Talking finance with Susan Boles from ScaleSpark

In today's episode of the Agency Accelerator Podcast, I am talking to Susan Boyles from scalespark, and we're talking about everything to do with money and finances. We dig deep into some of the decisions that you make early on in your agency that have a big impact on your growth and indeed can prevent you from growing. And we also discuss payments and pricing, the difference between packaged payments, retainers, and time based pricing. So there's lots of really good content in here and some good takeaways from all of us. So let's get on with today's show.

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So in today's episode of the Agency Excel Accelerator Podcast, I want to talk to you about finance, which is a topic that I don't talk directly about very often. But we're lucky to have Susan Bowles with us today, who is a virtual CFO and operations advisor for agencies, and she works at an organization called Scale Spark. And she focuses on helping agencies get clear on their numbers, truly understand their inner workings at a deeper level, so that they can make decisions from a place of intention and purpose instead of panic, which seems particularly relevant at the moment. Susan has over a decade of experience as a cfo, and she's on a mission to help agency founders build sustainable, resilient businesses. And Susan also runs her own podcast called Break the Ceiling, the show that breaks down unconventional strategies that you can use to save time, boost your profits, and increase your operational capacity. So welcome aboard, Susan. I hope I did your sort of biography and background some justice, but is there anything else you wanted to fill us in on?

No, I think you did a great job. Thanks for having me. I'm really excited for this conversation.

Good. So tell us a little bit about the kind of agencies that you typically work with and what would be the kind of common problems that you see them having?

Oh, man. How much time do you have? So the type of agencies that I tend to work with are usually relatively small, boutique sort of agencies. When I'm talking about small, I'm usually talking about, you know, under about 15 team members. And oftentimes those are a mix of employees or freelancers. Sometimes it's just, you know, an agency founder with a team of freelancers. And really what we're focusing on is how to run a more resilient, more efficient, effective business. So, you know, we talked a little bit in my intro about how I handle finances, and to me, finances are really intermingled. With the rest of your business. You know, when something is going wrong in your business, often it shows up in your finances. But that's really a trailing indicator. That's something that's saying, hey, this happened already. There's not much you can do about it now, but it gives you kind of some information, some data to go dig around in your operations and figure out where that problem actually is. So when I'm implementing solutions with my clients, sometimes there's a lot of different triggers we can pull. Sometime it's changing up what the team structure or the team skill mix is. Sometimes it's using technology to help fix those problems. Sometimes it's just a matter of having a clearly defined process. But all of those things kind of pull together to create that resiliency, both from a financial perspective, but also just in terms of your operations.

Yeah, absolutely. And I think, you know, we can make mistakes once, but we need to learn from them. I also think it's interesting. Interesting that what I see with a lot of agencies, and by the way, the audience you just described is exactly the audience for the agency accelerator podcast and also the audience that I predominantly work with. So that's great. But I see often, like, the entrepreneurial owner is the person that's been the amazing spark to get the agency to a certain size, but then they almost become the roadblock to growth, and we have to sort of help them get out of the way a bit.

Yes. Yeah, absolutely. What. What is really interesting is the timing on this one. So the kind of series that I've been running on Break the Ceiling lately came out of a conversation that I had with someone, and they asked me, you know, what is the number one thing that you are constantly fixing with your clients? And when I thought about the question, there really wasn't anything tactical. You know, we weren't actually fixing the same problems. But when I really started to think about it, I realized that almost every solution I was putting in place was something to counteract, something that the founder or the business owner had either put in place or their kind of concept of how the business should run. They brought their own idiosyncrasies to the table, and oftentimes were really just getting in their own way. So a lot of the solutions that I was bringing in were systematic ways to kind of short circuit that need for founders to get in their own way and mess up their own progress. Things like being a bottleneck. Like, you are the person that all the information has to funnel through, and that creates bottlenecks for Your team, it creates issues with them not being able to do their jobs effectively. Things like procrastination. Avoiding what? Avoiding doing the work. That's important. Some of the other ones we're talking about the relationship that you have with your business or money mindset and how the kind of money beliefs, the money stories that you have as a founder, you bring those into your business and it's really hard to see them from the inside. I describe it kind of as being inside a glass box. You can't see it, but it's actually what you are bumping up against. And so a lot of what we talked about were really those issues that the founder is bringing into the business that my work with them tends to create operational solutions to counteract those ways that we get in our own way.

Absolutely. Yeah, I completely agree. So talk to me a little bit about the beliefs on money and the money mindset, because I think I'm interested to hear what your angle is on that. Because I know sometimes I say to my clients, often when they're getting talking about pricing, I say to them, stop thinking about whether you think this is expensive or not, and start thinking about the value that you're delivering your clients and price based on that value, not your own personal beliefs. So is that what you mean by that or do you have some other take on it?

I mean, some of it is for sure, it always comes up in pricing because especially in service businesses, we tend to sort of associate our value with our price, if that makes sense. You know, what our worth is. We tie that very heavily personally to the price of the services that we're offering. And, you know, our perception of how we value money is really heavily influenced by our previous experience with money. So what I mean with that is, you know, your beliefs about money start in childhood. So if you have parents who were, you know, saving every single penny, maybe, you know, as an adult, you rebel against that and you spend every single penny that comes in as soon as it comes in. Or, you know, if maybe the opposite. Your parents never had any money, maybe you turned into a super saver and you're too afraid to invest money. You're too afraid to spend money to invest in growing your business. And those are just, you know, like really baby examples. But what was really interesting, I, you know, even as a money person who has done a lot of money mindset work, every time you move to the next level, new issues kind of come to the forefront. How you value money, how you view money. Every time you take kind of the next Step up in your business, you have to deal with those issues at that new level. And so if you are thinking about, you know, your goal is, oh, I want to hit seven figures, I want to hit eight figures. But to you, the biggest number you can kind of envision is like 100 or 200,000. It's going to be really hard to take that next step in your business to hit $1 million or hit $10 million, because your brain, like just can't comprehend it. And it puts limitations in place in your, in your mind. And so money mindset work is one of those things that I really don't think you can ever kind of do enough on.

There was two things that you mentioned when we were talking prior to today's podcast that I wanted to dig a bit deeper into. And one of the things you said was that the decisions that you make in your agency can be a big. You're hitting a ceiling to growing your agency. So I just wanted to touch upon that with you for a bit, if we can.

Yeah, so we've talked a little bit about some of them. You know, as a founder, we come in with these preconceptions and for a lot of agency owners, they're coming out of industry, they're coming out of other big agencies. You tend to structure your business in the way that you expect it based off of your experience beforehand. So if you came out of a big agency, you are coming into your agency, you kind of with those same assumptions that that's how you're supposed to do business. And it makes it really hard to think outside the box or think of creative ways to operate. And the truth is that as an agency or really any service business, you can design your business to be whatever you want. You can package your services however you think you know, if you like doing intensives, you can do intensives. If you like doing long term one on one retainers, you can structure your business that way. But often it's really hard for us to see that and see our own influences. So I have a really good example of this. I had a client I was working with a few years ago where I was doing this software implementation. We were implementing a project management tool that also integrated with like finances. Right. And it was a digital advertising company. So they managed to Google Ads and Facebook ads and those kinds of things for their clients. And the way that they were charging their clients was to charge this management fee. Right. Pretty standard practice. But what had happened is that the way that they were calculating this management fee did not work. With modern software systems, it wasn't the same way you would calculate margin or calculate markup. It was kind of a circular reasoning that was causing a lot of problems. You know, it meant that we were having to develop custom workarounds. We couldn't take advantage of the automations from the system that they were using. And when I went back and I was like, hey, you know, this is a real major sticking point that is causing a lot of problems for you. Where did this come from? Why are you doing this this way? And the answer I got from them was that one of the founders of the company had come out of the television advertising industry. They weren't in television advertising mind you, but I guess this is how they had calculated ad rates for TV ads. And that is where this whole concept came from. And it was really causing them so many issues. But they couldn't see that because they came in just going, oh well this is how it works in tv, so we'll just apply that here. And it was actually causing them operational limitations. It was costing them more money because they had to implement more expensive customized systems. They couldn't use off the shelf, they couldn't automate a lot of the processes because somebody had to stop and kind of back calculate what was happening. And so that's just one example of a default decision that they made really at the beginning of their business that, you know, five years down the road was actually causing them to not be able to grow. And as they were, you know, if they wanted to grow, they had to bring all of these extra people in, operational people to execute this process that, you know, a simple tweak in. Okay, well let's, let's rethink how we are, how we're generating our revenue. Let's just go with a straight margin calculation or you know, there are a lot, lots of options, there's. But instead of doing that, they were having all of these issues because of that one decision.

It's amazing, isn't it? I think, you know, it's that sort of adage that we know what we know. So people start, you know, and often they were freelancing before, like you say, working in a big small agency. But they have that experience and that's what they bring with them. And so they do things that way because they don't know any better. And actually we'd be all really smart to go and get external input, whether that be through a coach or through partnering with other agencies or just going and seeing what other agencies are doing or bringing in staff that have experiences at other agencies so that you can constantly be looking at your best practices, your practices, and do it in the best practice way, or look at systems and processes and constantly thinking, how can we do this better?

Yeah. I mean, to me, the number one most powerful tool in my arsenal is asking, why are you doing it that way? And if the answer is, well, we've always done it that way, or that's how the industry operates, or that's just how it's done, that's a pretty good indication that it is a decision that you kind of made by default. It's not something that is necessarily serving the business that you're running now. And that's a great place to start digging in and researching other alternatives.

Yeah. I'm amazed at how many agencies still price and sell on time to clients. And they talk about hourly rates or daily rates. And it's just. I mean, I've spoken about this many times before because it drives me crazy. And it is, you know, they're selling the wrong thing to clients because clients are not buying time. And time is a commodity. But so it's quite a lot of work from a. And I'm no mindset expert either, but it's quite a lot of work to get them to change that way of thinking. And they have all these limiting beliefs that they put in their way to justify why they're doing that or why they can't change, like the clients won't accept it or this is how it's done in our market. You don't understand. And it's like. Actually, I do understand. It's just that you're. You're, you know, kind of stuck in that rut, in that way of doing things, and you actually need to see that there are other better ways to do it that ultimately would lead you to be more profitable.

Yeah. And also, I think a lot of the times, you know, we're thinking about this from the perspective of the clients. Oh, the clients won't accept it. But if it's. If you think about it from the perspective of you being the client, you know, would you rather know up front how much something is going to cost you, or would you rather figure it out later on when you get the bill that suddenly you have to pay? You know, from the client's perspective, I would certainly much rather know upfront exactly how much it's going to cost, pay you for your package price and be able to budget that into my expenses versus Well, I think it might be around this much. But then all of a Sudden, when you get the final bill, it's, you know, five or $10,000 more than you were expecting and going, oh, my gosh, how. How am I going to pay that?

That brings me on to the second point that we discussed prior to the podcast, which is how an agency's pricing and payment strategy can have a huge impact on how easy or hard it is to run that agency. So just talk us a little bit about your experience and views on that.

Yeah, so if you think about kind of the workflow for a traditional time and materials billing, so you send a proposal, then you need a system to be able to track your time, your team's time against that project. Because if you don't know how much time or how many materials you've spent, it's really difficult to tell them, you know, how much you need to charge. And if you forget to track time, then you're kind of screwed. So first you need a system to track time, Then you need a methodology, either a person or a software system that can turn that time into an invoice. Then you have to send the invoice to them, then you have to wait for them to pay. If they don't pay, then you got to go chase them for payment. And, you know, potentially there is the risk of them just not ever paying you. I've seen that happen. It's not all that uncommon, but that is a very long, complicated workflow compared to something like we have a package price or a monthly retainer that we charge you upfront or automatically. And the onboarding process works like, here's the proposal. You sign it, you send, set up your payments, and either we charge you all at once, or we charge you every month automatically. And that's kind of the whole administration for that process. And the impacts of this are both operational. So instead of having to administrate that very long, complicated process where there's lots of opportunities for the system to fail, you know, maybe your team member that is creating the invoices is out sick, and so they don't get the invoices out on time or, you know, at the end of the workflow, the. The risk of them not paying you versus having upfront or automatic payments that require pretty much no effort on your part, and. And also guarantee that you get paid when you need to get paid. You know, the bills go out regularly every month. But by not setting up automatic or upfront payments, you are really creating this big risk for you that you're going to be required to send money out to pay your bills before the money that comes in from the work that you've done actually shows up. There's a big gap in there. So there are a lot of benefits to this. But one of the best things about pricing your services in a package is that you can do that upfront payment, you can do automatic payments because you know how much it's going to be. And that benefits both you and your clients, like I talked about. So I am very passionate about the payments part of the process because that I've just seen it create so much work on the administrative side just to get paid when you really could kind of flip the script here and figure out a way to get paid up front.

And so, yeah, that sounds really interesting and I guess it's sort of the ultimate goal that most agencies would have. When you talk about a package price, I'm interested to hear your views on how you manage to ensure that you're profitable internally. Do you still recommend that your clients do internal time tracking just to make sure that they are, you know, managing people's time effectively and not over servicing the client?

Yeah, definitely. So I am a huge proponent of tracking your time because that's a really powerful measure of data. If you're going to look at data in your business or how profitable say each client or each project or service line is, you need to know how much time it's going to take you. You know, in a service business, your inventory is actually your time. That is what's very limited. And you want to make sure that you are spending every hour in your business doing something that's actually creating some return on your investment of that time. So I absolutely recommend you still start, you still track your time, your team's time, down to the project level. The difference is that you don't have to then turn around and turn that into revenue. So when you're looking at kind of trying to decide to start packaging your services, I always recommend that you look at data of what you've already done. You know, once you've done several projects of kind of the same type over and over, you can start to figure out, you know, ballpark. This is about how it's going to how long it's going to take us, and you can kind of calculate your profit from that. But if you are earlier on in the stage, one of the kind of ways I like to transition folks from time and materials billing to like more packaged or retainer type pricing. And, you know, this also works for projects where you really don't quite know how long this thing is going to take you. I've used this with things like custom software development or, you know, very custom website builds, those sorts of things. And it is kind of the concept of a refillable retainer. So this is basically you saying, we're going to charge you our normal time and materials rate. We think it's going to be about this much each month. So pay us that amount upfront or every month for the length of the project. We will bill our time against that amount that you've already paid us, and at the end we'll kind of even it up. And if maybe you paid too much or we pay, you know, you still owe us a little bit, we'll send you a small bill at the end. And that's a good way to kind of transition not only to get data. If you're not, you know, if you haven't been tracking your time against projects, it can be really hard to figure out what's the right, what's the right package, what's the right price, how long is it going to take me, how do I figure out if this is going to actually be profitable? So that kind of concept of refillable retainer is a good transition to get you into that upfront pricing. So you're getting paid on time, but also collecting data to start giving you more information to adjust the packages or build packages later on.

Yeah, and you know what? This is exactly what I tell my clients. It drives me crazy when people are still selling time to clients and still reporting on time to clients because it takes so long to create those reports, which is an.

Oh, it does.

They didn't need, because a client doesn't really care. They care about the results. But also when we start talking to clients about packaging or retainers, and like you say, they're not quite sure how long something's going to take, then they really struggle to get the pricing of it right. And I say to my clients, look, this starts from the very first conversations you have with that prospect before they become a client, so that you start to ask them the right questions early on about what they're trying to achieve, what good looks like, what success looks like, so that you can measure against that during the project. And, and you're building this partner, partner consultative relationship with the client rather than the imbalanced supplier customer, where the customer beats the supplier up and questions why it took an hour to design that logo or whatever, which is, which is crazy, but you'd be amazed at how many companies still work that way. But the message that you've just given Susan, and the message that I give my clients all the time is that you need to build this wall between how you work internally and what you report to your clients. So internally, we have to keep measuring time because there is no more efficient way of doing it. And when I ran my agency, all we had was an Excel spreadsheet. There was no great time tracking software like there is now. So it's a lot easier now to do that. And by tracking time, we start to get our more junior members of our teams to start to think more commercially. Otherwise, we're in danger of someone wanting to create a piece of art with their design, their web design or their logo design, wherever it is, with no concept of how much the client is actually paying for this. So they spend way, way more time than they should, and they have no commerciality about it. They just want to do a nice job. And of course, then you find you're not profitable.

Absolutely. And, you know, there's this kind of other side of packaging your services in terms of how long things are supposed to take. If you have good data about how long this kind of project takes you, you can start focusing in and drilling down on, you know, where are those hours really being spent? How can I make that part of the process, that part of delivering this project go faster or operate more efficiently? You know, are there templates I can use? You know, when you have data about how long it takes, you can really start figuring out how to deliver that more efficiently. And the. The part of the problem that I have always had with kind of time and materials billing, and, you know, a lot of the times you'll find this with, like, your accountant or your lawyer is that when they bill you by the hour, the incentives on how well that should go are kind of screwed up. You know, from the perspective of the person billing in time and materials, it's to your own benefit to take as long as humanly possible to deliver that thing. You know, that is what the financial incentives of time and materials billing are. How long can I take this versus if you are charging them one flat rate, it is to your benefit to start delivering as efficiently as high value as possible. You know, and it really aligns the incentives of everybody kind of operating together in. In what I think is the right direction.

Yeah. So I think the really big message there is make sure that you are recording data so that when you are quoting for work and putting proposals together, you are really looking back at historical data to help you get as accurate quoting as Possible so that you don't end up having to massively over service the client in order to deliver the project or keep them happy.

Yeah, absolutely. And I think kind of the next level of that is really becoming the expert in knowing what your client actually needs. You know, most of your clients are coming in knowing that the end result is that they have to have a website or an ad campaign or. But what they actually care about is is that thing going to benefit their business? And you at the agency are the expert, you know, because you see this all day, you know it works. You know it doesn't. And as you take that data in, you can use that information to create the services and the packages that you know that is actually what they need and then turn that into a repeatable process that allows you to actually profit more the better you get at running that process.

Yeah, absolutely. That's kind of like you were saying earlier, it's about asking the why question again. Like if someone says we need a new website, their first question the web companies should be asking is, why do you need a website? What do you want it to do for you? Because you know, if you don't understand that, there's a good chance you're not going to deliver a project to a happy client. So I've got two more questions for you. And the first one, I don't know if I should ask three or one. But what's the top tips you would give to any small agency owner that's, you know, maybe a year or two into running their agency? They may be just themselves or one or two staff, what would be the kind of key tip you would give them about what they need to do?

So we already talked about this, which is flip your payment system so that you're getting paid upfront or automatically. That's important for the financial health of your business. But also if you are the only person in your business being able to kind of short circuit that time that you have to spend on administrating your business. So calculating the time, sending the invoices, sending time reports, following up to collect payment, putting systems in place to kind of short circuit the need for you to do that administration early on in your business can make a really, just a huge game changer. And it means that your team can stay smaller, longer. You don't actually need to bring somebody in to go do that part of the operations. So any, any administrative stuff that you can either eliminate by having computers do it is always a good place to go, especially at the beginning when you're trying to keep costs low and operate really lean and effectively.

I mean, it's kind of easy to figure that out. This is a simple thing I say to people is what. What do you think your hourly rate is? What do you think you're worth? And they'll come up with a price. And then I say, well, every task you do is it. Is it at that price or higher than that price or lower than that price? And if it's lower than that price, then why are you doing it? So if I'm charging myself out notionally at £200 an hour, but I'm doing a task that's worth £50 an hour, why am I doing it? Why am I not paying someone else to do it or delegating it or automating it? So my last question, which I ask every single guest that comes on to the Agency Accelerator podcast, is if you could go back in time and give your younger business self one piece of advice, what would that be?

You know, really, I think the best piece of advice, the thing that's really been a game changer for me is a willingness to dig in and learn. Being willing to understand what is happening behind the scenes really empowers you to make better choices, to make different choices, and to understand why you're making a choice. So my best advice that, you know, has. Has been pivotal for me all the way along has been, you know, invest in learning about how to run a business. You know, most of us spend time, we come into business, we know that we want to do the thing that we want to do. You know, maybe we come in and we like doing web design, so we start a web design agency. But there's not really a great methodology to learn about how to run a business. Well, they don't teach it in school and they don't, like, hand you a card when you become a business owner that says, oh, you're a business owner. Here's what you need to know. So spending time learning how to actually run a business really will pay off huge dividends.

Good advice. I always say to clients that if you're going to run your own business, you need to be good at doing three things. You need to be good at delivering whatever it is you do. So web design or PR or whatever. And I'm assuming that you're good at that because that's why you want to start your own business. You've also got to be good at finding new business, so business development and sales and marketing and all that stuff. And you also have to be good at running a business. And if you can't do all of those three things, and if you can't keep all of those three plates running, spinning, then you're going to fail. So Susan, if people want to find out more about you and your business, where would they go?

So my website is scalespark Co or you know, subscribe to Break the Ceiling. We talk about this kind of stuff all the time. It's really their designed to help people overcome those default decisions and give them a place to go to research new cool stuff about how they should run the behind the scenes of their business.

Brilliant. Okay, well I'll put links to both your website and the podcast in the show notes of this episode. And I just want to say thank you so much for joining us today.

Yeah, thanks for having me. This was really fun.

So I hope you enjoyed that episode. Although it was focused on finance, we ended up talking about a lot of the same things that I talk about all the time that be value pricing, fixed project fees rather than time based selling. I really like the idea of trying to get clients to pay up front because you obviously it's going to manage your cash flow. That's particularly important at the moment. And I also like the message that we should all be continually investing in our own education so that we keep learning.

So there we go. I'll see you next week and in.

The meantime, please make sure you have subscribed to the podcast and I would love you to share it and also leave a review as well because as you know, that really helps with the search rankings. And until then, I hope you have a great week and I'll see you next Thursday.