Scaling Agencies from 0 to $1M to Exit with John Doherty

[00:00:00] Speaker A: Everyone says that getting clients is the hardest part. If you don't want to talk to clients, you're in the wrong business. [00:00:04] Speaker B: A lot of people want to create agency businesses. Agency is not that business. It's a lot of work. [00:00:10] Speaker A: I mean, getting the right type of client coming in. So once you have them in, you have to deliver what you said you were going to deliver. You weren't born to sit in traffic, work for approval, or wait for Fridays. You were built to be free. Welcome to Rich and Remote, the show for the ones who dare to do life differently. Here we talk about building businesses that give you choices where you work, how you live, and what you create. This is for the entrepreneurs who crave freedom, financial freedom, location freedom, and freedom from everyone else's expectations. If you're ready to design a life on your own terms, you're in the right place. Rich and Remote, hosted by Alex and Carla Booth. [00:00:56] Speaker C: All right, welcome, good morning to Rich and Remote. Today it's starting to get super sunny here in Playa del Carmen. It's starting to get hot and humid. So we are taking advantage and staying indoors as much as we can. So it's very likely we are going to finish all of our episodes for the year just this summer. So we have a special guest here, but of course, Alex, welcome. And how are you? [00:01:21] Speaker B: I'm good. I'm loving it. New guest and also we're. Yeah, like you said, we're stuck inside, so might as well make the most of it. [00:01:28] Speaker C: Yeah. So our guest is actually our mastermind brother in one of our masterminds. He's a very well respected guy and every time we see him, we always share smiles and really good stories about agencies. He is the business coach that agency owners call on when they've hit a plateau and don't know how to get past it. With 10 years of experience building and selling two of his own agencies and paying hundreds of thousands of dollars to coaches to teach him along the way, he. He now does the same for his clients. With a deep background in digital marketing, specifically SEO, he knows how businesses work online and he loves guiding founders to build a business that they love. So, ladies and gentlemen, welcome. John Doherty. [00:02:13] Speaker A: Thanks, Carla. Thanks, Alex. I am super excited to be here. It's not as humid here in Denver, Colorado, but it is absolutely beautiful today. So I actually got out for a walk about two hours ago and it was lovely. [00:02:24] Speaker B: Is it true that Denver or Colorado has like 300 days of sunshine? I keep hearing that. [00:02:29] Speaker A: I think it's 310. So 310 days of at least two hours of direct sunlight is like the technical definition. But yes, it is sunny as anything here. [00:02:36] Speaker B: Yeah, we gotta check it out. I'm a super big snowboarder, so all the big resorts are there, Carla. And then you love sunshine. It might be like the perfect combination for us. [00:02:45] Speaker A: Yeah. Come on. Yeah, well, or up or something. I don't know. Wherever you are at the time, up [00:02:49] Speaker C: or down, isn't Denver also like the healthiest big city? Like least amount of obese people or something like that? I think we watched a video about this, Alex, and Vancouver has the cleanest air for a big city. So I remember those two things. [00:03:04] Speaker A: Vancouver's beautiful too. It's rainier than we are here, you know, but by the water. So I feel like if I had to move to a city not in Europe, I would move to Vancouver because it's fair. You got mountains, you got ocean. It's Canada. It's pretty, you know, everyone's nice. It's not bad. [00:03:19] Speaker B: Yeah, you can be at the ski hill in Vancouver in like 20 minutes. Mount Seymour is right there. And then you got Whistler, you got the ocean. Yeah, it's amazing. [00:03:27] Speaker A: It's not bad. [00:03:29] Speaker C: Let's get to the meat of this sandwich. So I know a lot of people are thinking of starting agencies especially as their first remote business or they have already started one, but they don't know how to properly grow it or, or even structure it. So, John, as someone who's worked with agencies at multiple stages, what separates the agencies that become sellable assets from the ones that are just glorified freelancing businesses? [00:03:57] Speaker A: Yeah, it's a good question. So I would also say that, like, there's nothing wrong with a glorified freelancing business if, like, you love what you do, you know, you love doing it, you're really good at it, just doing that. Having a high paying job is not necessarily a bad thing. Right? Like doctors are highly paid in their jobs, like the lawyers are highly paid in their jobs. Like, it's not necessarily a bad thing. I think where people get frustrated with it is when it's just a job without the high paying. So if you can make it. I had a post, I don't know, a couple months ago on LinkedIn that I said sometimes it's better to have a highly profitable $400,000 a year solo business than a $2 million a year agency. Just because in service businesses it can be really, really hard to have a good margin and to make good money yourself. And you Just feel like you're working just to pay everybody else. You're not actually getting paid. So. But the thing that separates agencies that are able to scale from the people who are not able to scale it is basically, are you able to charge market rates, Are you able to get great clients, and are you able to keep those clients around? And then also are you able to hire a team that you can keep around as well? So the thing that kills agencies is churn on both sides, talent and clients. People really only think about the client side and to be honest, like, front of house stuff, positioning, business model, marketing, sales, like, that's what I specialize in, to be completely honest with you. But I've also gotten very good at client retention over the years and we did some really interesting stuff with my last agency to improve that so we can talk about that more. But basically, like, if you can retain, if you can sign clients, you can retain clients and you also have a team that can keep them happy. So you're not doing all the things. That's two things. It's the best agency to run and it's the best agency to sell. So I always tell my clients, like, no matter which one they're wanting to do, and I always ask them before they come on, I'm like, what's your goal? Do you want to grow it and just like make a ton of profit or do you want to grow it for three to five years and sell it? It's kind of half and half, but everyone wants growth. And I'm like, you know, no matter what they say, I'm like, guess what? The good news is, no matter which one you want to do, we build the same thing. And then at the end you have optionality. [00:05:47] Speaker B: I. I'm a retention nerd. So, like, as soon as you brought up like, you're getting really good at retention, I. I immediately want to dive into that Carla interrupt me and have us go a different direction if that's the case. But like, I'm curious, like, what was the biggest kind of like retention play for you guys? I can talk about this all day. So just like super curious, like, what worked for you in agency space? [00:06:08] Speaker A: Y. So there's. There's a couple parts to it. The first one is, are you, do you know exactly who you're targeting and who you get the best results for and are you charging them enough? That might sound weird to say, but if you're charging too little, you're going to get people that are just signing up, taking a chance. Oh, sure, I'LL try it out. It's not that much money. The minute you start hearing that, you got to raise your prices significantly because the people who are the best clients, they value it the most. And so if you're charging like, you know, basically you can make them a hundred thousand dollars in the next year and you're charging 10 to 15% of that is about kind of the sweet spot for people. So charging them 10 to $15,000, they' to appreciate the work way more than something you're only charging like $3,000 for the year. It sounds cliche, but it really turn really does start at the beginning and getting the right type of client coming in on the back end. So once you have them in, I mean, you have to deliver what you said you were going to deliver, right? It's just first and foremost. But Alex, have you ever read the book Never Lose a Customer Again by Joey Coleman? [00:07:02] Speaker B: No, I haven't. It's on my short list of reads, so. [00:07:04] Speaker A: Okay, so it needs to be at the top of your list. Joey is a personal friend of mine. Love Joey. He's a great guy. He and I are in a Mastermind together. I'll be seeing him in IR Ireland here in a couple weeks. And how to Never Lose a Customer Again. I remember listening to it on walks. I was doing 75 hard back in like 2021 and was like listening to audiobooks. And so I remember listening to that. And then actually I met him right after I sold my first agency in Costa Rica. I was like, what do you, what's your name? Joey. What do you do? Oh, I write books. What have you written? Never Lose a Customer Again. I'm like, you're that Joey Coleman. So he's become a buddy, says it, it was really cool. But basically in that book he has some really like great strategies for retaining people. So at Editor Ninja we had, it was basically the design pickle of content editing. So I sold it to Proof to our largest competitor back in December to go all in on coaching. But we started off pretty low priced, right, Just to get clients. It's kind of where everybody starts. And over time we, you know, we raised our prices, we kept getting better and better clients. It was like, you know, I, I was hearing that like, oh, I'll try it out, right? Someone would sign up, pay us like 700 bucks and we'd never hear from them again. And then they turn two months later and ask for a refund because I didn't use it. I'm like, what is going on here? So basically with that, what we realized was, and I learned this from Joey is we didn't so like signing them and onboarding them and then there's activating them. So one thing that we did was we actually started doing an onboarding where my head of operations would do that call. We would get their first like document piece of, you know, content in into our system and we'd get it back to them the next day. So we shortened the time to them actually seeing some output from us and we found that that made them stick a lot longer. So there was that one second one was we got connected with them on Slack. So as soon as they signed on, we sh. We set up a shared Slack account. So we got them set up on Slack. Here's your account manager. Here's your editor. Like the team was in there. They had direct access. This also took me out of the account management loop. So I didn't do any account management for the last 18 months of the business, which is frigging awesome. I love it. And then the third one I also learned this from Joey is we sent them a swag package. We'd send them a box, cost us about $34 in materials and then another 10 to 20 kind of depending on where we were shipping it to. This is about 55 to 60 bucks per we. So we would send that out. They would get it within two weeks of signing. And it was like a notebook. I'm right here was a red pen. Editors use red pens. Their name is branded. Of course. We would send them a coffee mug and like a couple of other things. We did the same thing for our editors. Like our employees, by the way, they just got like slightly nicer stuff. And basically by doing those three Alex, we over doubled lifetime value. [00:09:20] Speaker B: Wow. I. I love. [00:09:21] Speaker A: Average client went from three months to seven months and price was like 40% higher as well. And it just like the business just took off. [00:09:27] Speaker B: I love that you said, you know, it starts right up front. Right. Retention starts right up front. I'm a huge fan of what I call time. The first win. Right. Like measuring how fast can I get them value. The faster you can get them value, the less likely they are to churn. But I also love that you mentioned, like, delivery is a thing. So even though you're raising your prices, that means they're going to be more engaged, they're going to be more invested. Right. Which is super key. If you can't get them to engage with you. If you can't get them to show up on your check ins, obviously, you don't know if they're at risk of churning. You don't know how to prioritize. So that solves one problem. But then you gotta be able to deliver, right? And I love that you brought that up, but I'm a huge proponent of time the first win. I just got my first opportunity to speak at DC Mex last week and went over time the first win, creating a North Star. So, like, gathering their goals during onboarding, correcting the expectation gap. So clients, no matter what business you have, they're going to have incorrect expectations coming into a business, whether it's sales that sets them or themselves. And you got to be able to close that gap. And I, I just, I love this stuff. So I'm like hearing you actually mention this and say that it was successful for you and then you actually were able to exit a business. Like, guys, this is exactly what I've been preaching. I'm not full of bs. This stuff works. [00:10:39] Speaker A: Yeah, yeah, yeah, yeah, yeah. And the expectation one is huge. And I've. I've been accused of being a little too, like, rigid up front, but I'm like, I'm just communicating. Like, I'm telling you what's okay and what's not. And like, I have no problem holding my own boundaries. And I'll just, I'll tell you, like, hey, these are like, you know, even with my own coaching clients now, it's like they get async access to me, but only between 9 and 4 mountain time, Monday through Friday. Like, I had a client yesterday. I. I love this client, but he sent me like four messages yesterday afternoon. And I'm like, it's Sunday and it's Mother's Day. Like, I responded this morning and it was totally fine, right? And I just, like, just asked me about something that's like, we, We've become friends over the last, like, number of months. It was like, kind of tangential, but, like, kind of a fairly big decision just for like, business expenses. And so I was like, look, dude. He's like, it set a boundary here if you need to. And I'm like, I'm good at setting boundaries. Like, don't. My only boundary is I don't reply between nine and I don't reply other than between nine and four. And I definitely don't reply on weekends. So. [00:11:33] Speaker B: And when I've told people, you know, get them on slack, we do that with our clients. Whether. And if they don't want to do slack, it'll be WhatsApp. And when I tell People to do that. They're like, well, I don't want to be talking to my clients 24 7. Or have them have the expectation I'm going to respond, well, then have a backbone and, like, set the boundaries. Like, they actually respect that. They, like you earn trust by setting those boundaries. [00:11:53] Speaker A: Yep. Nine to four, Monday through Friday. One business day turnaround. Often it's the same day, but sometimes it's not till the next day. And you know what? And if it's after like 5pm, definitely. Sorry, I'll get to you in the morning. You too, should be off, you know. Yeah, exactly. I don't know clients overseas that are like waiting. I have some in the uk, but it's like, you know, they're not pinging me at 5 o' clock my time, it's midnight for them, they're going to bed. So. [00:12:14] Speaker B: Yeah. And clients will eventually try to abuse that, open that streamlined communication of like, everything's on fire. And that's where having a backbone comes into play again too. You got to reset expectations. This isn't a fire. This isn't working towards our main goals that we discuss during onboarding. Right. Like, so it's just like, that is really important. [00:12:32] Speaker A: Yep, Yep. [00:12:34] Speaker B: Carla, I nerded out for a second. What do you got for us? [00:12:37] Speaker C: Yeah, well, for me, I think it's also not a lot of clients are mean or like, they want a lot of your time. What I noticed is that some of them are actually just newbies in this work thing, in this business thing, and you have to teach them. So I always tell my CSM team to properly, like, assess if the client is being an asshole or do they just not know what to do? And maybe in their own, like, the way they work is. That's how they work. I have clients that would text me at midnight. I have clients who admittedly told me that I'm an insomniac and I just work better at midnight. Cool, no problem. I'll turn off my notifications. As long as you don't expect a reply from me. And they're like, yeah, oh, no, I don't. I respect that. I'm just telling you, if you get a text from me, that's just me. So. [00:13:22] Speaker A: Yeah, totally, totally. [00:13:24] Speaker C: Yeah. And I guess at the end of the day, like, the word exit, exiting your company sounds like a very big milestone. And I think that a lot of people, for a lot of entrepreneurs, that's always an exciting possibility in the horizon. So what is the biggest misconception agency owners have about preparing for an exit [00:13:44] Speaker A: that's going to solve all your problems in your business. It's not. It's not. I mean, aiming to exit does solve a lot of problems in that, like, you know, because you got to fix churn, you got to fix lead gen. You got to get yourself out of a lot of the day to day get yourself out of delivery, like all of that stuff. If you want to sell it, that's what you ultimately have to do. But you also. But you don't have to do that from the start, by the way. Like when you're just getting started. I know people that they're like $3,000 a month and they're like, how do I outsource delivery? I'm like, you don't. You add a zero. And then we could start talking about like getting a little bit of delivery off your plate. Like that's how you get delivery off your plate. Right? You don't do it from the start. People are sold. This like, dream of like a business, a service business that runs itself. I'm like, I'm sorry, most service businesses are like restaurants. Like it's not going to run itself, you know, at least like at the start for sure. And it's definitely, it's definitely going to require people digitally. You know, we've got AI and such now, which can help us out a bit. But like, you're still gonna need people, you're still gonna have people problems anyways. I digress. The biggest thing that age, that people who are growing agencies get wrong about like exiting is they just don't grow big enough. And so. And they don't know what their number is in order to like not have to work again. I made this mistake with my first agency, I'll be completely honest, where, you know, we were like mid six figures and the business was pretty steady. It hadn't really been growing for a little bit this 2022. And so we'd like come off kind of the COVID high and then it's kind of like doing this and you know, AI was starting to do its thing and I sold it to private equity. I got a good multiple on ebitda, which was great, but it wasn't enough to retire. And I also didn't realize how good the cash flow was and I didn't realize how hard it was going to be to build a second agency. I did build the agency to that same, about that same level, about three times as fast. But it wasn't like I could just ride off into the sunset. I did basically Take the next six, nine months off, Something like that. You know, I was super burned out. Didn't even realize it till I sold. So, like, was able to recover and, you know, do lot of that, but I still had to work and so kind of depending on, like, what your lifestyle is and. And all that. Yeah, sure. If you're living in Bali and it's costing you 1500 bucks a month to live, you know, multiple six figures in your pocket, you're going to do okay, right? You can last off of that for quite a while. I live in Colorado. I'm married. I have two kids. I have two houses. I have two. Two nice German cars. Like, I couldn't retire, you know, So I think that's something that people, like, really don't understand. And actually, like, the cash flow can. If you build it right, the cash flow can be pretty great. And I think we can often. I know I undervalued that. Let me put it that way. Like, it really, really is about cash flow. So, yeah, I. I think those are kind of the things that people get wrong. And they also underestimate how long it's going to take them to get the next thing going if they need to start the next thing Right. [00:16:17] Speaker B: Did I did hear that a founder never feels kind of more broke until after they've sold their business, surprisingly, because of that cash flow, right? Like, you can get a $50 million check, and then all of a sudden you're starting to penny pinch a little bit and be a little bit more worried about money, even though you just got that big check. And I never thought I heard that on my first million. I think last week I was listening to a podcast, and that surprised the hell out of me. [00:16:43] Speaker A: Yeah, it's. It's true. Well, because, like, we're taught in. Even in the business world, we're taught to invest, we're taught to spend. We're taught to, like, bring on people like, oh, I'm investing in my business. Most investments we make in our business, I mean, the. Ian or Dan was talking about this on the Tropical MBA podcast just last week. Like, most of the investments we're making, our business aren't returning us anything. They're actually expenses. Like, they're actually costing us money. So that's something that we have to look at. And yeah, we've never, like, everyone's been taught, you know, save, save, save, make more. Which is, like, not necessarily bad advice, but it doesn't work once you have enough assets that then, like, yeah, the cash flow is cut, but you got 30 million. I don't have $30 million in the bank. But like you have $30 million in the bank, like, you can start just drawing from that and have even more ca. Like, cash flow is just coming from a different place. Right. But people don't know how to think that way. And so I think it's similar like with an agency. It's like we're, we're always like, grow, grow, grow, grow, grow. But the question is, why? And like, what are you getting back from it? So like, you know, I have a coaching business, mid six figures a year. It's like 62.5% net profit. Like, it's great. It's an awesome cash flow business. And I get these people that they're like, well, why don't you go to a hundred? I'm like, if I can go to a hundred and work the same amount as I am and have more impact, like, sure, I'll do it. But like, I'm not going to go to 100 and have less profit and have all these people and all this and complications going on. Like, I'm just not going to do it. Like, it's just not worth it, you know, like, I'm good where I am for now and at some point my ambition is going to get the better of me and I'm going to keep growing it. But like, I know that about myself. But for now it's like, man, the cash flow is so good. Like, why would I screw this up? You know, it's also my third round on a business. So like, you know, for first time people, I get it. But like, you know, sometimes you have to learn these lessons by going through the pain, which I definitely have. But you know, that's where I've arrived to now. [00:18:22] Speaker B: Would you say, like, if getting into like close to an exit, would you almost like line up your, your next venture before you even. I don't kick things off with the acquisition. I'm just curious, like, what would that learning be? How would you apply that learning now? [00:18:36] Speaker A: Yeah, I mean, I did that on both. [00:18:38] Speaker B: Okay. [00:18:38] Speaker A: Before I sold Credo, which is my Legion company, I had started Editor Ninja about year before. In retrospect, I was burned out. I was also like getting the entrepreneurial itch and like it was really, it was really hard to grow. And so I was just like, I need to do something else. Right. It's like, you know, I mean like, like they say like in the past you were rewarded for starting something new. And so like, as entrepreneurs were like, well, stuff's hard. You know, my job was hard. I started something and it worked out. So like this is hard, so I'll start something. And you know, and so like Editor Ninja was, was going, was already going. And so I like wanted to work on that more. It was growing, it was taking more of my time. So I was like, all right, let's sell this. Have the opportunity to sell it it. And then with Editor Ninja, basically about a year ago last summer, like last July, I've been wanting, I've coached off and on over the years and you know, was coming up on almost on 10 years of running, done few agencies and was like, I'm just tired. Like I don't really have the drive like to grow this thing and like be doing all the things I need to do just to grow it and be fair to the team and all that too. And so I just kind of tossed it out into the world. I literally put out one LinkedIn post and it got, got 27,000 impressions. It got like 150 likes. And in six weeks I picked up seven coaching clients and built a six figure coaching business. Wow. And I was like, okay, universe, but I've been putting in the work for 15 years, man. Right. Like, it wasn't like, it's not an overnight thing. It's like I've been putting in the freaking work, traveling, blogging, doing all the things for a long time. So I, you know, Bob Proctor says there's a, there's a time to sow and a time to reap, but you can't do both in the same season. Right. A season sow and a season to reap. Right. So, you know, I've been sewing for a really long time and you know, that was like, okay, now I can reap some. And yeah, so, and then I was like. And so basically the next couple of months was like, can I keep getting clients? Are clients getting good results? Do I enjoy it? And the answer to all three just became yes. And I was like, okay. So then, you know, it was time to figure out what to do with Editor Ninja. I was like, I don't want to keep doing this anymore. And so I was just going to shut it down and then got the opportunity to sell it. Like I was literally just going to shut down a multiple six figure a year business to go do something else. [00:20:29] Speaker C: Yeah. [00:20:29] Speaker A: Because I was tired of doing it. Right. Like, I'm great at helping people who want to do that now. I don't want to do that now. And I'm completely comfortable saying that I've [00:20:36] Speaker C: heard about that sentiment from a few people. Right now. It's almost like seven year itch or something like that. Like a version of it. So if someone has a high mrr, like business, like for example, Alex and I, we both have different businesses, both make seven figures and like high MRR and pretty consistent good retention, everyone's happy, employees are happy. What would be a prompt for me to remember or people for us to remember if we're going to consider like exiting that the number one reason is really just like burnout or like, I want something different? [00:21:12] Speaker A: Yeah, I would. You should ask yourself, am I considering this because it's hard or because I'm ready for the next thing? Am I running from or am I running to? [00:21:20] Speaker C: Good. [00:21:20] Speaker A: Yeah, that's the thing. And if you sell because you're running from, you're going to regret it if you know what you're running to. Even if, like, get seven figures in my pocket and take the next two years off. Right? Like, that's two. That's not from. That's two. Right. That's totally, totally, totally fine in my mind. I mean, y' all do what you want, but that would be like my recommendation. Just am I running from or am I running to? Because often people will be like, like, I've got clients that they're like, they're starting to grow. Like, they're. I've got one client that he's like, consistent. 65, 70K months. Had his best ever month last month and he was telling me that feels like leads are slow, feels like cash flow is slow, and we pulled it up. I'm like, bro, that's 25% more than you've ever made in a month. Month. And he's like, what the heck? I'm like, yeah, this is why we trust data. Not feelings for this sort of stuff. [00:22:00] Speaker B: Right? [00:22:00] Speaker A: Feelings matter. But like for finances, let's. Let's trust data. And he's like, okay, cool, that's great. What if I went and did this other thing and started this new brand? I'm like, no, no. Like, this feels hard right now because you're going to the next level because you're punching through to where you said you want to go and your internal thermostat is telling you this is not safe and I'm scared and I don't know what to do. What you know how to do is launch new offers and get them traction. So, like, that's what your body, that's what your nervous system literally is telling you to do. But Actually, if you sit in this discomfort, your nervous system is going to recalibrate and you're going to get used to it, and you're going to grow into something bigger and not add all this more chaos to it. So that. That's usually how I, like, talk people back from the edge. And sometimes, like, depending on the person, I'll just. I'll let them go and, like, and do it. I'm like, you know what? Go explore that. Go have a few conversations, see if you can sell it. And then, like, three days later, they come back, they're like, I had two conversations. People won't buy it. I'm like, cool. Like, they probably would if you'd spent longer than two days on it. But, like, now you know that, like, this isn't actually what you want to do, and you actually want to do this thing that you were telling me that you don't want to do, or you weren't even that you were just saying that you were bored, right? Or you just, like, don't know how to handle this new level of abundance, you know? So, yeah, that would be my advice. [00:23:04] Speaker C: Yeah, that's really good. [00:23:05] Speaker B: I don't know if you've experienced this since we created this podcast. Like, it's. It's called Rich and Remote, Right. And that it really is promoting the remote lifestyle. A lot of people want to create agency businesses, and then they have this idea that they're going to be digital nomads and traveling all around. And I don't know if anyone's taken away from what Joe's been saying. Like, it is. Agency is not that business. It's a lot of work. Right. And that's why, like, Carla and I, people think of us as digital nomads. We go from Mexico to the Philippines, back and forth, right. If there's a little trip in between, that's it. And that's already hard enough. So it's like, I feel like a lot of people might be. Have created a really strong agency and they want to build that life. That could be, like, their reason why of wanting the sell, wanting the change. And so I'm starting to see a lot of people create. Use their cash cow as an or their agency as a cash cow, and then start trying to create some SaaS, trying to create some E commerce, anything that would allow them to be a little bit more mobile. But I think, like, the general sense, like, I've never seen someone create an agency business and successfully have the freedom, like, to be like, a full digital nomad. How about you guys, I did it [00:24:11] Speaker A: a bit at the start. I wasn't, we weren't full time, but I had, we had months where we would travel, you know, but we would also spend a few weeks in each place. Like one year we went, we were in Barcelona for two weeks and then went. I used to live in Switzerland, so I went there for like a long weekend and then went to Chamonix in France. Skied in the morning and worked in the afternoons. My wife's like, we're in tech as well. So, you know, we did that another year. We actually did an around the world trip. My wife was taking a little bit of a break between jobs when we were leaving San Francisco and moving here. It was almost 10 years ago and we went Prague. So I worked in Prague, in Budapest because we were there for four weeks. We had like a weekend in, in Vienna and then I didn't work in Tokyo, in Japan. But like that'll also show you. I mean, I've had 9pm doing sales calls from a second bedroom in a, in an apartment in France. Like nights. Like that's the real right there that people aren't showing you. You know, I've had very few, like, I've done some like, you know, at the beach, answering emails and such. But like, yeah, I mean y' all are literally living in it. That's like 1% of the time, you know. So yeah, it is really hard. And those like I had like a couple part time people really like, for me, the goal with an agency is to build it so that you can take like a full week to two weeks off and it not fall apart. Yeah, it might grow, yeah, it might not grow, but it won't fall apart because someone else is kind of running it and you get, you get pulled into a couple little things. But like, that's fine. I'm happy to do that. But yeah, take a month off. You're not gonna do that from an agency, especially when you're small. [00:25:31] Speaker B: I totally agree. And like those, the times where you really get to test your team and like see if they're going to be the ones that are stepping up, they're the ones taking over. And like, I love those opportunities and I feel like as an agency owner you need to have them in order for your team to take on more responsibility. It's almost a necessity. Right. For mental clarity for you, but then also for the team to step up. [00:25:51] Speaker A: Yeah, I mean, I know it's been out for what, almost 20 years, but like the four hour workweek is where I learned this from about like, you know, he was basically like, you have. And then like you have up to like, like whatever, a hundred bucks, like to solve any problem. You know, Dan Martell talks about this too, where he's like, anyone can spend 50 bucks to solve a problem. Anyone at this level can spend 500. Anyone at this level can spend 5,000. C suite can spend 50,000. Just like giving them that freedom just to solve problems. So then you don't get pulled into it, right? If, like, if the cash is there and it's worth it to keep a client, like, yeah, like let you know, keep an eye on the expenses, of course. But like, yeah, there's definitely something to that, Alex. But yeah, like don't get into an agency business expecting to like, like not talk to your clients. Like anytime someone tells me that like they don't want to talk to clients but they want an agency, I'm like, you're in the wrong business. I'm sorry. [00:26:37] Speaker B: Yeah, exactly. [00:26:38] Speaker C: Better build a SaaS. [00:26:39] Speaker A: Yeah, totally. Yeah, yeah. And even then you got customer support, right? But like, don't. Wrong business. But like agencies, I mean, it's a great, it's an easy business to start. If you have a high value skill. It's an easy business to start. Everyone says that like getting clients is the hardest part. I actually don't think that's true. I also say that as a professional marketer, like if you, you work hard enough and build relationships, right? And like are willing to produce content, write stuff online, like you can get clients. It's not that hard. The hard part is like sales, getting them in and then keeping them around. And I mean we started off with churn, right? Like keeping them around is, is the hard part. But like if you don't turn people out, like your business is flat by default and then each one new one you add on, your business is going to grow by default. As opposed to like I had two turn, now I got to cover it. Like that's a really hard business to run. So. [00:27:23] Speaker C: Yeah, I, I see that. And then I think now we are moving to the other part of the conversation. So earlier there was like sales and churn. Let's talk about team management. So what are some of the, what is the first hire that an agency owner should do? So how do I move? For example, I'm a graphic designer and I want to start a design agency. What is the first hire that, that I should do? [00:27:47] Speaker A: First hire anyone should make is a virtual or executive assistant. Assistant. Get that work off your plate. They can like I. So at Editor Ninja, I had an assistant. He was awesome. Ended up helping with a lot more than just. He was not just an ea. Like he was basically running a lot of our life cycle marketing by the time I sold the business. But like I hate getting like spam link building whatever emails in my inbox. Like I freaking hate it. He would go, he worked, he's, he's based in New York so he would work east coast hours. And before I told him I was like, Bennett, before I get into the office, before I start my work at 9 o' clock my time, which is 11 o' clock yours, I want all of those emails cleared out of my inbox. I never want to see them again, right? And that sounds weird but like it was protecting my personal space, my brain space. Cause I would get so annoyed. I get freaking 15 to 20 of them a day, right? I was just like get this out of my inbox. It's been happening for 10 years. I'm so sick of this. And so like, but then also like he could reschedule stuff with clients. He could like, he could move my calendar, I've got two young kids, right? He could move stuff around if like one kids was sick or something like that. Like it just helped me out so much with that, with that stuff. So I think that's the first tire to make. I mean build systems around it, right? Where like people can't book certain things at certain times and all that. Like I very much time box my days. But then like basically my assistant, I don't have one now though. I've like considered getting one. But AI is doing most of the work for me at this point on that side, to be completely honest with you. But having that person, that takes the low level, I mean 10 to 15, 20 an hour tasks off your plate. Cause like if you're able to go and charge like, like I can charge 750 bucks plus for a coaching call for a one hour coaching. Why am I doing $15 an hour tasks? [00:29:23] Speaker C: Exactly. [00:29:23] Speaker A: It makes zero sense, right? So and you know, I also say that like that I knowing that I don't have an assistant right now, so I am doing some of those tasks, right? But like, but I've done that purposefully too. It's like I didn't default into that. I'm like, I know I'm making that trade off right now, you know, to get that like extra profit and not have to manage people and all of that, right? So that's the first hire for sure. Calendar Email, scheduling, booking, travel, all of that stuff. All that little stuff that just takes a brain space and it just sits there on your trello board for a while and then you're like, oh, I have a trip this week, I haven't booked a hook hotel. You know, like they can handle that. Then the second one is, my second one is operations. So someone account manage at least own like lower level account management and that sort of stuff. Your EA could potentially do that as well. Just to like make sure that like people are getting, I mean, properly onboarded, properly activated, right. And like being taken care of, right. Alex checked in on, because I don't do that stuff, right. I've got so many other things going on. So I hired that role at Editor Ninja was a little bit different. So with Credo My Legion company, I was the marketer, I was a salesperson. Like that's the stuff that I do, right? I'm pretty like not fully front of house, but like that's the stuff that I spend most of my time thinking about. So I hired kind of like support on like the, you know, on the back end. I mean operations, lead, qualification, scheduling, that sort of stuff. With Editor Ninja, I'm not an editor, I'm a writer. I'm not an editor. So I had to hire editors. So actually editors was my first hire there simply because I didn't have that skill set. But also wasn't my first agency. So I hired like couple and just like contractors project to project, right? Like they edited a thousand words, they got paid 30 bucks, like sort of thing, you know. So I wasn't paying them if I didn't have work for, for them, which is key, especially in an agency these days. And then. Yeah, but like in a Traditional1 It's EA help with operations, have a bunch of contractors and then eventually start carving off pieces of delivery. To hire people to do that as the, as the client load merits it. But always keep an eye on your, your gross profit, which should be absolute minimum 60%, ideally 80% or more. And I see so many agencies at like 25, 30K, even up to like 60 guys. I saw one the other day. That's at 150, 200K a month. Month. He's at 22% gross. 22% gross. I was just like, this is upside down. He's like, I can't grow, I have no profit. I'm like, yeah, I agree. I'm like, because your team is twice as big as it needs to be, right? So like gotta keep an eye on all of that, like, as you're hiring, and I'm sure it's been mentioned here before, but Dan Martell's Buy back your Time is, like, the best book about this. So Dan's an old friend and mentor of mine, and, like, really, really, really good book. Couldn't recommend minute, like, hire. I. Like, he basically taught me how to think about hire. [00:31:47] Speaker C: Yeah. Yeah. I love his book, too. I read it years ago, and we actually used it to pattern our, like, chief of staff training because a lot of. Yeah. So we patterned, like, literally page by page, and we built our own, like, version of the book, Buy by buy back your time chief of staff edition. [00:32:02] Speaker A: Nice. [00:32:03] Speaker C: I didn't, you know, for copyright, like. [00:32:05] Speaker A: Yeah, yeah. [00:32:05] Speaker C: Just no copyright issues. Yeah, no, they publish it, but can [00:32:08] Speaker A: I get a PDF of that? [00:32:10] Speaker C: Yeah, and then there's one. I think it was Carrie Robinson or Cassie Robinson, the How to work with me. So. Yeah, remember that essay? So that is also one of my favorite onboarding documents for our chiefs of staff, or. [00:32:24] Speaker A: So my assistant from many years ago, I think I hired her in, like, 2020. She created what she called the Hitchhiker's Guide to John. It was like how to manage my calendar, how to manage my inbox, all the way down to, like, John flies united because he's based in Denver. He has silver status. Status. He prefers aisle seats and will pay an extra hundred dollars for the ticket for every hour of layover. It saves him. [00:32:45] Speaker B: She knew. She knew your ratio of extra spend. That's hilarious. [00:32:48] Speaker A: Yeah. I mean, I told her this is what I'll do because she would be booking flights for me. I'm like, I hate layovers, especially domestically. So for every hour that you can save me of time, I will spend an extra 100 bucks. And she's like, done. And she put it in and, you know. Yeah, guardrails. Yeah. But it was the Hitchhiker's Guide to John, and that's been through, like, four different assistants since then, and each one is, like, added stuff. Like, as I've changed with, like, having kids and all that, you know, But. But yeah, it's great. Like, highly, highly recommend that. And even now, like, I mean, AI can take care of so, so much of that for you. I mean, I don't want to turn this into, like, an AI podcast, but, like, you know, record those conversations with your assistant and have them turn it into, you know, like a guide to you and then use that to help you make decisions. It's pretty cool. [00:33:24] Speaker C: Yeah. [00:33:25] Speaker B: On the account management side, I. I You know, for the sake of my brand, like to call them customer success managers. But there is a really cool thing happening. Just like while we brought up AI again, I also don't want to make this an AI conversation, but you can now have these account managers or CSMs be proactive because of leveraging AI. Like they can now take over a lot of that reactive work. A lot of setting you up for the strategy conversation. So like you as a founder, finally giving the responsibility of owning the client relationship over to someone who is good with operations but also good with the clients they can actually handle more. That way your margins can stay protected. You don't have to, you know, have a beefy team. You can stay lean but like that it being one of the most important positions, you know, following the ea, I really love the. This is kind of like a new world where like teams are actually able to stay, stay slim but be able to get the same amount. [00:34:15] Speaker A: And at some point you are going to need people like I don't want to, you know, say that like you're not. But I think that can has been kicked down the road a little ways. It used to be like 25 to 30,000, something like that in revenue usually with an agency. Now it's probably more like 50 to 60 is probably about where it is. But like you, but you open up enough loops that at some point you need someone to handle more loops and to close more loops. Um, so yeah, it can help out a lot. Like one thing that I do is all my coaching calls, we record them. Um, and so then basically I tell my clients, I'm like, I give you homework every week and then the next week I'm coming and I'm asking you, what did you get done? What'd you not get done? And like I don't necessarily care what they, how much they got done. Usually they get 60 to 70% done. That's totally fine. But if something has been there for three weeks and they haven't done it, usually it's marketing. We're going to talk about that, right? Cause at that point like it's not a knowledge issue, it's a mindset issue. And so we dig into that and we unblock them and then they go and actually like do the marketing. And that brings in business, right? But, but we record it on Google Meet. It gets automatically sent to Claude with a prompt, a custom prompt. It comes back into my inbox. I clean it up a bit, I like spot check it, clean it up a little bit and then I forward like the transcript and the video, the recording to them. And then each week before I go into coaching calls, I basically say, okay, I've got these calls today. Go and find my last two transcripts with them, including the homework, and then give me a rough agenda, things to check in on and then what I talked about that we would be doing next. And I get the rough agenda there. Previously I would've just had a human do it and now, you know, AI takes care of it for me. So I do wish I had a human for rescheduling stuff. Like I'm going to Ireland, Europe, here in about two weeks for 10 days. And I like had to reschedule all of my calls in that like first week of June into like other weeks. And man, that took so much time. I was like, I wish I had a human to do this for me. [00:35:53] Speaker C: Yeah, there's still little things that humans need to kind of close off on or, or you know, something decide on. Now that we are talking about operations or hiring people, building a team. What are some of the operational investments that, that significantly increase the value of an agency and really, really shows up in those like exit papers. [00:36:14] Speaker A: Yeah, I mean the big blocker to someone being able to sell an agency. Well, there are a few blockers to someone being able to sell an agency for top dollar. One is profitability. So if your gross profit is super low that your valuation's gonna suck. I gotta be honest with you, it's really gonna suck. If your growth has significantly slowed down or you're not growing. That's also gonna kill your valuation. So solve, try to solve those first. The other one is if you are doing everything or you're still like you, the founder are still need business going. That's a big problem. If you want to sell and get and not have an earn out. If you want to sell and walk away, you. It basically has to be running itself for at least a year before you can sell for top dollar is kind of the prevailing wisdom. But those are the three. So solid business model retention, which equals growth and then other people doing the things that are required to keep the business going. And some of this too is like, I don't want to say automated like marketing systems, but like someone else kind of being like the puppet master like budgets and you know, and that sort of stuff. Someone else needs to be doing that if you want to get top dollar or just has to be working on its own. Right. Like I mean in the past SEO was like, hey, we got a super strong like SEO, you know Channel. And so, like, I'm not needed. Someone else could be writing content. Right. And leads just keep coming in, like help make the business super sellable. That's changed a bit now. Top of funnel, you know, is. Has largely died with SEO. You know, AI discovery is. Who knows what that's doing these days. But yeah, like, you got to, you have to be. Be out of the day to day for a fair while before you're able to get top dollar and just be able to walk away. [00:37:42] Speaker C: Yeah. The team that kind of gets left behind. How do. What are the things that you do to. How do I say this? Like, process that transition better? Because of course, these people have a close relationship and a particular type of loyalty to the owner, CEO especially. They were there from day one. One. [00:38:02] Speaker A: Yeah. [00:38:02] Speaker B: Yeah. [00:38:03] Speaker A: It's a tough subject. The best you can do is be open with them. I've got a few learnings on this, actually. The best you can do is be as open with them as you can be at the right time. You can't get them involved too soon for a couple of reasons. Number one, they are not entrepreneurs. They do not handle stress and uncertainty. Like, we can. I can hold it super easily. Like, is this going to happen? Is this not going to happen? I'm just like, well, I can just keep on going, going. Most people, they are going to be frozen by that, by that uncertainty. They're like, am I going to have a job? Are you going to be my boss? Who's going to be my boss? What am I going to get paid? Like, all this stuff, right? What's. Am I getting a new computer? I mean, like, stuff that we think is silly, but, like, this just consumes their brain and they're not able to, like, bring it on. So the only time I would bring people, I brought people into, like, the. I made the mistake of bringing people in too early. And also, like, at my job at Zillow, we were moving up from one brand over to another brand. My team was. Was. And I made the mistake of telling my number two too early and she basically had a mental breakdown over it. And it, like, completely, like, severed our relationship. Like, she just couldn't handle it when I sold. But. But the thing I've learned about selling Carla is most people, they just roll with it. They're just happy to still have a job. Like when we sold editor Ninja, my head of ops and I, Sophia, were, you know, super close. We still, like, you know, text a couple times a week. And I knew she was going to need to be involved like in it, right? So, so I told her pretty early. I mean, we, like I said, we made the decision just to shut it down. And so like we were working through that together and then we got the chance to sell and like, she was, you know, involved with whatever, you know, was needed. I didn't need much from her, but she was happy to do it. But then when we sold, when we, when we told the team after like contract assigned and we told the team, I think we had, we had like 15, like contractors at the time. Only one of them took it badly. [00:39:44] Speaker C: Really? [00:39:44] Speaker A: No, 15. And we're like, all right, whatever, man. If you want to take that badly, like, that's your choice. Like, you know. But 14 and 15 were, were like, okay, totally fine. And over half of the team actually went over to proofed as well, something like that. So, you know, I think we handled that one like really well with my first one as well. When I sold, I didn't tell anyone. So like I signed it and then I told. I was actually in Mexico, I was in Cabo and I like had a call with the team and told them and like, they both started smiling. My two full time people started smiling and they're like, this is going to be great. They're like, you're burned out, you're not having fun. These guys are going to have fun with it. I'm like, sweet. So it was, it was actually a really interesting response. But yeah, it's a, like, you really have to know, like, who, who can you trust? And also like, if the buyer is big enough and the deal is big enough, they're going to want to get the person and they're going to want to like, get to know the person who's going to stay on and kind of like, you know, be the general manager or whatever. So you are going to have to bring them in at some point, but don't bring them in like basically until a deal is like as good as done. And then like, that's kind of like a final check. [00:40:42] Speaker C: I see. [00:40:43] Speaker B: Have you ever had to stay on with like any of these exits? Do you have to stay on for, you know, let's say a few months or like what was like that transition, the actual handoff? Like, because I think a lot of us that have all always thought of, thought of an exit as a goal, we actually don't know how it works at the very like moment of handoff. [00:40:59] Speaker A: Yeah, usually like, if it's a bigger thing and like, you're the face of the brand and Carl, I know you had a question about like how much of a face of the brand should you be? If you're the face of the brand they're going to try to lock you up for a period of time. There's a couple different ways that you can negotiate it. Yeah, but the way I did, I negotiated both of mine. Alex was I stuck around as an advisor, like a, I mean unpaid advisor. I got paid up front. Right. But an unpaid quote unquote unpaid advisor for like three to six months, something like that to help with like transition of stuff. And any like questions that came up around the technology or team or just like background on stuff is usually like a common thing when you don't have like a couple year long earn out. What I haven't done this. But watch out for the couple year long earnout where you're still involved. Because usually what they'll try to do and it makes no sense from like a pure business perspective but a lot of companies they'll buy, they'll buy a company, lock up an agency, lock up the founder for a few years, they'll pay them like salary and whatever and then their, the rest of their earnout is based, their money is based off of future performance and then they hamstring the founder and don't let them make the decisions that need to happen in order to hit the goals. And so the founder doesn't get paid and the company doesn't do what the acquiring company wanted to do. It makes no sense. But it happens all the time. It's like 90% of people of who have an earn out don't see all of that money. It's shockingly high. [00:42:19] Speaker B: That makes absolutely no sense to me. I mean I understand like the idea of wanting to lock in someone so because you are maybe like you represent the brand so much. Right, like I understand that part but like give them the ability to do what they were doing. Yeah, right. [00:42:32] Speaker A: Totally, totally. Yeah. So like, so that's dangerous. Like you either have to have like full control for like you know, it's like a three year earn out. Like you got to have full control for three years. Like yeah, like they technically own it and they're getting the enterprise value but like you get to make the decisions and you're basically just like reporting to them as you would like a VC or someone like that. But yeah, if they're like never, this is a mistake I've made too many times in my career. Never put your ability to make money in the hands of somebody else's ability to do Their job because so many people are bad at their job and if you put your money in someone else's hands, nine times out of ten they're going to completely F it up. So don't do that as you can up front. As minimal of an earn out as you can and as short of an earn out as you can. And really just try to make it time bound, not based off and like your output bound. Like I will do X, Y and Z not based off of future performance. [00:43:20] Speaker B: Yeah, I think that's why we became entrepreneurs in the first place. Right? That sounds like torture. [00:43:25] Speaker C: Yeah, I want to control how I make money. I don't want any ceiling. I don't want, you know, because. And the three of us, we've gone through the, the meltdown, the pandemic and like all of these things, the recession and so we just got to do what we got to do. So speaking about like red flags, things to watch out for. If I am an agency owner and I'm starting to have these conversations of possibly selling my business, exiting or even just selling my book of business or like my list of customers, oh, just buy this, these accounts for me because I'm, I'm so burnt out. What are some of the red flags that I need to look for from potential buyers? [00:44:02] Speaker A: Someone who wants to pay you purely on a performance basis. Like if they come over for, for X months and whatever, like walk away because it's never going to work out the way that you think it will. You'll be lucky to get half of what you've kind of like, you know, put in your mind. Get some cash up front. Like I was able to, I can't give exact numbers, but I was able to 4x the amount of cash that the buyer of Credo brought to the table. Because they're always going to come in and lowball you, right? Like they come in with their worst offer. They come in with their worst offer. I mean, as a shit negotiation, right. Like it makes sense. Like I don't hold it against it but like they come in with their worst offer. You come in with your best offer and you try to meet somewhere that you're both happy, you know, so make sure you get as much cash as you can up front. If they don't want to bring any cash to the table, just walk away. If it's based off of their ability to deliver and to continue to do good work and run the business, well, walk away like it's just not worth it and that. And if you do it in that Case just to get free. Which, like, I get it sometimes you're just so burnt out. You're so unhappy. Like, you just gotta get that frigging thing off your plate. Just assume that the cash you get up front is all you're gonna get paid straight up. The other thing is, is, and this goes to the like, you know, couple year earnout sort of thing, you're entering into a business partnership, into like kind of a co founder, business partner relationship. It's kind of like a marriage. So you really gotta be careful with who you get into business with. Make sure you can trust them. Make sure that they're, you know, above the board. [00:45:22] Speaker C: Yeah. [00:45:22] Speaker A: You know, with their operations. Try to talk, like, if they bought other companies, try to talk to those founders, those other founders ahead of time and see how it's been. [00:45:29] Speaker C: Mm. [00:45:31] Speaker A: Yeah. Those are all things that I would look for. [00:45:33] Speaker B: And did you, did you have. I mean, I'm assuming you did. You had to do your homework on buyers for each of your exits as well. Okay. Yeah, yeah. And, and, and that's what you did, is specifically reach out to. [00:45:43] Speaker A: I didn't do some of these things and I wish that I had. So. Learn from what? Learn from my mistakes? Yeah. Let me put it that way. [00:45:48] Speaker C: Okay. How about when that deal is really getting close and the owner, the agency owner is starting to get excited, they really want to tell everyone. And you know, of course they're. They're very excited. It's like a big thing. It's like winning the lottery or dating the hottest girl. Like, you can't stop yourself. You have to tell people. But how do agency owners protect themselves from that, like, emotional roller coaster? And also, what's one thing, or maybe a few things that agency owners obsess about at this specific time that buyers actually don't care much about or the public or the people around them? [00:46:23] Speaker A: I like that second one a lot, the first one. So you're never going to avoid the roller coaster. You have to learn how to ride the roller coaster and have some fun. Fun with it. So my best advice for, like, when you want to tell everyone, don't until the ink is dry. Like not even the. [00:46:38] Speaker C: In the wire hits. [00:46:39] Speaker A: The ink is dry until the wire hits. Like, do not tell anyone. So, yeah, just, I mean, yeah, you can tell you like your partner. [00:46:45] Speaker B: Right. [00:46:45] Speaker A: And maybe like your best friend and like your coach and whatever. Right. Because, like, hopefully they're helping you, like, through it. Right. Don't do it alone. Like, trust me, don't do it alone. And Listen to them. But yeah, don't say anything like publicly, like at all. Don't say anything to the team, like, unless, like, you know, these very specific people that we already talked about that like, have to be involved. But like, otherwise don't say anything to say anyone, anything to the team until the ink is dry, until the deal is done. So, yeah, that's my best advice right there. And then the second question was about, like, what are things people think are will add value or was it. It was a little bit different from that. [00:47:16] Speaker C: What do they obsess about or worry about that really don't matter to the buyers? [00:47:22] Speaker A: Anything custom and anything. Any like, kind of minor offers that are reliant on you to deliver. So think about this way, Carla. You run proximity else outsourcing. You've got a great team. It's pretty well like, you know, it's. They deliver, you don't have to do delivery, right? But say you got interested in doing some coaching, you had someone come in that is like a decent sized company and they're like, yeah, we want to hire like seven people. But also, Carla, will you consult with us for like, you know, a few hours a week? And you're like, okay, sure. But it's like 10 grand a month. And they're like, that's fine. We just want your brain on it. That 10 grand does not count towards your value unless you're going with the business and you're going to keep on doing that. So that's a big one. And yeah, like, and also like, the buyer doesn't, like, it's a business transaction. Like, the people that you're talking to that are determining the valuation, they don't care about, like, what stack your tech is built on or whether you like, use Zapier, like, whatever. Like, they're going to have other people internally that like, do that sort of stuff. But when you're in the actual, like, business conversation, none of that stuff matters. And actually this is an interesting one. I'm not sure how this is going to play out, but both of my companies, we had like proprietary technology in place for delivering the work, right. That was not a value add. [00:48:26] Speaker C: Wow. [00:48:27] Speaker A: It was a value add in that it let us deliver more work. Work with fewer people. And yeah, operationally, but like, it was no different from having like an asana or something like that, you know, So I think it, it will be different in the world of AI with custom models and like, that sort of stuff. But one thing to know is like, if it's an agency buying Another agency, say it's like a marketing agency buying another marketing agency and the one that's doing the buying doesn't have developers and technical people on board. They're going to see the tech as a liability, not as a value value at. Unless they can lock up the person that built the technology. So if you have technology and you have a co founder, that has to be a conversation to have as well. Who's going to take over the tech, who's going to keep like not even active development, who's going to like do upgrades and who's going to solve, who's going to like fix bugs and like that sort of stuff? Because that stuff just comes up, you know. So like that is something like a lot of founders especially like, you know, people like in our circles, like they're like, oh, I have this great technology that's delivering this work and then like kind of people sitting on top and like someone's going to want to buy that because I think it's cool. They're like, actually it's kind of a liability. Not actually cool. We just kind of want the contracts and the talent want like for the most part, that's what people want when they buy agencies. [00:49:30] Speaker C: Bare bones. Yeah, you're absolutely right. Sometimes you can be distracted by those little things. Oh, this proprietary, this, this, that, this, you know, this sticker wrapped van with our company's logo on it. [00:49:42] Speaker A: They don't care, right? Yeah, no, they don't care at all. They don't want it. Like it's going to be a liability to them and then you're going to have to go pay a few thousand dollars to, you know, get the wrap taken off and repaint the car because it was installed wrong in the first place. Yeah, I joke, but that'll happen. [00:49:56] Speaker C: Yeah. [00:49:57] Speaker B: I can't tell you how spot on of an example. That was about like the consulting side gig type thing. Like that's exact. I know. Carla, you have one of those going on right now. So I really like this person and [00:50:09] Speaker A: I do it, we all do it. It's just not part of your valuation. I'm sorry. [00:50:12] Speaker C: Yeah, yeah, no, I'm not selling. I'm not selling. [00:50:14] Speaker A: Yeah, yeah, yeah. And don't. And actually like if you, if you have that kind of thing, like with that kind of thing, I would actually set it up as a separate entity. Like I didn't do any of my coaching under Editor Ninja. I have a separate entity that I just like moved on to doing full time. And Editor Ninja was an asset sale. I Didn't sell the entity to them. So I had to like wind that down or I've had to wind that down. I'm still in the process of. It takes, it's way harder to shut down a business than it is to start a business. Way, way harder. But yeah, like, don't, don't include that on the same P and L. Interesting. [00:50:39] Speaker B: I would not have known that. Thank you for that conversation. [00:50:41] Speaker A: Also, I'm not, I'm not an accountant. I'm not an accountant. I'm just the person that has made the mistakes and some of it right, some of it wrong. But like, this is not official, like accounting and you know, advice. Yeah, yeah, sure. [00:50:52] Speaker C: So I know that you recently launched a super cool tool called the Agency Exit Calculator. [00:50:58] Speaker A: Can you tell us more about Agency valuation calculator? [00:51:00] Speaker C: Agency Valuation calculator. Tell us more about it. Because I want this place selfishly to be one of the first platforms to really spread it out and for people to know about it. We're definitely going to tell our friends about it and get as many agencies there as possible. [00:51:15] Speaker A: Yeah. So this is the tool. It's on johnfdaugherty.com,-O-H-E R-T-Y.com, it's linked in the footer. This is the tool that I wish I had had in about 2020 when I was first considering selling my first agency. And I went and talked to a bunch of like brokers and that sort of thing and you know, got some valuations, these like crazy ass spreadsheets and whatever. And I was like, man, it's so much simpler than this. Like, yes, you have to have good records. You have to have your P and L for the previous three years for buyers and all that sort of stuff. But like to get an idea of where you currently stand and like what you need to do to increase your valuation, there was none of that. I kind of coupled it together with like brokers, tents, coaches, like that sort of thing. So basically what I built was this tool that it's like, all right, what revenue are, uh, you can do it either monthly or annually. What are your costs? Client retention, like a few other things. It's like six or seven different things and then it. And you put like what your target exit is. So say you want to exit for 2.5. It'll then tell you the gap between where you currently are, where your valuation is, and it's kind of a range from like, you know, it's like over like, like 2 basis points, like 2 to 4x like valuation sort of thing. And then it tells you based off of like what I know and all the exits that I've seen, the exits I've been through, what the highest leverage things are in order to get your valuation up. And it's free. [00:52:25] Speaker B: I love that. I'm going to check it out immediately. It's awesome for this call. [00:52:28] Speaker A: It's awesome. It's really cool. I had a ton of fun putting it together. I built it with Claude, but then I looked at it and was like, ah, that valuation's wrong. I've had some clients asking me about, like, well, what's my agency worth? Or like prospects? Like, I want to sell for this. I'm like, well, where are you currently? And like it just kind of gives us the North Star. And it's like, you know, and then like having the human that actually knows what they're like looking at. Right. And like sometimes my spidey sense is like, I actually, like, I would adjust, like two should actually be one, like that kind of thing. But like it hits 80, 85%, like you know of it and like people have found it really useful. [00:52:55] Speaker B: I could see that. Like, like if I, if I do this right after this call, it's going to like game. It's going to gamify my business a little bit. I'm going to want to see those numbers jump up. [00:53:03] Speaker A: Yep. [00:53:03] Speaker B: Yeah, I could see that being kind of fun to do pre, like even planning an exit. [00:53:07] Speaker A: Totally. Yeah. Because you can go back and it saves like your, saves your numbers and you can adjust it. You're like, well, what if I go to125 but like delivery stays the same or whatever. Like I've had, I'm a numbers nerd. Like I've had a lot of fun kind of nerding out with that stuff. [00:53:20] Speaker B: Yeah. As soon as you said basis points, I'm like, oh, this is my guy. I love bips. [00:53:24] Speaker A: Yeah. [00:53:27] Speaker C: So I'm such a girl. That what I thought actually when you were describing the calculator is the opposite I was thinking of, oh, when I see that number, I'm gonna fantasize about my trip to the south of France. And maybe I can get all these alligator purses that I finally want. [00:53:44] Speaker B: And oh my gosh, it scares me. [00:53:46] Speaker A: Well, but if you've built. But if you've built the right business, you can do that. Cause you're like, I wanna sell for 2.5. And it's like, yo, you could sell for 3.5, right? You could sell between like 2.5 and 4.5. You're like, let' all the alligator prices you want, you know. Yeah, exactly. Alex doesn't care because you just made millions of dollars. Right. [00:54:01] Speaker B: Doesn't mean I still care. I still care. [00:54:06] Speaker A: Sorry, I don't want to get in the middle of this. [00:54:07] Speaker C: But, but, but here's the thing. Like with one calculator, two people can have two very different results on what they're going to do with their life. And it both makes them happy. Because, Alex, you feel excited about gamifying your business, which is what you were expecting. And I just looking forward to this long vacation. [00:54:25] Speaker A: Sure. [00:54:26] Speaker B: Yeah. [00:54:26] Speaker A: Yeah. And both are great. Both are great. [00:54:28] Speaker C: Yeah. And the best thing about those calculators is they are emotionless. It's all just numbers. They don't care about you. They don't care how attractive you are or whether you have privilege or not in your life. It's just all the numbers. [00:54:41] Speaker A: It's true. It's true. Yeah. And those like, those are the numbers that we have to take as much emotion out of while also recognizing that money is emotional. And I do very much believe that. And you know, people are motivated in different ways. So some people, they're going to see like, I want to sell for 2.2.5. My business is worth 350 right now. Some people, Alex me is like, it's gonna light a fire under your ass. Other people, they're gonna be discouraged and like, and neither one is bad. It's just pay attention to it because that is telling you something about yourself. And like the mental game and the personal game is the part that like, we don't talk about enough online. It's something I'm really trying to bring into conversations. I've done so much like deep personal work over the last like four or five years. Like, I'm a very different person now than I was when I sold Credo like almost four years ago. And you know, like, pay attention to that stuff. And those are the things that if you can solve them and you can really like, unlock those parts of yourself, the scarcity mindsets, like that sort of stuff, everything is going to be better. And you make it to the point you're like, you know what I need to sell for $5 million because like, fudge you mom. And like all this stuff, right? But like, you solve your mommy issues. I'm not trying to like diminish it at all, but like, you solve those sorts of issues and maybe you only need two to live the Life that you want, right? And maybe you go and, like, you know, I want to buy this giant house, and you go and rent a giant house for two weeks. You're like, this is a pain in the ass. I've got four air conditioners and, like, all this stuff that has to be maintained. You're like, actually, I don't want that. You know, like, try that stuff on. But, like. And allow for these numbers to shift as well. And, like, what? You want to shift as well. And maybe right now it discourages you, but maybe in a couple years, then all of a sudden you're fired up, right? You got up to 550. Like, all right, I'm making progress, you know, so just pay attention to that stuff. That stuff's really important. [00:56:13] Speaker B: Yeah, we are trying to. One of the things about Richard Remote is putting resources together from different people, different segments, and giving it to our audience. Like, I definitely want to, you know. You know, just give our audience the direction to go. Check this. This tool out. You mentioned it's free. You told us where it is. We'll definitely put either. Put it in our newsletter, Carla. We'll find a way to kind of direct our audience. [00:56:35] Speaker C: We'll put it in the show notes. [00:56:36] Speaker A: Yeah, that'd be awesome. [00:56:36] Speaker C: Yeah, no, for sure. And as a last message, by the way, thank you so much, John. We. We learned a lot, even just for ourselves. And so I always say my favorite part of having a podcast is I can scam the smartest people I know into giving me any advice. [00:56:50] Speaker A: I just gave you, like, an hour plus of free business coaching, so you're welcome. [00:56:53] Speaker C: How much is it? 750. [00:56:55] Speaker A: Yeah, I'll send you the invoice after the week. Gone over an hour. So that's the second hour. I built, like, a lower. I'm kidding. [00:57:00] Speaker B: It was worth it. It is worth it. [00:57:02] Speaker C: We can mow his lawn, Alex. [00:57:04] Speaker A: That's right. Yeah. [00:57:06] Speaker C: But as a final, like, message to agency owners who are listening, or maybe aspiring agency owners. In the age of AI, with everything that's going on right now, things moving so fast past, and some weird things happening in our economy and in the politics. If someone was starting over, what is your advice for them? [00:57:22] Speaker A: 2. One is focus on making it as profitable as you can from the start. Keep it as lean as you can for as long as you can. It is possible to run too lean, but you're probably a lot further from that than you think that you are. It's way worse to have too many people and have to let people Go than to be too lean because you can always, like, find fractional people to help you out. And then the second one is be connected to good humans. [00:57:44] Speaker B: Right. [00:57:44] Speaker A: Like, I. Carl, I connected with you, I mean, both of you through the dynamite circle. So, like, being. Whether it's a mastermind group or like, know if you're big enough like an EO or something like that, like, be around other people, at least have someone that you can tap on. Right. Like a lot. A fair bit of what I do for my clients is like, yeah, I teach them stuff and like, we work through problems together. But, like, a lot of what I do is, like, I hold space for them when they're going through tough times. Like a client churns. And I can just be there and be like, I'm the first person they tell. I actually had clients that I was the first person they told that they were pregnant. It was wild. I've never had. [00:58:18] Speaker C: Or. [00:58:18] Speaker A: I've never. No, no. I've never been the first person that knew someone was pregnant other than my wife. Like, it was wild. So, like, I. But I hold space for them, you know, when, like, stuff is tough and we celebrate wins and, you know, and when stuff is tough, we, like, commiserate and we work through it together. So, like, having that is really, really important. And don't underestimate the power. [00:58:35] Speaker C: Yeah. [00:58:36] Speaker B: I love having a. I love having a guest on that, really values, like earning trusted clients. It's just something I'm a huge champion of. So I've been really enjoying, like, your actually philosophy towards business and like, really focusing on the client. Even as a founder that's grown and scaled a team and you're still putting that as, like, one of the top values. And I. Yeah. So thank you for sharing that and kind of echoing that sentiment. [00:58:58] Speaker A: Happy to. [00:58:59] Speaker C: Yeah. And for as long as I've known you, John, as well, I definitely have noticed that you're much happier now that you're coaching. You definitely have that teacher heart inside of you. And I see it and it's so nice. It's so nice to see people. And I love celebrating people who are just, like, found their calling. [00:59:13] Speaker B: Who. [00:59:13] Speaker C: Who knows? You might start another agency. Right. But now you. [00:59:16] Speaker A: Yeah, maybe. Yeah. Yeah. Probably not. I mean, I. I might grow a bigger coaching business. I don't know. But there is something about, like, stepping into doing the thing that you've always wanted to do and that you're meant to do. That's what I feel about coaching. I actually come from, like, four generations of teachers and, like, I loved teaching, and I love seeing people grow, and I love supporting people. I actually thought I was gonna be a therapist at one point. I was gonna be a teacher at one point. I was gonna be a therapist at one point. That was gonna be a cardiologist. I didn't actually wanna. I hated school, so I was like, that's too much school for me. Right. To be a heart doctor. But, yeah, it's like, I. I feel like I've put in the work to get to where I am, and now, like, I love doing what I'm doing. It's super fun, you know, I think that's something else as well, is, like, if you're, like, really hating what you're doing, you owe it to yourself to not hate what you're doing. Like, life is too short. Life is too short to do that. And there's plenty of business ideas out there. There's other business models out there. And I'm not like, telling people to go and be like, ADHD and just, like, you know, try new things because they're bored. But, like, if you actually really hate what you're doing and you cannot be happy, you are not happy doing it. And it's been like that for a while. You owe it to yourself to change it up. So another hard lesson learned. [01:00:23] Speaker B: I've been that person before. [01:00:24] Speaker A: Yep, yep, yep. [01:00:26] Speaker C: Yeah, all good. Well, thank you so much, John. We had so much fun. If anyone wants to see your work or connect with you on social media, where can they find you? [01:00:34] Speaker A: Yeah, John F. Darty.com is my personal website. And. And then LinkedIn is a great place to connect with me and Instagram are kind of my two main, like, social media channels these days. So Doherty, JF On Instagram, and I don't even know John F. Doherty on LinkedIn. I don't know. [01:00:50] Speaker C: We'll link it all in the show notes. [01:00:51] Speaker A: Find me and send me a connection request. Tell me you found me on Rich and Remote and I'll accept it. [01:00:56] Speaker C: Yeah. And we'll also link the calculator. So if any one of you guys wants to have an initial call with John, ask for his advice, you can. And also book a time there. So thank you so much and see everyone. See all of you next week for another episode of Rich and Remote. Bye. [01:01:11] Speaker A: Bye. [01:01:12] Speaker C: Thank you. Thanks for listening to Rich and Remote. Where freedom isn't a dream, it's a decision. This is Karla, this is Alex Booth, and this is our journey to our dream Rich and Remote life. [01:01:27] Speaker B: If this episode inspired you share with with a friend who's ready to live life differently too. This is perfect for entrepreneurs who crave financial freedom, location freedom, and freedom from the opinions of others. [01:01:39] Speaker C: And don't forget to leave a quick review. It helps more freedom seekers find this show. Big thanks to our sponsors Huckleberry Consulting, getcsm and Proximity Outsourcing. [01:01:52] Speaker B: See you in the next episode and check out our online hangout spot, richandremote.com.