Stop Leaving Money on the Table: Part 1

Last week I gave you the list of the top 15 things I’ve learned about agencies that keep their clients the longest.

These agencies are also the largest and it's no coincidence.

Lets get into the first 5 this week.

I’m Nick Avaria, agency owner, and founder of Agency Acquisitions. Every week I share a client story, insights, and tips into scaling your agency faster. If we’re not yet connected on LinkedIn send me a connection request here for daily agency insights.

1. Great churn (clients lost) is less than 2.5% of clients dropping per month - some large agencies are at even less, only 1% churn per month.

From all the agencies that were doing more than $10M a year; the average was a churn rate of 2.7%.

Some were higher, around 4% or so, but their sales systems were incredibly robust. Also it's worth noting that these firms had lower profitability rates because of the sales and marketing expenditures required to hold this level of revenue with slightly higher churn. Some agencies are doing 10-15% less in profit to keep the sales machine fed.

Remember: when churn goes up, sales and marketing expenditures need to go up to maintain the revenue.

2. Agencies are only as good as their weakest service

I cannot begin to tell you how bad of an idea it is to white label other services.

Because you don't control the quality or results of these they can quickly create a mess.

It doesn’t matter if you are white labeling or just offering a service that you're just not that good at; it won’t end well.

Clients will judge you on your weakest service. Period.

So make sure your weakest service is one people would be happy with for years.

3. Once the service delivers on the sales promise - being exceptional at the service matters less than you think.

There are only gains on this if you are so good that you are in the top fraction of 1% at the service.

Also, not all services can reap the benefits of being exceptional. For example being exceptional at CRO is much easier to get the rewards of high price and high margin when compared to design.

Sure you can get more money for design, but if you are at the top of the CRO game you can just charge premiums so high that you can make 50-80% profit margins. 

To get here has huge diminishing returns. It's best to be in the top 10% and scale a company larger at 25-35% profit margin.

4. Agencies that don't align their sales people to long-term success via how they compensate them can never break out of low retention rate 

When I measure churn, I always measure churn by the client manager and churn by sales rep. 

Why?

Some sales reps have 4x higher churn than others. (as in 2-3% churn versus 8-12% or more).

These reps are blatantly overpromising and saying anything to get the close.

Even if your reps are commission based, there needs to be a component that is paid at close then another 6 months in. There’s other methods but you get the idea. 

They have to sell for longevity.

5. Client retention starts at sales and the way to maximize it most will not please your sales team, and likely some internal people as well. (Two choices 1. easy life now, hard life later or 2. hard life now, easy life later)

Sales and the delivery team have to work together. 

Sales has to be the expert at sales.

The product person has to be the sales engineer - the person that knows what the product/service can do inside and out.

The sales person (closer) is there to not let the sales engineer ramble until the prospects eyes glaze over, get bored, and walk away from the sale.

Both parties have to work together and they won't want to - but it's best for both and the agency.

If you want to check out the full YouTube video where I go over all the 15 of these in full context the link is below.

Catch you next time.

-Nick