MBA2424 Why People Hate Running Agency Businesses & How To Avoid The Headaches

0:08Heyo! Welcome to the$100 MBA show, Business Truths delivered on a silver platter with our practical business lessons. I'm your host, your coach, your teacher, Omar Zinhome. And in today's lesson, you will learn why people hate running agency businesses and how you can avoid the headaches. Agency businesses are simply service-based businesses. Some examples are like a video production company providing video services or a marketing agency providing advertising services. They change expertise or even labor in exchange for money. Pretty simple, right? So what's the problem? Well, I spoke to many agency business owners to find out why they hate running their business.

0:51I hear all the time. But also, I'm gonna show you how to solve for all those problems. If you want to run an agency business, it's not all bad. It's actually pretty good, and I'll show you why. But if you don't build it the right way, you can end up with a lot of heartache. Let's get into it. Let's get down to business. Agency businesses are fantastic because they're fairly easy to start with very little capital. So why do so many agency owners hate their business? And more importantly, how can they change those things so they can avoid all those migraine-inducing problems that go with an agency business?

1:27Back in 2012, I started an agency business, and I can tell you firsthand there's a right way to do it and a wrong way. And when you do it wrong, you're asking for trouble. More about that in a second, but I want to quickly share some of the huge positives of running an agency business. Here are a few of them in rapid fire. Again, agency businesses take very little to start. You don't actually need any capital. I started an agency back in 2012, like I mentioned, with just myself and my laptop. No employees, no office, no funding needed. Not only do you not need any funding, but you also don't need to invest before you get started.

2:02You don't have to buy expensive inventory or equipment. You don't need to hire expensive staff. You don't need expensive tools or programs. just your skills and a first client. Speaking of clients, one client can be all you need to quit your job and earn a full-time living with your agency business. Now, I wouldn't recommend just having one client, but the fact still remains true. If they are paying you enough, one client, if the service is valuable enough, they will be able to sustain your lifestyle. Another big advantage is that it's much easier to compete in services in many ways because it's hard to compare value with services versus products.

2:44For example, if I'm in the supermarket and I am comparing different laundry detergent, I can look at the label, I can look at the ingredients, I can make a judgment that one is better than the other for certain reasons. But with services, the quality of the work can vary, especially when it comes to something like copywriting or web design. One copywriter can write a piece of copy that can convert a whole lot better than another, and it's hard to know that from the get-go. So you can actually charge more, and you're not stuck with competition and dropping your rates to compete with others. And lastly, you can deliver your services online from anywhere at any time, giving you ultimate flexibility.

3:26So why do so many agency owners hate running their business then? Well, I actually asked several of my friends in business that have agency businesses. And here are their top five reasons why they hate running their business. And we're going to dive into these in detail. And then we're going to, of course, talk about how to solve these problems. So if you do want to run an agency business, how to do it right. So you can save your head some gray hairs. The first reason why they don't enjoy their business. and this is probably the most common thing that was said, managing people. I heard the term or the phrase people equals drama over and over.

4:06When you're running an agency business, you are managing people. The people that are pulling off your services, your staff are people. The clients are people. So from all angles, you're dealing with human beings and human beings are sometimes unpredictable. They can be emotional. People are dynamic. People will throw a spanner in the works. It's not like code where you can actually see what's happening. It's not binary. It's not on or off. They could surprise you. They can impress you. And at the same time, they can disappoint you. So managing people is often one of the biggest headaches people have when running an agency business because all they do is deal with people because the people are what make the business go.

4:47Number two, talent wars. In an agency, the product that you sell is a service. It's work, whether they're creating ads or designing logos or composing songs or whatever your agency provides. People provide this. And if you want to have a great agency, you've got to have great talent, great people doing the work. And the top talent in any industry is limited. And often these people either get poached by other agencies or they get so good they say, hey, I can start my own agency and do my own thing. So that's always a challenge for agency owners. How do they keep great talent? How do they incentivize them to stay and be loyal?

5:26How do they stop them from getting poached? And what do they do if they decide to go on their own and become their competition? So talent wars is a big reason why agencies struggle. Number three, client expectations. When you get the wrong client or a bad fit, that usually means their expectations were different than yours. Some clients, they will hire you for a service and think that you're going to just run their whole business. They have different expectations. They get disappointed when they don't get what they expected. For example, somebody might hire a PR agency to give them some PR. And their expectation is like, hey, I should be famous within a month.

6:03I should be getting calls from all the major news outlets. I should be getting interviews. I should be getting offers. Not understanding that the PR agency can't make people publish articles. They only could do so much. And the result of being famous is not something that they can guarantee. Number four, having to start from zero with every client every month. I heard this a few times from a few friends of mine that are agency owners. And let me give you an example to shape this. Every month, the client has an expectation. Say, for example, you are providing SEO services so that they can get organic traffic.

6:38The first month you do some changes. And because it's the first month, they make some drastic changes. And because they made those changes and you weren't doing anything before, they see really good results. So say, for example, they get 4 ,000 new visitors to their website off the SEO change or optimization. The next month, the client's going to be like, awesome, I want 4 ,000 more. I want 5 ,000 more. And it's like the agency has to start all over again and meet that expectation again and try to hit that target. And they have to do this every single month with every single client. It's hard to kind of build on compounding because your results sets a standard.

7:16and the client may not really understand how it all works. And lastly, the big pain point that I heard over and over was that a few or even one client can make or break your ability to stay in business. I mentioned this earlier, but some agency owners have two, three, maybe four big clients that basically carry the business. For some reason, one or two of them decide to leave you, that might mean the difference between you making or missing payroll. This is very scary for a lot of agencies because they feel like they're the bend over backwards for some of these big clients because otherwise they'd be in big trouble if they leave.

7:54So are agency businesses just horrible and you should never think about running one? No. Every problem has a solution. Luckily, most of these problems can be solved with one solution to cure all the headaches and the dramas that you would be expecting as an agency owner. and here's that solution this solution will solve most of these problems if not all you have to remove yourself from the agency be an agency owner not an agency operator and you have to do this as soon as possible this is not something that you want to put off or say i'll get around to it later i advise you to make it your number one priority as a business owner as an agency owner This means you need to find a director, a manager, a president of your agency that can run things day to day, that can manage things for you and take care of the people, take care of the talent, take care of the customer and client expectations.

8:57Make sure that your business doesn't hinge on one or two clients. And I say this because agency businesses are actually pretty good businesses and they're actually very good to scale, easy to scale, or I should say easier to scale than other businesses. And if you're providing high quality services, you can charge a premium and you can continue to build upon your brand and your legacy and increase your revenue. As the agency owner, your job is to hire and recruit the best talent. That's what you should be doing. Maybe in the first month, two, three, six months maximum, you are doing the work. You are doing the services.

9:38You are fulfilling the client work. But as soon as possible, you want to hire somebody immediately. You might be saying, well, I'm not going to have enough money to hire somebody if I only have one client or two clients. I need that money to sustain myself. Again, you're thinking like an employee. You need to think like a business owner. Work on margins. Find somebody that you can hire at a reasonable rate and then charge more than that rate to have a margin, a fat margin. This allows you to remove yourself from the business and you just have to manage that person in the beginning. They get their pay, you get your margin.

10:13Guess what? Once you do this once and create a set of SOPs, standard operating procedures, training manuals, training documents that that employee will help you do or will do for you, then you make the next hire. and that first hire trains the second hire. Guess what? More margins. You just doubled your margins. And a third hire tripled your margins. Fourth hire quadrupled your margins. You get the point. Once you have enough margins to hire a senior manager, that's your next hire. This person is going to become you. You're going to show them everything that you do as the owner. The recruitment of talent, the fulfilling of the services, the accounting, the meetings, the whatever you do.

10:57And they become the operator of the business. And from that point on, they're the only person that reports to you. They're giving you high level numbers, how much money you made, how much work you brought in, how many leads, high level numbers. This keeps you out of the drama, keeps you away from worrying about talent wars because you've trained them. You've done it, you've hired a team, you have a manager, and you've removed yourself from the equation. A good expectation, a good timeline is you get to this point where you hire your operator within the first year of your agency. By the end of 365 days, this should be the goal.

11:35This is how aggressive you have to be. And basically, you create a system of hiring and fulfilling services. You then reap the benefits, the rewards, the profits without the headaches. Well, there you have it, guys. Those are the reasons why people hate running agency businesses, but I just showed you how you can save yourself from all those headaches. All the agency owners I know that have an operator, that has a director, a president, a manager, that's running things day to day, they love their business. They're like, this is a great cash cow. And business begets business. People refer us. Our portfolio gets bigger.

12:13People see we have great work. because the owner of the business doesn't have to see or deal with the dramas. If you loved today's episode, if you loved the show, hit subscribe. Hit follow on your favorite podcast app right now. Whether you're listening on Spotify or Apple Podcasts or any app, go ahead and hit follow to get our next episode automatically. And you tell the algorithm, hey, this show's all right. Thank you in advance for doing that. It's the best way to give back. Before I go, I want to leave you with this. the reason why I want you to be on a tight deadline and get that manager in place within one year it's because you can't be in the grind in the grit in the agency for too long you need to get out of there as soon as possible as the owner because you need to spare yourself so that you can have a clear mind to think big picture expanding getting bigger clients having better services being the creative being the person that has a plan three five ten years ahead you You can't think like that when you're in the day-to-day trying to pull off the services yourself.

13:17Thanks so much for listening, and I'll check you in the next episode. I'll see you then. Take care.

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