Tuesday, May 21, 2024

How to Be a Successful Agency Owner [Pocast & Recap]

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When was the last time you took a vacation? If you’re trying to recall what year that was, that’s a problem. Too many agency owners today are so embroiled in the day-to-day operations of their business that they can’t take time off, can’t focus on providing the necessary direction for the business, and aren’t even paying themselves what they deserve. How do we make changes to ourselves and to our agencies to solve this? 

That’s exactly what Karl Sakas is going to talk to us about in the latest episode of Social Pulse Podcast: Agency Edition, hosted by head of Strategic Partnerships at Agorapulse, Mike Allton. You can listen to the whole thing below or read on for the transcript of the conversation.

Karl helps digital agency owners work less and earn more while rewarding their best employees. Drawing on his background in agency operations, Karl has personally advised hundreds of agencies on every inhabited continent. An international speaker, he’s the author of three books, including Work Less, Earn More and more than 400 articles on agency management.

Let’s start by talking about the work that you do. Tell us about your consulting, your coaching practice, the kind of agencies you work with, and how you help them.

Karel: I primarily help agency owners who are at a turning point in their business. Maybe they’re looking to sell at some point in the future. Maybe they don’t want to sell, but they want to get out of things in their work that they’re stuck doing now, and I help them make that happen. You know, as you mentioned in the book, Work Less, Earn More, that’s the overarching theme, whether you’re looking to exit or build a highly profitable lifestyle agency. Along the way, having been an agency employee coming from agency operations, part of that includes rewarding your best employees. So that’s around succession planning, promoting people, helping develop your team to take things on, and help them reach their own career goals along the way while helping you reach yours as the owner.

Agency Owner vs Agency Leader: What’s the Difference?

Mike: One of the topics that we’re going to talk about today is leadership. And I want to differentiate between an agency owner and an agency leader. Obviously, I can start an agency that doesn’t necessarily make me a good leader. Now, how would you define or describe in your words what an agency owner looks like, sounds like, talks like? How’s that look like to you?

Karl: We can think of agency leaders in overarching terms. It covers agency owners as well as agency executives, anyone in sort of an upper-managerial type role.

Agency owner defined

Anyone can be an agency owner. You keep getting enough work from clients, working as a freelancer. You start bringing in other people to help, and suddenly you have a business. You would be what we could think of as an accidental business or agency owner. And that can work for a while up to maybe ten people or so.

Agency leader defined

But as you grow and if you (or if you want to keep growing), you have to shift into approaching things as an agency leader rather than solely being an agency owner. And leading includes thinking ahead to the future rather than putting out day to day fires. You could think of it as rather than being the firefighter, you’re more of the fire marshal trying to prevent the future fires from happening. And along the way, you’re going to be growing your team as well. So, that’s sort of a starting point on that.

Mike: I like that analogy between a firefighter and a fire marshal. That makes a lot of sense. And you’re right. It looks like many agencies start to struggle a bit when they get to that ten employee-ish level that they’re able to grow and scale past there. There’s a lot of potential there. But why is it so challenging for these agency owners or executives to transition into this true leadership role?

The challenge of being an agency leader

Karl: It’s not their fault. A lot of it is that they started, as Michael Gerber would say, technicians, and now they’re moving to manager or eventually onto entrepreneur.

If you went to school and you’ve been spending all of your time focusing on design, you see that your primary contribution is being a designer. If you focus on development, it’s being a developer. If you’ve been a strategist, that’s your focus.

But as you serve as an agency owner or as an executive, it’s really more about getting results through other people. And that requires leaving behind some of the things you did before. Now, if you never want to leave things behind, that’s okay, but there will be a cap on the size of your agency.

And you may consider, if you just really don’t like managing people at all, you might want to focus on being an individual consultant rather than running an agency. But a lot of that is from people’s identity in the past. Are you a designer, a developer, a strategist, a copywriter, or are you running a business?

Mike: That makes a lot of sense. In our past episode, we were talking to Troy Sandidge. And he is technically a small agency owner, but he refers to himself as a collective because he and a couple other technicians, as you mentioned, are in his own business. And then for any kind of the service that they might want to do, they tap into other agency owners or other consultants. And so he’s got this group of people that he’s brought together. The sense that I got is very much what you just mentioned, which is that he still wants to be in that doer position and not necessarily grow to scale an agency where he’s managing and leading at least ten, twenty, fifty people. 

How to Become an Agency Leader

But for those who do want to grow out of that technician role and become that true leader, what would be the first step they want to take? They recognize that they’re doing too much themselves in the business. They want to work on that business.

What’s the first step?

Karl: Recognizing it is the first step. So the fact that if you’re like, “Wow. Like, I’m tired of doing things the way they are now. I want to make a change,” that is the first step.

Then I would take a look at what you are doing. As an agency owner, especially in the early days, you’re likely wearing a lot of hats. You could still be wearing a lot of hats even five, ten years into running the business.

Here’s a model to think about that: I’ve identified six agency roles. Every agency job fits into one of these in some way, and you could be wearing more than one hat at once. The six rules are this: 

Six agency roles

  1. First is account management (AM). Let’s keep clients happy and usually sell them more work. 
  2. Then there’s project management, which is delivering the work smoothly and profitably.
  3. Then you’ve got your subject matter expert, SME roles. That’s about doing the hands-on craft work, design development, analysis, copywriting, and so on. 
  4. Then you’ve got client strategy, which is focused on maximizing the client’s budget within the results within the budget they have optimizing. 
  5. You’ve also got business development, which is really three things, marketing, sales, and partnerships.
  6. And then finally, you’ve got what I would call support, which is operations focused on the shorter term and leadership focused on the long term. 

Now, as you think about those, you might be doing more than one. There’s a particular order that I recommend delegating those in to get better results. You would start by delegating the SME work, whether that’s design or development or copywriting, whatever you’re focusing on. You might initially start by delegating that to freelancers. Or, in the example you mentioned about the collective, maybe there are other firms that you would hire to to work with on that.

Then the next thing to consider delegating would be PM, project management. You could hire a freelance project manager. Or, if you have largely freelancers on your team, maybe you hire a full time PM to help you coordinate and hire all of the freelancers. 

So you’ve got the SME roles first to delegate, then project management. At that point, most agencies will delegate account management being the day-to-day client contact. Some of your clients aren’t going to like that, but you can frame it. When it’s renewal time, for instance, you could say, “Hey. If you’d like to keep me as your contact, you know, your price is going to go up thirty percent. If you’d like to work with so-and-so, who is an amazing account manager, (hopefully, they’ve met them already) your renewal fee will be only ten or fifteen percent, something like that.” You can structure things to create some incentives for the clients. 

Then at that point, after that, then you have to make a decision. The two things that people usually will delegate are either client strategy or some aspect of sales.

Within sales, you don’t have to do all of the sales. You might, for instance, stay as the closer, maybe the consultative and closer, but someone else does the initial screening, business development representative.

Or you may choose to delegate client strategy, which is tough. I’ve identified a step by step process to train client strategists from within. Otherwise, I think a lot of agencies expect people to magically figure it out.

Owners are usually the best strategists, but there’s a reason they started the business and are not in an employee role.

Of course, you could also delegate operations. The things that people tend to hold on to the longest are leadership about long term vision and strategy and making sure the culture is working, and then either client strategy or the higher level side of sales.

Learn How to Delegate

Mike: At least most of the agency owners that I personally worked with and and met over the years, they seem to mostly be subject matter experts who have gone on to grow into that agency model. I think that they’ve really struggled with letting go of doing the ads or doing the social media management or doing graphics.

Any quick tips for them to help them just get out of that role?

Karl: I started there as well. I was a freelance web designer in high school starting in the day as a dial up. I was hand coding HTML and BBEdit back in the day.

Being able to find and replace across multiple files, that was amazing. If you’re editing the sidebar menu or something like that, that was quite the thing.

But, something to consider is what do you want most from your work? Your goal is to continue doing the SME work, you’ll need to hire someone else to serve in the leadership role. And they tend to be pretty expensive, and you can also make a mishire.

One of the most famous examples of a founder not serving as the CEO would be Craig of Craigslist. He was CEO briefly, admitted he was terrible as a CEO, and he changed his job. He hired a CEO and changed his job. His title for many years was customer service representative because that’s what he loved. He loved helping people solve problems. I did check his LinkedIn recently. I think he’s now moved to focus on his foundation and philanthropy and so on. 

You don’t have to be the CEO, but someone needs to be. Otherwise, you’re going to create a leadership vacuum. And when you create a leadership vacuum, your team is trying to do their best to help out, but it’s often not going to get the result you want.

So, someone needs to do it. It starts by understanding that it’s time to make a shift or, if you don’t, enlisting someone else to help.

Mike: That’s such a great point. You’re at that point where if you want to grow, you have to make a change. And it’s either find somebody else or you change internally, and you decide if you don’t need to do these tasks anymore. 

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Restructuring Your Agency for Growth

Mike: We’re talking about agencies who are trying to get to that growth mode, get out of that starter phase where it’s just the founder and maybe a few other employees who are taking different kinds of tasks. 

Now, once they recognize that we want to grow, they need to restructure. Is there a particular structure that you advise for these kinds of agencies?

10-, 25-, or 50-people agencies

Karl: Agencies may well need to restructure, and they may need to restructure a couple times in the course of their growth. I mentioned that the ten person mark is a point for a lot of agencies. Twenty-five can be another one. Fifty can be another. Everyone’s unique. When agencies start out, they start out with a flat structure where usually everyone is reporting to the owner, or maybe there’s an infra manager for a few of the people. And then they have to decide what they do next.

Matrix or hierarchical structures

A lot of agencies move to a matrix or hierarchical structure where you’ve got departments for different areas. And, usually, your client-facing and highly billable people will have a matrix situation where they have a day-to-day manager or project manager assigning them things, but then they’ll also have their team manager as well that they’ll see occasionally. And that can work for a while. I have clients with as many as two hundred plus clients delivering using the matrix model, but it can become creaky.

Pod structures

What agencies sometimes consider at that point is switching to a pod structure. I’ll be writing more about that on my blog. I have an article about team structure, and I’ll dig deeper on pods, specifically. Pods are basically mini agencies within the agency. There’ll be a pod lead, who is usually an account manager slash strategist, sometimes a project manager if they’re a more technically oriented agency, and then various SMEs on the team. You might have a designer. You might have a developer. The pod is going to be bespoke to each agency, and then you’re also going to have some cross pod roles. Maybe you occasionally do video shoots. You might have a videographer on staff, and they work across pods in addition to, of course, your sales and operations related roles. 

There are some other models. There’s one that I would call eclectic, which means you’ve just made something up, and it’s working. I don’t recommend that particular model because it tends to be unsustainable. One key person leaves, and it all falls apart or or things like that.

The other model to consider is on demand. You’d mentioned the collective model. Collective would be an example of an on demand model, and both of those are an example of what I would call the front end agency model. Front end is where the agency is doing the brand of the agency. They’re doing marketing and sales, usually account management.

But then they fulfill a lot of the work through other firms that we could think of as back end agencies. Traditionally, you’d think of those as white label firms.

There are, of course, plenty of agencies that are what I would call a full stack agency. They’re doing the front end work and the back end fulfillment.

But you need to decide what’s right for you. There are pros and cons to all of these.

The Role of a Mid-Level Manager

Mike: Fascinating. But one of the things that you’re implying is that we’re going to have to hire people basically as mid level managers, if I’m the agency leader, and I need to step away from doing the work. We’ve got people who can do the work.

At some point, if we’re going to grow and scale, we need to have people who can manage and lead these teams. (And I love, by the way, the pod idea. I’ve seen that in other industries, referred to as tiger teams, where it’s cluttered to different people from different departments, all focused on a very specific project, in this case, the client.)

What recommendations do you have when it comes to actually training some of these folks so that I, as the agency owner and leader, can really rely on them to take that sublevel leadership role?

Karl: Two angles to consider. One is true for hiring in any role. You could think of a Venn diagram with three circles that are overlapping. And in my Venn diagram, there are desire, competence, and capacity.

Someone will need all three of these for whatever the role is. Otherwise, they’re going to be what I would call a reluctant employee. They could do the work, but they don’t want to. 

You need desire. People need to want to do the work. They need competence. They need to know how to do the work. And finally, they need capacity, which is having time to get it done. And that’s true for any kind of role, desire, competence, capacity, you need all of those.

If something isn’t happening, you might take a look at which of those is missing.

But when it comes to leadership and management specifically, I think of it as three tiers of training and support.

Keeping in mind that when you hire someone externally, you’re bringing in their external experience from managing people that they’ve gained elsewhere.

Whereas if you promote from within—which is usually a good idea—but if you’re promoting someone who’s only worked at your agency, they’re not going to bring in the outside perspective about what they’re doing. They’re doing their best, but they may not have experienced management elsewhere, and they’re just doing the best they can.

But those three tiers, you could start with an introductory intro level manager training. I’m a big fan of two firms that do this. One is manager tools. They also do a version of that spread out over several days virtually. That’s manager dash tools. One of my team members did it recently. It’s quite good.

Another one is LifeLab’s LeaderLab, which has you can either book them for a private training for your whole team or you could do individual modules. Both of those are good intro to leadership options along with various books.

Then you want to consider something more intermediate.

For instance, I do, and it’s not available right now. I’m running it now, but you can’t apply.

My agency leadership enhanced it. It’s an eight week long virtual program. It’s a cohort.

And it’s not an intro. Everyone is already in a leadership role. They’re already leading and managing people, and they’re able to communicate as peers. So it’s not just me saying things. They’re learning from each other. Something of that nature is helpful. And then I would say the third tier, and this is especially important if you have someone that you want to become the CEO at your agency or someone to promote to become there, is something more in-depth. I did a program over a decade ago from a firm called Grinnell Leadership.

They had their leadership jump start. It’s a week-long program at the beach in North Carolina, but it is not a vacation. It’s not therapy, but having been to therapy for many years, I would compare it to the equivalent of getting two years of therapy in four days. Very intense, but also potentially life changing for me. So, that’s an investment.

But if this is someone you want to turn the agency over to someone to run it on your behalf, you want to make sure they’re getting the support they need and also the self awareness so that they can get help in areas where they might have gaps, where until they go through a process like that, they may not realize what the gaps are.

Extreme Ownership

Mike: Those are some tremendous ideas, suggestions, and resources on management. 

One of my favorite books on management is Extreme Ownership. And then that Jocko Willink is talking about the need for great leaders to stay in what he calls the middle of the situation—not so far back that they lose sight of what’s happening at the front, not so far forward that they’re too focused on that front line, and they lose what he calls operational awareness. I know agency owners are often getting sucked in the weeds of issues that their staff bring to them. Do you have any techniques to help them lead their team without getting pulled too far to the front?

Karl: It’s a tough balancing act. And, I mean, thinking about the military analogy, both of my parents were career army officers.

As they worked their way up, part of that was letting go of things that they used to do so that the more junior team members, junior officers, and the enlisted personnel, including especially the NCOs leading things, would handle things for them.

If you jump in and are doing things that your frontline team is doing, you’re sending a message to them. You’re sending the message you don’t trust them to do it or that you don’t think it’s good enough.

I mean, that’s demoralizing. Think about when you’ve been an employee in the past, your boss just jumped in and you had it, but your boss was insisting on doing it. Of course, the same thing can happen if you are too far back or too far away. I would think of that as rather than delegation that is abdication, where you’re telling the team to figure it out. They say they have questions. And you’re like, “Figure it out. I don’t want to help.” That’s not good either.

One angle to consider when team members come to you with questions is a concept that I call the three As. And this is something that integrates into communications so that when people come to you, I’ll often hear complaints about how the team’s interrupting me all the time. That may be partly your fault around how you handle things. 

The Three As: Awareness, Advice, Actively Involved

The three As are this, and people can volunteer which of the three As it is when they come to you, or you could ask.

The first of the three As is aware. Are you sharing this with me so that I am aware? Is it you’re sharing the second A for advice? Are you sharing because you need my advice on this? Or finally, the third A is actively involved. Are you sharing because you need me to become actively involved in this? So aware, advise, actively involved.

Notably, as a manager, you get to decide if you need to escalate. They might be saying, “I’m just making you aware,” and then you realize that they don’t have a certain key piece of information. You can say, “I need to share some advice on that,” and then you do that. Or if it’s something catastrophic, then you may insist on being actively involved.

But, for the most part, you’re going to respect your team’s decisions on that. So consider using the three As: aware, advise, actively involved. Things can go more smoothly, but just be careful. If you have no idea what’s going on that turns into abdication, that would be a fourth A that you don’t want.

What If an Employee Doesn’t Want to Lead?

Mike: Tremendous advice. What if you’ve got some of these employees that are, say, unable or maybe just unwilling to step up into these kinds of tiered leadership roles that you’re trying to create? What would you suggest then?

Karl: So you want to consider: Are you giving them the support they need to move on? If they have, say, desire and capacity but not competence, what can you do to help? You know, soon after my colleague Kate joined, I started sending her to various training sessions. I sent her to manager tools. She did the LifeLabs leader lab program. She also did the Grinnell leadership program as well. 

I think some of that came from my experience in my very first job where I was an individual contributor, but I knew that I wanted to manage people in the future, And I found this course. It was a day-long program. It was an introduction for first time supervisors or something like that. And I proposed it to my boss, and we had a tuition reimbursement and all. And the company was like, “Well, why would we send you to that? You don’t manage anyone.” And I was thinking to myself, “Would it be better if I took that before I was managing people rather than after?” And I actually ended up paying for it out of pocket and taking a vacation day to go. I thought it was that valuable. 

If that’s your agency, don’t do that, and instead invest in that training.

Now some people might have the desire, but competence is never going to happen. In that case, you’ll have to have a candid conversation with them about where you see the cap or how far you think they can go. And I talk about a new hire ramp up plan around what steps you expect at different points. You do want to create a ramp up plan working with the team member about what you’d expect at different points rather than just saying, “I don’t think you’re doing a good enough job.” Like, you break it down so they understand what you expect rather than making them guess.

But some people just may not. And you’ll have to decide if you can keep their help in a mid level role. Often, you might, as long as they understand that they’re not going to get significant increases in pay and a significant increase in title.

That happened with an agency that I worked with a number of years ago in Colorado where a department head left. Two team members were interested in becoming the new director. And the owner in our coaching said, “How do we decide which one? One seems promising. The other, I don’t think they have the potential, but I also don’t want them to feel bad and just quit.” And I said, “Have them read my book, Made to Lead.” It’s a pocket guide on leading marketing and creative teams and have them give you a book report. Basically, report back on what stood out and all that.

One team member put together an amazing, in-depth analysis and reflected on what his strengths and weaknesses would be, things like that. The other team member, the one where the owner wasn’t sure would be a good match, but what to do?

They read the book, and they actually bowed out and said, “You know what? I like the idea of the title of being a director and the pay. But once I realize what it is to actually manage people, I don’t want that job.” So problem solved.

Have the Right People in the Right Seats

Mike: What a fantastic story. And you’re right. If we give them the tools upfront before and not after they need them, amazing things can happen. And sometimes people are going to have that self awareness to say, “You know what? This isn’t for me.” Appreciate restraint. If you can keep them and they’re great at what they do now, perfect. And if not, then you may need to have a discussion and help them find a new job. That’s okay. They’ll probably thank you someday. That might or might not. 

But you always want to have the right people in the right seat at the right time. And sometimes that may mean not with you and your organization. That might mean with somebody else’s.

Karl: That’s especially hard if you’ve had someone who has been on board for a long time, and they’re a loyal team member, and they’re great at what they do, but the thing that you need them to do in the future is different from what they want to do or what they can do or what have you. 

One of the things we’ve talked about in the agency leadership intensive is around not letting things fester. Don’t let things fester with your clients, with your team, with your business partner, if you have a business partner or partners.

It’s no fun to have a difficult conversation, but it’s only going to get worse later. Don’t let it fester.

Mike: What a way to leave us. Karl, this has been so tremendous. Thank you. I know folks are going to want to listen to this a couple of times, and definitely go to the show notes. We’ll have all kinds of links and resources there. But, Karl, for people who want to know more, learn more, where should they go today?

Karl: I have hundreds of free resources on my website, sakasandcompany.com. You also might be interested if you’re looking for ways to work less and earn more, you can check out my book on that topic, Work Less, Earn More: How to Escape the Daily Grind of Agency Ownership, available on Amazon worldwide in a range of formats, including a new Audible version if you prefer to listen. I know I listen to a lot of audiobooks these days.

And you can go to the book’s website to get all of the links along with a free workbook to help you apply the exercises from that.

Mike: Perfect. Thank you so much, Karl. That’s all we’ve got for today, friends. Until next time.

 

How to Be a Successful Agency Owner [Pocast & Recap]How to Be a Successful Agency Owner [Pocast & Recap]

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