5 ways to become a better financial leader when running your own agency
One of the trickiest transitions you have to make when setting up your own agency is going from an expert in your field to a business leader. And I remember it well.
When I first left my career in corporate banking and started de Jong Phillips back in 2015, it was a huge learning curve. And what I discovered is that being excellent at what you do, doesn’t necessarily mean that running a business is going to come naturally to you.
There’s just so much to learn.
I did have one advantage though, and that is that one of the most important skill sets any business owner can have is all about finances. That’s why I never wanted to be an accountant who just crunched the numbers; I wanted to help my clients become better financial leaders too.
Agencies that scale profitably and predictably, always have a good financial leader at the helm. Unfortunately, so many highly skilled agency owners struggle with this because they don’t have any idea where to start.
But here’s the good news: you don’t have to have a head for numbers to be a good financial leader; you just need a finance team and accountant who can guide and mentor you along the way.
Well, I think there are 2 main things:
So many new clients come to us who have been basing all their decisions on what their business looked like 3 months ago.
You can’t make good business decisions based on the last quarter’s results.
That’s why it’s so important to have systems set up that gives you instant and easy access to what your business numbers look like in real time so you can make better decisions faster. It also means you can nip any potential problems in the bud quickly. There’s fabulous software out there to help you do this; we always put our clients onto our favourite cloud-based accounting system, specifically Xero.
I’ve always been an entrepreneur at heart, so when I set up de Jong Phillips, I wanted to help my clients use their numbers to thrive in business.
The truth is, most business owners don’t know what they’re looking for though. That’s why partnering with an accountant like us will help you to make more money and thrive.
Well, below are 5 things we encourage our clients to do so they can grow the successful and profitable agencies they desire.
1. Create a competitive advantage
Being competitive isn’t necessarily about beating the competition on price, in fact, being the cheapest is rarely the wisest business strategy. Competitive advantage is basically anything that gives you an edge. So yes, pricing is important, but more in terms of whether you’re using the right pricing strategy to help you reach your financial goals.
You should also look at the value you’re offering your clients:
- How can you make your services more effective, efficient, and comprehensive?
- How can you save time on jobs and therefore increase your profits?
- What systems and processes can you put in place to make sure your customer gets the best experience every single time?
The most successful agencies approach business with a growth mindset and are constantly monitoring what they can do more quickly, more efficiently, and more profitably.
2. Let the numbers lead your decisions
We all know what it’s like to get stuck in analysis paralysis, which is why when you let the numbers lead your decision-making process, business becomes so much easier!
Again, pricing is a great example of this; a lot of agencies who come to work with us are stuck treading water charging by the hour. The problem with this strategy is that there’s always going to be a cap on how much you can earn and this makes scaling much harder to do. That’s why we always advise our clients to charge for the value they offer, not the time they spend.
A lot of clients can be resistant to charging for value over time. That is until we show them the actual numbers. For example,
One of our clients wanted to hit a certain growth target for next year. But when we looked at their numbers it was clear it could never happen because of the time-based charging system they were using. At first, they weren’t convinced. So we showed them how they only had 1400 billable hours available to them each year. This, minus their staffing costs and expenses, meant there was no way they could hit the financial goals they were aiming for. Suddenly they realised that changing up their pricing strategy was a no-brainer.
When you understand how your numbers play out, it’s so much easier to make good business decisions.
3. Teach your team about budget management
You know that ‘time is money’, but the people you employ are probably less aware of how their work affects your bottom line and your agency’s overall financial success.
It’s super important your team understands it’s not just about ROI (Return on Investment) but also ROE (Return on Effort).
Another client of ours who runs a digital agency found that some of their projects were not as profitable as they should have been. When we looked into this it was clear that part of the problem was that their designers were so focused on getting great client feedback, that they were spending far too long on each project. So we encouraged our client to introduce some budget management training for all their team. Once everyone understood that the longer a job takes the less profitable it becomes, they all became much more mindful of how they were spending their time – while still keeping quality high.
Here are a few great ways to get your team thinking more commercially:
- In-house training and mentoring sessions on budget management
- Setting up systems and processes
- Specifying how long projects should take
- Introducing time-tracking apps like Harvest
4. Be transparent about how business is going
Sharing openly with your team about your business finances, particularly if they’re not going very well, may not seem very appealing. But being open and honest with staff about how things are really going, can actually reap huge benefits.
I saw first-hand proof of this over the last few years when a lot of agencies were struggling during the pandemic. Those I know that were open with their teams about their financial challenges, unanimously found:
- increased rapport with their staff
- more understanding and support of management decisions.
- Staff were more proactive in helping to problem-solve.
Being open with your team, therefore, is another great way to encourage them to become more commercially minded.
5. See your accountant as part of your team
The more our clients share with us about their business decisions (and the sooner they do it) the better we can help them.
Business owners who keep their accountants in the loop and consult with them before they make any major decisions, usually end up reaping benefits they didn’t even realise were possible.
If you decided you wanted to set up a new market in a different country for example but didn’t consult your accountant until after the ball was rolling, there’s a good chance you’ll have missed a trick or two that could have saved you time, money or both.
One of our clients was recently doing exactly that, and luckily for them, they chose to consult with us from the off-set. As a result, we were able to support and advise them on a whole host of financial issues, from tax implications and pricing strategies to funding and staffing costs. This not only saved them time and money, but also a lot of potential stress.
Remember, you don’t know what you don’t know. That’s why good financial leaders forge close relationships with their finance teams so they can ask questions before pressing go.
As you can tell, financial leadership really is the key to growing a successful and profitable agency business.
That’s why choosing the right accountant to partner with is so important. At de Jong Phillips we help our clients become great financial leaders. So if you’d like to find out more about how we can support you, book a call.