How Agency Right-Sizing Impacts Profitability with Nick Eubanks

Right-sizing is the key to profitability. If you don't hire enough, you can't get client work done. If you hire too much, you end up sending all your profits to payroll.

Nick Eubanks can tell you all about how to hit that workforce sweet spot. He's the founder and Chief Strategy Officer at From the Future, an agency which partners with companies in high growth industries to accelerate customer acquisition. He's also one of the minds behind the Traffic Think Tank, a place where you can "learn, connect, and level up with the best SEOs on the planet." 

He also runs Agency Builder. This is "a battle-tested program for agency owners to increase revenue, build the right team, and drive profitable growth." Nick will help you increase sales, scale your team, and grow profits. The builder is full of training, templates, and automation tools to help you make your agency awesome.  

Tune in right now to get some of his most valuable insights absolutely free.

The highlights:

[1:54] An increase in works doesn’t always lead to more profit 

[7:38] Tracking work fulfillment and tying to resources.

[8:52] Common mistakes and learning from experience.

[13:28] Fine-tuning the agency sales funnel.

[17:15] Scaling services and revenue via your existing clients.

[21:10] An Agency Builder free webinar opportunity for our listeners.

[22:40] Nick's cause. 

The insights:

Major resource allocation issues

Nick says he made a lot of mistakes when he first got started. 

"It was because I followed my intuition about how to hire and when to hire."

He describes his early process.

"For the first two years, I was like, all right. Cool. I'm going to track how much production work I have on each person on a weekly basis, and how many hours of deliverables that sold that person can fill on within that time period. 

When I get to 80% of that person's capacity, 32 hours for a 40-hour person, we're going to hire another one. And that made sense to me."

After a few years of this, Nick had 20 in-house employees and 15 contractors, and he was asking himself why he was making less money than ever. 

"My revenues had grown every year, but my profits had gone down. I was charging the same amount I ever was. What was going on?"

Fortunately, Nick had a mentor who showed him a better path. 

"If you're going to have your agency kick-off sustainable profits at the level you're targeting with your pricing and cost management, then you need to be running hot. You've got to be running your agency at 100% to 105% of capacity. 

You always have the right amount of people for the right departments that could do the right deliverables at the right time. If you don't have enough sustained work for somebody to make a full time hire you grow into that with contractor resourcing."

Designing a predictable model for forecasting

Taking this approach to hiring means it's vital to have a predictable forecasting model that works. Nick has a method for that as well.

"If you have a halfway decent close rate you generally assume 50% of the proposals that are sent out are closed. By the time you're spinning up a proposal hopefully, 50% of those deals will convert into actual customers."

From there, you look at your pipeline and pick ten stages. 

"Even if your pipeline's not ten. Maybe it's less than that. Just pick 10 [anyway]." 

By way of example: 

Getting the lead - 10%
Making contact - 20%
Budget qualified - 30%
...and so on.

"Every stage I advance I have a potential new client or a potential new deal with an existing client, I can just use a very clean 10% probability. We know if they're in stage 2 there's a 20% probability, and let's say it's for a $1000 a month retainer. I can project that $200 next month."

He says these deals should always be based on the scope of the agreement. 

"So I know I'm selling 10 hours of SEO services next month. I can take those ten hours, if the deal is at the 20% stage, and project those 2 hours into my projections as well."

This lets agencies look ahead to the work people do and whether they have enough resources to get that work done. To ask: 

"How many more hours can I sell for each department or product type before I have to hire? Can I make those hires work? Where do they come from? Can I turn my existing resources knob up or down, or do I need to start building out a virtual bench?"

Tracking your usage and resources by tying it to your pipeline

Nick says it's very important to keep one's finger on the pulse of the business. 

"How much client business could we lose or could potentially get paused next month before I have to start cutting more significant commitment resources, part-time or full time?" 

Or...what deals are in the pipeline, and can the agency actually fulfill them if they close?

"It's an amazing thing how dynamic it actually is and how overwhelming it can be until you just put something relatively simple in place to track it." 

The mistakes almost every agency makes

"It's painfully consistent. I've worked with guys at $1200 a month and people who come to me when they're at $23,500 a month. The problems are almost always the same, across the board."

The most prevalent?

"Nobody's billing for project management. They're like yeah, we just bake that into our pricing. As opposed to them making it a separate line item, adjusting the pricing accordingly, and billing for it."

He suggests billing that at somewhere between 10% to 15%.

"That's just found money for most of these agencies. They're not tracking it. If you're not tracking it you can't really bill for it. They're not building it into their scope or SOWs. That was one big one."

Most agencies don't track all the things they're actually doing and where their time is being sent. 

"They have sloppy or inaccurate time tracking. It's not a tool problem as much as a methodology and culture problem. It's not as hard to fix as you might imagine, but it's just getting that visibility."

Identifying these missed opportunities often shocks agency owners.

"They think they bill $150 an hour, but based on the overhead factor and that project management time they think their actual blended rate is $120 an hour. And then you find out here are all these internal meetings you're not accurately accounting for. 

Here's all this additional account planning time being spent by your team members on the client accounts themselves that's not being tracked against that account, that's not being accounted as an expense. So their blended rate is probably $85 an hour. That's a best-case scenario."

A lot of profitability gets lost when you don't have simple processes in place to keep track of these things, and it's the biggest thing to master if you want to level up as an agency. 

Once the time tracking is implemented correctly, it usually takes anywhere from 3 to 6 months to get the blended rate up. 

"One of the first things we set is where you want your average blended rate to be. Then it's figuring out how far off you are from that rate. That's a big eye-opening moment. But it takes a couple of months to get them there. 

Fine-tuning the sales funnel

Agencies typically need to address focusing on building their pipeline for sales. 

"Not necessarily the act of selling, but actually building a process for selling. A specific document or process for each stage of our funnel. 

We know we generate leads through these 5 different channels. In the early days, it's probably going to be personal brand and referrals. 

This is how we treat them. When they come in, this is the questionnaire they get. This is the report we create for them. This is how we budget qualify, sales qualify, marketing qualify. Can we land and expand?"

Nick uses listening tools to fine-tune the sales funnel to account for changes in the economy and circumstance. One tool he uses is a Reddit Scraper he came up with, which is free for download on his site. It generates a sheet that lets you see all the topics that are being spoken about in a particular subreddit.

Check out how it works.

https://youtu.be/0TzsExi0qq8 

Why does it work?

"There are subreddits for everything. There are subreddits for painting your toenails. You can really dial into the specific pain points of your target clients, target customer audience, and target ideal clients. It lets you stay ahead of the curve, shift, and prepare." 

You should use some of this listening information to diversify the products and services that you're selling as an agency. 

Land new clients, but grow your existing client’s services

Nick talked about how in the beginning he was always chasing new business. 

"I was like cool, we can retain 50% of our clients or more every 12 months, we're doing great, I can build on top of that."

Yet Nick's mentor pointed out that agencies that thrive, the ones that are around the longest, get 70% of their new revenue every year from their existing clients. 

"So you're not working so hard to grow new accounts. So how do you land and expand? 

How do you get into an existing account, provide as much value as you possibly can, become a strategic partner, expand that account, and use that to grow a dedicated team?"

If you do that, a flywheel just kicks off profit for your business on the basis of having a handful of client accounts. 

The nuances of the agency business model are fascinating precisely because you're selling human capital. 

"In the agency world specifically, there are these nuances on how to manage that team and how to manage the operational side of the business to really squeeze out as many efficiencies as possible." 

One thing they do at From the Future is a quarterly business review.

"If you are any one of our clients that spends over $20,000 a month or above, you're going to get one of these. It's essentially a full competitive audit of the entire industry."

The audit shows everything each client's competitors are doing, and what they are doing to win new revenue opportunities in their space. 

"The average one results in an almost 50% net new expansion of the MRR. You're just showing the client. They're already working with you. The trust is already there. You're ideally doing this as your relationship gets stronger and stronger. 

You're showing them: here are the additional things we could be doing for you. Here are the revenue opportunities. Let us show you how much we care about you and how much we think about you and how important your growth is to us as your partner. 

It changes the dynamic of those narratives, and I can say emphatically they almost always convert into more business." 

Become invaluable to your existing clients. Embed your agency within the fabric of your client’s profit stream.

"The more your account teams can figuratively embed into your client organizations, the more reliant they become and the more it becomes harder for them to walk away. They almost function as an extension of their internal teams." 

He says the ultimate sales pitch for why anyone should hire an agency is cost savings. If you were to hire the same group of people it would cost a company hundreds of thousands of dollars a year in salary as opposed to thousands in fees. 

Agencies should build on that strength. 

"Constantly provide value, and constantly improve your reporting to demonstrate how you're providing value." 

A great free webinar opportunity for agencies

On September 23rd at 1:00 pm EST, Nick and his Agency Builder partner, Selena Vidya, are doing a live resource-building set-up. 

"There's nothing to buy. There's nothing for sale. You don't need any paid tools. I'm going to do it in Google Sheets, but I'm going to show you how to set up the sheet I'm talking about from scratch."

If you go to the webinar you'll actually be getting one of the properties they offer in Agency Builder. "We call it the resource manager, and it's the craziest thing you've ever seen built-in Google Sheets." 

Register for the free webinar here.

What’s your right now cause?

 

Nick supports Hope Works in Camden. 

"What they do is provide paid developmental training for underprivileged youth, youth that does not have the same resources and opportunities that a lot of other kids do. 

They pay young people to come in to learn HTML, CSS, Javascript, GPS coordination, stuff that's in high demand for well-paying jobs in the immediate area. Then they'll actually help those students get jobs, once they graduate from their programs."

The fact that young people get paid to learn skills is a big help for them. They build up their resumes and get placed in companies.

"Most of these kids are POC and I think now more than ever this is the time to be supporting the overall BLM movement, hands down. The more we can empower the youth of America that are in these underprivileged areas, with education, especially with professional trades, all these things you don't need to get a four-year degree to get, [the better]."

He points out that code is the new modern trade, that you don't need a four-year degree to get into it. 

"You can go to Iron Hack for four to six months and you can make $70,000, $80,000, $100,000 a year as a developer. It's not just the trades our parents remember. It's not just being an electrician, a lineman, a plumber. It's changed, and so Hope Works is making a really big impact." 

Connect with Nick Eubanks

Want to connect with Nick? There are a ton of channels and businesses to find him.

Agency Builder Website
From the Future Agency Website
Traffic Think Tank
Twitter
LinkedIn