I get asked a lot of questions online.

The most common?

“What would be the first thing you’d do when starting a new agency?”

Well, I just started a new one so this topic is fresh on my mind.

Let’s jump in.

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It’s all about figuring out the economics of a business. Not branding, not client acquisition, not design, but economics.

A lot of businesses sounds great in theory, but not on paper because the business owners don’t do the due diligence to figure out if the economics (the money in vs money out) will work.

So you first need to understand what your business is and what your business is not. For an agency, it is not something that will make you a multimillionaire. The company can gross $100m, but you as the owner will probably not become a multimillionaire just by the economics of an agency.

What an agency is, however, is steady cash flow. Something that you can have as a baseline for future businesses.

Now that I am restarting my agency, I’m laying out the services that I want to offer. I’m standardizing my agency and only offering one service – SEO optimization.

Within that scope of SEO, I’m highly specializing in what I’m offering.

Right here is a breakdown of all the deliverables:

agency deliverables

Also included is a breakdown of those deliverables, links and some additional notes.

Then I also include the amount of hours each will take and the amount I will charge each client.

cost of hires

I’ll also include MY cost for each service. If I’m doing it myself, that will include my time required to do the work. If I’m paying someone else to do it, that will include how much that will cost to hire them.

agency planning sheet

From there, I can decide how much I can charge for that service which will help me understand how much I am going to make.

There’s a book called Profit First that I highly recommend – it talks about managing the business based on the bottom line (the net profit of the company).

Take how much money coming in, subtract that by how much money is going out, and whatever that number is, that’s what your agency is.

Going back to my services, I can remove some work to meet the needs of lower budget clients, but I will not add or do custom work.

Custom work can pose as a big problem for agencies. When a client requests extra work and agencies agree, even when they get paid for it, it’s not really worth it.

That’s because of something called scope creep, which is the little extra things you don’t get paid for (thinking, strategizing, project management, etc).

It’s important that you figure out what you want from your agency. For me, I want to run a headache free service with high margins and pays me and my staff well.

To get there, it would have to be through automation. The more standardized my service is, the easier it will be to automate because it’s hard to automate custom work.

So if you want a headache free, automated agency, standardize your work and don’t take on custom work, even if you’re getting paid for it.

I hire people to do the work because my time is most effectively spent acquiring new clients, not doing the work.

Each deliverable in my spreadsheet has an SOP and training.

All I have to do is find people (mainly through Upwork), train them on how to do that deliverable and then let them manage it.

This allows me to focus on getting clients and building the business, not getting stuck on doing client work.

This is a mistake agencies make. They do the work which stops them from doing other things. If you’re doing client work, you’re an employee not a business owner.

To hit my goal of $1m in revenue in year 1, my expenses will be around $17k/month.

agency expenses

Those expenses include:

  • Utilities
  • Softwares
  • Office rent
  • Staff

After expenses are paid, I can then take what I want from the profits. With $1m in revenue and $17k/month expenses, the agency profit would be around $750k at the end of the year.

From there I can determine what I could personally take from that $750k.

That’s what I’ve been working on this week for the agency. Next week, we’ll be talking about hiring, services, and much more.

See you in the next article.

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