Five Mistakes That Stop Agencies From Scaling To $10 Million

I have sold three agencies in the past 12 years and I work with 550 agency owners on a monthly basis. And there are five critical mistakes that prevent them from scaling past $10 million per year or more. In this video, I'm going to go over these five things and how to fix them in just a step by step, very transparent format. So the first thing that prevents people from scaling is they don't charge enough money, they have improper pricing. And charging more money is so powerful because every increase in price is just pure margin that money can be reinvested in better hires, paid ads, more outreach, better content, software and tools, and much, much more. So there is an ideal pricing formula that I found and it goes something like this. So you should have a minimum effective hourly rate of at least $250. So that means if you charge $2,500 a month or something of that nature, it should take you 10 hours or less to fulfill. If you charge $10,000 per month, it could take 40 hours and so on. The reason that you need to have this $250 effective hourly rate is because once you take into account the ad spend, the customer acquisition cost, the labor costs, software costs, salaries for non revenue producing roles like HR Finance, that sort of thing, the software, the tools you use, the appointment setting costs, closing costs, and of course taxes, there is literally money left over to scale if you're currently charging under $250 per hour. So what do you do to solve that problem over the next month? You can use a tool such as Clockify or there's many others to try to get an accurate read on how much time it takes to fulfill for each client. So if you have four employees on X project and it takes 10 hours each, that's 40 hours on that, you better be charging $10,000 a month or more for it to maintain in line with this effective hourly rate. Once you have that data next month, try to reduce the time it takes to fulfill for the client while maintaining the similar quality by building internal processes, tools, AI systems having higher standards and guidelines for your and consequences for not fulfilling for your employees and that kind of stuff. And don't stop improving, don't stop becoming more time efficient until you have reached that $2,500 per hour or $250 per hour or more. And for all future clients, come in at pricing using the data that you have at this effective hourly rate. The next thing that I see all the time in my view is one of the dumbest mistakes, but a very Common one. So this mistake has to do with focusing on one channel and sticking to it and not utilizing the four main customer acquisition channels. The people who preach focusing on one channel and sticking to it in 99% of cases outside of Alex Hormozi are trying to sell you a course or a service on the exact thing that they are preaching. People say you have to do outreach only. Oh my God, they sell an outreach course. How about that? Truly amazing. So the truth is that lead generation is like a machine, and all of the possible client acquisition methods are like a cog in that machine. If you're missing enough of the cogs, the machine ceases to work. So the four main buckets of client acquisition are paid ads, content outreach, and partnerships. And then there are a lot of subcategories in each. For example, in content, you have YouTube, LinkedIn, Twitter, Instagram, Facebook, and paid ads. You have meta, YouTube native, just, you know, job boards who name it. So, for example, if someone has seen your paid ads and content before and they receive a cold email from you, they're much more likely to respond to that outreach than if they hadn't seen paid ads and hadn't seen content before. Likewise, if someone clicks on your paid ad and there's a bunch of useful content on your profile, they're much more likely to click the link or take whatever action you're trying to get them to take in comparison to if your profile was dead and bare. So, like, what do you do about this? What do you do to make sure you're taking advantage of all four client acquisition methods? I broke it down to nine key deliverables that should be met on a weekly basis. There could be more, but these are the most basic. Three new ad creatives per week, three YouTube videos per week, 25 short form tweets per week, 10 long form threads that are cross posted to LinkedIn and Instagram as carousels. Seven short form videos per week, five newsletters per week. Five hours of prospecting and networking with potential clients every week, as well as five hours of prospecting and networking with potential partners. Whether that's media partners, whether that's referral or white label partners, doesn't matter. And then follow up with your entire CRM twice per week. At its most basic level, people not doing this is preventing them from scaling. You don't necessarily even need to be the one in your agency that does these things, but you as the owner need to make sure that these nine things happen every single week. And once you have all of these traffic, you need to sell them something. And that leads me to the next point, which is 99% of agencies don't scale because they only have one offer and that offer is their main high priced recurring service. If you do email marketing, it's email management. If you do Facebook ads, it's creative and media buying. Do you do SEO? It's whatever SEO people do, I have no idea. And having different offers is so important. You want an offer that you could sell to every level of the target market. If you don't, you're only selling to the 1% that is currently looking for your services, has enough money and needs it. The other 90% of the market have nowhere to go. They're just not monetized. So what do you need? At my previous agency, to give you an example, it was a landing page and CRO agency for E commerce. We had seven different offers. We had our main recurring Service which is 8 to 15k per month. SE or CRO, that was a very small percentage of people who could afford that and need that. But that is the backbone of the agency. We had an intro offer which was a landing page for 2,500 or three for 5,000. This was a great step to get your foot in the door. So if someone bought a landing page, it worked for their paid ads. Very easy to say, okay, I'll do this for you on an ongoing basis site wide. The next was our referral and white label partnerships. So I had 77 different Facebook ad and Google Ad and Native ad and TikTok ad agencies paying me 5k per month for basically unlimited landing pages for their clients because they need landing pages for their clients or their ads aren't going to work and they're going to get fired. It's another one. I had a similar amount of referral partnerships where they didn't necessarily want to white label me, but they can refer into me. It's much, very easy. The next is I had a course that cost 1497 on how to make a great landing page. I increased the price of that later, but most of the sales were at that 1497 mark. I had a program which is basically just a CRO focused program like a lot of huge brand owners who had an internal team and just kind of wanted a second set of eyes join that same with a lot of other landing page and CRO agencies who wanted me to help them fulfill for their clients join. That kind of a little bit of competition there, but it's fine. Then I had affiliate commissions where tools like webflow and convert.com and clickfunnels. Then I had a digital product which is a hundred landing page templates built in Webflow for 97. So you can kind of see here that no matter what or no matter where someone adds, whether they are an actual client, whether they're a similar agency, whether they're small, big or huge, I had something to offer them. And that's not the case for most agencies. If you're looking to do something like this, make sure you have one or more of each of these seven offers so you can promote them all at the same time to different levels. If you have a form on your website that you know has conditional logic like Typeform and they say, okay, I'm at this revenue level, you could send them to a page with that offer and then vice versa. So you want to have that recurring service, that intro offer the referral and white label partnerships, the courses, the programs, the affiliate commissions, and the digital product. You want to have all of those or so you're not fully monetizing your time, target audience. And then once you have all this traffic and offers, you need good, competent people. And that comes from training. So once agencies start generating leads and getting all these clients, they falter the most when they have to build out a team. And this is especially true with single like founder agencies and even co founder agencies. If you have three, four different founders, it's not a big a deal. But it's always a constant balance between getting clients and doing the actual work. So like, what do we do about this? This was by far my greatest weakness. For the first seven or so years of my career, I did not know how to train people and I'm prone to somewhat crazy behavior on, on occasion. And I never keep or kept employees for long. So the three things that I did to fix this, and I found out about these things over time. The first is every Saturday and Sunday, I spent four hours making checklists of every single task that I did on a weekly basis in my agency. Step by step checklist, super in depth. Then I would train people for two hours per day, Monday to Friday, by going through the checklist in front of them, doing the task using only the checklist, and then having them do it back to me in front of me using only the checklist. This is the essence of training and the essence of skill transfer. Once they're able to do it back using only the checklist, they basically have been trained. The next thing I did was the start, stop, keep method on a weekly basis. So every Friday I would Basically go over and tell every employee that I'm responsible for. Sometimes there's managers who would do this for their employees too. Three to five things that they should start doing, three to five things that they should stop doing, and three to five things that they should keep doing. This is a great way for a low pressure and a low stress, very time efficient way to do feedback. And over time, especially if you do this daily, in their first 30 days, people start doing exactly what you want and it's a very good way to train people. The final thing I did was insert an hour of learning and studying each day for every employee. So that was 9am to 10am local time. Basically they were to watch YouTube videos, go over internal training, read books, all that kind of stuff, and then write up a small report of what they learned. This gets them in a great mindset and a super high leverage for all of us involved. They're able to learn and become much smarter and much more capable and they become much greater value for money overtime. If you hire someone at 60k per year and all of a sudden you know you put 200 hours in training over them over the course of you know what you're doing with them in this one hour per day, they and now they can basically worth 120k or even more to you. That's very good example of value for money labor leverage. Most employees and agency owners never train anyone to do anything and as such they never get better value for money over time. The final reason agencies don't scale is more of a mindset than anything else. And that has to do with margin. Most agency owners are not comfortable reducing margin whatsoever, but it is inevitable that you need to do so. If you want to scale, you are not really going to get anywhere long term while maintaining 70 to 80 or even 90% margins. You need to reinvest and stop taking so much money out of the business. If you don't, you're never going to break the threshold where your agency is now an asset instead of a job. It's just how it is. I give this advice because I have been there myself. When I went to scaling mode at my previous agency, we went from 85% margin with me spending a lot of money and taking a lot of money out to 20% margin in just a six week period. That came from increasing ad costs, hiring appointment setters, hiring closers, a sales manager, a lot of new team members, a CFO and a coo, as well as some other costs. So on paper my monthly income went from about 175k because this was about 200k per month revenue down to 35k the following month. If I was overextended and needed to take all of that money out, I would have been freaking out. But this set us up with these increase in expenses to go from 200k ish per month to over 900k per month in the following four months. And then my monthly income, so to speak, was actually the same as it was before. But now I have a big agency that's actually an asset that I actually could remove myself from. So what should you do? So keep your monthly expenses as low as possible. So it's not a big shock when you have to scale. This is more of a thing you just have to accept mentally. It's not really something on the to do list. You just have to get used to it and realize it. You will only make potentially less money for a short while. Because if you're hiring to scale up, it's because you are going to accommodate more clients and get more revenue. You're not just going to screw around and increase your expenses for no reason. So you're gonna kind of like be doe here now your profitability is gonna go a dip, but then it's gonna go all the way back up as you get more clients. This is my list of the five main things that screw people over and prevent them from getting to $10 million or more per year. I hope it was valuable and I'll see you in the next one.