What does it take to run a profitable & successful agency?

Hey all, it's Rob here. Now, if you're an entrepreneur and you're running your own agency or you're aspiring to start your own agency, then this podcast episode is definitely one for you. Because in this episode I want to talk to you all about what it takes to run a successful and profitable and enjoyable agency. Now, I hope you're having an amazing week. I certainly am. I'm recording this from sunny Cape Town in South Africa, where I've been on a two week holiday and I have two more weeks working here. Now, I'm halfway through week one and it's really interesting because I seem to be working harder than ever now, that's partly because I haven't got a lot of distractions here. My office is in the Airbnb apartment that I'm in. But it's also because I know I'm going to reward myself later on in the day with a stroll around Cape Town or visits the shops or whatever. So the reason I'm telling you that is not to brag, but is because if you hear any strange noises, I'm right in the center of town. So there's a lot of traffic noise. So. So apologies for that. Anyway, let's get on with today's episode. Accelerate your agency's profitable growth with tools, tips and value added interviews with your host agency owner and coach, Rob DaCosta. Let's start this episode by painting a picture. Now, like every entrepreneur, you started your agency because you had a dream and a passion. You probably wanted to be in control of your own destiny and maybe you even felt you could do it better than others. Now, that's certainly how I felt when I started my agency back in the early 90s. I had arrogant youth, I suppose, on my side, thinking that it was very difficult for us to find a good tech PR company. I used to work in the tech sector as a marketing manager, so I thought I would start my own PR agency in the tech sector and the rest is history, I suppose. But it takes more than just passion and a good idea to run a successful business. So let me first outline the three things that it takes any kind of business to be successful. So any entrepreneur needs to be able to do all three of these things, not just one of them. Now, the first one is they need to be good at delivering the work that they do. So this is about revenue. This is about doing the work that your client engages you to do, whether that be writing content, organizing a press tour, designing a website, designing graphics, and so on. And of course, when we start our own agency, we're going to be good at that, that type of thing, because you know, that's what we've already been doing. However, it takes two other things to do that. If you're just good at delivering the business, but you're not good at the two other areas, your business is going to fail. And I'm pretty sure this is one of the key reasons why whenever the stat is 8 out of 10 businesses fail in the first year is because they also have to be good at the second and third thing. And the second thing is they have to be really good at strategy. And strategy in its simplest terms simply means how am I earning money in the future? So strategy, think of it as how am I going to earn money in the future? So strategy looks like things like marketing, sales, business development, pitching, planning, having a vision, having a strategy, and so on. And we need to be really good at doing that as well. And if we don't have that forward looking plan, then our business is going to fail. And the third thing we need to be good at is admin. And admin is everything to do with running your business. So in the early days that means just getting good systems in place and being organized. But it also means doing your finance, making sure you invoice on time, making sure you're good at credit control. And then as you grow, it means things like recruiting staff, recruiting freelancers, managing the staff, looking at growing systems and processes that will help your business grow. So we've got to be great jugglers. And let me tell you that one of the key reasons why businesses fail is because the entrepreneur, owner or the senior team don't allocate enough time to all three of those areas. Let's just take a scenario here. If I'm really good at revenue but not really good at strategy or an admin, then what's going to happen is I'm going to be really busy for the short term and then I'm going to have my business is going to fall off a cliff. As projects come to an end, I'm probably not invoicing in time because I'm not very good at my admin and I'm going to have all sorts of problems. If I'm really good at strategy but not revenue, then I'm going to have lots of great plans in place. I might win business, but I'm going to lose it pretty quickly as well because I'm not good at delivering it. And finally, if I don't allocate enough time to admin that's the running of my business, then I'm going to be super disorganized. I can't tell you the number of people I've spoken to who tell me, oh, I'm just too busy to do my invoicing or I miss the end of the month. And that means certainly for some of the bigger businesses, that means if you don't get your invoices out by the end of the month, you may delay your payment by another 30 days because bigger organizations tend to have a payment run on a certain date and if you miss that date, you're going to have to wait another 30 days. So if you're not good at running your business, you're going to be disorganized and you're going to have massive cash flow issues. So if you want to be successful, you know, fundamentally, if you want to run a profitable and successful agency, you have to be good at balancing your time between revenue, that's how I'm earning money today, strategy, how I'm earning money in the future, and admin, which is everything to do with how I run my business. So make sure you allocate enough time. And a really, really kind of general rule of thumb here is that you want to be able to spend, let's say if a small business, 60% of your time doing revenue, that's delivering work, 30% of your time in strategy, that's planning for the future, and if my maths are right, then 10% of your time in admin, that's a rough idea. It's going to be different for everybody and it varies over time depending what kind of team you've got around you. But don't be fooled into the fact of getting so caught up in delivering client work that you don't have time for the other stuff, because I guarantee you will not run a profitable and successful agency. So let's move on to talk about the five traits of a successful entrepreneurial agency owner or a senior team. And the first thing I thought about when I was trying to work out my top five number one by far is, is that you need to have a clear vision that motivates and excites you and that you can communicate and share with the rest of your organization if you have a team and make sure that you bring them along with you. And what does a vision look like? Whilst I don't want to go into ton of details in this podcast about that because there's plenty of other stuff that you can find on my website or other places, but a Vision needs to talk about the destination that you want to reach, and it needs to describe that destination in terms of the sales that you want to make, in terms of the type of customer that you want to have, in terms of the type of agency that you want to have, in terms of the staff that you need. What systems and processes do you need to support that vision and how are you going to measure the steps along that journey? So that's what your vision looks like. And of course you then need to turn that into quarterly strategies, and then turn those quarterly strategies into monthly plans and then where you possibly can delegate some of these activities, projects to be owned by other people in your agency. So that is the number one thing you need to have if you want to run a successful agency is some form of documented vision. Now you need to make sure that you revisit this vision frequently, because an agency that creates a vision at the beginning of the year and casts it in stone is the agency that's doomed to fail to deliver that. So your vision needs to be done, a dynamic document that you are constantly updating based on what you know at that point in time and that you're then developing quarterly plans to help you deliver that. And if you have this concept of 12 month vision, quarterly strategies and monthly plans, then before you know it, your monthly plan will deliver that 12 month vision. So, number one, have a clear vision. Now the second thing you need to do, perhaps almost before you even have a vision, is, is get super clear on who you are and who you are not as an agency. So that means finding your niche that is profitable, that is enjoyable and that you really commit to. I've said this many, many times and no doubt I'll be saying in future podcasts as well, but the agency that has a clear niche will always win against the agency that's trying to please everybody and be a generalist. So work out your niche. And your niche is the intersection of where your passion is, where you know you can make money, and where you have attract track record for delivering great work. The intersection of those three areas will define your niche. So the second trait of a successful entrepreneurial agency owner is to work out where their niche is, get super clear about it and stay committed to it. When you have a clear niche, it doesn't stop you taking on work outside of that niche. It just means that you're going to pin your colors to the mask and you're going to market yourself and promote yourself as a specialist in that niche. Just remember that if you are going to see your gp, you won't ask them to do knee surgery. You'll want to go and see a specialist knee surgeon. And guess what? You're going to pay more money for that knee surgery than you would to your gp. And the same applies when we think about a nice agency versus a generalist. So that's my second clear trait, is to get a clear niche. Number three is to, as you grow, build a really strong team and don't be afraid to hire great, challenging people. The agency owner who is really controlling and wants to stay in control and wants to know about everything and therefore creates a bottleneck for themselves because all the clients want to work with them is the agency owner that won't be able to grow their business. Whereas one who realizes what I really need to do is hire really smart people, delegate as much down to those people as possible, is the one that will be successful in growing their agency. And this brings me on to my fourth point, which is that the agency owner needs to focus their time on the things that they can only do, which is normally things to do with the vision, with the strategy, with the product development, and with kind of the strategic business development. And they work out ways of delegating everything else to other people. Now, if you're a one man band, you might be sitting here thinking, rob, that's fine, but I don't have anyone to delegate to. But, but we always do. We can either hire freelance staff or we can hire a virtual assistant, or we can look at ways of automating things, which I've spoken about in previous podcasts. But there are always ways of delegating and sometimes delegating means stop doing the things that actually aren't moving you forward. So the question, as the owner, you always want to be asking yourself is, am I doing the things that are really moving my agency forward or am I getting distracted by things that I know I can do well, but actually other people could do as well, or just being distracted by shiny new object syndrome by being seduced by some sexy new idea, but it isn't driving me forward to deliver that vision. So every day you want to kind of ask yourself, am I doing the things that are moving us forward to deliver that vision and am I doing the things that only I can do now? Not am I doing the things that I can do better than other people? Because. Because in our arrogance, we always think we can do better than other people. But that isn't the question. The question is, am I doing things that only I can do or do I need to train other people to do those tasks or when I delegate, do I need to accept the fact that they may not do it as well as me, but that's okay because they'll do it well enough. So my fourth point is focus your time on things that only you can do and delegate everything else. And my final fifth trait of a successful entrepreneurial agency owner is one that is mentally tough. And what that means is they need to be resilient. And perhaps most importantly, they need to put really good boundaries in place so that they can identify the difference between their work life and their personal life. They can not try to be friends with everybody in their agency or friends with all the customers. But they have really strong boundaries and that they're in control so that the world isn't happening to them. And things happen that derail you from your vision. If you're mentally tough, then even if things do happen that derail you, you have ways of righting yourself. And you know, the whole thing around mental health and mental toughness is becoming a more and more frequent conversation and one that I'm going to talk about in a future podcast because I think it is so important. We need to create the right culture in our agency so that we can have mentally resilient stuff staff, which means people that perform at their best, that are not absent a lot of the time and are not being stressed. And of course part of that means winning the right kind of client as well. And that comes back to the second point about getting a clear niche. Because when we have a clear niche and we win the right kind of clients in that niche, we can always do great work for them and those particular clients will always appreciate the work that we do. And therefore we'd like to have a more a stronger relationship with them which means that, you know, we're not going to get so stressed about working working with them. Now I just want to pause at this point in the podcast and tell you about the Agency Accelerator Mastermind Group which the doors are opening in a couple of weeks time so I wanted to make sure that you are one of the first to hear about it. Now the Agency Accelerator is a 12 week hybrid coaching program that consists of one to one sessions with me group weekly coaching calls plus access to over 40 hours of online content and resources such as tool tools and templates. So if you want to find out more about it, head over to da costacoaching.co.uk agency accelerator. That's dacostacoaching.co.uk agency-acceler so you can find out a lot more about it and make sure that you register your interest because we are only taking 20 people onto the program. We already have some people that have registered their interest, so I don't want you guys to miss out. As I said, the doors open in a couple of weeks time and they'll only be open for a few days for people to sign up. So make sure you register your interest. Okay, back to today's podcast. I thought it would be a fun thing to do to list five do's and five don'ts of running a profitable and successful agency. And to be honest, when I was compiling this list, I could have probably done 20. But let's stick to five do's and don'ts. So let's start with the don'ts. Let's, let's be do the negatives because I'm sure you can relate to some of these points. And to be honest, I know I've done some of these things as well. So let's focus on them. Number one, don't put all your eggs in one basket. You may win this really big client that gives you a lot of work, but I guarantee you at some point in the future, something's going to change that's outside of your control. And that could well mean you falling off a cliff of losing a lot of revenue if you lose that big client. So if you do win a big client, that's fine, but make sure you're mitigating your risk by winning some other clients as well or making sure that you spread your risk so you have a number of clients and that you're not getting, you know, 80% of your revenue from 20% of your clients. So make sure that you don't put all your eggs in one basket and mitigate that risk so that you don't fall fall off a cliff at some point in the future. That's number one. Number two is don't hire staff solely in your like, there's a real tendency to hire people that we can really relate to that we really understand that has kind of the same temperament and personality and probably has the same kind of values as you. And that's fine. But if you hire a team of people who are just like you, then you're not going to get a really sort of balanced viewpoint of the world and a really solid kind of devil's advocate management team that's going to make sure that you are growing your agency in the most sort of successful way possible. So that's number two. Which is don't hire people in your. Like, sometimes we need to hire people that we don't quite get. But people have a very different viewpoint to us and that helps us create, like I say, a really good, well rounded team. You'll often find in bigger agencies where there is a finance director or a finance manager that they seem to be really different to the rest of the management team. They're much more black and white, they might be a bit more pessimistic in their viewpoint, but they are really, really important. And I'll just tell you a quick story here. When I sold my agency and I sold my agency to a big American company and I was part of about a 12 man board on this company and when we used to have our monthly board meetings, everybody was really similar and everybody used to get really frustrated with the finance director because he would always be the ah, yes, but what if person. He was that person who was playing devil's advocate and he often had a very different viewpoint to everybody else. But in hindsight I realized how crucial he was as part of that decision making process and he was a really good example of not having people who are all in the same like so when you hire your number two and your number three, make sure you get that balance right. That's number two. My third is don't get seduced by shiny new objects. We are all guilty of that. You know, the other day I got an email from some company saying we've got this fantastic new piece of software that is a great way of driving traffic to your website and we guarantee you that you'll get all this extra traffic. So I went down this kind of rabbit hole of thinking, oh that sounds interesting and investigating that. And of course I wasted half an hour of my life to realize I actually, you know what, it wasn't really doing what it said it was not going to work for me at all. It is really easy to get seduced by shiny new objects, especially when the place we're standing in feels really difficult right now. It's easy to say, oh God, this is a hard market to be and I know I'll go and diversify into that market. Or this is a really hard product to sell. So I know I'll go and develop another product as well. And all that does is distracts us and takes us away from our core focus. So we are in a world of information overload. We are bombarded by social media, by new apps, new software technology, by people, by emails, by newsletters and so on and so on. And so on. So it is really, really easy to get distracted. And to that end, you should really limit the time that you spend looking at all those things. So my third don't is don't be seduced by shiny new objects. And my fourth point, which might be a bit of a controversial point, but I really believe this is don't outsource the sales function. I have seen time and time again agencies that have outsourced their sales function to an external company or they brought in a highly paid sales director or business development director who promised the earth. And they're great in an interview because of course, they're salespeople but failed to deliver. In the early days of running an agency, you are the best person to sell your business. And you may not like selling, but you are by far the best person. If you're really passionate about what you do, then when you're selling, that passion will come across and people will buy that from you. So remember that you are the best salesperson. That doesn't mean you're the only person that will ever sell, because of course you want to get other people in your company to be part of that process. And you may well one day bring a business development person in, but in the early days, you will be the person that can best sell your agency. And when you are seduced by the idea of outsourcing the sales function to an external agency, I almost guarantee you it will fail. So I want to save you a load of grief and definitely a load of money by telling you that in the early days of your business, don't outsource the sales function. And I would even question a larger business if they were outsourcing it to an external party, whether that would really work. Honest to God, guys, today I just feel like things like telesales just doesn't work because it kind of contradicts that sales funnel of no like trust. So you cold calling just doesn't work. You have to find other ways. Not that I'm suggesting outsourcing the sales function just about cold calling. It's not, it's about everything else. But just remember, you are the best person to represent your business and you are the best person to sell your business because people will pick up on the passion that you have for the service that you offer and the belief that you can do a great job for your clients. So that's number four, don't outsource the sales function. And number five kind of follows on from that, which is don't look for a silver bullet because it just doesn't exist. And what I mean by that is sometimes people believe there is some magic solution to, I don't know, running a business or bringing in new sales. And like I say, we get bombarded with loads of information which tells us that there are, but there aren't. Guys, there really, really isn't. When you see all these people who tell you how easy it is to make seven figure sums in your sleep, it's just a load of baloney. So there isn't a magic bullet to, for example, bringing in sales or to running an agency. It's all about hard work. What? There is a simple equation and this equation is simply this. Put the right effort in, do the right things and do them to the right audience and do that consistently enough and then I guarantee you you will get results. So that equation is the truth, which is do the right things to the right people and you will get results and you have to do it consistently. So there we go. That's my first five don'ts, which is don't put all your eggs in one basket, don't hire staff solely in your like, don't get seduced by this shiny new objects, don't outsource the sales function and don't look for a silver bullet solution because it doesn't exist. So, okay, my negatives, now let's turn it into a positive. Let's say what are the five key things that I think you should be doing if you want to run a profitable and successful growing agency that you're excited about and that you really enjoy the journey? So number one is get focused and revisit your vision regularly. We've already talked about the importance of developing a vision, a strategy and an action plan. If that destination is really exciting and you can get the rest of your team excited by it, then that's going to really drive you every day. That's going to get you out of bed every single day. And you need to revisit your vision regularly because things will change. I always use the analogy and I think I've used it before in a podcast, which is imagine the vision is that we want to go to the south of France and everyone's really excited to get to the south of France. And our strategy is how we're going to get there. So we're going to take a ferry, we're going to drive through Paris, blah, blah, blah. We're going to stay overnight here and there, but then we find that the ferry is cancelled. Well, what are we going to do? We're not just going to sit there and wait. So there's another ferry. We're going to look for an alternative solution. So we need to be willing to revisit and change our vision based on the things that we know at that particular point in time. That's number one. Number two, which kind of follows on from that, and I think it's really, really important, is that you put metrics in place in your agency to constantly measure the performance and the progress of your agency and make adjustments accordingly. Now, if you've got some key metrics, milestones, whatever you want to call them, KPIs in place that you are measuring on a monthly or an ongoing basis, then it helps you make really good decisions and it helps you make those decisions with confidence, such as when should we be making investments, like hiring a member of staff or investing in that new technology or spending more money on marketing. If you don't have those metrics in place, you'll always be hesitant. Yes, but should we really do that? I know we've had a good few months, but should we really do that? What happens if we don't have a good few months? If you've got the metrics in place in advance, then you can simply say, okay, guys, we've hit that metric. That means I'm now confident enough to make this investment. So that's my second do, which is put metrics in place to constantly measure and adjust the performance of your agency. Number three kind of goes right back to the beginning of this podcast, which is make sure no matter how busy you get delivering client work, that you are always investing time in strategy. Because if you don't invest time in strategy, that is future of your agency, business development and so on, then you're going to have problems in the future and you won't grow in a sustainable way. So the way you want to think about this is that if I have allocated, say, a day, a week to work on strategy, then I only have four days to do other stuff and I might need half a day to do admin. That means I've only got three and a half days a week to do client work. And when I filled that capacity with ideal client work, I need to figure out a way of getting more capacity, hiring somebody else or outsourcing. What I don't want to do is just take the day I allocated to strategy and fill it with client work. Now, I know it can't ever be as rigid as that, but that's the kind of mentality you need to have. So you have to have this idea of allocating time to strategy. No matter how busy you get delivering client work, if you want to grow in a sustainable, enjoyable and pain free way, that's number, number three. Number four is, and I think this is a really important point, remember that there is no blueprint of how your agency should grow. Let me just say that again, there's no blueprint of how your agency should grow. It's all down to what you want, your aspirations. What success looks like for you is enjoying the journey and building something that you are super proud of. Not doing something because others think you should do it or because you think you should do it. I remember years ago doing some vision work with a marketing agency and, and we meet typically once a month. So we did the vision work, we created this vision and then I went back the next month and my client said to me, I'm really sorry Rob, I wasted your time last month. Because upon reflection, that vision that we captured for my three year plan isn't really what I want to do. And I said, you know what, we didn't waste our time at all because sometimes we need to go there in order to realize that we want to be somewhere else. And what this client had done done is she had kind of articulated a vision of what she thought an agency like hers should look like in three years time. But when she played that against her family commitments and her own passion, she realized that actually that wasn't what she wanted. So remember, there is no blueprint of how your agency should grow. It's fine to say I want to be a one man band. It's fine to say I never want to have more than five staff. It's fine to say I've got a financial target of this. It's also fine to say I want to grow a thing. 30, 40, 50 man agency. There is no blueprint of what's right and wrong. The only thing that defines success is you having a vision that you are excited by and focusing on delivering that vision and making sure you enjoy the journey as you go. So that's number four. Remember, there's no blueprint that defines how your agency should grow. My last point in the do's is that you should build a network of supportive people and surround yourself by amazing, clever, talented, inspirational people. These could be people like colleagues that are running a bigger agency than you. It could be getting yourself a coach, a mentor or non exec director, an advisor, whatever, you know, a network of support. Whatever it is, it needs to give you a great sounding board and Also a platform to learn from people who have been there and done it before you and can share the good, the bad and ugly the ugly to help you avoid making some of the mistakes that they made, but also make sure that you enjoy the journey. So there you go. That's my five, my five do's. So, number one, get focused on your vision and revisit it regularly. Number two, put metrics in place so that you can constantly measure the performance of your agency and make adjustments accordingly. Number three is to allocate time to strategy, no matter how busy you get. Number four is remember, there's no blueprint of what defines success for you. It's different for everybody. And my fifth point is build a network of great, inspiring, supportive people around you. Okay, so you know what? These have come about from my own personal experiences of things that I wish I'd done that I didn't do. And they've also come about from some of the work I've done with the 350 plus agencies I've worked with over the last 14 years. So I really hope this podcast has provided some really good value for you. I want to make sure that as you grow your agency, that you do it not only in a profitable way, but in an enjoyable way as well. Because, you know, when we're led just solely by money, we're never going to do our best work. We're never going to be really excited. But when we are following our passion, then money follows and it's so important that we enjoy the journey as well. Well as the destination. So that's it for this podcast. I hope you found it successful. Make sure you read the show notes while I'll put some additional links that I think are connected to this podcast. I have a growth package and a sales package on my website, which has a whole bunch of free tools and downloads. So I'll link to that in the podcast notes and I look forward to you joining me on the next episode of the Agency Accelerator SA.