How to Build a Million Dollar Agency (and Why Mine Eventually Failed)

million dollar agency

I remember it well.

I was called down to the office of my employer and was told I was being “laid off”. Or was I fired? Or did I quit? Perhaps it was all three. All I knew was I hated what I was doing.

The problem was, I had no idea what I was going to do next.

I am a trained engineer. But I had started a solar panel installation business in college and I was responsible for the biz dev, the sales, and marketing..

Around this same time, I was introduced to direct response marketing and copywriting. For me, this stuff was magic. My analytic brain and my creative brain could work together.

I started off doing $10 gigs on elance.  Then graduated to $100 gigs, then $1,000 gigs.  And before I knew it, I had a business.

I wound up working with over 10 incredible freelancers at any given time (some of whom worked consistently with me for over 30 hours a week and became full time employees).  And I was just at the 7 figure mark.

And then, it all came to an end.

In this post, I share with you the lessons that I learned through my successes, failures, and what I’d do if I had to do it all over again.

Enjoy!

Go Super Deep With Your Service

What do I mean by go super deep?

I mean offer one type of service to one type of client.  When I first started I was all things marketing to all types of customers.  

That’s what everyone did.  When I was in the thick of growing my agency back in 2010, anyone who was capable of signing into Twitter and Facebook became a social media consultant. 

Not only that, we were becoming the used car salesman of the 21st century.  You know, the slick guy who will sell you any old lemon just to make a quick buck.  

At the time, businesses were flocking to agencies and consultants to get them on Twitter, Facebook, and “do seo”.  Problem was, hardly any of us were actually good at it.

It was the fastest way to compete at the bottom of the market.  Seriously, I remember writing proposals for $500 a month and not getting the job because their 19 year old marketing major nephew would do it for cheaper.

As I learned and grew, I slowly refined my service offering and the type of customer that I worked with.  

Toward the latter stages we focused on doing lead gen for high tech businesses with long sales cycles.  We should have focused even more:  Something like “Lead Gen for A/V Companies”.

If I were to start over, I’d start an agency that did one of the following:

  • SEO for eCommerce Companies
  • Content Marketing for SaaS Companies
  • Email Marketing for Realtors
  • Onboarding for SaaS Companies
  • FB Ads  for Microbreweries

One of my favorite new agencies to follow is Your Growth Machine.  They only do SEO focused content marketing for Ecommerce and they are good at what they do.

Once I found my niche and service, I would hustle to find 10 companies willing to pay me $10,000 per month.

Say No to Opportunities

I’ll never forget the first time it happened.

The client’s name was Rob and he was the CEO of a company called Cenero.

I had just finished up an ebook and the copy for a squeeze page so he could collect email addresses.

He told me he wished he could update his outdated website and asked if I’d be interested.

Of course I can do that.

Meanwhile, I don’t have a single design bone in my body. 

All I kept thinking of was how the hell am I going to to design this guy’s website?

So, I did what any consultant would do. I outsourced. Rinsed. And repeated.

I found more clients, solved more of their problems, outsourced to more people.

Before I knew it, my lead gen business was also a design shop, and a media company, and we were even building apps.  And then we were just another run of the mill business that does everything, but isn’t truly great at anything.

I was watching a Gary Vaynerchuk video and I heard him say “Do you know how much money VaynerMedia leaves on the table because we don’t build websites?”

In the short term, you will leave money on the table.  But in the long run, you will be much better off for two reasons:

  1. It’s impossible to be great at everything.  You will either deliver a shitty service or it will be done so inefficiently that your margins will erode.
  2. If you do EVERYTHING, you will be known for NOTHING.

This is yet another one of the critical failure points of my agency.

Relentlessly Fill Your Funnel with New Prospects

In the early days of your agency or consulting business, almost all of your clients are going to come through your personal network and referrals.

This will give you early traction, help you build your portfolio, and get some cash.

But your network is only so big.  And referrals will only take you so far.

If you’ve run an agency, no doubt you’ve experienced the feast or famine cycle of business growth.  Some months you have more work than you can handle.  Other months, you’re wondering how you’re going to make payroll.

5 Ways You Can Fill Your Prospect Pipeline

  1. Show up where your clients hang out on a consistent basis.  I knew that most of my clients attended local industry events and conferences.  I not only made it a point to attend, I also spoke at many of them.  This allowed me to get my name and expertise out there.
  2. Eat your own dog food.  If you’re a social media agency, then you should have a vibrant social media following.  Or if you’re an SEO agency, then you should at least be getting some organic traffic to your site.  
  3. Write Guest Posts.  I built this agency on the back of guest posting.  Yes, I had to shut it down in the end.  But we did get to seven figures.  So, sales wasn’t the issue.  Guest posting allowed me to build my brand, be recognized as an industry authority, and drive qualified traffic into my agency pipeline.
  4. Ask for Referrals: While your personal network is probably dried up, your customers surely have friends in the industry. The biggest mistake people make when asking for referrals (if they even do ask for one), is they say something like “if you no anyone who’d want to work with us, let me know.”  Instead, you should say something like “Do you know Ecommerce companies who would like us to take over their content marketing and increase their traffic and sales like we did for you?”  This is a much more specific ask.
  5. Dream 100 Once you know exactly who your ideal customer is and what you can offer them, make a list of the 100 companies that you would love to work with.  This is what Chet Holmes called the Dream 100.  Next, you simply email them and let them know how you can help them.

Steal this email template

Hey (first name),

My name is Greg and I run a company that helps ecommerce businesses drive more traffic through content marketing and SEO.

For instance, we’ve helped (company A) increase traffic by 400% over the past six months.  Oh, and sales went up by 500%… because you can’t pay the bills with traffic, right?

Anyway, I’ve looked through your site and came up with some really interesting content ideas that will help you sell more of (product x).

Are you available Wednesday at 11 EST to discuss?

Cheers,

Greg


Marketing yourself, especially when you’re small, can be incredibly difficult.  Most of us spend all of our time doing client work that we neglect our own business.  

I totally get that.

But, your personal network will eventually dry up.  And your referral rate won’t be a sustainable means of growth. The best way to avoid the feast and famine that most small agencies and consultants face is to constantly fill your deal pipeline with new business.

deliver results

Deliver Results

While we’re on the subject of filling your pipeline, the best way to do that is by branding yourself as an agency that keeps its promise.  .So many agencies promise the moon and don’t deliver.  So, simply by being good at what you do, you’ll stand out.

For us, we promised companies that they would see a 3X return on their investment.  In other words, if they had a $5,000 budget, we would help them make $15,000 in profit.  

This did two things for us:

  1. It filtered out companies we knew we couldn’t help achieve these ambitious goals.
  2. It kept us accountable for our results.  And so many times, when we delivered what we were promised, the relationship continued long term.

What is the promise your agency or consulting business makes?

Set Up Processes Early

When I first started out as a consultant, I was able to easily work with three or four clients at a time.

However, the more time passed, the more clients I worked with.

You’d think this would be a good thing. But I was miserable.

More clients meant more headaches, more freelancers to manage, more late night calls demanding work gets done sooner or cheaper, more industries to learn.

Like most consultants, I wore multiple hats. I was the sales guy, account manager, copywriter, quality control person, customer service person, and served more positions than I care to remember.

 Oh, and let’s not forget about the cash flow problems.

I remember sitting in a client’s office that I had just “won”. And I can remember it being a clear turning point for me:

On the outside, I was smiling, telling the client how excited I was to working with him. On the inside, I kept thinking: “How the fuck am I supposed to squeeze in even more work?”

This is where my agency crumbled to the ground.  It collapsed on itself.

I should have set up processes as soon as I started.  That way I would have been able to scale efficiently.

The three processes that your agency NEEDS to set up as a foundation are:

  1. Deliverability:  How will you guarantee that every customer gets the exact same results whether you are working on the project or one of your employees.  This is where you will set up a standard procedure of operations for every job function of the company.
  2. Sales:  What are you going to do to consistently fill your sales pipeline with 5-10 deals per month?  And how will you close these deals?  Will a sales person eventually be able to replace you?
  3. Collections:  The bane of existence for every client service company.  How are you going to bill your clients?  Are you going to have automatic follow up when they are late?  What is your pay cycle going to be?  

Yes, as you grow, you will want to set up a process for things like hiring, accounting, and payroll.

Your People are Everything

Let’s face it.

In a business where intellectual and creative capital are a key differentiator, having a team of smart and creative people is a must.

When you’re just starting out and don’t have the money to build a full time team, you could hire really talented freelancers.  

Over the past few years, I’ve given a quite a bit of thought about hiring:  what I did right, what I did wrong, and what I’d do again.

Hiring Your First Employee

Let’s get beyond the whole “hire slow; fire fast” mantra.  You already know that.

I want to talk about what type of person you should hire first.

Right now, you have a decision to make.  Are you going to scale your consulting business?  Or do you want to build an agency?

If you scale your consulting business, you will always be the customer face.  When customers have an issue, then they will call you.  Chances are, you will also be the person make sales.  

This is the route I took, accidentally.  The company might have been called Cloud Marketing Labs; but my customers saw it as Greg Digneo Inc.

If this is the route you want to go, then you probably don’t even need to hire a full time employee.  I built my consulting business with several freelancers.  Many of whom worked “for” me 30+ hours a week.

However, what I was trying to do was build a scalable agency.  If I had thought it through, I would have waited until I could afford to hire a full time account manager.  Someone to replace me as the customer face of the agency.

This would have allowed me to move further and further behind the scenes as the business grew.  Clients would have been buying Cloud Marketing Labs; not Greg Digneo Inc.

Let me just make this clear:  There is no right or wrong answer here. 

You just need to decide which type of business you want to build.  For me:  I wanted to build an agency, but built a consulting business.  That helped lead to the downfall of my business.

Culture

The culture of your organization begins with you.  It extends with your first hire.  In other words, it’s never too early to think about the type of agency that you want to build.

For me, I wanted a business where people loved their work and cared deeply about the space we were in.

So, I hired bloggers writing about technology.  I hired website developers who built projects on the side for fun.

The culture I wanted to create was one of passion.  My job was going to be to give them work they wanted to do.

agency ceo

Be the CEO

If you’re looking to be a consultant and have a few people to offload work to, then you can skip to the next section. 

But if you’re looking to build an agency, then at some point in time, you’re going to have to step back from the weeds.

You may not have the time to write and promote as much content, or run creative ad campaigns, or run clever contests as you did when you were a solo consultant. 

At least for me, this is the stuff that made me fall in love with marketing in the first place. But as CEO, your job will be to manage the processes and growth of the agency.

Your time is going to be spent on biz dev, growth, process development, and strategy.  If you want to build an agency, make sure you’re willing to give up the things that made you want to start out as a consultant.

Watch Your Cash

If my inability to set up proper processes was what murdered my business, then my inability to “watch my cash” was an accomplice.

One of the single most difficult parts of running my consulting business was cash flow.

You see, most clients paid on a 60 or 90 day pay schedule. 

Sure, I’d get half up front, but that would cover the cost to get the project started with whichever freelancer I was working with.

It didn’t cover my bills.

In most cases I wouldn’t profit until 90 days after I made my first deliverable.  Which makes it really hard to invest in more projects.

How could I have overcome this?

2 Ways:

Way 1: Leverage!

When you have no leverage, and you desperately need a sale, you’ll take whatever you’re offered.  

My issue?  I did have the pipeline, but was still negotiating from a place of fear.  I was never confident enough to walk away from a deal if the terms weren’t agreeable to me.

This means I was forever running a cash flow negative business, constantly stressed I wouldn’t be able to make payroll or keep the lights on.

As soon as I wasn’t afraid to walk away from a deal, I was able to negotiate far better terms.  (Note:  You’ll also need a proven record of success.)

Way 2:  Retainer clients

Retainer clients are clients that pay you monthly for a repeatable service like content marketing, SEO, or managing ads.

You see, most agencies, and we were one of them for a long time, are project based agencies.  You build a website, or create a sales page, or a logo, or whatever.

You do the work, get paid 90 days later, and the contract ends.

With a retainer client, you get paid at the end of the month, effectively shortening your payment cycle by 60 days and getting recurring revenue. (More on recurring revenue below.)

Ask the Right Questions

Back in 2011, when the industry was much more immature, I remember being on the phone with a potential client exchanging some preliminary thoughts on working together.

So, I started asking some questions.  

Such as; 

  • What’s the lifetime value of a customer?
  • How long before you see a positive ROI in a customer?
  • How long does it take from a lead to become a sale?  What are the major bottlenecks?

Etc…

This is a time when most people just pitched their Facebook or Twitter services because the client wanted to be “on social media”.

After I had asked the 10th or 11th question the potential client stopped me and said “we’ve talked to five other consultants, you’re the first one to ask these questions.”

Eventually, I did get the job, and I attribute it to asking questions that emphasize that I am not just another marketer.  I wanted to emphasize that I also know and understand their business.

When you walk into these sales meetings with a customer, think of it like a date.  

You wouldn’t meet a girl and immediately propose, right?  You’d ask questions, get to know her, see if you’re right for each other, ask for a second date, and build a relationship over time.

The same applies to your potential clients.  Get to know them before pitching your services and proposing.

Build Recurring Revenue Services

The best part about recurring revenue is predictability.

I talk with so many agency owners who experience these periods of feast and famine.  They may make $50,000 one month, but then won’t make any new revenue for three months.  

I’ve been there and done that.

That’s no way to build a business of any kind.

For one thing, in order to know how many people you will need to hire, you’ll need to be sure that there is consistent work for them to do.

Second, with recurring pricing, “all” you need to do is find 10 customers willing to pay you $10,000 per month.  

(Note:  “All” is in quotes because I know it’s not as easy as I made it sound.  However, it’s far easier than trying to find 100 customers who pay you a one time fee of $10,000.)

One more thing…

Have fun!

Running an agency or a consulting business is hard!  

Like really hard.

There are never enough hours in the day.  There are always new clients to serve, employees to manage, freelancers to hire.

There is always going to be clients who don’t pay on time…

And clients who demand more of your time.

Let’s face it.

I think if I truly wanted to, I could have turned this whole thing around.  I was able to make sales and deliver results.  

I just had almost everything else all wrong.

Why didn’t I?

Because it wasn’t fun any more.  

I was tired.  Drained.

I stopped taking on new clients.  The freelancers I worked with slowly found other gigs.  

Until finally the business collapsed.

I wrote this post because people ask me all the time what happened and what I would do differently.

This is the story.  The good, the bad, and the bloody.

If you’re a consultant looking to grow into an agency… or if you’re looking to scale your consulting business, I hope that you find my story valuable.

If you have had similar experiences, no matter what business you’re in, then I’d love to hear about them in the comments below.

 
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Greg Digneo

Greg Digneo

Greg Digneo writes for TimeDoctor.com, a time monitoring and productivity monitoring software designed for tracking hours and productivity of remote teams. If you would like to see where you and your team are spending your time during work, then try Time Doctor FREE for 14 days.

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