I Made These 3 Enormous Mistakes - so you don't have to...

I've been telling people that I run an "accidental agency" for years. This sentiment is the likely root of the gigantic blindspots that led to the recent (and heartbreaking) downsizing of my already small team. As the person behind an "accidental agency," I gave myself permission to think like a consultant or someone just passing through. Not the best approach when people are counting on you.

However, in March (2.25yrs into the business) I suddenly had this nagging feeling that I needed to change my attitude and approach...PRONTO or else everything would fall apart. I had an inkling of what I needed to do, but at that point, I was already working 300 hours/month and falling terribly behind. Instead of reaching out for help, I did something that made it worse. I hired someone internally to "fix" this (who wasn't really the right person...not his fault) and took my eye off of the issues.

Turns out that my instincts were good (even if my reaction sucked). In late May, a major client relationship went sideways (our contact left, who was also our champion) and I knew it was just a matter of time until we would lose the business. We had some strong leads, but there was no guarantee that they would come through fast enough.

Of course, a well-run agency with efficient processes, tight time tracking and decent margins could weather that gap. We were not that agency. Six weeks later, the plug was pulled and, with it, our entire runway.

Remember that whole "accidental" thing? It was hella fun to work at Truly Social and, sure, we tracked our time, but we had been doing several risky things for a long time that put us in a horrifically vulnerable position. Finding out that some of these mistakes are quite common (conversations I've had since), I thought I'd share them with you.

ENORMOUS MISTAKE #1: OVER-SERVICING CLIENTS

I'm a people pleaser. It's a terrible trait for me to have personally, but it's much, much worse for me to have brought into my business. My desire to over-deliver is also compounded by the industry we operate within. Marketing has been squeezed for years and social media? People still think it's free and about tweeting stuff a few times a day. So, not only do I over-deliver to compensate for my nagging self-doubt, I also over-deliver to help change people's perception of an entire industry (that perception pretty bad thanks to "gurus" and agencies that have been charging enormous fees to actually just tweet about stuff a few times a day).

I would get an inbound lead and reply, asking what they want me to help them with. More often than not, they wanted to do pretty much everything and get epic results, but their budget? It was nothing (even in cases where I could see that they were spending hundreds of thousands on FB ads - they didn't want to invest more than a couple dollars on the content). Instead of saying, "that's not realistic," I would think to myself:

"That's okay. I'll take the smaller contract because, once they see how much more value we bring, they are sure to understand and pay what it actually costs. It's an investment in a longer-term relationship!"

I know. I can see your reaction right now:

You would think that, after 18+ years of this, I would have learned my lesson. Turns out I needed to learn it a few more times. Hope springs eternal over here.

2+ years of over-servicing later, I had no margins (please don't make me tell you), a ballooned staff of more over-servicers (I trained them well...ugh), no money saved for a rainy day, and those clients I was "investing" in? When I sent them new estimates with actual hours, they left (or reduced their contracts). Didn't want to pay so much. Decided to build an in-house team (I have another post about that later). So...

LESSON #1: Estimate as accurately as humanly possible (time sheets are your friend), put in clearly defined boundaries (don't cross them), communicate allotted hours to your team, have them track closely and note anything that would change those hours. The minute that those hours seem "off," it's time for a conversation with the client. If they don't work with you on this, THEY WILL NEVER VALUE YOU. So sad. But totally true. 

ENORMOUS MISTAKE #2: IMPROPER VETTING OF CLIENTS

I have a growing list of red flags that has turned into an epic 16-page client intake assessment form. I plan to use at least part of that form to identify the delusional and time-wasters. Another part of that form is something I'll use in an exploratory meeting to get a sense of what we're working with - are they looking for a saviour? or a solid social strategy and team to help you implement it? (the pricing is vastly different)

Our ultimate undoing of late was my failure to see how impossible it was going to be to achieve success with the client who recently left. The mandate was more than fuzzy. The goals were non-existent. The barriers to information and answers and timelines and anything else that could have helped us help them were enormous. All of this while the expectations were insanely high. I looked at this project on the outset and, instead of saying, "Let's talk when you are further along and have more to work with," I said:

"This sounds like a cool challenge! Let's do this!"

I know, I know, I know:

Frickin awful lesson to learn. Amazing, talented people who ran around like chickens, bending over backwards to figure out how to help this client (and whose advice was dismissed), were let go because the sudden exodus of this doomed project left TSI with too many employees and not enough work/income. The worst part of it is, though we had a healthy contract with them, we also over-serviced in a big way. Well, there goes that "investment". So...

Lesson #2: Don't take on a project that is set up for failure. You are not a saviour, you're a frickin marketer. Make certain the mandate is clear, the goals are defined, and the project will be as successful as possible.

ENORMOUS MISTAKE #3: UNDERCHARGING

I talked a little bit about trying to price hours and services and all of the things that cost an agency money that you have to take into account. Well, back to that whole "accidental agency" thing...when I started out doing Truly Social, it was just me. I was working from my home office and didn't really have much overhead. So, I looked at the market and looked at my expenses and said, "I think this would be a good rate to charge."

Now, I've been working in marketing for over 18 years. I have been on agency and client side. I've built and raised money for a startup. I know the entire spectrum of marketing disciplines and have a good level of experience in each: brand, advertising, direct, PR, mobile, digital, search, communications, design, content, affiliate, social, influencer, loyalty. I know how to calculate customer lifetime value (CLV) and average revenue per user (ARPU) and cost per acquisition (CPA) and, because I've seen the numbers across industries and around the world, I have a good sense of what they should be. I write, design, shoot, and edit. I have advanced knowledge of analytics, insights, and research tools. Everyone I hire, I mentor and train to do this stuff (and oversee all projects + am hands on with all strategies). I'll stop there, but all of this is to say: you hire us? You get crazy value for your money.

So...what was that rate? $150/hr. (And my staff? $75/hr).

Yeah. Those are freelancer rates. Freelancer working out of the home office with no overhead rates. What's worse is that >10 years ago while running our digital/social agency in San Francisco (and with much less experience), we charged $250/hr. Successfully. What gives?

I'm not going to justify it. Instead, here are some average agency billing rates I came across from 2016:

Yes, the rates are going down (the industry is being hacked away at) and in Canada, this would be high, but still. That's a big delta between the executives over there and my $150/hr. I'm undercharging by a lot and I'm also undercharging for my team. If I was still one person working out of my home office without any overhead, maybe I could justify it, but I'm not and we have loads of overhead. But it's not just about looking at a fee table or thinking about "worth" subjectively. It really comes down to practicality.

When I sat down and actually calculated what each person "costs" me (their salary + taxes + benefits + office space + equipment + software + a lot of other things that you pay for when you leave the comfort of your home office), I cried. (yes, this should have been done a long time ago)

For instance, someone who gets paid $42,000/yr (and that's what an account coordinator costs in Toronto) costs the company upwards $60,000/yr (or ~$50/hr). Bill them out at $75/hr? That's not a great margin. That doesn't account for low utilization, holidays, sick days, training time, etc etc.

The math says that - making $25/hr for each billable hour, while over-servicing and stressing ourselves out over projects that we're set up to fail on - equals ticking time bomb. So:

Lesson #3: Don't discount your time. Research market rates. Calculate what that employee (and your time) really costs. Once again, if the client doesn't think you are worth it, they never will.

HOW THE HELL DID I EVEN GET THIS FAR?!?

I'm sure you're wondering this, too.

As I added everything up and started putting together the spreadsheets and crunching the numbers and going back through everything, I just kept thinking that I'm pretty lucky that we're not in WORSE shape.

We have no debt. Now that we've cut a bunch of expenses (by the end of this month, there will be 4 fewer team members - this is heartbreaking - and we've stopped paying ourselves for the time being), we have some breathing room. We're using this time to get creative with cost cutting (our lovely office is in a great location - perfect for sharing with another small team, no?) and update our website so people will know the great work we do (don't look now...it's very vague). We have some promising irons in the fire and more strong prospects coming in. We've taken on a few smaller projects that will help extend things. We just found out we won a prestigious award for our work that we will show off soon! We're not out of hot water, but it could be a lot worse (knocking on wood right now).

A friend asked me this the other day:

"Is it worth it? Why not just go back to consulting from the home office?"

That would be the less stressful, easy peasy, uncomplicated thing to do, I suppose...if you don't count the carnage in between now and then, which I do. But even if that was an option that had a low impact on others, it wouldn't be my first choice.

I think it is totally worth it.

Sure, it's painful and stressful and I feel quite incredibly out of my depth pretty much every day. But then there are these little victories that pop up to remind me that:

A. Every failure is an opportunity to learn. I may be masochistic, but I feel like this is making me stronger. Smarter. Every time I figure something out these days, I feel a sense of accomplishment. I also feel like this f*%k up is going to make Truly Social stronger. Smarter. More agile. (but we need to get through this first!)

B. We're doing great work. The results are coming in. We are building something here. I'm not doing this to get rich (thank gawd, that would be depressing!). I'm not doing this because I'm all about agency life. I made a decision to keep moving forward and to take on this role as an agency owner so I could continue to scale the work want to do. The time is right:

The hype is over and the "gurus" have moved onto cryptocurrency and Blockchain. It's time to show the true potential of social .

It's time to show that social isn't about "posting to Twitter and Facebook," but about approaching marketing (and more) through a social lens. We're already demonstrating that it isn't about vanity metrics, it's about results. But not because we're interrupting people. It's because we help our clients know their audience, then we help them provide value to that audience and that helps drive real results. (more on this at a later date)

C. I should really listen to my instincts. They are really keen. And my instincts right now? They say keep going. They say:

"You've built a really great team of talented people who believe in what you're doing. You have great clients who found you because they believed in what you're doing. Now... it's time for you to believe in what you're doing."

I've internalized so much self-doubt over the years that I didn't even realize that I was building it into the fabric of my company.

Of all of the lessons that I wanted to share, this one is the biggest one. It sounds trite to say it and, in the moment, it's super scary to act on it, but if any business, agency or otherwise is going to survive (well, until the robots take over), we need to learn how to say this:

" No. I will not work on this project for you because you don't seem to value my time or my experience. "

I hope this helps others who may be struggling with similar issues.

It's been one helluva crash course MBA. I'll be back with more.