How Increasing Retention Can Take Your Business to New Heights with Ethical Scaling's Ben McLellan

Hello, this is Gray MacKenzie, and before we get started with today's interview, I want to quickly thank our sponsor for this episode, textexpander. You know I'm all about standardizing processes and working efficiently. Well, TextExpander helps agency teams do both from an efficiency perspective. TextExpander saves me personally a couple of hours worth of typing each month. And when you magnify that across our growing team, the time saving adds up. But, and this is the cool part that I didn't anticipate when I first started using Text expansion tools seven or eight years ago. TextExpander keeps our messaging consistently on point with the right spelling, language and formatting. So we've been able to eliminate a ton of simple mistakes and copy paste mix ups by rolling out textexpander across the team. I've actually got a video that'll be up on our YouTube shortly with a bunch of my favorite use cases. But for now, I want you to head to textexpander.com podcast and you get to lock in a 20% year one discount for all Agency Journey listeners. Again, thanks to Texas Banner, both for their sponsorship and the impact they've had on our team. Now let's get to today's interview. All right. Welcome back to Agency Journey. My name is Gray MacKenzie. I am one of the founders here at Zenpilot. And this week I've got the pleasure of bringing on the founder of ethical scaling, Ben McClellan. Ben, welcome to the show. I'm excited to have this conversation.

Yeah, thanks for having me, Gray. I'm looking forward to it.

Why the name Ethical Scaling?

That's a great question. How much time do you have? It's funny, man. When I look back throughout my life, I've been someone who's always wanted to do what they say they're going to do when they say they're going to do. It is really defined as integrity. And so as I was looking at, like, how do we brand this thing and what makes sense, the ethical piece, it's not, to me, it's not just about like doing the right thing and running your business ethically. There's also this kind of context for me around building a business that actually supports the life that you want, you know, so, yeah, we want to be good people and do things the kind of the right way or you know what I mean there. But I think a lot of times as business owners, we can kind of lose sight of like, why are we building the business or why are we pushing to grow? And so in my experience that just leaves a lot of owners kind of lost and, like, confused and burnt out and things like that. So, you know, ethical scaling is like our way of trying to support business owners with, you know, running a healthy organization, having good culture, having. Having the right team, but also, you know, having that kind of fulfilling journey for themselves, which I think can be lacking a lot of times, for sure.

All right, well, that was. That's question number one. We'll go more into that concept. We should give people a sense of what you do and who you are. So you guys work primarily with. With entrepreneurs, business owners, and you're focused really heavily. I mean, really, there's a lot of overlap between. Or like, people would look at it from the outside and see a lot of overlap between our two businesses. We're both focused on how do we consistently get great work and great experiences out the door for teams. Obviously, we approach it from a project management first mentality, but we're both. Our two kind of service sets play really well. Like, you kind of need both sides of the. Of the coin to be successful. So why don't you just, in your own words, what are the main things that ethical scaling does?

Yeah, for sure. So. So our main offer is what we call the raving fan formula. And so, you know, we work with online businesses, both agencies, and coaching consulting programs. It's really around creating amazing client experiences. Okay, so little different, you know, to me, you guys are more infrastructure, software, you know, project management, flow. Like, that's an oper aspect, just like we are. But we're very focused on, like, how are you onboarding your clients? You know, what are you training them in any way? If so, what does that training look like? Even if you're an agency, you know, sometimes you got to train clients on what they need to do to make your. Your process work. How are you tracking, you know, your client journey? Are you understanding the peaks and valleys that your clients will go through based on, you know, you having taken clients through that process and then setting up your support systems according to those peaks and valleys, you know, and then we look at like, hey, how's your team functioning? You know, do they have KPIs? Are they clear on their targets? What's their meeting cadence? How's their communication with clients and with each other, those kinds of things. And then the last area that we work on is really, we call it the profit multiplier. In agencies, that's more of like, how do we retain clients for long as possible? You know, in coaching consulting, it might look like how do we take people from an initial engagement to higher level engagement, Things like that?

Yep, that makes a ton of sense. I former podcast guest and real good, real good friend Mike Lisavetsky from Juice. He just tweeted basically, like, too many agencies are trying to scale with adspenders. Not enough agencies are trying to scale with customer attention. I was like, that's a good way of putting it that we all. So many agencies, I mean, you've seen the churn and burn. Just say we'll pour money into the top of the funnel to get people in and hopefully retain them long enough to make our money back and some profit. And then there's not enough attention put on the back end.

Yeah, 100%. And I think it's a trap we can all easily fall into because it's like, oh, we need to keep feeding the machine with new. Right. And you know, it's, it's funny, the other day I gave a presentation on this, this kind of stuff, and I was showing these business owners, you know, if you took your retention from your quote unquote, front end offer, what, whatever that is, could be an agency, could be a coaching program. If you go from a 10%, you know, retention up to a 30% retention, your business grows by 46%. Like, if you change nothing else, pricing, same number of clients, same owner's composite, same everything, your business grows by 46%. And it's like most people, even me saying that won't totally get the impact of it until you start to experience like, wow, I focused on retention and like, our business broke through that ceiling we've been at for six months or a year or whatever it is. Right.

We can explore this in a lot of different ways. But actually, I do have a question I want to ask around the retention side. But before we get there, let's go through your background a little bit so people understand where you've seen where these principles come from. Because the experience obviously shapes a lot of that insight.

Yeah, for sure. Initially, my entrepreneurial journey started in personal training and yoga. So I ran a personal training and yoga studio for about six and a half years. That was my own business. And, you know, we were successful by those types of business standards. You know, we weren't doing like seven figures or anything like that, but we were profitable. You know, I was pulling six figures a year in salary as the owner and like, it was a nice kind of stable gig for me. But I sucked at marketing in that phase of my life. I still don't consider myself a great Marketer. But I always had trouble getting new people in the door. What I was a master at, though, was retaining people. And I had some personal training clients for like 12 years. Like, no lie. And not just one or two. I had like, you know, a dozen. So, you know, and I didn't even realize what I was doing at the time, honestly. Like, I didn't have a method and I didn't break it down to, like, explain it to other people. But, you know, so I ended up selling that business. And then I started to get into Facebook ads and I started my own small agency and, you know, did 8 to 10k a month, something like that, at its peak. But then I started to get on into the online coaching world and I made my way up to being the client success director at Traffic and Funnels, which, you know, huge company. I was overseeing like 250 active clients at a time at kind of my. My end phase there. And so, you know, that experience, I literally took over a thousand people through that process that we had there. And it just taught me so much around, like, what do fulfillment systems actually need? What do they not need? What's the most valuable thing? You know, all of that. So the combination of having my own business and understanding how to build relationships and retain people, clients, plus being a traffic and funnels and having that kind of experience led me to, you know, kind of putting this raving fan formula down on paper and creating an actual process around it.

How did you guys traffic and funnels in terms of retention? So I'm assuming when you're saying a thousand people through, they're going through the entry level traffic.

Yeah, the front end. That was a front end program.

Okay. Yep. What were. And I don't know how much you're allowed to reveal from. From that experience, but in terms of people, like, what was the conversion path in that kind of ideal fit? Someone comes in and goes through the initial program. What. What does that flow look like?

Yeah. So you mean like, what was our cadence to upgrade them or.

Or both? Like. Yeah. So what was the initial offer? Was what, 8k, 9k, 10k somewhere in.

Yep, 10k offer. 10k offer.

Yep, 10k offer. What was there a natural upsell for most people? I'm sure there were probably a couple different paths.

Yeah, I mean, there was really one when I was there, there was a backend mastermind. And when I was there, I think we were doing six months and the price point varied a little bit. I think it started at 12k and when I left, it was up to like 24k or something like that. So essentially it was for people who had gotten some kind of solid result in the front end program and, you know, they were ready to continue growing their business, you know, and there would be people that we didn't invite to the back end program, which is, you know, which is important, like, who do we want to serve long term versus who are we okay with serving short term?

So even there you're more than doubling the LTV if, if folks enrolled in the next. The back end or the second, second stage.

Yeah, absolutely, absolutely.

Do you, in your work right now, when you're working with agencies, do you work with any agencies who are not primarily retainer focused?

I'm trying to think through our roster.

You know, I guess the gist is like the main assumption that you're primarily working with agencies or working with agencies on a retainer model. Is that the right model? Most of the time, yeah.

Yeah. I mean, and even for me, like when we work with clients, we don't do pay in fulls, which some people would be like, are you nuts? But, but for me personally, one, I like recurring payments. And just knowing, okay, we've got 20 clients for the next six months and they're each paying 4k a month or whatever it is. And like, okay, cool, we can build on that, but we have a solid foundation. Right. So I actually love that. And there's also this kind of accountability of like, hey, each month, how are we doing, you know, producing results or how is our relationship with this client going? You know? So with that said, I do think that it's smart for agencies to do usually like a four month upfront kind of agreement, like, hey, we're going to work together for the next four months. I mean, because you've seen it like, how many agencies can get a client, you know, where they want them to be in like 60 days? Like really freaking hard to do that. Right.

What do you think? So there's a natural psychological aspect that creates a lot of churn, which is, you know, dopamine kicks in a lot stronger when it's new than when I just keep serving the same thing and get the recurring checks. I'd much rather get the new check, even if it's a little bit smaller because it's new, like purely because of the phenomenon of novelty. But where do. I mean, what are agencies specifically getting wrong and around client retention right now?

Yeah. So clear communication and relational KPI. So one thing that we do when we help clients with tracking is like, results are important. Right. We know that if someone's not getting results, they're probably not going to be happy. But we've all had those instances where we got amazing results for someone and then they left and we're left scratching our head going, like, why would you leave when you're getting a 5x ROAS or whatever? It can be puzzling. But what we forget about is that the relationship can be as important, some cases more important than the results we're getting for clients. And with that said, we work with something called we call client archetypes and basically identify four different types of general. You can stretch that or shrink that down or whatever you want. But what we also see agencies doing is like working with everyone in the same exact way. And so if someone's more of a controlling type, you're going to want to treat them a little bit differently than if they're like more of a follower. Right. Or if they're a warrior, you're going to treat them a little bit differently than if they're just a pure doer archetype. And so I think that's where a lot of agencies are kind of missing the boat. In fact, we're working with someone now and they've got just an amazing head account manager. She's brilliant with processes and making sure the team has what they need. Where she's a little bit lacking, though, is she doesn't have a coaching and sales background to be able to say if you're having trouble with a client, how do you help your account managers navigate those relationships and those tough conversations. So that the human side is usually where we see the biggest challenges. For agencies that are having trouble with churn or not retaining what they want.

Makes a lot of sense. I've always looked at it as you get three main. Like, there's three fundamental reasons that agencies lose clients. Everyone thinks of results. Then the next one is contacts changing. You know, a new contact comes in, they don't necessarily like you or dislike you. It's purely that they've got a connection with someone else who they've worked with before and they bring them in and replace you. Or your key champion goes away. And the rest, nobody else happened to like you, like you thought that they liked you. Which is where I'd always encourage people to try and develop multiple points of contact internally. You don't want to be dependent on one key stakeholder. And then the third thing is expectations. Are you setting expectations correctly? And if you don't intentionally set expectations, you know, it's up to it's. Pandora's box in terms of what expectations are and it's very hard to hit a moving target. And of those three, everyone thinks results are the most important. But in the short term, results are the bottom of the obviously long term you can't get away with not delivering. But in the near term, if we're talking three to six months, results are at the very bottom of the list in terms of why churn happens. And I think the ARC type thing is, I mean this is the fundamental training that every account manager should have in an agency and 0% of them actually.

Yeah, yep, yep.

How do you like in terms of how you guys are delivering services and obviously the site is ethical. Scaling.com we'll link that stuff up so people can track you down and, and can learn more. But in terms of how you roll that, hey, we've identified, here's the types of people. How do you transfer some of that knowledge of how account managers should interface with clients? Like how does that get distributed to teams that you're working with?

Yeah, honestly what we typically do is just a short training with the team of account managers and it's not, you know, so my brain is like super simple, you know, like I'm a simpleton so I need complex ideas to be broken out down into very simple things that I can retain. So I, I thought, you know, Jay on my team and I kind of tag teamed on this and, and I've studied like not, you know, I haven't done like the Myers Briggs and all that stuff but I've studied humans and like energy and what I'll call constitutions or personalities for, for years and you know, even through the lens of like Eastern medicine, like traditional Chinese medicine and stuff. And so that has kind of helped me to understand like, oh, this is the kind of type of person I'm working with here and it helps me to relate a lot better to people. So we made that just into a super simple training and anyone on our team can, can deliver it and when we do that with agencies, you start to see like the light bulbs going off like, oh, that's why I struggle to connect with Joe because Joe is like this type and I'm treating him as if he's this type, you know, so it's really powerful but it's like, you know, super simple.

Yeah, that makes sense. Are you plugging in any feedback loops with most of the teams that you or what are the main feedback loops that you're plugging in?

Yeah, so we talk about, you know, whenever you have like, let's say most, most agencies are going to have a one to one call with clients on some regular cadence. Right. At least monthly. So we, we actually encourage our clients to get back to that expectation piece on every one of those touc. So it's like, hey Gray, when we kicked off a month ago, this is what we talked about in terms of what you wanted and here's where we are. How are you feeling about that? Any feedback for us? And so obviously there's a vulnerability there that has to happen. But we've found that the more regular your cadence is with those kinds of things, the easier it is to fix issues or get things back on course and to retain clients for longer. Even with something as simple as that, almost every call like some kind of check in, even if it's quick, like just on how things are going. And then we love something that we call a strategic review. So you know, like in our world that be about every 90 days. If you're doing a four month engagement, I'd probably do that every 90 days, you know, because then it gives you a chance to kind of check in where you are, results you've gotten, where do they want to go next type of thing. And it even can queue up the next engagement, if that makes sense.

Yeah, that does make a lot of sense, that question. Nobody likes to ask that question. How are you feeling about that, who it is and even which book, which is silly, it might be in Prince Caspian. Have you ever read the Chronicles of Narnia?

Yeah, man, years ago. 100 years ago when I was 12.

Right, right. Yeah, right. Yeah, but there's, I forget who says it, but basically like if there's a WASP in the room, I want to know where it is. And it's the same. It's the WASP in the room principle. It's if there's a problem, not knowing about it only. Only makes it worse, not, not better.

Yeah, 100%. And that. And that's why like even, you know, some conflict resolution training for your account managers can be really powerful. It's like you don't even have to do it yourself. You know, I'm sure there's all kinds of resources, classes online, like things like that, where you can just put them through that training and really empower them.

Are there structural things in engagements that agencies consistently give? I mean this is something, and you and I have talked about this before in our business right now we've got these three stages, right? You get the system design, our blueprint, the implementation and then Support on the back end. And that support has been the hardest thing for us to figure out. How do we not overcomplicate our business, but how do we also provide for the handful of archetypes that we have, Provide the right solution for each of them is that, hey, we're doing a quarterly audit or we're actually coming in and we're being an interim PM champion. What is the right solution for most teams look like so that we're supporting them? Well, long term. So we're a little atypical than the normal agency in that sense, where there's a clear project, but it's not even a website design project, where it's like, yeah, on the back end you're going to need hosting or whatever. We're not necessarily part of the long term solution, but we want to be there for the folks who need it. But for agents. So maybe we're a bad example, but for an agency, are there structural things that we're doing wrong in terms of how engagements are put together, pricing, packaging, what we think is valuable versus what clients actually care about?

Yeah, it's a good question. I think, again, taking the time to slow down and actually understand what's most valuable to the client. Like you literally just mentioned that most of us are terrible at that. Right. We're like, oh, I created this awesome thing and I'm going to pitch it and then it's like falls flat and you're like, oh, what happened? It's like, well, there's no feedback loop there. Right. So I think that it's so vital and I would say for agencies like continuing to get feedback around what's most valuable in working with you as an agency that allows you to adjust your offer or your support or just refine things in a way where you get to a point where it's like there's very little to fix or adjust in your delivery because you've been getting that consistent feedback.

Yeah. What's funny is clients will always categorize you so much easier than you ask any of us to define what our business does. And we've got like, well, we do this and we do that. We do this and we're good at this and we're good at that. And it's like, I've got 74 different things, I'm trying to condense that down and maybe I can get it to five or six. And then you ask a client and they're like, yeah, you guys are the only ones who actually do click up for agencies. Well, that seems really simple to you. And you almost get a little offended at first. No, that's too simple. We do a lot more than that. If that's how they think about you, like focus on what they actually value and care about and deliver whatever. The thing is that you've realized your insight that they actually need deliver that under the guise of. In a lot of ways, click ups the Trojan horse in our business model. Under the guise of here's what you're interested in, here's what you came to us for, here's what we're actually, I think now this would be maybe not the most ethically way. Ethical way to say it, but there's an element that I think is ethical of sell them what they want, give them what they need. Where you're providing both. Here's what you want on the surface level, but really that's just your diagnosis, your self diagnosis of what you think you need to get the outcome that you want. And we'll help you get the outcome that you want and then show you how that's gonna play out.

Yeah, yeah, 100%. And I mean, it's similar with us. You know, it's like client experience is not the sexiest thing in the world. Right. And it's like, but you know, if you can just demonstrate like the quick wins and they can have, have that. Right. It's like, oh man, this was the best onboarding call I've ever had. Okay, cool. Building the trust and rapport, you know, so. So I think same thing with agencies. It's like, hey, what are the quickest wins we can get our clients to just get them like more emotionally bought into what our process is.

Yep. Do you know the guys at Clever Profits?

Yeah, yeah, they're okay. No, I'm just kidding. Yeah, I love those guys.

I'm trying to remember what call this was. Maybe a three month call or a six month check in call. We got it. So we're working with them. We've had Adam on the podcast too. They're running our books, which is again an oversimplification of their business. But I'm the customer. I said I do. And they had a hand, you know, questions around like favorite song or there's like this random list of stuff. And the first moment that the slide went up with like, hey, here's the questions. I was like, I don't have time for this, I got stuff going on. And I was like, no, I'll tolerate it, I'll put up with it. It was an awesome conversation, like a really fun Conversation, almost no business impact whatsoever. Like, I'm sure there's some people who get on and are probably like, you know, that commercial mindset carries through a little bit longer.

Yeah.

But it actually built a personal connection and it's something totally unusual that is, is not typical to do. It could certainly have been overdone and gone too far and been like, okay, let's, let's not spend more than 10 minutes on this. But to spend five minutes on it was fun and built a cool connection. Have you seen things like that? Is there anything like that that you've seen be really effective in terms of, hey, here's an atypical thing that has a high impact on relationship building?

Yeah, I love this question. So yes. And it's something that we do. So for us, our lead core value is humor. And if you don't have a sense of humor, I don't really want to be anywhere near you, let alone work with you as a client. So oftentimes, like, you know, if someone reaches out to me in messenger as an example, like, my first thing is going to be some kind of like joke or jab or whatever because it acts as a filter for us. Right. Like right away. Now look, obviously sometimes people can be having a bad day, whatever, so it's not just like, oh, they didn't laugh, like I write them off. It's not that, but I use that as, as a bit of a filter to go like, is this our kind of person or is this maybe not not the right fit? Because if you're going to work with us, like, humor is going to be part of the engagement. And so if you don't like that, if you just want to be serious, totally cool. But like, we're not going to be a good fit. So in the same vein, like clever profits, I don't know if they've thought of it this way, but it could be like the person that kind of vibes with that type of conversation is going to be their ideal person. And the person that's not, they're probably going to have challenges with along.

For sure. It's whatever you can do to get to. For some people, it's humor. For you and me, that's probably humor. For other people, you know, there's some, there's some other piece that that connection point is, but to build an actual human connection, like, hey, there's a, there's something here that we share, whether it's an inside joke. Now because of whatever it was, I think inside jokes are like, that's A secret hack. I think for you and me, for our personalities, that comes naturally, but it's certainly something that if you're more manipulative, you could probably find a way to hack. Got an inside joke with somebody that just makes such a. There's a bond and there's a connection because of that, which is cool to see. So in terms of the first thing that you come in and do in an engagement, and let's just call it the first. Either first thing or first handful of things, I'm assuming early on you're assessing, hey, what's the journey that you're actually leading clients on? Show me how you've designed that. What are the pieces, though, early in those engagements that you're finding are, hey, here's the common stuff we have to rip up, throw out, and start over with or massively redesign.

Yeah, it's almost always the onboarding process. The onboarding call flow itself is just typically not that good. You know, it could. And it can be a range. It can be like, it's too short and in the weeds, or it's too long and, like, all over the place. Or you're repeating stuff that should have been shared from the sales call that already happened. You know, so the client's like, repeating themselves from the sales call. That's one of the worst things, because then it's like, well, is the sales call team even talking to the fulfillment team? Like, you know, I got to start over from scratch. So onboarding is a big one. And I can tell you, and people might balk at this, but, you know, of the two refunds we've given over the last year and a half, both of them were. Because the onboarding wasn't smooth in our own business, you know, so to me, that's just a reminder of, like, gotta nail the onboarding. Gotta nail the onboarding. And so there's that. And I think the other one is, you know, the other big one is the communication between the account manager and the client. And, like, having the client feel like they're heard, there's someone connecting with them, there's someone that truly cares about them. That's kind of like the. The other big thing, I would say we see.

Makes sense. Do you measure? Are you guys keeping. I would assume you're probably building up an aggregate of data here in terms of average client retention rates. Do you guys see. Is there, like, a number in your experience that you're looking at as, hey, here's an average agency retention timeline.

Yeah. So, you know, it's. It's kind of the, the standard that, you know, the 15% churn number, like, it's, it's pretty standard. You know, like we have one client who will turn like 25% and then we have another one who's like 5%. So industry definitely has, definitely plays a role, you know, like we work with a solar agency and like that, man, that's like, I don't, I can't fathom how anyone would want to serve that market. No offense to anyone in the solar market, but it's like, it's just, it's intense. There's a lot of people, there's a lot of ups and downs in that industry itself, you know, so, yeah, that number in the agency world has kind of rung true from what we've seen.

Yeah, makes sense. All right, I didn't prep you for this question at all, but this is one of the, one of the last questions I always ask people.

Yeah.

Are there any. And this is the tactical. This is the tool side of me coming out. Are there any lesser known tools that you guys use in the day to day and just love.

That's a really good question. I don't think it's lesser known, but we love ghl, you know, to give them a little, a little shout out. I have not personally used ClickUp, but, you know, if you guys, I swear by that, then I'll be on board with that. I'm trying to think what else. I imagine a lot of agencies are using Slack for client communication. We love Slack. I think where a lot of agencies run into issues is where they're not setting the expectation appropriately so they'll go, oh, well, slack sucks. It's like, well, slack doesn't suck. You suck at setting expectations. So instead of, you know, and same thing with project management. It's like, oh, this software sucks. Or this one sucks. It's like, well, how are you utilizing it? So I think, you know, I don't have any, like, great tools that are probably flying under the radar, but I do think that Mentality shift can be really powerful of like, well, it's not necessarily the tool. Sometimes it's the tool. But like before you just jump to a new tool, you know, ask some deeper questions.

For sure. Well, high level. I don't know, I think it's maybe been mentioned one time so far. Obviously we've had Sean on the podcast before, but that's a, that's a great one as well. You know, you hear a lot of HubSpot and pipedrive.

Yeah, yeah, well. And high level does not really do project management so but like in terms of pipelines and marketing you know an all in one type of solution outside of project management like I love it.

That's awesome. Yeah cool. Well we mentioned the website ethicalscaling.com Ben anywhere else you want to point people here?

No I mean if anyone wants to connect with me on Facebook I'm more than happy to connect there and also we do have some I have a training on archetypes so if anyone wants that I'm happy to just share that training it's pretty straightforward but I think think really valuable especially in the in.

The agency world so that'd be huge we'll for sure put in the site we'll put we'll see if you get too much spam if we put the your Facebook profile probably not right in the show notes as well so make sure that's all in the show notes for this episode But Ben this has been awesome. I appreciate you coming on man. Thanks for your time.

Yeah thanks for having me It.