In this blog, I am going to talk about the ‘Assets Over Agency Concept’ in detail. I will walk you through the seven major asset opportunities that I have encountered over the last five to 10 years of being in the business.
If you are currently in the agency business and providing marketing services to small businesses, this is going to be a very valuable concept. This is an opportunity for you to make your business more profitable and scalable. This will also make your life easier and more enjoyable.
I know these things because I have been selling to small businesses throughout my entire career. I have been an entrepreneur for almost 20 years now. I have been doing cold calls, knocking on doors to selling to small businesses through Facebook ad campaigns and emails, webinars, and everything in between.
I covered and went through the services, marketing, agency services, and software services personally.
What I am going to share is not just something that came to me overnight. This has shaped my entire career.
If you were selling to small businesses and you are not doing it the way that I will describe to you with Assets Over Agency Concept then you are going to be caught in the ‘Cycle of Doom’.
The Cycle of Doom
The ‘cycle of doom’ is where you put all your effort into selling to small businesses and they can’t afford to pay you a lot of money.
They just simply can’t. The economics are not there. They’re small businesses but they still are very demanding, want lots of attention, and want to be guided like a child. If you let them, eventually, they are going to demand custom services.
Small businesses will demand your attention which will absolutely break your business. The truth is you will not find an agency offering custom professional services that has built a good business selling to smaller companies.
I knew this because I have studied the market inside and out. I have proven that every single business that has sold to the SMB marketplace is doing this Assets Over Agency concept.
When people hear the word agency, they think that all it does is some sort of customer service for their clients. Well, that works with Fortune 1000 companies because they have massive budgets that they are willing to spend on marketing thus building a really nice profitable business.
Looking at the agency world, there are lots of good profitable firms. Look at the 20 to 30-man agency working for small businesses in the marketplace. There is nothing wrong with that but I have been there and I am sure that the owners of those businesses do not have the life that you think they have just because they have the manpower.
You may see that as a sign of success, but that person is scraping and clawing to make payroll every month. That is a real challenge to get ahead, stay ahead, and build some sort of asset that is valuable. I know because I’ve been there and I’ve also been on the other side of it.
These thoughts always remind me of a quote from Warren Buffett,
“…when a business with a bad reputation comes into contact with a management team with a good reputation, it’s usually the business that leaves with its reputation intact.”
Warren Buffett is such an amazingly brilliant man and has a way of saying things simply and powerfully. He is saying that bad business and bad business models almost always win over good management teams, people who have lots of experience, and smart people.
When your business has a bad model, bad economic service, and service structure it is almost sure to lose no matter how smart and how much you hustle.
We don’t get any extra credit for working hard
One of the reasons why Warren Buffet is so brilliant is that he thoughtfully makes decisions about the types of businesses that he puts his money into. He considers structure, economic advantage, and competitive advantage.
It makes it very likely that even if the management team isn’t the most brilliant and doesn’t execute perfectly, his money is still going to get more valuable in this business.
As entrepreneurs, that’s what we should all be looking for. We don’t get any extra credit for taking care of clients or working hard. Aside from not getting paid really well, doing client service is just plain hard work, stress, and jumping through the hoops to make them happy without any upside.
Importance of Assets Over Agency
Assets Over Agency is all about finding structures. It is a model that gives you the ability to scale, be more profitable, and require less time investment. Ultimately, it will give you a more valuable asset that you can eventually sell because you are developing a business that is attractive to other people.
Building a business that is all about custom service makes you look bad to buyers. It shows them how much work, effort, and time should be invested. It doesn’t matter if it can generate a profit of $5,000,000 a year if there is too much work involved that it is almost not worth the pain.
A business should be process-driven, there should be a broad customer base that even if one customer goes away it will not hurt the business as a whole. That is the kind of business that clients will surely buy, the kind that has a high-security investment.
7 Assets Over Agency Models
Productized Services are services that you can put into very discrete packages with discrete price points and a clear list of what’s included and what’s not in the service.
This takes off the possibility or at least minimizes the possibility of clients demanding a customized service. Anything outside that service package requires another set of payments. This also makes the relationship and expectations between you and your client fair right from the start.
In reality, no business can perform every single function and service. You have to have a specific area of expertise or field that you can offer to the client. It may look good when you tell your client that you can do everything but it only makes you look a total amateur.
An example of this is my own experience back on my IT services company. In the industry it was an hourly service business wherein when something breaks, you go and fix it then charge $125 an hour.
Nobody knew how long you are going to be there so you go and bill like crazy. It was horrible. Horrible for both the clients and the service provider. The service provider can’t scale their business and the clients are scared to get help for their own business because they know that their bill was going to start running the moment they begin.
What I did is that I created a very discrete package at set price points, and I said, “Hey, we will proactively support your computers for this. We’ll make sure your data and network is backed up for this. Put them all together and here’s your monthly fee. It is a set monthly fee, you can call me as much as you want and we’re never going to charge you more.”
That totally changed the dynamics of the relationship with the client. I had a recurring revenue, and there is a very clear of what is included and what is not. If it went outside that then I charge them. Generally, they knew what they are getting and that if they demand more they are going to pay extra.
I had a totally different relationship with my clients and I was able to scale that business into multiple millions of dollars and sell it for multiple millions of dollars because of the model that we had created.
Click here to read a more detailed post about how to create ‘Productized Services’.
Businesses are spending lots of their budget on buying ads on Facebook, newspaper, magazines, radio, television or any medium that can be used to launch an advertisement.
When it comes to the media assets, advertisement consumes a lot of the budget more so than the agency itself. One, because with ads you can actually observe your market when your ad is running, the second reason is that advertisement helps you to get right in front of your audience. The advertisement makes it easier for customers to understand what they are buying.
From a service provider’s perspective, it is easier to sell advertising on my media property than to try and sell some sort of custom service. Clients can see my media property, they can understand who my audience is because they see the type of content that I produce. There are advertising opportunities and there is a cost for that.
Building your own media means building an asset. Just like what I am doing right now.
Clients can see the impact of my reach because they see me producing media every day and sharing the content to the market every day. There are businesses coming to me and saying, “Hey, I saw your article on X, Y, and Z. How much would it cost me to advertise in that or to have a coverage of my business like that?”
I am still going out and offering marketing services to those clients. The only difference between an agency offering marketing services and me is that mine is based around an asset.
My assets produce tangible results, and the value is increasing every day as I bring more advertisers and more readers or viewers of my content.
Lead Generation Sites
Lead generation, simply put, is generating more customers through qualified leads. And this is something that business really wants, lots of customers.
Instead of just managing Facebook ad campaigns for and their accounts, you build your own assets by building your own lead generation sites and sell those leads to businesses.
Now, you got something so easy to control and manage. If the customer stops paying you can just cut off the lead supply and transfer the leads to another business that is willing to pay you. No need to start from scratch with a new client and having to take over their accounts and manage it.
Direct Mail Campaigns
When talking about Direct Mail Campaigns I am referring to Valpak, the coupon mailers. Valpak has been around forever, just mailing out a simple envelope of coupons to businesses.
So, instead of doing custom mailers for a particular client, you build your own brand of mailers and you sell spots from those mailers. Through this, you have built an asset with your own customer base.
You’ve built an asset with your own brand that people now expect to see your coupons. Your mailers are now direct mails that will always come in their mailbox.
Next is Sales Funnel, and this one is absolutely taking off. This is what people see when agencies are doing really well.
I have got several friends in the agency industry that are killing it right now and they don’t do custom agency service. What they do is design a sales process, a sales funnel that works really well for each client that signs up with them for a set monthly fee.
They are essentially taking the sales funnel and selling the process to businesses. It is the same sales process they just do minor customizations with the brand and logo. They own the process, they just take it and sit down with clients then let it run.
This a more attractive model than trying to create a custom sales process for each client. This may be difficult for those with clients across multiple industries but if you focus on a vertical industry then this will work and kill the game.
You are going to design and optimize a single sales process that you will constantly test, tweak, and learn for all of your clients to make sure that everybody has the best updated sales system.
One good example I have seen is the law office of James Sokolov.
He was a lawyer that realized that his marketing system to get legal clients that were absolutely crushing the competition. So what he did is he went around the United States find lawyers and said, “Hey look, you pay me x and I will just deliver clients to you. Because of my marketing system, you will become a dominant lawyer in the market.”
And he has done very well with that model, last time I checked it was worth $100 million dollars already.
This is, probably, the most successful model in selling to small businesses. One of the greatest example is Microsoft.
They built a huge client base of small businesses selling them reasonably priced software. Their Quickbooks is a good example of software they developed for accounting purposes that they are selling to small business.
That is a software business itself. Software as a product. There are also software-based services like what payroll processing firms are doing. Payroll used to be done by bookkeepers manually, now it is automated thanks to payroll processing firms. They provided a software that can process their monthly salary in exchange for a monthly fee.
There are many examples of a software-based service but in a sense, if you are a small business like a salon or a chiropractor, a simple automated reminder system in a form of text messaging-based platform can help you gain a 30% improvement in your appointment show up.
This industry grew to a hundred million dollar business and very quickly ended up being sold to somebody. This is a very attractive business model that will surely create and give you clients and give you a solid strong asset.
Your Business Itself
This is the most important concept to understand as an entrepreneur. As an entrepreneur, if you do well at all it will become the asset value of your business.
From day one of your business, you should already think about how you will build your business to maximize the asset value.
Because no matter how much income you make, over the years, the most valuable thing that should happen is to be able to sell your business for a good chunk of money. If you don’t do that from day one you are going to have a hard time selling your business and the valuation will be much much lower.
A perfect example was my IT services business. I built that business around process, structure, recurring revenue points and set price points from day one. And because of that, I was able to get a couple of times of the revenue when I sold it versus the industry average of selling your business for a quarter or a third of your revenue.
So if you’re doing a million dollars in sales, you might get $250,000 as a purchase price. Whereas if I was doing a million dollars in sales, I was getting two or three times my sale price because of the way that I structured the business.
Just like building a house, how can you make your house more attractive so that when you want to get out and move to another house, all the brokers and buyers will be excited to buy it.
Again, I think the most important concept that small entrepreneurs can understand is that you’ve got to treat your business like your most valuable asset.
Every day, think about how you are designing your model so that it is going to be very attractive to buyers. So you can exit in a big way that will make all of the hard work worth it. Because, honestly, you can have a nice salary, benefits, and all that stability but you are not going to get the exit to a much beautiful lifestyle.
As an entrepreneur, you have taken a lot of risks, and you can make sure that all those risks are worthwhile.
The entrepreneurs that are rich, those guys have sold their businesses and made a lot of money, and it is because of the assets of their business, not the profit.
And those are seven really important concepts and examples for the whole asset over agency model. Model concepts that can give you a more profitable, more scalable, and easier to run business where you can have the lifestyle that does not require you to chase down every client and do their customized demands every hour.
Stay tuned to our email. I will send you this video as well as some specific examples of companies in each of these areas that are doing this really, really well.