#2: Blueprints of an Agency's Birth

My personal reflection on the contrasting paths agency founders take, and how these initial steps shape the journey towards scalability and success.

Here is the Newsletter #1 The Agency Genesis if you missed it.

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There are mainly two types of agency founders.

The first type has experience working in another service company before, let’s say an Account Manager at Belkins, engaging with agency’s clients, and then decides to step out and start their own venture, often bringing some clients along.

The second type starts off with freelance or consulting work but aspires for more — more income, more projects, which gradually transitions from a solo venture to a small boutique agency.

I have a soft spot for the latter, who test their skills with consulting work and then aim to scale. These are the best new agencies who can actually deliver. They are born out of ambition.

Going back to the first type of founders, we had a couple of instances at Belkins where individuals who worked with us launched a competing company soon after parting ways. However, to the best of my knowledge, they didn’t snatch our clients. It boils down to this -

If a client can be easily taken away, it often means they are merely outsourcing tasks to you and don’t see your agency as a valuable partner. The value, in their eyes, lies in the person who moved with them. Perhaps, in such scenarios, it’s a situation that works out for the best?

An agency is synonymous with the solution it offers. It's not only about people but encompasses the processes, technology, frameworks, insights, playbooks, and other assets your agency possesses.

As your agency grows, ensure you are also amplifying these valuable assets.

Now, back to the two types of founders - Type 1: Start with a client, carve my own path, and Type 2: Begin with freelance gigs, then scale progressively.

Typically, agencies of the Type 1 initiate with a stronger foundation, often having several clients, employees, and resources at their disposal right from the outset. They might earn more, but progressively it can change.

Here’s a point worth noting:

Although these agencies have the advantage of starting with certain advantages (clients, materials, tools, processes) already in place, keeping the growth going tends to be a challenge. The main issue is -

there's a big difference between copying something and actually creating it yourself.

At Belkins, we’ve always been open about how we do things—the how, what, and why of our actions. The main reason is we never worried that sharing our methods could put us at a disadvantage.

In the service industry, it's all about how well you execute, not about keeping secrets.

I don’t really believe in competing over ideas or knowledge. Instead, I think the real competition is for people and clients.

The winner in this game is the one who brings together a great team and delivers excellent service. Many agencies miss this point, focusing more on tools, automation, and playbooks, and forgetting about the crucial role of people.

The result?

A high churn rate, showing a shift away from what really matters for sustainable growth and client satisfaction.

Everything boils down to a simple fact: both people and assets are vital.

If the focus is solely on people, clients might not see the additional value and might view it as mere outsourcing.

Conversely, if the emphasis is only on add-ons and automation, sidelining the human aspect, a high churn rate and subpar service are almost guaranteed.

Luckily, Belkins was able to succeed in both.

The founder in Type 2 (begin with freelance gigs, then scale progressively) primarily services 2-3 clients and earns more at the beginning but less later on.

The challenge with Type 2 agencies arises from the comfort and liberty the founder enjoys while managing the first couple of clients almost single-handedly.

The attractive pay, flexible schedule, the freedom to travel, and spend time with family could make the prospect of diving into the demanding hustle of scaling up less appealing for many.

A whopping 80% might shy away from trading this comfort for the initially less lucrative, more demanding phase of scaling up.

However, without taking this step, evolving into THE agency remains a far-fetched dream. The dynamics of managing 1, 10, 100, or 1,000 ongoing clients are entirely different.

From what I've seen, The Real Deal in agency life begins to surface once you cross the 100-ongoing-clients threshold.

Reflecting on Belkins’ early days, while we didn’t transition with clients from our previous jobs, my partner and I found ourselves in a tight spot. We, along with a few colleagues, were let go, and since their lay-off was somewhat linked to us, we felt responsible for 5-6 individuals but had no clients at the time. This situation was a crash course in understanding the essence of scalability. When you have individuals relying on you to provide for them, securing a steady stream of clients becomes imperative. For us, scaling was not a matter of 'if,' but 'when' and 'how.'

The Secret Agency Formula

Don’t tell anyone. I’m sharing my secret formula.

You have a client with specific pains and a budget, paired with a service provider (your agency) that offers a solution with associated costs, resulting in a certain Return on Investment (ROI). If the ROI is positive, it’s a win-win. If not, it’s a dead-end for both parties.

Here’s a simplified formula:

Key components of this formula include:

• Clients should have identifiable pains they aim to address.

• Clients must have a budget.

• The agency should offer a solution that fits within the client's budget.

• The cost of the solution should be less than the budget allocated.

• The ROI needs to be positive for a successful outcome.

I've witnessed the formula fall apart when clients lack a budget, the solution proposed is too pricey, or when the needed solution doesn’t work, leading to a negative ROI.

The focal point of today’s newsletter, dear subscribers, is to unmask the often unromantic inception of agencies which, as far as my lens reaches, is primarily propelled by clear-cut commercial aspirations—more revenue, more comfort, or a firm belief in one’s ability to outperform the current employer. While the initial phase may lack a poetic narrative, it certainly doesn't mean that the journey ahead won’t compose its own song of triumph and satisfaction, it will.

Today’s message is a straightforward nudge: go ahead and take action.

Now, for the seasoned owners steering the ship of multimillion-dollar agencies, who already won and just browsing through, today’s dialogue invites a moment of reflection for you as well:

• Is my agency on a scaling trajectory?

• Have I cultivated an environment that retains the talent and douses any spark that might entice them to venture out on their own?

• Are my engagements finely tuned with clients who appreciate and have the budget for the value I provide, or am I undervaluing my solutions?

Fret not; there’s more in store to provoke thought and refine strategies for you, dear accomplished agency leaders, in the newsletters to come.

If you’ve read up to this point and don’t feel overwhelmed, I’d love to connect on LinkedIn. Your engagement fuels my passion for sharing these insights.

Thank you for your time, and see you in the next edition!