The state of the market (Q2)

A few updates from the trenches for you.

I want to share what I'm seeing across the 30+ agencies I'm currently working with, because the patterns are pretty consistent right now and they might match what you're experiencing in your own business.

Sales pipelines have been slow.

Q1 was rough for a lot of agencies, but the interesting thing is that it wasn't slow in the way most people are framing it. The volume of leads coming in didn't drop dramatically. What changed is the time it took to close them. Agencies that were typically closing deals in 15 to 30 days were suddenly looking at 45 to 60. Agencies that were used to 60-day sales cycles were dragging out to 90 or 120. The deals were still happening - they were just taking significantly longer to come together, which had the same effect on cash flow as losing pipeline volume.

The good news is that I'm starting to see things pick back up. As of the first week of April, I've had multiple clients tell me their pipelines are warming up again and deals are moving. So if Q1 felt brutal, you're not alone, and the data I'm seeing suggests Q2 is going to look meaningfully better. Hold the line.

Now let me talk about AI…

Right now, there's a tendency to overindex on AI in a way that's not generating returns.

This is my theory: Coming out of COVID, a lot of agency owners became disillusioned with managing people. Remote work made it harder, the labor market got weird and hiring became unpredictable. Most owners I talk to love their people, but they hate dealing with their people.

The friction of management became something they wanted to escape from.

And then AI showed up and offered what looks like an escape hatch. Reduce headcount and just let the software do the things you used to need humans for. It's seductive. I get it.

But that's not the right reason to use AI, and it's not even the right framing for what AI is good at right now. The point of using AI in your agency is to render a better product in the marketplace.

To do work that was previously impossible at the level of quality and speed you can now hit. To widen the gap between what your agency delivers and what your competitors can match.

Headcount reduction might be a side effect down the road, but it shouldn't be the goal driving your decisions today.

(I know I mentioned this in my last email but it’s worth repeating)

I had this conversation with an agency owner just yesterday. I asked him how much time he'd personally spent on AI in the previous week - building skills, training models, generating outputs, whatever he was working on. He said he'd probably spent 20 to 30 hours. So I asked him the obvious follow-up: what do you have to show for those 30 hours? Tangible outcomes. A campaign that's performing. Hours saved across the team. A new capability that's making you money. Something measurable.

The honest answer was nothing. He'd been playing with it. Treating it like a toy. Tinkering, experimenting, watching tutorials, reading posts on LinkedIn about prompts that other people had used to get cool results. None of it tied to a specific outcome he was trying to produce in his business.

This is the problem. AI is not a toy. But it absolutely becomes one if you sit down behind it without a clear purpose for what you're trying to get it to do. You'll burn 20 hours a week on it for months and end up with a folder full of half-finished experiments and zero impact on your P&L.

Before you spend any meaningful time on AI in your business, you need to do the unsexy work of building a plan. What outcome are you trying to produce? What does success look like? What's the metric you're going to measure against? Then you execute against that plan. The random meandering - "I saw this post and it can do this thing, let me try it" - does not produce returns. It produces hours you can never get back.

The other thing I want to remind you of is something that's true of every gold rush in history. The people making money from talking about AI aren’t mining for gold, they are selling shovels. Right now in AI, the people making serious money are mostly the platforms, the tooling companies, and the consultants selling courses about prompts. They're not the agency owners trying to retrofit their entire business around the technology overnight.

I'll give you one specific example:

People keep telling me AI can write a 10-email sequence in 20 minutes. And technically, that's true. The AI will produce 10 emails in 20 minutes. But every time I look at the sequence that has not been edited by a human, it's completely unusable. Zero out of ten. Generic, voiceless, hollow. The kind of thing that would actively damage your brand if you sent it. And when I get the owner to read what the AI produced, even they admit it's terrible. But they'd been about to launch it because the speed felt impressive enough that they didn't stop to look at the quality.

Speed without quality is not a productivity gain.

Use AI. Absolutely use AI. But use it the way you'd use any other major investment in your business - with a clear purpose, measurable outcomes, and a willingness to throw out the experiments that aren't working.

Don't use it as an escape from the parts of your business that are hard. Use it as a multiplier for the parts that are already working.

Book a call here so we can figure out where AI might fit inside your operation (what to automate, what to leave alone, where the highest-leverage opportunities are hiding).

Nick

P.S.

The biggest lie agency owners tell themselves?

I'll go first:

"We just need more leads."

P.P.S.

A few months back, I joined AJ Cassata (Founder of Revenue Boost), for a 50 minute chat about how I scaled my agency to $10M ARR in 3 years.

Catch it below if you’re interested 👇️