In this episode, Chip talks with Jason Swenk of Agency Mastery 360 about the intricate dynamics of agency growth, operations, and sales. The discussion touches upon multiple challenges that agency owners grapple with daily, offering a number of actionable insights.
- The Accidental Agency Owner: Jason himself began as an accidental agency owner at 22 when he designed a website poking fun at the pop band, NSYNC. From there, he scaled to an eight-figure agency with over 100 employees before selling. The “accidental” trajectory resonates with many in the agency world, leading to unique challenges and growth patterns.
- The Importance of Clarity: Jason emphasizes that clarity is paramount for agency success. Many agencies fall into the trap of accepting any client that comes their way, diluting their niche and expertise. By clearly understanding the direction they want to take, agencies can build a robust framework and delegate more efficiently.
- The Agency CEO Role: The transition from owner to CEO is vital for growth. A CEO needs to set the vision, coach the leadership team, be the organization’s face, build strategic relationships, and understand essential financial metrics.
- To Sell or Not to Sell: When contemplating selling their agency, owners need to assess the motivation behind this decision. Whether it’s discontentment, wanting a change, or a genuine need for cash, understanding the core reason can make the process more seamless. Jason sheds light on valuation nuances, stressing the importance of EBITDA and the pitfalls of earnouts.
- Enhancing Sales and Lead Generation: One of the primary pain points for agency owners is sales. Jason recommends a multi-channel approach, which includes inbound and outbound strategies.
Chip and Jason highlight the importance of evolving with the agency. Whether it’s adjusting the business model, understanding financial metrics, or pivoting strategies, staying proactive ensures sustained growth and success.
Jason Swenk: “We’re accidental. We knew how to do something cool. Someone offered us money and then the next thing we knew, we created this great prison around ourselves because we were doing everything.”
Chip Griffin: “If an agency owner is able to define their role effectively, they’re going to be more successful because they’re going to actually enjoy it.”
Jason Swenk: “If you come up with a plan, I don’t care if the plan works or not, you’re going to have so much more certainty in order to make the right decision. Then you’re inspiring your team rather than demotivating them.”
Chip Griffin: “I think that the expectations amongst a lot of agency owners are inflated as far as how easy it is for them to sell, what the sale looks like, how much money they’re going to get from it.”
About Jason Swenk
Jason Swenk is the agency advisor & coach that guides marketing agencies through a proven framework for growing their agency faster.
Jason has literally written the book for growing an agency from nothing to two 8 figure agencies. He is one of the most sought out advisors to agencies in the World, by showing them an 8 system framework that worked for growing his agency, working with brands like AT&T, Hitachi, Lotus Cars, and eventually lead to selling his agency.
Jason currently hosts the Smart Agency Master Class Podcast, the #1 Digital Marketing Agency Owner podcast for sharing the strategies and stories from real agency owners of what is working today in the agency world, and how they got to where they are now.
The following is a computer-generated transcript. Please listen to the audio to confirm accuracy.
Chip Griffin: Hello and welcome to another episode of Chats with Chip. I’m your host, Chip Griffin, the founder of SAGA, the Small Agency Growth Alliance, and I am delighted to have with me a real expert on agencies, someone who can help guide you in some of the decisions you may have ahead, Jason Swenk. Welcome to the show, Jason.
Jason Swenk: Hey, thanks for having me on.
Chip Griffin: It is great to have you. And before we dive into having our conversation, why don’t you just share a little bit about yourself with listeners who may not already be familiar with you?
Jason Swenk: Yeah. So I started at an early age of you know, 22 of starting my agency. I was an accidental agency owner, like a lot of us and knew how to design a website.
And made fun of my first website I created was called NSHIT. It made fun of NSYNC and one of my friends looked like Justin Timberlake. So it was an easy transition and kind of got started by accident. And then the next thing I knew I was accidental agency owner had over a hundred employees and grew over eight figures and we sold it and then transitioned into doing absolutely nothing for a long time.
And I was completely bored like a lot of us that do that. And I just kept helping my old competitors. And they were like, Hey, how’d you, how’d you sell? How’d you do this? And started a podcast called the Smart Agency Masterclass nine years ago. And been running Agency Owner Masterminds ever since.
Chip Griffin: And I would certainly encourage folks who are not regular listeners to your podcast to become listeners because you have a great array of guests on, particularly agency owners who have been there and done that and experienced some of the pains that I know listeners have as well as some of the opportunities.
So it is definitely worth a listen. And I think that I know I learn the most from just talking with other agency owners. I’m sure you do as well. And so I think one of the common themes that we do see is exactly what you mentioned, which is that many are accidental owners. I know I was, you were, it’s, it’s how you often get started in the business.
And so I guess, you know, as, as you talk to accidental owners, what do you, what do you hear as the common pain points that, you know, maybe most of them are experiencing that they need help with?
Jason Swenk: Well, I mean, the, the one that I think is the most is around clarity and it’s actually the most boring. Like, you know, I have an eight system framework.
I always walk people through, but the first system is really the most boring. It’s around clarity. We’re accidental. We knew how to do something cool. Someone offered us money and we started designing or, you know, started taking on clients. And then what we realized was it, we kept getting the same or similar clients.
Because we were based on referrals. We didn’t have any intention of where we’re going. We didn’t know what we needed to do. We just kept adding services, adding new clients. And then the next thing we knew we were, we created this great prison around ourselves because we were doing everything. We couldn’t delegate anything to our team if we actually hired people, because we never knew where the boat was actually going.
So now everyone’s coming to us for everything, and I, I almost took a job to kind of sum all this up. I almost took a job with NASCAR to be their CMO. And they asked me two questions, they said, what do you love doing every day? What don’t you hate, you know, you never want to do. And I couldn’t think of it in the interview, but I went home that night because I got to a point where we were a couple million in revenue.
And my wife said, just shut the agency down. You’re so miserable. You’re so miserable to be around. I think a lot of us have gotten there. Right. And so I took this interview, I came home and I basically wrote, started writing down everything I hated in the agency that I never wanted to do again. And then I started writing down everything I loved in the agency.
And what I realized was I can actually do this. And when I did this, that’s when the agency started taking off. So the exercise for all of you to do really quick, or, well, spend about a half hour, 45 minutes, take a sheet of paper, put your fist on the sheet of paper, draw a circle around it, spend 30 minutes or 45 minutes of writing everything you do not like doing or never want to do in the agency ever again.
And then after you’re done with that, write down everything in the side of the circle of everything you love doing. And then now this should tell you what your role needs to do. So you can build the business around yourself and then you can start delegating, saying no, using automation, AI, whatever you want.
And then you can get that, you know, that sense of peace and freedom back. Right. That we all wanted.
Chip Griffin: Yeah, I mean, it is, it is amazing to me how you can talk with an agency owner and, and they’re, you know, on paper, it’s a very successful agency, you know, doing great business, having strong profits, but the, the owner is miserable because they’ve allowed inertia to carry them forward to where they are and they haven’t taken the time to get that clarity to make intentional decisions about what the business is going to do for them.
Because ultimately, why take on all the risk and stress of having your own agency if it’s not meeting your needs, giving you the money you want, the kind of work you want, the amount of work you want, the flexibility, all those kinds of things. And so I, I love that exercise that you’ve suggested. And, and I think that if, if an agency owner is able to define their role effectively, they’re going to be more successful because they’re going to actually enjoy it.
Jason Swenk: Yeah. And you got to think about too, like. What types of clients do we want to work with? You know, what types of services are we the most profitable at? You know, if you think about if you’re only going to be paid on performance only after you deliver, which services would you, you offer? Who would you offer that to?
And that’s very specific, right? And then you can turn the agency around. And then you can start bringing people on that believe in the same values that you have, right? In order to really kind of catapult. Because at the growing and scaling, an agency is all about who, not how, and I’m not talking about just who you need to hire, but who do you need to become because your agency is only as, you know, it only scales as fast.
And up to the level that you’re at. So if it actually is at a plateau, you’re at a plateau. So how do you ups, you know, kind of upgrade yourself and get to the next level.
Chip Griffin: And, you know, as, as you work with agency owners and, and they’re trying to overcome this and try to figure out, okay, how do I go to that next level?
I mean, sometimes I find an owner who, who does have an idea of what’s outside that circle, what they don’t want to do, but they don’t really, they can’t figure out how to take that next step. So how do you counsel them to just think about, you know, making that incremental next step forward?
Jason Swenk: Well, they, they first need to know where, what’s that, like, where’s the destination, right?
I mean, that’s everything. Of like, do I want to build, and there’s no right or wrong answer. Do I want to build a lifestyle agency? Do I want to build an incubator agency? Kind of like Gary Vaynerchuk started, you know, VaynerMedia where it just kept building other brands. Do I want to build, you know, a business that I can sell one day.
There’s different ways that we need to go about doing this. And then that will tell you which different types of people do we need to bring in, in order to, you know, help us get there because we can’t do it all ourselves. So if you’re growing your agency right now and you’re like, Oh man, I’m doing all the sales.
I’m doing all marketing, I’m doing all, I’m doing most delivery, right? I’m doing, you know, all these other things. There’s only really kind of five roles as an agency CEO that you need to be. And I always tell people, it’s like, you got to transform from this, from an owner to a CEO, right? So first one, set the vision of where you’re actually going and communicate it to the team often. Like often.
Number two is all about coaching and mentoring your leadership team so you can build them up. And if you have more than five direct reports, you’re shooting yourself in the foot. Like you’ve managed teams before I’m like, because you have to coach them to where they want to be. And where are they, you’re helping them.
Number three, you should be the face of the organization. I know a lot of people, and that’s a whole nother conversation. People be like, Oh, then everybody’s going to want to work with me. Bullshit. Gary Vaynerchuk is a great example. He doesn’t work on any clients for his agency, but he’s the brand. So they need to have a face to the brand.
The next is building strategic relationships. Only owners can, you know, really kind of do that, get it to the next level. And then it really understanding kind of the KPIs or the financials. What is the most important metrics that I need to know if I was on a deserted island to make sure my agency was going.
So when you get those five roles, I’m going to tell you, you’re going to be completely and utterly depressed because you’re going to go into a meeting, right? Like you’re like, you’re laughing too, because I know this has happened to you. Right? Like, you’re like, Hey guys, you needed my help? No, I’m good. Hey, you need my help? No, I’m good. You go to another one. No, I’m good. And, and then you go home to your significant other and you’re like, Oh, it doesn’t, doesn’t need me anymore. The business doesn’t need you for the old stuff. It needs you for the new stuff, which I just explained.
Chip Griffin: Yeah. And it is, I mean, it is as someone who went through that evolution, with a couple of my own businesses, it is a challenge to shift that role because it is not just shifting your role. It’s shifting the mindset, right? And making sure that you’re not getting, you know, too deep into the weeds on some of the things that you had to be involved with in years one and two of the business, but now you need to be focused on something different.
So it does take some real concerted intention on the part of the owner to make that transition.
You know, I, one of the things that you mentioned was, you know, thinking about, you know, what’s your, what you want from the business lifestyle versus selling it versus other options as well. And I think, you know, there’s a lot of people who, you know, hear some of this advice, you know, you shouldn’t be building a lifestyle business, which I think is rubbish.
If that’s what you want, by all means, build it. And the reality is, frankly, most agencies. are more likely to be lifestyle businesses than businesses that you sell. They can sell, you sold yours, I’ve sold a business as well. You know, we, we, it certainly can happen, but I think that the expectations amongst a lot of agency owners are inflated as far as how easy it is for them to sell, what the sale looks like, how much money they’re going to get from it.
And so I spend a lot of time working with agency owners to give them a little bit of a reality check. So, you know, as someone who’s been there, done that. You know, what, what do you say to an agency owner who comes to you and says, look, I’m trying to, I got to get this in shape to sell it. Cause you know, this is, this is my retirement, right?
This is, this is my nest egg.
Jason Swenk: Well, you know, there you, it’s all about figuring out the right systems in, in the right order. Right. In order to get your agency to a point where you can sell. I’ll give you kind of how you can do really quick evaluations of where your agency’s at. So if you do want to sell.
For a significant amount, like there’s people that sell all day long and you see these ads from these people, I sold my agency and I’ll show you how to do the same, but they’re not telling you how much they sold it for or they just kind of transition. Right? So if you’re under a million in EBITDA, which is basically net profit, your agency’s worth anywhere from one to two X.
I’m just giving you a basic formula. So most agencies out there that are maybe a million dollars in top line, right? They think they’re gonna get a multiple on the top line revenue, the gross revenue. And this is the reality check for a lot of people. And if you look at their profitability, then it’s around a hundred thousand, maybe 20 or or a hundred thousand or 200,000.
So meaning they’re worth 200 to 400,000 in valuation. And a lot of times that’s kind of a kick in the gut, honestly. But if you can get over the million in EBITDA, then you can get five to eight X sometimes. And then the next level up is three million in EBITDA. Then you can start kind of calling it out.
Right? Like, so the other agency that I’m a part owner in, we’re a little over 10 million in EBITDA. So, you know, we can start seeing multiples in the 10 X, sometimes even a lot higher. And we bought, and you know, within that agencies, we bought nine different agencies in the past two years, I think… could have been 10, I’ve been losing track, but we’re looking at the net profit. But we’re also looking at how dependent is the business on the actual owners. So if they go away, what goes away with that? And so if you understand kind of the valuation formula, a lot of people look at, then you can go, okay, what do we need to do? And what do we need to set up? And in order to have an opportunity to sell, because Chip, you probably get these, I get these all the time too.
I’m like, Hey, I want to buy your agency. Okay. Oh, but we’re going to do owner’s financing, which means you’re going to pay yourself to give away your company, which is total bullshit.
Chip Griffin: Right. And I mean, the vast majority of deals that people hear about in the agency space are, you know, the, the, the terms are not great.
The total valuations. I mean, and even some of the ones that you see in the trade press, you know, you’ll see such and such an agency sold. And you know, you and I get to see the terms of some of these deals behind the scenes and we know they ain’t all that cool. You know, the the valuation isn’t great.
They tend to come with very heavy earnouts So, you know, it’s it’s not a guaranteed sure thing and also oh by the way, you have to become an employee of the acquirer for two, three, five years after the fact, which a lot of owners simply aren’t prepared to do. And so you need to understand what’s involved.
If that’s what you want, not to say it’s wrong or bad. There’s certainly good reasons to sell, but you need to understand what it actually looks like to get there.
Jason Swenk: My business partners get pissed at me all the time within the agency. Cause I talk out a lot of owners from selling. I’m like, okay, you’ve built this amazing agency.
You don’t work that much anymore, which tells me that the business doesn’t need you for all the old stuff. Kind of like what I was telling you, you’re making millions of dollars in profit that you can personally take away and, you know, figure out ways to not pay the tax man, why do you want to sell? What am I missing?
So I came up with like, and I tell people this, unless you need the money, unless there’s some kind of medical thing, or you just hate it. That’s the only reason you should sell. And then also too if you hate it I want you to have a plan and a very concrete plan of what you want to do next. Because if you just sell going I want the money Like you can create a business now.
Like people think I have to get to the 10 million mark to sell. That’s not the case. And they want to get to the 10 million mark because they think in their heads that, well, then I can go do X, Y, and Z and it gives me more freedom, but that’s not necessarily the case. So if you have that in mind and you mentioned the earn out, I’m going to tell you, like it costs me millions.
I, I did well, but I left millions on the table because I had bad advice from the business broker that we used that we hired after all these companies were coming after us. And like, we never saw that. Like earnouts are made to, designed to make you fail. So be happy with the cash and be happy with all that.
And then also too like, you mentioned it, you got to be an employee of this company, right? So make sure like you like the culture, make sure you believe in this. It’s hard because a lot of us have been doing this for a decade or whatever, however long, if you’re younger and you’ve been doing it for two years and three years.
Or at least three years, it might be a little easier for you, but, you know, for some of the old farts like us, you know, working for someone is going to be a complete nightmare.
Chip Griffin: Right. Yeah. Very, very difficult for sure. You know, I, you mentioned people wanting to sell because they hate their business or hate being in that business or whatever.
And I, you know, I, and I see that a lot as a motivator to sell. And I think that one of the key things that they need to do at that point is figure out what do they hate? Right. You know, use that exercise that, that you suggested earlier in this episode about, you know, writing down what it is that you don’t want to do and what you do want to do.
And, and is there, can you change the business? Can you evolve the business so that you don’t hate it? Because I will tell you that taking a successful business and evolving it Is a whole lot easier than starting over in most cases, unless you’re going in a completely different direction, you know, hey, you know, I want to be a fly fisherman now or something like that, you know, you want to just go hog wild in a different direction.
Then, you know, maybe starting from scratch is better, but more often than not, if it’s anything like the current business, you’re going to be better off taking the success that you’ve had and moving in that direction from that place of success.
Jason Swenk: Yeah. What, what I’ve found is agency owners, their risk tolerance changes over time. Like in the very beginning, we’re not risking very much because we’re nothing, and then we, we, we start building it up a little bit more, you know, it, it actually like we have more to risk. And then, you know, as life progresses to like, we start acquiring more assets, you know, a family, all this kind of stuff.
So it puts more pressure on us. And then when the business kind of starts plateauing because we plateaued, right? It only grows up to the level that you’re leveled up at. They don’t have a strategy for scaling themselves, scaling the business or any of the other things. So then they get worried and they think.
It’s kind of like Tommy Boy, right? Like when he’s doing like the, he’s crashing the car. It’s like, Oh, let’s look at the person with the other brakes and like starts ramming them. And, and that’s what we feel our business is like. We’re on fire and it’s going to burn down tomorrow. And there’s a lot of uncertainty there.
So we’re like, we need to get out. We need to find a new business. We need to go do software. Like I can tell you after I sold my agency, I went to go build an iPhone app. I hated it. The grass is only greener on the side you water. So just remember that, but you, like, if you come up with, you really think where you want to go, how do I level up?
What are the strategies I need to put in place or what’s the plan? If you come up with a plan, I don’t care if the plan works or not, you’re going to have so much more certainty and take away that uncertainty in order to make the right decision. So then you’re inspiring your team rather than demotivating them because you suck.
Like, because your mentally attitude just sucks. And it just brings down the rest of the team. Like we’ve all gone through that. Like all the business is going to shitter and like, we’re blaming all the people and they can, and your whole team senses it. And that’s just a collision disaster. You know, going down to the bottom.
Chip Griffin: Well, I like what you’re talking about in terms of a plan too, because I think that, you know, having a plan is reassuring in and of itself, but more importantly, it’s the process that you go through to create the plan. Yeah. That is what makes the difference. You know, I, I often have a business owner will say to me, you know, do I need to put together a business plan?
Not really, because as soon as you put it together, it’s going to go on a shelf and you’re never ever going to look at it again. But the process that you go through to think through what does the business look like, what direction is it going, all of those things, that process is really important and does help lead to your success.
So, have the plan because of what it takes to do it.
Jason Swenk: I’m glad you mentioned, yeah, because I hate business plans too. Like if you’re just doing a business plan to do a business plan, they’re dumb.
Chip Griffin: They’re stupid, but the process does make you think about things. But just don’t think that this is something that you need to, you know, pull out as your guidebook every week and say, well, you know, in paragraph seven of page three, we said we were going to do this, let’s do this.
Jason Swenk: I mean, you know, it’s like what we’re talking about. Everyone is like, if your business was based on referrals, which just isn’t scalable and it’s just kind of leveled off. We’ll, we’ll come up with a plan of like, how can we generate leads? How can we generate more awareness? Oh, I need to create a content.
Oh, I need to create a podcast. Cool. Like that’s the plan. That’s going to give you the confidence you need to get that momentum, to get that ball rolling up a hill. So then you get to the top and then, then it’s easy sailing. You’re just, you know, you’re pushing it downhill. So.
Chip Griffin: Right. Well, now that you’ve mentioned leads and we’ve talked about people, you know, wanting to get out of the business because they hate it.
A lot of agency owners want to get out of it because they hate having to sell. And, and so they say, you know, I just, I need to wash my hands of this. And, and so, you know, I know that you have agency owners coming to you and saying, Hey, you know, I, I, how do I get it to the next level? How do I, you know, increase that sales engine?
Or worse, you know, Hey, I just lost a whale client. You know, I, I need to replace them tomorrow. How do I do that? So when, when, when an agency owner is coming to you with these challenges, you know, how do you counsel them?
Jason Swenk: Yeah, I look at it as a healthy agency or the perfect agency has a multi channel approach for generating business, right?
They have an inbound strategy for putting out helpful content that’s making people aware and then bringing them and then making them trust. So then when they chat with you there’s no selling. I never sell anything. I’m never trying to convince anybody of anything and neither is any of my team. But they’re coming to us because they’ve seen some of our content talking about how to get the budget 99 percent of the time.
So then they don’t waste time with the wrong prospect. Or, you know, we’re putting out case stories of people that had success from X, Y, and Z. Marty’s a great example. He’s in our mastermind. And we basically told him, I said, and he goes after big brands. We said, let’s do some remarketing ads of just the success stories you had from your brands.
About months went by, a large airline called him, brought him in and he goes into the pitch. And they literally don’t really ask questions which is a bad sign, right, when you’re pitching. You’re like, oh crap, I didn’t get this thing. And they go, when can you start? And he’s like, oh, really?
This was horrible. Like there was no back and forth. And he asked them about like three months later, after like they signed the deal and everything, cause you don’t want to jinx it. Right? Like, why are you going with me? And he goes Hey man, I watched all your videos. We’ve watched all your videos. We know you can do it.
So creating an inbound strategy, putting out the content. Second one is an outbound strategy and please do not hire those companies that promise you 10 appointments guaranteed. I’ve never seen one of them work in past 25 years. I think you could probably agree too, Chip, right? It’s just that’s a whole nother story. But what you can do…
so like, for example, I’ll give you guys a strategy. If you’re a B2C agency and you’re trying, let’s say you’re selling say you want to work with brands in the beauty industry, makeup. Well, what I would do is let’s say this was lipstick. Let me get a pen. Let’s just say this was lipstick. So I would make a list of all the brands that I want to work with that I can help.
That can pay the price that I need. I don’t care how big they are. I want you to buy their lipstick, buy their product. Then what I want you to do is identify the decision makers. Then I want you to create a video, create a note, create whatever it is saying, Hey, Chip, I just bought your lipstick. I love it.
And you’re holding it up. So they know your customer, you might put it on or whatever you want and saying, you know, I love your product, but I felt like something felt short on whatever stage it was. I would love to kind of just tell you about it. Let me know if you have five minutes to jump on a call.
I can promise you, we did this left and right. I interviewed people from international hotel group, IHG, the CMO. I said, how do people get your attention? They’re like, call me up with something unique. So come up with an outbound strategy for that. And then the third is strategic partnerships. Look at the people going after your audience.
It doesn’t, it could be your competition. It could be technology companies, publications, associations, whatever it is. See how you can actually help them. And two plus two equals 80 versus four, right? Mm-hmm. And that’s how we landed LegalZoom, because we were one of the best partners in the world for Sitefinity.
We landed Hitachi because we’re one of the best partners in the world for Microsoft, because we built these relationships that goes back to becoming the agency CEO. So those are the three channels to really create a pipeline for your agency where you can pick and choose your clients.
Chip Griffin: Well, I think we’ve covered a tremendous amount of ground here in just 25 minutes.
We’ve talked about everything about why you want to have the agency to exiting it, to operations and processes, to sales. So if someone though is interested in, in learning more and accessing some of the resources that you have available, how can they learn more about you?
Jason Swenk: Yep. Two, two places you go, you can go to agencymastery360.Com. We have tons of resources out there. And then if you want to make sure that we’re sending you that information, go to swenk.it. So S W E N K dot it. So you got to swenk it.
Chip Griffin: And as you always sign off your videos, have a swenk day. So Jason, I really appreciate you taking the time to share your, your insights and wisdom with the audience here.
I’m sure that many of them will be checking you out and, and I hope that they’re all subscribing to your podcast and your lists and all that, because there are lots of great. Resources available there. Again, my guest today has been Jason Swenk and my name or sorry, and this has been Chats with Chip.
Thanks for joining us.