The 4 Ps of Sustained Agency Growth and Profitability


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John McTigue presents his vision and experiences on inbound marketing agency growth and profitability at the HubSpot Inbound 2012 User Conference.

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  • How many of you represent or own an inbound marketing agency – or something like that?How many of you are profitable? Ok that’s pretty good.How many of you are both growing and profitable?Depends on which month you’re talking about, right?Well, today I’m going to share some war stories and offer a few suggestions that might help, since my Partner Chris and I have made every mistake in the book, but somehow we have finally found ourselves seeing some daylight.
  • How many of you represent or own an inbound marketing agency – or something like that?How many of you are profitable? Ok that’s pretty good.How many of you are both growing and profitable?Depends on which month you’re talking about, right?Well, today I’m going to share some war stories and offer a few suggestions that might help, since my Partner Chris and I have made every mistake in the book, but somehow we have finally found ourselves seeing some daylight.
  • This is what happens to the hair of an inbound marketing agency owner after a few years in the trenches. And, as you can see today, I’ve finally given up and now I’m trying not to grow hair. That’s actually very relevant to my comments today.
  • In the immortal words of Donna Summer, you work hard for the money, but they never treat you right.It’s true isn’t it. I’m going to do a lot of talking about clients here in my Defense Against the Dark Arts lecture, so if you are a client, please listen up. Maybe there’s hope for you too.For those of you who are new to the biz, I’ll offer a great resource.Then we’re going to dive into to the Power of Process, the engine that drives everything we do.Once we understand what the hell we’re doing, we’ll figure out how to get people to pay for it.Next, we will delve into the ugly science of proposal making and offer up a few been there done that’s.Then we’ll talk about Planning. You might think this should go first, but you would be wrong about that.Finally, I’m going to cheat and add another “P” that’s top secret even from my Partner.
  • If you’re a relatively new inbound marketing agency, much of what I’m talking about today may sound more like bitching and moaning than anything else. If you really want to know how to get your agency off the ground, go read Paul Roetzer’s book, The Marketing Agency Blueprint. It’s a great read and isn’t nearly as cynical and rude as I am.Paul you can send my check to the Avon office on Monday.
  • The word “process” is so overused, it makes my head hurt, but it’s crucial to everything we do. Bottom line, if you don’t know what to do and how to do it and when to do it, you can’t make money.I’m going to break process down into 2 parts, Sales and Execution. If you don’t know how to sell, there’s no point in worrying about execution, so Sales is absolutely numerouno in the Process pecking order.You have to know what you sell, how much it costs you, how long it takes to deliver and how much profit you want to make.Then there are the mystical intangibles that we often forget about – like who do you want to work with, how do you find them, and how do you sell to them? Just do inbound marketing, and everything will come out in the wash – right Patrick? Of course – that’s why we’re all here.OK, let’s break sales down into a process.
  • What do you offer? Pretty important question – that drives your manpower decisions, pricing, competition, markets etc. Are you going to be an all-in-one marketing agency or a boutique shop?Are you going to serve one industry or region or try to conquer the world? These are the kinds of questions that my partner Chris and I awake at night and often several drinks to resolve. To this day, we are still evolving on this question, but I think that’s because we like the decision making process so much. Just to give you a little background, we started twelve years ago as a small marketing agency focused on brand and print in Northeastern Ohio. When I joined, we were adding websites to the mix and that got us over a few state borders. A few years later we caught a small wave called inbound marketing and parlayed that into both a national and international presence. Now we’re doing Enterprise Inbound Marketing, and if you have to ask me what that is, you can’t afford us.You might think we started with a small niche and grew that, but you would be wrong about that. We’ve actually narrowed our focus every year. We started by offering all the groceries, and now we’re just selling extra premium Black Angus steaks.
  • Here’s another way to look at the grocery aisle. There’s a lot to do in our business. The question is what do your customers want? A better question ask is what do they really need? Just looking at this list, you probably need at least one expert and one supporting person for each of these disciplines, so you’re looking at a 40 person agency to even get started doing all of these things. But is it even necessary?
  • According to an RSW US survey done earlier this year, over 80% of companies that hire marketing agencies rate industry or sector focus as an important or very important factor.
  • Going back to the grocery aisle analogy, are you going to try to offer your services to many industries? Might work well for those industries in which you have experience, but what about the others? How will you sell to them with little track record? It’s very tough to do that when clients usually go for the industry niche players.
  • When it comes to other decision factors, companies look for agency specialty and body of work in an industry as well as recommendations by their colleagues and timeliness of response.
  • In fact, over 43% of those surveyed choose an agency based on specialty.
  • And another 41% are more likely to choose your agency based on timely response to their inquiries. So what’s it going to be? Are you going to attempt to sell the entire store or a tightly focused set of services that meet your clients needs exactly?I can tell you from our own experience, we used to try to sell the whole store. Strategy, design, print and web, inbound, outbound, you name it. That made it very hard to figure out what to propose to a client and harder still to win deals that were reasonably priced.Even worse, taking the Walmart approach made it very difficult to plan for staffing, provide training and keep our internal teams focused on the task at hand. So that’s why we have worked hard to narrow our offerings down to what we know and what we do best. The rest we refer to other providers. We may lose some business that way, but the business we get is a good fit with a high chance of success and recurring revenues.
  • Now that we know what to sell, how do we sell?Like most of you we embrace the inbound marketing sales funnel approach in which we draw in leads with top of the funnel content, nurture them to build relationships and reinforce message and convert them to sales with ongoing content and communication.What we’ve learned over the years is that you have to think hard about who you want to work with as a client. We’ve gotten lots of leads with our top funnel strategy of creating helpful cheatsheets, videos and webinars, but the large majority of our leads have been people who are just getting started or learning more about inbound marketing. We would nurture them with case studies, white papers and case studies. As predicted, a good number would contact us for sales consultations. All good right?No, not really. We would get a lot of people asking us for website designs or social media campaigns for $5000 or less. What did we want? Relatively sophisticated buyers with aggressive goals for marketing and budgets to back those goals, in other words companies that understood the value of inbound marketing and could afford our retainers priced at well over $5000 per month.So, we wasted a lot of time on sales calls with people who were never going to be our clients in the first place.Lesson learned: Now that you know what you sell, figure out who your clients are, and tailor your content marketing strategy to appeal to those people.
  • OK, let’s assume now that you have the sales funnel piece worked out. What’s next?We may be getting more qualified leads now but turning them into valuable retainer clients is an artform in itself.We enrolled most of our client-facing people in the Kurlan sales course with Rick Roberge and Frank Belzer, and those guys taught us a lot about the dynamics of sales.On a typical sales call, we used to introduce our company and services, then jump into a Powerpoint to convince the potential buyers and we would end up agreeing to send them a proposal. Then the line went dead and we never heard from them again or got a short rejection email.Now, we don’t do that. We first find out if there’s any reason to continue the conversation beyond “hello”. That means finding out why they contacted us and listening for deal killers. I’ll give you a common example. “We’re contacting several agencies about redesigning our website.” Deal killer #1 – we don’t want to waste a bunch of time on beauty contests. #2, we want services retainers not web design projects. At this point I’m letting them know what we really do and seeing if that’s what they want. Exit call in 30 seconds.A good call might go something like…“Hi John, we’ve been reading your blogs and website content and wanted to find out more about your monthly services.” They did their homework, know what we do and are generally tuned in…” Check, check, check. OK, let’s continue the call.Next we qualify them further on pain points, history and budget. Assuming there’s a fit, we go to step 3. Here’s how we will solve your pain points and why we’re the best solution out there. Here’s what we will deliver and how much it costs.If they’re still listening, we close. Review the pain points and solutions. Review the deal points and next steps. Then we ask for the sale.We’re still in the first conversation, there has been no Powerpoint and no Proposal. If we’re agreed on the deal points, we can take it to the next step which might include a proposal, or if necessary a presentation if absolutely necessary.Of source, we document everything in Salesforce and make sure any follow ups are scheduled.Since we started using this sales process we have been very successful at closing deals with highly qualified clients and wasting less time on bad clients. It took us a long time to get here, and we kissed a bunch of frogs along the way, but now we’re confident that we have this thing down.
  • Now that we have a sale, we need to execute. The keys to successful retainer execution are knowing where to start, where to end, each step along the way and measuring how well you’re doing at each step. To be a successful company, you have to be able to reproduce the process consistently and scale it to meet new demands. This involves process assessment, continuous improvement and training to keep your people up to speed and grow to meet demand.
  • It’s a good idea to map out who’s going to do what and when.So here you see a typical retainer process staffed by a team of experts at the senior strategic level, creating content, generating demand, converting leads and analyzing results.Each step has distinct deliverables, timing and tools.Once you get these down, you can start figuring how much manpower it takes to do each step, scale those deliverables to meet client goals and figure out pricing, which we’ll talk about in a minute. It’s taken us a lot of trial and error to fine tune our execution process, and we’re still refining it.
  • You can’t execute unless everybody knows what they supposed to be doing. As Jack Welch, former Chairman of GE once said, “An organization's ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage”.To do that you have to institutionalize learning. What do you do to get new employees up to speed or help your veterans stay current in this fast paced industry?You can’t just say, “go visit HubSpot and learn about inbound marketing”. Surely that will help, but it doesn’t provide context for your style of inbound marketing or knowledge from your experiences with clients.We think training is critical to our success, so we have invested time and resources in building in-house videos and formal courses on our various processes using a learning management system – everything from holding meetings to creating lead nurturing campaigns in HubSpot. We require all of our employees to complete these courses and we often share them with our clients.Our learning process has already paid huge dividends including making us leaner, more efficient and more profitable.Now we are even learning from our clients and are working on implementing a Continuous Improvement process along the lines of Toyota’s kaizen workshops to help us operate even more effectively.
  • One of the most common threads in the agency forums is the uncertainty about pricing.We charge a lot for our services, and we even post our prices on our website. A lot of people think we’re nuts.Let’s take these one a time.Our prices are based on the processes we’ve just discussed. First, we know what it takes to deliver what we promise during the sales process. We have broken execution down into its components, and we know how much manpower, direct costs and overhead are involved. We have a profit margin in mind based on our company plan, which I’ll get to shortly. So – we know how much we need to charge to be both effective and profitable.We also know that we have competitors, and they may charge a flat rate for everything or charge by the hour. We don’t do that, and I’ll tell you why.
  • We just do monthly retainers now based on client goals and the level of effort we know is needed to meet them.We don’t do one-size-fits all turnkey pricing, because there are always exceptions and additional needs. If you just say you’re doing 2 blog posts a week and an hour or two of tweeting, what happens when your client asks for a brochure or a tradeshow banner? What if they have a new product release coming up, and you need to ramp up the effort to get the word out? Did your proposal or contract cover those exceptions, and does the client understand that it will cost more?We also don’t do projects, like websites, with a payment up front and one upon completion.The problem is that the website is never done. The client is constantly asking for revisions or changing content prior to launch. Again, you have to cover these contingencies in the contract and hold your clients to them, or you will never be profitable.We also don’t do consulting or anything else on an hourly basis mostly because it takes our key people away from more profitable retainers. Hourly pricing also opens the door for clients insisting on a daily accounting and questioning everything you do. No, we don’t do that either.
  • So here’s our pricing on our website. We have 3 basic levels, Basic Professional and Enterprise, just like HubSpot. Odd coincidence wouldn’t you say? These levels are treated as guidelines, not turnkey packages, so we always work through this schedule with prospective clients during sales calls and identify what they need before settling on a solution. It helps them to understand the deliverables, results and costs associated with their needs. You can see all of this on our website under inbound marketing pricing.What’s the purpose of doing this online and in public? Well, it helps to explain our pricing and get people comfortable with the levels of effort needed in each component of inbound marketing.Second, it helps leads pre-qualify themselves based on budget. When we get a lead that appears to be off target or unqualified, we will often send them here to see if they survive the sticker shock.This all goes back to knowing who you want to work with and tailoring your services and pricing message to fit them and exclude others.
  • So, the bottom line on pricing is:First, getting the deal points down in the first conversation. An online pricing page helps a lot here.Once that’s done, you create a proposal that reflects the deal points and pricing.Either your proposal is a contract or you have a Statement of Work that includes all the details, including all contingencies for additional time and work as needed.Make sure you have a Term so either you or your client can bail out if things go south.Make sure you have legal Terms detailed out.Make sure you review the Proposal/SOW in the first meeting to make sure there aren’t any surprises as you move forward.
  • The second thing I see a lot of discussion about is the Proposal.A Proposal can be your best friend or your worst enemy.Best friend if you nailed the scope, the pricing, the budget and expectationsWorst enemy if you don’t do any of those things.The most common pitfalls are:First, you deliver your proposal too soon. You haven’t had the in-depth conversation to understand goals, metrics and history. You don’t even know if the prospect is qualified. You haven’t discussed the scope, deal points and pricing. What if your proposal is way off and it gets accepted? You spend the entire engagement fighting over language and scope, and you invariably end up on the losing end.Bottom line – don’t send a proposal until the deal is done in principal. Don’t sell with your proposal. Sell first, then send a proposal that reflects the deal exactly.People always ask for proposals up front. Why? Because their kicking tires. They want to see how much this stuff costs. They want to line you up against the other Hubpot Partners and haggle over price and scope. So you waste your time putting a proposal together and there’s no indication of how they will evaluate you and when they make a decision. You need to get that intel first as well.
  • And don’t get me started with RFP’s.My advice – politely decline them, all of them.Why?Because RFP’s are backwards. Clients don’t know what they need. That’s why they’re reaching out to you.The other thing is that companies spend tons of time and effort on RFP’s, and they’re loaded with siloed interests. The IT depratment is just waiting to get their hands on your proposal and rip it to shreds. As they say in New York, “forget about it…” It can take many hours, even days to prepare an RFP response, and then what? They go through some crowdsourcing and ultimately the decision comes down to politics. Trust me, your time is better spent doing something else.
  • So the bottom line on proposals is to make them air tight for deliverables and additional services and fees. If you take nothing else away from this talk, do that. Make sure you can do what you say you’re going to do – people, skill sets, time etc. Raise your hand if you’re not always sure how you’re going to do that…Make them real contracts that your brother in law the lawyer would be happy with.
  • Now, you might think that Planning should have been the first P in my talk today.Well sure, but how can you create a plan that doesn’t include your process, pricing and proposals? So I’m right to make it last.Planning is important because of the original 7 P’s:Proper Planning and Preparation Prevents Piss Poor PerformanceIf you want to be profitable and grow your company, you need a realistic but dynamic plan, and you need to measure your progress against it.My Partner Chris is a real numbers junkie, and thank God he is because I’m not. I’m the guy who dreams up schemes that can easily make us go bankrupt. So Chris has multiple speadsheets that track everything we do and forecast ahead so that we can hire people and not lose our shirts.
  • What are the different kinds of planning?Well for each retainer you need a plan. We develop these with our clients, then ignore all of their suggestions and work the Plan.
  • There’s also Resource Planning.The most important decisions you make are about hiring and firing. They’re also the most agonizing decisions, so you need a plan to figure out who fits into your company culture and can withstand all the crap you throw at them every day.Even though we live and work in separate states, Chris and I are on the phone every day talking about personnel and priorities. Face it, as your company grows this stuff will consume you, so either hire an HR person or get over it.
  • Last but not least are the fun conversations.What do you want to be when you grow up? Do you want to dominate your space and become a big agency? Do you want to grow slowly and lead a balanced life. Or do you want to work 14 hours a day and burn out by the time your my age? Your choice.How are you going to get there? Who’s going to throw money at you because they believe in what you’re doing?These are all important questions that deserve only the finest adult beverages before consideration.
  • So who’s going to do all of the Planning and Process building and Pricing and Proposals? You? How many cowboy hats can you wear at one time? Well you can’t do everything yourself and do everything well.That’s why if you’re lucky enough to find a good partner, that’s the most important P.Chris and I have been working together for almost 10 years now. I’m the wily veteran guy on the right and Chris is the young gunslinger on the left. Some of you who know us might say that’s backwards, it’s the old gunslinger and the young guy who calmly keeps them out of jail.My point is, if there’s anything that has gotten Kuno as far as we have, it’s that trust we have and sharing of both good and bad on a daily basis. We’ve mae=de a lot of mistakes, but we’ve learned from them, and we hope you will too.
  • So to pull an old line from HubSpot TV…What’s the Marketing Takeaway?Well, first figure out who you are and what you sell.Figure out how to do everything, involve your people in defining your processes, and pass them on to your new people. Keep coming back to those processes and make them better on a regular basis.Now you’re in a strong position to dictate price and win yourself some great clients.This solid foundation will make you profitable in the long run and allow you to grow without selling the farm to do so..Finally, if you can find a good partner, that’s the best investment you’ll ever make.
  • The 4 Ps of Sustained Agency Growth and Profitability

    1. 1. The 4 P’s of Sustained Agency Growth & Profitability PROCESS, PRICING, PROPOSAL & PLANNING HUBSPO T VAR TRACK
    2. 2. The 4 P’s of Sustained Agency Growth & Profitability PROCESS, PRICING, PROPOSAL & PLANNING HUBSPO T VAR TRACK
    3. 3. JOHN McTIGUE EVP and Co-Owner @jmctigue
    4. 4. YOU WORK HARD FOR YOUR MONEY • Nuts & Bolts for New VARs • The Power of Process • The Art of Pricing • The Science of Proposals • The Purpose of Planning • The 5th P • That’s a wrap …But they never treat you right
    5. 5. NUTS & BOLTS For New VARs
    6. 6. THE POWER OF PROCESS • Knowing what you offer • Knowing what it costs you • Knowing how long it takes • Knowing how to price • Knowing how to sell SALES
    7. 7. WHAT DO YOU OFFER?
    8. 8. INBOUND WHAT DO YOU OFFER? • Strategy/Consulting • PR/Press Releases • Collateral Copy/Design • Direct Mail • Telemarketing • TV/Radio • Online Ads • Print/Outdoor Ads • Mobile Marketing OUTBOUND • Strategy/Consulting • Content Creation & Design • SEO/SEM • Social Media Marketing • Lead Generation • Lead Nurturing • Email Marketing • Web Design/Development • CRM Integration/App Dev • Analytics/Reporting
    9. 9. Ad Agency Evaluation Criteria (January 2012) HOW DO YOU GET THE DEAL? 10 9 8 7 6 5 4 3 2 1 20% 20% 14% 20% 10% 7% 1% 1% 3% 3% How important is it that an agency be focused on a specific sector?10 = Very Important 1 = Not at all Important Source: MARKETINGCHARTS.COM
    10. 10. 80% Of marketers are more likely to choose an agency focused on a specific sector. OVER Source: RSW/US
    11. 11. When deciding on a new agency, which factors most influenced your choice? HOW DO YOU GET THE DEAL? 27%Other, please specify Agency specialty Awards won Quality and quantity of website Search engine results Searches on marketing websites General, unspecified awareness Recommendation from another agency Industry trade body Recommendation from colleague Timely response by agency Introductory service 43% 10% 29% 6% 13% 21% 12% 10% 38% 36% 41% 10% Source: RSW/US
    12. 12. 43% Of marketers are more likely to choose an agency based on specialty.Source: RSW/US
    13. 13. 41% Of marketers are more likely to choose based on timely response from agency.Source: RSW/US
    15. 15. SALES PROCESS PART 2 CLIENT QUALIFICATIONPURPOSE • Why are we talking? • Should we continue? • Goals/Needs/Pain Points • History/Knowledge • Budget/Plans AGENCY SOLUTIONSALES CLOSE DOCUMENT & FOLLOW-UP • How we will solve client problem • Why we are the best solution • Cost, deliverables, timeframe • Review solution • Review costs • Ask for the sale, if yes -> PROPOSAL • Log calls & emails • Status updates (scoring) • Close or return to funnel
    16. 16. • Knowing where to start • Knowing where to end • Knowing each step • Verifying/measuring progress • Assessing results • Maintaining consistency • Training new people EXECUTION THE POWER OF PROCESS
    17. 17. EXECUTION PROCESS Strategy (Senior Consultant) Content (Sr. Cons., Content Mgr, Blogger, Designer) Promotion (Sr. Cons., Consultant) Conversion (Sr. Cons., EDC) Analysis (Team) • Goals • Persona • Branding • Message • Collaboration • Web • Blog • Advanced • Social • Social • PPC • Email • Outbound • CTAs • Landing Pages • Lead Nurturing • AMA • Weekly • Quarterly • Trends • Advice • Collaboration STRATEGIC PLAN CONTENT CALENDAR HUBSPOT, HOOTSUITE, ETC HUBSPOT ENTERPRISE HUBSPOT, GOOGLE AN. ETC.B A S E C A M P
    19. 19. THE ART OF PRICING • What are your deliverables? • What is your cost per deliverable? • What is your planned profit? • Competitive factors • Other pricing models  Manpower  Direct costs  Overhead
    20. 20. THE PITFALLS OF PRICING • Turnkey pricing • Deliverables pricing • Low cost “consulting” packages • Hourly pricing – transparency, accuracy, value?  When is it “done”  How many revisions? Cost for more…  Need clear language for additions/exceptions
    22. 22. THE SCIENCE OF PRICING • The deal is already discussed and agreed to • The Proposal reflects the deal • The Proposal is a contract (?) • The Proposal has a term • The Proposal has terms • Discuss the Proposal in the 1st meeting
    23. 23. THE PITFALLS OF PROPOSALS • Too Soon  Lack of understanding of goals, metrics, history  Lack of qualification information  Lack of discussion and deal points  What if the proposal gets accepted? • Too Risky  Kicking Tires  Beauty Contest  Criteria for acceptance unknown
    24. 24. THE PROBLEM WITH RFPs • Backwards Process  Client thinks they know what they need  Client doesn’t have any idea what they need • Client Investment in RFP  Time/Resources already spent  Crowd sourcing, siloed interests • Agency Investment in RFP Time/Resources to prepare  Beauty contest based on unknown criteria
    25. 25. PROPOSAL MUST-HAVES • Air-tight Scope  Deliverables  Clear process for beyond-scope services  3rd party costs and payment responsibility • Resources  Who’s assigned (?) Roles (?) Commitment (?) • Term & Termination • Pricing & Payment Terms • Confidentiality etc.
    26. 26. Proper Planning and Preparation Prevents Piss Poor Performance
    30. 30. The 5th P… PARTNERSHIP
    31. 31. SUMMARY • Decide what you offer • Figure out the Perfect Process • Price accordingly to Process + Profit • Proposals only when ready & qualified • Planning is the key to Profitability • The 5th P keeps you Sane