almost no control of your cash flow, and this is a major cause of stress and anxiety for most agency owners.

4. Not knowing their numbers

When you operate your agency without knowing your numbers, from your conversion rates to your project profitability, client acquisition costs, fulfillment costs, etc., it’s like you are flying a plane in the fog without instruments. You are leaving it all up to chance, and what you cannot see can kill you. Unfortunately, this is a very common mistake. Once you know your numbers (you need clear KPI’s and metrics for all the most important things you do in your business), as boring as the idea might seem, you will establish a baseline, and you will set yourself up for success.

5. Not having an active client acquisition process in place

Another major reason why agencies don’t have a consistent stream of client projects and cash flowing into the business is simply because there is no consistent, measurable action that ensures that the business stays healthy. As a consequence, sometimes they have too much work, sometimes too little, and most of the time, they are operating with a high degree of uncertainty. This is the norm. No wonder most agencies struggle to make predictable profits and grow their business. As we will discuss, every agency needs a dedicated process with roles and responsibilities for attracting new leads and prospects, and for converting the right ones into clients.

6. Lacking a repeatable fulfillment system

Agencies who keep winging it by providing too much flexibility and customization will typically suffer from low profitability and they will find it nearly impossible to grow beyond their core team (the people winging it). Every company that wants to be profitable and grow needs systems to provide results consistently at a profit. These are the most common problems I see over and over again. There are more, but if you get these right, you can build a solid, profitable agency business. 

7. Operating from a weak entrepreneurial mindset

I left this one for last, although this is the most important point. Having dealt with over a thousand of entrepreneurs, only a small percentage of them are actually entrepreneurs according to my definition. A real entrepreneur is not someone who operates from fear, thinks small, and only wants to have enough money and clients to have a ”good life”. While that is definitely worth striving for, it’s not what entrepreneurship is about. Entrepreneurs want to make a positive difference, they are problem solvers and risk-takers who think differently from regular people. 

Agency owners are often great craftspeople who have some degree of entrepreneurial mindset, but not enough to make their business grow profitably. To do that, you have to be pulled by a bigger vision or dream, you have to have belief and faith in yourself, and you have to be willing to do whatever it takes to turn your dream into reality. Small-minded thinking and operating from fear will not serve you as you pursue 2-10x growth. More on this later.

So, Where Do You Stand?

If you were to rate yourself against the most common mistakes above, how well would you do. I challenge you to ask yourself how many of these mistakes you are making in your business right now. Look, I don’t do this to make you feel bad, but in order to help you first get an awareness of where you’re at, so you can establish a baseline. We’ll continue by exploring some numbers later, but this is a great place to start. 

The Secret That Almost Everyone Ignores

The secret to building a predictable, profitable agency that can grow beyond you as the main bottleneck can be summed up in one keyword; standardization. I am sure you have heard of the idea of productization, and how it can make your business more predictable, profitable and scalable? I am one of the big proponents of productization myself. The secret to productization lies in standardization. 

But what does it mean to standardize?

A simple way to explain it is to list everything you do in your business, from client acquisition to proposition, and fulfillment. Then you list all the things you do in each area, and ask yourself what you can decide to do in the exact same way every time. 

When you standardize parts of your business, you are doing the opposite of customizing. You’re providing less flexibility, but instead you are driving up efficiencies, you are learning how to master certain things to a higher degree than if you kept customizing or adjusting your business to the changing needs of clients. 

When you serve similar type of clients with similar problems, looking for similar results, you can standardize your offering, and that is the secret to predictability, profitability, and scalability for an agency. 

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I’d love to hear your thoughts in the comments.