All Things Tested - Co-Founder of SocialKaty & SocialDevCamp, Andy Angelos
The “All Things Tested” series is taking an interesting turn. In today’s addition, we are focusing on the testing that takes place within a startup marketing agency. SocialKaty was a digital agency of about 20 employees at the time of its acquisition by Manifest Digital in 2014. In order to grow an agency and maximize profitability, leadership must test the structural integrity of the organization. We have brought in Andy Angelos, COO & Co-Founder of SocialKaty to provide our readership with some insights from his experience building and growing an agency from the ground up.
AdBasis (AB): You’ve had some non-traditional structures to your agencies. Why do you think more agencies don’t experiment with their operations and organizational design?
Andy Angelos (AA): Service-based companies are typically straightforward businesses. But I believe that testing the operational capacity of your organization is how you learn to grow. This is applicable to a wide range of functions: billing, new business development, resource management, technology resources, reporting structure, talent nurturing, etc. You can always find and test the stress points of your business.
Marketing agencies spend so much time iterating on different strategies for their clients. And just when a silver-bullet approach is discovered, the success of the tactic sometimes grinds to halt due to the pace of the industry. As a result, many agencies exist in a near constant test mode without applying learnings to their own business.
This is great news for clients wanting innovation from their partners, but can be detrimental when agencies forget to apply the same rigorous testing to improve their own business. The most common example is the marketing agency that does not invest in improving their own marketing because “they’re too busy working on clients.”
AB: Can you provide an example of operational testing that helped your company grow?
AA:As we started securing larger clients at SocialKaty, the payment terms also became larger. It is common for many larger agencies to have 60, 75, or 90 day payment terms, but this created a cash flow problem hindering our growth. We were too small to access a line of credit, so we decided that shortening payment cycles was the best route to fulfill the increasing demands of our client base.
There are a number of methods we tested including automated reminders before the due date and sending small thank you gifts to encourage more prompt payments. Ultimately, we found financial incentives during the negotiation process could provide the needed cash infusions. The incentives would differ based on the dynamics of a client’s business, but we offered 10% reductions on contracts to secure upfront payment. This is a non-starter for some clients, but we also had success presenting incentives for other guaranteed payment methods like ACH. The lesson was simple: Getting paid should not be a hindrance to growth. We found ways to increase the likelihood of being paid on-time or early.
AB: You mentioned that you can test a number of different parts of your organization. How did you decide where to focus on internal improvements?
AA: As mentioned, service based businesses are usually not too complicated. They primarily surround available time and how much you can charge for that time. It is important for leadership teams to identify the few simple levers that can be adjusted to improve profitability or increase revenues. Some common agency levers include the amount of work an individual can bill, the price of your services, or the length of your client contracts. Each lever will not move on it’s own; you are required to actively experimenting with ways to improve your business
For example, let’s take the amount of work an individual can bill. This is based on the price of your service and also the productivity of an individual team member. If you wanted to increase profits, you can a) work with business development to charge more for the same, b) invest in tools and habits that allow your team to be more productive, or c) alter productions workflows to be more efficient. Here is where non-core functions like building technology, partnerships, or removing non-essential tasks can be impactful.
Our team, like many agencies, had problems with hour tracking. Account managers did not complete on-time, which forced finance and operations to spend the end of each-month in panic mode. We thought to ourselves, “Why are wasting time trying to enforce better standards? All we get is frustration and retroactive, inaccurate data?” The solution was to gradually transition our clients to packaged pricing based on deliverables instead of hours. This also required re-envisioning resource management, but removed the cognitive overload and negativity surrounding hour tracking.
About Andy Angelos:
Andy is an entrepreneur and marketer obsessed with practical ways to scale businesses. After selling his most recent company, SocialKaty (now 10x Lab), Andy has been mentoring startups and helping politicians make smarter targeting decisions with through data and automation.
Prior to SocialKaty, Andy co-founded SocialDevCamp and contributed to Mashable.com. Under Andy's direction, SocialDevCamp grew into a 450 person summer camp for the web that united entrepreneurs, developers, and marketers from around the world.
Learn more about Andy at: www.andyangelos.com