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For this episode of Ecoffee with Experts, Matt Fraser hosted Sean Daily, Founder and CEO of The 108 Group. With his wealth of knowledge, Sean reveals the attitude of a successful Digital Marketing agency owner, the secret to organizing and establishing an agency that can scale, and much more. Watch now.
Every business you want to create depends on the vision, which is what you want to make and then what you want your level of freedom to be.
Hello everyone. Welcome to this episode of Ecoffee with Experts. I am your host, Matt Fraser. I have on the show with me a special guest, Sean Daily. He is the Founder and CEO of The 108 Group, a full-service Digital Marketing, Web Development, and SEO agency headquartered in Santa Rosa, California. Sean is a Northern California-based entrepreneur and Internet Marketing expert with a strong business and technology background. He has founded Social Media Ninjas and Dealer Marketing Ninjas through Marketing agencies. Sean helps dozens of small to medium-sized businesses across the US increase revenue through inbound social media and mobile and local search marketing strategies. Sean attended the University of Massachusetts Amherst and Syracuse University for Computer Sciences. He and his wife, Heather, co-founded and directed Loving Home Ministries, a 501 C3 nonprofit that supports Kenyan orphans. Sean, welcome to the show. It’s a pleasure to have you here.
Pleasure to be here, Matt, thanks for inviting me.
In this episode, we’ll talk about something you’re very familiar with, an agency exit blueprint, and how to build a profitable headache-free marketing agency that you can sell for a minimum of 2x your annual recurring revenue. I think we’ve been connected on Facebook for ten years, but it’s funny how that goes. Sometimes, you connect with people online but don’t connect in person. So we’ve connected in person like this over the last few weeks. And I know you’re very experienced in this. So you’ve exited several agencies, correct me if I’m wrong.
Yeah, that’s right. So this is my third agency exit. It’s my fourth or fifth business exit in over 30 something years, but three marketing agencies over the last 22.
You’ve got a plethora of experience and probably tips to share and mistakes to avoid. What is the most important mindset to succeed as a Digital Marketing agency owner?
What is the single most important mindset? If I had to pick one thing, I would say to succeed as a Marketing Agency owner, it’s an amalgamation of so many things. Forget the question. So many skill sets will have that version of pain if you’re missing any of them. So, if I had to pick one, I’d say tenacity. Being able to plow through things. Because what I see, and that’s not an agency thing, it’s a business thing. Most people I see fail in business because of a lack of tenacity. Now, tenacity without intelligence and intelligent reaction is torture. Self-torture, so you must also put an intelligent reaction to whatever’s going on into the process. I’m having problems with clients. I’m having problems with my, I have a buddy right now who’s owned as many agencies as me, and he’s having horrible problems with retention of team members and getting the right people. So many pitfalls can happen, but you must have tenacity and a mastermind. I’m going to go through it, I know this isn’t the question you asked, but if it’s okay, you’ll indulge me. Thou shalt not have an agency without the following. I never thought about this. I’m going through this in my mind from a friend named Rex Wiseheart, who was instrumental to my success early on, and he was my Obi-Wan Kenobi in the desert. He was the mastermind I was in, and he just told a bunch of us, young agency owners, all these things to do and not do. So I’m passing on some wisdom in this one. Before I say this, I’m not giving legal or financial advice. It is something that I think of for myself. Thou should never take $1 outside of the corporation. So personal LLC type business. That’s something I would never do. Your mileage may vary, check with your advisors. I would never have an agency that did not at least have the strongly recommended option of using bank drafts or ACH transactions to get payments from clients. I would never be operating an agency, in business, or in my life without a good solid team of a regular mastermind group I meet with weekly. I think everybody knows what masterminds are these days. But years ago, everybody was like, Oh, what’s that? And it’s thinking Grow Rich thing. Napoleon Hill, read the book, if you haven’t, it’s free. But they are amazing. And in the sense of an agency owner, I would have a bunch of other agency owners, some more successful than you, some less, startup Guys. Guys that are willing to the Obi-Wan Kenobi type guy, like I’ve got. And I would have them in a group meeting regularly. And that’s going to change your life in so many ways. That’s your peer group. Because we’re all in our homes, and it’s great. I love it. I live here with my family, and I work, and it’s great. But we’re disconnected from colleagues. And some people have agency buildings they drive to, and that’s fine. Most of us, though, are working over the internet. And we need that community because we’re all sitting here kind of going slowly crazy sometimes as business owners or agency owners, trying to figure out problems. You have Facebook groups, etc., but having other human beings looking at each other like we are right now is invaluable to me. So, that’s another one. I’m sure we’ll come up with some others. That’s my top three or four. I have another one too. You will always have a lieutenant. So thou shalt delegate everything that one canst.
Okay, delegation is extremely important.
Okay, that skill took me nearly 20 years to develop as a business owner, not an agency owner. Probably half the time, I was in agencies where I was a wunderkind. I can do it all. I want to do it all. Everything’s interesting to me, and it feeds that. I don’t consider myself an ADD type person. But I think many marketers live in a world of distraction, and we’re surrounded by distraction. We create distraction, and this industry feeds on it. So it’s easy to get distracted by things. So in doing that all the time, you must ensure that you’ve delegated certain tasks to have the luxury of pursuing other things. Otherwise, you’re just spinning around chasing your tail, not getting anywhere. So the only way to grow a business is to be a true business owner. So a business owner or an entrepreneur is, and I’m borrowing this from the E Myth. Which, interestingly, was written by a guy who lives in the town I’m in right now, Michael Gerber. He’s been around forever. But he talks about don’t confuse an entrepreneur, a manager, and a technician. You must know who you are and what you’re supposed to be. Don’t pretend you’re an entrepreneur when you’re a technician or a manager. Don’t think you’re a good manager if you’re a sucky manager. You must find other people who are better than you at every job in the company and bring them in over time. But as you can, the first thing you’re looking to do is peel off each of these tasks- bookkeeping, client service, follow-up customer service, marketing, lead generation, whatever it is. All the roles in the company, because that frees you up to be an entrepreneur, if you are, in fact, talented at that, because not everybody is and works on or at least the manager working on the business. This is trite, but it’s true, if you’re working in the business, you can’t be working on the business. And what happens is everybody gets head down. And I get it as well as your day-to-day clients, tasks, finances, bookkeeping, everything. And you’re like, I still don’t have time. And the only defense you have against that condition in creating more time is to delegate all the time radically, which will also have the more important benefit and side effect of allowing you to maximize your income and maximize the growth in the agency. So I didn’t get that for a very long time. And the discipline of delegation is not a destination. It’s a journey. You can always get better. Some people say, oh, yeah, I’m a good delegator. I brought this person on, and I’ve got this personal assistant and your VA, and they’re doing everything. But nobody looks at everything you do. Audit a day and how you spent your time, and you must always think, do I need to be the person doing that? Is it the best use of my time to be doing that? Also, what is my time worth? What would I like my time to be worth? Is it $500 an hour or 1000 an hour, or 200 an hour? How do you value yourself? And then look at it mathematically. Am I earning for every hour I choose to work, whether 5 or 40 or 100? Am I doing tasks that are worth that amount per hour? And if not, then I need to find out where the weaknesses are. As you can see, I wrote a 1000 page book on optimization of the Windows Enterprise operating system right here. Variant optimization, and I don’t always live it. I’m not perfect by any means at this. But that’s essentially where the bottleneck is in my income? That usually comes from a lack of delegation because we are limited human beings at the end of the day. We have families, other interests, things that hopefully, we take care of ourselves, and we need to work out and go out and touch the grass, as they say, on Twitter all the time. Twitter, you have to go touch grass. So to do that, you need to have other people that you empower. So anyway, I don’t want to beat that over the head.
That book, Michael Gerber’s book, the E Myth, revisited, I can’t begin to go on and tell you how many business owners and agency owners I’ve told to read that book that has never heard of it. So I’m glad you mentioned it because it is a key book to read as an entrepreneur and a business owner. So would you say you started to develop his philosophy of taking your entire company? He would talk about developing the organizational map, then developing the duties of each of those positions, deciding at the beginning who would do those things, and then hiring people. So let’s say, you have three people in the startup of an agency or business. A person is going to be CEO, even if they all have equal shares. One person will be the VP of sales, the marketing director, the CMO, or whatever. And then you figure out all the positions that are under, and you work like mad for 12 to 16 hours a day, to get up and go until you can hire unless you have the startup capital to generate enough revenue to hire people to fill those positions.
I recognize the value of it. And so the spirit of it is always with me. So it’s one of those governing principles or core values that I’m always thinking about. So the importance for me is not about the hierarchy maps and doing all that, although you can go wild if that’s your thing because I’m not a big details guy. Like, I don’t want to get buried in details, I used to be. I’ve moved from where I’m not into systems and processes to where I’m not doing the work. I get dragged down in those details. So again, delegation, I bring other people in to build project management systems. And I participate in them as lightly as possible because I hate it. But I recognize its value and importance, you must have systems and processes. And then you were talking about returning to the E Myth and delegation. And you have to understand that people, and at least at a global level, one should understand that you’re screwed out of the gate if you’ve got people doing jobs that they’re not inherently good at, whether you or your partners or what have you. So now, I’ve never really had business partners in the traditional sense in my businesses. I’ve always been more of a solo entrepreneur who works with others and works collaboratively with other agencies. I’ve done joint ventures type things and things like that. So it’s not like I don’t work with other people. But in terms of my company, they tend to keep the team small. And highly leveraged outsourcing model, which I tend to use, and I’m drifting into another side topic here. But this is a preferred agency model discussion. Can I shift that way?
I was waiting. And I was going to ask you what is the key to structuring and building an agency that can scale. So this will lead right into it.
It’s tough to become an organically grown in-house agency that hires people directly. If you can do that, God bless you. I know people that have built agencies like that. It’s hard to start there unless you’ve gotten funding or if you’re doing the organic growth startup model. And this is the model I eventually get because, like, trust me, I didn’t get any of this stuff right. I made so many mistakes. I had an awesome in-house team of six amazing people in my first agency, and I could have done anything with them. It’s not about what you do, it’s the team you do it with. So you can move mountains and do anything with the right team. So building your team, regardless of their role, and whether they’re contractors or employees or members of white label agencies that you have a relationship with through your vendor-client relationship, they’re still on your team. Making good choices and hiring those people is equivalent to your success. And when you have that, you can do anything. You can build software and chase your fancies, but you’re not going anywhere if you don’t have that. And so, back to my first team, I did that, but it was very cumbersome. I had to deal with many things, with the employee stuff, and it wasn’t as complicated or expensive as it is now. I’m in California, which is bad. So I did all that. It was great when I rebooted in 2010 and started a new agency. I did another thing before that in 2006. But talking about like more of a Digital Marketing agency. When I did that, I said, I’m going to do this a little bit differently this time. I will use more of what I call the leverage outsourcing model. And that’s the idea of finding high-quality white label vendors for many core activities, not necessarily everything. But knowing what I want the agency to do, regardless of how many people are on this team. Knowing okay, what are our core competencies and interests? What should we be doing? I have seen it where that is simply dealing with the clients, not for me, but other agencies where it’s like dealing with the clients. I have seen it where it’s fulfillment and people outsource, like to somebody like dot and company who outsource client relationship management, that’s all they do.
So they manage clients for you?
They manage the clients for you. I’m not quoting prices, but it starts at maybe a couple of $1,000 a month, depending on how many clients you have. But you can skin this cat, no matter what you want, and there are many ways to do this. So you should not have a new subconscious thought form that says you must do this, or this thing, because you’re mistaken. You don’t have to do any part of the business, you could be a virtual agency. And you could be this person I would tip my cap to and have the most respect for at this stage in my life, where you have nothing but the agency’s ownership. You hire somebody to be the agency Director. Then you tell that person how to run the model, or hopefully, they already know some of it. And you build a completely virtualized model with the minimum number of in-house team members using a completely leveraged model. It means you’ve got white label PPC, fulfillment, Facebook ads, SEO, and website development, you build systems that allow these people to talk together. You have one person who’s the octopus, managing all these outsourced agencies. And you could outsource, as I said a few minutes ago, the client service part of it or keep that if you like, but let me pause there. As the agency owner, you probably got into this with some passion and joy for doing this. Otherwise, my question to you would be, what are you doing? So I was just building this whole thing with this cool experiment and virtual agency ownership that would be for somebody that’s not really into it anymore, like me. I don’t want to own a Digital Agency anymore. I want to work in marketing and agency owners. But I could easily, if I wanted to, build an agency where I’m not doing any of the parts that I don’t want to do anymore and still own an agency. It may make sense because at least I would be in a uniquely qualified position to assess how that agency is being run and give occasional consultation as the owner and maybe board member. So I’m just saying you can do that. So radically thinking about divorcing yourself mentally from the business and all the tasks in the business. And suppose you do choose to do something. In that case, you do it based on your passion, your talent or some hybrid thereof, or the temporary necessity until you can delegate. Suppose it does not meet the qualifications either now or in the future, that role of being something you want to do or should be doing. So, what you should be doing, it’s the coolest thing in the world. Imagine I’m a football guy. Imagine if you were like an insane athlete, and you were a team owner, and you were like, I can run on the field and play any position I want in any game. Like that would be my dream. I wouldn’t want my body destroyed by this. But if I was 21, in great shape, and willing to trash my body and risk CT later in my life. I could be a tight end, or that’s ridiculous, and fans would not like this. But that’s what you are as an agency owner. You can run on the field and do whatever you want to do any day you want. That’s the freedom you should be giving yourself. Now that is not what most agency owners do. They think I have to do this and grind this out. I have to do this every day. And then they complained later that I lost my joy. I lost my passion. I hate this now. Never allow a business to grow to the point where you hate any part of it because that’s not a failure of the business, or you’re not a victim. It’s your failure to plan, including this and previous businesses. Let’s switch gears, posturing towards the sale because that’s part of what we’re talking about.
Can I ask, what I am hearing is, if you are trying to start an agency, you shouldn’t try and do everything inside the agency. If you’re starting up, you should not hire the in-house organic time to develop because that takes capital to develop and hire all those in-house employees. But you should instead develop a model where you can partner with outsource partners as much as possible to delegate as many things as possible to grow.
Let me give an example and add some specificity to it, and you can change the names to protect the innocent here. I used to use Click Funnels not long ago, but before that, we were cobbling everything together manually with WordPress sites and whatever flavor of the month funnel software. But with high level, for example, some companies have pre-trained, specific, knowledgeable people that you could build your high level, like a SAS-based system for your clients. And you can then hire pre-screened, pre-trained team members that you can then employ to use to manage your Digital Marketing funnels at a high level for your clients. So that exists, that’s not mythological. There’s a whole industry built around itself. When you say we’ll do it in-house, we’ll do it ourselves and everything, you have already surrendered so much of your time and created so much unnecessary headache. Now, you may choose to do that, which is different, you might say, Okay, well, we’ve looked at the offerings out there. I’m not finding what I want, so we’re going to build it this way. And you should build it to fit like a glove for you. There’s no one way again, everybody asks, how’s this guy doing this? Well, that’s built on my quirks and my journey over 35-plus years as an entrepreneur. So, if you have somebody who’s raring to go, young and energetic, stars in their eyes, that’s awesome. At 19-20, that was me in my first business, you’re willing to do more. But even if you’re that person, you have to ask yourself, Is that the best thing I can do? And if you can take the old wisdom mindset and put it into the young body and the timeframe, that’s when you’re going to go crazy as far as making money because you want to learn from your elders. That’s what almost nobody does, it’s like youth is wasted on the young. It doesn’t need to be. You have YouTube, masterminds, and information everywhere. So I’m just saying, if you can learn these, learn from others smarter than you, because there’s a lot of people out there that have documented their experiences, where you can go, okay, note to self not going to do that. And just being mindful about all.
So does that mean the agency owner or startup should delegate those things instead of trying to do everything in the business? What should the main things that they focus on be? I don’t know if it’s a leading question, but what comes to mind is Marketing and Sales, you should focus solely on the agency’s marketing and Sales of the agency. Getting as many leads, customers, and clients as possible and outsourcing everything else?
You should know how you will fulfill it. So what I would do before I started the business is build a fulfillment framework. I wouldn’t go crazy building the world’s greatest system until I have clients. Now you don’t have to do it this way. You can get a client and figure it out. But the trap that I’ve seen occurs, and this is how it starts, and this is a classic agency startup model. Just me and I got a client. it doesn’t matter how I got him, friend, family member, referral, bummed an old employer. Have the client. Now I’m really busy, I’m doing everything. My time is buried from doing this one client, maybe I get a second one, the third one, they start referring me whatever it is, now I have absolutely no time. Now I’m trying to fulfill it simultaneously. At the same time, I’m trying to build a system for my business, for the fulfillment, customer service, sales, and marketing, and you’re already screwed. It’s so much better to go. Okay, who’s going to fulfill these key roles? What are the key roles of customer service fulfillment? What is my model? How do I communicate with clients and provide reports? How do I do sales and marketing and build globally? So do at least a wireframe model of it, and once you know how to take care of one client, you have this perfect client in your mind. Then you build a fulfillment system you think is going to work. And it’s like Mike Tyson said, everybody goes into a fight with a plan, so they get punched in the face. But you’re going to have one on paper that you think will work, and you know how things are getting done, and it minimizes your time involvement- that’s key. And you’ll be all in on sales and marketing. However, you want to do that. Again, personal involvement it’s an admission of defeat every time as a business owner, agency, or otherwise, that you say, oh, I need to do that. Do you think that the greatest business owners, the super successful people with 30 to 50-year careers that have made millions or billions of dollars, do everything in this company to start a new business? Or do you think they will pull in their team as the first thing, build the engine, and then worry about it? But they’re the person that has the mind. They’re the giant brain making it all happen because entrepreneurship is a creative art. It’s a creative form. It truly is. People think of the left brain, it’s the right-brained because you’re dreaming of a business. So dream well, don’t just dream big, dream well, Dream intelligently. Dream of a model that makes some freaking sense. Suppose you run screaming into the night to build this business. And it’s like, your hair’s on fire, and it’s chaos. It’s really fun. I get it. It’s a lot of adrenaline.
You’re just cracking out on your business, just cranking out on it, and you’re going to wake up with a serious hangover. It’s going to feel sort of good. It will be a little hickey, but you’ll have some money and stuff. It would help if you were like, yeah, build a business. No, you build a headache, you build a future blow-up is what you built. And I and you put up ceiling over your head. Go ahead.
I did that. I’m going to be frank with you and transparent and vulnerable. I did it. I had a business partner who went out and sold five clients. It should have been $20,000 worth of work for each client. And he charged five grand and then suggested that I’d be the one that did everything because I needed to learn. Well, that’s ridiculous, I didn’t need to learn it all. I could do it all. But I wanted to outsource. I wanted to find fulfillment partners, but there wasn’t enough money. And it was like under the guise of, well, we’re just starting up, we need to get these clients, and it was an absolute nightmare. I was working 14, 15,16 hours a day. It’s sad; it took the wind out of my sails regarding other things to even want to do that again.
I’m doing this for Digital Web Solutions. But I wish I had known some of the things you shared 10-15 years ago. So I hope people get tremendous value out of this because you’re sharing things that could save people a bunch of headaches. So then, if you build the maps to a certain degree of your fulfillment model. I am curious, some people are general Marketing agencies, so I’m not going to name names. They do everything, and they claim to do everything. And yet they don’t. I’ve talked to agencies that say they do SEO but don’t. So there are two questions here. First, I have to slow down. The first question. Should you try and be a general marketing agency, like Acme marketing in Chicago, that offers services to local clients? Or should you niche down to a specific type of client like you did? You did Dental, social, you did Marketing For Dental Marketing ninjas?
In addition to a more known brand, which was maybe an interest. Again, there isn’t one pat answer, nor should there be. What is part of your dream? What is the dream business? Do you want to do everything there? And each scenario presents opportunities and challenges that are unique. I’ve done both. So I’ve had multiple generics or general. I’ve had several industry-specific fed businesses. Where I am now if you pick a niche business in a particular industry, then here are the advantages, let me just list some of the advantages. The advantages should be a lot less competition, the ability to reuse campaigns, and knowledge, which is wasted if you are working with 22 different like, we were working with 40 different industries in the US. You’re not going to see another left-handed underwater basket weaver or roofer or something that you did once, but you’re also doing like 39 others, and you’re not going to get a lot of repeats. That is going to cost you. It’s going to be very expensive for you. And it’s also going to be a waste because you’re going to collect a lot of knowledge, resources, abilities, and so forth. Here’s where it can be good, because you work with a few industries or however many, and then you find one where you’re like, I like this industry. So you start researching and saying, I want to do more of this. I like this. So that can be good. But there are also other ways to figure that out. You don’t have to use trial and error because that’s expensive and could be costly for you. So choose wisely, if you’re going to go vertical, the niche path, choose a recession-proof industry. Choose an industry that isn’t overcrowded. Dentistry, to me, is overcrowded, so I wouldn’t choose that niche today. But you can still win. I’m not saying you can’t, but it’s been the flavor of the decade for marketing, and it’s over-marketed. They’re great when you get them. But there are a lot of other ones out there. There are so many weird industries that make good money that if you find out about one of them, there are also up and more up-and-coming things. I’ve heard about weird niches, like, you’ve got some offshoots of things like cosmetic surgery, and I’m not telling anybody to go into this. But you can look into things where you have cool sculpting, or you have these more like, I don’t want to say fad procedures, but there’s money, and people are spending it, and it stood the test of time, and it doesn’t seem like it’s going anywhere. I wouldn’t tie myself to anything too faddish because it could be something that will be around for the long haul. So it’s got to be something that meets that criteria, where people are spending money irrationally on it, which can be pets, kids, hobbies, or golf. I am thinking of things people spend irrationally on, regardless of the economy. Or things related to building and construction, but that does change in different economies. You have to look at it. Medical health is a big one too. People are never going to sacrifice their health past a certain point. So if you can look at the industries connected to those areas, irrational exuberance, hobbies, passion, children, pets, or we know how much America and the world spend on health and lifestyle. Regardless of what it is, it’s them making money, those businesses in those industries. And if you have a connection to the industry, these things may push it up as you know it. Like I worked in an industry, my dad and my best friend worked in that industry. I have gotten insider tips about how underserved the industry is. That can be your secret angle, and that’s fine too. But, it would help if you also vetted it to make sure you can make a living like you could be doing it ten years from now. Let us assume you meet all the criteria in the niche and it is working out. Then you can crush it. Because you can go in and build, spend all that time building overheads, marketing funnels, emails, autoresponders, landing pages, and everything. You will not only get to reuse that stuff, but you will also get to use it for multiple clients over time to help merge the best of the best, which will make your value proposition better. You will never get that when you are in five or ten industries. You can’t do it, you will crush yourself. Even a large agency couldn’t do that. So that’s a thing if you can find it and build a few vertical brands. So build them up as silos. So you build one vertical agency, and then you find another.
And they can be complementary.
Where you can get referrals, one lends itself to the other. Public agencies are tougher. There are more distractions and waste-prone. The people I respect the most I see them doing vertically.
It is hitting home because I started a General Marketing agency in 2011, and if I could go back, I would have chosen a vertical. So not to talk about myself, but I decided to go into the automotive industry in 2013 and sold cars to become one of them. I eventually started a dealer Marketing agency. But that is a story in and of itself which I will get on someone else podcast and talk about myself. But I did have that intention, so I know what you are talking about. If I could do it today, I would much rather choose a specific niche to target and learn about.
Going back to the sale aspect.
Yes, that’s what I want you to talk about.
I want to tie it to that discussion. So one of the things that I have seen, and I got one today, is dental companies, DSO, Dental Service Organizations, or other companies that are in the industry and want to make a strategic acquisition of somebody in that industry already to get cross leverage. I have a friend who just sold his agency for millions of dollars; it was a software platform in a particular agency. They didn’t care about the software, they kept it up but only wanted the list of customers. So what happens is if you can build that, and sometimes they are a larger agency that acquires both. So if you are looking vertically or if they have a dental cutout, your agency is siloed in. So they will say that is strategic for us. So let’s say we have a cadre of construction industries, and you happen to be doing flooring, and they don’t have one yet. So you get a lot of that type of interest in outreach from people like my client is interested in. So I get those constantly, I got one this morning for dentistry because they think I am still the agency owner.
They think you are still the owner and want to buy it?
I get those multiple times per month, all of which are opportunities to sell.
So we could talk about it for a long time. We could create an entire course on this. We could create a real mastermind, and I think you should. So setting up all those things to be headache free, I think the biggest thing you’ve talked about is ensuring that you are not the technician and you are in the business and not working on the business. So here is my question, the things you’ve shared are so amazing because when you outsource to fulfillment partners, you know what your debt cost is as opposed to having to come up with what your cost per action is on your SOP. You already know what that is, so sell it.
You exactly how much you are making.
I worked in a car dealership as a Marketing Director and had great success, but I didn’t know how to clone myself into how I scale this thing. It was so hard. Now, I would have gone back and recorded what I was doing every fifteen minutes to generate my SOPs. But I’m trying to get at that you have done this. So you have the fulfillment partners. You are churning out money. You are getting clients, and you have created this system. How do you know when a good time to sell is? To go to a bank, you need to be in business for a minimum of two years to get financing. Do you operate for two years and then exit?
It will present challenges not to have PNL for two years. I like that number two, so I would agree with that. I am not saying you couldn’t sell in a year and a half. You will be tempted to discount the agency based on. Well, I don’t know there are a lot of risks here because we haven’t seen two years. Maybe you were playing out your skull last year. You get a lot of that, so there is less opportunity. It will solidify your numbers and your ability to be fairly paid based on your numbers and your track record. So I like that number, but I don’t want anybody to hear me saying wait two years. That seems like a reasonable minimum. It will take a minimum of two years to build a viable agency to hit the numbers that I am about to say, which quote, everybody’s numbers are their own. But I like the idea of going all in aggressively and trying to build as quickly as possible in the beginning, based on the level scaling model. Not destroying your life, not seeing your family, and letting your health go by the wayside. The quicker you get there, the quicker you can flip it if that is what you want. Think about it with the end in mind. Start with the end in mind, an old Stephen Covey thing. So start with what you want to sell this agency for, and in what time frame? That will then determine your strategy, or it should. When I start a business, I ask, how long will I have it, and what do I want to sell it for? It’s like creating a brand. So, how does this brand act on social media? How does it look and think and talk, and what is it saying? What images does it post on Facebook? So this successful agency that is sold for ten million dollars in three years, what does it need to do? What does it look like? And everything needs to meet those criteria. Otherwise, you are only kidding yourself. If you don’t hold that accountability, here is my future thought: my future sale. Let’s wind that back because that gets into details we don’t have. However, we can say that, and I am here to tell you, is to be that future buyer. Now you are walking into the business, and now we are flipping it. I am not me. I am me outside me selling myself this as the buyer of this business. Why am I buying this business? Here is the sales pitch. I am going to give you an example. It is a turn-key operation that does not require me. These are all important points. I have procedures, systems, and people to hand the keys over. The company, again, is not financial or corporate legal advice. But I like to build them in a silo in their own company, not with any other assets mixed in. they are completely their own, in my case, LOC you co taxes and S-corporate. That is what I do, and it is in its silo. There is no asset sale. You can hand the entire thing over if that is what they want, or it becomes not an asset sale but a stock sale. You never know what a buyer will want, and they are very different; you have to ask an attorney about how they are different. But if it goes that way, it will be an empty can at the end. You don’t have to worry about any other thing. That is what happens in it. Everything for that and to achieve that agency is inside one LLC with nothing else mixed in. For me, I will never do it any other way. If you have that, you will be fawning over and thanking yourself when you sell it because then it will be so easy. My first business sale took a year. I had three parties that I dealt with, but with the final buyer, it took over a year to sell it, and it was the worst business year of my life going through the sale and running my business simultaneously. It was a stock sale, and we started as a stock sale, and then it became an asset sale. They get up in your business because they are taking on the liability of how the company was run instead of only buying an asset. Like buying the customer list and the goodwill and ensuring everything is alright, which is super clean. It’s like me selling you this cup or this spoon; it’s an asset. We agree on a price; here it is. All harmless stuff etc. So it’s clean. That allows you to put only one entity into whatever container you choose. I did make an asset sale on my first company, Realtime Publishing Agency, and in the end, it became an empty canister. I had a C-core that was an empty container, and I renamed it after my kids and then used it for other things. But it was fun; I didn’t mind having that empty container. It became a tax benefit to me. I would have been just as happy if I had built that company correctly, which I didn’t, to make a stock sale at that time and handed the keys over. You are taking the entire structure of the corporation, not vacuuming the asset out of it, if that makes sense. Those are two different sales scenarios. So build with the end in mind that you want, and it to be as clean as possible. You don’t want any BSs in agency owners when you go to sell the business. Buyers can have questions about things. They want to see that there is no mixing of anything. When other businesses and other things, you don’t want to have to replace them. Keep everything out that is not related to the company. Keep it as pure as possible. Think about the books you are running from the eyes of future buyers. More importantly, if you have contracts, you are negotiating, and one of the strengths of your negotiation on your side as the seller is to say, going back to my speech, listen, I set this company up. I have automated systems in place for how the clients are fulfilled, and we approach clients. I have reliable partners, key members, or employees in place to do this. I have backups for some of my vendors, which is another question you will get. I do this for myself, not to impress a future buyer. I have a backup because I have had the phone call; it happened recently with a vendor of ours in the agency where they say, you know what, it’s been a great ride, but we have decided to stop offering these white label services to anybody. We are not doing it anymore. I will not say the names because they will know who this is if someone calls. And we have forty campaigns running on that. By the way, good ones don’t grow on trees. So you have to have backup options. I will also have conversations with other providers of SEO, Graphic designers. I don’t care what it is. I will have the conversation to the point, and I may even throw them the occasional bone of a job to see what it is like, to try them out as a system that’s running and warmed up like a backup generator that I can turn on if the lights go out.If you don’t do that now, you should do that for your peace of mind. When a buyer sees you, they are like, this is a well-managed and well-run business that I don’t have to stress about. Because these are the things that you are going to stress about. They are going to spend millions of dollars on this business, so that they will have a lot of questions. You have to make it, so they imagine themselves walking to the business console, knowing where everything is; they have other people doing everything so they’ll have time to learn the business.Even if they already know agency work. If you can create that glovelike fit, that warm and fuzzy fit for them, that is going to be dollars in your pocket from the sale, and it’s going to remove expensive BSs that you are going to spend a lot of money on CPAs, Bookkeepers, Attorneys, back and forth wranglings. The buyer is trying to knock you down and your price because they were concerned about these things. You have to make it, so it is impeccable. You don’t have to, but you should to the point of ridiculousness. We can be casual and be like, I can kick back and do this, however, and run it that way. That’s a lifestyle business where you are like, this fits my lifestyle, and that’s cool. but lifestyle businesses run that way suck to sell. Because people are going to come in and go, I am not you, and I don’t know where all the bodies are buried, and it seems you have been playing fast and loose with some of this stuff.
Flying by the seat of your pants.
You are barnstorming your entire business. It’s okay. You are forgiven if you start it that way. If you have done any of that, which we all have, but from henceforth, you are done doing that. Now you are going to build a squeaky clean business, ready to be handed over to the new party with no fuss. I have a buddy Zack who is very good at this. He has taken it further, where every company is in its silo because I sometimes will have multiple entities in the silos. A new entity, new anything, new LLC.
New business should be a new LLC, there is no division of it, it is its entity.
The entity, in its corporate silo and legal structure, and he does that radically and even beyond that. The way the books are run, everything has its own set of books. Everything is separated. No mixing whatsoever. At the top is a holding company, I am not giving financial or legal advice. Still, the way he and I do it, we have an empty permanent entity, the parent company with nearly nothing in it, and that entity owns the other entities. I like that model.
We are not giving financial or legal advice, but I am assuming the holding, I think this is brilliant. I am assuming the profit gets paid to the holding company, the parent company. Is that how it works?
Yes. It’s the owner, but you can do that. However, you are advised to do it. You can have the money run however you want, that’s up to you. It’s more of a control thing and less of a structure thing. So if I wanted to start one agency, I would start two companies if I were starting from scratch. I would create an empty LCL own forever and name it after my kids because I will probably have this forever. There would be no point in selling it as it won’t have anything. Then I would create a second that owns the entity types I am not getting into. I would choose LLCs, and I would have taxes and corporate. So one would own the other, and then this is where I would build the agency. And everything would happen here. So all the money and everything related to that agency would run her. Then when I sell this entity, the top one sells that entity to another entity. So if I start new companies, they are under the owning chart of the top one. So my friend and I have been doing this for thirty years. We both agree from everything we have seen, that’s where we have arrived, that is the best. We won’t ever do it any other way. So that is what works for us.
That is brilliant. So ignore what I said, now I understand what you are saying. You would have the parent company and keep all the money in the child companies then, when you sell, you get the big payday to the holding company.
Yes. It’s not about where the money resides. I can’t get into that, but it is more about the entity. The number isn’t going to change in profit and loss. It is irrelevant where the cash goes. That is up to you how you maintain that. But what is important is the entity is self-contained and very clean. That facilitates your ability to do that, and here are the keys. Let’s tie this back to Thou shalt delegate everything. Do you see how they match up? You have delegated everything. Everything that you are doing, which by the way, I am guilty of this myself. I was making all the sales for my previous agency. Guess what I am doing now, having sold it eight months ago? All the sales for that agency still. Not full-time, but that was part of my earnout. So I get punished for failing to do and the indulgence of my joy of selling. That became a trap. I never hired another closer, so I am still the closer for the company. You have to be beyond a certain point, like two months, but I cage myself with that little thing I didn’t do. That one thing I held onto. Because I like it, I’m not preaching, not knowing what I am doing when I say these things. I am saying these are the lessons, and though I feel good about all the other delegations, I did most of what I said in this. But the one thing you don’t do is the one thing that will blow up. You won’t get away with it later. So everything you choose you will pay for it. It’s either going to come from your bottom line, or it is going to cage you. So it depends on what that vision is. What do I want to make, and then what do I want my freedom level to be? It is a topic for another day because I know we are running out of time. Structuring the deal; is what we can talk about if you ever want to get together again.
How to structure the deal and the specifics of how to ensure the future asset purchase agreement or business sale agreement is as advantageous to you as the agency owner as possible. There is a lot to that.
I think we will leave it there. The golden nuggets that you shared are just wow. I know there will be tremendous value in this to the community. I want to thank you for coming on the show. If our listeners want to reach out and connect with you, predominantly, we have agencies that listen to our show and watch our stuff. So how can they connect with you if they want to?
They can send me an email at S-E-A-N D-A-I-L-Y; I am sure you will have that on the screen. So it’s email@example.com. I am on Twitter, but it’s mostly football and NFT and Cryptos, but I am on there @SeanDaily. The website is the108group.com, but it’s a holding company website, so there is not much going on there.
Are you on LinkedIn in case people want to connect with you there?
Yes, I am also on LinkedIn, I think it’s Sean K Daily.
I will put it in the notes.
LinkedIn is Sean Daily.
I want to thank you for coming on today, and I appreciate it, and I hope we get together again for part two.
Yes, I enjoyed it. Thanks, Matt.
Okay. Enjoy your day.
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