Can You Scale Your Agency Fast Without Burning Through Talent?

Are you struggling to retain employees? Do you know how to keep scaling without burning through talent? When Robert Glazer started Acceleration Partners, he always had a vision of working with an international team. Now, his agency, which is focused on managing partnership and affiliate programs for high-growth brands, has 300 employees in eight different countries. Robert joined Jason in this episode to talk about how he avoids burning through talent, how he trains his employees to ask why, and what he invested in to get beyond the referral stage.

3 Golden Nuggets

1. Beyond the referral stage. Robert ran a referral-based agency for about 15 years. Of course, it couldn’t last forever and eventually, they started focusing more on sales and marketing so he and his partner would be less overwhelmed by the sales aspect. It’s a stage every agency will go through and they faced it by investing in leadership, having great marketing, and great delivery. In the end, they have exponential revenue growth from the time they started scaling the sales and marketing team and hired a fully integrated sales and marketing team.
2. On not burning through talent. With an agency that has been in Glassdoor's best places to work, what have they focused on when building their culture? Robert says they always had a vision of working remotely with employees from different countries. They have also focused on offering a work environment where employees can grow professionally, which is one of the main reasons people leave their jobs. In the end, agency life is not for everyone, some will love its unpredictable nature and others won’t, but Robert made sure to create a culture that does not reward overworking employees unnecessarily and offers flexible hours.
3. Asking why. On the subject of them not rewarding working extra hours with little results, Robert explains they have resorted to training employees to ask why. Why does the client need this data by tomorrow? Could this be solved any other way? Do they really need everything they think they need? “Don’t assume, because they're asking for something that it's the right thing or you can't explain to them the trade-off or explain the consequences,” he says.

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.

Subscribe

Apple | Spotify | iHeart Radio | Stitcher | Radio FM

Scaling Your Agency Faster Without Burning Through Talent

{These transcripts have been auto-generated. While largely accurate, they may contain some errors.}

Jason: [00:00:00] What's up, agency owners? Jason Swenk here and I have another great episode where we're going to talk about how you can scale your agency rapidly without burning through a ton of talent, because all of us have been going through and going, how do we keep employees and how do we find the right talent?

And on today's episode, I have a guest that's going to talk exactly about that, that's done this. So let's go ahead and jump into the episode.

Hey, Robert, welcome to the show.

Robert: [00:00:32] Thanks for having me, Jason.

Jason: [00:00:33] Yeah. So tell us who you are and what you do.

Robert: [00:00:36] Uh, yeah, I'm Bob Glazer. I'm the founder and the chairman of the board of Acceleration Partners. Acceleration Partners is the largest global independent agency focused on managing partnership and affiliate programs for well-known and high-growth brands.

Uh, we have almost 200 clients and, uh, I think, uh, getting close to 300 employees across eight countries and we manage programs across 25 different countries.

Jason: [00:01:02] Very cool. And so how did you start the agency? What made you fall into this?

Robert: [00:01:08] Uh, like most agency owners… No, I don't know anyone who started the agency intentionally. I just, you know, I started doing some work in the affiliate space.

I found a lot of problems with it. I started helping a company fix its program. Uh, that company ended up being a huge success. It was called Tiny Prints. Sold them to Shutterfly for $300 million.

People then spread out from that and start saying, hey, can we do that thing that you helped us with there? And then I couldn't do enough of those. So I hired some people, so, and sort of the rest was history from there. So we were very, for years, just all referral-based, uh, word of mouth, you know, 15 years. It's really in the last five years that we've had kind of sales and marketing a little bit before.

Jason: [00:01:47] So, what were some of the stages that you went through, you know, in order, like, obviously go through the referral stage, right? And you only can get to a certain plateau. And I feel a lot of people listening to the show right now, you know, are at that level, right. They're kind of plateaued, you know, it could be at 5 million, 10 million, whatever it is, they're plateaued, but you have to do something different.

What were the things that you guys did different?

Robert: [00:02:10] We invested a lot in thought leadership, content marketing. We wrote a book that was the first in our industry called Performance Partnerships. So we really focused on having great… someone sent me the barbell strategy, having great marketing, having great delivery, which drove the word of mouth.

Eventually, though, you know, we were like, look, we don't want to sell or need to sell. Eventually, myself and Matt who is now CEO who is the VP of client services, we're just handling sales calls all day. So even if they were inbound, right, then you had to talk to these people. And we were, you know, the people that called us, we answered the phone, but we weren't following up with them and checking in and the things that you need to do to keep, uh, a sales pipeline moving.

So eventually we started to acquiesce. It was like, look, even if we don't want to be cold calling people like this is a lot of, I find, to manage. But from the time we started scaling the sales and marketing team and now with a fully integrated sales and marketing team, I mean, we will, we will sell more this year revenue than we did in our for… Our revenue growth this year will be more than our first 10 years, right? Combined.

So it takes a while to get those pieces working. You can go either way. Again, it depends on the type of business you want to build. I wanted to establish our marketing before our sales, like, get the demand going, but, you know, I've seen the opposite approach work too where you get account development and people calling and doing that.

We had a really good referral pipeline and we thought that that thought leadership would also help on the conversion of, you know, the people who are examining us.

Jason: [00:03:39] Gotcha. So what have you seen work to allow you to scale rapidly without burning through talent?

Robert: [00:03:45] Yeah, look, it's hard in this business. Paradoxically, I would say, you know, we, we started by sort of in the premise, you know, five or 10 years ago that people aren't gonna stay here forever and turning that into sort of an open conversation and, you know, having a productive alumni group. But we've, we've actually always been remote. We focused on having sort of a world-class, uh, culture.

We spent a lot of time and energy on our culture have been in Glassdoor's best places to work a few years. And look, agency life is not for everyone, but what's interesting is people who come here from other agencies really say to us, this is really different.

Some people are a lot of people, realize agency is not right for them. Maybe that's not the work that they want. So we've done a lot to really screen the type of person who likes that fast growth, high pace. You are serving clients. If you don't like client service, probably not a great role, but they like the kind of unpredictability and working on something new and different.

I think that the biggest thing that keeps your talent around is investing in your talent and helping them grow and develop. That's one of the reasons we are a growth firm and that growth has allowed for, you know, I think we've had 87 seven promotions last year or something like that, you know, across our team.

So for people to see that, oh, that person started associate and manager and now they are a director or VP. And that, that path is available to them. I think these days people leave for two reasons. They don't, they don't like their manager, maybe three reasons, they don't like what they're doing or they just don't, they're not growing or don't see a path for them.

I don't think anyone here is blocked. I mean, that's one of the nice things. If you go up 30% a year for a while, as we have, there's just new roles available every year. No, no one is blocked on their development path.

Jason: [00:05:31] So when someone joins from another agency, what do they say it's different?

Robert: [00:05:35] I think that… look, there's an interesting expectation gap. I actually think the last year has really shown some almost generational gaps in the workplace. We didn't see it before, you know, for better, for worse. I think some gen Z or people coming out now, I mean, they just, they think a 35 hour or 40 workweek is, is a work. That's the workweek and the expectation isn't above that.

Some people want to learn and be exposed to a lot of things and understand that they're going to have to do that. But I think the biggest difference… so, so look there's times when there's a lot of work or whatever proposal was due and clients are, but we generally want to solve these problems. We generally don't want people, they don't work weekends. They don't work nights.

And so what I've heard people express is at other agencies, people just didn't care if I was working 18 hours a day and they didn't care if I was burnt out or work weekends. They're like, no one wants that here. No, one's asking me to do that. But again, I think we all have to be honest, and this is the nature of the business. Sometimes if there's a million-dollar proposal and the client wants it on a Monday morning, someone's probably going to be working on that on a Sunday night.

Like I, I, to me, that's the trade-off of flexibility. The other side is you want to go watch your kid's soccer game on a Friday afternoon? Like you can do like awesome. Go do that.

So I think that's the biggest difference is people feel really supported. We are not celebrating. We actually talk culturally, we celebrate work performance, marketing, and we get paid how well these programs do. So we talk culturally about, we don't reward working hard. We reward working smart.

I've seen people work a hundred hours a week and not get a lot done and really exhaust themselves and those around them. So I think that's the difference. If you haven't worked in an agency before, agency life can feel different. If you have, I think there's some ones who… again, it's a badge of honor to pull it all night, or I don't think anyone's ever done that in history of our company.

Jason: [00:07:27] Are you looking for a content creation solution for your agency and/or clients? Verblio can help you with everything from blog posts, eBooks to video scripts, and a lot more. Verblio is a crowdsource solution to content creation with the pool of more than 3000 highly vetted writers who produce custom SEO-rich content.

In fact, my team has been using Verblio and we love the ease of their process. With Verblio, we set the criteria for the style and the tone, and then they match you with the writers that have the expertise in your subject matter. Verblio is a platform specifically designed for agency. And that's why for a limited time, they're offering my listeners 50% off the first month of content.

Just go to verblio.com/smartagency to learn more. That's Verblio, V E R B L I O.com/smartagency.

Well, I mean, there's lots of people out there that talk about how much they work and how much they hustle. And that's really all they do. And that's perfectly fine for them. But I know when I'm working with agencies and I know when I'm running this business or the other agency, it's like, look, I want to do it smart.

I want to be able to maintain, to take off Monday and Friday, Saturday, and Sunday, and only work Tuesday, Wednesday, Thursday. That's what I want. And then you have to figure that out. Like in our mastermind, we were chatting at the end of the year, we were talking about what are the things we're going to say no to, in order to really like set the goal around time.

Your goal should be around your time, not around money because you always sacrifice money. And that always makes a big difference. Cause yeah, I remember out of school I worked for Arthur Anderson and that was like a badge of honor to see how many hours, you know, oh, you got to 80 hours a week? I got a hundred hours a week. I'd be like, you're an idiot.

Robert: [00:09:24] We actually train around asking, you know, why a lot. And when a client asks for panic for a ridiculous amount of things last minute, you go to them and you say, well, why do you need…? Well, my boss, I have a new boss starting tomorrow. And I wanted them to have this two years of data. And he said, hey, how about we give them X, Y, and Z?

And like, I don't want to reward the person spending 10 hours on something they didn't need to do, because it didn't produce a better outcome and it exhausted them. If they could solve that problem in a half an hour by asking why, what do you need? You know, a lot of times, I think it's explaining to clients too what that means.

Yes, we can chase those new to new markets, but you realize that mean the core launch mark is then aren't going to get the same support? And they'll say, well, can we do both? Can't… no, so we can either double the team or we can, I think a lot of times it actually if you're an agency that provides great services, your biggest problem is that your teams don't know how to say no well, or sort of put a lid on scope creep and they over-deliver.

And by the way, what happens when you overdeliver in an agency? I go look at the PNL at the end of the month and not only is the employee upset, but we haven't made any money. So that's a lose, lose.

Jason: [00:10:36] Well, yeah. And the clients are getting overwhelmed by all the stuff that you just provided them. And a lot of times they get confused, which means they're going to leave. So you just burn out your clients.

Robert: [00:10:45] Don’t assume, because they're asking for something it's the right thing or you can't explain to them the trade-off or explain the consequences. Again, if they say, well, let's chase this city and that city, are you okay if that deteriorates the results on the existing two cities?

Well, if it's one of these things where it's 99, 1% and it's oh, when you put it that way, I know I don't want to put those campaigns at risk at all.

Jason: [00:11:08] Yes. Awesome. Well, Robert, this has been great. Is there anything I didn't ask you that you think would benefit the audience?

Robert: [00:11:14] Yeah, just in terms of, I think thinking about where you want your agency to go in terms of determining how you want to run it, right? I think there are a bunch of different paths, particularly, you know, there are a lot of people exiting these days, and I think there's a specific set of things that you need to do and understand your industry if you want to move towards that outcome.

Jason: [00:11:33] Let's go over a couple of those. What's important in your eyes?

Robert: [00:11:37] A couple of things. Cause you might hear from your friends who have SAS businesses or otherwise, but agencies are sold on EBIT. They are not sold on revenue. They're not sold on customers or clients or other things they're sold on trailing 12 month EBIT.

So, first of all, you can get over the fact that you haven't started a SAS business, you know, and your friend did, and he sold it for 10 times sales. And then you need I, so I think the two things that I see really hurt the most… one is not having everything relying on the founder, right? These are the things that impact valuation. Understanding that trailing 12 months EBITDA is the primary driver and then having a proper cost accounting for your business.

The amount of agencies I've seen who don't have for gross margins correctly, who aren’t putting, you know, the actual people cost of doing the works in a gross margins. Like this is kind of finance 101. You can't, if the people are delivering the service, then that is, you know, you can't say you have a hundred percent gross margin and operating expenses, it doesn't, it doesn't present an accurate picture.

And I would also encourage everyone out there to, you know, if you're an owner-operator, pay yourself a market salary in the business and then take the profits, so that you have a proper PNL. Because we, we've gone to look at businesses and they say their profits’ a million dollars in EBITDA, and then there's three founders taking $30,000 a year. Well, those financials are not accurate. And then you're very upset, but your evaluation is not going to be there.

So those are three of the things I would really encourage people to do if they're thinking about an exit down the line.

Jason: [00:13:07] What do you see the multiples being in? Uh, you know, I've seen them as ranges, so let's say you're under a million in EBITDA. What's the multiple?

Robert: [00:13:15] Yeah. So I built a chart on this for marketing agencies. I'm happy to share it with you. So under a million in EBITDA, I mean, right now it's hard, but it could be two to four times EBITDA with a heavy earn-out. Because again, under a million EBITDA, the owners, probably the head of marketing head of sales. I wouldn't expect them to get more than 50% of that upfront.

I think two to 3 million in EBITDA these days, maybe 5, 6, 7, you know, the first inflection point, major inflection point, is 5 million in EBITDA. And I think, you know, healthy agencies have 5 million EBITDA with recurring revenue, you know, business are, are going for 10 times plus EBITDA these days.

Jason: [00:13:58] Yeah, what we'll do is anything under a million in EBITDA is usually one to two X EBITDA. A million to 3 million is usually four to six. Three to about, you know, six would be a little bit more. And then if you're over the 10 figure mark in EBITDA, then it's really write your own ticket, depending on a number of different things.

Robert: [00:14:20] Agencies over 10 million, 20 million are getting 20 times earnings some of them these days. But I think he made the point you made is really interesting. Again, this is why you need to focus on what your strategy is. The problem, it's hard to get one of those one to two times EBITDA deals done, because why would that founder sell when they can just have to hold on a business for two years?

But they haven’t created anything beyond themselves that has value. In fact, if the earnings of that $1 million EBITDA, you know, and they are the head of sales, the head of marketing, the head of whatever, that includes $400,000 of things that you'd need to pay for other people, then it's really 600,000. So that's the problem. That's why those deals don't get done.

Again, if I'm the seller, do I want to give up the…? You know, you wouldn't give up one time, EBIT if it's, unless you saw it, your business is going to collapse. And even too, he said, if I just held on for two years. So if you want to get real value for your business, it needs to be a valuable business beyond yourself. And the more that you can take yourself out of functions, you know, when you start having a marketing person, when you start having a salesperson and you're not on all the sales calls, these are the things that might get you up to a two to three from one to two.

Jason: [00:15:28] Yeah. My partners always get mad at me. A lot of times I talk people out and I'm like, look, you're not worth what you think you're worth, and if you are worth what you think you are, like, why do you want to sell? Like, there's lots of mastermind members that we've gotten to the level where they're the chairman and they're not in the day-to-day and they're getting millions of dollars every year.

So why would they sell?

Robert: [00:15:51] Let's say, it's, let's say it's a million-dollar EBITDA business and you're out of it, but it's just only a million of EBITDA, which again is not a lot of scale. And let's just say someone will pay two to three times for that. I mean, do you want to sell the golden goose or do you want to keep getting the eggs, right?

That becomes a tough, tough equation. But I think if you certainly don't want to get a deal done, you go to market and you tell everyone, you know, that you want evaluation either, or you're… An agency is an agency. There could be a hot segment, but they've all, every sale has been valued generally the same for the history of, of time.

And I think when you go to market and talk to people and your expectations are just nothing like the deals that are, I always say market-clearing prices. We hear a lot of rumors, right? We hear LOIs… 80% of deals I think don't close, right? So you hear a lot of headline LOI that didn't close. You don't know whether the headline number had earn-outs or not. It could have had five or six years of earn-outs.

And so I, the only prices and comps you can use or what I call market-clearing prices, not the rumor that your friend said, or the LOI that your other friend said, or otherwise.

Jason: [00:17:00] Yeah. Awesome. Well, Robert, what’s the agency website, people can go and check out?

Robert: [00:17:03] Yeah. It's probably easier to Google than it is to spell it all out. It's accelerationpartners.com. Uh, hopefully, we're doing a decent job at SEO and you put Acceleration Partners. I'm sure one of your SEO agencies listening will, uh, will give us a call and offer to fix.

Jason: [00:17:18] Awesome. Well, thanks so much for coming on the show. And if you guys enjoyed this episode and you want to be around amazing agency owners that can see the things that you're not able to see and help you scale and grow and get to a point where you've really created the freedom in your agency, where you're making the profit. You don't have to make all the decisions. You don't have to have all the risks and your team is, you know, humming along. I'd love to invite all of you to go to digitalagencyelite.com. This is our exclusive mastermind for agency owners that are experienced.

Go there now and until next time have a Swenk day.