If you own a struggling agency, and have hit a bunch of dead ends trying to turn it into a profitable business, or if you have a young agency and are ready for massive growth, but need some expert guidance from someone who has been there, Jason Swenk is the guy you're going to want to talk to.
Jason launched and grew his own agency into a multimillion dollar business. Then he sold it and dedicated himself to a new passion: mentoring and educating other agency owners.
Naturally, he's a busy guy, but he nevertheless made some time to sit down and talk to me about the state of marketing agencies going into 2019, what many agencies are getting wrong, and what it takes to go from frustrated marketing consultant to successful agency owner.
Here's the transcript of our old-school phone conversation. As usual, all ums, ahhs, and other extraneous bits have been edited out for easy reading.
Carmen: So my first question is, when you're starting an agency, what trends are you seeing lately in regards to new service offerings that agencies might be dipping into?
Jason: Messenger marketing is a big one, with Facebook messenger.
Carmen: How does that work, exactly?
Jason: Well, think about everybody's always emailing back and forth for communication.
But there's a huge delay. You're competing with everybody else in the inbox. Think of SMS, right?
People want an answer right away.
Well, everybody's always on Facebook. Or they're always on their phone. You're able to log in, and not even log in, you're already logged into Facebook,. You're able to go to someone's page and say:
"Hey, I'm looking for this type of shoe, what would you recommend, this is my lifestyle."
The customer can go through an automated process and actually chat with a human.
So for example, I don't have a contact page anymore.
About a year and a half ago I deleted my contact page and just linked it to Facebook Messenger. So when someone comes on it, my Don Bot, Don Draper, welcomes them and says:
"Hey, I'm a Bot, I have a couple of questions for you and then you can chat directly with Jason."
It gets people the information they're wanting right away, and then when I do have a conversation with them it's immediate.
Carmen: So, if you're busy or unable to come to the messenger how do you handle that?
Jason: You just do it when you have time. As I'm doing this interview now, there's people hitting me up.
I'll hit them back either tonight or tomorrow. The cool thing is, it actually rings their app.
It buzzes their phone when I actually reply back!
Then we can start up that dialogue right there.
Carmen: Well that's awesome! I did notice your Don Bot, I remember that. I thought it was funny!
Do you think there's a type of agency that's becoming more prevalent lately? Such as SEO, or SEM, or traditional marketing?
Jason: No, I think if an agency relates themselves to a particular service, they're going to lose out in the long run.
It's more like relating themselves to a solution. If you say "Hey, I do SEO," you're shooting yourself in the foot, because a lot of people don't know what SEO is.
But, if you can talk about the solution SEO gets you, or SEM gets you, or content marketing gets you, then you can bring in more complimentary services that help you with that solution.
At the end of the day, clients of agencies don't care what they do, they just care about the results. Agencies have a hard time realizing that.
Carmen:That's fair. What do you think are the biggest challenges for agencies who are starting out?
Jason: They're trying to read the medicine bottle from inside the bottle.
They're too close to it.
Carmen: Why do you think they have such a hard time with that?
Jason: They don't charge enough.
They don't have clarity for where they actually want to go. Or what they want to do.
For example, almost every agency that starts out or agency owner that starts out is an accidental agency owner.
They knew how to do something cool, and got some money to go do it, but they really didn't know what to do next. That happened to me. It happened to so many other people. For five years, you just go around and you're being reactionary to what's coming to you.
Usually your business is built on referrals from that. Referrals work like this. You'll never get business really bigger than the referral. They always refer you business at the same level, or below. So then that just hurts you for increasing your prices later on.
Then you're in this Catch-22 going, "I'm so busy, I can't raise my price, because no one is going to say yes to these prices, but I don't have enough money to pay someone." They just struggle.
So what I tell people to do, when you're starting out, you have to figure out:
"Who would you love to work for?"
What do you have a passion for? What do you have knowledge in? Think about: how can you actually help them out, and what are the results you can deliver to them?
Once you figure out the results that you can deliver to them, charge accordingly.
I always did a pricing model of 10X as a minimum. I would say, "If I'm going to deliver $100,000 of value in the next year to this client, I'm going to divide that by ten." I'll charge $10,000 in order to help them out.
It's all about knowing who you want to go after and what you need to be charging, what you want to be charging in order to hit your goals.
Figure out the rest from there.
Carmen: So, you weren't there for five years. How did you make that shift?
Jason: Oh, it was tough. I mean, when I started I didn't even know what an invoice was.
My first client asked me for an invoice and this was in 1999 so obviously there was no search engines or Google or any of that. You just kind of stumble around until you get to a point where you are so frustrated you're about to quit. You have to look at yourself:
"Do I go take a job? Do I just throw in the towel? Or do I try to get resourceful enough to figure out what I need to do?"
I got to a point where I was going to take a job with someone. I was going to take a job with the B2C node at NASCAR. They asked me two questions. They said, "What do you want to do every day, and what don't you ever want to do ever again?"
I thought about that question. I went back and I took a piece of 8.5 by 11" paper. I drew a circle about as big as my fist on the piece of paper. Everything within the circle, I wrote what I wanted to do. I wanted to keep it small and focused. Then all this stuff I didn't want to do anymore, I wrote on the outside of the circle. By doing that, I was able to figure out:
"Okay. This is what I want to do, this is what I don't want to do. This is what I need to delegate. This is what I need to use technology for. This is what I need to hire."
I came up with a plan in order to execute on that. That's how I got out of that mode.
Carmen: That's awesome. So okay. Maybe you've gone through this process and you decide later on that maybe you want to offer a new service, like, for example, Facebook marketing. What is your advice on what that process should look like?
Jason: Well, you have to have systems in place for the services you're now doing really well.
If you're still scattered, and you're not as profitable, and you have scope creep and profit leak, you're not ready to add another service yet.
Just because you add a service...a lot of people think, "I need to add a service so I can make more money."
No! You gotta make sure you're going to get more profitable on this one service, have the systems in place, and then you can build on that.
It's just like when people start out, they start out trying to help everybody. And I'm like, "You have to start with the smaller niche."
So think about Facebook. Facebook didn't come out trying to compete with MySpace. They didn't say, "Hey, we're the social network for everybody."
They said, "Hey, we're doing it just for Harvard students." Then Ivy League schools. Then it just kept getting bigger and bigger. They started adding features.
But you have to have that right foundation to build upon.
If you have a service on the side of a mountain and it's crumbling already, you pile more stuff on top of it, it's going to fall down. Especially if you take the time, build the right foundation, now you can add as many services as you want that are complementary to what your clients are needing.
Carmen: If you're an agency who is evaluating vendors, what would your best recommendation be? What kind of expectations would you have of a vendor? How important do you think it would be to white label vendor services?
Jason: You know I've gone round and round on this for many years.
It just depends on the particular service.
It's like when I try to outsource complicated things. I would give them detailed instructions. I'd say, oh, "Build me a peanut butter jelly sandwich."
Only these guys would say, "Okay, what do we do first?" And I'd say, "Put the peanut butter on the bread."
They'd literally take the jar of peanut butter and jelly and put it on the loaf of bread. I was like, "Dude, you have to take the bread out..."
I've always had challenges with outsourcing. I've always believed in doing it in-house, for the simple things.
For example, writing content, we use an outside provider. Or people who edit podcasts or video. Where you can follow a certain framework or follow instructions that works well, but I think the biggest thing is communication and understanding their process.
How are they going to comfortably communicate, who's on my team.
I think those are the most important things. But, everybody always struggles with it.
Carmen: That's fair. What would you say are the best places for agencies to look for new clients? Once they've gone through this process of deciding who they want to serve, how do they then go about connecting with these people?
Jason: Well, I think you have to first figure out who your niche is and where they are.
A lot of people say, "I want to go fishing, but I don't know what kind of fish I want to catch, so I'm just going to go to some kind of water." They go to this creek, looking for this huge sailfish, and I'm like, "Sailfishes are in the ocean."
Then they spend about a year there. And they're like, "Oh. Sailfishes are in the ocean."
So they get a boat, and they go to the ocean, and they're using the same bait that they used in the creek. Then they figure out, "Oh, I need the sailfish bait!" They get the right fish on the line, and they don't have the right fishing pole, so the fishing pole breaks.
You have to know who you're going after, fish where the fish are, use the right bait, use the right tackle. I'm not a very good fisherman, but I think that's a good analogy.
The right place is where whomever you're going after is. It could be at a conference. It could be on Facebook. It could be on LinkedIn.
Carmen: What would your advice be for an agency that's looking to scale up?
Jason: Whenever you want to scale up you have to set up the right systems. If you want to grow your agency, you really only have to do two things:
Either get more customers, or raise your prices.
That's really it. But in order to do that, you have to have the right systems in place. I've talked a little bit about the first system: clarity.
You have to know who you're going after, you have to know what they actually want, you have to know where you want to go. Then you can know what to say yes to and what to say no to.
Once you have that, you have to figure out the right positioning. "How do I position myself as the trusted advisor," rather than talk like every other agency out there.
Once you have that you can go to system 3, the offering. "What should I actually be charging? What's the right order of my services?" Rather than pitching marriage right off the bat.
Once you have that foundation, then you go to prospecting, sales, delivery, operations, and leadership. You have to have the right systems in place in order to scale. At every level. There's so many levels at agencies. You have to constantly reset and rebuild some of these systems.
Once you just say, "ooh, check the box, I've got Jason's Agency Playbook, check the box." No, no.
Once you get to the next level you have to go back and rethink everything.
Carmen: Can you give me an example of that rethinking process?
Jason: Well yeah. When we grew the agency to over a million. We were like, "Oh, cool, these systems are going to be in place forever."
But then when we got to thirteen million we were like, "Oh, crap, these systems don't work anymore. We have to have a structure for our team to be able to report to each other."
When we were at a million, we had one level of directors. But then when we got to thirteen million we had like four levels of directors. You have different structures within the company. We have an HR department.
We have to do a lot more communication because we have hundreds of employees. Versus ten. I don't know everybody.
Carmen: You're not just shouting across the office anymore.
Jason: That's right.
Carmen: You mentioned your playbook, and you offer that playbook, and your mentoring and mastermind services. Who is your ideal client on that front, and what are your solutions for them?
Jason: Agency owners that know they want to be further along than they actually are, and they actually want help.
They're anywhere from $500,000 in revenue all the way up to $20 million in revenue. We have three offerings for them. It just depends on what type of person they are.
Some people like to learn on their own. That's when I tell them, "Hey, go through the Agency Playbook online training."
Or sometimes owners want to know what other agency owners are doing and they want to be able to ask them questions. That's where the Mastermind group comes in.
For the select few that really want the private mentoring, I private mentor ten agencies at a time. I just want to keep it really simple and provide a resource I wish I had when I was running my agency.
Carmen: That's awesome; that's super-targeted. Just like you were talking about. So, what's your best prediction for what's ahead going into 2019? What's going to change for agencies?
Jason: Well, I did a survey to my list that I'll be publishing probably in the next month or two. It's about the future of agencies in 2019.
So we polled like 30,000 people that own agencies. Some of the trends I saw were: agencies, about 85% of the people we polled, believe they're delivering value to their clients. But the thing that really struck me is over 90% didn't know if their clients actually knew the value they were delivering to their clients.
And that's everything!
If you don't understand the value you're delivering to your clients, how do you know what to charge? How do you know if your client actually trusts you?
Your client just looks at you like a commodity if they're just looking at you like a commodity and they're just barking orders to you.
So in 2019 I really want agency owners to really focus on, "What's the value you deliver to your clients?"
If you can increase the value you deliver to your clients you can charge more. You can make more. If you demonstrate the value, now you're going to start to position yourself in a different light. Otherwise, when some other agency comes up and says, "ooh, how is your agency treating you," you're not going to hold on to your clients for very long.
So I really want to trend, to start a thing, "How do we know the value we deliver," and, "Do our clients know the value we deliver?" Because that was a shocking stat.
The other thing, people have a misconception on the net profit margin, on what a healthy net profit market is.
A lot of people think if we're at 20% or 15% that's good. That's horrible. The industry average for service-based companies is around 30% in the US.
So if you're at 20% I'd consider you to be low. Now for agencies, that might be average. But all the agencies I've ever had work with us, they can maintain over a 30% - 40% profit margin.
Even when we were at 13 million in revenue our net profit margin was over 45%.
So I just want to show people, the bigger you get doesn't mean you have to reduce your profit margin.
Carmen: Stepping back just a second. If the agency doesn't know the value they're providing to their clients, how do they find that out? What detective work do they have to put in?
Jason: Well they gotta ask the right questions. It depends on what type of agency they are.
If they're a Facebook agency doing pay-per-click, they gotta go, "How much is a lead worth?"
And then out of how many leads does it take to convert to a sale? How much is a sale worth? What's the lifetime value of a sale?
Figure that out. Figure out the ROI. Then they can start having the client determine the value they do. That's the most important thing.
You can't tell someone, "I'm valuable to you." But if I can ask the right question to get them to determine my value to them, I'm going to win, and they're going to win.
Carmen: Perfect! Well, thank you so much. I really appreciate your time today, and I appreciate your insights.
Jason: Sure, definitely. It was great chatting with you.