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Small Agency Growth Alliance

Beware easy-to-sell but hard-to-serve clients for your agency

It’s not uncommon to hear agency owners talk about wanting to target small businesses because there are so many of them and you can talk with the decision-maker more easily.

While it may be an appealing target, there are reasons to be cautious. There’s a good chance that you will be dealing with the owner, which can help lead to a faster sale since they may treat it as an impulse purchase. On the flip side, every penny you get is out of the owner’s pocket so they will be scrutinizing results far more closely than an employee in a larger organization.

Chip and Gini talk about these and other issues, while also noting that there is a time and place for focusing on smaller organizations as an agency as long as you have a clear plan and model to make it successful.

Key takeaways

  • Gini Dietrich: “Because for small clients, this is their livelihood – the way that they look at spending money is this is coming out of my personal pocket.”
  • Chip Griffin: “Generally speaking, the easier it is to sell somebody, the harder it is going to be to meet their expectations.”
  • Gini Dietrich: “You don’t want to be chaotic. You don’t want ten or twenty or thirty new clients every month.”
  • Chip Griffin: “If you’re coming in as a low cost provider, you will always be a low cost provider.”

Related

The following is a computer-generated transcript. Please listen to the audio to confirm accuracy.

Chip Griffin: Hello and welcome to another episode of the Agency Leadership Podcast. I’m Chip Griffin.

Gini Dietrich: And I’m Gini Dietrich.

Chip Griffin: Gini, I, I’ve got this idea. We can convince millions of people really easy to subscribe to this podcast because it’s so cheap. They’re cheap. They’re they’re small. It’s great. We’re all set.

Gini Dietrich: Let’s do it. I like it.

Chip Griffin: Right after this.

Gini Dietrich: Okay.

Chip Griffin: Maybe it’s not a good idea.

Gini Dietrich: I also don’t think you want to call people cheap, but okay.

Chip Griffin: Well, I mean, as we know, I do not prepare these opens, it is, this is not like SNL. I don’t have it all scripted out, test it out throughout the week and then dive in with live from New York. I, I come up with it literally on the fly.

Yes. Sometimes that ends up better than others. So if I have offended any of you as listeners, what’s new.

Gini Dietrich: I’m sorry. And it’s sort of expected.

Chip Griffin: Unless this is your first time listening, it happens because I say what’s on my mind for better or often for worse.

Gini Dietrich: It’s not, it’s not that bad. It’s not that bad.

Chip Griffin: I’ve said worse.

Gini Dietrich: You have.

Chip Griffin: But what we actually are going to talk about today is this desire that a lot of agencies have to, to go hunt for small businesses, small charities, the, the independent consultants and coaches and that kind of thing. And, and, and it’s, I think, rooted in the idea that you get to deal directly with the decision maker.

And so maybe you’ve been frustrated in dealing with larger businesses and the approval process to win the business, the approval process to service them. And so in your mind. The solution is to go after the small guys and it’s just, we just need to do more of them. So, you know, yes, they are smaller budgets, but we’ll just service more of them and we’ll be fine.

We’ll make lots of money that way.

Gini Dietrich: I think it’s also rooted in the fact that you start your business. I’m guilty of this as well. And you think nobody is servicing these clients. So. I can work with small businesses. I can work with nonprofits. We can do really great work for them and do really high level, strategic senior level work with them.

And what you don’t realize is there’s a reason that those companies are not serviced. Like when I started my business, I had, I, my experience to that point was food PR. And so I wanted to do restaurants.

Let me tell you how hard it is to grow a business when all you’re getting in exchange for your work is free meals. You’re eating very well, you’re drinking very well, but you can’t pay your people and you can’t make your mortgage.

Chip Griffin: I mean, in fairness, there are successful restaurant PR firms. So, it is not impossible to make money that way, but you really need to have a, a solid plan behind it.

I think that’s where the problem comes about because I talked to a lot of agency owners who are like, you know, well, you know, we’re just going to start targeting these small businesses or those small businesses and they don’t really think it through. What does it take to do that? Right. Because it is at least in theory, easier to sell to a lot of these smaller businesses because you are dealing with the decision maker, the dollar amounts are smaller And so it can become a little bit more of an impulse purchase than it might be for you know when you’re selling to one of the larger brands who has a whole committee that has to approve things and that sort of thing. So there is some truth to that piece of it. The problem comes because these accounts tend to not be particularly profitable. Right and it also comes because servicing these accounts isn’t, doesn’t really carry that much less overhead than a larger, more expensive account.

So when you sit there and think, well, you know, I, I need five times as many, but it’s five times as easy to sell. So it’s okay. Your onboarding time isn’t going to be all that different. And so your ability to onboard at the scale you would need to, and to even just do the basics of, you know, having client calls on a regular basis and those kinds of things, that’s really challenging to do at scale. And there’s a reason why most agencies aren’t successful at doing that.

Gini Dietrich: Yeah. And the other thing I would add to that is it generally speaking, those clients, because they’re small and because this is their livelihood, right? And They are the way that they look at spending money is this is coming out of my personal pocket.

They tend to be a lot more, challenging because they, they want to know, like, if I’m going to spend 1, 000 a month or 2, 000 a month, how are you going to make me 10,000 a month In return, right? They want to know that. And they’re very squeaky wheels and they’re really high maintenance and they’re really challenging to work with.

When you have a client that has a more mature business and they’re spending 10 grand a month or 40 grand a month or a hundred grand a month. It’s not their own money because it’s usually, there’s usually a team, a communications or marketing team working with you. So it’s their budget versus their own personal pocket.

And they’re like, they hire you because you’re good at what you do. So it’s not as challenging. And when you work with the smaller clients. Yes, you absolutely are giving them work that almost nobody else will do. And yes, you’re giving them the ability to grow in a way that almost no one else will help them.

But it comes with all of these other challenges, all these other issues.

Chip Griffin: Yeah. And I think you hit the nail on the head there. It is their money. It is their own pocket that your fee is coming out of. And so, I mean, think about it, you know, most of our, our listeners are owners of agencies themselves. Yep.

Think about all of the people that you pay money out to. I’m sure from time to time you sit there and say, you know, instead of giving that person money, I could just be putting it in my own pocket. And so that’s the test that you’re constantly having to meet with them. And that’s why they are the squeaky wheel.

That’s why they tend to micromanage. Because they are seeing all of this as money that could be in their pocket. That they could be spending on cars, houses, kids, whatever it is. Yep. Yep. That they have. Yep. And so for them it is a much more personal decision. Yes. And they are assessing you in a far different way than you’re being assessed by a CMO at a mid sized company.

Who is not only playing with other people’s money, but also tends to take a longer view of things than someone who is, you know, fighting to, you know, meet payroll every other week out of their own pocket.

Gini Dietrich: Yeah, I mean, I don’t want to dissuade anyone from doing it because I think there is some altruism in doing the work that nobody else wants to do.

But I also think that as your business matures, your agency matures, you’re going to find out that there are different ways, different You know, clients that you’ll be able to service as you grow. And maybe right now that’s a good target market for you because you’re small, they’re small. And maybe the idea is that as they grow, you will too.

And that might be true, you know, I wouldn’t say that that happens all the time, but in some cases, it might. As you grow and evolve and your business becomes more mature, you will definitely change the way that you do client service and the types of clients that you work with. So it might very well be good right now.

It’s just, I think our point is just be aware of all of the challenges that come along with it.

Chip Griffin: Yeah. And I think that. You know, it is that awareness that allows you to make that intentional decision because certainly small, small businesses do require PR and marketing services for sure. And so there is a need from there.

There’s a reason to be servicing them, but you need to not look at it as. It’s an easy sale. I’ll just do it at scale. You really need to have a clear understanding of what you’re getting into and a clear plan. And look, I mean, I’m, I’m a big believer in working with small businesses. It’s what I do now.

Right? I mean, my whole company name is Small Agency, right? So I intentionally work with small businesses, but I go into it, understanding what it takes to do that. And I have pricing set up that is in such a way that I know I can still make money doing it. And so you need to make sure that if you are going to be working with small businesses, particularly if your background is perhaps working with mid to large size companies, which for many agency owners it is because they typically came from a larger organization or a larger agency.

And so they became used to providing that level of service and those kinds of solutions. If that’s where you come from. Then you need to make sure that you are resetting yourself in order to meet the expectations of the market that you’re serving and structure it in such a way. Map it out. How much time is this going to take?

And figure out, are you actually turning a profit at the prices that you can charge? Because, you know, generally speaking, the easier it is to sell somebody, the harder it is going to be to meet their expectations.

Gini Dietrich: Yeah, I would totally agree with that because they, to your point earlier, you said it’s sort of an impulse buy where they’re like, Oh yeah, I can afford 1500 bucks a month.

Let’s do it. But then as you dig in, they’re like, okay, well what am I getting for that? And you know, not to say that you should be shying away from that. You definitely should be measuring your work and showing your value and all those kinds of things, but they tend to be a little more high maintenance with those kinds of things.

And it’s, it’s, they tend to be harder to, Make happy as you’re doing the work than it is with a more mature, mature business. So just like understand everything that goes into that. And to your point, and we’ve talked about this, we talk about it on almost every episode. You have to be profitable. So if you want to work with small businesses, you have to figure out how to do it in a way that allows you also to make money. Because you’re not, you’re not a nonprofit, you’re not doing this for free.

You have to make money as well.

Chip Griffin: Well, and I think, you know, we need to be clear with ourselves when we’re selling into these markets, what we can actually accomplish. And so I think, you know, one of the problems, particularly when you’re providing PR services to a very small entity, oftentimes, you can sit down and quickly identify some low hanging fruit, you know, some opportunities, perhaps in their local media or things like that, or, or some key trade press, but then you have to ask yourself, is this sustainable?

And so you might be better off, if you’re going to go down this path, to reframe what you’re servicing and, and sell it as, you know, more of a project basis kind of thing for them, as opposed to your typical ongoing that you would go for with a larger entity. Because then you’re promising something that you reasonably can expect to be able to deliver.

If someone has never received any PR and you’re just helping them, you know, get some of the basics out there in smaller publications, trade, press, local, etc. You might, you might be able to set that up as something that you can actually do. You can actually deliver and you can do it at a price where everybody’s happy.

The problem comes a lot of times where I’ve seen agencies working with smaller businesses, they come in, they have some real success in the first, you know, month or two, and then it peters off because there’s less to do, right? I mean, that’s true whether it’s media relations, it’s true if you’re doing, you know, oftentimes SEO or PPC.

I mean, if you don’t have a giant budget, how much more are you going to do, right? You can’t, you know, if you’re, particularly if it’s a B2B small business or something like that, you can’t be going in there and editing their PPC search terms every single month and having a major impact. Right. To the extent that any impact occurs, it’ll be relatively minor after you’ve got things sort of firing because the budget’s just not big enough.

The number of, you’re not selling a lot of products and services that you are constantly tweaking because there’s new inventory coming in or something like that. If it’s, you know, if it’s email campaigns, I mean, yes, you know, it might be the, you know, generating the content for them. But beyond that, there may not be a lot of, you know, special stuff, if you will, that goes into it.

And so you need to think about how you’re structuring your services so that people don’t feel like they are paying a lot for very little because all of a sudden your results are going downhill. Simply because they’re not there to be had.

Gini Dietrich: Right, right, right, right. I actually just recommended that very thing to a client because she has a client who, she keeps saying, they’re gonna get funding and then they’re gonna pay me more.

And I’m like, great. Let’s not bank on that. Let’s not count on it because they may not get funding. And you don’t want to do all of this work in anticipation that they’re going to pay you more. Let’s create a project plan and say, okay, for the budget that you have right now, I can do this. And when you get funding, we can add on this, this, and this.

And she’s like, well, what if they don’t go for it? And I’m like, okay, what if they don’t? Like, are you going to do all of this other stuff? And then not never get – risk never getting paid for it. I think that’s really hard for some agency owners to understand. Like you are also running a business and you can’t do free work with the idea that someday you might get paid.

You can’t do that. So the idea of creating – I really like that idea of creating a project plan and saying we’re going to do based on the budget that you have right now, we’re going to do this. And these are the kinds of results that we anticipate as we grow as you grow. If you get funding or you grow the business or whatever happens to be, we can add on this other stuff.

But right now we’re going to do this. and then stick to it.

Chip Griffin: Well, and as important, don’t cut them any kind of deal on those early services. Because I will tell you that that never, ever, ever works. If you come in and you say, well, you know, this is a startup, they’re trying to get funding, you know, once they get funding, they’ll be able to really afford our full services.

Nope. They will expect to pay at the same rate. They may, they may, yes, say we’ll take more services, but at that same discounted rate. Right. And even if you don’t say, well, it’s based on this hourly rate, they just, they, they say, okay, well, I got this for 2, 000. Yep. Yep. You know, if I’m paying 10, I want five times as much.

And you’re like, well, hold on. We kind of subsidized that. So we’re only going to give you a 2X instead of 5X. They’re not going to accept that, and so there’s no, you cannot ever, and this is true whether it’s a small organization or a large organization, never go in with a cheap package just to get your foot in the door.

There’s nothing, well, there are many things I hate, but there are few things I hate more than when an agency owner tells me, well we’re just doing this just to get our foot in the door, and then we’ll be able to make it up later.

Gini Dietrich: You don’t, you never make it up. You will never make it up.

Chip Griffin: Never, ever, ever make it up.

I have never seen that happen.

Gini Dietrich: That is absolutely true.

Chip Griffin: If you’re coming in as a low cost provider, you will always be a low cost provider.

Gini Dietrich: You’re right. They will always expect it. One of the things that has happened to me several times over the course of my business life is someone will come and say, this all sounds great.

Really want to do this. I’m really excited to work with you. Can you, can we pay start paying you in 60 or 90 days after we hit X, after we sell our first customer, after like whatever happens to be. And in the beginning I would say yes. And I never got that return. I had that happen to me earlier this year.

And I told the guy, no, And he was like, well, what do you mean no? And I was like, well, you run a business

Chip Griffin: like we speak English, don’t we?

Gini Dietrich: Right. How would you like it if your clients came to you and said, we’ll pay you in 90 days after we do X, that you have no control over. You have payroll to make you have rent to make.

Like I went through this whole thing. How would you do that? And he goes, well, I just want you to take some risk with me. And I’m like. Why? I am taking some risk with you. You may not be here in six months, like we’re taking some risk together, but this is like, if you want to work with us, this is, this is how much it costs and we’re not waiting.

And so we, we ended up walking away from it. He’s like, I’ll find someone who will, and I’m like, I’m sure you will.

Chip Griffin: Oh, I mean, but why should you take risk?

Gini Dietrich: I shouldn’t.

Chip Griffin: You’re providing a service. Correct. You know, if you were an investor, okay, well that’s different.

Gini Dietrich: That’s totally different.

Chip Griffin: If they were giving you a piece of the business, that might be different.

Although we’ve talked about that before, and you can go back and find our episode where we talked about taking equity for your work. We still, by and large, for most of you, we don’t think that’s a good idea. Correct. But at least then you’re getting some kind of upside for the risk if if your risk is simply getting paid For the work that you’re doing Why?

Yeah, that’s that’s nuts And so you really need to be thinking about this and not just get attracted to the idea that there are all these customers out here who are easy to sell. You know we talked in the last episode about you know how how dangerous it is to go after the the really big clients who are really hard to sell and really hard to turn a profit once you get there.

The same is true here at the other end of the spectrum, except in reverse. Right? It’s they’re easy to sell to, but really hard to make a profit out. Really hard to build an agency business around. That’s exactly right. So just do not get persuaded by how quote unquote easy it is to sell. Selling is a balancing act.

It should not be too hard. You shouldn’t be spending tens of thousands of dollars to win a piece of business, but it also shouldn’t be so easy that it’s a one call close, which by the way, is another one of my pet peeves. You watch these YouTube videos from these so called agency experts who, you know, here’s the trick to the one call close.

If you get a client for your agency using a one call close, I guarantee you’re setting yourself up for disaster.

Gini Dietrich: They will not be a client of yours a year from now.

Chip Griffin: No. No, and, and, and having a high churn rate, unless you are setting yourself up to do just projects, but if it’s a high churn rate on retainer based work or monthly payment based work, that’s a problem.

Gini Dietrich: It’s a problem. Yeah.

Chip Griffin: You not only have to deal with replacing all that business, but you have, they’re going, going unhappy. Why do I want to build a marketplace of people who are unhappy with my agency?

Gini Dietrich: And they talk to other people, and those people talk to other people, and suddenly you have a reputation issue.

Chip Griffin: Right, so it’s easy to sell for a while, up until everybody looks at you and they think, Oh. Oh,

Gini Dietrich: Yes. And we, and we talked, I mean, at the beginning of this, we, you talked about the, the idea being that you can sell a whole bunch of small business clients and, you know, keep it going. But we talked about this last week too. The idea of adding that many clients is chaotic. And we’ve talked about chaos in your business as well.

You don’t want to be chaotic. You don’t want tens or twenties or thirties of new clients every month. Like we want two new clients a year. That’s it. That’s it. I don’t want two new clients a month. I don’t want 10 new clients a month. I can’t handle that. We don’t have the capacity for it. So you have to also figure out where it is that you fit in, where, you know, that fits for you and your business.

Because that, those kinds of things, like, we keep getting these emails saying, I can get you 10 new clients a month. I don’t want 10 clients a month. Please do not do that to me. No. But everybody’s out there saying. You can do it in one close, you can get to 10 new clients a month, and all of a sudden you start seeing dollar signs in your brain, and that’s not how you grow a business.

Chip Griffin: Right, and I, I think the key here is, whatever your plan is for your agency, sit down and actually test it on paper and say, okay, you know, whether you listen to us and you say, yes, it is going to be 10 clients, understand, You know, what do those 10 clients look like? How big are they? What are the results that you’re producing for them?

How do you staff it? How do you onboard them? How do you make sure they stick around? Can you actually find that business? And, and so that’s great, you know, if you can figure that out. If you want to go down the route of adding lots of small clients, fine. Sit down and map it out and figure out, is it actually possible?

It might be, right? You might have the model that works for it. But you can’t go in and just do it off the top of your head because it sounds good. It feels good. Someone else told you it was a good idea. You actually need to sit down and model out whatever your business model is to understand how it works for you and ask yourself, is this realistic?

Is this achievable? Yeah.

Gini Dietrich: And also add in there how many people you’re going to have to employ and what that looks like. Contractors or full time employees, whatever it happens to be. What that looks like, how you’re going to keep them trained, how you’re going to keep them from burning out. Like all of the stuff that goes into it.

Chip Griffin: And if you can do all that. Go after the small clients, go after the big clients, go after whoever you want. Just make sure that you understand what you’re getting into when you do it. So hopefully between last episode and this episode, we’ve, we’ve given you some food for thoughts that you will think very carefully about who your target clients are, who you want to go after and how you’re going to grow your agency.

So with that, that will draw to an end of this episode of the Agency Leadership Podcast. I’m Chip Griffin.

Gini Dietrich: I’m Gini Dietrich.

Chip Griffin: And it depends.

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The Hosts

Chip Griffin is the founder of the Small Agency Growth Alliance (SAGA) where he helps PR & marketing agency owners build the businesses that they want to own. He brings more than two decades of experience as an agency executive and entrepreneur to share the wisdom of his success and lessons of his failures. Follow him on Twitter at @ChipGriffin.

 

Gini Dietrich is the founder and CEO of Arment Dietrich, an integrated marketing communications firm. She is the author of Spin Sucks, the lead blogger at Spin Sucks, and the host of Spin Sucks the podcast. She also is co-author of Marketing in the Round and co-host of Inside PR. Follow her on Twitter at @GiniDietrich.

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