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How to Delegate Work In Your Agency with Karl Sakas (Part 1 of 2)

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Delegation helps you focus on higher and higher value activities, but that doesn’t make it easy. My guest, Karl Sakas, has been called “The Agency Whisperer” and has advised hundreds of agency owners to delegate effectively to take control of their agencies.

Mentioned in this episode:

Apply for a Strategy Call With Liston
15 Steps to Delegation by Karl Sakas
Building a Lifestyle v. Equity Business by Karl Sakas
Rev.com Transcription Service
Meltdown: Why Our Systems Fail and What We Can Do About It by Clearfield and Tilcsik

For more information on remote selling and a complete list of links mentioned in this podcast, visit this remote selling article on our website.


How to Delegate Work In Your Agency with Karl Sakas (Part 1 of 2):

Full Transcript

Liston Witherill:
Welcome to Modern Sales, a podcast for entrepreneurs, business owners, and salespeople looking to have more and better conversations with your perfect clients. You’ll get a healthy scoop of psychology, behavioral economics, and sales studies to help you create win-win relationships. I’m your host, Liston Witherill, and I’m pleased to welcome you to Modern Sales. I am Liston and I am here to help you build a better consulting business. I want to help you scale your sales up, grow that thing as much or as little as you want to. You may not want to grow too much, and I can help you with that too, but that’s what I want to cover today.

Liston Witherill:
Today I have a guest. His name is Carl Sekis. We’re going to have a great conversation. He’s been called the Dr. Phil of agency consultants, so strap in. This is going to be a good one. I’m going to get to Carl in a second, but first I wanted to let you know if you’re looking for help growing your agency, all you have to do is apply for a strategy call with me. Go to liston.io/strategy. You can fill out a few quick questions. I’ll take a look. If we’re a potential fit to work together, then I will let you know. And if not, no hard feelings. I’ll give you some free stuff. So that’s liston.io/strategy. And now Carl Sekis, my friend. How are you today?

Karl Sakas:
Liston, great to be here. Doing well.

Liston Witherill:
Awesome. And so you’ve been called the Dr. Phil of agency consultants and when I asked you how should I introduce you, you said you’re an agency consultant focusing on growing pains. What does that mean for all of our listeners?

Karl Sakas:
Growing pains can take many forms. It could be that you have a lot of revenue coming in. Maybe revenue is up, but your profit margins are down. Maybe you’re having trouble retaining your key people, but you’re not sure why people are leaving. Maybe you have a lot of leads coming in because they’ve work with you to figure that out and grow and now they’re having trouble keeping up when it comes to actually fulfilling all of the work they’re selling. Those are some examples, but the goal ultimately is if you’re having growing pains with your agency, I can help you conquer them.

Liston Witherill:
All right now, Carl, you are the only Dr. Phil of agency so far as I know and I think Jay Baer gave you that moniker, but I’m wondering how did you get into this in the first place? Like how did you just land here?

Karl Sakas:
I started in digital marketing back in high school, so in the days of dial up and IE3, started learning direct mail, started building websites and fast forward to more recently, I was a PM and director of operations at one agency and then another, and I realized there was this opportunity where people who start agencies usually love some aspect of the work, could be design, development, strategy, copywriting, PR. And so they start an agency. And the problem is when you’re running an agency, you aren’t just a designer, developer or copywriter and so on anymore, you are now a business owner and you’re responsible for everything.

Karl Sakas:
Hopefully you’ll be able to delegate over time, but ultimately your job is to make sure it all gets done. And I realized there was this opportunity where, growing up, I’m a fourth generation business owner, grew up helping in my family’s small business. One of my grandfathers was a business professor for 40 some years. I’d hear his stories about consulting with big companies all over the world. And so all of the business things that I noticed agency owners struggling with were things that just came naturally to me. So I put everything together in 2013 and launched my business, what’s now Sekis and Company, doing coaching, consulting and training for agencies all over the world.

Liston Witherill:
Okay, so I want you to review here, go back in time. We’re going to jump into our time machine. We’re going to hit rewind on the tape deck, and go back to 2013 and you are just starting this for the first time. And I guess I’m wondering like what were some of the first steps that you took? I mean, you talk about helping agencies with growing pains. What were some of the first steps you took to start the flywheel going for yourself?

Karl Sakas:
One of the first things was I pitched my then boss on my going from full time as the head of operations to becoming a part time contractor. So going from 40 to 60 hours a week salaried, to 10 hours a week as a contractor. The goal there was to build up a revenue flow initially and then also free up time to, to launch the business. So I put together a proposal, I gave her the proposal, which was really more about her than about me, about how she benefited. And ultimately her only question was, “When do you want to start?” That was great. Worked with her for a few months and I actually worked out of the same coworking space. And then once that wrapped up, it helped that I already had that initial revenue flow and I had been able to use the time to start my marketing, start connecting with prospective clients.

Liston Witherill:
Okay. And I want to give you a compliment, my friend. When we first met, I forget when this was, earlier in the year, I think our mutual friend Philip Morgan introduced us maybe? Okay. I think that’s right.

Karl Sakas:
Yeah. Yeah.

Liston Witherill:
And we talked on the phone and you asked for my address, maybe your assistant asked for my address and I didn’t think much of it, but I’d say within a week I received all of the physical media that you had, which I think were like two or three books.

Karl Sakas:
Yes.

Liston Witherill:
And I have to tell you, I haven’t read the books cover to cover. I definitely opened them and flip through them, but that was such a different and unique and impactful experience. So I don’t know that I have a question, but I wanted to compliment you and let you know that that definitely had an impression on me and very few people would take the time to do that. So I immediately knew that there was something different about you than most other people I meet in the industry.

Karl Sakas:
Well, thank you. What is more normal for you?

Liston Witherill:
Well, it’s interesting. Why don’t you be the podcast host for a second?

Karl Sakas:
Okay.

Liston Witherill:
What’s really interesting is like I give referrals all the time. I think I’ve made a few connections for you. Like I’ve definitely on a weekly, maybe every other week basis, I’m connecting to people for something, right? For some reason. And what I always find fascinating about that is it’s very rare that the service provider who I’m connecting a potential client to will even say thank you.

Karl Sakas:
Wow.

Liston Witherill:
It’s less than half the time will they even respond and say, “Hey, thanks so much for that referral.”

Karl Sakas:
I mean, even if a referral isn’t a good fit, you should be saying thank you for thinking of you as a potential match.

Liston Witherill:
Right? You could think of everything as raising a child or conditioning a dog. So like if someone does a behavior that you want to see more of, you want to encourage them and say, “Thank you so much. I really appreciate that.” I don’t expect that everybody’s going to send me a book, but when you ask what is normal behavior, I think this falls in line with a little bit more normal or average where I don’t even get a response from the person, but I sent them potentially 10 to $50,000 in business.

Karl Sakas:
I will thank my parents for that. Growing up it was like, “Send the thank you note, send it promptly.” That kind of thing. But I think that also reflects that I think perhaps there’s a culture in business around the idea of like you did it yourself. Perhaps you did a lot of things yourself, but you’ve got a team of people supporting you. Maybe it’s employees, maybe it’s freelancers. You have some sort of a team supporting you, and although you’re perhaps the hero of the story, you’re not doing it alone. And then of course, ideally you make your clients the hero in their story

Liston Witherill:
And you’re not really the hero at all. If I’ve learned anything this year in the amount that I’ve built up my own business, it’s that it’s much bigger than me. I mean it’s … I’ve spent a lot of time and invest in personal branding. Like for instance, this podcast is creatively named after me, but I have an editor and I have an assistant and I have other people helping make this happen. I mean, I wouldn’t be able to sustain this level of effort just as I’m guessing you didn’t slap the label on that envelope and package up the books to send to me. I’m guessing someone else did that. Maybe you did. I don’t know, but-

Karl Sakas:
I think in that case I probably did. I will get my assistant’s help if I’m doing several at once, but, I mean, delegation.

Liston Witherill:
Well, so what we can agree on Carl is that you’re the hero and I’m not, so no worries.

Karl Sakas:
I don’t know if we’d go there, but we could be our own hero. Yeah.

Liston Witherill:
So yeah, we’re going to get to delegation. I definitely want to talk about that, but before we get there, I saw an article on your website, which I think is a great kind of lead in to this discussion around delegation because I also have a lot to say on that, but we’ll let you do 90% of the talking, I promise. The article that piqued my interest was titled something about, is your agency a lifestyle agency or an equity agency.

Karl Sakas:
Yes.

Liston Witherill:
And I was hoping you can talk a little bit about that and why an agency owner should be thinking about that now.

Karl Sakas:
Yeah, it’s an important question in a variety of ways. So first, here’s the difference by definition for it, a lifestyle agency is the default for most agencies. The idea is that your agency is designed to pump out reasonable profit margins, ideally 20 to 30% net, and meanwhile be paying you an above market salary package or other compensation package, more than you’d make if you’re an employee somewhere else. The idea there is that the agency is ultimately an income asset. It keeps pumping out money for as long as you want to work there. That’s one side. That’s the default, and you’re not necessarily planning to sell. The other end of the continuum, you’ve got lifestyle, the other end is equity and the idea there is that you are growing your agency in order to sell it for some sort of an exit, some sort of a pay day.

Karl Sakas:
And for most people I talk to, they’re looking for a million or several million dollars equivalent when they sell. And in that case, you’re investing in the agency’s growth along the way, hopefully you’re still paying yourself well as you go along, but you’re highly dependent on this big pay day. At the end, it’s risky, but you ultimately may make more money in the end. Most people are somewhere in the middle, but they tend to lean one way or the other. And I’ll actually ask people about this in my prospective client intake process, where do you lean on the lifestyle versus equity continuum? And I have an article on it, and knowing that is helpful. Delegation is important in either case, but Stephen Covey said, “Begin with the end in mind.” If I know where an agency owner wants to go, we can work backwards from there. Whether it’s get the money out now through the lifestyle side or focus on maximizing the valuation to get the money out later on the equity side.

Liston Witherill:
Yeah, and so obviously one of the big differences if I’m running one versus the other is how much I pay myself versus how much I sink back into the business. I’m guessing that’s one of the big differences.

Karl Sakas:
Yes.

Liston Witherill:
What are some of the other things that people need to think about in terms of how their day to day or even month to month life would be different in terms of what they’re actually doing?

Karl Sakas:
There’s a concept called needed but not necessary. This came from Merck Cuban, the investor, and I’ve applied it to an agency management perspective, so in his example he was talking about … Mark Cuban, when he invests in companies, he wants to be needed but not necessary. That is his investment is needed, it’s helpful to the business, but it’s not necessary in the sense that if they don’t get his investment, they go out of business. When I saw that concept, I applied that to agency management, which is you want to make yourself needed but not necessary as an agency owner. That is your team needs you. You’re not going to disappear for a year and everything’s fine, but you are not necessary to every single day to day decision.

Liston Witherill:
Right. One thing I think about too is it’s not required, but a lot of … If you’re in an agency, any service business, if you’re able to build up some sort of intellectual property, IP for shorthand, if you can build up some IP that really sweetens the deal and that’s something that can be leveraged and sold beyond an individual. And so I was wondering in terms of the services or the way you do the services, does anything change in one versus the other?

Karl Sakas:
And then I would say it’s always a good idea to be looking for IP development opportunities. For instance, about a year and a half ago I was looking for ways to boost the production values of my agency coaching program. And one of the things that I did was [inaudible 00:12:52]. I’ve got all of these templates and tools and all that I’ve built for my clients. Why don’t I put them all together in one place? And that turned into what I now call the agency resource library. So it’s 50 plus tools, templates, SOP, stuff like that. And so initially four year or a year and a half, that was a clients only thing, so you’d have to be a coaching or a consulting client, pretty hefty budget and I’ve now turned that into its own information product so you can buy access to just the resource library. But that’s a long time in the making.

Karl Sakas:
That’s based on everything I’ve been doing since 2013 that I’ve been developing, and some things go back even before that, but the key thing was that I was looking for, wait a minute, there are these patterns, more than one person needs this thing. Why don’t I bundle it together? One of the risks that agencies have is you’ve got silos, and say there are certain questions or certain requests that different clients have for different team members, different employees you have, they’re thinking, “Oh, well two people asked this question.” But if you were to go up a level, they’d be thinking, “Well, 10 people ask this question.” And then if you’re there as the owner, you’re thinking, “Wow, every single client or almost every single client has asked this, we need to create something to meet that need.” That could be IP, that could be a service, it could be something else. But it helps to have that perspective on things, to be looking for those opportunities. And then not just to see them, but to look for ways to capitalize on them.

Liston Witherill:
Well, and I think also like I have a coaching client right now who identified a client came to him and said, “Hey, we’re this type of company in this industry, and we want this very specific solution.” And he came to me and he asked, “How should I price it?” And I asked him, “Do you think that other companies in this industry would benefit from the solution?” And he said, “Yeah, I mean, of course.” And I said, “Well, maybe you should license it to them so that you retain right to sell it to someone else who’s maybe not a direct competitor but could use it in a different regional market, right? Or state or local market.”

Karl Sakas:
Yeah.

Liston Witherill:
So I think there’s lots of ways to leverage those things that we’re seeing.

Karl Sakas:
I will say check your contract. Either it needs to say you retain ownership and the clients have a perpetual paid [inaudible 00:15:14] license to use it, or vice versa. The clients own it but you’ve got the license. The key is that you need to clarify that yes, they’re getting their instance and this and that and they have ownership and control over it once they’ve paid you everything, but you do want to have the clause to reflect that you have the right to reuse it in other capacities. Not sharing any of their confidential info, of course.

Liston Witherill:
I agree with that. And that needs to be a conscious decision made prior to the contracting stage.

Karl Sakas:
Yes.

Liston Witherill:
You would need to actually proactively do that. It wouldn’t just show up.

Karl Sakas:
Exactly. That’s the thing in life. Some things just show up, but when your agency or your other business as your primary asset, I wouldn’t recommend relying on happy accidents.

Liston Witherill:
But they’re nice occasionally too.

Karl Sakas:
Sure, sure.

Liston Witherill:
I did want to ask you about, you mentioned a lifestyle business is one that kicks off say 20 to 30% net profit, so that’s great, but I guess what I’m wondering from the equity perspective, of course you can continue to build a bigger and bigger asset, but in your experience, do profits also scale up along with head count? Because that’s the way a lot of people think about growing an agency, we’ll just add more and more people and we’ll make more money. If we get 20% off of every dollar, then let’s just get more dollars in the door. But I’ve actually seen that that’s not always the case, because the management glut can become huge if you’re duplicating your internal organizational structure every time you add a new person. So how do you think about dealing with that?

Karl Sakas:
As you grow, you do have to add additional administrative overhead layers, management and so on. At certain break points, usually eight to 12 people, you’re adding a project manager, sometime between 15 and 25 you’re adding an account management structure, probably adding a salesperson. Typically in the 30s you’re adding someone who’s dedicated to HR and culture, as you’re into the 50s you’re hiring C level type people, that kind of thing. Typically these are people in roles who aren’t as highly billable as a subject matter expert, like a designer or developer or strategist, writer and so on. So your margins may go down.

Karl Sakas:
Part of the agency model assumes that you’ve got senior people who are somewhat less billable who are managing highly billable junior people that you’re paying less to. Now there are some risks and challenges with that business model, but that’s pretty common. In theory, as you grow, say you’re maintaining 20% as you grow with some bumps along the way, the absolute number is growing. I will say that clients who run bigger agencies tend to have higher levels of stress on a regular basis. So you probably want to think about your stress tolerance. For instance, worked with a client whose compensation was about 180,000 a year, and at the time had about 40 employees. And another client right around the same time with four full time people including himself, and he was paying himself 160,000 a year. So 20,000 less. He was definitely way less stressed out.

Liston Witherill:
Yes, much happier and easier way to make 160,000 than have 40 employees.

Karl Sakas:
That said, if you’re heading toward equity, if that’s your goal, you’re going to have to grow. Different MNA consultants have different perspective on this. Sometimes it’s you need to have at least 10 million in revenue. Others it might be as little as 5 million, but if you’re at one or $2 million, it’s going to be harder to get someone to acquire you, and I have an article about building a dream 100 acquirer list based on the Chet Holmes concept of the dream 100 client list, and you may find someone, I have clients who’ve been acquired less than five or $10 million, but you need to find someone who’s really interested. If someone’s coming in off the street as one MNA person mentioned, it takes almost as much time to do due diligence on a $2 million agency as a $20 million agency.

Liston Witherill:
Right, right.

Karl Sakas:
At least relatively, and if the bigger agency or the bigger firm is looking to add revenue, perhaps because they’re trying to grow to do their own exit in the future, it’s a lot easier to acquire one $20 million firm than 10 two million dollar firms.

Liston Witherill:
I’m not sure, maybe I missed it, but do you find that the profitability scales with employees? Or are you just saying it’s dependent and that’s what you’re trying to communicate through the example of the two clients you had?

Karl Sakas:
Profit margins can be somewhat stable. They’re going to drop a bit as you hire additional management layers where you’re paying the salary but you’re not getting the billables. But for sure if you’re maintaining roughly the same margins as you grow, your profits should grow on an absolute basis because you’re getting, say, 20% on five million versus 20% on one million.

Liston Witherill:
Yeah. The question is do you actually get that, yeah, and I guess it also depends-

Karl Sakas:
There’s a lot can go wrong.

Liston Witherill:
Yeah, and are we talking about net income and also if you have some larger clients at the $5 million range, like yeah, something that goes wrong there could really basically wipe out your profits for even over a year, a year or two.

Karl Sakas:
Yeah. The key is to avoid getting into a client concentration problem that is getting more than 20% of revenue from any one client. And you can do that in any size, though if you’re five million in revenue, well, you better make sure that no one’s more than $1 million a year, but you need people who are approaching that to help you reach that without having a zillion clients. I have an article on what is the ideal client count. For me, that’s between 10 and 20 active clients. There are plenty of agencies who have way more than that. I would say that agencies who have way more than that, as I look at their numbers, they tend not to be highly profitable, because they’re wasting resources across different clients, they have a client dilution problem.

Liston Witherill:
Interesting. Okay.

Karl Sakas:
Yep.

Liston Witherill:
One thing I would imagine, Carl, is as these companies are getting bigger, one of the things that they need to think about is delegation, which is something that you’re very, very attuned to, and actually what spurred this conversation that we’re having right now in the first place is this article that you wrote about the steps that someone needs to take in order to delegate effectively.

Karl Sakas:
Yes.

Liston Witherill:
And we’re going to talk about that in episode two tomorrow. So if you’re not subscribed, make sure you hit that subscribe button so you don’t miss the rest of my conversation with Carl Sekis.

Carl Sekis:
See you in the future.

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