Our next Agency Growth Club episode welcomes a candid conversation with Nick Eubanks, a seasoned agency owner and coach. 

Nick shares invaluable insights into the challenges faced by agency owners. 

Our discussion revolved around the lessons learned from Nick’s experiences, particularly focusing on: 

• The costly mistakes he made while acquiring agencies

• The significance of effective resource management

• Strategies for maintaining healthy cash flow

• The importance of upselling to existing clients

Additionally, Nick addresses the complexities of dealing with difficult clients and the necessity of having a vetting process in place.

Key Takeaways from the Episode

1. Costly Lessons from Agency Acquisitions

Nick recounts his experience of acquiring two agencies within a week, which he describes as his largest professional mistake. 

The rapid integration of two different teams and client bases proved to be overwhelming and led to significant client churn and loss of valuable team members. 

He emphasizes the misconception that clients would adapt to a new way of service delivery simply because they were now under a different agency. This assumption resulted in a substantial loss of revenue and highlighted the importance of understanding client expectations during transitions.

Actionable Advice:

• Thorough Due Diligence:
  Before acquiring another agency, conduct comprehensive due diligence to understand the client base, team dynamics, and operational processes.

• Gradual Integration:
  Plan a phased integration process to ensure a smooth transition for both clients and team members.

• Client Communication:
  Maintain open lines of communication with clients to manage their expectations and address any concerns promptly.

2. Common Pitfalls in Agency Operations

Nick identifies a prevalent issue among small agencies:
Improper resource management. 

Many agency owners, especially those with revenues under $5 million, struggle with staffing levels and resource utilization. 

He explains that many founders mistakenly hire new staff when there is still available capacity, which ultimately hampers profitability. Instead, he advocates for running teams at higher utilization rates (95-105%) before making new hires, ensuring that agencies remain financially viable.

Actionable Advice:

• Utilization Tracking:
  Implement a system to track team utilization rates and identify when additional resources are genuinely needed.
  
  

• Cross-Training:
  Cross-train team members to handle multiple roles, increasing flexibility and efficiency.
  
  

• Performance Metrics:
  Establish clear performance metrics to evaluate team productivity and identify areas for improvement.

3. Cash Flow Management Strategies

Nick shares his past experiences with cash flow challenges, including times when he had to rely on credit cards to meet payroll. 

He stresses the importance of preparing for potential cash flow issues by maintaining a financial buffer—ideally three months’ worth of operating expenses in reserve. He suggests implementing a dual invoicing cycle to ensure consistent cash flow throughout the month. 

By staggering invoice dates, agencies can better manage their incoming cash and align it with outgoing expenses.

Actionable Advice:

• Financial Buffer:
  Build and maintain a financial buffer to cover at least three months of operating expenses.
  
  

• Dual Invoicing Cycle:
  Implement a dual invoicing cycle to ensure a steady cash flow throughout the month.
  
  

• Expense Monitoring:
  Regularly review and monitor expenses to identify areas where costs can be reduced or optimized.

4. Upselling to Existing Clients

One of the most effective strategies for agency growth is upselling to existing clients. 

Nick recommends that agencies aim for 70% of their revenue growth to come from current clients rather than new business. 

He advises scheduling quarterly business reviews with clients to discuss their needs and identify opportunities for additional services. This proactive approach not only strengthens client relationships but also drives revenue growth.

Actionable Advice:

• Quarterly Business Reviews:
  Schedule regular business reviews with clients to discuss their evolving needs and identify upsell opportunities.

• Client Feedback:
  Actively seek client feedback to understand their pain points and tailor your services accordingly.
  
  

• Value-Added Services:
  Develop and offer value-added services that complement your existing offerings and address client needs.

5. Dealing with Difficult Clients

Nick acknowledges the challenge of managing difficult clients and emphasizes the importance of having a client vetting process. He suggests that agency owners should be discerning about the clients they take on, as a bad client can be as detrimental as hiring the wrong team member. 

He encourages agency owners to establish clear expectations and boundaries with clients from the outset to avoid misunderstandings and potential conflicts down the line.

Actionable Advice:

• Client Vetting:
  Implement a thorough client vetting process to ensure alignment with your agency’s values and capabilities.
  
  

• Clear Expectations:
  Set clear expectations and boundaries with clients from the beginning to prevent misunderstandings.
  
  

• Regular Check-Ins:
  Conduct regular check-ins with clients to address any issues early and maintain a positive working relationship.

6. Building a Strong Team

Reflecting on his journey, Nick wishes he had focused earlier on developing talent within his agency. 

He emphasizes the importance of nurturing entry-level employees to become future leaders, which can alleviate pressure on agency owners as the business grows. 

Additionally, he advises hiring support staff earlier in the process to help manage the complexities of team dynamics and client relationships.

Actionable Advice:

• Talent Development:
  Invest in training and development programs to nurture entry-level employees and prepare them for leadership roles.
  
  

• Support Staff:
  Hire support staff early to manage administrative tasks and allow senior team members to focus on strategic initiatives.
  
  

• Team Building:
  Foster a positive team culture through regular team-building activities and open communication.

Additional Insights from the Episode

• Regularly Evaluate Client Relationships: Nick emphasizes the importance of regularly evaluating and potentially “firing” the bottom 10% of clients each year. This practice is not just about letting go of difficult clients; it serves as a catalyst for agency owners to reflect on their client relationships. For every ten challenging clients, there is often one exceptional client who values the work, pays on time, and fosters a long-term partnership. These positive relationships are what make a service business thrive.
  
  

• The “Asshole Fee” Strategy: Nick shares his preferred method for parting ways with difficult clients: the “asshole fee.” This approach involves increasing the fees for clients who are particularly challenging to work with. For instance, if the agency is planning a general price increase of 5% for all clients, a problematic client might see a 15% increase. This strategy not only helps to filter out clients who are not a good fit but also allows the agency to maintain a level of financial compensation for the extra stress that comes with those clients. However, Nick stresses that if a client is disrespectful or mean to team members, no amount of money is worth the negative impact on the team’s morale.
  
  

• Growth Strategies: Nick outlines a multi-faceted approach to doubling revenue within a year, particularly for SEO agency owners. He points out that while SEO is a long-term game, agency owners should focus on creating high-quality sales enablement content that resonates with their ideal customer profile. He advocates for a combination of scaled outbound marketing and account-based marketing (ABM), leveraging social media platforms like Twitter, LinkedIn, and Instagram for direct messaging, and running paid social ads to generate leads.
  
  

• The “Dream 100” Exercise: A key component of Nick’s growth strategy is the “Dream 100” exercise, where agency owners identify their top 100 target clients and develop tailored outreach campaigns. He encourages agency founders to leverage their personal brands to generate leads, especially in the early stages of their businesses. Nick suggests sending personalized emails and engaging in activities that may not scale but can yield significant results when time allows.
  
  

• Asking for Referrals: Nick highlights the importance of asking for referrals from clients regularly. He proposes a simple scoring system to gauge client satisfaction, categorizing clients as cold, warm, or hot based on their interactions. This system helps agency owners identify when to ask for referrals and when to address potential issues with clients.
  
  

• Self-Awareness in Leadership: Nick reflects on his own journey, admitting that he initially struggled with the realization that he was often the biggest obstacle to his agency’s growth. He acknowledges his passion for sales and content creation but recognizes that he is not a natural people manager. This self-awareness led him to hire a CEO for his last agency, allowing him to focus on his strengths while delegating people management to someone more suited for the role.
  
  

• Embracing Failure: Nick concludes by discussing the importance of embracing failure as a part of the entrepreneurial journey. He believes that failure is acceptable as long as it is acknowledged and learned from quickly. This mindset fosters resilience and encourages agency owners to move forward rather than dwell on setbacks.

Nick’s experiences offer a roadmap for agency owners navigating growth and challenges. From managing cash flow to building a strong team, his insights underscore the importance of resilience, adaptability, and strategic decision-making.