Agency Growth from 0- to 8-Figures in 8 Years - Smart Agency Masterclass: Podcast for Digital Marketing Agencies

Agency Growth from Zero to 8-Figures in 8 Years

By Jason Swenk on March 29, 2017

Wonder what it takes to get to your agency to 7- or 8- figures? Today’s guest tells us all about how his agency has grown to 8-figures in 8 years, plus the challenges he’s faced and how he got over them in order to succeed and grow.

In this episode, we’ll cover:

  • The challenges/solutions of growing to 7- and 8-figures.
  • Healthy agency profit margin ranges.
  • Challenges of  managing at the 20+ employee level.
  • How to stay relevant as your agency grows.

My guest on the show this time is Matt Bertulli, owner of Demac Media, in Canada. Over the last eight years his agency has grown to 95 full-time employees and just crested the 8-figure mark. In Matt’s interview, he was very candid about the struggles and challenges they faced getting to various milestones of growth and how he pushed past them in order to success.

What Does Healthy Growth Look Like?

Right off the bat, Matt knew in order to cut through the noise his agency needed to specialize. He took the leap of faith and did it. Rather than competing for a piece of the pie, Matt (an engineer by trade) took a more strategic approach to growth and capitalized on a niche right away. That meant in their early years, Demac Media grew an aggressive 45-50% each year. Today their growth is in the 25-30% range.

Going from Startup to $1 Million Revenue

CHALLENGE: Matt says the getting to the one million mark was super challenging. In the early days of owning his agency he felt like he was faking confidence and stability in order to win clients… His favorite line from back then: “We’re a real agency!” He had a lot of doubts and it was a very unsettling time period. Crossing over that $1 million in revenue was shocking and amazing.

SOLUTION: We’re in a golden age of agencies and there’s never been a better time to to build and grow one. Small and mid-sized agencies can compete with the big guys. We’re capable of much more than we give ourselves credit for… The struggle to grow to $1 million is not external – it’s the head game you play with yourself.

When you take a step back and look at who you’re working with and what you’re charging, is it getting you closer to your financial goals? Early on, agencies tend to fall into a trap of spinning their wheels on a pain in the ass client spending $10K on a project. That client sends referrals for similar work at similar budget levels.

You can’t grow by acquiring business at the same levels ~ scaling requires you to do more and better.Click To Tweet

Increasing from $1 Million to Multiple Millions

CHALLENGE: According to Matt the journey from $1 to $5 million actually wasn’t too hard. It was much more difficult to break the ceiling into the $1+ million than to leap from $1 to $5 million. The hardest part was his own resistance to adopting processes and systems. Despite his background as an engineer, Matt didn’t understand how systems would leverage his agency’s ability to scale.

SOLUTION: First, it’s important to create systems that can help you acquire the clients you want to work with – and you don’t need to wait until you’re at the $1-$5 million mark. Processes and systems will expedite growth regardless of where you’re at now. And, know your numbers. As I like to tell my clients, it just takes some backwards math to figure out your goal and then work backwards using the number of clients and pricing you’ll need to reach the goal. An especially important figure is your agency’s profitability.

What’s a Good Target for Profitability?

In a service business, profitability can be really good but you have to work at it and focus on it. As they were reaching the $5 million revenue milestone, Demac Media’s profit margin was anywhere between 35-40%. Few realize it, but that’s exactly where it should be!

Profitability within this range means:

  • Pricing is right where it should be.
  • The agency is working efficiently.
  • The agency is not over-delivering or allow scope creep.
  • The right people are in key roles at the agency.

Profitability is the best measure of financial success. Top line revenue doesn’t matter if your profit margins aren’t healthy.

Hiring as Your Agency Grows

I have had a lot of agency owners tell me they don’t want to grow too big because they having upwards of 20+ employees creates more work. And Matt says that is partially true… but probably not for the reasons you think.

From the beginning, Matt had his mind set on not having an org chart. He felt like a defined lines of responsibility would stifle creativity. So he just had everyone report to him. (Uh, oh! If that’s your approach then sure, having more than 20+ employees definitely will be a nightmare.) Matt explained that when he realized the need for agency management and structure, growing the team was much less of a burden.

As you grow it’s imperative to hire a management team. Now at 95 employees Matt only has 5 direct reports, which is the leadership team. He says having the right people in place has freed him up to spend time where he wants and work on what he enjoys.

Cresting the 8-Figures Revenue Mark

CHALLENGE: The road from $5 to $10+ million is the toughest; Matt even calls it Death Valley. It can be lonely and isolating – it was a really challenging time for my agency too. At that level you feel sort of stuck and might even want out. The demands for your time lessens and your inbox shrinks. You’ve grown your team with all the right people and they can run things without you, which can be really depressing!

SOLUTION: This is the time to redefine your role within the agency. It takes clarity and self awareness to find your new role. You aren’t needed for the daily operations, it’s more about creating and communicating the vision to support your team as well as these other four roles of a Founder/CEO. When you do an awesome job of communicating the agency vision you will earn your employees buy-in. When they believe in it, your clients will too. And when employees and clients all believe in the agency vision the financial success follows.

Another great solution is to find peer groups or a mastermind. I might even know a good one you can check out 🙂 In a group setting you can problem solve and idea share with like-minded entrepreneurs. You can make connections, receive input and advice from people who’ve been (or are) in your shoes.

Matt’s final piece of advice is to keep trying new things and taking risks. He says no matter what growth level you reach, it’s key to stay a little uncomfortable. Getting too comfortable makes us complacent and complacency causes insignificance.

Don’t be the next the Blockbuster… adapt, change, and innovate – especially when it’s a little scary – in order to avoid becoming irrelevant.

Avoid getting left in the dust! Check out the Agency Playbook, the online video training to help you acquire your ideal clients, increase your profit, and grow your agency.

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