Category: Uncategorized

Are Agencies Good Businesses?

“Are agencies good businesses,” I asked a small group of agency owners at an event recently.

“No,” one of them immediately replied, “They’re terrible.”

After a thoughtful pause, another owner said, “They can be.”

I’ve asked this question of most agency owners I encounter. It’s a question I’ve pondered for a long time. My general feeling is that agencies aren’t that good of a business model.

That evening, I spoke with someone with no agency experience who bought an agency. He told me that he purchased it based on its objective attributes. From his perspective a business is just a business. Whether you’re McDonalds or a small agency, your model can be reduced to financial documents and some attributes around how you create value (services vs products, inventory, recurring revenue, etc.) Any business can be exposed and evaluated apples-to-apples on a spreadsheet.

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Shooting Through Windows

There’s a software product in the association market called Prop Fuel. It delivers one question surveys via email. It’s doing well and I can tell that it’s growing from the regular referrals I hear for it. What’s interesting to me is that I built it eleven years ago.

Back in 2013, I coded my first software product. It was a plugin for Joomla that I called “Mail in Vote.” I developed it for people that needed an easy mechanism to get consensus from a group and it did what Prop Fuel does now. I worked nights and evenings for nine months and made a few sales, but mostly I learned was that I had a lot to learn about building and marketing software products. Mail in Vote actually killed my career as a developer, because in the process of grinding away on it, I developed serious repetitive-stress injuries which forced me to build a team to do the work instead.

Eleven years ago Mail in Vote was a failure, today Prop Fuel is a success. The market context is different, a platform market versus a vertical market, but as big of a difference is that the time hadn’t come for the concept. Prop Fuel does well because associations have over-used survey tools in the past ten years and need a survey “lite” method to get information. Even if Mail in Vote was tightly tied to the association market eleven years ago, it would have had a similar ho-hum reception because there wasn’t the same “survey fatigue” then as there is now. Eventually, things will change enough in the market that even the one question survey won’t be desirable.

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Power Dynamics

As my career has progressed as an entrepreneur, I’ve observed more and more how power differences impact a business. Your pricing, growth, and ability to successfully negotiate all are underwritten by the power dynamics of your situation.

As a simple example, my dad is a retired farmer. Early on in his career he had to sell everything he grew to cover the cost of the enormous farm loans he took on each year. That meant that whatever market middleman he sold to dictated the price of the resources he harvested. However good their relationship was or how good of a negotiator my dad was made little difference to the price he would get for. If that middleman could get the same resources for a lower price from many other farmers-they would.

At some point though, my dad was able to stockpile resources. He didn’t have to sell everything at the end of the year to turn a profit and he would cover a stack of hay rather than sell it or warehouse surplus barrels of mint oil. Then, when a drought hit Australia, or some other catastrophe occurred, the power dynamics would reverse. He made his money then by being one of the few people that had control of resources that the market needed.

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Intentional Enlightenment

Can you plan for growth?

Not as in, planning to be ready if it occurs, but rather planning to cause it to occur.

You’ve probably seen examples of both. To a large extent, businesses growth is governed by two forces:

1) The business’s available market demand.
2) The ignorance of the business operator.

A growth plan affects both of these elements.

Foundational to a growth plan is opportunity assessment:

  • What’s the relationship between the market and the product?
  • What’s the capability of the business to go to market and deliver the product?

The plan systematically evaluates the interactions between the market and the business and brings clarity to what the market demand is and what it will take to access it… Or the impetus to move on to a better opportunity.

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Hat Tricks for Team Growth

Small business operators are multi-hat wearing folks. We put on our sales hat to deal with customers, switch to our operations manager hat to make sure sales are fulfilled correctly, and then put on our CEO hat to chart a path for the business. We’re a part-time everything. As a business grows, these different hats are transferred from our heads onto employees and contractors. However, hiring ourselves out of a role is a bit of a hat trick.

Hat trick is a term from sports that relates to the achievement of three goals in a game. Similarly with hiring, there are three factors that you have to evaluate accurately:

  1. The financial cost to the business of a new hire.
  2. The financial benefit to the business (in a time span.)
  3. The opportunity cost to the owner-operator.

This makes for some tricky math (pun!)

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Your Own Way

I recently attended a speech by a well-known agency owner in Portland, Kent Lewis of Anvil Media (now Deksia.) He operated his agency for 25 years in Portland and sold it this spring. He stayed on as marketing director and presented on building a network through social media and using it to sell.

Kent has a LinkedIn network of over 22,000 people that he built over a ten year period. He did this through grinding, by sending personalized connection requests and commenting on others’ activity 5 – 10 times each day. He said that he was getting ready to go on vacation and it would be the first time in years that he wouldn’t check his social media.

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Persian Emperors & Revenue Growth

In The Histories, Herodotus explains how Cyrus became the first Persian emperor. Cyrus was the adopted son of a wealthy leader in Persia. At that time, the Medes, not the Persians were the dominant people of the region. Cyrus forged a letter saying that the King of the Medes had appointed him military general for the Persian tribes. He used this as a pretext to force the Persian military to assemble near his parents’ property with scythes.

Nearby was a large thicket of thorny shrubs and he told the Persian soldiers to clear it. All day, the Persian men toiled under the heavy sun of the Levant. When they finished their task in the evening, Cyrus told them to assemble again the next morning.

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Narrow Your Options

When I started freelancing as a developer, I emailed my old boss, Joe, and asked for advice. Joe was a general contractor for more than thirty years and I wanted to tap into his business experience. I said something like, “I’m just starting out. What advice would you give someone brand new on how to be successful?”

I don’t know what I expected, maybe something about marketing or sales. Instead, Joe wrote back, “A plan is only as good as its options.”

This mystified me.

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Navigating The Murk

Several years ago, in a small hotel conference room, I watched Dan Martell chart out a startup’s path.

He had a big a-frame writing pad and on the bottom left he started a line that went up and to the right.  Initially the line was straight, but after a couple of inches he started to scribble, and then take the line into a yarn ball of turns and twists.  Then the line started to straighten out to its original trajectory and eventually became true and finished on the top right of the poster board.

He tapped his yarn ball at the beginning of the line and said, “This is the murky middle.  After the initial optimism of your new startup you end up here.  Nothing is clear.   And you make an endless series of pivots to try and get your business to work with no idea of what will work and when it’s going to end.”

I come back to that illustration time and again.

It’s emblematic of what it means to be an entrepreneur because it is our quintessential problem.

The Murk is the fog of uncertainty where there are no known routes to success. It’s a problem that cannot be solved by reading a book or getting advice from someone who has been there.

Being able to navigate The Murk successfully and come out the other side is one of the core skills of entrepreneurship.

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What It’s Like to Donate a Kidney

A few days ago, I donated a kidney to my dad.  Because it might be helpful to other donors, I’m writing down what my experience was like here- all the way from learning about my dad’s disease to walking out of the hospital with one kidney.  I’ve included notes on the prep work, what the pain has been like, and what sort of medications I’ve been taking.

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