Freelancers’ Show

The Freelancers' Show discusses the challenges that freelancers face. The panel includes technology freelancers and entrepreneurs with many years of experience.

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224

224 FS Building an Agency with Drew McLellan


0:45: Introductions

2:40: Building an Agency

  • Adding employees
  • Traditional vs 1099 model

7:30: Where you’re spending your time

  • Running the business vs. doing your craft
  • Risks of agency vs. risks of freelancing
  • Mistakes agency-owners make

11:00: Financial metrics

  • 55% salaries, 25% overhead, 20% profit
  • Smart hiring

18:40: Freelancing is a people business

19:30: Agencies must embrace all things digital

  • SEO
  • SEM
  • WordPress
  • Art vs data and ROI

23:15: The future of agencies

  • Demonstrable ROI
  • Pricing and value

27:00: Bringing on a partner

  • Skill sets
  • Types of leadership

33:40: Where to begin

  • Marketing
  • Time investment

37:20: Having a vision: What is your best life?

  • The Reporter

Picks:

Drip (Philip)

Course on Drip (Philip)

Having a vision for your business (Reuven)

Dev Shop Marketing Briefing (Reuven)

12 Week Year (Charles)

A Conversation of Character (Charles)

Who (Charles)

The Radical Leap (Drew)

Traction (Drew)

Entrepreneurial Operating System (Drew)

Wunderlist (Drew)

Agency Management Institute

This episode is sponsored by

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TRANSCRIPT

Charles: Hey everybody and welcome to Episode 224 of the Freelancer’s Show. This week on our panel we have Philip Morgan.

Philip: Howdy.

Charles: Reuven Lerner.

Reuven: Hey, everyone.

Charles: I’m Charles Max Wood from Devchat.tv. Quick shout out that I am pulling together events for next year. If you want to go to Freelance Remote Conf next year because you missed it this year, check it out.

We also have a special guest this week and that is Drew McLellan.

Drew: Hey everybody, glad to be here.

Charles: You want to give us a quick introduction?

Drew: Short introduction, I basically have worked at or for advertising agencies my entire career. In college, got hired from an ad professor to work at Grey Advertising in Minneapolis. When I graduated, I left Minneapolis and went to New York to work for Y&R.

Throughout the course of my career, I’ve worked for lots of agencies across the country before starting my own in 1995. We’re cruising on year 21. I’m hopeful that that means things are going well.

About a decade ago, I became the owner of an organization called Agency Management Institute. What we do is we help agency owners run the backend of their business better. Lots of agency owners are accidental business owners. They started freelancing or they got downsized, and they all of a sudden had five employees. It occurred to them that they didn’t know how to read a balance sheet or really understand what it takes to run a business so we help them run the business side of their agency.

That’s me in a nutshell. I split my time between my own agency and running this consulting firm where I work with about 250 small to midsized privately held agencies throughout the year.

Charles: Gotcha. This is a Freelancer Show, I think most of the people that listen to the show are one employee shop. I do get the question periodically though. I have more work than I can handle so I want to grow into an agency. What should people be looking at to get started with building an agency? From there, we can go into how do you manage it and all of that stuff.

Drew: Sure. The first thing I would say is this is a beautiful, beautiful time for freelancers if they want to work in the agency space. More and more agencies are moving to a hybrid model. Used to be that agencies might have a freelancer or two on the roster but for the most part they wanted everybody under their roof. Today, with the sophistication level of what agencies have to deliver for clients, it’s pretty tough for them to have all of that talent under one roof so they’re much more open to ongoing freelance relationships.

The good news for your listeners is agencies are a very viable client opportunity for them, for both a short term deal and also a very long term deal where they sell a block of hours to an agency in an ongoing basis.

Being an agency space doesn’t necessarily mean today that you have to add employees. What I would say to anybody listening, if they’re sort of teetering on that brink, once you add one employee, you might as well add ten. There’s all kind of things that come into play when you start adding employees. I will say that we serve several agencies that are completely virtual and actually operate completely on 1099. They have contracts with their teammates but they’re actually not employees. There’s more than one way to skin the agency cat.

Charles: Let’s say that I start pulling people together. I guess I’m looking for kind of a best practice. Am I better off pulling in subcontractors or am I better off actually hiring employees and building out of that model first?

Drew: As always, you have to start with the end in mind. I think part of what you have to decide is what are you trying to build and what is your timeframe. If you’re relatively young and your goal is to build a business that will support you for the next 20 or 30 years, it may very well make sense to build a more traditional agency with brick and mortar employees that you can train to do what your agency’s way, that you can build up a base of business, that you can chase after business together, and that you have a bunch more unified vision for what you want.

Also, I think you can work with bigger clients. The larger clients aren’t as excited about working with a hot pudge of freelancers who are sort of loosely knit together.

If your goal is to work for local businesses or regional business, I think you can get by with the 1099 model. If your goal is to go after national sized accounts, then I think you probably do need to build at least the hybrid of some bodies in house as employees, and then you’re hiring for specialists.

I think if you also want to build something big, 20, 30, 40 people, then again you probably want to have employees. If you want to keep it 10 or under which a lot of people seem to want to do these days, then the 1099 route may be an option.

I think the other thing you have to think about is how senior of a team do you want around you. It’s a lot less expensive and less risky to build a very senior team using the 1099 model than it would be to go out and hire all of those $75,000 to $150,000 employees, especially if you’re just starting out. I wish I could tell you there is one magic best practice but that’s not the case.

Reuven: I got what you were saying. I’ve been freelancing for 20 years now. I’ve said in the podcast before when I started off, my expectation and my dream was obviously I’ll hire people and I’ll one day have this huge office towers, with gleaming large text on them, Lerner Consulting. I’ll have thousands of people working for me.

When I got to a few people, I realized wow, this is a lot of work, that is not my core interest or competency. It’s really hard to find enough work to fill many full time employees worth. I’ve now sort of gone almost all the way in the other direction. I actually have an employee that works for me but it’s on an hourly basis and the more work I can get for him, the better for both of us. But we’re in Israel so it’s not 1099, but it’s essentially the same sort of thing.

I find that makes me much calmer because I don’t need to worry about paying people’s full time salaries and making sure that I’m bringing enough income to support them. Everyone’s okay with that, I’m okay with that too.

Drew: Yeah. I think it’s a couple things. One, I think it depends on how you define success. For some people, the shiny tower with their name it is important so then you’re going to have build a more traditional structure.

I also think what matters is where you want to spend your time. If you love the work that you do, let’s say you’re a graphic designer, you’re a freelance graphic designer, and you love that work. The minute you start hiring employees, I promise you, you don’t get to do that work anymore. Now you’re working on the business and you’re running the business. To your point, you’re chasing business because you need to make sure everybody’s plate is full so you could make payroll.

When you have a team of freelancers that may pool together and create a cohesive team to go after business together, you’re really only responsible for what you can kill and eat as opposed to taking care of the 10 other mouths that are looking at you expectantly for dinner.

I think it also depends on do you want to run a business because then you should start an agency. Do you want to continue to do your craft, whether it’s writing or graphic design, whatever it might be, SEO, whatever it might be inside the agency space, then I would tell you you’re probably better off not to creating an agency because you won’t get to do that anymore.

Reuven: Yeah, that’s a very good point. I think if somebody ever told me that. Like, “Hey, if you want to build an agency, that’s fine, but it means you won’t be doing development, you’re going to be running a business.” I think I would have thought twice about it way back when.

Drew: That’s the root. When you start an agency, that’s the Achilles’ heel for most owners is they have such a hard time getting out of the day to day work because they are good at it and they are faster filling the blank that they end up working two full time jobs. During the day, they’re servicing clients and working with their team. At night, they’re working on the business, whatever that means, whether it’s accounting or HR issues, or deciding what kind of insurance to offer, all the kind of things that come with running a business.

Charles: Yeah. It’s funny that you talk about that because probably a year and a few months ago I was at that place, not with an agency but I was doing the podcast, and I was also doing consulting as a programmer. It just got to the point where I was doing two full time jobs. Yeah, it just got to the point where yeah, you got to pick one. I felt like I could have a bigger impact doing the podcast, that’s what I went with.

I’ve built up teams and I spent most of my times to go between not the programmer. It was is the client happy? How do I keep the client happy? How do I find more work? How do I make this all go?

Drew: You also have the risk factor too. Again, it’s the risk of being a freelancer is, I’m not saying there isn’t risk but it’s smaller. My agency is 12 people so my line of credit which allows me to ebb and flow with client billing and still be able to make payroll means that I have to have a pretty good line of credit. You know what, that’s tied to my house.

I think the risks are different too when you own a traditional looking business with employees as opposed to owning your own business and being the only employee, and then you subcontract out as you need more services to take care of your clients. Their pressure points are very different.

Charles: As people start to build out an agency, let’s say somebody goes, “I guess I’m okay stepping out of the programmer role, or graphic designer role, and being the manager guy.” What kinds of mistakes do people end up making as they build their agency? The lessons that they learn the hard way that if somebody just sat them down for five minutes and said, “Don’t do that,” it would’ve saved them a bunch of trouble.

Drew: Yeah. I think the metrics, the financial metrics become really important because the risk is so much greater. Understanding how an agency makes money and understanding that you can’t look at your gross billings but you have to look at your adjusted gross income so you take out all your cost to goods. That’s the money you have to spend and understanding the ratios of how much of that should be spent on people, how much of that should be spent on overhead, and how much should be leftover for profit, and managing to that every single month.

The biggest mistake agency owners make, this is true if they’re a new agency owner or they’ve been doing it for 20 years, is that they don’t adjust staff appropriately as work ebbs and flows. They wait too long to hire which really stresses out their team when they bring on new business. The biggest mistake they make is they don’t cut staff fast enough when the revenue stream is clipped. What happens is they end up going in a hole that’s really difficult to dig out of after you’ve been in it for a while.

Charles: There are two questions here. The first one I’m going to ask is the less emotional of the two because I’ve had to fire people, let people go, that’s really rough.

Drew: It’s horrible, yup.

Charles: The question I have is how do you get those numbers? How do you get to a place where you have that information so you can make those calls with the best information you can get?

Drew: I’ll tell you. For an agency, an agency should have about $150,000 per full time equivalent which includes the owner. Until your AGI, again, gross billings minus cost of goods, is $150,000, you have no business hiring anybody. You can contract that out because that falls into the cost of goods category but you should not add anybody on staff. That’s metric number one.

Charles: Can you say that again, AGI?

Drew: AGI is that you take your gross billings, let’s say I bill a quarter of $1,000,000, so $250,000 a year but $100, 000 of it goes to contract, labor, or other folks. Really, I have $150,000 at the end of the day that I have to run my business with. That’s money I actually get to spend.

What I’m saying is until you have more than $150,000, you should not have a staff person, you should be doing it on your own. To add one staff person, you need to have $300,000 of AGI.

Philip: I wonder if you say that because you’re billing at $150 an hour.

Drew: No.

Reuven: What if you’re billing less? What if you’re billing more?

Drew: No, it doesn’t matter. It’s what it costs to have an employee and still have profit built in. Agencies typically are going to bill at anywhere between $95 an hour and $250 an hour depending on their area of expertise, what part of the market they’re in, but the metric holds true because it’s really tied to salaries.

Assuming that the average salary that you’re going to pay somebody is $100,000 or less, the $150 works. Here’s why, of your AGI, 55% of your AGI should be spent on your salaries. That’s a loaded salaries, that salaries, benefits, all of that. 25% should be spent on overhead because in theory you’re going to have professional developing, you’re going to have legal fees, whether you have an office or not you might have rent, if you’re working out of your home you might be paying yourself rent, whatever that is. 20% of that should be left for profit.

Those are the metrics that you have to be watching every single month. The minute things get out of whack in those metrics, you have to make the decisions. To your point, this I don’t think is agency specific, but there’s no worse day in a business owner’s life than having to let someone go simply because you don’t have enough money to pay them. That’s a horrible, horrible day. You want to be smart about hiring.

The other companion mistake that business owners and agency owners make is they get so busy taking care of the clients that they have that they don’t have an aggressive new business program going to always keep the pipeline full so that when one client goes away you know that there are several there that are queued up and ready to drop so you don’t have to be the revolving door of the employees.

Charles: We never have talked about that.

Drew: I can’t image that you ever have. It’s a topic that no one needs to talk about, just forget about it.

Philip: Back to something you said earlier, how many agencies get in that hole and never get out? Have you seen any number about that, I’m kind of curious.

Drew: In terms of not being able to financially ride the ship?

Philip: Yeah, they get behind, they kind of take their eye off the ball.

Drew: Yeah. Here’s what happens. I take my eye out of the ball, I’m not watching the metrics, a client leaves, I don’t right size my shop, all of a sudden I have to make payroll, so I dip into the line of credit. The next month comes around so I have to dip in the line of credit more.

What ends up happening is the agency owner either stops taking a salary to pay back the line of credit or they take a reduced salary, or they’re just on the line for that huge line of credit which is tied to their house. Most agencies, they won’t shut the door but all of a sudden you’re the worst paid employee in the shop which seems like a bad plan.

Reuven: I was just called in a few months ago to help. Some investors were thinking of buying an agency. I sat down and talked to the agency owner, the owner of the CTO. I said to the owner, “In analyzing what you’re doing here, it doesn’t seem like you’re making enough to actually pay the bills.” He said, “Yeah, I did just take a second mortgage on my house so I could pay for it.” I said, “Wait, that’s a really bad sign.”

If you’re in the web field, you should be able to be making money with your business, not losing it. Like taking out loans in their house, that’s bad.

Drew: Yeah, something’s broken. In many cases, again, I think a lot of times people evolve accidentally into business ownership. They don’t really have the background to know what these metrics are and to know how to run the business. They’re great web dev people, or they’re great graphic designers or whatever it is, but in terms of running a business that’s a whole different skill set.

Quite honestly, a lot of us got into the field that we got into, I’m a great example of that, to avoid doing math and running a business. All of a sudden I was like, “Crap, I own a business, I have to figure this out.”

I was 30 years old so I was also the perfect combination of ignorant and arrogant. I thought how hard can it be and then I very quickly learned just how hard it could be. There were some bumpy days for me early on as I learned all of these things that we’re talking about but fortunately we were able to ride the ship and knock on wood, things are going better.

It’s important to understand that just because you’re good at your craft doesn’t mean you have the skills and the knowledge natively to run the business which means you have to learn from somewhere or from someone. That’s why shows like these are important because you guys are teaching people the core skills and the metrics and the things they need to know to run a better business.

Reuven: My favorite other thing that people accidentally misunderstand about freelancing or running an agency is that it’s like a people business. I think a lot of people get into it so they can deal with people “on their own terms.” Then, they find out how important communication is.

Drew: Yeah. When those people are standing between you and making your mortgage payment, all of a sudden they become pretty critical. You probably need to learn how to deal with them in a way that gets them to keep coming back for more.

Reuven: Yeah, for sure. I am still stuck on the numbers here because that was so interesting to me. Where do you see agencies making hire, revenue per employee numbers? Are there particular specialties or areas of focus that you see them doing better in?

Drew: Like the rest of the world, agencies have been forced to really embrace all things digital. Where agencies are able to charge a premium is for SEO, SEM. Web dev has become less so that, I think WordPress even with its customization has really democratized the class that an agency can charge for that. Most are building something pretty sophisticated on the backend with databases and things like that. Marketing automation or anything that’s sort of tied to mobile, agencies are able to charge their premium for. However, those employees also come at a premium price.

I don’t think at the end of the day at net’s out that those are more profitable but I do think they’re stickier. I think for an agency that’s really good at say marketing automation and really driving lead gen for a client, I think that relationship is stickier than a traditional agency who’s whipping out brand ads. From the client’s perspective, anybody can do a brand ad but not everybody can do the marketing automation, especially the programming of all that.

Saving everything up and monitoring it and being able to really show an ROI. Coming out of the recession, clients are obsessed with data and ROI. Agencies that are able really to tie their activities to lead gen and sales are the agencies where clients are coming back to them and saying, “I know that I gave you $100,000 last year but based on the results that you’ve delivered and that we can count and measure, I can play up to the sea suite, I want to give you $200,000 this year.” The more traditional agencies are not having that sort of opportunity handed to them.

Reuven: I know and I know that’s endlessly frustrating to, say, designers who are like, “No, but this is my art.” What do you say to that argument that this is art, it’s important. I don’t know how to tie it to ROI, what do I do?

Drew: I think a lot agencies are struggling with this with some of their more established older employees who grew up in the agency through the ranks when the creative kids were the cool kids inside an agency. And now, the data nerds are the cool kids inside agencies.

A lot of creatives, particularly art people, are feeling very displaced. The reality is in the agency world, art was never about art. It was really about messaging and selling something, whether it’s selling a brand, or selling a widget, whatever it is.

For a lot of those employees, if they’re not willing to advance their skills, if they’re not willing to broaden their toolbox to include some digital things, quite honestly they’re becoming really obsolete inside agencies. Now, agency owners are faced with a very default decision of I’ve had an employee for 15 or 20 years, the skill set that they have and they’re brilliant at that, nobody wants to buy that anymore. Because they’ve been with me for a really long time, they’re one of the most expensive employees I have. You talk about difficult days as an agency owner, that’s a tough one.

Reuven: Wow, I bet, just thinking about it.

Drew: Yeah. This is somebody who’s been with you for a long time, who has been loyal, who does have incredible skills. It’s sort of somebody who’s selling VHS tapes. It’s not that they didn’t serve a great purpose in their day but nobody wants it anymore.

Reuven: When you put on for looking to your crystal ball, where do you look to see what’s coming down the pipe in terms of demand for skills sets and services?

Drew: I think the big shift for agencies, and I think this is just as true for freelancers, we used to stand squarely on the marketing side of the equation. And now, we’ve got to get into the sales side with our clients.

Regardless of what our specialty skill is, or what our agency offers, or what are freelancers offer, we cannot demonstrate ROI, we’re pretty easily replaced. It’s so easy to shop for our replacement today.Geography is irrelevant, time zone is irrelevant. People are either going to buy based on results, or they’re going to buy based on price. Either you have to be able to point to results and have a dotted line from the work you did to results, or you’re going to have to get a lot cheaper to survive. Most agencies and probably most freelancers aren’t structured in a way that they can keep getting cheaper.

Philip: I never thought about that but it’s true. Most things that you buy, you expect them especially with the technology roll, you’re expecting them to get cheaper and cheaper over time. Services are totally the opposite. Maybe it won’t get more expensive, but surely you’re not going to get cheaper. I don’t want to get cheaper. It’s not like I’m able to manufacture code more easily or more cheaply. I have to pay myself, pay my salary, pay all these other things.

Reuven: From the buyer’s perspective, services are getting cheaper because Drew talked about WordPress becoming commoditized. That’s a great example. From the buyer’s perspective, there is that expectation that over time they will get cheaper.

Drew: Unfortunately for all of us, keep in mind that our buyer isn’t sophisticated enough to see the difference between the commodity version of what we do and the really high end version of what we do. All you have to do is watch television and look at the commercials that run and go, “Somebody actually paid someone to make that?”

The challenge for all of us is that while the buyer wants it to get less expensive, what it takes for us, the manpower, the people, whether it’s just ourselves or it’s a team of people, that’s not getting cheaper. Everybody wants a raise. We’ve got to keep adding more value.

I think the value, again whether you’re a freelancer or an agency is tied to two things. One, that you understand business enough that you can be a really good strategic partner, that you can really help your client think through whatever it is they’re trying to solve because that’s pretty tough to buy. Two, that you are able to tie it to results, that you are crawling inside their CRM, or you’re doing whatever you have to do to demonstrate that when we move this lever, you get this many inquiries, or this many sales, or this many test drives, whatever it is based on your client.

Those are the two things that we can do to continue to demand market value for what we sell that allows us to have a great living, have employees if we want to have them, everybody gets raises. Because cost to living isn’t going down.

Quite honestly, being smart about automating when we can. Again, a lot of agencies used to do marketing emails for their clients manually. Nobody I know does that anymore because there are tools out there that make it efficient to do. There is some automation in our world too.

Charles: One thing I want to dig into here a little bit because we talked about the direction towards agencies. Once you have your agency going, you have people that you can work with, you have the ball rolling, you got your marketing going and things like that. I found that some people do really well managing the small team or a small company, when things grow to a certain point they’re not really sure how to move to that next level. Should those people consider bringing on a partner, or a general manager, or something, or are there ways for them to learn the things they need to know in order to step in and do whatever is needed for the company to grow to that next stage or should they just keep it small?

Drew: Part of it depends on your skill set. A lot of my agencies might have two partners.  One of them is more the business side of the business. The other one is the more sales side of the business. It’s rare to find somebody who is naturally talented in everything from HR and accounting to sales, to staff mentoring and development.

I think that single person can manage a team of maybe 15 or so. The minute your agency gets bigger than 15, either you’ve got to have department heads that are taking care of a lot of the mentoring and growing of staff. You probably are going to have some administrative staff like accounting person or a CFO who’s handling both HR and accounting. You end up forming it out. It may not necessarily be a business partner but it certainly is recognizing that you can’t wear all of those hats and be good at it.

The one thing that an agency owner and/or freelancer is probably uniquely suited to do is to sell the services of that business. Oftentimes, agency owners get so quagmired in the day to day running of the business or dealing with clients that they don’t spend the time as we talked about earlier chasing after the new business that they need to keep their business viable and flourishing.

Reuven: I did this years ago. I probably been in business for myself I guess four or five years. I had about two or three employees at that point. I realized it just sort of wasn’t going the right direction so I found someone who had actually been a client before and we got along really well.She was doing freelance, COO type work. I hired her to be a part time COO for my company. It seemed really silly at the time but it was one of the best decisions I ever made. I learned so much from her. I got so much great advice that even though it’s years later, I still think back to some of the things she taught me and how useful that advice was.

I would definitely suggest to people that even if you’re not growing to 10 or 15 people, even if you only have a handful and you can afford it, having someone who has that business experience can be long term, super, super useful.

Drew: I think part of it is being really honest with yourself about your skill sets. If you look at the administrative running of a business and say either it’s not my skill set, I know what to do, I’m just not good at it, or I don’t know what to do.

Again, for some of you, it might be a business coach who comes in and just coaches you through it and helps you set up systems. For others, it might be hiring a COO. I don’t know if yours was full time or not but even hiring somebody on a part time basis that’s sort of a COO for hire that comes in and spends 10 hours a day or a week with your business, that may be enough.

I think one of the arts of owning a business is recognizing both challenge and opportunity when they’re small and jumping on them at that moment rather than waiting for them to either be a huge problem or an opportunity that’s too big for you to harness. I think that’s one of the skill sets that’s required to be a good business owner. Regardless if you have employees or not, it’s being able to recognize a) your own strengths and weakness, and b) where and when to get help whether it’s a strategic alliance or an employee, or a business partner, all of that. All of that’s a viable yes depending on the situation.

Charles: One thing that I see though when people do this, so they bring in somebody else to help them with whatever part of it they’re not good at, is that they either wind up turning the whole thing over to them and then later down the line they get frustrated because it’s not being done the way they want, or the way that it should be done, or the other thing is that they still want some of that control or at least to be involved, or to know what’s going on. To what degree do you continue to have your fingers in that pie so to speak, because it is still your business, without micromanaging the person you pull in?

Drew: I think the key to that is to define early on how you’re going to interact with each other and sort of where the roles and responsibilities are. Even if it’s just the two of you building a leadership team where you’re meeting on a weekly basis to go through issues and that you define, I think there are three levels of decision making for business owners.

The first one is I’m going to let everybody vote and what we all decides is what we’re going to do. The second one is I’m going to ask either all my employees or some of my employees for their opinion but I’m going to make the decision. The third one is I’m not asking any of you, I’m just going to make the decision.

I think when you bring in somebody at that level, you need to define what things they get to decide, what things you get to decide, and what things they even get to vote on and not. Be really clear about that because otherwise what happens, I’m sure you guys have never seen this, but otherwise what happens is business owners have this really horrible passive aggressive way of dealing with leaders inside their organization where they set them up to fail a lot of times because they’re not really clear about their communication. They cut them at the knees every time they get irritated by them or they let it fester until it’ll just explode so that becomes ridiculous.

I think it’s important to define it early on. Probably on a quarterly basis, review how you’re working together and decide if it needs revising. Again, I think it’s about being proactive rather than reactive. But absolutely, you should not advocate control of your business to anybody. Even if you have a business partner, you shouldn’t do that. I’ve seen lots of agencies where one partner basically takes over the agency and pushes the other partner out because the other partner has sort of checked out and was doing the part of the work that they loved but wasn’t really paying attention to the business side of the business.

Reuven: This ties back to earlier. You said something to the effect of an agency’s understanding of how they can benefit their client’s businesses, one of the most powerful things they can learn. Do you have pointers for people who they get it mentally but they don’t know where to begin. How do you begin learning how to help your clients in that way?

Drew: I think part of it is understanding that regardless of what your skill set is, whether you’re a marketing strategist, whether you’re a graphic designer, whether you’re a great writer, our clients aren’t really buying that from us, they’re buying business results. What the best agency folks, and quite honestly I think, the best freelancers are the ones who understand how business work and who really spend the time learning their clients business. That’s everything from how do you make the stuff that you sell, how do you find clients, how do you find employees, how do you train employees, what’s your distribution channels, all of that stuff that we think is outside of our sort of what we influence.

The truth is that marketing is everything and everywhere and we absolutely should be influencing all of that. The more you can have a business conversation with your client about whether it might be an R&D issue or it could be a technical issue, the more you could go toe to toe with them and have that conversation, the more they think of you as a partner as opposed to a vendor. It’s much harder to replace a partner than it is a vendor.

Part of it is investing time learning your client’s business and not just their marketing or their website, or whatever it is, but really expanding beyond the one little piece of it that you touch and understanding the whole of their business. Sometimes that’s shadowing your client for a day or two, sometimes that’s sitting in on departmental meetings, sometimes that’s going out to the factory floor and watching a shift. It can be a lot of different things but it’s really about taking a deep dive and investing in learning their business.

Reuven: Yeah. I think it’s important to point out that maybe an investment and maybe horrible horrors, unbillable time that you have to invest to add more value to the relationship.

Drew: Yeah. In fact it probably is. If you said to your client, “Hey, I want to spend an eight-hour shift on your factory floor and I’m charging you $200 an hour. They’re going to go, “No.” But if you say to them, “Hey, I would like to make this investment. I’m not going to charge you. I just really want to understand what happens on the factory floor so we can tell that story better.” They’re going to eat that up for lunch.

Reuven: Yup. They’ll give you a personalized hard hat to wear while you’re doing it.

Drew: That’s right. Who doesn’t need one of those?

Reuven: Exactly.

Drew: I think for people who own their own business, it’s so easy to stay in the short term of getting stuff done in our to-do list. The things that really matter, like spending eight hours on a factory floor, or doing your new business biz dev activity everyday, or continuing to listen to podcast, read best practice books to hanging out with other people who do what you do and learning from them. Those kind of investments are what will make our business successful in the long run.

Reuven: I could not agree more.

Charles: Yup.

Phillip: I’m just curious. Let’s say someone is starting off totally new. They know what they do, they know what they can do but they’re not sure what actually they’re going in. How should they decide between these different things? How should they decide whether I’m aiming to have an agency, I’m aiming at being an individual, I need to partner up with someone. What are the some of the things they can think about when making those decisions?

Drew: I take business owners through an exercise that I call the reporter. In essence, it’s answering questions as if the reporter were interviewing you five years down the road and you are super successful.

It sounds ridiculous but you actually can get yourself into the headspace of here’s what I actually want to be doing in five years. I did it many, many years ago. It’s fascinating to me that I will turn back to it every once in awhile and how many of the things that I envisioned have actually now come true down to owning some ocean front property so I can walk on the beach and strategize about my business, which I would have thought, “That’s never going to happen.”

The exercise really forces you to think into the future about what is your best life. Quite honestly, at the end of the day if you’re willing to take the risk of being self-employed, surely you deserve the best life you can give yourself and your family. What does that look like? What does that really mean? It really take your through this process of defining your work world and the lessons that you’ve learned over the last five years as you were building to x, whatever x is.

It sounds a little wowish but honestly it’s really impressive in terms of how it helps someone guide some of those decisions. The truth of it is why wouldn’t we make decisions today that will allow us to have the financial future and a professional future that we want to have in five years. If we don’t start that today, we’re not going to get it in five years. It’s not like in the blink of an eye. Every overnight success spent 20 years building to that one overnight moment. We need to start building to it now.

Charles: I’ve been reading a couple of books, the kind that talk about that one is called The 12 Week Year. Yeah, it basically talks about that. It’s like okay, then you break it down into what you’re going to accomplish over the next 12 weeks to get there. Yeah, just having that vision is so powerful.

Drew: Yeah, absolutely.

Charles: I mentioned Tom and Aaron earlier on the show because we were talking about interview valley. They actually are part of a mastermind group that I’m a part of and we’re getting together in Nashville in November. What we decided is come as you will be in 2020 which is about three or four years away. It’s the same kind of thing. Who am I going to be? What am I going to be doing? What kinds of things are really going to be me? How did I get there? What did I do?

As you build out that vision and figure out what those steps are, then it makes a whole lot more sense. It’s not, “Oh, I have this agency and I’m going to flail about and see if I can get clients.” Then, “Oh, I got money but it’s a deliberate.” “This is how I’m going to be living.” “This is how I’m going to be dreaming.” “This is how I’m going to be working and these are the kinds of things that I’m going to have accomplished over the next few years.”

It really does clear things up because then it’s not, “Oh, I need more clients.” It’s, “I’m trying to accomplish this so I need to go find these clients, or I need to tone back in this area and move ahead in this other area,” and things like that.

Drew: Yeah. It’s the equivalent of getting in your car and just driving around hoping you end up in Nashville which was your destination all along. You have to start with the destination and then you figure out how to get there. I think a lot of business owners just start driving around the block wondering where they’re going to be as opposed to saying here’s where I’m going and here’s the path I’m going to take to get there.

Charles: Yeah. It’s like from where I live, I want to go to California, California is West. If I start driving West, I’m going to drive through a whole bunch of mountains. If I go East for a little while, I’ll wind up on the freeway and I’ll get there ton faster.

Drew: Right. It’s about being intentional, I think. That starts with knowing where you’re headed.

Charles: Yup. Alright. I’m going to push us into picks.

Philip: Okay. My pick is one we’ve mentioned very often on the show which is Drip. I’ve been doing all sorts of automated stuff with them. My specific pick with them is their service which I’ve just been so overwhelmed by. I’ve been emailing them, they get back to me really quickly, they give me all sorts of suggestions. I really felt like I’m more than getting my money’s worth, although I don’t want to pay more if you guys are listening. In terms of how it’s really allowing me to grow my business in new and different ways.

I guess I’ll have another pick that’s related to that, Bren and Dawn, who we all know and love on the show, has started to come out with a new course on how you can really get the most out of Drip. I didn’t realize this. He was Drip user number two. He’s been really figuring out how to turn it and crank it, and tune it to get as much as you can out of Drip.

Between their service and his new course with some videos that have really been instructive, I feel like I’m on a whole different plane now. Just starting to find time to implement all the ideas that I’ve been getting from these various directions.

Reuven: I got two picks this week. One is squishy, one is just the idea of having a vision for your business. I’m just extending what Drew said. I feel like there’s something powerful about being able to say in one sentence to people this is my vision, it’s different than the position statement because it’s future facing and touches on things like what Chuck was saying earlier. Having an impact or what kind of change are you wanting to create. It’s different, it’s weird, and squishy. It’s different than a position statement or your core message. I’m finding that powerful and kind of communicating what you’re about.

Nothing actionable there, just it’s awesome to have some kind of vision for your business. That thing that you spend 30, 40, 50, 60, 70, 80 hours a week on, whatever it is.

Second pick, I did a Dev Shop Marketing Briefing last week on the topic of the mindset that I think you need to embrace. Some of the challenges around doing email marketing. I’m not talking about tactical challenges like how to set up an awesome campaign that converts well or anything like that.

We really spent, me and a panel of a few other folks who are very stagious in their journey with email marketing, we spent 80 minutes talking about all the kind of mindset stuff that comes up when you start actually using email marketing. I think it was great. I was the presenter so I guess I’m biased but you might want to check that out if you are curious about email marketing or if you’ve tried it but you held back from going all the way because it felt uncomfortable. I think this presentation will be useful to folks.

Charles: Alright. I’ve got a couple of books that I’m going to pick.

The first one I already mentioned is The 12 Week Year by Brian P. Moran and Michael Lennington. Yeah, basically their premise is that if you’re planning out for a year for your business, it’s just too long to really have all of the targets in sight so they advocate that you do a 12 week year essentially. You just plan out that 12 weeks and then you use your overarching vision of what you want your lifestyle, your business, and everything else to look like as a guide post so that you can plan out what you’re going to do this 12 weeks. When the next 12 weeks come up, you figure out what you’re going to do in those 12 weeks.

Another one that I just listened to on audible that I really enjoyed, It covers a lot of different topics is A Conversation on Character by Zig Ziglar. He had a few other gentlemen on there with him and they just talk through several topics about what it means to be a good person, what it means to be a good business person.They go into stuff on sales, there’s all kind of stuff in there. It’s really, really good.

The last one is a book called Who by Geoff Smart and Randy Street. I listened to it while I was in Atlanta. It discusses who to hire and how to figure out if they’re the right kind of person to hire. There’s this whole strategy behind it. It was really, really good, really interesting way of thinking about what does success look like for the role that I’m hiring for, what skills do they need for that, what can I ask them to figure out if they are the type of person that I would want to hire for this role, teaches you how to screen people out over the phone. When you conduct the interviews, how you conduct the interviews in order to get all the information you need to make the best decision possible.

It’s a little bit of a time consuming process as far as hiring people which makes the phone screening that much more critical because you really only want to be interviewing people who are a good fit. I really thought that it was an excellent way to think about okay I need to bring somebody in. Who is the person that I need to bring in and how do I know if they’re the right person? Those are my picks.

Drew: Alright. Tying back to our conversation, the first pick I would have is a book by a guy named Steve Farber called The Radical Leap, it’s a leadership book, it’s the best leadership book I’ve ever read. I will tell you that if you’re teetering on the should I stay a freelancer versus should I start a company where I have employees. Knowing that you are willing to do what it takes to create a culture that cultivates growth and loyalty is pretty critical in today’s market where it’s tough to find and keep good employees.

Radical Leap is a great book on leadership. I think if you read it and go yes, then you probably have what it takes to run a business with employees. If you read it and go no, the freelance path might be a better one for you.

Second book that I always recommend to every agency owner is a book called Traction by Gino Wickman. It is all about getting stuff done inside your business. It’s not agency specific so it’s good for anybody who’s running a business. Again, it’s good if you’re a solo entrepreneur, or you’ve got 150 employees. It is a rock solid, it’s called Entrepreneur’s Operating System. It’s amazing what you can get done when you follow the system that is outlined in that book, super easy to read.

Just a really practical pick for me. Like all of us, I struggle with getting everything done that I need to get done and keeping track of everything I need to get done and making sure that whatever device I’m looking at at the moment, I have the right to do list. I love a tool called Wunderlist that allows me to sort to dos, to lump them in categories, to share them with my team so I can assign to dos. I think they’re actually out of Holland, maybe, hence the spelling of Wunderlist, but really great customer service and syncs on all of your tools. Phone, tablets, and computers. It’s a beautiful, beautiful thing.

Charles: Awesome. To wrap up, I just wanted to ask if people start an agency and thinking, “Oh, I could really use somebody like Drew or somebody like Drew’s agency to run this for me.” How do they get a hold of you?

Drew: The best place is to go to agencymanagementinstitute.com. All of the contact information is there, information about the podcast, information about the workshops we teach, lots of free tools. Obviously, they can reach me by email at just drew@agencymanagementinstitute.com. In social, I’m Drew McLellan pretty much everywhere.

Charles: Alright, thank you for coming.

Drew: Thanks for having me. I appreciate it. Enjoy the conversation.

Charles: Alright. We’ll wrap this one up and we’ll catch you all next week.

Philip: Bye, everyone.

Drew: Bye.

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