Business longevity is something every agency owner would ideally love to achieve. But what is the secret to achieving this?

In this episode, we’ll cover:

• The #1 secret to business longevity in the agency world.
• Whether you should act like a digital agency owner or a CEO.
• The best first hire for a growing agency.
• 3 tips for setting profitability goals.

When it comes to achieving business longevity, how about a lesson from a guy who’s been in the agency business for over 20 years! You know… right about the time when Al Gore invented the Internet and you had to “dial up” for service 🙂  My guest, Craig Cooke founded his agency, Rhythm in 1996 and he’s here to share two decades worth of growth lessons and secrets.

What’s the #1 Secret to Business Longevity?

One word: adaptability. It’s super important for business longevity to be willing to evolve and change over time. Respond to the demands and needs of your clients, as well as staying current with tools and technology. In Craig’s 20 years as an agency owner, his business has morphed FOUR TIMES! Here’s how and why:

1996 – Craig and his partner establish RhythmNet.com, a dotcom startup for independent musicians to promote and sell their music on CD (no digital downloads back then!). Great concept, but ahead of its time. Too few people were online and even fewer were comfortable making purchases online.

1997 – RhythmNet.com started to dabble in developing websites to offset losses on the music side of the business.

1998 – Site development is in bigger demand than independent music promotion and sales. RhythmNet.com becomes RhythmNet Design Group, an agency focused on website design.

2004 – With growing demand for more interactive services, RhythmNet Design Group becomes Rhythm Interactive, a full service interactive agency.

2015 – As terminology and technology have changed, the partners decide to drop the word “Interactive” from their company name and are now Rhythm, an integrated marketing with a digital core.

Focus is so important, but Craig cautions not to be so focused that you are blind to the need for change. He says to split your focus: 80% on your core offering and 20% to exploring new things.

Are you an Agency Owner or a CEO? What’s the difference?

As an agency owner, your role will develop and change over time. Whether you have a partner or you’re flying solo, you start out wearing all the hats:  sales, design, project management, billing… As your grow, scale, and add team members you have to define roles and responsibilities. This not only assigns accountability but it makes things clearer for your clients, team (and self) about what you do, and what you don’t do.

Craig says that today, he is more of a CEO than an owner. As the agency has grown, he’s been able to walk away from the sales and operations to focus more on the strategy and development of his leadership team.

For me, there was a real transition when my agency got to 30+ people. I hired such great talent that I started to feel irrelevant. That’s when I realized my new role was to management and mentorship, focusing on the leadership team one level deep from me. There’s a trickle down effect with this approach and your entire team is stronger for it.

Rhythm currently has a staff of 50 and Craig agrees that his greatest role is mentorship. He says if you’re going to scale you have to recognize the strengths of your team. Realize that they are better than you at some things and then nurture that so they can grow. Making a conscious effort to do this has paid off in big ways.

What’s the Best First Hire for a Growing Agency?

Look at the skill set of the owner(s) and determine where there’s a gap. What are the pain points or consistent issues that arise? That’s how you identify what missing. A lot of agency owners, including Craig, tell me they hired a project manager first. And those who didn’t, always wish they had!

If you’re hesitant to hire a PM or Traffic Manager because they aren’t billable, think about it differently. Every agency has a fully burdened rate which includes everything it costs for you to do business. Client retention is more than just the hours your designers and developers spend. Those additional overhead costs are your fully burdened rate –  check out this post to calculate your fully burdened rate. Or, consider adapting Rhythm process and include “project management” and “traffic” line items on every project estimate.

Profit Margins & Goal Setting for Agencies

Are you looking for higher profit margins? There’s an illusion that agencies have a high profit margin but in reality margins are looking to be between 14-20%. Craig says that’s because there are constant changes that require continual education – new languages, new platforms, new tools – that constantly drive costs over budget. Educating “green” clients also takes time, costs money and lowers your margins.

Here’s are some things to keep in mind when you are setting up your profitability goals:

1. Understand there is a spread. As you grow, the increases might not be as significant year over year. Be realistic with your goals.
2. Take strategic planning seriously. Determine where the leaks are and what can be done to stop them. (Hint: Usually it’s a matter of having the right systems and processes.)
3. Take a tiered approach to your goal setting. Have an aggressive dollar and percentage increase as your target, but also have medium and low numbers that you’d be OK with too.

Bottom line, it’s your duty to yourself and your team to be profitable so you can grow and scale. The best way to do that is have systems and processes in place. Systems outperform talent every time. So click here to check out the Agency Playbook and the 12-systems I used for building my 7-figure agency.

Become a Better Agency

Now that you know the secret to business longevity, you need to ensure that other aspects of your business are consistently improved and monitored to be successful. Take a step back and look at the bigger picture of your agency for weak spots.

I have more than likely experienced all if not most of the different struggles an agency owner experiences through my own experience and I can help you from what I learned. I have covered many topics from what to do with your sales processes to improve them, how you can increase your agency profit margins or how you can build authority for your agency.

I have the best ways for your business to stop losing money on projects, how performance based pricing models can be the best strategy for your agency and why including remote teams or freelancers in your team can be beneficial in the long run.

Learn more about my career as well as tips, tricks and insights by checking out my blogs that cover a wide variety of topics.

Find more from me like advice from other successful agency experts in my Ask Swenk series and more of my videos on my Youtube channel.