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In this episode of the Agency Leadership Podcast, Chip Griffin and Gini Dietrich discuss what to do when the business revenue isn’t enough to meet payroll or personal obligations.
The topic was inspired by a post in the Spin Sucks Community where an agency owner asked about doing freelancing to supplement agency revenue during a rough patch.
Chip and Gini explore several aspects of this topic including:
- Figuring out the real reason why revenue is lagging — and making sure to address that issue, regardless of any short-term fixes that may be available.
- Finding a way to make any freelancing or other income-supplementation efforts fit into the overall story that the agency tells.
- Identifying when a revenue dry spell is actually a new reality for the agency.
- Avoiding the urge to panic and engage in short-sighted decision-making.
- Knowing when it is time to throw in the towel.
Automated Transcript
The following is an automatically generated transcript. Please consult the audio for accuracy.
CHIP
Hello and welcome to another episode of the Agency Leadership Podcast. I’m Chip Griffin
GINI
and I am Gini Dietrich
CHIP
and we are back with you this week to talk about another exciting topic but before we do a couple of Thank you sir in order first to thank you to Jenny your co host Joe Thornley on inside PR he gave a real nice shout out on the most recent episode to this podcast and we definitely appreciate that
it’s always it’s always good to know we’ve got someone who listened to at least I think we have a couple people we gotta get we gotta
GINI
we have like five five is probably right Don’t you think
CHIP
hey you know i’d be happy with five you know I you know I have done podcast before I’m pretty sure you know Brian person was the only person listening in so
but that you know any case another shout out john wall he left us a nice five star review on iTunes. So thank you for that john, another friend of the show. So we got at least you know, another listener their ears to we’ll just keep finding them
GINI
my mom. Listen, there’s three.
CHIP
Your mom listens to this.
GINI
She might I’m not sure I asked her. But yeah,
CHIP
I can guarantee you. My parents do not listen to this. They don’t know what I do. I they alternately think that I’m in the CIA or the mafia. So and the answer for anybody listening is neither. Just so we’re
GINI
clear answer was yes. to both.
CHIP
Yeah. No, I don’t. I don’t really want the kind of visits. That would be an order. I think if people thought those were true. So anyway,
another shout out. Congratulations to the Red Sox on winning the World Series. Yeah, yeah.
GINI
Although if the cubbies don’t do it, I would prefer the Red Sox over anybody else. So
CHIP
well, and, you know, I feel the same way about the cup. So unfortunately, this was not the year for your cubs. And
GINI
no, it was not. But you know what? Good for the Red Sox. That’s awesome.
CHIP
Yeah. And, you know, we’ve had a nice five episode run here of talking about baseball. But we’ll have to find something else to move on to shoot. I don’t know, I just have to find your next pain point to drill right in on it.
GINI
That’s all right. I’m learning yours as well.
CHIP
Fantastic. This is going to be a great show. Everybody’s going to love this. And then. And then finally, in the shout outs department. A shout out to the spin sucks community that you put together. There was a great conversation as follow up to our episode where we talked about working in versus on your agency business. And that that really seems to have struck a chord with that community.
GINI
Yeah, I think it’s, I mean, it’s definitely a conversation we continue to have. Because there it’s like anything else? cyclical, right? So if you’re super, super busy, you’re not working on the business. And if you’re not so busy, you are. So it’s it’s an interesting conversation, I think, to keep top of mind for people.
CHIP
Absolutely. But it is not the topic for this week.
For this week, we’re going to talk about something Well, I mean, there are some tie in certainly to that. But the The question is another one that came out of the spin sucks community? And the question the gist of it is that someone’s got an agency that’s struggling. And so the owner is looking at potentially doing some freelancing or outsourcing her own services in order to help make ends meet and continue the agency business on a going forward basis. So I thought it would be helpful to sort of broaden that discussion to essentially, you know, what do you do when your agency is either in the red or not generating enough revenue to do what you want it to do? And this is something that most agencies struggle with at one point or another on, you know, to some degree or another. So it’s I think it’s very relevant. And, you know, it’s something I know, I’ve experienced with my own businesses, including my agency businesses at one point or another, kind of, you know, figure out how to sort it through I think you’ve confronted similar issues in the past. And so it’s, it’s something I think we both can speak from personal experience, not just theoretical,
GINI
yeah, and I think it’s a really good conversation to have. And, of course, this is going to go to your ending tagline, which is, it’s depends. But, you know, if you’re a solo printer, or you’re one or two contractors, you and one or two contractors versus an agency with, you know, five, or 10 or 50 or 100 employees, the the decisions are different. But what do you do when your agency is in the red? And you have to look at all of your different options, does it mean that you as the owner, go and moonlight so that you can bring in some extra cash? Do you go work at Starbucks, you can bring in some extra, like, what do you do? You know, are you do you depend on a line of credit, so that you can get through the rough time? are you adding new revenues, streams are like, there are a lot of different things, I think that you need to be thinking about.
CHIP
But it of course, depends on the size, right? I mean, if it’s, if it’s just you, and then that’s a different conversation and a different set of decisions, then, if you have employees,
GINI
right, but it all I think it all comes back to the same, you know, core thing, which is, first of all, to try to understand, you know, why it is that you are not, you know, making your numbers work. So, that starts with understanding your numbers, something we’ve talked about previously on this show, and something that agency owners need to, in general, get a better handle on than they do today. But certainly, if you’re, you know, if you’re, if you’re going to go write that check in, you know, whether that’s to yourself to an employee to a vendor and the cash isn’t there, you need to understand why what is it that is that is taking those hard earned dollars that you have generated and, and sending them out the door in excess of what you’re bringing? Is it a collections issue, right? I mean, a lot of agencies run into this where, you know, they just do a very poor job of getting their clients to actually pay on time. And so, it might be as simple as that, in which case, you know, you know, the solution to that, if it’s that you’re, you’re simply not
who’s in the mafia to give them
CHIP
that that’s correct. Well, actually, the CIA first because, you know, then they can, you know, get into their systems with their friends, the NSA anyway, but yeah, I mean, it’s, you know, so, I mean, in some ways, that’s a painful problem, but it’s one that’s, you know, relatively straightforward. I’m not going to say, easy, but straightforward, at least to remedy but if it’s that you’re not generating enough business, okay, well, then you have to take a look and say, Okay, why am I not generating that business? Is it because I don’t have the right processes, and I’m pitching the wrong things to the wrong people, you know, what is it, you know, or is it simply that I’m spending too much, right. And, and this is something that a lot of agency owners don’t want to hear. But, you know, you know, if you’ve, you may have too many employees for the business that you have, you may be spending, I won’t say extravagantly but excessively on, you know, maybe it’s travel, right? I mean, I actually know a lot of agency owners who, you know, feel like, okay, I’ve paid my dues. Now, I’m going to stay in the nicer hotels, and, you know, by myself up to business class, if I’m traveling along distance, or whatever, and that’s fine. But you need to work that into your numbers. And you need to understand what the implications of that are. So, you know, it could be that service, I mean, there’s, there was a good discussion in the spin sucks community recently about someone looking to renew some software and trying to figure out is it even worth having this particular piece of software, you know, those are the kinds of things that you really need to take a hard look at, particularly if the numbers aren’t what you want them to be?
GINI
Well, and that’s a really good point. And I think that so often, we have definitely discussed this before. But so often agency leaders, just by nature of the beast, don’t pay attention to the finances. But if you have, if you have projections, and you carefully, you know, consider them an update them and, you know, they’re there are reports that your accountant or bookkeeper can pull for you, or whoever’s handling, you know, doing bookkeeping for you that there are reports that you can have pulled, but from my perspective, that always looks history at historical data, it doesn’t tell me what’s coming. So I keep I keep a spreadsheet of cash flow flow projections, and I have all of that in there. And it’s it’s updated based on our p&l, you know, when what’s in the the actual p&l so that I have historical data, but I’m also predicting are projecting the future. So if I know a retainer client is going to be x, I can project that out, I know that if we’re doing an online course, and it’s we’re expecting it to do X, I can project that out. And that helps me determine employees and benefits and travel and other extravagant sees meals and entertainment, you know, those kinds of things that helps me project all of that if I don’t do that. And I have also found that when I take my eyes off of those things, I make really stupid decisions based just on whatever feels good at the time, and not on what makes sense for the business. So we keep hounding this you have to understand the numbers, but you have to understand the numbers
CHIP
well, and the reality is, agencies as businesses are not that complex, they are not, you know, you don’t have inventory that you have to deal with, you’re not, you know, you’re not doing r, amp D, on some new drug, where you just have no idea whether it’s going to hit or not, you know, you’re not, you know, generally involved in financing operations where you need to, you know, have particular reserves and that kind of stuff, you need to have cash reserves, generally, for your business. But it’s, you know, more like you would have in your own household, not, not something more complex, you know, where if you were dealing with financial instruments, there might be even regulatory requirements, they agencies are fundamentally pretty simple businesses. So, if you if you’re not drilling into the numbers, you know,
I don’t know what to tell you. I know, I know, they’re not comfortable. I know, they’re not fun. It’s not the same as doing actual communications work. But if you even just invest a couple of hours a month, you will come out so far ahead for that investment of your time.
GINI
Well, and here’s what’s interesting, too, I think I was talking to a girlfriend about this last week. And she said, now that I fully understand the numbers, it’s fun, like, I know, I know what they mean, I understand how they affect my business, and I can predict future growth based on them. She’s like, I’m really enjoying it. And I think that’s the thing, we just once you understand it, and you understand what it is that they’re what the numbers are telling you, and you’re not so fearful of it, you can make decisions, like, what happens when, like, what happens when my agency is in the red? And when, when is it going to go into the red, maybe it’s going to go into the red in, you know, May and it’s February. So what do I need to do about that now, you know, do we need to take work outside of our, the focus of our agency is a dry spell a new reality, like, it helps you figure out those kinds of things before it happens instead of wallets happening. Because if you can do it, while before it happens, and you understand that, then you can make logical decisions versus emotional decisions.
CHIP
Exactly. And you know, why would not typically advocate an agency again, because it’s a relatively simple business routinely going into the red there, there may be, depending on your kind of agency business, you know, there, it’s possible that you may have some seasonality to it, you know, it’s a little bit less common for agencies, and it is and other sectors. But, you know, there are still some agencies that sort of specialize in in certain, you know, if you’re tourism, and you’re, you know, in a ski area, maybe, you know, maybe you do the majority of your business leading up to ski season, and it just, you know, so I don’t want to rule it out. But, you know, so, if you’ve got a business like that, then as long as you’re planning for it, you know, periods of time, you know, at least on a monthly basis in the red may not be horrible. But if you’re not planning for it, it’s probably going to come up and smack in the face.
GINI
Yeah. And then you have to make decisions that you aren’t ready to make, like laying off people or, you know, trying to find go go work at Starbucks to make ends meet, or whatever happens to be, but if you’re planning for it, then you know exactly what you need to do. And it’s, it’s logical versus emotional,
CHIP
right? But let’s, so let’s, let’s take the, you know, to sort of get back to the, the, the original question that that came in, through the community. So it’s, let’s say that we’ve identified what the, the problem is, and we’ve got a plan to solve it. But that’s, it’s going to take some time before that, you know, it’s not a it’s not a it’s not a quick fix, for whatever reason, you know, how, how do you look at taking on work, but let’s just call it generally outside of the focus of your agency. So that may mean that you’re, you know, freelancing for your smaller agency or solo printer, it may mean, you know, taking on projects that are not ideal, but generate revenue in the short term, you know, so how do you feel about taking your eye off the ball just to make ends meet?
GINI
Yeah, I think there’s no better motivator than a crisis. And if you see a crisis on the forefront, or you’re in the middle of a crisis, that’s the best time for change. So yeah, I mean, I think that there, there may be times where you have to, you have to, you have no choice, because otherwise, you’re not going to make payroll, or you’re not going to fulfill the commitments that you’ve made to clients, or you’re not going to fulfill the commitment you’ve made to your call, or, you know, you can’t pay your mortgage, or whatever happens to be. So there may be times where you have to do that. And it’s not fun, and it kind of sucks, but it also reinforces the necessity to, you know, evolve as things go and to project out those kinds of things. I mean, I’ll be perfectly transparent last October, exactly a year ago, we knew that if something didn’t change by May, we would have only $40,000 in the bank of this year. And so, you know, that seven months, but we knew that we had to do something pretty drastic. And so there was an all hands on meeting and it was, what do what should we be doing? And what kinds of things can we be doing? And really focusing in on that, and I’m happy and proud to say that we not just did it made it but we crushed it. So you have there are going to be times where you have to look at those kinds of things. And, you know, do I like to say, yeah, go outside of your focus, or echo five, find a freelance job or go work at Starbucks know, that sucks, and I’m sorry, but sometimes you just have to do those things.
CHIP
Yeah, I agree. I think that, you know, at the end of the day, you have obligations that you need to meet and and you need to figure out, you know, what it’s going to take to do that the only sort of addendum I would give to your advice is, if at all possible, trying to find a way to weave that into your story, right? So, so if you are taking on freelance work, try to try to be able to at least describe it in such a way that it’s as if it’s part of your agency’s mission, you know, try to try to figure out if you’re going to take on outside work, you know, how can you tie that back, I mean, you know, it might even be, hey, this is market research, right? I just getting paid going to Starbucks, right? You know, let’s, okay, maybe, maybe now, I’m going to make a push into helping to market coffee shops, because of this experience, you know, but the try to try to, if at all possible, it’s not always possible. But if it’s, if it’s possible, try to find that way to weave it into your overall picture. Because then, first of all, it will be more satisfying to you. But then it will also help you make sure that, you know, everything you’re doing is complimentary of each other, which I think is you’ve talked previously about having multiple revenue streams, which I also advocate, but, you know, finding ways to make sure that you can describe them all so that they are interrelated, you’re super helpful, even if it’s in, you know, one of these crisis type moments.
Unknown
The other thing I would say is,
GINI
you always want to get funding when you don’t need it. So if that’s a line of credit, if it’s a mezzanine loan, whatever it happens to be, you want to get that when you don’t need it. Because if you’re in the middle of a crisis, no one’s going to loan you any money. And so there may not that I advocate debt by any stretch of the imagination, I think it’s kind of evil. But I do think there are times when you might eat, and maybe it is because the business is cyclical, and you are going into the red for a little bit, you know, there may be times where you have to lean on some sort of financing to get you through without having to go work at Starbucks. And I think that’s okay, as long as you have a plan to pay it back, as you know, as quickly as possible, it also makes you a really well functioning business. So that when you go to get an increase in your line of credit, or you know, and have bigger loan, or whatever happens to be banks are more willing to lend to you, because you’ve proven that not only can you take on the debt, but you can, you can pay it back as well. So I think there’s, there’s value in that piece of it as well. And not, you know, like I said, I’m not an advocate of taking on debt. But and, and it may not be that if you have 10 employees, and you are in a crisis, that you have to let some of them go, you know, you don’t want to keep paying payroll based on your line of credit by at all. But I think there’s all there is value in having some funding or financing behind you to sort of cushion the blow a little bit.
CHIP
Yeah, I think, you know, probably, at some point, we’ll end up doing an episode where we talk a little bit more about, you know, debt and financing, and those sorts of things. Because I think, you know, there are a lot of different options out there that the agency owners can take advantage of, whether they should or not as a whole nother story. You know, I, I’m an advocate of using lines of credit and things like that, you know, purely to handle collections issues, you know, for most agencies, where you’re not doing any kind of real r, amp D or anything like that, I’m not a huge fan of using it for day to day operations. But, you know, as a as a bridge, when you’ve got a big client who’s just slow it paying, you know, the smoothing things out with a line of credit can be a very helpful way of doing it. But let’s So, you know, I think one of the challenges here is that, you know, people don’t like to make the tough decisions. And so I would say, you know, as an owner, before you divert your own personal focus, see, if there is a way to tighten your belt, as painful as it may be, you know, are there people that you can let go whether the freelancers, your W, twos, are there other expenses that you can trim, so that you can avoid having to lose focus, because if you lose focus, even just for a portion of your time, it’s going to be that much harder, and that much longer, before you dig yourself out of the red. So keep that in mind.
GINI
Yes, and this all goes into everything that we’ve talked about, it goes into planning, it goes into knowing the numbers, it goes into having your pipeline full, so that, you know, something like this happens, you’re prepared, like all of this business stuff goes together at all is integrated. So yeah, it’s your you shouldn’t be surprised if you end up in the red.
CHIP
So now, here’s the the toughest question, when do you When do you sort of decide, as you mentioned earlier, that a dry spells become a reality? When do you sort of taking that to the next step? When do you decide, hey, this is it’s time to throw in the towel? This is we all know not every business succeeds, right? You know, there are reasons why, you know, businesses, close agencies included, you know, what, what do you think the the things are that that people should be thinking about, as they’re saying, you know, is this is this a hill? I want to keep climbing?
Unknown
It depends,
GINI
but I think there are several different answers to that. Number one is, to your point earlier, do you have the accounts receivable, but they haven’t been paid yet? So then, yeah, no, that’s not time to throw in the towel, you may be in really Dire Straits, but you know, the money’s coming. So then you just have to get really aggressive on getting that money in,
are you losing passion for the business? And if you are, that’s another opportunity to think about, is this what I should be doing? Have you thought about other revenue streams? You know, passive income for us has been incredibly, incredibly profitable and efficient and relevant, and all of those things for our business. And so, you know, have you consider those kinds of things, I think there’s, there’s a lot around it, you know, when and when I, when I talk one on one with agency owners, I will always ask, do you still love running the business? And if the answer is no, then maybe it is time to throw in the towel. So if you if they’re still passionate around what you’re doing, and they’re still passionate around growing something in or building something, and, you know, living the dream that you always thought you would live, then I think the you have, the answer may be really tough right now. But that doesn’t necessarily mean that you need to throw in the towel.
CHIP
So I I agree with the passion piece, I think the the second piece that I would add to it is path. So you need to have the passion for what it is that you’re doing, you have the passion for the business for growing it. But you also need to be able to describe a realistic path forward. So, you know, if you can’t sit down and explain at least to yourself, but preferably, you know, to someone else who will try to shoot holes in it, what that path is, how is it that you’re going to go from where you are today to, you know, where it is that you’re trying to go? Even just that sort of a minimal point, you know, how do I break even, how do I, you know, generate enough revenue to pay whatever bills I need to pay, if you can’t describe in concrete terms that path and it’s in? And if you can’t believe in that path, right? So it can’t be, well, you know, tomorrow I’m gonna sign a million dollar client,
Unknown
which, which, if you’re talking to
Unknown
actually people actually think that we’re terribly optimistic as entrepreneurs, but that’s just not Yes, I’m laughing because people actually think that
CHIP
No, no, it’s, it’s, I mean, honestly, I’ve run into that so many times, you know, whether that’s with agency owners, or even just, you know, business development people within companies or whatever, you know, they just, oh, you know, I’m going to hit my numbers. Okay, cool. Great. How are you going to hit your numbers? Well, you know, I’m just going to close, you know, an enterprise deal, okay, great. From where, right, you know, to tell me what, tell me what’s your pipeline looks like today, right now, you know, and, and if you don’t have, you know, four or five prospects in there that are close to closing, you’re probably not going to get a million dollars tomorrow. I mean, I’m not, you know, I hate to be, you know, Debbie Downer, but it’s probably not going to happen, unless you, you know, you’re almost there already. And so, that’s, you know, that would then be a credible path forward if you were just about to sign. But if you if you can’t describe that path, and it doesn’t really matter how much passion you have, you know,
you’re not going to get there That said, if you’ve got the passion, then you can rework the path, right. So it may be that you can’t describe the path. But if you work, you know, with someone, you bounce around in the spin sucks community or, you know, wherever, you know, you may be able to find that path forward. And, and I think that’s, that’s critical. And if you can check those two boxes, then I would advocate not throwing in the towel. But if you can’t check both of them, it’s time to start thinking seriously about whether this is, you know, what you really want to do?
Unknown
Yeah, I totally agree. Totally, totally.
Unknown
And that’s okay. It’s okay.
CHIP
It is absolutely okay. And, and, you know, I mean, and, you know, we talked about people becoming accidental agency owners, you know, if you got into it accidentally, there’s no reason you can’t get out of it deliberately. Right, right, that you’re not, you know, you’re not compelled to do this. And it’s tough because, you know, particularly in, you know, today’s economy where, you know, people have become accustomed to things like being able to work remotely or, you know, what have you, you know, that I know, a lot of people who are, you know, either small agency owners, or, or solo prs. Who are, you know, they’re doing it because of the, like, the flexibility not necessarily, because they have the passion for generating the business and that sort of thing. And that’s, that’s a tough road to be on. That is, that is not a comfortable place to be.
GINI
No, it’s not. And it’s, you know, I mean, this business in any business, it doesn’t, it’s not just agencies, but any business that ran is so simple. So you’re, you’re going to have years where they’re awesome. And you’re going to have years where you, you do question everything. So I think the passion and the path are very, very, very important to remember. Because when you’re in a down year, or you’re thinking, you have to go out and find freelance clients, or you’re gonna have to go work at Williams Sonoma, to bring in some extra cash, whatever it happens to be, if you still have the passion and you do have a path for getting out of the situation that you’re in. You will you’ll be fine, for sure.
CHIP
Absolutely. And I think we’ve demonstrated a lot of passion on the show, we’ve we’ve followed a path. The path has taken us now to the end of another episode of the agency leadership podcast. And so I don’t really have anything more to add to what we’ve already said. I’m not sure if you have any other additional points you’d like to make. Before we wrap up, Jenny.
GINI
Now I looked through our bullet points, and I think we covered it all
CHIP
fantastic. Well, hopefully, you know, for those of you who are in this position now, or perhaps somewhere down the road, you’re googling around and you find this episode because you’re facing this challenge. Hopefully, we’ve been of some assistance to you. We wish you all the best as you figure out how to get your agency on the right path, and we look forward to having you join us again next week. And so with that, I’m Chip Griffin
GINI
and I am Gini Dietrich
CHIP
and it depends
