Successful entrepreneurs have too many people talking to them, each with some nugget that would change their lives. The endless stream of coaching comes from your employees, the owner you bought the agency from, the guy in your business roundtable who always seems to have that idea for you, and the newest business book. Oh, and your clients. The successful entrepreneur builds a powerful defense system that keeps unqualified outside voices at bay. That leader is somewhat self-assured, makes decisions, recognizes and corrects mistakes quickly, and listens to a few people who have proven to be reliable guides in their lives. They succeed in part because they do NOT listen to people.
There is more danger in listening to too many people than listening to too few of them, but here are a few suggestions about how to narrow down the list of voices in your head:
I’m getting more calls than usual from agency principals who are nervous about their businesses. It’s a combination of three things, it seems:
Those are the three external factors that are bringing some agencies back to their home bases where–truth be told–they are doing really good things:
I think the current agency leaders are the best leaders we’ve ever had.
I’ve written and spoken extensively about how half of your hires need to take your firm further from their very first day. The easy test for that is whether you can picture them teaching an agency-wide seminar where everyone soaks up some insight.
But you can go too far with that concept, leaping so many rungs on the ladder all at once that you lose your footing. I’m talking about hiring far out ahead of your supply lines, making that first big hire, stretching with the compensation package, hoping to be in the big leagues now. Here’s why it’s tricky to pull off:
I think it’s easier to get carried through a day, like a leaf on a river, and get nothing of substance done. Our typical interruptive, distracting environments ensure that something can always be done, whether it really moves us forward or not. I am disgusted by my own lack of progress in certain areas, and I’m sad for you as well.
Let me nudge you about where I wish you would spend more…and less…time making those better business decisions.
Say that you’re a tightly positioned marketing firm but that your service offerings for that vertical or that demographic or that type of business are broad. Should an account person be capable of speaking intelligently about each of your offerings? Do you need different SMEs for each service line? Would your clients even pay for that? How do you make sure that your front-line client interactions aren’t getting lost in translation?
While there is no simple answer to these questions, there are some clear guidelines around the fringes. As you solve this for your particular firm, keep these six principles in mind:
That’s a very confusing statement on the surface, so let me explain. The global economy is sending mixed signals these days and so salary load is top of mind for principals. Let me walk you through the decision matrix so that you can make a smart business decision about that. (Please forward this to your controller if you need help following this.)
First, figure out your salary allowance. Look at your fee basis for last year. Look at total revenue ($4M in our example firm) and subtract cost of goods sold ($1M) These COGS capture outside expenses like media and freelancers but not employees on salary–put employee salaries in here and you’ll get it wrong. That leaves us with $3M in agency gross income, gross profit, or fee revenue, which all refer to basically the same thing. You can afford to spend 45% of that on unburdened compensation, including your own. So add up what people make ($36K + $78k + $128k, etc.) and see where you stand. Our example firm can afford to spend 45% of $3M, or $1,350k. It turns out that they are spending $1,620k. It appears that folks are overpaid, but not so quick.
Second, normalize the allowance. There’s a calculation here that you cannot skip, and that’s to calculate....
I recently keynoted a conference on UX and before and after taking the stage I made a point of asking as many of your clients the same very specific questions about how they hire agencies. Two newer trends quickly became apparent, and it would be good to keep these in mind.
You’ve had some new business success recently and now it’s time to staff for it. You might be too quick to hire people, and when you do hire, you may be hiring the wrong ones. So let’s see if I can help you out a little with some principles that might preserve the momentum at your agency and keep you out of trouble:
I recently did some repeat consulting for a client, and I was surprised at how little things had changed since I worked with them a few years back. Working with any advisor is a painful process, but it's designed to be a good investment rather than a fair bit of pain for just a little bit of gain.
She initiated the re-engagement, so I presumed that I wasn't blamed for the lack of progress, but I can't help the introspection. Did I misread her situation? Did I not work hard enough to suggest a solution that she could realistically implement? Was everything good except that I wasn't present enough during the implementation period?
Each of those reasons has been true at one time or another in a consulting career that spans decades, but it's rare and I nearly always catch it in time and make it right, where appropriate. This time, though, I decided to chart out the simple...but profound...reasons why change might not take root at your firm. Why you keep trying different things and can never seem to get rid of those weights that keep you from soaring above the average firm around you. Why you might wonder if you should call it quits and go work for someone else, and maybe make more money with...
Years ago, when I still owned my agency, I went to work one Sunday afternoon so that I could get something done without the usual interruptions. I was anxious to catch up on our billing because receivables were dropping as clients paid and I needed to turn some WIP (work in progress) into some AR (accounts receivable). I hated the accounting nature of that part of my job, but it felt so good to generate $100,000 of invoices in just a few minutes.
I finished and felt like I'd accomplished something. I was satisfied because I was suddenly caught up, in this one thing, for this short time. It almost felt like I'd earned all that money in a few minutes!
But not for long. That next morning I started the week off and I kept thinking about how high our high receivables balance was! When would some of that client money start coming in? I knew why it was high--I'd just bumped them up to that level the day before--and I knew that none of it was due yet, but I could see this underlying anxiety in myself. Yesterday it was because receivables where low; today it was because they were high. Crazy.
Do you see that in yourself? Always worried about something? It's a curse and a blessing, really. You're never satisfied. You never rest for long. It's always this or that on your list of tasks:
Most of you hate timekeeping. You hate doing it and you hate enforcing it (see an eight-part sliding plan to do just that).
There's very little scientific connection, too, between profitable firms and firms that are religious about tracking all of their time. So these are the only times when you need to stay on top of it:
At the end of this piece I'll share why I'm nervous to admit this, but for now let me just say that your job running an agency really is different than running another kind of firm. There are two reasons for that.