5 Deadly Mistakes of the Old Model Agency Trap
The traditional agency model is a broken business model that leaves many stuck as victims of the ‘agency trap’. When business owners are trapped by a business that cannot operate or grow without them, this is the agency trap.
This is a problem because your business does not serve you in the way that it should. Instead of providing you with an abundance of time, money and freedom, the agency trap robs you of these things.
Personally, this leaves you feeling unfulfilled, empty, trapped, overwhelmed, stressed, busy and often times, feeling like a fraud. Speaking from experience here, so don’t feel bad. You’re not alone.
But, surely freedom is why you started your business to begin with, right? The agency trap surely wasn’t what you were hoping for when you finished the final chapter of The 4 Hour Workweek, amirite?
The core fundamental problem of the agency trap is that your business relies far too heavily on you. The old agency model relies on manual labor instead of repeatable systems and automation. You are the operator, not the owner.
Before we get started, it’s also really important to understand what should NEVER be automated or delegated by you, the business owner:
Clarity on where the business is and where it’s going
Understanding current bottlenecks and opportunities
Strategy design
Resource allocation
Hiring & culture
Org chart
Below is a graphic outlining tasks based on their value. As the business owner, you want to spend 80% of your time performing the $250 and $1000 per hour tasks while delegating and automating the rest.
Now let’s dive into the deadly mistakes agency owners make that keep them stuck:
1: You have a generic AF or non-existent niche
Sorry, but eCommerce is not a niche. Neither is “small to medium sized businesses who want to grow their online business”. Neither is “tech startups”. This may seem like common sense to many of you but it’s shocking how generic the targeting is for 99% of agencies. Without laser specific targeting, your message will get lost in a sea of noise. The more specific your targeting, the higher your conversions.
I understand why this happens. A lot of agencies avoid choosing a niche because they don’t want to “restrict themselves”. The reality for a services business is that if you don’t intentionally set restrictions, you’re fucked, pardon my French.
This approach leaves you like 99% of agencies who splinter their energy into 10 different niches and offerings never achieving world class quality, while the top 1% of new era agencies narrow their focus to achieve much better outcomes, specifically, higher quality of work, profitability and lifestyle.
Why are you fucked if you do not narrow your focus? Working with a wide variety of clients increases the number of variables involved in each and every process of your business, dramatically enhancing business complexity, reducing scalability and sacrificing profit margins as well as quality of life. It’s impossible to automate a business when you are constantly creating new offers, new services and working with new types of clients.
Q: What do you think is easier to scale profitably and sustainably?
A: Serving 10 different clients with 10 different problems
B: Solving the same problem for 10 clients with the exact same problem
Less is more. The simpler it is for you to do great work for clients, the quicker your business will grow. That’s the power of niching.
While you can certainly work with multiple niches, focus is key. If you are trying to automate and grow in two different niches at once, just remember the Confucius saying…
He who tries to catch two rabbits at once catches none.
Now maybe you have seen some of our previous client success stories or other agencies killing it who work in different niches and are wondering, YO WTF?! But what you fail to see is that most of these clients, and what I always recommend, is that you first optimize and streamline your current niche/service before expanding into multiple.
If you try to do both at once, things take twice as long and are twice as ineffective. Do not do this. This is the opposite of the approach taken by new era agencies who successfully work with multiple niches and offer multiple services with fat profit margins.
But again, many of you reading this are not looking to build a massive corporation or company beyond the 7 or 8 figure mark, so realistically speaking, you can achieve your lifestyle and profit goals by becoming the #1 option for 1 specific niche with one specific offer.
If you don’t need to expand into new markets or create new services, don’t. The simpler your business is, the happier you and your clients will be.
2: Your lead generation strategy is "hope for referrals"
As you know, this is a very unpredictable and non-scalable approach to generating leads for your business that can lead to some very tight, cash-crunched months. No bueno.
Leads are the lifeblood to any services based business and 99% of the time, relying on inconsistent lead flow from referrals and networking simply won’t cut it.
While this approach leads to inconsistent lead generation, it consistently leads to burn out and frustration, especially when you get those tire kicking prospects!
Referrals are proof that you do great work, right? This is a sign to establish a proven and predictable lead generation strategy across multiple channels.
I will walk you through exactly how to do this in later chapters.
3: Proposal ping-pong (sales process changes from client to client)
When agencies lack a target niche and/or lack a sound lead generation strategy, they can find themselves in some pretty weird situations, like dealing with endless sales cycles and “proposal ping-pong”.
The ‘work with anyone who pays you’ approach results in long, drawn out sales cycles as well record-setting low conversion rates.
In the rare case that a prospect says yes and becomes a client, it isn’t long before the less than stellar operations and delivery process gets all funked up.
This is again why niching is so important. Spending hours on custom proposals can quickly become a massive time suck.
While proposals and custom work may make sense for exclusive, high-end 6+ figure contracts, relying on proposals for your front-end offer is a costly mistake.
In the later chapter I will break down how other new era model businesses have shrunken their sales cycle from 3-6 months to 30 to 60 minutes.
4: The delivery process changes from client to client
When you constantly change your delivery process, everything suffers. Quality of work is inconsistent along with client results. As a result, profitability sucks and clients rarely stay longer than a few months and instead of setting growth records, you’re setting churn rate records.
This means you’ve got to refill that pipeline that disappeared when you spent all your time on delivery and operations instead of growing the business.
Given that you have no predictable way to generate qualified prospects on demand AND are stuck with random AF sales cycles, that is no easy task. Enter 100 hour workweeks! The agency trap is now living up to its name!
I’ve talked to way too many upset agency owners who could have had 7+ figure agencies if it wasn’t for sky-high churn rates…
STORY TIME: The Agency Trap Robs Agency Owner of 7-Figure Run Rate
For example, one of my friends worked with over 50 retainer clients inside his growth marketing agency over the course of a year, billing over $2,000 per month for each.
However, by the end of the year he only had a little over 10 clients remaining and was earning just over $20,000 per month. Had he done a better job at improving his delivery process and improving client results, he would have retained his clients better.
Even 10% churn rate (which is VERY high for services businesses) would have resulted in 45 clients, aka $90,000 per month revenue. So instead of earning $90,000 per month, he was earning $20,000 per month, meaning that his poor delivery process had cost him over $70,000 per month or $840,000 per year. OUCH.
What would you do with an extra $840,000 per year? Don’t let that be you.
5: Relying on manual work and systems that only exist in your head
Many agency owners have systems but most of them cannot be executed independently and require constant input, training and guidance on behalf of the agency owner. This is the core problem of the old agency model and why it becomes a deadly trap.
As long as you are responsible for delivering on your marketing, sales and delivery processes, you are a bottleneck to the growth of your business, and the cost is your time and energy.
The purpose of wealth is freedom and impact. If you are stuck in your business, this is not wealth. If you want to convert your agency into a wealth generating machine, removing yourself from core operations is required.
For those of you who are thinking about one day selling your agency, not having streamlined processes and high profit margins will result in a very low valuation and exit price.
Even if you aren’t looking to sell, your business assets are worth far less if you still have to move the dials and knobs within your business. I will take you through our ‘replace yourself’ process in the new model transformation chapter of this book.