229. The 3 Metrics that Matters to Guarantee Profitability

0:00Nick Aria:Most agency owners think paying employees more will kill their margin. But today's guest believes the opposite and has built and sold multiple agencies proving it. Nick Aria started by fixing broken agencies after leaving a$100 million company. What began as consulting turned into running teams, acquiring struggling agencies, and scaling them using one core belief. The fastest way to grow profit isn't better tactics, it's better paid people. I'm Ryan Atkinson and you're listening to Help The Podcast where we uncover the secret to building and running successful businesses and I am so excited to welcome Nick here today to talk about how you can scale an agency to one million dollars by paying above market it actually increases profits and so much more so Nick thank you so much for being here thank you so much for having me Ryan I'm excited to be here yeah it's gonna be so good and if someone's hearing you for the first time like okay who is this Nick guy give us a quick 30 second background just so people can understand you a little bit more than we're gonna dive into all the good stuff totally so like yeah like quick 30 seconder.

0:55I'm a guy that actually started kind of in like almost like an internal management consulting role in this like really large, like industrial services business. I was working directly with like the vice president of sales and marketing, the COO, CFO, et cetera. And we ended up doing like a bunch of like mergers and acquisitions in that space. So like learn to analyze business real well. Fast forward a few years because like I did a bunch of entrepreneurship between then agency, grew my own agency, sold part of it, became part of another one we did a bunch of m &a there left that agency went on to found my second agency that was like solo did some acquisition there as well and basically what my whole takeaway has been time and time again is exactly the intro like pay people more to get out of the day-to-day business my core belief that like agencies are i love them because they are places where like having a good culture and treating people well is like a requirement.

1:51And I really like that about agencies, like having come from like the industrial services background, like it's like really rough around the edges. People aren't kind to each other. And agencies is just like a much nicer place to be.

2:03Nick Aria:And I want to work with nice people. I like it. Let's actually dive into first about paying people above market. Why does that actually help people instead of like killing markets? I hear here, you know, paying someone$100 ,000 instead of$60 ,000. I mean, that takes $40 ,000 away from profit. So I mean, push back on me there. I mean, how is that actually going to increase profits for someone that's listening? First of all, there's like a second element that maybe that's the second thing we talk about. But it forces you to charge more for your services to be able to afford the person in the first place, which is in my opinion, not the wrong thing.

2:33So like we can talk about why that's the right thing later. But ultimately, the other benefits of this is like, well, how much management do you need to give somebody that you pay$60 ,000 to versus like 100 and how much supervision does 100 per year person need versus like 150 or two or three and you start figuring out pretty quick that the curve like if you think about this on a curve the amount of time that people need for you to invest in them to actually get them to produce like outsized outcomes like revenue profitability wise as you go up the ladder of how much you pay the amount of time falls, but not in a linear fashion.

3:13It's actually way faster than that, right? So like somebody that you pay 200K a year versus somebody that you pay 50K a year, do you manage that 50K a person per year four times as much as the 200K person per year? It's like, no, you probably manage them even less. Not only that, but they're probably telling you what to do. So they're actually like inverse managing you. It's like they're actually telling you what to do and saving you time rather than, you know, you having to like burn the midnight oil because this person at 50K a year screwed up and now you need to salvage the work. And now you stop selling because you've got to fix the work.

3:50And now you're kind of caught in this like eternal put out fires place and on the hamster wheel and you're getting nowhere fast.

3:57Nick Aria:Talk to me about this, though. So someone's going to start an agency from ground zero. Obviously, you're going to have to do some stuff, you know, early on, but like hire like one or two. Are you saying like someone should be going after that 200K person opposed to like a 50K person? Or is there like kind of steps you need to like get there? So the answer is it depends. Okay. This all almost touches into the second point around like maximizing dollar per hour. Like, look, if you're good at what you do, because this is why you open an agency, right? You open an agency because you're good at something.

4:26And you should be probably not just good. You should probably be exceptional. The fastest way to become a highly scalable business is to start it off. the opposite, meaning like non-scalable. What does that mean? That means that you are the product and you are the delivery mechanism of that product for as long as possible. This is where people get this wrong, though. They price their services in a way where it's like, OK, well, if I were to hire somebody else, I can still charge this amount. And that's the wrong way of thinking about it. The first thing you need to do is just push up the price as much as possible because you should be exceptional, meaning like you do better work than the majority of the market.

5:04Therefore, if the majority of the market is charging 3k a month or 5k a month or depends on the service mix that you have you should be charging well above that and the reason that people are going to pay you that is because you have a certain reputation around like being great at what it is that you do the ultimate truth of how much you can charge for the services of an agency it's fundamentally anchored to that founder and what they can do let me give you an example i've worked with agency owners that for their own time, if you want them on a call to consult, et cetera, it's anywhere between a thousand to$2 ,000 USD per hour, right?

5:40Wow. What they charge for their own agency's time, meaning like, hey, somebody that I trained, et cetera, it's 300 bucks an hour. And they get it because it's anchored to the fact that they charge$2 ,000 an hour. Now, if, for example, the founder charges$500 an hour or maybe even like$300 an hour, why would somebody else pay the person beneath you 200 you know what i mean and the relationship isn't one-to-one so it's not like oh you know whatever the founder charges you can charge like 30 or whatever that's not how it works there's a diminishing returns thing that goes on but at the beginning when you're trying to launch your first order of business is charge as much as possible to create the margin so that therefore you can hire somebody that maybe isn't 200k but it's somebody that is so independent that when you hire them, they require very little of your management and you can teach them how you do things.

6:35Now, are you going to be able to charge as much for what they do versus you doing it? No, but it's still going to be ideally above market of what everybody else does. And like you basically have to create the margin room to do this. And this is the number one way that I know how to do it.

6:51Nick Aria:Yeah. I want to talk about like pushing pricing up because it's something that we're dealing with our own agency where like we had packages of like 12 ,000 14 ,000 16 ,000 and like our win rate was like 50 on like a 16k package like it was absurd I was like well we just can't keep doing that so our new pricing is like 14k 19k and 24k so they went up slightly close rates are starting to like definitely fall on that but like how do you measure pricing and if you're like pricing too high or like not pricing enough like what metrics are you looking at like what advice would you have for me on that because that's work early like look i have this like like i call it like the 30 30 rule right and when you're getting into prices like you're talking about like the half of the 30 is probably taking care of really well and the other 30 maybe i don't know based off your current increase so the 30 30 rule is simple is the product and service that you're delivering 30 delivery cost meaning like 70 margin after like direct cost so like your direct cost to deliver that thing is 30 or less that's the first half of the 30 30 rule at those prices you can definitely massage the hours etc to like get there and if you can't like you have an operational problem at that point so like you got to figure that out okay the other half of the 33 rule is close percentage so like you said we were closing 50 so i pushed prices up that is actually the 30 30 rule in action if your close rate is between 30 and 40 percent once you get to like the north side of that range like 35 plus it may be time to increase prices like for me if i see like a 40 closure i'm like yeah price increase time like here we go because especially like if you have like a reasonable pipeline right like if you have a few leads like you don't need like you know hundreds of leads a month or anything but like even if you have like 10 leads a month and you're closing you know of the sales qualified ones and by the way this is an important distinction this is 30 close rate of sales qualified leads not marketing qualified leads so like if you get 20 leads and and then you're like oh i'm only closing 25 but your sales qualified leads are like half of that or less it's based off of sales qualified leads in terms of divisors so like if you're closing you know five of 10 sales qualified leads that's 50 like you have to push your prices up and you keep doing that until you hit like 30, 35%.

9:09Like that's the math.

9:10Nick Aria:Are you ready to launch, grow and scale a business? Inside the Upflip Academy, you'll get a complete roadmap to shortcut your success with 25 plus step-by-step programs taught by active business owners, not gurus who share their step-by-step blueprints, plus ongoing live workshops, skills training, a business idea database, and community to share resources and celebrate your wins. Click the link in the description below to join the Elphab Academy today and start surrounding yourself with the people and tools that can change everything for your business. I'm literally working through this today.

9:46Nick Aria:I'm talking to my co-founder literally in an hour. Like this is not a joke. That's what like the close rates that like I'm gonna like, I wanna be around like that 25 to 30%, but hit on the marketing qualified leads and the sales qualified lead a little bit deeper because I know pretty well what you're saying, but our audience might, what is the two distinction of it? Because I love that you're saying that That's literally how I think about it today. So I love that you said that. The marketing qualified leads, I mean, like any lead that comes your way, right? One way or another. Like if it's inbound, if it's outbound, like it changes in definition a bit.

10:12Like, I mean, like it's not technically a marketing qualified lead at that point. It's more like an interested party. But if it's inbound, marketing qualified lead is every single lead. The sales qualified leads are people that follow your ideal client profile, like your ICP and that have needs. So like ICP is not enough. And like, look, a lot of people get their sales qualified leads definition wrong. They're like, oh, this person's like part of target audience. It's like, but do they have need? Do they have budget? Like, there's more than one element to this. And so your sales qualified criteria should be pretty tight.

10:46And like why people generally loosen the sales qualified criteria is because they look at their marketing funnel and they say, oh, well, only 20 % of our leads are sales qualified. Like, let's expand what sales qualified means so that we don't feel bad about the fact that only two in 10 leads are viable. But guess what? Like, it depends on your funnel. Like, if you have like a very content and personal brand focus funnel, yeah, you're

11:08Nick Aria:going to get like sales qualified leads at a much higher rate. But if you're doing like YouTube ads and like Facebook ads and like things that are a lot colder in general, 10 to 30 percent is sort of like the average that I've seen across like multiple agencies. Yeah, that's what I was going to ask. So we're like a video marketing agency. And so obviously I didn't reinvent the wheel here. Like we do like product demos, like explain our videos, like those types of videos. So I would say like our goal every month is to book like honestly, like 40 meetings, like a month. And like, we can like hit that, like actually pretty well, but like what percentage of that do you think should actually be like a sales qualifies that 10 to 30 % then or break that down for me?

11:46Nick Aria:And yeah. Oh, if you're 10 to 30%, yeah. I mean like, but by the way, like it depends on how you get the lead. So like, so to me, like for example, like if it's a personal brand that's generating the leads, it's like your sales qualified should probably be like, I mean, truly anywhere between like 30 and 50%. It's just naturally higher. If it's like Google, Facebook, like VSLs, like, you know, like video sales that are etc, like it's going to be at a lower rate, right? Why primarily because of budget. Once you like eliminate the budget side, generally, people are going to qualify more often than not, but not all the time.

12:23The other thing I would say is like price dependent. So like, look, if any agency has like a two to three K product, your sales qualified definition is way broader than somebody charging, you know, 10 or 20 K a month. It's just obvious because of budgetary constraint.

12:38Nick Aria:It's interesting because like, since we pushed our pricing up to like 14 K for like two videos, essentially like seven K a video, people have been like coming in a lot more. Like, can I actually just like get started with one video at a lower price point? It's an interesting problem because we never really had it before we like raise prices so would you have any like advice on like how to think about that problem where like people i get i'm throwing this all at you on the spot here but um any advice there's two fundamental challenges right it's like this could be a sales challenge in terms of how it's packaged so like you're not necessarily getting a objection like this is not like a like a straight up objection but how i think about sales.

13:15And by the way, I'm not that good of a salesperson. But I still consider what you just said an objection, right? Because it's not necessarily they don't want to buy. They just don't want to buy what you're telling them to buy, which is effectively an objection. The problem is that the question comes up in the first place. So how I would approach it is actually like maybe overly simplistic and maybe not in the scope of what you're asking. But how I would solve it is, hey, we sell a package of two. The reason is, is because like B-roll synergies, da, da, da, da da da da like all of these synergies that like it's like we're able to take these elements so if you want two it's 14 and like then it would would be like i would straight up give people the option to do one it's just that like one is like 11 or like 10 or whatever right because it's like hey like getting the editor to edit two videos it's faster than editing one so they need to understand that and so like either a show them the price for one from the get-go and have like a a pricing matrix of like, here's our pricing matrix, number one, or number two, it's like, you need to talk them through your process, which is like your unique process and how you're able to render the value in the way that you're able to render it.

14:23So like the question is never asked. To me, like any kind of sales objection is like, what are we doing wrong that the question is asked in the first place? Like that's where my brain goes.

14:31Nick Aria:That's what I was working through last night because like when I'm packaging these together, I was like, okay, obviously like I'm not conveying the value here, like somehow, like I'm looking inward before I'm looking outward on that. It's something that you understand that they don't understand. That's why the question is occurring. That is super helpful. I want to ask them, of course, I'm going to get a lot of advice out of you today, Nick. So how should we think about scaling? So we did about 348 last year in 2025. It was about 128 % increase from our first year in operation in 2024. First of all, when you're below$5 million in revenue, never look at percentages.

15:03They make you feel good, but they're not real.

15:05Nick Aria:I also know that, but it does make me feel good. So I'm going to say it. So how would you think about, you know, getting an additional 700 K in revenue this year with like go to market, either customer retention. I know you're really big on that referrals. The first question I would ask you based off your current system, because you're closing at such a high rate is like, well, how much is the rebuy rate? And or is there some sort of like product or service that you're tacking on that creates monthly recurring revenue in any way, shape or form? Right. Because like, here's the thing, like, like, look, I don't know the details of your business in depth, but if every single client comes in, buys something and then leaves, if you're trying to create a$1 million agency, that means that you need to sell a million dollars per year.

15:44And then if you need one or$2 million agency, you have to sell$2 million per year. But if you have a business that, for example, is fully monthly recurring, then it's a question about client retention. And so if you sell a million dollars this year and you have a three-year retention, next year, you're going to sell a million dollars again. Now you're going to be a two. And then the next year you're going to be at three right like that's how this works so like what's the monthly recurring revenue component that you currently have going on and what percentage of

16:10Nick Aria:the business is that it's all retainers basically like you'll buy like a package of like six videos four videos like two videos essentially so there really is no like monthly recurrence all like per month per what so basically like a two video package will expire within like four months a four video package will expire within like eight months and a six video package will expire like like within a year. So the reoccurring, like honestly, isn't great. I know it's a challenge like of our business. It's not recurring. It's all you've done is like put term limits on a, on a project basis. Exactly.

16:40Nick Aria:Yeah. It's not reoccurring. I agree with that a hundred percent. Like I don't think it's reoccurring at all. So like, is our biggest challenge like that? We don't have reoccurring. You need to figure out the recurring element and put it into place. Or you need to figure out how to like, absolutely make it rain leads. Okay. Fair. It's like, look, it's, I'm not telling you that going project is not in the cards. I have seen agencies doing like five, six million dollars a year on a project basis only. But they are like sales and marketing machines. And the first question I ask them, I'm like, why?

17:13Like, why are you doing this to yourself? Like, they're like, well, it's work. It's not broken. We're making good money, but we want to grow. And like, we can't grow more. And like, you know, we've thrown the, you know, we've thrown like everything at like sales and marketing. And like we stalled now. So now we're doing monthly recurring revenue. I'm like, you should have done this like, you know, 80 % ago when you were like a million bucks.

17:35Nick Aria:I was having this conversation. The person before I told you that recommended the E-Myth, he was talking yesterday about like a flooring company where they're like, well, they're a flooring company. But like, really, they're a sales and marketing company that like just happens to do flooring. They're just kick ass at sales and marketing. That's why they do like a billion dollars. I mean, I was like, that's kind of like my agency. So, yeah, that's I think our problem is like we need to rein leads, as you basically said, to reach like a million revenue. There's really no other way if we'd have like a reoccurring model there.

17:59And to be frank, like, I mean, the question is, do you want to be a sales and marketing organization or do you want to be a product? Like, do you want to be excellent at the product you deliver? And by the way, this is a strategic decision for sure. Yeah. To me, like, look, like I have a client that has sub 1 % churn monthly, like sub 1 % monthly revenue. That's insane. Which is insane. Okay. In fact, their actual numbers are 0.65 % per month. Oh my gosh, that's crazy. For all of 2025. And the reason that this client approached me in late 2024, I think it was like August or so, 2024. They're like, Nick, you talk a lot about client retention.

18:42We think we have a client churn problem. I looked and it was like 1.5 % monthly churn. And I'm like, dude, best practice is below 2%. You're crushing. and the guy's like can you help cut it down further I'm like all right like let's go through your systems I'm like I can improve it but like man like no promises sure enough like within you know three months we got the turn down to like I think it was q1.1 oh wow for q1 q2 it went up and it was like it basically averaged out to 0.65 on the year but like totally abnormal my point is this it's like how many deals that they really need to close to grow when you're losing that little revenue right and the answer is not a lot right because what we're really saying is that they lost eight percent like because 0.65 times 12 they lost eight less than eight percent of their total revenue in the year by the way that's just like straight up looking at churn without considering upsells and referrals if we consider upsells and referrals which in my world i do they didn't but like because they're like that strict about it i was like guys you have negative churn because just the referrals and upsells accounted for more than that and then on top of that they did sales and marketing but they were doing sales and marketing at such a low level where it was like three percent of their budget and guess what like other agencies are spending eight to twelve percent i know agencies spending 12 to 16 or even like sometimes 20 plus on sales and marketing guess what happens when you're spending like two to three percent and you're still growing like that delta between like 20 and like three it's all going to the bottom line and it was right and so they're insanely profitable losing no clients and the guy was like oh well you know i sleep better at night knowing that our churn is lower i'm like dude like you like you're telling me that 1.5 a month was keeping you up at night like and i'm like i've worked with people doing like 15 to 20 monthly churn right like that should keep you up at night and like the reason i tell this story is because to me and like this is not wrong by the way if other people operate this way to me being a sales and marketing organization and putting a lot of the focus there means that you're not obsessed with like client delivery and client retention and to me knowing that the average client is going to stay with me for like three plus years helps me sleep at night here's the thing like sales and marketing and especially in the agency space is streaky right meaning like You figure out how to generate leads from Google, for example, and you go all in on that.

21:09And then Google changes algorithm. It's like, bang, it's not working anymore. Or you figure out this optimal VSL on Meta. And you get a bunch of leads. And then all of a sudden, Meta changes its algorithm. They launch Adromeda. And some of your ads work. And they slowly start to taper off and not work. And you need to figure out something else. And it's like, if you're in a sales and marketing organization, because of the world that we live in today, unless you're generating your leads through like tending events in person rolodex and like calling people or like outbound or outbound email which is like people can do it and they can figure it out but again all of these things are so subject to these algorithms that we have no control over you're like one algorithm change away from your sales and marketing part of your organization completely going down in flames and like i can't sleep at night that way it's so funny because we

21:56Nick Aria:We were, we were sending, how we get like primary, our leads is like basically sending like offer emails every day. Like it's probably attributed to like over 80 % of our revenue in 2025, but we were sending them through HubSpot originally. August comes along, boom, open rates drop from 30 % to legit like 5%. And it's like, we were scrambling to like get something. We got like a new system up, but it took like a month to like get it like back and running. Like that's true to like what's true. Yeah. And how did that feel? Yeah. It sucked. Imagine if every single one of your clients, it's like, you knew that every single one of your clients is going to last three years.

22:26How do you feel about your business now? It's like, I know what business I want to run. And like, to be honest, if it comes at the sacrifice of the sales and marketing engine, it's like, so be it. Because here's the thing, like, like people that open an agency, they can get like 10 to 20 closes a year. Even if it's just like word of mouth networking, you can get 10 to 20 closes a year. You just got to put in the elbow grease, right? So it's like, okay, well, what if every single client, like, look, quick math every single client's 5k you close 20 of them that's 100k a month you're now a 1.2 million

22:57Nick Aria:dollar agency it's insane that last literally every client lasts for an average of three years that's like you're at 3 million bucks it's like that's the math it's not that hard and so like this is my entire thesis and by the way like how i came about this was that in my own agency at one point i did the math and we were averaging 15 churn oh gosh i had like account managers so like Like, this is the thing. People are like, oh, I know my churn rate. And I'm like, do you know your churn rate by account manager? Do you know your churn rate by sales rep? Why? When I was averaging 15 % churn, I had one account manager that was doing sub 1.5 % churn.

23:36I think it was like 1.2, 1.3 % churn. That's what she was doing. And she had the lowest churn rate of everybody. The person in second place had something like 3 % or 4 % churn. And then I had somebody at 8%. Then I had somebody else at like 12%. And then another person at like 22. Oh, gosh. 22 % sure. Like this person was like evaporating like clients in like real time, like as soon as they touched their hand. Right. And so what did I do? It's like I reverse engineered with a person doing like one and a half was doing right. Got all their stuff. The person that was doing like like three to four, I went in there to just to see if there was anything good going on.

24:12And then I basically like said, like, OK, now account managers are judged on churn. your specific churn number not the company churn number like your book of business churn and like this how we're going to go about it and sure enough like some people that had really high churn left the business because they knew that the writing was on the wall and they didn't want to make the change and sure enough you know fast forward to like a few months later our churn was basically like sub two and a half percent across the board yeah well so how did you do that like