Want A Profitability Agency? Understand These Dynamics Featuring Marcel Petitpas
Want a profitable agency? There’s much more to being a successful marketing agency than writing great copy, unique placement, and gathering attention for your client. You have to be able to run a financially sound operation. Learn the key indicators you want to look at in order to be successful.
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About Marcel
Marcel Petitpas is the CEO & Co-Founder of Parakeeto, a software company that helps agencies increase profitability by generating accurate, data-driven estimates in seconds using their existing time-tracking data.
He’s also the fractional COO at Gold Front, an award-winning creative agency in San Francisco working with brands like Uber, Slack, Keap and more. As well as the head strategic coach at SaaS Academy by Dan Martell, the #1 coaching program for B2B SaaS businesses in the world.
In his work as a speaker, podcast host and consultant, specializing in Agency Profitability Optimization, he’s helped hundreds of agencies around the world improve profitability and cash flow in their business.
When he’s not helping agencies make more money, he’s probably watching “The Office” or “Parks and Rec” on a never-ending loop and eating breakfast foods for every meal of the day.
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Full Transcript Below
Want A Profitability Agency? Understand These Dynamics Featuring Marcel Petitpas
Tue, 8/24 12:07PM • 40:24
Estimated reading time: 41 minutes
SUMMARY KEYWORDS
agency, client, profitability, project, processes, typically, create, gross margin, people, estimate, service, marcel, work, thought, overhead, cash flow, business, revenue, call, sell
SPEAKERS
Marcel, Roy Barker
Introduction
Roy Barker 00:02
Hello and welcome to another episode of The Business of Business Podcast. I’m your host Roy. Of course we are the podcast that brings you a wide variety of guests. That speak to a diverse set of topics. Hopefully, we can shine a light on something that maybe you haven’t thought about. To help you be successful or if there’s something keeping you up at night definitely.
We can provide you some information and guest professionals. I can help you with that we just want to see everybody and be successful in their endeavors. Today is no different. We are lucky enough to have Marcel Petitpas I hope I got that right. He is CEO and founder of Parakeeto Software company that helps agencies increase profitability by generating accurate data driven estimates.
In seconds using their existing time tracking data is also the fractional COO of Gold Front an award winning creative agency in San Francisco working with brands like Uber, Slack,, Keap and more as well as head of Strategic Coach at Saas Academy by Dan Martell the number one coaching program for B2B SAS businesses in the world.
In his work as a speaker, podcast host and consultant specializing in agency profitability optimization, he has helped hundreds of agencies around the world improve profitability and cash flow in their businesses. Marcel, welcome to the show. Thanks for taking time out of your day to visit with us.
Marcel 01:32
Thank you, Roy, for having me and for taking the time out of your day for that very elaborate intro. I think I’ve missed the Uber Slack and as KEAP. I’m not sure if that’s keep up so used to be Infusionsoft, they rebranded we actually helped them with some of the creative in that rebrand that launch video. Okay, well, yeah, some pretty cool companies we get to work with there.
Roy Barker 01:53
I’m about 97%, right on pronunciations this morning. So Well, before we jump off into this agency profitability and some things that you could do to help. Tell us a little bit about your past? How did you is Have you always been in marketing? Is that been? It sounds like you may have constant marketing skills and the analytical skills as well. So how do you match those up? And how did you get here?
More About Marcel
Marcel 02:19
Yeah, so I mean, my career at the earliest started in sales, retail sales. And that led to me becoming an account manager with Apple. Where I worked with primarily future shop, and then Best Buy here in Canada as a manager. Helping them sell more Apple products. So that was a combination of marketing, sales, skills, training, you know, all that kind of good stuff. And then left Apple to start my own agency, when I was very young. That agency was called Real Tours Media, and we were doing real estate services primarily in virtual reality.
So we, you know, create those 3d models of a house that people could kind of tour through from their home. Or with a VR headset. We were kind of early days in that. And that was when I first started really running into these problems of, hey, like, when we sell a project to a client. It can actually cost us more money to do that work than the client paid us. Started getting really in touch with some of the challenges of trying to figure that stuff out as a small agency, you know.
The tools that are available out there, your accounting data is in one place, your time tracking data isn’t another, you know, your estimates about the project are probably in a spreadsheet, somewhere bringing all that together to get a pulse on are we actually gonna make money on this thing is actually not as straightforward as I thought it was going to be. And that’s where I kind of discovered this problem space. From there, you know, that agency didn’t work out for those reasons, the cash flow, the pricing, it all just kind of didn’t work.
And candidly, I didn’t like doing the work. And I realized very early on that I didn’t have enough margin in that service to hire somebody to scale us. So I left that business and got really interested in software as a service or SaaS. And from there, you know, started failed at several different ideas and eventually landed on Parakeeto, when a friend of mine called me up and said, Hey, I’m sick and tired of building spreadsheets to answer these questions in my agency about are we making money? Can we bring on you know, new work?
Do we need to hire people? And you know, there isn’t a solution out there. That’s, that’s solving this for me. I want to figure out how to make this easier for agency owners. And I immediately resonated, said, Yeah, I totally know what you’re talking about. We start we put our heads together. And that was the birth of Parakeeto.
Setting Prices
Roy Barker 04:21
Oh, nice. Yeah, it’s, it’s a definite issue. You know, I’m sure not only for marketing agencies but for consultants or you know. A lot of times people that sell products is you know. I’ve worked with people to say, what’s your you know, they charge x numbers like. Well, what’s all included in that? How did you come up with that price? When you sit down and really work it out, it’s like, you know, they were priced at 4999. And they were, it cost them about 7990.
To do that, not a bad thing. I mean, he can’t keep that up. But you know, we, we always talk about price and value. Not wanting to, you know, necessarily be the price leader. Then as the in the consultant world it’s like. We call it scope creep or work creep or cost creep. That, you know, you just do one little thing more, you put a little extra time into this. Then the next thing, you know. Like you said, at the end of the job. You’re writing a check to your customer. Which isn’t ever the position you really want to be in.
Marcel 05:19
Yeah, it’s a it’s a funny thing, right? I think as service business owners, we tend to make the mistake of thinking of revenue as being revenue, or revenue as being the same as profit. And I think that often comes from this starting point, I think a lot of us start into building an agency or building or consultancy doing the work ourselves. And we don’t value our time, the same way that we, you know, inherently understand the cost of having somebody else do the work.
So a lot of times, we’re setting these baseline expectations, that, you know, when I sell something to a client, that money belongs to me, of course, at scale, that money doesn’t belong to you, first, you have to pay all the people to get the work done, and then what’s leftover belongs to you. And then you got to pay your rent, and then you got to pay for all your software, and then you got to pay your lawyer and your accountant, and then you get to keep some of that money.
So often, there is an inflection point where the design of our products and services needs to change dramatically to make sure that there’s enough margin in that service to actually have a healthy and scalable business. And that’s what we help agencies do. Of course, we have software, but we also do a lot of consulting around this as well.
Stay or Go?
Roy Barker 06:20
Now, I think this is an awesome time to be having this discussion. Because you know, we’ve talked about this over the last six or eight months. That some people may have gotten into, into doing some consulting or some marketing, because of COVID. And so now it’s like time to make a decision, do we go back to the work for somebody else? Do we stay in this business? That’s an important part of it. Is being able to make a living. Not just while in way, your time and you know, at the end of the day not having anything?
Marcel 06:54
Yep. Yep. So I think one of the things that needs to be true in order to make that assessment is you need to understand what the profitability of your service offering is, and then be able to figure out if you can truly scale it. So I mean, if you’re just a consultants, and you just want to be solo, that’s one thing, right? Then you just figure out like, basically, how much time does it take me to do this kind of an engagement? Therefore, how many of them can I do in a year?
And does that get me to a level of revenue that I’m happy with from a lifestyle perspective? But notice that even in that simplest possible case, there’s still an element of tracking your time that’s required there so that you can actually assess like, what is my capacity to earn revenue in a year, you should know that number, you should know if I work all the hours that I’m willing to work, how much money could I earn in a given year, so that you’re not setting yourself up again for disappointment. And then if you’re going to take that a level further, basically, what you need to understand is a couple of really important numbers on a project by project basis. And then as well, at the agency level, or at the company level.
The first is, what is my agency gross income. So I think a mistake that a lot of people make in the agency spaces, they focus on top line revenue, when depending on what your service offering is, there might be a lot of revenue that’s passing through you on to another vendor that actually doesn’t belong to you and is not, is not going to be impacted by your level of efficiency. So an example of this would be if you have ad spend, that you’re doing on behalf of a client or print budgets, or you hire an external video production agency to do a part of an engagement, right? There’s might be some external vendors that you work with where they’re actually doing the work.
And so you need to be able to subtract that out from your revenue to understand what is my agency gross income, what is the amount of revenue that I’m responsible, or my team is responsible for earning with the work we do for the clients so that you can start to understand how efficiently your business and your system earns that revenue. The next thing you want to be able to figure out is what is our gross margin or gross profit. And so many accountants that work with agencies don’t actually include this inherently in the profit and loss statement, because it’s designed to be generic for all of their clients who run all kinds of different businesses.
But an agency is unique because you typically have two layers of cogs, you have the first layer, which is all the external vendors that gets you to your AGI. On your profit loss statement today, it’s probably called your gross profit. Then the second thing you got to figure out is what does it cost us to actually earn that revenue, and that is by looking at your production expenses that are typically shared across clients. This would be things like your software that you pay for your Adobe Creative Cloud, your stock images, your you know, figma design software, like all the stuff that you might use to actually do creative work for your clients.
And then there’s the direct labor cost. So what does it actually cost you or cost you for the team that’s doing the work in terms of the time they put in what they cost per hour, whether they’re a freelancer contractor or they’re an employee need to understand what they cost, measure the amount of time that they put in on every project and figure out how much did it cost us so that you can understand what was our gross margin on that product. And if you’re gross margin on a project by project basis is not in that 60 to 70% range, then you probably want to work on getting that up and if at the agency level like across your whole business.
If you’re not in a, you know, 45 to 60% range, then you probably have some improvements that you want to make. So that’s your kind of target on gross margin, then from there, it’s a question of paying attention to your overhead, making sure you’re not overspending relative to your size. But typically 20 to 30% of your AGI being spent on overhead is an appropriate level. That should mean that, say, for example, you’re making a 50% gross margin across the whole agency, after you sold your product.
And you spend 25% of that of your AGI on overhead, you have a 25%. net margin, that’s a profitable agency, and you’re in a good place. So those are kind of some of the baselines that you need to start understanding, no, and we can get into more nuance and how to figure that stuff out some of the details on the calculations.But unless you’re clear on that information, then it’s going to be really, really hard to start hiring people and build the agency and make sure you have good cash flow, and it’s scalable. And what we see too often is an agency owner comes to us once they’ve hired 10 people and they’re like, I don’t get it, we’re so busy, but I have no money in my bank account what’s going on here. And it’s Well, you didn’t pay attention to those important things.
Stay On Track
Roy Barker 11:03
Well, on the secondary part of that, too. Is if we’re not keeping up with, you know, the time that we spend on each project correctly. It’s hard to know. Do we have the bandwidth to take on that next project. Without having to bring somebody on? And you know, we typically see that a lot. And I’ve been kind of reiterating this a lot lately. But businesses don’t always fail, because they don’t have any business.
There’s a lot of businesses that fail because they had too much business to good marketing. Right? They weren’t able to keep up with it, you know, on the back end. And so, another thing you mentioned was, you know, top line revenue. I love to, you know, it’s kind of financial humor. But I love it when somebody says, I’ve got a $10 million company, it’s like. Okay, well, if it costs you 20 million to make that 10 million, then you know what? We’re, you know, and so I don’t think people focus enough on like, what is that margin? What is that bottom line that we get to keep?
That’s the most important part. And even when you’re on your own. There are a lot of expenses, you know. The software, your equipment, your travel, you know. Sometimes you have somebody do a little one off project. Got to be sure, and include all of that into, you know, our pricing as well.
Marcel 12:17
Yeah, absolutely. And I want to double click on something you said there, which was like kind of the difference between starvation and indigestion, they often feel the same in an agency, which is just like shit, our payroll and our overheads coming up, we don’t have a lot of cash in our bank account. And so you think, Okay, well, I just need to go close a couple more deals, so I can pay that. But if the problem is that your services and fundamentally profitable, right, it’s creating cash flow problems for your business, then selling more is actually going to make the problem worse, right?
Your agency is experiencing indigestion. So until you have insight into what is the gross margin, what is the gross profitability of our service, then you won’t know if that’s the case or not, you’re just gonna feel like we just need more work. We just need more work. But you’re just gonna keep compounding this element of being behind the eight ball. Yeah,
Roy Barker 13:01
yeah. And something about, you know, talking about cash flow. And we can I can ask you what is the best way to structure this for the marketing agency? I know, you know, like. In the business that I do, we get a percentage upfront. Because you know, we have to pay, you know, we have to pay vendors and things like that. I have worked with a couple of they were more solopreneurs. They were in the marketing space that they just did the job. And cross their fingers and hope that they got something at the end of the day. And sometimes the end of that day, wasn’t the it wasn’t the same day that the project ended.
Marcel 13:36
Yeah, yeah. So the way I explained this, typically. It’s like for most people’s contracts that they write with clients, profitability is a function of the volume of time that goes into a project, cash flow is a function of the time elapsed on that project. And typically, that’s because to your point, you’re usually trying to get some kind of payment upfront, some kind of deposit, whether it’s 25 50%, the more money you can get up front, obviously, the better.
And then generally, the rest of the payment is tied to milestones, usually the completeness of the project. So when you deliver certain deliverables to the client that might trigger milestone payments, that’s a typical contract. What I love is after some kind of a project based engagement moving on to a retainer, or you get their credit card on file, and you’re just charging it every single month, so that really can alleviate a lot of the cash flow challenges that you run into.
But really, it’s just making sure that you’re not putting yourself in a position where deadlines keep getting pushed out, because of course, that’s the kiss of death, right? Where if all of a sudden, the client needs one more revision, one more revision, one more revision, and all of a sudden your milestone payment gets pushed out three, four or five months. That’s when you start to run into significant cashflow problems, especially if that’s a material amount of money if that’s a big project, a big client, and you’ve put all your eggs in that basket.
So I think contract structure is important. definitely make sure you get enough money up front to cover your costs. So typically, if you’re going to have you know, a 60 to 70% On your project, getting 50% upfront should be enough to pay for all the delivery of the project. And if the client screws off and never pays you again, at least you’re not going to be in the red. So try to push for a 50% upfront deposit. And then do your best to structure the contract such that there are limits on revisions and there are limits on time extensions to the contract.
That perhaps there’s a scope change that’s triggered if that and the timeline gets pushed out too, significantly, so that you’re not putting yourself in a position where you might end up having to go a very long time without getting paid and outlay a ton of capital to get this thing done for the client without ever seeing that cash flow back in,
Roy Barker 15:38
Regular clients, I work with their understanding, and you know. These are part of the ways we can educate them. But I will say that there are some clients that have a short memory. That due to them not getting stuff to you. They want something changes more revisions, this and that. Then at the end of the day, they’re like, wow, we’re 60 days over this deadline. And you know. It’s hard some at that point It’s really difficult to go back and explain to them that, well. You were a major influence, or major influence on that.
So I think that’s where pricing, we have to realize our value. This is another component of realizing that value is that if you want if you want or need 50% upfront. You shouldn’t be scared to ask for that. You know, and that’s sometimes with our newer clients, we have to educate them. Look, here’s the way this goes. If we you know, if we push. If we can’t get our information in a timely manner. We don’t get responses in a timely manner. Then we push out these deadlines. And then that’s not good for either one of us.
Marcel 16:45
Yeah, cuz I mean, imagine that case where the deadline is pushed out 60 days, and then you’ve got 90 day payment terms on your invoice, right? You’re five months late on getting paid, but your whole team still need to get paid in that time. So yeah, definitely an important thing to pay attention to on the cash flow side.
Roy Barker 16:59
Then when you start looking at scheduling work it compounds. Because, you know, I thought this job was going to be over August 30. And now we’re in October, and we’re still working on it. But we had three other jobs that we started. Because we thought we were going to be free on our time. So it can kind of rip has a ripple effect through every part of the business
Marcel 17:20
100%. And this is where like, you know, this is why our company, our thesis is solving this broader problem of profitability for agencies that we started with estimation. The reason for that is estimation, we really see it as being the foundation of agency operations. If you think about it, all the systems that you want to build in your agency that look forward at anything resource planning, capacity management, hiring, profitability, cash flow, all of those rely on the assumptions you make about your client work, when you are designing that and selling it to the client, right?
How much time is it going to take what time horizon, what volume of time and these different skill sets, you know who is going to be required to work on this. And if those assumptions are way off, then all these systems that you try to build on top of it are going to be way off as a result. So that foundation, the place where you have to start is getting really deliberate about estimation how you come up with assumptions for your client work.
How you use historical data to make that more objective and more accurate over time, how you normalize the structure of that estimate, so that you can actually start building time tracking schemas that map back to the estimate, you start building cost tracking that map back to the estimate, like all of these things need to be really intentionally designed, if you want to be in a place where you can quickly and easily answer questions like, did we scope this properly?
How should we change our scope next time? You know, did we make a profit on this? Do we have enough people to work on this project? If not, when can we start? Or who do we need to bring in in order to say, yes, these questions you’re asking yourself every day, but they’re hard to answer, probably because you haven’t put enough thought into how that data is structured, so that you can quickly ask those questions of it and get the answers.
Scope Creep or Under Pricing
Roy Barker 18:53
So when, you know, if you were come to my agency and asked me, you know. What, what is the amount of time you spend per job? versus how much you price that are? Are you finding that people are just letting that the scope creep out and kind of go crazy? Or do you find that they’re not charging enough, you know. Per hour or some I’m sure it’s some combination. But which do you find the most that they’re not charging enough? Or that they’re just letting their hours get out of control?
Marcel 19:25
Yeah, I mean, so we do. Part of our consulting practices. We start with an audit and we go in and we evaluate earning efficiency. Also, we look at average bill rate, we look at gross margin on the p&l. We dig into projects, we look at utilization rates, and then we look at overhead spending. The two major culprits are almost always utilization and or average billable rate. So the two things that we see is you’re not earning revenue efficiently.
That’s typically a question of pricing. And there’s one or two reasons that the price is too low either I they just didn’t set the price high enough to begin With and so they’re being too optimistic in their estimation, or they are not actually targeting a high enough gross profit, or they’re trying to do all kinds of stuff like, you know bake time off and holidays and overhead into their our, like cost per hour for employees, which just makes things way more complicated.
And they’re targeting like a net profit on a project, which, to me doesn’t make any sense at all like this, it just really doesn’t make sense. Like your overhead is not tied to a single project, you’re not going to hire a fire your accounting firm, or downsize your office space because of a single project. So why not focus on gross margin and simplify that calculation? The second reason is because, yeah, they just estimated the project poorly, and it ended up taking twice as many hours as they thought. So it’s the scope creep thing.
And I don’t know if that’s so much, you know, it varies. If that’s more their client management isn’t good, or if it’s more, so they just did a poor job of scoping the project. And it wasn’t the client changed what they wanted, they just didn’t quite do a good enough job of understanding that. Then the second piece is utilization, we see a lot of utilization gaps. And those are typically caused by one of three things. Number one, they are not consistent enough about new business.
So we see what I like to call the feast or famine roller coaster a lot, which is where if the founder is still involved in sales and delivery, they sell, sell, sell, when there’s no work, they get a bunch of work, then they get slammed with the work and they stop selling. Then they lift their head up after six months, and like Oh, shit, we have no work to do, then they sell, sell, sell. And those, you know, 345678 week periods where there’s almost no work to do, that just drags your utilization rate down.
So typically, those companies, when we benchmark their utilization, we create a graph and the graph goes from 150%, where the team is completely slammed nobody’s sleeping, they’re you know, living off of coffee, to they have nothing to do, they’re sitting on their hands, you know, they’re looking for internal projects to work on backup to 150%. It’s just totally unsustainable. The second reason is they just don’t have great project management practices. So they’re not doing a great job of capacity management Resource Planning Task assignments. And a lot of times we see this in agencies where they have either a client or service dilution problem. So they are having a single person work on way too many clients at the same time.
So they’re not productive, because they’re bouncing around, they’re constantly in meetings, they’re not actually getting things done. or number two, they are creating skill set silos where they might have a lot of services that they offer, but their team is relatively small. And so they might have this thing where they’ve got three designers, but only one of them knows how to do this particular thing. So they might have enough hours to keep the whole team utilized. But they can’t effectively collaborate, because they’re creating skill sets silos within the organization. So those are a couple of their culprits. And then the last one is just team composition.
They, you know, typically, we see this when you have a wide and shallow delivery team that’s trying to do a bunch of different services, as opposed to creating deep competency in a couple of specific areas, which again, allow you to have more billable employees relative to administrative employees, because you’re decreasing all the complexity that happens on admin, finance, accounting, project management, account management, sales.
So you can make that process more efficient, reduce that overhead, and focus more of your budget on producers. And if you can balance the team, and then utilize them, that typically makes a massive difference. So those are kind of the two big issues that we see. And some of the reasons behind why those numbers typically are below what they should be for these agencies that we work with. Okay.
Break the Marketing to Fullfillment Cycle
Roy Barker 23:23 Want a Profitable Agency
Yeah. Something you said earlier about, you know. It’s a, it’s a definite cycle for, you know, most solopreneurs entrepreneurs, smaller businesses is market market market. Yeah, who we got all this business. So we quit that. And then, you know, six months out, it’s like, wow, this dried up in a hurry. So it’s back to market market market.
And, you know. That puts a stress on, on your employees. If you if you are a smaller company, or even a mid size. Where, like you said, you know, we’re about 125% of capacity. So everybody’s working from can to can’t, and you wear them out, we get a little burnout. And then we have this period where we’ve got nothing. So now they’re sitting around worrying about is this job going to be here tomorrow. So I think just another good point. And why it would be so nice to at least smooth this out as much as totally possible.
Marcel 24:14
Yeah. And and these things are all related, right? So the way that we get there is by making sure that our delivery process is well defined enough that we can hire people to do that work. And as a founder, we don’t have to be involved anymore, necessarily, or we can make deliberate decisions about whether we choose to be involved in work or not, not that we have to be involved. Right. So we want to as quickly as possible in the agency separate ourselves from delivery, because that is a natural handbrake, right. If you are still going to sell yourself into pain as a founder when you’re selling, then there is a natural handbrake just built into that relationship.
So very quickly start to better define your delivery processes. In doing that your delivery processes should get more efficient, which means it costs you less to earn your revenues your profitability goes up, that’s good. And as your processes get more defined, they’re easier to actually estimate, right? Because if you know, here’s the five steps that we do to build a great website for a client, then it’s much easier to predict what those five steps are going to take in terms of time, who they’re going to require time for how much of that’s designed.
How much Miss development, how much of his strategy, whereas if our processes are not very well defined, then maybe it’s not the fact that we’re just bad at estimating, it’s that the thing we’re trying to estimate is just hard to estimate. So we want to close that gap by defining our processes. And as processes get designed, another great benefit is it typically reduces the amount of skill or experience required to do the work. Because the more open ended processes, the more judgment is required from the person doing the work in order to do that thing.
And typically, employees with good judgment are expensive, because they have more experience, they’ve seen more things, they’re able to be more self sufficient. And that’s not good for margin either. So it is to your benefit as an agency owner, especially in the early days, if you’re still doing a lot of work to document your processes, such that you can get somebody to do every single part of delivering the result to the client as early as possible.
That way, if you do happen to go out and sell a bunch of work, you’re not then going to get pulled in and get pulled away from sales that allows you to then focus on sales all the time, which creates outsize pipeline, which means that you can go into every sales conversation, not worrying about losing the work. That way, you can ask for that 50% deposit upfront, that way, you can ask for the price that you actually need to do this work well, that way, you can start to define the process for the client, as opposed to taking orders from the client, therefore protecting scope creep.
So you can start doing all the things that allow you to actually control engagement from end to end, which usually ends up meaning better work for your client, because you got to do your process the way that you’re supposed to do it, and better margins for you, because you got to actually keep things running the way that you estimated they would, will get the price of the claim in the first place.
Document The Process
Roy Barker 26:52 Want a Profitable Agency
Yeah, I’m a big fan of the documentation of processes. And not only just one time. But you know, we always it should be a, you know, a dynamic document. That we’re always looking at. Because what I found is that even though people think, Oh, this process is really dialed in. When you put it on paper and you start walking through it, you usually will find either gaps that that they were unaware of, or maybe just little tweaks that could be made to make it much more efficient than what it was.
Marcel 27:21
And this is this is the entire thesis of Parakeeto. So for those that are listening, if you want to dig into this, we have a system called the agency profitability flywheel, you can find tutorial videos on exactly what that is inside of our agency profitability toolkit, which is free on our website. So make sure you go check that out. We’ll see if we’re, I can leave it in the show notes for you. Yeah, the basic premise there is absolutely no, you want to create a feedback loop between our estimates and actuals. So we can see what are the projects that are going way better than we thought and which ones are not going the way that we thought?
And then within that we can even get some additional level of insight like, where are we going over? Is it dev, project management? Is it design? Right? What are the problem areas? And then we can start facilitating a regular meeting cadence for most people. This is project retroactive, they do it at the end of every project, they sit down, they have a conversation about how did this go? What can we learn from it, I prefer to do actually what I call project performance meetings, which happen every two weeks.
And we just look at the projects that have finished or that are close to finishing in that two week period. But that depends on the rate of change in your agency. And you get the team involved in that conversation. So it’s not a conversation about, hey, here’s what we’re seeing, I think we should change this. We’re talking to the team, we’re saying, hey, looks like we absolutely crushed this project, we were way more efficient than we thought we took us half the amount of time that we planned. What did we do differently here?
What can we learn from this, we can apply to other projects? And they go oh, well, you know, the way we hand it off from design to dev was super efficient. We did this new thing that I thought was really smart. We reuse templates from the last project that we did. And it really saved us a lot of time. It’s like amazing, that’s a great idea, we should document that process. Do you want to be accountable for installing that process, when we get the team involved in this conversation, it creates buy in, and they’re actually more incentivized to install, following maintain these processes.
And then as an owner that scales because we’re no longer the bottleneck in defining how things should work. We’re just facilitators. And we let the team actually do the work of making the way that things happen in the agency more efficient over time. And eventually, we can be completely removed from this process of estimating, tracking, reporting, and reviewing this and then facilitating process improvements with the team. We could have our whole project management organization running that whole process.
But that is the profitability flywheel which should make our estimates more accurate, make our processes more efficient, and build profitability and scalability into the agency, just naturally with the data and the processes that are happening every single day. So if you want to dig deeper on that, definitely go check that out. But right I absolutely agree that we want to make sure that this is a living document and that process is a process, not an event.
Stakeholder Involvement
Roy Barker 29:52 Want a Profitable Agency
Right, right. Yeah. It’s funny because I just said I had just written down a couple things when you started that about We really need to involve the team and we need to listen, not just lip service, and also our customers, because I think there’s there can, it’s easily to have a disconnect between I think, Wow, this went super smooth life is really good. The customers like good gravy, I mean, what’s going on over that place?
So I think it’s eye-opening. And a lot of people don’t ask it because they’re scared to the answer. But I think you have to turn that around and say, if we want to do this better, we’ve got it. Number one, get the people that are doing it involved and really listen to them. But then we’ve also got to hear what our customer has to say about that.
Marcel 30:39
Absolutely. On that note, I think one of the places that I see agencies dropped the ball all the time is client communication, you know, you go a week, two weeks, three weeks without letting the client know what’s going on. And in those moments, you let the client create their own narrative about what’s happening.
That’s when I see scope creep happen, because the client is used to having to micromanage their agency, and when you’re not creating clarity for them on what’s going on, then they feel like they have to step in and tell you what to do. Because in their mind, you’re not doing anything. Right. So creating these cadences around talking to customers, often giving them updates, getting feedback often is just a really great practice.
If nothing else to like, manage the relationship and reduce the risk that they’re going to feel like they have to step in, and tell you what to do in order to you know, get a successful outcome from the engagement. And it should give you more ammunition to go into that conversation at the end of the project with the team and understand like, not only did this go well, for us, but to your point, like was this a good outcome for the client?
Roy Barker 31:39 Want a Profitable Agency
Oh, yeah, cuz those periods of silence, you know, it’s like, as a customer, you think? How long? How long do I let this go? I don’t want to be, you know, to in their business, I want to give them time. But then I don’t want to let so much time go by that nothing’s been done. Or we’re off track, we have issues. And so that’s why I think, just even if it’s just an email, like, Hey, you know, we told you, we’re working on this, this is what we’re doing.
We’re about 50% there, we should have, you know, something to show you next week or anything, you know, anything is better than nothing. Because you know, at when when you don’t hear anything, you’re, as a consumer, your mind starts kind of wandering. And if you’ve had a bad experience before, that just amplifies those feelings that you start having
Marcel 32:22
100% you just allow your client to bring whatever baggage they have into your engagement. And it’s usually not not good baggage. Yeah.
Niche Down
Roy Barker 32:31 Want a Profitable Agency
So what about earlier you had mentioned? Kind of doing a lot of stuff. So what’s your opinion on kind of having a nice that you fit into, instead of trying to be everything to everybody?
Marcel 32:48
Yeah, I think probably you can probably predict the answer to this question. So obviously, I like systems. I like to have a system for estimating. I like to have a system for tracking time and doing the work. And all of these things. Systems require some level of regularity, right. If there’s a ton of variety in the type of work that we do, then it’s very, very hard to create systems that are predictable and repeatable around that.
So I definitely like the idea of finding a way to reduce the complexity of the work that you offer, and reduce how much that changes. And I think there’s a couple of different ways to look at doing this. Ultimately, it comes down to solving a specific problem for a specific person. So I think a lot of people get too caught up in this idea of Oh, we’ve got to pick just one service that we offer, like we need to just do Facebook ads are just do website design development. And we also need to just serve one industry or just one type of client. And I think those are useful lenses to apply to niching.
But fundamentally, at the end of the day, if you can understand who has a specific problem, understand that problem better than anyone else, and design a great way to solve that problem, even if, right so like this is the one case for full service agencies. I think that’s become a bad word. I think there still is room for full service agencies. But I think full service agencies need to pick one problem that they apply a full service lens to, right.
So you know, it’s not inherently bad to say we will build your website and build your funnel and run your ads and do your email campaigns. If you’re doing that for 100 different industries, or 100 different types of businesses, that’s where there’s too much complexity. But if you can say, we can build the entire marketing engine for a legal firm, then you can start to actually create a process for that that’s repeatable, you can start to create scopes of work for that that are relatively compatible with one another, you can start to create horizontally consistent data schemas, like you can still do a lot of things and create some level of consistency.
Until you create that level of consistency, right, all this stuff that I’ve talked about is a lot harder to do. And so I definitely think it behooves agency owners that might be feeling like they’re doing a lot of different things to start thinking about. How to focus in. And there’s a lot of advantages to that we could do a whole episode on that, and I’m sure you’ve done several others on that topic. So and so have I,
Want A Profitability Agency
Roy Barker 35:08 Want a Profitable Agency
yeah, it’s that it’s strategic, I think is the best way to put it is that you know, because when, when you’re starting out, or when you get that low spot, you know, somebody walked in and said, I’d like for you to change the alternator on that 62 Chevy up front, you know, we’re like, okay, we’ll jump right on that. But it’s, if we set our you know, get our processes down for whatever we do, then when we see upsell opportunities or ways to expand if we do it in a manageable and strategic way, where we, you know, actually develop the processes before we get involved in it.
Because that’s what I see a lot too is that when we get into this, this area, we’re not that we don’t do a lot. And then we’re trying to figure out processes and procedures, you know, in the midst of trying to do the job and do it right. Whereas if we thought about how do we do this, how do we add this extra service, it’s much more manageable. And so it just has to be my opinion, it just has to be very thought out.
Marcel 36:10
And there’s a psychological aspect to this, I think is fascinating. If you haven’t tried saying no to a client during a sales call. Try it. And more often than I mean, this literally happened to me yesterday, where I told the client like, these are the things I think you need help with. And that’s not what I do. I’m not an expert in these things. I think there’s other people out there that are much better suited to serve you.
And that flip the sale, I spent the next 10 minutes hearing from the client, all the reasons that I should work with them, right, they were now trying to sell me on why I should still work with them. And they started adjusting their needs to fit into the box of like what I said, like this is my lane, this is where I like to live, this is where I bring the most value, it’s a fascinating thing to try.
So I’d encourage you to try it on a call when you get somebody that you’re like, clearly this is just not a good fit. Or we’ve never done this before. I’m not really excited about this, push back and just see how it changes the dynamic of the conversation. More often than not, you’ll find yourself basically flipping the sale. Yeah,
Roy Barker 37:03 Want a Profitable Agency
and we talked about that a lot too. With pricing, you know, the minute somebody comes out, start, Oh, that’s too high, you know, start trying to beat you down on pricing. Sometimes all you got to do is say you know what, we just may not be a good match, but I wish you luck. And then like you said, you’ll spend the next 30 minutes listening to them sell you on why you actually should work with them.
Marcel 37:22
It’s a fascinating experiment. And it’s this, it’s this really interesting compounding effect of when you don’t need the work. You can sell like you don’t need the work. And when you sell like you don’t need the work, you typically make more money, you close more deals, and you end up with more profitable projects on the back end.
Roy Barker 37:38 Want a Profitable Agency
Yeah, yeah. Cut down our mistakes or our chances for mistakes for sure. Because when we get in a bind and feel like we have to sell everybody that we talked to, we can do some things we probably shouldn’t be doing.
Marcel 37:50
We end up with indigestion ROI ingestion, I feel like starvation.
Roy Barker 37:55 Want a Profitable Agency
All right, Marcel. Well, is there anything else you want to put out there before we wrap this up?
Marcel 38:00
Yeah, I mean, if you’ve listened to this episode, and you want to dig deeper into all this stuff, I mean, like everything from how to calculate the cost per hour on your employee, you know, basis how to figure out what the right utilization rate is for you all the nerdy details of agency profitability. We’ve got all kinds of free resources for you. I’d start by checking out the agency profitability toolkit, definitely check out our blog. And we also have a podcast called The Agency Profit Podcast where we talk about, you guessed it, agency profitability.
So if you want to go deeper, you want to dive into all the content we’ve created. I spent the last three years just kind of share everything I know, on this subject. So feel free to go and consume that. And if you have questions, or you want to nerd out, you’ll be able to find me on the internet pretty easily. So feel free to reach out. I’d love to hear from you.
Wrap Up
Roy Barker 38:44 Want a Profitable Agency
Okay, yeah. Great. And can you give us the website and let everybody know where they can go find you?
Marcel 38:49
Absolutely. So Parakeeto.com, P A R A K E E T O.com. And it’s The Agency Profit Podcast. You’ll find that on any other podcasts services that you use. If you want to find me, LinkedIn is probably the best place to reach out to Marcel Petitpas, I’m wearing the same shirt with a the Parkeets on it and my profile picture so easy to spot. Feel free to connect, send me a message. Let me know you’re heard about me on Roy’s podcast, and I’ll be happy to chat. All right, great. Well, we appreciate that.
Roy Barker 39:17
I like the that’s a good idea of wearing the same shirt as the profile picture. I’m glad to think about that.
Marcel 39:23
I keep that UX consistent omni channel. Yeah, right.
Roy Barker 39:27 Want a Profitable Agency
Right. All right. Well, thanks so much. It’s been great talking to you a lot of great information y’all reach out to Marcel and, you know, read some of his information, reach out and talk to him, see how he can help you improve your agency profitability. So until next time, that’s gonna do it for this podcast episode. You can also find us at www.thebusinessofbusinesspodcast.com. We’re on all the major podcast platforms iTunes, Stitcher, Google, Spotify, and Pandora.
We’re also on all the major social media networks, probably hanging out On Instagram a little more than others, So reach out there we’d love to interact with you, you can find a video of this interview will go up on our YouTube page. So go over there, check out the video and some of our other great guests from the past. Until next time, that’s gonna do it. For The Business of Business Podcast. Take care of yourself and take care of your business.
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