If You're Scaling an Agency, Start Here — Transcript

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1. 0:00I run a performance-based marketing
2. 0:01agency called Smith and Sons for kitchen
3. 0:03and bathroom models and outdoor living
4. 0:05companies. Currently at 8K per month,
5. 0:07profit is 7K. We work on a pay per show
6. 0:10model and position them for high-end
7. 0:13projects, so not like discounts, etc.
8. 0:16Without retainers or ad spend on their
9. 0:18end, so we take the risk there. Right
10. 0:21now it costs me and yeah, right now it
11. 0:23costs me around $250
12. 0:26to acquire a customer. On the last,
13. 0:28that's where I ran the ads. I have a
14. 0:30$1,000 setup fee and I charge $500
15. 0:34per qualified appointment show. To get
16. 0:37them one appointment show
17. 0:39Yeah, to get them one appointment show
18. 0:41it costs at the worst times,
19. 0:43like I'm aiming for $210. And if I don't
20. 0:47get them at least 10 appointments in the
21. 0:49first month, I refund them the setup
22. 0:51fee. Now, currently to let you know, I
23. 0:54do have two clients in this, but I have
24. 0:56three other clients still in free
25. 0:59service, which I kept for cash flow
26. 1:00because that's what I ran before. My
27. 1:03question is from just what I told you
28. 1:05guys now and from your experience, what
29. 1:07do you see which I currently don't see?
30. 1:11So, what would you do in my position to
31. 1:12absolutely like scale this or maybe do
32. 1:15differently? Are you keeping the
33. 1:18customers?
34. 1:20Until I'm basically I wanted to keep
35. 1:24them until I'm at 10K sufficiently in
36. 1:27the modeling and then completely ditch.
37. 1:32>> He's cutting out?
38. 1:32>> I want to ditch the free
39. 1:35>> Oh, you want to ditch the free? No, no,
40. 1:36Layla was Layla was asking a question.
41. 1:38Also, I think Layla's audio is low for
42. 1:39anybody on our team. If you can boost
43. 1:41her audio a little
44. 1:41>> Yeah, I I didn't
45. 1:43I don't hear Layla at all.
46. 1:45>> That's right. I'm just on mute.
47. 1:48Okay.
48. 1:50So, the question was I mean, I don't
49. 1:51think you should cut your cash flow. You
50. 1:53have you only have like four customers,
51. 1:55right?
52. 1:57>> Um currently at
53. 2:00five.
54. 2:00>> Okay. So, you have five customers and
55. 2:02that means that if you're doing $8,000 a
56. 2:04month that you said 8,000 top line,
57. 2:067,000 bottom line, but you said your
58. 2:08cost of getting a show is 210 on 500.
59. 2:10Those margins don't make sense. What am
60. 2:11I missing?
61. 2:13>> Um yeah, because so base Okay.
62. 2:17Uh I'm I didn't So, for the 8K, I'm not
63. 2:20basically
64. 2:22counting in the $200, which is lost. I
65. 2:25just count in the 300.
66. 2:26>> Okay, got it.
67. 2:27>> the one guy I'm currently The one guy
68. 2:29I'm currently onboarding, so I only have
69. 2:30one guy currently on it. Uh yeah, the
70. 2:33other guy is currently on onboarding.
71. 2:35>> And when you say guys on onboarding, you
72. 2:37mean a client?
73. 2:40>> Uh yeah, the one company I'm currently
74. 2:42onboarding to get them into the $500
75. 2:45thing. I got his $1,000 setup fee
76. 2:47basically, but he's not actively
77. 2:48[snorts]
78. 2:49>> And you have five clients, all right?
79. 2:52>> Uh yes. Currently, I'm looking to scale
80. 2:55this now, but yeah, that's
81. 2:56>> I mean
82. 2:57Go for it. I know you're going to say
83. 2:58what you're going to say.
84. 2:59>> Well, I was just thinking that we have
85. 3:00to run some more water through the well.
86. 3:02>> Yeah.
87. 3:04Can you Did you write that up?
88. 3:05>> What?
89. 3:06No. What did you say?
90. 3:09>> Run some water through the well.
91. 3:10>> You hear that?
92. 3:12>> So, I need to get more data.
93. 3:14>> You need to Yeah, you need to get more
94. 3:15data. I mean, at that point, that sample
95. 3:17size is so small. I think we need to
96. 3:19focus on getting a bigger sample size.
97. 3:23And then we can go from there.
98. 3:26>> I I understand. Okay. Well, what is What
99. 3:29would you say? What is just your opinion
100. 3:31about the model, the offer? I'm You
101. 3:33know, I'm running this because all other
102. 3:35agencies are basically running this
103. 3:37paper appointment, and
104. 3:39uh yeah, they you know, and they pay for
105. 3:41the ads, but like the trust is really
106. 3:43low in that market, so I was thinking
107. 3:45about doing that.
108. 3:46>> Dude, I think everything's fine. I think
109. 3:48everything's fine. The The The I'd say
110. 3:50one risk that I see that's relatively
111. 3:52significant is your cost per show
112. 3:54relative to the revenue per show is kind
113. 3:57of low. I would say the guys who I see
114. 3:58like really murder it are at like 20%.
115. 4:01So, you're you're at like 60.
116. 4:03Uh I'm sorry, 40. So, I would I would
117. 4:05want to see if we could drive that down
118. 4:06cuz my fear of the business is that when
119. 4:08you take this to scale, you'll be less
120. 4:09efficient and your margins are going to
121. 4:10compress. That's like I would say like
122. 4:12that's kind of like my biggest red flag.
123. 4:14Overall, the model of lead cost and
124. 4:16arbitrage, there's nothing wrong with
125. 4:18it. I've seen some massive um agencies
126. 4:21that run that model. The next issue that
127. 4:23you're going to run into is the types of
128. 4:24businesses that you're serving. So,
129. 4:26you're going to want to go upmarket for
130. 4:28people who can spend 50,000, 100,000,
131. 4:30200,000 dollars a month in ads.
132. 4:32That's That's what you're going to want
133. 4:34to go after because the volatility of
134. 4:35your business is going to be predicated
135. 4:37on the volatility of their business. So,
136. 4:39when you go after and this is super
137. 4:40common for small business owners, for
138. 4:41everyone who's listening, is like
139. 4:44you go after If you go Most people who
140. 4:46are poor, I'm not saying you're poor,
141. 4:47but like most people are starting out in
142. 4:48business, you go after other people who
143. 4:51are also smarting starting out in
144. 4:52business because that's where your
145. 4:53confidence level is. But their business
146. 4:55They don't know anything either, right?
147. 4:57So, it's the blind leading the blind and
148. 4:58you're like, "What's wrong with my
149. 4:59business? All these people are
150. 5:00churning." And they're churning because
151. 5:01they don't know what the hell they're
152. 5:02doing in their business either. And so,
153. 5:05you're going to want to earn the right
154. 5:06to go upmarket as fast as you can. Um
155. 5:09and if you have five clients that pay
156. 5:11you what they're paying now versus
157. 5:13having five clients and each one pays
158. 5:14$100,000 a month, you could run the same
159. 5:16op ops and have 100 times the revenue.
160. 5:20>> Yeah.
161. 5:21>> The biggest Can you hear me?
162. 5:23>> Yes, I can
163. 5:24>> Oh, okay. Fantastic. You can You can
164. 5:26hear me? Sounds okay?
165. 5:29>> Yes.
166. 5:30>> Okay, great. I I was going to say the
167. 5:31next The next thing that you're going to
168. 5:33want to realize is that like we've done
169. 5:35the paper show model, and we also had a
170. 5:37software that used to enable the paper
171. 5:38show model. There's two things that you
172. 5:40want to watch out for, which is one,
173. 5:42when you're doing paper show, a lot of
174. 5:43times the businesses are going to think,
175. 5:45"Well, if they show, but they don't
176. 5:46close, why the [ __ ] am I paying you? And
177. 5:48so then you're going to be really
178. 5:49tempted to be like, "Oh, can I just help
179. 5:51them sell these people? I'm just going
180. 5:53to also maybe I should start a sales
181. 5:54agency and close these motherfuckers."
182. 5:56That's the next thing that's going to
183. 5:57happen. The the second piece to it, and
184. 5:59by the way, don't do that. Go upmarket
185. 6:01instead, cuz people that are upmarket
186. 6:02have their own sales team, and they
187. 6:04understand that concept that even though
188. 6:06you get somebody to show, it doesn't
189. 6:07mean that they're guaranteed to close
190. 6:08you. So, you have trained sales people.
191. 6:10So, do not give in to the temptation.
192. 6:12Don't try and serve an avatar that isn't
193. 6:14best for you more. That's the biggest
194. 6:16mistake people make, which is like
195. 6:18you're serving an avatar that isn't your
196. 6:20best avatar, and you try to go above and
197. 6:21beyond for it. You just don't want to do
198. 6:23that. The second thing is that Okay.
199. 6:27That's like I feel like that's like
200. 6:282010.
201. 6:29Um bringing it back.
202. 6:32>> [laughter]
203. 6:32>> Uh the second piece is that with the
204. 6:34paper show model, here's the place where
205. 6:36it goes wrong, which I saw firsthand,
206. 6:38which is why agencies have churn with
207. 6:40it, which is that
208. 6:41um
209. 6:43customers want to be able to predict how
210. 6:44much money they're going to spend with
211. 6:45you.
212. 6:46So, if you look at churn, and you look
213. 6:48at customer retention, the customers who
214. 6:50retain the most are the customers who
215. 6:52understand how much they're going to
216. 6:53pay.
217. 6:54And so, one thing that you can do is you
218. 6:56can give people a range estimate, or you
219. 6:58can give them a heads-up different times
220. 7:00through the month as to how much you're
221. 7:02going to be billing them.
222. 7:03Now, it seems contrary because you
223. 7:04think, "Okay, well, if I tell them how
224. 7:06much they're going to be paying, they'll
225. 7:07be like, 'Oh my god, that's so much.'"
226. 7:08But the reality is actually if they get
227. 7:09a bill that's unexpected, that is like
228. 7:11it looks and it's like once you get one
229. 7:13unexpected bill from a company, it's
230. 7:15like by the second one, there's a 50%
231. 7:17likelihood that they're going to churn.
232. 7:19So,
233. 7:20think about how you can communicate with
234. 7:22those customers. Maybe it's every other
235. 7:24week, maybe it's every week to show them
236. 7:26what their tab looks like.
237. 7:28Yeah, or by increment. That's a great
238. 7:30one, too. Yeah, just like every 5,000 or
239. 7:32whatever, whatever, every thousand,
240. 7:33every 5,000 they spend, you just let it
241. 7:35you just automatic just letting them
242. 7:36know that this is happening. We can turn
243. 7:38it off whenever you want.
244. 7:39So, So think another piece that you can
245. 7:41also ask is when you're getting the
246. 7:42sale, when you're onboarding them, ask
247. 7:44them what their budget is.
248. 7:46I know it seems contrary, but it's like
249. 7:47if you want to get them to spend more
250. 7:48money with you, you also need to show
251. 7:50them that you're okay
252. 7:51spending as much as they're comfortable
253. 7:53to start. Does that make sense? And you
254. 7:55can coach them up from there once you
255. 7:56get buy-in.
256. 7:59>> Yeah. Okay. Yeah, that makes sense. I
257. 8:01currently what I currently do is I build
258. 8:03like this lovable thing where I put in
259. 8:05the numbers, so close rate, average
260. 8:06contract value, etc. And um basically I
261. 8:10do that on the sales call though, so
262. 8:12that's a big nugget
263. 8:13>> That's right.
264. 8:14>> uh because then I can always like weekly
265. 8:17tell them like hey, this is how much you
266. 8:18should spend and that's what you should
267. 8:20expect in the long term to get a return.
268. 8:21So thank you for that tip. Um I mean, if
269. 8:24you were me here, how would like you
270. 8:27think about going from like 8K per month
271. 8:30right now to like 50K in this exact
272. 8:32model as fast as possible and also as
273. 8:34sustain- sustainably.
274. 8:36>> Dude, this is uh we we answered it. So I
275. 8:38I want to ask you what do you think we
276. 8:39What do you think we just said?
277. 8:41Just so I want to make sure you retain
278. 8:42it in your brain.
279. 8:43>> that I that I that I that I need to get
280. 8:45more that I that I need to get more data
281. 8:47and like just sell more probably.
282. 8:49>> And?
283. 8:51And?
284. 8:52>> And that I should
285. 8:54not
286. 8:55uh switch my business model and get them
287. 8:58to basically uh convince me to get them
288. 9:00to sell.
289. 9:02And also make sure that they know how
290. 9:05much
291. 9:06they get charged.
292. 9:08>> And go up market.
293. 9:10>> [laughter]
294. 9:11>> And go up market.
295. 9:12>> Yes.
296. 9:13But but
297. 9:14up up market the one thing I want to
298. 9:16ask, what do you think about the avatar?
299. 9:181 million above? Because I was thinking
300. 9:20about it.
301. 9:21>> Just go up.
302. 9:22>> have an opinion on this?
303. 9:23>> Just go up. Just Just like in your ads
304. 9:24or your outreach, look for people who
305. 9:25are doing 10 times those numbers.
306. 9:27>> Number go up good.
307. 9:28>> Yeah. Big number good.
308. 9:31>> Okay. Okay.
309. 9:32>> Cool. Like you could literally have the
310. 9:33same size company you have in terms of
311. 9:34head count, literally just add a zero to
312. 9:36what the people that you're trying to
313. 9:38attract are and you will make
314. 9:40significantly more money and love your
315. 9:41life more.
316. 9:43>> Mhm.
317. 9:44Okay. Yeah. Thank you.
318. 9:46>> All right, rock and roll.
319. 9:47>> Should I Should I Should I increase the
320. 9:49setup fee?
321. 9:51>> No, I don't think yet, dude. It's five
322. 9:52people.
323. 9:53>> Yeah.
324. 9:54>> You got to get more water through the
325. 9:55well. Also, there's a like for everybody
326. 9:57listening, like it's like okay okay
327. 9:59increase your prices, but like you
328. 10:01haven't even gotten to the threshold of
329. 10:02delivery.
330. 10:04So, until you get to the point where
331. 10:05your delivery is stressed and you can
332. 10:06see how your team and how your company
333. 10:08operates when you are stretched when it
334. 10:10comes to your client load, do not
335. 10:12increase your prices. You increase your
336. 10:13prices when you know that your product
337. 10:15and your delivery is rock solid. So, we
338. 10:16got to get more water through the pipes
339. 10:17first.
340. 10:18>> Okay.
341. 10:20Okay. I got it. Thank you very much. I
342. 10:22appreciate you. Thank you.
343. 10:23>> Have a good Thursday.
344. 10:24>> man.