How Can You Scale Your Agency and Grow Net Profit?

Lacie Edgeman is a Partner and VP of Finance at PrograMetrix. She has extensive experience in finance within the marketing and creative industry. Lacie prides herself in helping hold her agency to high standards while keeping their projects on budget without sacrificing vision or quality. She is on the show to share the importance of niching down in order to scale. She also explains the difference between growing and scaling and why both are important.

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3 Golden Nuggets

1.  Grow your profit margins with a niche. Lacie says without a niche, you're looking at 10% margins, but with a niche, it's 25%. With a specialization, revenue increases becoming more efficient, yielding a net profit increase.
2. There is a difference between growing and scaling your agency. It's important to know the difference and know when it's time for each. Growing requires the investment of time and resources. Scaling means bringing in more revenue without additional expenses.
3. Use your right project management tool to its full capability. It's one of the fastest and easiest ways to scale. Rather than just using your PM software for task management, you can automate things for efficiency. That provides true scale.

Sponsors and Resources

Verblio: Today's episode of the Smart Agency Masterclass is sponsored by Verblio. Check out Verblio.com/smartagency and get 50% off your first month of content creation. Our team loves using Verblio because of the ease in their process and their large pool of crowd-sourced writers.

Jason: [00:00:00] On this episode, I talk with an agency owner about the difference between growing your agency and scaling. And there's a big difference. And I think all of you will really like this. She comes from a finance background, she's a co-owner at an amazing agency. And so she gives us a really good perspective of what you need to do in order to scale your agency. So, enjoy.

Hey, welcome to the show.

Lacie: [00:00:30] Hi, nice to be here.

Jason: [00:00:00] Yeah, I'm excited to have you on and tell your guys' story. So tell us who you are and what do you do? Yeah, so we are PrograMetrix.

Lacie: [00:00:30] We are a PrograMetrix media buying agency and programmatic is such one of those terms that is a little bit confusing to people, but it's really just simply the automated buying of ad space.

So think about Hulu. The commercials you see on Hulu or Spotify, or even those display ads you see on forbes.com. And I am a partner here at the agency and I have a background in finance and operations. And I know we're going to be talking about niching today, which is very important. And my career path has been a little bit of a niche as well.

So I started out in a traditional creative shop. Moved into a B2B agency, then finally made my way to digital and then niched a little bit further into programmatic, which I'm very excited about. I really do feel like it's the future of advertising.

Jason: [00:01:31] Awesome. So tell us, how did you get started in the first agency?

Lacie: [00:01:35] What was that story? Yeah. So somebody took a chance on me. I think, uh, probably a lot of the viewers have nonlinear paths into marketing or were into advertising and mine was very similar. So I was actually in the construction industry and was getting my degree in finance and wanted to move to Austin, Texas, and had an agency that kind of just rolled the dice on me with my finance background and, uh, started working there.

And I just love, I love agency world. I think people either love it or hate it. And I just absolutely love it. Fast-paced, exciting, never a dull moment.

Jason: [00:02:14] That's awesome. So let's kind of jump into it a little bit about specialization. You know, a lot of people struggle with this because they feel that they're going to miss out. But you know, how did you guys go about specializing? And not per se, just picking programmatic, but how did you guys have the confidence, and what were, kind of, some of the steps that you guys went down in order to specialize?

Lacie: [00:02:37] Yeah. And I know this I'm probably preaching to the choir here. The specialization is so important. So one of the things we looked at when we specialized is, you know, what were the advantages and disadvantages. And we just felt like we weren't going to be able to scale the business. So there is a difference between growing and scaling and, I want to talk about that a little bit later.

But that's one of the reasons we really looked at it and programmatic specifically because it is at the forefront of advertising. And really what we feel like as the future of advertising. We also, our co-founders kind of grew up in the ad tech space. So it was kind of a natural fit, but I think there was a year there where we kind of experimented with the whole full service and it just wasn't working out.

So what we found is that it is very counterintuitive that people think, Oh, I want to capture this revenue going out the door and I don't want to let it go. But what they don't realize is it really hurts their business. You can not deliver at a high level to your clients. So you're, you're hurting your reputation by taking on work that you're just not specialized for.

Jason: [00:03:44] Yeah, I totally agree. What's the difference in your eyes about growing and scaling? Because it is a pretty big leap between the two. So can you talk a little bit more about that?

Lacie: [00:03:56] Yeah, of course. Growing and scaling. I think a lot of agencies don't really understand how big of a difference it is. Right?

So growing is where you add revenue at the same rate as you're adding expenses. And so what happens again? He'd been in finances there's less leftover at the end of the day. If you can scale, if you can be efficient, if you can put in those processes, you can scale meaning that you're adding more revenue with less expenses.

And you're really making that amount at the bottom, that kind of you're left with, a little bit bigger at the end of the day.

Jason: [00:04:31] Yeah. There's so many people and me, and I've gone through it in the past where, you know, we kept growing and I was like, oh my gosh. And agencies are notorious for this.

Be like, Oh, we're, you know, so-and-so millions in revenue. And everybody's like, Oh, that'd be nice. But. Can you look at, you know, oh man, I'm actually making less this year and we grew. Rather than figure out those efficiencies and those systems.

So what were some of, I presume you guys probably learned this the hard way, is that true? Or did you guys just pop right out and be like, we figured it all out.

Lacie: [00:05:07] Well, I think there was, like I said, about a year of us experimenting, but it was pretty, we like figured it out pretty soon. It was like, okay, we know what we're good at. We know what we're not good at. And. If we just realized we were using a lot of extra time to do those things we weren't good at. And it just wasn't sustainable for long term.

Jason: [00:05:27] For the people listening, because a lot of them are in a growing phase, but not a scaling phase. Or a lot of them say, I don't want my agency to be any bigger because they really haven't figured out the growing part or the scaling part. Right. So was there steps that you guys took that made this process easier that they could be like, Oh, let me look here.

Lacie: [00:05:51] Yeah. So I think first of all, you need to identify what you're really good at, right? And what you can do at a high level, deliver great results. Where you can be the best in the industry, go with that and then create partnerships. So one of the things we've done and we do believe in true partnerships, both on the client-side and the vendor side, create those partnerships where you vet those companies.

And you can feel very confident that if you don't do that, you're not good at it. That you have a partner that can do it. Our clients love that. Right? When we commit to doing something, we're going to do it very well. And if we can't, we're going to let them know, Hey, that's not something we specialize in, but here we can actually help facilitate that process for you. Make it easy for you.

Again, I think that the hardest thing is that fear. That fear of that revenue going to another person. But, you just get more if you are collaborative and have those partnerships. So that would be one of the first things; a partnership level.

The other thing that's really important is that process, right? And I know we actually use the Agency Playbook and so looking at those processes. So a lot of the things we do is we have daily huddles. So we're always on the same page. We have weekly meetings and then we use a project management tool. It's very important. We have, um, I know you talk a lot about having those automated systems in place. We do as well.

We have intake forms. Where somebody fills out a form and then all of the tasks are created in the project management tool. So that's very important for that scaling as well, instead of just growing.

Jason: [00:07:24] Yeah, no, I, I love that. I mean, it's, it's the little things that you do. A lot of us, you know, as we're trying to scale agency, we just look at kind of the shiny red objects and we think.

Well, the cure or the end all, be all is to just get more revenue in the door and sell more. But it's, if you don't have the right foundation, you know. Kind of like when you guys probably jumped in the Playbook, you know, you got a video from being like, hey, focus on the first three systems. These are the most important.

And then you can go on to all the other ones. Cause we all jumped to prospecting and sales and think that's it. Or, we don't even think about kind of the delivery part.

What were some of the other efficiencies that, or processes that you guys put in place to make you guys more efficient?

Lacie: [00:08:14] Yeah, so kind of going back to that form. So one great example is the project management tool, right? And, and I think people don't utilize that. First of all, some people don't even have a project management tool.

Jason: [00:08:26] Yeah. It's more like task management.

Lacie: [00:08:27] Yeah, right. So using, using that to its full capacity is one of the best things I can recommend.

And there's a lot of really great tools out there, but the tool we use, we can actually have our clients submit a request form. Um, again, it automatically schedules all of the tasks for us. So there's, there's no question about when something's due, how we go about it. And then we're able to actually organize all of the internal stuff as well.

All of those internal projects we have. And, I think prioritizing those internal projects, um, to your point, you know, spending that time on those first three sections of the book is really important. Like people don't think about that. They're worried about everything else, but, um, until you do that, you will not have that, that scaling capacity.

Jason: [00:09:15] So I'm not very good at finance at all. So I love talking with people and surrounding myself that are really good at finance and having that kind of background. Because like you start putting spreadsheets.  I'm sure you probably love spreadsheets. Like I look at them and I feel kind of a little dizzy, you know, looking at them, but it's awesome.

And I think all of you guys compliment each other from, you know, the other owner and owners that you guys have. So what are the things on, um, a weekly or quarterly basis that you're looking at from finance to make sure that they didn't cease going in the direction that you guys want it to go?

Lacie: [00:09:52] Yeah. So we do have like executive meetings, bi-weekly executive meetings, which again, I think it's important to get that time. But one of the things that I keep a pretty close eye on, is the revenue, right? I think that's, that's one of the things that you have to keep an eye on. And we have like a revenue forecast sheet and I created that.

And again, in the efficiency lens, you can pivot all of the data. So it makes it very easy to see what's going on. What are we doing next month? Where do we need to fill the gap? We have it split out by, you know, revenue that's under contract, revenue that we expect to get, and then revenue, that's kind of up in the air so that we can, um, go after that.

And that's very similar to your process, right? That, you know, kind of keeping those in sections and then focusing there so we can very easily see just with a glance. Okay, we need to go get some more new business. Or we need to double down on what we think we should expect, get those contracts signed. So from a finance perspective, where we look at that a lot, we know that revenue isn't the important number.

And I know you would agree with that as well. Right? The net profit is the important part, but it does start somewhere. We've got to make sure you've got that coming through. So we look at that. We also look at our client roster, right? We want to make sure that we're not too heavy on one client versus another client.

We're very lucky here that we have a very diverse portfolio, but I have worked for other agencies where you have that one big client and it's just, it can be very detrimental to the agency. For the staff and for the management, I think everybody's constantly looking over their shoulder saying, okay, I hope the client's happy.

And, um, it also gives us a lot of flexibility to be honest with our clients, which is really important to us. I don't think a lot of agencies get that opportunity because they're worried about that revenue, you know, going out the door and I can't speak honestly. And, and that's really important to us so that, that we actually have that flexibility is nice.

Jason: [00:11:49] There's so many people that they do, their budgeting kind of looking at their bank account. But with, you know, when you guys do kind of the proforma or projections. You know, can get a really good snapshot of, you know, like you were saying. Like when the bad times are going to come and usually if you have six months to plan for it, I think that's more than enough time. Sometimes even a quarter to plan for that.

Cause I always found that what we do today actually affects us three, four months down the road. So if like, if you're looking at your pipeline and it dried up. You know, the next quarter is going to be hard to start.

Lacie: [00:12:28] Yeah. I think that's a great point and something that we, you know, do very well is keeping an eye on that.

And what I always say is because I know there's a lot of philosophies out there and people really care about cash, which you need to be concerned about cash don't get me wrong. But I always say that your P&L or your proforma is the canary in the coal mine. Right? It's going to tell you what is happening.

And, and so, you know, cash is important, but it's the end of the day, your P&L and what you're forecasting is going to tell you what's going to happen with cash. So we do focus most of our energy there in the forecasting piece. And I will say, you know, when the pandemic hit, I think a lot of agencies had a hard time and we were able to pivot very quickly and we kind of knew what was coming down the line.

We were able to make some changes, communicate those changes to our team. And we came out even better, I think after that because we had that battle scar. I think everybody has, uh, has those battle scars now?

Jason: [00:13:26] Yeah, I think I, I saw, um, a huge step for a month, like in March for everybody where it was just.

It was so new. Everybody was panicking. Everybody was stopping their marketing, which I always loved that quote by Henry Ford. He was like, stopping your marketing is, like stopping your watch to save time. And then people were like, Oh, well, stopping marketing is the dumbest thing because especially digital marketing because we need to reach our people, but we're not.

We're not able to right now. And so I've seen so many agencies like yourself have such huge growth through such a hard time. Um, you know, for certain businesses, because, you know, we offer a unique solution. They're kind of the frontline people for business. You know, I'm not taking anything away from the doctors and nurses are, the first responders and that.

But, you know, for business, like all agencies are really kind of that first responder. So it's, um, it's exciting to see what people are able to do and really create.

If an agency's listening right now, you know, since you've worked with a number of different agencies and you own, you know, part-owner of this agency, what's a good margin that you guys are shooting for, or that you think people should shoot for in the agency space?

Lacie: [00:14:47] Yeah, that's a great question. What I would say is it kind of depends on what you're focusing on, right? If you're a creative shop, I think your margins are going to be a little bit lower. If you're just doing digital advertising, specifically social and Google. I think your margins are going to be a little bit lower because again, that tends to be more commoditized.

And you have to try a lot harder to be kind of out in front of the pack. Um, but if you are able to niche again, this is the whole part about niching. If you're able to really niche, you should be able to get those margins close to 25 at a minimum 25% is what I would say. But if you're not niching, you're probably at the 10% range, that's the importance of niching.

So I think, you know, you have to stop looking at the revenue, going out the door, and think about the ability to really, to get those net profits up.

Jason: [00:15:38] Yeah. I mean, when you have that specialization, you know, like, this weekend, my poor son was playing flag football and uh, snapped his shoulder. And so, you know, we're not going to go to a generalist.

Right? Like literally, and it's, it's the same thing. Like we're going to go to a specialist that he's literally right there right now, going to a specialist to figure out what we need to do. And they make a ton of money because they are the specialists because they know that one craft better than everyone else who's like, oh yeah, your temperature's high. Take this and call me in the morning. And that's what I tell agencies all the time. And they fight it for so long. And then once they make that decision, they're like, why did I wait so long? But I think it's a process that you have to go through and it takes some people a decade. Sometimes longer, sometimes years, months. You never know.

So let's switch focus and kind of wrap up a little bit about, and I love to interview women on the show. Especially women owners, because there's far fewer than men. Why do you think that is?

Lacie: [00:16:49] You know, that's a great question. I don't know the answer to that question.

What I know is that it seems to be getting better. That's what I know. I know there's a 3% conference that happens every year and that I think has brought some attention to the problem. I am also a part of a group called Together Digital, which is a women's group for digital specifically. So there are some new avenues for us.

Um, and there's a lot of agency owners there. I don't know the answer to that question. All I know is that I feel like women, in general, are working on it. Right. We're trying to figure out why we're trying to create the solutions to be more present in the space.

Jason: [00:17:32] And I, I see a shift coming and I get real excited because more and more, the people that we interview are women.

And I'm like, this is awesome. And so, that's always really good. So I'm happy for that.

Is there anything I didn't ask you that you think would benefit the audience?

Lacie: [00:17:48] You know, I, I think we did a really great job today. Just covering off on just that, that niching and I know again, you and I think very similarly, I just wish I could encourage everybody out there to really take a look, even if you're just want to take a piece of your business and try to niche there and see how it goes.

But it's so powerful and you can be doing so much more with your agency. If you could take a lane, stick to it, and you will see those revenues go up. Well, you'll see the bottom line go up really. And that's the most important part.

Jason: [00:18:21] Yeah, I just had to commit to it for a while. And I always tell people, but I'm like, look, as soon as you pick a specialization or a niche, whichever you want, you'll still get work outside of that.

It's just, you're marketing to that particular audience and you know them better than they know themselves. So they're going to listen to you and, and then you really stop being that commodity or that "me too" agency, I always tell everybody about. They have a problem, they come to you to solve it.

It's kinda like that Vanilla Ice song. You got a problem. Yo, I'll solve it.

Awesome. So you guys don't want to hear me say, obviously. What's the website address that everybody can go and check the agency out?

Lacie: [00:19:05] Yeah, it's a PrograMetrix.com and, um, definitely check us out on LinkedIn. We have a ton of marketing content out there. Even some things that you can use to learn and, and even go back to your clients with too.

Jason: [00:19:19] Awesome. Well, thanks for coming on the show. And if you guys enjoyed this episode and you want to be surrounded by amazing agency owners, where they can see the things that you might not be able to see, that can challenge you to hold you accountable, have fun with, I want to invite all of you to go to DigitalAgencyElite.com.

This is our exclusive mastermind for agency owners that really want to grow and scale faster, and they want to do it with a group that understands and empathizes with them and likes to have fun. So go to DigitalAgencyElite.com. And until next time have a Swenk day.