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The Death Spiral for Scaling Agencies
Manage episode 418196889 series 3574119
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Summary
In this episode, Nathan and Sebastian discuss the two levels of value within an agency and the three major problems that arise during scaling. They emphasise the importance of understanding the agency business model for any business owner who may work with or be approached by an agency. They explain how value is generated through the solution of problems and how agencies achieve economies of scale. They also provide insights on assessing the quality of internal systems and the accountability of agency employees. The conversation discusses three major challenges that agencies face when scaling: erosion of core competency, staff churn, and client churn.
Takeaways
- Understanding the agency business model is important for any business owner who may work with or be approached by an agency.
- The two levels of value within an agency are internal systems and people.
- The three major problems during scaling are staff churn, erosion of core competency, and client churn.
- Value is generated through the solution of problems, and agencies achieve economies of scale.
- Assessing the quality of internal systems and the accountability of agency employees is crucial when choosing an agency. Erosion of core competency occurs when agencies expand into new verticals or service lines, diluting their hyper-specialised talent.
- Complacency among key team members can lead to a decline in service delivery and a loss of core competency.
- Client churn is a significant challenge for agencies as it can negatively impact cash flow and lead to a death spiral.
- Understanding an agency's average tenure, up-skilling process, and client retention numbers is crucial when evaluating their ability to scale.
Chapters
00:00 Understanding the Agency Business Model
06:46 The Three Major Problems During Scaling
11:34 Generating Value through Problem-Solving
15:33 Assessing Agency Quality: Internal Systems and Accountability
36:31 Complacency and Employee Churn
43:05 Client Churn
Keywords
agency business model, value, internal systems, people, common problems, novel problems, anti-SOPs, economies of scale, assessing agency quality, accountability, agency scaling, erosion of core competency, complacency, client churn, upskilling, employee churn, P&L structure
22 episodes
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