#Agency 9: Metrics That Matter to an Agency w/ Drew McLellan

WEBVTT 1 00:00:05.719 --> 00:00:09.509 There's a ton of noise out there. So how do you get decision makers 2 00:00:09.630 --> 00:00:14.589 to pay attention to your brand? Start a podcast and invite your ideal clients 3 00:00:14.910 --> 00:00:24.140 to be guests on your show. Learn more at sweetphish MEDIACOM. You're listening 4 00:00:24.179 --> 00:00:29.179 to BEDB growth, a daily podcast for B TOB leaders. We've interviewed names 5 00:00:29.219 --> 00:00:32.859 you've probably heard before, like Gary Vander truck and Simon Senek, but you've 6 00:00:32.899 --> 00:00:37.009 probably never heard from the majority of our guests. That's because the bulk of 7 00:00:37.090 --> 00:00:41.570 our interviews aren't with professional speakers and authors. Most of our guests are in 8 00:00:41.609 --> 00:00:46.409 the trenches leading sales and marketing teams. They're implementing strategy, they're experimenting with 9 00:00:46.530 --> 00:00:51.200 tactics, they're building the fastest growing BDB companies in the world. My name 10 00:00:51.200 --> 00:00:54.799 is James Carberry. I'm the founder of sweet fish media, a podcast agency 11 00:00:54.880 --> 00:00:57.920 for BB brands, and I'm also one of the cohosts of this show. 12 00:00:58.560 --> 00:01:02.320 When we're not interviewing sales and marketing leaders, you'll hear stories from behind the 13 00:01:02.399 --> 00:01:04.989 scenes of our own business. Will share the ups and downs of our journey 14 00:01:06.269 --> 00:01:11.549 as we attempt to take over the world. Just getting well, maybe let's 15 00:01:11.549 --> 00:01:21.060 get into the show. Hey everybody, drew McClellan here from Agency Management Institute, 16 00:01:21.219 --> 00:01:26.060 back again in the host seats for the agency track of be to be 17 00:01:26.180 --> 00:01:30.019 growth. Always grateful that the folks there invite me to come back and do 18 00:01:30.219 --> 00:01:33.930 this every month, so thank you to them for letting me spend some time 19 00:01:34.090 --> 00:01:38.689 with you today. What I want to talk about is the metrics that matter 20 00:01:38.849 --> 00:01:41.489 to an agency, but before I do that I want to introduce myself to 21 00:01:41.609 --> 00:01:46.489 those of you who are not familiar with me or Ami. Ami Is Agency 22 00:01:46.530 --> 00:01:49.959 Management Institute. We've been around since the S and our job is to help 23 00:01:51.000 --> 00:01:56.200 agency owners run the business of their business better. So we focus on the 24 00:01:56.239 --> 00:02:00.239 back of the house things, things like finance and metrics and whether or not 25 00:02:00.319 --> 00:02:07.669 you're making money, employee issues, bisdev strategies, succession planning, growing your 26 00:02:07.710 --> 00:02:12.389 leadership team, all that sort of stuff. All this stuff that clients don't 27 00:02:12.430 --> 00:02:16.060 necessarily see but are critical to you being able to actually serve clients. So 28 00:02:16.939 --> 00:02:21.099 that's what we spend our time doing and today what I want to talk about 29 00:02:21.419 --> 00:02:23.780 is and want to talk about some financial metrics that you should be tracking on 30 00:02:23.900 --> 00:02:29.500 a regular basis. These are very industry specific. We teach a workshop called 31 00:02:29.539 --> 00:02:32.810 money matters once a year where we go into a great detail about these metrics, 32 00:02:32.810 --> 00:02:37.370 which obviously we're not going to do today. But every year I'll meet 33 00:02:37.370 --> 00:02:39.569 agency owners who've been doing this for twenty or thirty years and I'll go, 34 00:02:39.610 --> 00:02:45.039 oh my God, why didn't I know these metrics? And the reality is 35 00:02:45.120 --> 00:02:49.479 they're very specific to our industry and so if you're not getting your information, 36 00:02:49.520 --> 00:02:53.159 if you're not getting your data from someone one who knows our world, if 37 00:02:53.159 --> 00:02:57.080 you're working with, for example, a CPA or an accountant who is a 38 00:02:57.240 --> 00:03:00.870 generalist, these are not metrics that they're going to be familiar with. So 39 00:03:00.270 --> 00:03:02.349 I want to get them to you now, whether you've been doing it for 40 00:03:02.430 --> 00:03:07.270 a year or ten years or twenty years, today's the day you start measuring 41 00:03:07.430 --> 00:03:13.939 these things, because how I define winning the game for an agency owner and 42 00:03:14.180 --> 00:03:16.539 the agency team, by the way, is it's your job, the reason 43 00:03:16.580 --> 00:03:21.939 why you own this business or the reason why the agency exists is for the 44 00:03:22.020 --> 00:03:25.219 agency to be profitable and for the agency owner and the team to make as 45 00:03:25.259 --> 00:03:29.409 much money as possible. That is not a dirty thing, that's not a 46 00:03:29.569 --> 00:03:34.210 bad thing. You are in business to make money. You absolutely the way 47 00:03:34.250 --> 00:03:38.569 you make money is by adding value and providing value to clients. So I'm 48 00:03:38.610 --> 00:03:44.759 not saying make money in a way that is an ethical or doesn't have integrity. 49 00:03:45.120 --> 00:03:49.680 Have incredible integrity, deliver incredible value, but don't do it for Friggin 50 00:03:49.759 --> 00:03:54.680 free. And many agencies are really working, in many cases for free or 51 00:03:54.789 --> 00:03:59.909 for such a thin margin that really what you have is a really expensive job, 52 00:04:00.030 --> 00:04:02.110 and I want you to stop that. I want you to make more 53 00:04:02.189 --> 00:04:04.990 money and I want you to keep more of what you make. And the 54 00:04:05.069 --> 00:04:10.259 way you do that is by understanding the rules of the game, the financial 55 00:04:10.300 --> 00:04:14.580 game that is agency management, so you can play it with great skill and 56 00:04:14.699 --> 00:04:18.339 great strategy. And the start to that is measuring the metrics that matter, 57 00:04:18.779 --> 00:04:25.050 because you all know that whatever you measure you actually pay more attention to and 58 00:04:25.329 --> 00:04:30.170 that's the needle that you move. So what you measure matters. It really 59 00:04:30.329 --> 00:04:35.170 is that simple. So here's a truth. Ninety nine point nine tense of 60 00:04:35.250 --> 00:04:40.160 agency owners did not made your in accounting and, if we're really honest, 61 00:04:40.240 --> 00:04:45.519 most of us went into marketing or advertising or PR to avoid math classes in 62 00:04:45.600 --> 00:04:50.240 college. So we are not prone to be math centric, we are not 63 00:04:50.560 --> 00:04:57.110 prone to understand general accounting and the good news is if you understand the metrics 64 00:04:57.149 --> 00:05:00.149 that I'm going to walk you through in this podcast episode, you don't have 65 00:05:00.189 --> 00:05:03.350 to be an accountant, you don't have to understand the gap principles of accounting, 66 00:05:03.670 --> 00:05:09.300 you just need to look at these numbers every month or every quarter and 67 00:05:09.420 --> 00:05:13.180 you're going to know in an instant whether or not your agency is healthy. 68 00:05:14.220 --> 00:05:16.660 So here's some things that you should measure and I'm going to give you a 69 00:05:16.740 --> 00:05:19.660 laundry list that I'm going to tell you about some key metrics. Number One, 70 00:05:19.699 --> 00:05:28.129 absolutely the foundational fact inside an agency, where you get all of your 71 00:05:28.170 --> 00:05:32.050 data, it's starts and ends with time sheets. I know there are consultants 72 00:05:32.050 --> 00:05:34.329 out there that say, Oh, if you don't build by the hour and 73 00:05:34.410 --> 00:05:38.600 you don't have to do your time, time sheets have nothing to do with 74 00:05:38.800 --> 00:05:44.600 billing. Time sheets have everything to do with asset at allocation. Are you 75 00:05:44.800 --> 00:05:47.720 using the resources you have, the people on your team? Are you using 76 00:05:47.759 --> 00:05:51.790 them well? Are you using them efficiently? Are you pricing them appropriately? 77 00:05:51.870 --> 00:05:56.949 Are you telling a client something is going to take three hours when the reality 78 00:05:57.029 --> 00:06:00.110 is it always takes seven hours? You don't know any of those things. 79 00:06:00.430 --> 00:06:03.860 If you don't have daily time sheets and you, my friend, you, 80 00:06:04.100 --> 00:06:08.220 the owner of the agency, also need to do a time sheet. I 81 00:06:08.459 --> 00:06:10.899 can hear you now. I don't do any builliable work, I don't do 82 00:06:10.939 --> 00:06:14.100 any client work. I don't have to do a timesheet, I promise you. 83 00:06:14.180 --> 00:06:15.699 You do have to do a timesheet. We need to know how you're 84 00:06:15.699 --> 00:06:20.529 spending your time as well, because if anything, if nothing else, it's 85 00:06:20.529 --> 00:06:24.689 going to tell you you're not spending it where you should be spending it, 86 00:06:24.810 --> 00:06:28.529 on Biz, Deev and other things, that you're getting sucked into client crises 87 00:06:28.610 --> 00:06:31.879 or other areas. And without the time sheet you don't really have any idea 88 00:06:32.199 --> 00:06:36.319 how bad of a problem that is or how well you're doing it avoiding that 89 00:06:36.480 --> 00:06:41.959 problem. So everybody on the team needs to do daily tag sheets. So 90 00:06:42.079 --> 00:06:45.519 here's some other things. You need to track gross revenue and the growth of 91 00:06:45.600 --> 00:06:51.350 that gross revenue, Agi which hopefully you know is gross revenue. Cost of 92 00:06:51.430 --> 00:06:57.430 goods. So cost of goods are going to be media printing software that you 93 00:06:57.629 --> 00:07:00.230 only buy for let's say you're a media shop and you have planning and buying 94 00:07:00.310 --> 00:07:03.939 software that you would not have inside your business if it weren't for the fact 95 00:07:03.939 --> 00:07:09.220 that you're buying media for clients. So anything that is a card cost to 96 00:07:09.259 --> 00:07:13.420 you, including contract labor, by the way, that is bought in service 97 00:07:13.620 --> 00:07:16.769 of clients. So rent, lawyers, fees, things like that. That's 98 00:07:16.810 --> 00:07:21.649 just overhead expense. But a lot of your software, all of your contractors, 99 00:07:23.490 --> 00:07:26.449 printing media, all of that is a cost of goods. So gross 100 00:07:26.529 --> 00:07:30.319 revenue cost of goods equals, you're adjusted, gross income or Agi, and 101 00:07:30.439 --> 00:07:34.199 the Agi is the money you actually get to keep to run your agency. 102 00:07:34.279 --> 00:07:38.519 And so that is you're going to spend that unloaded salaries, you're going to 103 00:07:38.560 --> 00:07:41.959 spend that on overhead and you're going to spend that on profit before taxes. 104 00:07:42.439 --> 00:07:46.750 So that's the number you need to track, is Agi. I also want 105 00:07:46.750 --> 00:07:49.670 you to track how you're spending the Agi. So what I want you to 106 00:07:49.750 --> 00:07:54.949 be spending your Agi and is fifty five percent of your Agi should be spent 107 00:07:55.269 --> 00:08:00.139 on loaded salaries, twenty five percent of your Agi should be spent on overhead, 108 00:08:00.379 --> 00:08:05.100 which will leave you twenty percent for profit. Now, in our world 109 00:08:05.220 --> 00:08:09.699 today, right now, employees are coming at a very expensive premium. They 110 00:08:09.819 --> 00:08:13.730 know that they're in demand. In most cases they have multiple job offers. 111 00:08:13.009 --> 00:08:18.730 So we are overpaying for employees right now. When there's an economic correction, 112 00:08:18.769 --> 00:08:22.209 if there is one coming, that will change all of a sudden salaries begin 113 00:08:22.290 --> 00:08:28.000 to readjust. But right now you're probably overpaying. So it may be that 114 00:08:28.120 --> 00:08:31.759 your salaries are at sixty percent or sixty two percent. I want you to 115 00:08:31.839 --> 00:08:35.759 make adjustments in the overhead category, glory, so that the two of those, 116 00:08:35.080 --> 00:08:39.000 overhead and salaries, are no more than eighty percent. What I want 117 00:08:39.039 --> 00:08:43.149 you to stop doing is robbing it out of the profit bucket. I want 118 00:08:43.149 --> 00:08:46.429 you to try and leave that at twenty percent. Why? Because I want 119 00:08:46.470 --> 00:08:50.230 you to make more and keep more of what you make. So yeah, 120 00:08:50.230 --> 00:08:52.429 I want you to measure that. What is our AGI month over month, 121 00:08:52.470 --> 00:08:56.980 quarter over quarter, year over year, and how are we spending it? 122 00:08:56.419 --> 00:09:01.139 Another thing that you need to be measuring is how many months of cash we 123 00:09:01.220 --> 00:09:05.820 have on hand. So total overhead versus our overhead. So ideally you have 124 00:09:07.299 --> 00:09:11.250 at least two months of cash in the business that is liquid, that you 125 00:09:11.289 --> 00:09:16.129 can get to, and then another two months outside of the business that the 126 00:09:16.169 --> 00:09:18.610 owner has that they could lend into the business that they have to. If 127 00:09:18.649 --> 00:09:24.049 you have a gorilla client, which is a client that is thirty or forty 128 00:09:24.129 --> 00:09:26.919 percent of your business or greater than you need to have more than two months 129 00:09:28.039 --> 00:09:31.639 of cash on hand inside the business. I also want you to track how 130 00:09:31.720 --> 00:09:35.039 long it takes you to get paid, cash flow and some other things. 131 00:09:35.120 --> 00:09:37.750 So I'm going to get you some key metrics now that you absolutely need to 132 00:09:37.830 --> 00:09:43.590 be tracking on a regular basis. So for your entire agency, and I 133 00:09:43.710 --> 00:09:48.230 did, I did an episode on this last month. So if I'm not 134 00:09:48.309 --> 00:09:50.230 going to go into a lot of detail here, but you can listen to 135 00:09:50.309 --> 00:09:54.620 last month's episode and here exactly how you calculate this. But for your entire 136 00:09:54.659 --> 00:10:00.059 agency, billable people, non builliable people, owners, CFO is, whoever 137 00:10:00.100 --> 00:10:03.139 it is, anyone who gets a w two from you. You need to 138 00:10:03.220 --> 00:10:05.779 take all of their time, all of the time that they could work, 139 00:10:07.250 --> 00:10:11.809 and you want the seventy five percent of that time for all of them, 140 00:10:11.090 --> 00:10:16.330 not by person but as a group. Seventy five percent of that time needs 141 00:10:16.370 --> 00:10:20.929 to be billable. And then sixty five percent of that, so seventy five 142 00:10:20.929 --> 00:10:24.480 percent should be spent on billible tasks. Sixty five percent of it should actually 143 00:10:24.519 --> 00:10:31.919 be build to the clients. So seventy five percent billibile sixty five percent utilized. 144 00:10:31.039 --> 00:10:33.519 And again, if you want more detail on that, go back to 145 00:10:33.639 --> 00:10:39.470 last month's episode where I talked for a long time about out of calculate that. 146 00:10:39.710 --> 00:10:43.110 So that's a key thing, billability and utilization. Then I want you 147 00:10:43.190 --> 00:10:48.149 to measure the amount of revenue that you're getting from your existing clients. So 148 00:10:48.669 --> 00:10:54.220 how much new revenue are we getting from our existing client base? And your 149 00:10:54.340 --> 00:10:58.460 goal should be sixty to seventy percent of your net new revenue you're over year 150 00:10:58.580 --> 00:11:03.700 should come from existing clients. So when I talk to agencies about their Biz 151 00:11:03.779 --> 00:11:09.169 DEV goals and there their plans to grow the the agency, they always talk 152 00:11:09.250 --> 00:11:13.610 to me about prospects people that they're not doing work with at all right now. 153 00:11:13.210 --> 00:11:16.450 And what I'm saying to you is more than a half of your new 154 00:11:16.570 --> 00:11:20.440 revenue should come from the clients you already have, and I did a whole 155 00:11:20.440 --> 00:11:24.879 episode on that a couple months ago, so you can go back and listen 156 00:11:24.919 --> 00:11:28.080 to at in great detail about how you can make that happen by working with 157 00:11:28.159 --> 00:11:33.950 your as to grow their book a business. It's story time, and this 158 00:11:33.149 --> 00:11:37.870 growth story is about search engine marketing. Okay, so the story revolves around 159 00:11:37.990 --> 00:11:45.590 e sub a project management Sass company specifically for subcontractors. Even though you sub 160 00:11:45.710 --> 00:11:50.740 had incredible customer attention, they struggled with growth. Being a niche service, 161 00:11:50.820 --> 00:11:56.019 they discovered that there was little demand expressed for their solutions within search engines. 162 00:11:56.659 --> 00:12:01.850 To take on this challenge, E sub hired directive consulting the BB Search Marketing 163 00:12:01.889 --> 00:12:07.169 Agency. After refining targeting, pre qualifying clicks with an ad copy and developing 164 00:12:07.289 --> 00:12:13.409 custom landing pages, directive was able to increase e subs marketing qualified leads by 165 00:12:13.450 --> 00:12:18.360 seventy one percent while decreasing their cost per lead by sixty five percent. I 166 00:12:18.519 --> 00:12:22.320 have a hunch that directive can get these kind of results from too, so 167 00:12:22.720 --> 00:12:28.120 head over to directive consultingcom and request a totally free custom proposal. That's directive 168 00:12:28.279 --> 00:12:35.149 consultingcom. All right, let's get back to this interview. Another thing I 169 00:12:35.230 --> 00:12:37.870 want you to do is I want you to look at the new business prospects 170 00:12:39.029 --> 00:12:43.230 on your target list and if anyone on that list is less than that, 171 00:12:43.379 --> 00:12:48.539 you believe their spend would be less than ten percent of your current Agi and 172 00:12:48.700 --> 00:12:54.139 want you to take them offlet stop chasing after the minnows. I want you. 173 00:12:54.220 --> 00:12:54.940 You don't have to go out for a whale. I'm not saying you 174 00:12:56.019 --> 00:12:58.730 have to only go after people who are fifty or sixty percent of your Agi, 175 00:13:00.210 --> 00:13:03.690 but I do want you to go after prospects that are big enough to 176 00:13:03.850 --> 00:13:07.529 matter. They're big enough to change the trajectory of your agency, and that 177 00:13:07.649 --> 00:13:11.129 number is about ten percent of your adjusted gross income. So again, if 178 00:13:11.169 --> 00:13:16.320 you're a million dollar agency, you should be chasing prospects that you think are 179 00:13:16.320 --> 00:13:20.000 going to kick off at least a hundred thousand dollars of Agi. Now, 180 00:13:20.080 --> 00:13:22.639 that doesn't mean if somebody smaller comes and knocks on your door and as a 181 00:13:22.720 --> 00:13:26.039 project for you, you should say now, what I'm talking about is who 182 00:13:26.039 --> 00:13:33.309 you're proactively chasing after should be at least ten percent of your current adjusted gross 183 00:13:33.350 --> 00:13:37.110 income. Right. So we've already talked about the fifty five, twenty twenty, 184 00:13:37.470 --> 00:13:41.389 and the key to that is protecting the tent. So for many of 185 00:13:41.460 --> 00:13:43.860 you, this fifty five is going to be heavy. You're going to be 186 00:13:43.899 --> 00:13:48.100 at sixty as some agencies that are in the High S, depending on the 187 00:13:48.220 --> 00:13:52.340 employee mix they have. If you have a lot of Dev people and folks 188 00:13:52.419 --> 00:13:56.090 like that. Right now they are charging a premium price to work for us, 189 00:13:56.529 --> 00:14:00.809 and so your numbers may be out of whack, but if you're going 190 00:14:00.970 --> 00:14:05.970 to steal from something, steal from the overhead bucket, not the profit bucket, 191 00:14:05.610 --> 00:14:09.799 because I want payroll and overhead together never to be more than eighty percent 192 00:14:09.919 --> 00:14:13.320 of your just a gross income, and by the way, that includes your 193 00:14:13.519 --> 00:14:18.320 w two income as well. If you are an owner, you absolutely need 194 00:14:18.440 --> 00:14:24.509 to be taking both wt income and draws, distributions or dividends, depending on 195 00:14:24.789 --> 00:14:31.470 the legal structure of your business, but your wtwo income absolutely has to be 196 00:14:31.590 --> 00:14:35.549 included in that mix, and I am not suggesting that what you do is 197 00:14:35.629 --> 00:14:41.179 you squeeze down your wt income to make those numbers work. You need to 198 00:14:41.220 --> 00:14:43.940 pay yourself a reasonable wage and for you need to do that for a couple 199 00:14:45.019 --> 00:14:48.860 reasons. Number One, the IRS will say to you, or your State's 200 00:14:48.059 --> 00:14:52.450 labor division is going to say to you, that you are underpaying yourself in 201 00:14:52.610 --> 00:14:58.210 salary to overpay yourself and dividends, and the reason you're doing that is because 202 00:14:58.210 --> 00:15:03.289 you're trying to avoid taxes and you can pay a huge penalty if you get 203 00:15:03.289 --> 00:15:07.200 audited and you get caught doing that. Number two, if you are underpaying 204 00:15:07.240 --> 00:15:11.399 yourself what that means is you are not contributing significantly to your K or your 205 00:15:11.480 --> 00:15:16.399 simple IRA, because those are all salary based. And Number Three, the 206 00:15:16.480 --> 00:15:18.120 IRS is going to come back and say, you know what, if you 207 00:15:18.279 --> 00:15:22.350 got hit by a bus and the agency had to hire someone to do your 208 00:15:22.429 --> 00:15:28.070 job, then you would not pay them sixtyzero dollars or whatever small amount of 209 00:15:28.070 --> 00:15:31.230 money you're paying yourself. So you need to pay yourself a reasonable wage. 210 00:15:31.629 --> 00:15:35.269 From most agency owners, in most Marcus, that's going to be about a 211 00:15:35.470 --> 00:15:39.460 hundred and thirty grand, which is also the Max that you're going to that's 212 00:15:39.500 --> 00:15:43.379 the salary amount that you're going to Max out your social security. So another 213 00:15:43.500 --> 00:15:48.580 reason to pay yourself that. You know your salary and your dividends or your 214 00:15:48.620 --> 00:15:52.169 distributions, however those, however you categorize those, those pay you for two 215 00:15:52.250 --> 00:15:56.769 different roles that you play in the agency. Your salaries the job you do. 216 00:15:56.970 --> 00:16:00.169 So you're the CEO, you're the president, you're the bizdev Guy, 217 00:16:00.289 --> 00:16:03.250 whatever that is. That's if you stop doing that work, the agency would 218 00:16:03.289 --> 00:16:07.440 have to hire someone else to do that work. That's what your salary is 219 00:16:07.519 --> 00:16:11.879 for. Your draw your dividend, your distributions. That is the reward for 220 00:16:12.000 --> 00:16:17.519 being an agency owner and a business owner and taking the risks that come with 221 00:16:17.559 --> 00:16:21.669 owning a business. So you need to have both of those things coming into 222 00:16:21.710 --> 00:16:25.950 your pocket to reward you for the two roles that you play. And then 223 00:16:26.269 --> 00:16:27.830 here's the other metric that I want you to think about, and this is 224 00:16:27.870 --> 00:16:33.700 probably the most violated metric in all of agency land, and that is you 225 00:16:33.820 --> 00:16:40.460 need to have about a hundred and fifty thousand dollars of Agi per fte. 226 00:16:41.299 --> 00:16:45.299 So in other words, if my Agi is one point five million, then 227 00:16:45.299 --> 00:16:51.210 I could have ten employees. There is a range. Hundred and thirty thousand 228 00:16:51.250 --> 00:16:55.450 dollars is a safe range. It's fine, but odds are you're probably only 229 00:16:55.529 --> 00:17:00.129 making single digit or ten percent profit if you're at that point. So if 230 00:17:00.169 --> 00:17:03.200 you want to get back to my twenty percent profit, which should be your 231 00:17:03.240 --> 00:17:06.519 target, you want to get closer to the one hundred and fifty of Agiper 232 00:17:06.599 --> 00:17:11.440 fte. If you're any anywhere near a hundred thousand dollars of Agi per ftee 233 00:17:11.000 --> 00:17:15.269 that it should be a huge red flag for you that you either are overstaffed 234 00:17:15.509 --> 00:17:21.549 or you are really over servicing clients and everybody's busy and they're doing billable work 235 00:17:21.589 --> 00:17:23.869 but you're not actually building clients for it. But there's a problem there. 236 00:17:23.990 --> 00:17:30.299 You need to be examining that problem and sort of triaging what it is and, 237 00:17:30.420 --> 00:17:33.779 whatever it is, getting it fixed. So again, hundred fifty thousand 238 00:17:33.819 --> 00:17:38.019 dollars of Agi per fte. Another thing I want you to measure is I 239 00:17:38.099 --> 00:17:44.529 want you to measure the client mix and balance of your agency. So ideally 240 00:17:45.210 --> 00:17:49.210 you would have no single client that is over twenty percent of your a total 241 00:17:49.289 --> 00:17:56.490 agi and you would have no single clients that is smaller than five percent of 242 00:17:56.569 --> 00:18:00.079 your total agi. And if you do that, if you have clients, 243 00:18:00.319 --> 00:18:03.160 every client you have is bigger than five percent of your total agi and no 244 00:18:03.359 --> 00:18:07.640 one is larger than twenty percent. That's an ideal balance. If any of 245 00:18:07.720 --> 00:18:11.599 those clients goes away, will it hurt? Will you have to pinch pennies 246 00:18:11.640 --> 00:18:14.710 for a little while? Yes. Are you going to have to do a 247 00:18:14.829 --> 00:18:19.589 massive layoff or cuts or, you know, expenses dramatically? No, you 248 00:18:19.710 --> 00:18:26.670 won't. So again, no single client over twenty percent, no clients smaller 249 00:18:26.750 --> 00:18:29.819 than five percent of your Agi. So that I want you to have a 250 00:18:29.940 --> 00:18:33.700 balance and a mix of clients so that if for any of them walk away, 251 00:18:33.900 --> 00:18:37.380 you're not at risk. Another client factor. I want you to look 252 00:18:37.420 --> 00:18:45.009 at his profitability. You should have at least ten percent profit from every client. 253 00:18:45.650 --> 00:18:49.529 Do not pay for the privilege of working for someone. Do not work 254 00:18:49.650 --> 00:18:53.250 for free, do not work for pennies. Every client should tick off at 255 00:18:53.369 --> 00:18:57.319 least ten percent profit. That is more than reasonable. Now I'm not saying 256 00:18:57.319 --> 00:19:02.039 all your clients too only kick off ten percent profit, because then obviously you're 257 00:19:02.039 --> 00:19:06.200 not going to get to the threshold of twenty percent profitability. But a client 258 00:19:06.359 --> 00:19:10.430 is acceptable at ten percent. Anybody who is below ten percent, you should 259 00:19:10.430 --> 00:19:15.069 have a plan in place to grow their profitability and if you can't grow their 260 00:19:15.150 --> 00:19:19.230 profitability, you should have a plan in place for replacing that client and then 261 00:19:19.309 --> 00:19:22.710 saying goodbye. All right. So what I want you to do is I 262 00:19:22.789 --> 00:19:26.819 want you to take all of these numbers that I've given you and I want 263 00:19:26.819 --> 00:19:30.660 you to build a dashboard. We've built a dashboard that includes a lot of 264 00:19:30.779 --> 00:19:34.180 these. We call it the AMI financial report card. We will include a 265 00:19:34.740 --> 00:19:38.890 link to where you can download that in the show notes. It will give 266 00:19:38.930 --> 00:19:44.289 you a glance at your numbers very quickly. You only have to fill in 267 00:19:44.930 --> 00:19:48.609 a few numbers and then it calculates the rest. So you're more than welcome 268 00:19:48.650 --> 00:19:52.410 to download that and use it. It has a dashboard, a visual dashboard, 269 00:19:52.490 --> 00:19:56.640 on the front end, so you will be able to use pictures to 270 00:19:56.920 --> 00:20:00.359 look at very quickly at whether or not your health. But some of the 271 00:20:00.440 --> 00:20:03.319 things that I've talked about today aren't built into that spreadsheet. So you're gonna 272 00:20:03.319 --> 00:20:07.549 have to build a auxiliary dashboard, if you will, or another spreadsheet, 273 00:20:07.549 --> 00:20:11.789 whether it's in Google sheets or excel, to measure all of this. And 274 00:20:11.829 --> 00:20:15.549 then, with your leadership team, I want you to review this scorecard on 275 00:20:15.630 --> 00:20:18.829 a regular basis. So if you meet with your leadership team weekly, probably 276 00:20:18.869 --> 00:20:22.220 once a month, you want to review these because most of these the needles 277 00:20:22.339 --> 00:20:26.420 not going to move more than once a month other than the timesheets being done 278 00:20:26.460 --> 00:20:29.579 every day, so you could check that every week. Are we at ninety 279 00:20:29.619 --> 00:20:33.779 five percent compliance, but the rest of them are really monthly or longer term 280 00:20:33.859 --> 00:20:37.730 measurements. But if you don't measure them and you don't then talk about them 281 00:20:38.170 --> 00:20:41.690 and you don't examine the measurements so that you have a plan in place to 282 00:20:41.730 --> 00:20:47.650 adjust or celebrate if the numbers are great, then you're not going to move 283 00:20:47.769 --> 00:20:52.079 the needle on these numbers. So measure them, meet and talk about them 284 00:20:52.400 --> 00:20:55.720 and make sure that they matter. That is the way for you to get 285 00:20:55.759 --> 00:21:00.599 to twenty percent profitability, which is again getting us to our goal of I 286 00:21:00.759 --> 00:21:03.960 want you to make more money. I want you to keep more of the 287 00:21:03.039 --> 00:21:07.069 money you make, and I know that when I say you make more money 288 00:21:07.069 --> 00:21:10.230 and you keep more money, what that means is not that you're going to 289 00:21:10.309 --> 00:21:11.470 take it all, not that you're going to keep it all, but you 290 00:21:11.549 --> 00:21:15.269 can do all the things in your agency that you want to do. You 291 00:21:15.349 --> 00:21:18.700 can invest in professional development, you can give your people raises and bonuses, 292 00:21:19.140 --> 00:21:26.019 you can do team outings to create more Camaraderie and Team Spirit for your team. 293 00:21:26.380 --> 00:21:29.259 All the things that you want to do around the culture, around the 294 00:21:29.299 --> 00:21:33.450 professional development and around the retention of employees, all of those come with a 295 00:21:33.490 --> 00:21:40.210 very specific, hard cost and if you start measuring these metrics, you will 296 00:21:40.210 --> 00:21:44.690 be able to do all of those things and take more money home deep for 297 00:21:44.730 --> 00:21:48.880 you and your family. All right, if you're interested in Ami and you 298 00:21:48.960 --> 00:21:52.559 wonder what else we do, head over to agency Management Institutecom. We are 299 00:21:52.680 --> 00:21:55.680 happy to have you come there. We have all kinds of free resources. 300 00:21:55.839 --> 00:22:00.279 Ebooks are podcast build a better agency where we have a new episode every week. 301 00:22:00.880 --> 00:22:03.430 All of those things are there, at least a good starting point to 302 00:22:03.549 --> 00:22:07.109 find them, and I'm always happy to answer questions as well. Thanks for 303 00:22:07.190 --> 00:22:11.230 listening. I will be back next month with another episode and again thanks to 304 00:22:11.309 --> 00:22:14.390 our friends and sweet fish for inviting me to do this. Talk to you 305 00:22:14.470 --> 00:22:21.980 soon. I hate it when podcasts incessantly ask their listeners for reviews, but 306 00:22:22.059 --> 00:22:25.740 I get why they do it, because reviews are enormously helpful when you're trying 307 00:22:25.779 --> 00:22:29.019 to grow a podcast audience. So here's what we decided to do. If 308 00:22:29.059 --> 00:22:32.569 you leave a review for me to be growth in apple podcasts and email me 309 00:22:32.650 --> 00:22:36.849 a screenshot of the review to James at Sweet Fish Mediacom, I'll send you 310 00:22:36.930 --> 00:22:40.730 as signed copy of my new book, content based networking, how to instantly 311 00:22:40.769 --> 00:22:44.049 connect with anyone you want to know. We get a review, you get 312 00:22:44.089 --> 00:22:45.559 a free book. We both win.