Are you willing to start saying no to wrong customers to see real change for your agency? Kerrie Luginbill is a partner and Chief Strategy Officer at Old Town Media, a Colorado-based agency that since its beginnings offered a unique and agile approach to web design, development, and marketing by providing customers a business-driven approach. Now they partner with companies to create and implement marketing strategies that connect with their audience and inspire action. Kerrie discusses how she increased revenue by 4X in under one year. And now, after 15 years in the business, her agency crafted a “no-fly” list for customers, identified their target client, and the growth that resulted from this move.

3 Golden Nuggets

1. Saying no to wrong prospects. Kerrie and her team really noticed a difference once they identified the right target customer for them and started to say no to the ones that did not fit that target. It was what catalyzed the growth, she says. Of course, it’s not easy turning down business, but they found that saying yes to the wrong kind of customer really reduces the amount of space you have for the right ones. Especially when it comes to clients that are disrespecting your team. Learning to say no can be a way for you to protect your team and a catalyst for growth.
2. The no-fly list. With that in mind, Kerrie and her agency began creating a no-fly list, writing down all the similarities that made some customers not fit in the target customer model. They started identifying red flags, like referencing another company’s vision to explain their own. They wanted to work with companies that had a clear vision of where they wanted to go. Their biggest focus was value, because ideal clients must have a lifetime value customer that can afford them the margin to have an engagement with them that’s large enough for them to drive value.
3. Shifting to value-based pricing. It’s very hard to get to value-based pricing when you’re working with a small margin. Once you start saying no to low-margin clients you will start to identify people that share your values and with which you can form a strong engagement and a strong relationship. You can find that those clients are even easier to work with. This way, you start to reduce stress on your team, which helps reduce turnover. This is when you can start shifting to value-based pricing.

Sponsors and Resources

Ninja Cat: Today’s episode is sponsored by Ninja Cat, a digital marketing performance management platform where you can unify your data, create beautiful, insightful reports and presentations that will help you grow your business. Head over to ninjacat.io/masterclass to enjoy an exclusive offer for podcast listeners.

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Saying No to the Wrong Customers and Shifting to Value-Based Pricing

Jason: [00:00:00] Welcome, agency owners. I’m Jason Swenk and here’s another episode of the Smart Agency Masterclass. And on today’s episode, I have an amazing guest who went from $500,000 in revenue to over $2 million in just under a year. And we’re going to talk about the one thing that she actually did at her agency in order to accomplish this.

Now, before we jump into the episode. I want you to do me a favor. I want you to take a screenshot of the podcast. And then I want you to upload it to social media and tag us so I can give you a shout-out for listening to the show. Let’s go ahead and bring Kerrie on.

Hey, Kerrie. Welcome to the show.

Kerrie: [00:00:43] Hello. How’s it going?

Jason: [00:00:45] Awesome. I’m excited to have you on, so tell us who you are and what do you do?

Kerrie: [00:00:50] Yeah, my name is Kerrie Luginbill and I am a partner and the Chief Strategy Officer at a creative agency in Fort Collins, Colorado. So just about 45 minutes North of Denver.

Jason: [00:01:03] Awesome. I’ll uh, we, we just moved to Colorado in Durango, so I’m starting to just try to figure out where everything uh is, but, uh, uh, I’m… Let’s go ahead and jump into it and talk about what’s the one thing, you know, that took you from 500,000 to over 2 million in less than a year? Because there’s a lot of people that spend years, sometimes decades.

Um, and they hit that plateau and they can’t figure out what do they actually need.

Kerrie: [00:01:34] Yeah, and full disclosure. It was more than one year. It was a couple of years, but there was a really distinct difference that we, we took a different direction that we took with the agency that really catalyzed a lot of that growth.

And it was really identifying the right target customer for us and saying no to the customers that were not in that target. It’s really hard as an entrepreneur to say no to business and to work. But what we found over the last couple of years is that when you say yes to the wrong kind of client, you are really creating, you’re reducing the amount of space that you have for the right client.

And that was really inhibiting us. And so we had to kind of fight ourselves. Our, the ownership, there are three of us that are partners and, you know, so we’d have to question each other and serve as checks and balances for each other so that we could stop taking in what was not helping us grow.

Jason: [00:02:34] What were some things that you did in order to kind of really narrow it down? Because I always look at, you know, when you start an agency, you’re just reactionary. Like you got a pulse, you got some money, like I’ll take you on. And then you, you know, there’s a, there’s a switch like you guys went through, like, how did you start evaluating going this is the people I need to say no to?

Kerrie: [00:02:58] Yeah, absolutely. It’s funny you say that. I remember the first couple of years, uh, trying to launch the agency and literally taking anything. Um, and I think you’re, we’re all there at a certain point. And I think there’s a level of professional maturity that comes with being an entrepreneur for a specific amount of time and starting to get things under your belt, bigger clients that give you a little bit more confidence to say no to some of those smaller clients.

But what we did was we actually started creating a, like a no fly list and we would write down the similarities that would cause, you know, clients to maybe not be that ideal target customer. And started to find a lot of correlations between them and then started to build out the correlations between the clients that were really strong for our company and really fit with us well, and then between those two, we started to create essentially a target persona for our client list.

And the biggest thing that we focus on is our client’s customer value. So when you hire an agency, you as a, as any kind of business product or service, you must have the amount of margin that allows you to work comfortably with an agency. So, you know, businesses with really tight margins, uh, independent restaurants, salons, things like that are actually really challenging for us to work with. Because they don’t have the margin in the day to day to be able to have a large enough engagement with to create a lot of value for them.

So we started to tease that out and it really comes down to our ideal client is a client that has a lifetime value customer that can afford them the margin to have an engagement with us that’s large enough for us to drive value.

Jason: [00:04:51] Yeah. I love that. What are, what are some of the criteria? So obviously that’s probably one of the criteria is of the no fly list. And I like that. I’ve never heard of that. I, I always treat it as kind of like a Vegas buffet. Like you try everything out and then the stuff that you were like, ooh, I don’t like that. Like, you’re not going to go back to that section anymore. But, and then by the time you come back to the, well, I guess a smaller buffet, the time you come back, the second time, you probably be like, ooh, I like this stuff.

So what was some of the criteria on your no fly list at first?

Kerrie: [00:05:25] Yeah. So I think at first it started, it wasn’t very sophisticated. It was, you know, the little things that we were identifying. Um, typically one of my big red flags is if a client comes to us and they, they want help, you know, defining their brand messaging, creating, you know, creating a place for them in the market and they reference other company’s visions to explain their own vision.

That’s usually a pretty big red flag because I start to, you know, it’s almost like, well, is it your idea? Or did you see somebody else had a great idea? And now you’re trying to replicate that. And so we really look for that strong vision from the client, whether we’re working with the business owner, operations director or marketing director, it’s really important that they have a vision for where they want to go so that we can work together to tease that out and really hone it in.

But if they’re referencing someone else’s vision that has been successful, that’s usually one of those red flags.

Jason: [00:06:27] Oh yeah. Like I, I remember getting all the time, hey, I want to build… I get this great idea that no one’s ever thought of, it’s Facebook, YouTube, and Google put together. But I have a budget of like a thousand dollars.

And I’m like, holy cow. Like, get me off the phone.

Kerrie: [00:06:45] Yeah. You know, um, we, we were known for building websites in the, in the beginning. Because Old Town Media started creating websites before WordPress was, you know, really taking over the market. It was a much higher barrier to entry. And so everybody had to go hire a professional for their website.

It wasn’t something you could kind of go figure out yourself very easily. And so that created a reputation for us where we were known as a web shop for a lot of years. And people would come to us wanting a website for an idea before they had a business plan for that idea. That was another one of the big red flags on that list is if you don’t know how you’re going to operate business and you want a website because you think that that’s going to solve all of your problems, that’s typically not the answer.

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Yeah. Yeah, I know I, I love that you make sure that… I love the criteria because I think a lot of agencies we take on certain industries that have a low margin. And then they’re like, hey, I’m at my cap. Like they can’t spend anymore. I’m like, well, are they really? Like, how can you actually add value? And they’re like, and they keep their pricing the same.

Like, there’s so many mastermind members that we, we, uh, they come in in the very beginning and they’re like, oh, I’m at my cap. And then by the time we’re like, no, no, no, this is who you actually need to go after… And as we’re raising our prices and, and you tell me when you actually did this, when you actually started kind of implementing the no fly list and then your target persona that you’re going after. I presume that you were able to probably charge more, which meant probably that you could hire the right people, which meant you had more freedom.

Am I on the right path?

Kerrie: [00:09:48] Yep. Absolutely. You know, and people still get through the no fly list every once in a while. And we actually we’ve broken out, you know, our ideal target to incorporate a percentage of clients that we’ll take on that don’t have the margin that we work with a little bit differently, but they have to be passion projects for us.

It has to be something that we’re really passionate about as a team. Um, but you are exactly right. Once you start saying no to those low-margin clients and, you know, you’ll start to identify that the people that you have a really strong engagement with and a really strong relationship with, they’re usually easier to work with too.

And so you start to, you know, reduce some of the stress on your team, which increases, you know, how long your team members stay with you. You’re reducing turnover. You’re reducing that chaos in the company. And you can start shifting to value-based pricing. That’s kind of the buzzword, I think, in the agency world is everybody’s like, you know, time and materials versus value-based pricing.

And it’s really hard to get to value-based pricing when you’re working with such a small margin. You’re really, you know, serving as more than just a like brand or creative partner, but also a sales partner and like an advocate for smaller businesses. And I think it’s just a very different relationship.

Jason: [00:11:11] Yeah. How, uh, what are some things that you guys do in order to demonstrate, you know, the value in your pricing? So you can charge on value-based pricing rather than time and material.

Kerrie: [00:11:24] Yeah. So it really comes down to making sure that you have really, really clear objectives and key metrics for your clients.

And so it’s actually kind of interesting. We use KRAs for our employees. So key result areas where you basically, you define an objective, you have actions that then will help you achieve the metrics that achieve your outcome. So, you know, you start with an outcome actions metrics. We’ve taken that KRA approach to actually how we look at our client engagements and we define them the same way.

We say, okay, we’re working with a client. We’re doing content creation for them. What’s the outcome we’re trying to achieve? What are the actions we’re taking? And what are the metrics we’re looking at? When you can tie it into the data for them, and you can say, hey, when we pull this lever, you have more sales. And you can start to look at what outcomes you’re achieving based on the actual actions that you’re taking.

That time of material dollar amount is not as relevant because there’s such a strong value to actually achieving those outcomes.

Jason: [00:12:36] I see a lot of agencies, they really don’t focus on the results or they don’t focus on kind of the leading indicators that will actually get the results. And, and like, and it amazes me because a lot of times when I’m chatting with an agency owner that wants to scale faster, um, it really kind of, and like I was chatting with an owner not too long ago, they had resentment for their clients.

I was like, well, let’s get to the real problem. And I told him, I said, the real problem is you’re resenting your clients because you’re too dependent on the clients. He’s like, well, what do you mean? I was like, well, you’re dependent on the wrong types of clients that aren’t paying you the right amount.

And I asked what’s the value that you deliver to them? He didn’t know. And I was like, well, how could you ever charge value-based pricing if you don’t know the value? Like how are, how are they? So, um, I’m glad there’s, there’s agencies that are focused on the results. Cause I, I see when, when our mastermind members and the people that go through our frameworks, when they start kind of understanding the results that they deliver.

And that’s the key part is you gotta be able to deliver the results to your clients. There’s so many people that go well, I took a course on how to start an agency from Joe, Joe. And I’m like, well, they taught you Facebook ads, but did they teach you like how to deliver the results and all that? Like, and they’re just learning on other people’s dime, which always frustrates the heck out of me.

Kerrie: [00:14:05] Yeah. You know, and I think in those earlier days where you’re working with smaller clients that maybe it’s a solo preneur or some, you know, small margin kind of business, a lot of times they don’t have their own data figured out. And so it becomes even more challenging for that agency to tie their outcomes to their results, because they’re not getting the same kind of data back from the client.

And that is… That’s something that we’ve started working on. How can we actually help our clients get to more sophisticated reporting internally so that we can tie our, our actions to their results and start to get a little bit farther into that? But it’s a lot of client education too, you know, a lot of times, um, it’s explaining the difference between lead and lag indicators and trying to help them see that, you know, by the time you’re looking at this number, it’s already too late. And we should really be looking at these lead indicators and some of these numbers over here, because they’re ultimately going to influence these lag numbers.

So I think it’s, it’s really just marketing, especially in today’s age, is getting a lot more sophisticated when it comes to data and being able to correlate activities to actual outcomes. And it’s something that I think agencies are, are really, they need to be more responsible in getting there and focusing on that.

Jason: [00:15:31] Totally agree. Well, this has been amazing. Is there anything Kerrie that I did not ask you that you think would benefit the audience?

Kerrie: [00:15:40] You know, I think the biggest thing I wish that somebody would have told me like three or four years ago is it’s okay to say no. It is okay to say no. If it doesn’t feel right, or if you know, a client is not respecting your team or your time, it’s okay to say no. Because when you open up that space, you are creating space for something better and a better fit and a better relationship.

And that’s what will grow, grow your agency.

Jason: [00:16:08] Yeah. And, and those troublesome clients that you should say no to, like, if they’re treating, mishandling your team, you’re not making money on that end. Like, and I don’t even care if you’re making money on that. It’s going to cost your team and your employees, which then just makes you have to do everything all over again, which is a complete nightmare.

Um, and you go back and then you’re just… Then you get to a point where you’re selling for penny on the dollar to someone that’s going to take advantage of your client portfolio. And I don’t want that to happen.

So awesome. Um, what’s the agency website people can go and check you out?

Kerrie: [00:16:45] Yeah, oldtownmedia.com. We’re on Facebook and Instagram, but we probably put the most of our, uh, fun stuff on Instagram, so…

Jason: [00:16:56] Awesome. Well, everyone go check out their website and Kerrie, thanks so much for coming on the show. If you guys enjoyed this episode and you want to be surrounded by amazing agency owners that are on a fast growth pace and really scaling their agency fast and they want to be surrounded by other amazing people. Um, so you can scale your agency faster, go to digitalagencyelite.com.

This is our exclusive community our mastermind, uh, members where we just have so much fun together going through, you know, the frameworks that are working for other agencies.

So go to digitalagencyelite.com. And until next time have a Swenk day.