Episode 186: What You Really Need to Know About Building an Agency

October 7, 2019 | Maggie Patterson

When you’re building a business built on services, at some point in your journey, you’re going to start to have questions about how you can grow. How you can serve more clients. How you can make more money. Enter the idea of building a team and creating an agency to help you continue to grow. In this episode, we’re going to dive into what you really need to know about building an agency based on my years of hands-on experience as an agency owner.

In the last few episodes, we focused on the freelance or solopreneur business model, and for the next few episodes, we’re going to build on it by dissecting the agency model. Before we dive in, I wanted to give you a bit of background on my experience with agency life. While you may know me today as the owner of Scoop Studios, I have a very long history in the agency world.

Early on in my career, I joined a small, entrepreneurial PR agency where I started at the literal bottom. Over the course of my five years there, I worked my way up the ranks, being promoted five times, and becoming an Account Director. As I grew in my role, I took on more and more responsibility managing strategy, teams, budget, and big-name clients. The company grew rapidly in the time I was there, and that gave me a crash course in all things agency, and my mentors there really shaped who I am as a professional — especially as the leader of an agency today.

Once I busted out as a freelancer, I had the opportunity to do contract work with a number of agencies, and my education on running an agency continued. And to be honest, at that stage in the game, I didn’t ever think I’d want to own an agency because to me that represented a more formal, rigid way of doing things. Lots of process and lots of stress that I wasn’t interested in.

But thank you Internet. As the world of work has changed, so has the agency world. And that makes the ability to run this type of business incredibly accessible. The rise of the “micro” agency offers service-based business owners a way to create leveraged income — without all the trappings of the big agency world.

It’s pretty appealing for many of us, but here’s the thing more people need to realize. An agency should be built by design — not by accident. And believe me, I know exactly how easy it is for that accident to happen.

Back in 2014, as I had more and more client opportunities, I took on a number of contractors to help. While it got the job done, it wasn’t strategic or well-thought-out from a business point of view, and the only thing that saved me along the way is the fact that it wasn’t new territory. At the point I teamed up with my former business partner Brittany in late 2015, things got a lot more thoughtful and intentional about how we were building the business, which got me to where we are today.

Let me tell you this about Scoop: It’s not the biggest agency around, and my vision for it is very clear. I want a service-business that lets me do work I enjoy, get paid very well for it, and be very flexible in how I spend my time. I get to create a full-time job for my sister (and hopefully another person in 2020) and support a team of talented freelancers. I get to work with clients that I enjoy and stretch myself on an ongoing basis. And, yes, I want to grow, but in a controlled way, and I’m still not sure what my end game, is, and that’s okay.

Through my experience with Scoop, there are four things I wish I’d known sooner about creating an agency that isn’t just built on the back of the owner grinding it out, day in, day out. I call these the four Cs, and they’re really the fundamentals of what you need to build — and ultimately grow — an agency.

Do You Have the Clients?

Yes, I know, needing clients is a total no-brainer, but let me explain. It’s really easy to have the vision for growth and for how you want things to be. But unless you’re able to consistently acquire clients and support your team, things are going to be a challenge.

One of the biggest mistakes I made over the last few years is overestimating my ability to get a steady stream of clients, while weathering inevitable client attrition, to grow the business. If you’re relying on a single way of acquiring clients, it’s time to diversify. I see way too many service business owners with lots of ambition pushing forward with their vision without a well-rounded plan for where these clients are coming from. I’m all for having faith, but you also need a practical plan where you’re able to get the clients you need to meet your goals.

In my case, that’s meant looking carefully over the last 12 to 18 months at how we acquire clients and then adding new strategies to the mix. This year, we’ve added cold outreach, and now I only wish we’d done it sooner as it’s proven to be the boost we needed to close the gap on revenue goals.

So, if you’re building an agency, or want to build an agency, look carefully at how you get clients. How do they find you? And keep in mind that as the owner, you’re likely going to have to invest time on an ongoing basis on lead gen and new business activities. It’s a big part of how I spend my time (which I love), but it’s something that’s easy to overlook as you cut to the grand finale of hitting your goals and achieving your vision.

Most of the agency owners I work with get super fixated on capacity as it’s a big challenge, but before we can even talk about capacity, we need to address capability as a core, foundational piece of the ability to build and run an agency.

First stop with capabilities is realizing your skills and talents as a business owner. Let’s be real, to run an agency you need a team, and that’s going to mean a certain level of leadership is required. While you don’t need to do that all on your own, it’s important that you assess if you want to lead, how you want to lead and work on developing those skills.

Full confession: This is a constant work in progress for me. I’m an imperfect leader, but it’s also something I find rewarding on many levels. Part of this has been figuring out how I want to lead, where I need help, and how that all will come together.

Next up are the capabilities of your team. To deliver to clients, you need a certain mix of skills in order to thrive. This can be the functional work you deliver to clients, client service skills, project management or specific ones around billing, accounting, or other essentials.

I often see agency owners that have an unrealistic view of what capabilities a single person on your team can have. Yes, there are some magical unicorns, but invest some time in figuring out the basic structure your team needs. You may have someone who’s an amazing designer, but they’re not going to be your project manager and client service director too.

Finally, be prepared to invest in training your team — particularly if they’re full-time employees. As one of my friends recently said to me, getting people where you want them to be often takes longer than we realize, so we need to have a realistic plan. If you’re dealing with contractors, you still need to have systems and processes in place and be comfortable with them taking time to get up to speed.

Do You Have the Capacity?

Capacity can be a significant challenge, as it’s a constantly moving target. But many times, when we want to grow, we don’t do the math or take the time to figure out if we can actually service new clients. That’s where things can fall apart with client services, or we end up stressed out.

I wish I had a capacity-o-meter that made it really easy to determine capacity, but I’ve learned the hard way that we need capacity in advance of when we think we do. It’s better to have a team that’s running under capacity than one that’s completely overcapacity, as there needs to be a built-in buffer for surprises.

If you’re looking at capacity today and are completely maxed out or can’t figure out where you’d put a new client, you need to build capacity before you start hustling for new clients. This may be a new contractor, a full-time hire, or admin help to move lower-value tasks off your plate.

Hard truth: There should always be a lag between when you hire and when you actually need to fill that role. Otherwise, you’re going to hire when you’re in a pinch, and it’s harder to find the right person.

Now you may be thinking about how you hire someone before you have the work to support them, and that brings me to the final C on our list.

Do You Have the Cash?

To build an agency, you need to be willing and able to invest in your business. If you have personal requirements where you need to take a large portion of the company’s profits, or your business expenses are out of control, it will be challenging for you to have the cash flow needed to make strategic investments in the business.

How much cash flow you “need” will largely depend on your level of risk tolerance, your client cycles, and other factors. You’ll want to consider things like how much buffer or runway you need to have saved on an ongoing basis.

Also, what kind of cash do you need to save in order to make specific business investments, such as a new hire or even capital investments? Before you dive in and go into “let’s grow mode” and make a key hire, decide how much you want to have banked.

Personally, I try to balance building up my savings, putting money aside for future investments and growing in a way that’s a bit slower as a way to manage my stress. I’d rather know everything is locked down than trying to accelerate growth by adding capacity and taking on any and every client under the sun.

As we wrap up, I will say there’s no one “right” way to grow an agency, but the four Cs are a solid way to ensure you’re thinking critically as you navigate that growth.

In the next few episodes, we’re going to go behind-the-scenes of several agencies to learn how they’re doing things, their biggest lessons, and so much more.