Should You Give Up and Close Your Agency?
Have you ever considered closing your agency because you feel like you’re failing? Cash flow problems, employee issues, bad clients… the struggle is real! You don’t have to throw in the towel. Just check out what this agency owner did to turn things around to become profitable and happy again.
In this episode, we’ll cover:
- How an agency might go from good to bad.
- 6 Steps to turning around a struggling agency.
One regret from an agency owner. Our guest today is Jack Jostes, President and CEO of Ramblin Jackson, the SEO agency he started in 2009. In his video “The Good, The Bad and The Ugly” he talks about his eight year journey as an agency owner and the valuable lessons he learned in order to go from almost close to thriving. Jack’s on the show to talk about the steps he took to turn around his agency so he and his team could enjoy it again.
How Does an Agency Go from Good to Bad?
Like many entrepreneurs, Jack fell into the business by accident. He was working in sales and started to learn SEO as a trade from someone in the business. He decided to start a digital agency to marry those two skills but he admits he had no idea what he was getting into.
At first, things were great and it was super fun taking on new clients, challenging new project and hiring contractors to help with all the new work. After a couple years, though, he decided to bring on a partner with 20 years experience in the agency business. It turned out to be a great decision because they grew 50% for several years after forming the partnership.
The Bad & The Ugly…
Jack says it was fun and growth at great at first. But then things got bad – and ugly. Cash flow was terrible. Jack and his partner went months without getting paid and vendors were paid late. The team morale was low and clients were getting frustrated. Jack got to the point where he considered closing. That’s when he reached out to me the first time and told him not to give up! I told Jack about the Navy Seal’s 40% rule which is, when your mind thinks you’re done, you’re really only 40% done. And that was Jack’s turning point.
6 Steps to Turning Around a Struggling Agency
So how did Jack turn things around? Here are the six steps he took:
1- Get really clear about company vision.
Jack was unhappy and ready to throw in the towel. I get it. I considered closing my agency when we were struggling too. When things are hard and it’s not fun it seems like giving up is the answer.
However, Jack said he took a step back and got really clear about what he wanted and didn’t want for the agency. Then he had an honest, respectful conversation with his partner where they realized they wanted different things. That’s when they made the mutual decision to part ways. Jack bought his partner out and since it was an amicable split, they still work on some projects together.
2- Understand and be transparent about financials.
Jack says part of the reason they had such bad cash flow was because he was embarrassed of the state of the financials and kept it a secret. He used to feel as President, the accounts receivables and collections were his responsibility. No one was aware or incentivized to help achieve better cash flow.
After going through my Agency Playbook he discovered ways to incentive his team. Now there are key employees are get bonuses based on accounts receivables and attaining agency financial goals.
3- Change payment terms.
Like most agencies, Ramblin Jackson’s payment terms were 50% to start and 50% upon completion. However, the problem with this payment structure is when the client stalls on a project the final amount can’t get billed. That means the agency is stuck holding the bag while the client drags their feet on providing information, feedback or approvals.
Now, they require full payment up front for smaller projects or use my date-driven payment terms for larger engagements. As a result they’re they’ve reduced project cycles since prepaid clients are motivated to receive the value they’ve already paid for.
4- Hire slow. Fire fast.
It’s imperative to have a A players on your team – even in roles that might not seem integral to the outward success of the agency. In Jack’s case, it was the bookkeeper who was awful and incompetent. He was always slow to send invoices and didn’t have a pulse on agency finances.
Once Jack fired the bookkeeper and hired a new one things turned around quickly. In fact, the new bookkeeper found over $10,000 of unsent invoices! She has also streamlined bookkeeping and created systems to make it easy.
5- Tie others to the same bomb.
By holding everyone accountable to the same goals, there is more cohesiveness among the internal departments. For example, Sales doesn’t get commission until the client pays the invoice. With common goals everyone is motivated to work together to achieve them.
6- Invest in mentors.
Agency ownership can be lonely! Jack says he has worked with some incredible coaches over the years who each specialize in different aspects of business. He had worked with a sales coach (at different job) and now pays that coach to help his sales team at Ramblin Jackson. He also works with a sales management coach and an executive coach to help him hone his skills in those areas.
Jack also says it’s been key finding a coach who has owned and sold a successful agency. (Hint: it’s me!) The Agency Playbook and our Agency University have been invaluable resources for the mentorship from someone who’s been there and done it.
One Thing To Do Sooner Than Later
After 9 years in the business, Jack says the one thing he wishes he’d done sooner is specialize. In his early days he was hungry for the work and it seemed counterintuitive to concentrate in one niche. Besides, you aren’t sure what you do and don’t want to do until you’ve tried it all. But once you figure that out, pull the trigger and focus on what you do best.
If you are struggling or feel like giving up your agency like Jack was 18 months ago, I challenge you to take action on at least one of the six steps above and see where it leads you. You can be happy and successful again. It just takes the motivation to make a change.