
What Are Some of The Biggest Challenges Digital Agencies Face in 2024
Challenges agencies face daily can hinder success. Discover the top obstacles and practical solutions to help your agency thrive in a competitive market.
This insightful video delves into the most significant challenges agencies face in today’s fast-paced landscape. From navigating client expectations to managing tight budgets and adapting to rapid technological changes, we explore the hurdles that impede growth and success. Join us as industry experts share their experiences and strategies for overcoming these obstacles.
Chris Martinez, Founder of Bloom Partners
https://www.linkedin.com/in/chrismartinez13/
#1 – Chris, can you explain how you got into agency consultation?
#2 – What are some of the biggest challenges agencies face at the end of 2024 and the beginning of 2025?
#3 – What are some actionable things agency owners can do connected to the challenges you outlined in the previous question?
#4 – What are some of the most significant opportunities you see agencies have in the changing world of AI and increasing offshoring?
#5— What AI tools do you personally use to help you run your business?
#6—If you had your time machine (H. G. Wells) and could travel back to the beginning of you?
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The Show’s Main Transcript
[00:00:00.910] – Jonathan Denwood
Welcome back, folks, to the WP Tonic Show. This is episode 941. And I will switch off my email because it’s just a bus. So 3, 2, 1. Welcome back, folks, to the WP Tonic Show. This is episode 941. We have a fabulous guest with us. We got Chris Messes, founder of Blue Partners. They consult agencies. They help you with your agency problems. And if you’re looking to sell your agency, I think they can consult with that. Chris has a ton of knowledge. He’s run a few agencies and has been in this sector for several years. It should be a fabulous show. Chris, would you like to give the tribe a quick 20 for a second in? Try to talk about yourself, Chris. Sure.
[00:01:19.060] – Chris Martinez
My name is Chris Martínez. I am a local of Los Angeles, California. I spent about five years living in Tijuana, Mexico. I’m one of the first to build a team for your marketing Agency in Mexico. Tijuana, Mexico, if you’ve never been there before, is known as the most dangerous city in the world. I can tell you it is the most dangerous city in the world right now. It wasn’t when I first got there, but I’m glad to be back stateside here in San Diego.
[00:01:43.810] – Jonathan Denwood
Yes, that’s fabulous. I got my great co-host, Kurt. Kurt, would you like to introduce yourself to the new listeners and viewers?
[00:01:52.900] – Kurt von Ahnen
Yeah, Kurt von Ahnen with Manana Nomas. We focus mainly on membership and learning-type websites, and I also work directly with the folks at WP and Lifter LMS.
[00:02:01.680] – Jonathan Denwood
As I said, in this great interview, we will discuss with Chris how he got into the agency and agency consultation world, what are some of the biggest challenges agencies face, how they can deal with them, and what are some of the opportunities. It should be a fantastic discussion. But before we go into the meat and potatoes of this show, I’ve got a message from one of our major sponsors. We will be back in a few moments, folks. Three, two, one. And coming back, folks, I also want to point out that we’ve got a fabulous free resource for freelancers and agency owners. We’ve got a list of the best WordPress plugins and special offers from our major sponsors. To get all these free goodies, and I know How you like your free goodies, all you have to do is go over to wp-tonic. Com/partners. No, not partners, deals, sorry. It’s Wp-Tonic. Com. Com/deals. I had a bit of a brain fart there. It’s early. I haven’t had enough coffee, tribe, but there we go. Chris, as I said in the intro, how did you get into the agency world and pivot to consulting agencies?
[00:03:36.450] – Jonathan Denwood
Maybe you can give us some background info.
[00:03:38.880] – Chris Martinez
Yeah, absolutely. Like most of us, I went to university for marketing agencies, and then Here I am. No, I’m just kidding. I wouldn’t say I liked anything to do with the internet.
[00:03:51.370] – Jonathan Denwood
Sounds crazy. I don’t either, Chris. This is back in 2007.
[00:03:58.000] – Chris Martinez
I’ll start the story there. So in 2007, my dad died of cancer, and then I decided I wanted to start a soccer magazine or UK, you would call it football. I started the soccer magazine. It failed miserably. It was a local print soccer magazine in 2007, the same year David Beckham began to play in MLS. Anyways, that magazine failed miserably. I lost all my money and some, and I had to figure out how to pick up the pieces of my life. Fast forward a couple of years after the magazine failed, and I had an idea. I was like, I need to build a website. I didn’t have any money. A friend said, Hey, go figure out this WordPress thing. I was like, WordPress? Websites? I don’t want to do it. Why don’t you help me do it? He’s like, No, figure it out on your own. I was very angry with him then, but it ended up being the most excellent advice. Throughout a weekend and a thousand calls to HostGator, I built my first WordPress, and I’m surprised you haven’t recovered from that experience.
[00:05:03.620] – Chris Martinez
Well, I’m very stubborn. I don’t give up. And so I was determined to figure this thing out. And so that eventually led to me building more websites and learning how to drive traffic. At one point, Russell Brunson had a coaching program called Dotcom Secrets, and I hired them to teach me how to drive traffic, paying them 500 bucks a month. And I was broke. I went to my first job working in digital marketing. I worked for a company called Reach Local. If you guys remember them, they did PPC management, and I was a salesperson. And that’s when I got the idea for my agency in 2012. And I partnered with two guys. We had a little team in the Philippines, and we were cranking out websites, doing content, and building the agency. And eventually, in 2015, I moved from LA to San Diego, and I was like, You know what? I’m sick and tired of staying up till 2:00 in the morning talking with the Philippines team and still not doing things right. I said I wondered if I could find a team in Mexico.
[00:06:12.650] – Chris Martinez
Tijuana is only 20 minutes away. I bet you I could find people down there. And back then, it was very, very difficult to find talent. Indeed didn’t have a presence there. Most people, they knew web development, but they didn’t know WordPress. And this is one of those weird things. Then at At that time, nobody knew WordPress. And so I went down there, I set up a company, I ended up hiring a team. We grew my agency. We ended up having over 200 and something clients on retainer with this little team in Mexico. Now, one of my superpowers has always been operations and systems and processes. And so we were very, very efficient. So I kept telling friends like, Hey, why don’t you set up a team down in Mexico? Nobody would do it. So I got the idea, let’s set up an outsourcing company. We grew that outsourcing company. We had hundreds of millions and millions in revenue. I launched that company. It was called dudeagency. Io. We ran that from 2017 up until earlier this year. Now, what happened? 2022-ish, our clients started asking us how to solve other problems other than just outsourcing.
[00:07:18.030] – Chris Martinez
How are you guys training these people? They’re amazing. I want to learn that and apply it to my agency and all my team members. How are you so efficient with your processes because you bang stuff out so fast for us? Can you teach me how to do that? How can I be more profitable? And we ended up getting a client that came to us and said, Hey, I don’t want to pay you at all for the outsourcing stuff. I just want you to consult me and show me how to run my business more effectively. I’ll pay you 5,000 bucks a month. I was like, Cool, let’s do this. Then that ended up growing and we started improving the product and we’re like, Hey, this outsourcing piece, one, I don’t personally think that that business model, the way that we were running it, is going to be around that much longer. There’s just really no need. But two, the bigger problems that we can solve. What if we help these agencies that are doing pretty well, seven figures in revenue, not very profitable. We help them improve some of these, what we call simple fixes, get them growing, get them scaling, profitability goes up, and we help them to do the exit.
[00:08:20.060] – Chris Martinez
Actually, now we’re actually taking the equity with a lot of our clients as well. We can be a part of that growth and that big exit. That’s when we launched Bloom in July. So that was the fastest way that I could tell that story. I think I came in in under a couple of minutes or a few minutes.
[00:08:34.910] – Jonathan Denwood
You’re fabulous. Fabulous. Over to you, Kurt.
[00:08:39.040] – Kurt von Ahnen
Yeah, there was a ton of content in that answer, Chris. It’s mind boggling to some that run agencies that would go, okay, so let me get this straight. He did this, he did this, he did this. And I like the part that you pointed out, operations being your superpower. That seems to be what I’m seeing with other agencies that I might intertwine with or do projects with is that they’re getting lost in the… They might be good at talking to people or getting a client, but they seem to be lost in the processing of the tasks or the work that goes in the client work.
[00:09:17.430] – Chris Martinez
How do you…
[00:09:19.720] – Kurt von Ahnen
Well, the question really is, what are some of the biggest challenges that agencies face? And I feel like I’m front loading the question with my own opinions. I’ll just let you answer that question. What are some of the biggest challenges that these agencies are seeing?
[00:09:31.260] – Chris Martinez
100% what you just recognize. So when I look at the typical agency owner, especially one that’s gotten the business to, let’s just say, a million dollars in revenue. They’re typically… They were really good at sales, they were really good at marketing, or They’re really good at technology. It’s usually a combination or one of those three. And so you’re growing this business. And most of us, we start out as a freelancer, and somebody gives us a project. We’re like, okay, that’s cool. We can do that. And then we did a good job, and that turns into a referral. And then eventually you’re like, okay, well, I need to hire a contractor because there’s just so much work. Nobody ever taught you how to hire somebody or train somebody or manage products. You just figure it out over time, blood, sweat, and tears type of thing. And then before you know it, because you were so good at getting results for clients and usually decently good at selling, now you have this business, but you can’t get to the next level. So most of the clients that come to us, they’re doing decent revenue. Profitability is usually in that 10% range.
[00:10:35.320] – Chris Martinez
But man, those agencies are working really hard. The agency owners are working really hard. 60, 70 hours a week. They feel like they can’t leave the business, otherwise it’s going to fall apart. The reality is that it’s not rocket science. It’s just that you don’t know how to run the business effectively. You’re so accustomed to running it, so you’re essentially the centerpiece of this business, which you had to do. You had to do that for a number of years. Now we have to retrain you, essentially, and show you these skills. And one of the simple things is we got to start building out a leadership team. We got to put people in place who are qualified and know how to report back to you to prove to you that the business is running smoothly. You got to find the right people. You got to show them exactly what they need to do. We got to be able to hold them accountable to doing their job. I equate, I’m going to use an American football reference. I equate it from going from Peewee football or playground football, where we’re just running around like chickens with our head off.
[00:11:36.050] – Chris Martinez
In one minute, you’re the quarterback, and next minute, you’re wide receiver. Everybody’s just having fun to being in the NFL, where now there’s structure and you have great players We have coaches and we have plays. Then we have the head office who’s making the decisions and saying, Hey, I need this person to do this. If this person scores nine touch downs this season, I’m going to give them a million dollar signing bonus. And what’s funny is that we always focus on the signing bonus that the player is getting. But nobody ever thinks about, How much money do you think the organization is making when that person scores nine times? They gave them a million bucks. They probably made $100 million. And that’s where we need to get to as agency owners, we need to evolve our skills and become better at running the business. And that’s essentially where my team comes in and does that. I say that a lot of the times we have to drag our our agency owners kicking and screaming across the finish line. We are not the types of people that are going to tell you you’re a special snowflake and that everything’s rosy.
[00:12:44.890] – Chris Martinez
We are that tough coach that’s going to tell you, Hey, this is wrong. This is not right. You need to man up and let’s get to work. I’m going to be there every step of the way. But you can’t keep doing things the other, the way that you’ve been doing them if this is truly what you want. If you want to be able to sell your business for 5 million, 6 million, 10 million. I met a guy last week who sold his agency for $32 million. If that’s the life that you want, these are the things that we need to do.
[00:13:16.200] – Kurt von Ahnen
So your answer led to a question that was in my head and I wasn’t sure if I was going to ask it or not, but now I’m going to, Chris.
[00:13:23.070] – Chris Martinez
Ask it, dude. I’m an open book.
[00:13:24.970] – Kurt von Ahnen
How much or what percentage or however you want to phrase the answer, but Some of the work is skills-based, and I bet you a lot of the work is mindset-based. How much of this is mindset-based where you’re just really having to beat on the client and go, Look, get over this imposter syndrome. We’ve got something to build here.
[00:13:43.470] – Chris Martinez
I’m going to give you the truthful answer. It’s 80% mindset. It’s 80%. It’s when you decide that that’s something that you’re willing to invest in or that you’re willing to reinvent yourself on, then we can get it done. But so many of us have programmed things in our brains, consciously, subconsciously, that prevents us from getting forward. The imposter syndrome that you just mentioned. Everybody has that. I don’t know anybody that doesn’t have that. Some of us have just figured out a system to get through that.
[00:14:19.320] – Kurt von Ahnen
Well, you think of a freelancer that’s building websites for $500 a site to compete with someone’s nephew, right? And then that click in the brain that goes off that goes, wait, I can get for this. Then I can get 5,000 for this. And then I could add a couple of features and sell this for 15 grand. And those are all mindset jumps. They’re not really skills or technical knowledge jumps. They’re small growth patterns with huge leaps of mental awareness.
[00:14:46.870] – Chris Martinez
Absolutely. Here’s a crazy thought. Whatever you think is the most that you could ever sell a website for, somebody looks at that and says, I would never do it for that sheep. They’re out there. You’re like, Oh, my God, if I could get a million dollars for a website, that’d be amazing. There’s somebody out there that’s like, I would not even talk to somebody if their budget was only a million dollars.
[00:15:13.940] – Kurt von Ahnen
I remember when the Affordable Care Act came out and they came out with that $93 million marketplace site. I told my wife, I said, We’re done. We’re done at this level. We got to go.
[00:15:25.620] – Chris Martinez
What a nightmare. 93 million and it didn’t work, right? It’s crazy. Oh, sorry.
[00:15:31.560] – Kurt von Ahnen
I was going to pass to Jonathan, but go ahead.
[00:15:34.170] – Chris Martinez
Pass away.
[00:15:35.830] – Kurt von Ahnen
Jonathan, it’s up to you.
[00:15:37.330] – Jonathan Denwood
Yeah, Chris. We have a lot of listeners and viewers of the show that I’m thinking are slightly lesser than the one million. I sense they’re between the 200 to half a million range by the conversations. Have you got any insights, any actionable? I know it’s It’s a difficult question, but I’m all about specifics here. Have you got any advice about how somebody that’s got what I call a microagency? Yeah, for sure. That’s in this 200 to half a million, how they actively in a one year, maybe two year period, get closer to that one million mark.
[00:16:28.810] – Chris Martinez
Yeah. So first of all, keep in mind, I came from nothing, literally nothing. I had less than nothing in my bank account when I started my marketing agency.
[00:16:37.780] – Jonathan Denwood
Well, if you’re a WordPress agency, that’s something that regularly happens, Chris.
[00:16:43.930] – Chris Martinez
Yeah. So maybe the first step is, stop carrying yourself a WordPress agency. I’m going to drop some of my truth bombs on you guys. So first of all, if you are not building a marketing agency that you can sell one day, you are absolutely wasting your time. Okay? This business is so unbelievably difficult, and it changes all the time. One day, you will wake up and not want to do this anymore. Or worst case scenario, like my dad, you could get pancreatic cancer and be dead in a month. These are realities. And so you need to be building your business from today so that it’s an asset, so that it could be sold one day. Start with that end in mind. Hey, I want to be able to sell this. Whether that dream of yours is to sell it for $250,000 or $250 million, it does not matter. You need to have that end goal in mind. I will tell you something. In the United States, the government is going to take 40% of whatever you sell it for. So just keep that in mind. Plus, you’re going to sign a non-compet, and you won’t be able to work in this business for anywhere from on the low, low end a year, but most likely it’s going to be 3-5 years.
[00:17:57.310] – Chris Martinez
So whatever you sell that business for, sell 60% of that is going to go in your pocket, 40% of that is going to go to the government. Also, if you pay a broker, that’s going to be anywhere from 5 to 10% plus lawyer fees and all that stuff. You’re also going to get an earnout, too. So a lot of the times you’re not going to get all that cash up front. And then after all that is said and done, you’re not going to be able to work in this industry that you’ve been working in, most of us, for over a decade for the next 3-5 years. The main source of income for you is going to be gone for the next 3-5 years. When you come back, it’s probably going to be very, very different. So just take that into consideration that the number that you need is typically going to be bigger than what you think it is. The next thing is nicheing. So I think all of us have heard the riches are in the niches. So find a niche and really focus on the problems that you’re solving. One of the things that drives me crazy about our industry, and that really, really frustrates me, is that the number of scammers that have come in and legitimately ripped people off have driven the reputation of our business into the toilet.
[00:19:08.730] – Jonathan Denwood
I’m not trying to be funny, but is there a army of them in there?
[00:19:12.690] – Chris Martinez
The majority of them. And unfortunately, the clients, the small business owners, can’t tell the difference. So they loop us all together and they say, Well, I tried this kid and I paid him thousands of dollars and I didn’t get anything. And that’s why I can’t trust you Kirek, right? Because you’re just like one of them. That’s what the client says.
[00:19:35.150] – Jonathan Denwood
You can trust Kirek. It’s me that you trust.
[00:19:38.090] – Chris Martinez
Okay, Jonathan, we can’t trust you.
[00:19:41.450] – Jonathan Denwood
This is the challenge that we face. I trust Kirek, whether I trust myself, actually, Chris. Perfect.
[00:19:50.470] – Chris Martinez
This is the challenge that we face. We can point the finger at everybody else, but to some Why don’t we have to turn around and point the finger back at us because we didn’t stand up to it? Enough is enough, guys. If you guys are with me, we need to repair the reputation of our industry and start focusing on client results. If you’re out there listening right now, you need to take a stand with us and say, We’re going to put the customer first and make sure that we get that client results. Don’t sell stuff that you can’t actually deliver on. It’s unethical. Any other industry, it doesn’t fly.
[00:20:28.090] – Jonathan Denwood
I do agree with you, but the only thing I would say to you is this doesn’t apply. It’s not 100% scenario, but there’s a lot of clients that just want you to tell them what they want to hear. I resist it. I’m still resisting it. I was consulting with a possible client yesterday, and it was really very evident that she was very resistant to the honest advice. She had some preset aspirations and views that were really unrealistic to her skill level, which I was isomized from our discussion. But she was very resistant because she had this vision, and it’s great to have a vision. It’s what keeps us going. But if we haven’t got the practical skills to get to that vision, it’s a little bit of hot air, isn’t it?
[00:21:27.660] – Chris Martinez
Yeah, I would turn them away. That’s That’s what I would do. I think that’s what we have to do. Trust me, I’ve been in a position where it’s like, do I take on this project where I don’t feel like it’s going to work, but I also need to keep the lights on? And I’ve had to make the hard decision. There are good people that are out there. And in the end, when it doesn’t work out, do you think they’re going to say, oh, it was my fault? Of course not. They’re going to blame you. They’re going to blame Jonathan. That’s what happens every single time. So we have to have the courage to be able to say no. And I think from marketing ourselves, we got to get better at explaining what’s the benefit of what we do and also who we work with and who we don’t.
[00:22:11.020] – Jonathan Denwood
So to recap before I throw it over to Kurt, we might go We’ll probably go for our half break, actually. We’ll probably go for our half break. But to recap, I think what you’re saying is there’s two things from this end question is, really find a niche, try stopping being a generalist. Really concentrate on end result, and be in a position where you can turn away some clients that really aren’t a good fit, because it will have consequences. Is that a good synopsis?
[00:22:47.970] – Chris Martinez
Yeah, I would say the first one that I mentioned was having the end goal in mind of selling the business, right? And recognize that you’re going to sell a business, or you’re building a business that can sell. The second one is picking the niche. The third one is really comes down to just having a great product that gets client results. We focus on that, we’ll be fine. Everything else will be easy.
[00:23:07.350] – Jonathan Denwood
All right. I think it’s time for us to go for our mid break. We’ve had a great discussion with Chris. I think we’ve covered some great stuff. We will be back in a few moments, folks. Three, two, one. We’re coming back, folks. We’ve had a feast about all the problems of agency ownership and the opportunities. It should be a great second half discussion. Before we go into it, I wanted to point out, if you’re looking for a great WordPress host, a much more partner, a true partner for your projects, why don’t you look at what WP Tonic has to offer for the freelancer and the agency owner? We’ve got some great packages. We got tons of experience. I’ve been a specialized boutique hosting provider. You can find more information by going to wp-tonic. Com/partners, wp-tonic. Com/partners. Let’s build something special together. Back over to you, Kurt.
[00:24:15.810] – Kurt von Ahnen
Well, we go into this topic on a lot of our shows, Chris, and I think it’s important thinking about agencies and the use of AI and opportunities. I think some of us are They’re coming at it and saying, AI is going to take all of our jobs or AI is going to steal our opportunities. Other people are saying, AI is a birth of opportunity because now we can become the experts in this tool and propagate fame and fortune. What do you think are some of the most significant opportunities in an agency with AI from your perspective?
[00:24:49.740] – Chris Martinez
Yeah. I mean, if you’re saying that anything is going to take your job or AI is going to take your job, you’re a fool because it wasn’t your job to begin We earn our place, at least in a capitalistic society, which I am a huge advocate of. We earn our place. You earn your spot on the team. So nobody’s taking your job. This technology that’s coming around, though, is a massive opportunity for us. It’s one of the things that we’ll be talking about at my event in San Diego in December is how we can leverage AI to be more efficient. Me being an operations systems and processes type of brain, I love efficiency. I’m with efficiency. I want to figure out how can we get this thing done faster but without compromising on the quality and without increasing cost. These tools that are now really coming of age are going to change the game. One thing specifically, and we’ll absolutely be talking about this at my event, AI cold calling. We’re using it right now with phenomenal success. You guys, it’s going to become so good that you won’t be able to to tell the difference that it’s a person or an AI.
[00:26:02.410] – Chris Martinez
I’m telling you.
[00:26:03.370] – Jonathan Denwood
I have that effect on customers already, Chris.
[00:26:08.130] – Chris Martinez
Exactly. Where are you going to have clones of Jonathan just running around?
[00:26:11.810] – Jonathan Denwood
That would be a real nightmare, Chris. That’s something I would not want on society at all?
[00:26:16.820] – Chris Martinez
It’s the Star Wars show coming. Come on. Revenge of the Jonathans. What I was going to say is this technology here, it’s a massive opportunity, especially for those that jump in early. This AI cold calling that we’re doing right now that I’m using for myself and that my clients are using, this will become the standard within the next year. I promise you that. The technology is just going to get better. It’s not just for us.
[00:26:44.450] – Jonathan Denwood
Chris, how can you live with your conscience, Chris?
[00:26:47.880] – Chris Martinez
Why is that?
[00:26:48.870] – Jonathan Denwood
You know what I call it, Chris? It’s really effective. You’ve just made my blood cold.
[00:26:57.220] – Chris Martinez
Listen, let’s talk about this.
[00:26:58.740] – Jonathan Denwood
It’s my English Chris.
[00:27:00.660] – Chris Martinez
Now I know. I like it.
[00:27:01.580] – Jonathan Denwood
I don’t get offended. Kirk’s got used to it.
[00:27:05.320] – Chris Martinez
Yeah. Let’s look at it this way. Actually, here’s a very practical application. When we do lead generation for a client, we’re booking appointments for them. What’s the biggest What’s the biggest mistake that those clients make? By booking an appointment for them, what’s the biggest mistake that they make?
[00:27:24.630] – Jonathan Denwood
I’ve just gone blank, actually, Chris.
[00:27:26.560] – Chris Martinez
They don’t call the prospect back. They don’t call them back fast enough. The speed to calling them back, they take too long. All the data shows you got to call them back within, I don’t know, 30 seconds or something like that. They’re not calling them. Then they say, These leads suck, and they point the finger back at you, and you suck, and you’re a scammer just like the rest of them, and then they cancel. That’s what happens. I get it, especially if it’s a smaller business, and maybe they don’t have a dedicated sales team. They can be on the phone calling immediately as soon as they fill out the form or whatever. But now we can use this. Right now, we can use this technology. Form fill comes in. The call goes out immediately to that prospect and says, Hey, Jonathan, thanks so much for filling out the form. How are you doing today? And you have no idea that’s an AI. You’re like, Everything’s going well. You’ll probably figure it out after a couple of sentences, but then they’ll There’ll be instances where you’re like, Now I’m not sure that this is a robot.
[00:28:34.450] – Chris Martinez
What happens is that the call gets booked and our lead conversion goes up and our cost per lead goes down. This is very beneficial for that small business owner. Now you don’t have to have a $10,000 a month sales team to be able to book these calls. Think about how that’s empowering the little guy. I’m very much about empowering the little guy because I’m the little guy. I’m not We’re supposed to be here. So these tools, to me, this is our ability to fight against the evil empire. It gives us the upper hand if we’re brave enough to adopt the new technology.
[00:29:15.750] – Jonathan Denwood
You dealt with my English humor really well. You’re still making my blood go cold, though, Chris.
[00:29:23.820] – Kurt von Ahnen
But bless you.
[00:29:24.920] – Chris Martinez
That’s what I’m here for. It’s my California- Yeah, bless you. Optimism.
[00:29:28.950] – Jonathan Denwood
Let’s Let’s talk about offshoring, because especially in the WordPress freelance agency, there’s a contradictory feeling. There’s a lot of people, domestic, that really resent offshore agencies. Wp Tonic. Wp Tonic is a hybrid. I have some people offshore, and I have some Most of them are subcontractors. I haven’t got anybody that actually works for me full-time. They’re all subcontractors. I’ve chosen that route. But there’s a mixed feeling. But I’ve had a hybrid for the past eight years, and there’s a definite skill to it. I have another podcast where I have another partner partner who runs a larger agency than me, and he has a reasonably large team. I think it’s between 15 to 20 people in the Philippines, and it’s taken him years to build that team. I think there’s definitely a skill base in managing and growing an agency with offshore Offshore teams. What are some of the… So I think you’re a great person to get some more insight about this because you got a ton of experience. What do you think agency owners… I’ve got some thoughts about this, but what are some of the biggest misconceptions that agency owners have around offshore staff and the management of them, Chris, based on your extensive experience.
[00:31:36.840] – Chris Martinez
Yeah. No, I’m glad you point that out because I’ve hired people all across the world, hundreds and hundreds of people in Latin America, specifically. We just found that that was the best for us because of the time zone. I think the biggest misconception came from this stupid term called virtual assistant, where somebody created this term called virtual assistant. They made it seem like it was this magical human being that can just do anything. You We need them to do copy and design and make the coffee. I think that comes from a certain guy that wrote the four-hour week course.
[00:32:10.210] – Jonathan Denwood
Wasn’t that one of his-What does that guy even do?
[00:32:13.140] – Chris Martinez
I’ve never met him before. I would love to have a conversation with them. But yes, it was this term that was just created, and then people foolishly assigned that and she’s like, I’m going to send that to my VA. It doesn’t really work like that. Just like In the United States, you have people that are good at certain things and you hire them for a specific role, and they’re not good at other things, and you wouldn’t hire them for that other role. You do need to make sure first that what you need done aligns with that person’s skill sets. It seems pretty basic, but I have to say that first. Once you’ve found somebody that has the right technical ability, if they’re going to build websites, get a web developer. If they’re a designer, have a designer. If they’re an ads person, make sure they have with ads, Google ads, meta ads, whatever it is, make sure that they have the experience. You give tests for that. Second thing, and this is the most important thing, is the soft skills. Do How are they a good culture fit for your company? One of the things that I will say, and this will piss somebody off, there are certain cultures around the world that does not value being on time.
[00:33:27.510] – Chris Martinez
It’s just not important to them. They don’t grow up learning that. For me, I’m a stickler for being on time. You better be on time. And you better hit deadlines because I know that my clients, at least here in the United States, they’re waiting on us to hit a deadline. They can ignore you all week long. But if you say, Hey, this is going to be ready at 3:00 on Friday, guess what? 2:54, they’re refreshing their inbox waiting for that thing to come through. So for us to hit deadlines, guess what? We got to have other people that hit deadlines. And so when you’re hiring overseas, you absolutely need to check for those soft skills. I don’t want to say more so than in the US, but the standard is the same. I hold everybody to the same exact standard, regardless of where they live. We’re in an age where we have access to everybody. I can show you how to go out and hire people anywhere in the whole entire world. It’s very, very easy. We have to find the right people. And I I think that most marketing agencies, I mean, I get it, you’re overworked, you’re tired, you don’t have time to sort through 100 resumes to find one good person.
[00:34:40.230] – Chris Martinez
It’s just the way that it is, though, because what’s the consequence? I use this example of Google’s hiring process. I don’t know if you’ve known anybody who’s worked for Google before or their hiring process. This is at least two months long.
[00:34:53.480] – Jonathan Denwood
I’ve got a couple of people. Yeah. Okay.
[00:34:56.390] – Chris Martinez
It’s two months long. They have like 160,000 globally. Their hiring process is so stringent, and they have 160,000 employees. If they hire one bad person, it’s not going to make or break them. But then Mr. Or Ms. Agency owner who’s got 10 employees, they’re like, Resume looks good. Interview, they seem somebody cool that I would want to have a beer with. Let’s give them a shot. That person can kill your business. Small business owners should be more diligent about their hiring than the bigger guys, but we’re not. That’s a problem. Hiring overseas can be massively helpful. It can help you save so much money. You can still find amazing people. I personally believe that there’s amazing people all across the globe. Now with our technology and just how easy it is to connect, we can find people that have the skill sets that fit within our budget. It’s amazing. But if you screw it up, it can be absolutely detrimental. It can put you out of business. You do have to take it seriously.
[00:36:04.310] – Jonathan Denwood
You got any insights about the hiring process thing?
[00:36:09.620] – Chris Martinez
Yeah, I’ll give you my seven-step hiring process. It’s pretty quick. First, part of the hiring process is the actual resume. Actually, I should say the job post. In the job post, I always put in a little test. Send me your resume as a PDF, include a cover letter, and put it in an award document, put this is the subject of the email. Simple test, just checking attention to detail. Keep in mind that the best that anybody is ever going to perform in a job is in the interview process. It’s the best you’re ever going to get them. If they screw that up, guess what? If you hire them, it’s going to be 10 times worse. So your hiring process is designed to exclude people. We’re not trying to prove that little Johnny is amazing and he needs to work with me. No, it’s Johnny’s proving that he’s good enough to be on our team. It’s very cutthroat. Then After that, they send in their resume. If we like them, we’ll send them a questionnaire. They got to respond. For me, it’s within 48 hours. Now, when I graduated from college and I had zero job opportunities, guess what?
[00:37:10.910] – Chris Martinez
I was looking for a job right away because I had to put food in my mouth. And side note, I went through every Fortune 500 company, and I applied to every single job that I could find. That’s what it took. And if they emailed me and said, Hey, we’re interested, I emailed back immediately. I ended up getting hired from number 267. And so if somebody doesn’t reply to my questionnaire asking them for information about their work experience and show me some examples of your work, they don’t reply within 48 hours. To me, they’re gone. It means they don’t want a job. I want people who are ambitious who want to be here. If they pass that, we take them to a phone interview. Just quick 15 minutes. We want to get a sense for how they speak. Do they show up on time? Very much looking at the soft skills. Then it goes to, usually we have two technical tests. We use a service called Testdome. I highly recommend that you check it out. I do not own that company. They’re just a good product. Testdome. Com, you can create a standardized test, evaluate pretty much anything.
[00:38:13.010] – Chris Martinez
They pass that, then we move them on to an actual test where, let’s just say it’s a web developer, we’ll give them a website that they need to build. I do not pay for those tests, by the way, or I do not pay them for their time when building out that sample project. It’s not a live project. They pass that, then we’ll We’ll send them a personality test. We use a psychometric exam, make sure that their skill sets align with what we’re looking for in the person. They pass that, it goes to the final round of interviews, and usually it’s 3-4 people. Each person has a standard list of questions that they’re asking. One of the most important things that you need to do is a core values test. And so you ask them, let’s just say one of your core values is going the extra mile for your clients. You have to ask them a specific question and say, Hey, Kurt, when’s the last in a work setting, Tell me about the last time in a work setting where you went the extra mile for a client. And you want to hear what they have to say.
[00:39:07.240] – Chris Martinez
If they’re bullshitting you, they will make it up or it’ll be very vague. But if they’re telling the truth, they will give you a specific answer. That’s what we’re looking for. Most of the time, they will pass that final round of interviews. But if anybody on the team that’s doing the interview says, Hey, there’s something not right, we’ll discuss it, and then we’ll exclude that person. That whole funnel takes about two weeks. It works very, very well.
[00:39:32.650] – Jonathan Denwood
Yeah, I’d imagine it does actually. But these are people that you’re employing directly. Is that correct?
[00:39:38.870] – Chris Martinez
Yeah, I mean, you can hire them as independent contractors. Yeah, that’s typically who I only like to hire.
[00:39:44.230] – Jonathan Denwood
I’ve adapted some of your methodologies. I used to be a little… I got to be true. Well, I found people that have been recommended to me. I took on a couple… The graphic designer worked for me for six years. She was based in Indonesia. She was fabulous, and the developer still works for me. But I took on another agency. These people have been working for her for about five years, and she just one day decided she didn’t want to run an agency, and she gave them no notice. And she said, Well, can you take over them? And I did. And they were excellent. I give her a due. She was merciless. I tend to make excuses for people, Chris.
[00:40:34.070] – Chris Martinez
Yeah, that’s normal. You’re a nice guy.
[00:40:37.220] – Jonathan Denwood
Oh am I? Thank you.
[00:40:38.470] – Chris Martinez
That’s not really- That’s that sweetheart face.
[00:40:40.250] – Jonathan Denwood
Yeah, thank you. That stuff won’t get anywhere with me. It’s just that I’ve stopped making excuses. I give them so much slack, and then I just get rid of them because I’ve lost all patience with excuses. Because I think it’s a bit like what you said, your clients have no time for your excuses, do they?
[00:41:07.610] – Chris Martinez
Yeah, exactly. We’ve got results to get for the clients. We owe it to them.
[00:41:13.880] – Jonathan Denwood
I’ve adopted some of you are… Because I think you’re totally spot on. I’ve noticed with… If they’re being recommended to you from other people, it’s normally better. But if you’re just going on a general freelance It’s a platform. It’s a bit like if you were going on dating, I would say 80% of the people on these platforms are junk. They’re some really great people, but you Most of them won’t follow any instructions, and they have got nothing really to show you, and they’re totally vague about what they did anyway. I think you’re spot on, Chris. I’ll give you that. You are spot on. Back over to you, Kurt.
[00:42:02.310] – Kurt von Ahnen
Well, I want to drive it back to close the AI questions because we talked about, does AI take your job or not take your job? But Chris, in the grand scheme of your business, and I’m not thinking of you as agency now, I’m thinking it was like a guy that helps other agencies, right?
[00:42:16.530] – Chris Martinez
That’s the way I’m picturing it. I still own a couple of agencies. Actually, I just recently took equity in a few agencies. We’re taking more equity. It’s more fun for me to be able to have my hands really deep in the business.
[00:42:29.420] – Kurt von Ahnen
Well, Where do you sit with your AI toolbox? What are some of the prime tools that help you get through your day?
[00:42:37.810] – Chris Martinez
Well, some of them I’m not going to talk about because we’re still keeping those in the secret toolbox. I’m sorry, guys. This is just part of the time period.
[00:42:45.550] – Jonathan Denwood
I didn’t like you, Chris, but now I’m going off you.
[00:42:48.280] – Chris Martinez
That’s fine. I’ll live.
[00:42:50.180] – Jonathan Denwood
Yeah, I’m sure you will.
[00:42:51.700] – Chris Martinez
There’s certain things that it’s so early that it gives us a massive competitive advantage. But the The one that I like the most is still ChatGPT. Most people don’t tap into how much ChatGPT can do for you. Now, the thing that I don’t like is that we’re pushing all of our answers back into the universe with ChatGPT. We’re looking at some tools right now so that I can truly loan myself, and it’s not going to go out into the universe.
[00:43:21.120] – Jonathan Denwood
What could go wrong, Chris?
[00:43:23.560] – Chris Martinez
I don’t necessarily know that all of my thoughts need be pushed into the universe because I don’t know if that’s going to benefit humanity at all.
[00:43:33.770] – Jonathan Denwood
I’m pretty sure that my thoughts will take the big community.
[00:43:36.740] – Chris Martinez
Exactly. But honestly, ChatGPT, the way that you look at AI, in my opinion, because I’m a big Star Wars fan, and I love C3PO. I love the idea of having my own C3PO. I don’t know if you guys watch Star Wars or not, but C3PO and RTD2, they could run all the computations of the computer to make sure that we don’t hit a star as we’re flying through space. There’s some of these little tasks that we can use. So a perfect example, meetings. So I love read. That’s the one that I use to record all of my meetings. So after we do a client meeting, we will take that transcription out of read. And these tools, they have a meeting summary, but they’re crappy. We’ll take the transcription out of read. We pop it in the ChatGPT, and I have some specific prompts. I say, this is a meeting that I did with Jimmy from whatever agency. I want you to go through and give me a meeting summary outlining everything that happened in the meeting. And I want you to outline the specific to-dos that Jimmy agreed to do and that I agreed to do, including the deadlines.
[00:44:44.410] – Chris Martinez
I upload that in. It creates this meeting summary. I take that and I pop it into my fresh desk. And we’re working on an integration straight into fresh desk right now. Fresh desk is our ticketing software. Now there’s a record of that meeting. I still have the transcription and the video if I need to go back, but that gets popped into fresh desk, and now we can create to-dos and deadlines and all this stuff, and it happens within minutes. Before, I would personally have to remember what we talked about. First of all, I would take notes on my notepad. I would take notes. I would write down all the things that I had to do that I have to sit down on the computer and I have to remember, What did Jimmy say? And then I type it up. And then I think I said this. Wait, did I say that? Let me go back to the recording. It would take 30 minutes, and now I can get We got done in five minutes or less. When we look at efficiency, did the quality of that process improve? Well, absolutely. Now it’s way better. What about the speed?
[00:45:41.540] – Chris Martinez
Well, now I can do it in a sixth of the time. My quality of life goes up. The experience for the client also improves. Our value that we bring to the client improves. My capacity to handle more clients also improves as well. That’s just one simple, simple thing that we learned. If you’re not doing I’m guessing that most of you are having meetings with your clients. The simplest thing that you could do right now, record the calls, upload the transcription, use that prompt that I gave you, create the meeting summaries, put it in your project management system or your ticketing system. You will absolutely improve the experience for your clients and you’ll make more money.
[00:46:20.260] – Kurt von Ahnen
Yeah, I’m seeing all the parallels in the different markets that I tend to dance around in. Chris, for instance, I work with automotive, motorcycle, and marine dealerships in a lot of different levels. When you were talking about the cold calling in response to a trigger, I immediately thought of business development centers, what they call the BDC in that industry, right? You click on any car ad immediately, your email goes, your text goes, your phone rings, come on down to the dealership, take a look at it now, blah, blah, blah. And this thing’s setting you up for an appointment to meet a salesman, but it’s probably not a real person, right?
[00:46:56.350] – Chris Martinez
Yeah.
[00:46:56.810] – Kurt von Ahnen
So it’s doing its thing. I’m like, okay, I definitely see where that works. I was looking to possibly sell a Volkswagen GTI a couple of years ago, and they hunted me down like I was a wild animal in the woods, man. They wanted that car during the pandemic. Everybody was after me, and every tool you could think of was working. And as an agency owner, I wasn’t evading the calls because it was an annoyance. I was trying to reverse engineer what the heck was going on, and is it useful to me? So I was thinking of that use case. When you were talking about other things just now with ChatGPT, I thought about the work I do in the Marine industry. They have their own AI with the Marine Retailers Association they call AMI. It doesn’t go out to the whole internet. It only researches or gives you answers based on a restricted bandwidth of marine information. It’s like, Okay, so that’s that use case. I, again, try to reverse engineer that thought. Rich If the riches are in the niches and I niche that down and I craft an AI tool in a certain realm, then we’re in that market.
[00:48:08.350] – Kurt von Ahnen
And so I think the conversation we’re having today has really opened up a couple of extra doors in the brain.
[00:48:15.490] – Chris Martinez
Yeah, absolutely. I don’t want to say it’s the Wild West because there’s a negative association with that, but the opportunities are massive. And I’m not really like, I don’t get excited about tech very easily because to me, most of it is smoke and mirrors or BS or hype. But this is legitimately going to change the way that we function as human beings. We should just get on board with this.
[00:48:42.380] – Jonathan Denwood
I’ll give you a tip back, actually, Chris. I was using Freshdesk, and it’s great, but it was getting really quite expensive. And then I moved to Fluent Support. It’s a WordPress plugin. We got it on a subdomain with its own server, and it’s It saved me a ton of money, and it does exactly what Fluent Freshdesk does. So that’s Fluent Support. Have a look at it because I think it saved you a ton of money, Chris.
[00:49:14.700] – Chris Martinez
I love saving money.
[00:49:16.020] – Jonathan Denwood
Yeah, you got to keep… Let’s go to the final question. Sure. If you’re up to it, we might have some bonus content, but if you need to disappear at the hour, I totally understand.
[00:49:28.510] – Chris Martinez
Let me see. I think I left a good buffer for you guys.
[00:49:33.070] – Jonathan Denwood
Kirk has to go before the hour because he’s got something else he’s got to do. But my final official question is, I’m from England. My I’m into Doctor Who in the TARDIS, the time machine. I’m into my H. G. Wells, the time machine as well. So if you had your own time machine and you could go back to the beginning of your career, is there one or two little tips that you would like to give yourself?
[00:50:02.500] – Chris Martinez
To my career? That’s a tough one.
[00:50:05.910] – Jonathan Denwood
Or anything, Chris.
[00:50:07.780] – Chris Martinez
Oh, anything. I mean, I talk to my dad before he dies. That’s for sure. Because he died so soon. Within a month, he was dead and gone. And he died three days before I turned 27. So when you’re a man or a young man that age, you’re just starting to come into your own. I was excelling in my career, and I was starting to connect with my dad on a different level, and then he was gone. This January 10th, it’ll be 18 years. That’s what I would absolutely go back and do that over again. I would tell me as a kid to not be so stupid and that everything’s going to be okay. Professionally, I would say, Don’t start that soccer magazine. You’re an idiot. But at the same time, I All these failures that I’ve had, I wouldn’t be where I’m at today had I not had that negative experience. This is one of the things that I learned when I had that failure of a soccer magazine is you really do get to see who your friends are. Because this is the time period. It’s like 2009, basically. I’d lost all my money.
[00:51:21.280] – Chris Martinez
I had less than $40 in the bank. I had nobody to return to. I was a miserable piece of shit to be around because I was just so angry all the All right? I don’t hope I’m allowed to curse on this show.
[00:51:33.120] – Jonathan Denwood
I was just miserable to be around. I’ve been pretty clean for about six months, but I have these. Kirk will say, I just have these shows where I curse, like a sailor. That’s okay. That’s all I am. I don’t know what triggers it, actually, Chris, but I don’t normally curse, and then I have these episodes, don’t I, Kirk?
[00:51:54.170] – Kurt von Ahnen
At times.
[00:51:55.730] – Jonathan Denwood
That’s okay.
[00:51:57.750] – Chris Martinez
Yeah, so I was miserable at that time. Nobody wanted to be around me. Then I had these people that were supposed to be my friends. I thought that they were my friends. I don’t blame them for leaving because I was very, very difficult to be around. That’s on me. But it is surprising to see who’s going to be there in your darkest times and who’s not. And it’s usually it surprises you. I’m thankful for that because I got to realize at age 29 what really matters. All All those things that people say about you, all the fancy stuff and being in the limelight or the cool kids and whatever, it doesn’t matter. It doesn’t matter.
[00:52:39.220] – Jonathan Denwood
So we’re going to have some bonus content, folks. You’ll be able to watch the whole podcast plus the bonus content on the WP Tonic YouTube channel. But we’re going to wrap up the podcast part of the show. Chris, what’s the best way for people to find out about you? And Maybe you want to quickly give some info about this conference you mentioned that you are holding in December. Yeah, absolutely.
[00:53:09.580] – Chris Martinez
You can go to our website, bloompartners. Io. That’s our website. Our podcast is up there. We always have at least three articles that go up every single day. You can jump on our newsletter. But the biggest way, if you are looking at your 2024 and you’re saying one of two things, This did not go the way that I had planned, or this went amazingly well, and I’m a little bit scared for how I’m going to deal with that in 2025, come to our event. It’s called Agency Freedom Live. It’s December fifth through the seventh, so about three weeks away. We’re going to map out exactly how you’re going to go from maybe not having the best year in 2024 to making it the best year of your life. We’re going to talk about strategic planning. We’re going to go through budgeting. We’re going to go through team. We’ve got speakers that are coming in. My friend Cory’s come in and he worked at Scorpion. He’s going to talk about how he took them from 10 million to 120 million in revenue, teach you about how to build out your sales team. We’re going to be talking about AI.
[00:54:06.320] – Chris Martinez
We’re talking about hiring and training and scaling your people. My friend Ralph Burns, who runs an agency called Tier 11, he’s going to be talking about how he’s and built his own team and his own multimillion dollar agency. So it’s going to be an amazing event. You can go to agencyfreedomlive. Com and grab one of those final tickets that we have. I’d love to see you and meet you face to face. Of course, we’re going to have a lot of fun, too.
[00:54:30.550] – Jonathan Denwood
You’ll find all the links to everything Chris says in the show notes that will be up at the beginning of next week on the WP Tonic website, folks. Kirk, what’s the best way for people to find out more about you and your ideas and what you’re up to.
[00:54:46.620] – Kurt von Ahnen
When it comes to business, Manana Nomas is the website, manananomas. Com. If you want to connect personally, the best place to find me is on LinkedIn. I say it all the time. I’m the only Kurt von Ahnen on LinkedIn, so when you find me, you know you got the right guy.
[00:55:01.590] – Jonathan Denwood
Like I say, we’re going to continue the discussion. I’m going to be asking Chris about how you get your agency ready for sell and a couple of other things. And you’ll be able to see all the interview plus the bonus content, like I say, on the WP Tonic website. We will be back next week, probably for our final show. No, actually, I’m getting confused. We We have got some more shows coming up, but we are going to have a break in December. We will be back soon. See you soon, folks. Bye. Chris, let’s go on to the bonus content. Sure. Got any insights based on your extensive experience about somebody is thinking… I think, like you said at the beginning of the podcast part, the conversation, they got be having a plan of action about one day they’re going to sell this business. But I think a lot of people, they start thinking about it a year, 18 months. I have sold not in this space. I’m a dyslexic, and I got into retailing, dry cleaning in the UK, and I did my computer science degree as a mature student in my late ’20s. Part-time.
[00:56:31.540] – Jonathan Denwood
But I built up a pretty successful dry cleaning business, and then I married an American lady, and she wanted to come back to California, and I was burnt out, so I was quite up for it. And I attempted to sell this business. It was the most painful experience, only building up a business, but actually selling a business is That’s what it’s called, the excuciatings, the amount of time wastes, and it took three attempts to actually get the person that really bought it in the end, and it took a lot longer and it was more painful. Is that similar to the experiences people get when they’re selling a digital agency?
[00:57:25.170] – Chris Martinez
Yeah, I think one of the things that probably hurts the most is when somebody is not willing to give you what you think it’s worth. They’re just going to look at the numbers. I’m just telling you flat out right now. The only thing that they care about is the numbers. They don’t care about your click-through rates or your cost per lead or your amazing design process that you have. They do not care. All they care about is the numbers. Unfortunately, many of us agency owners, we don’t really like the numbers. I’ve learned to love the numbers. I think that the numbers are the truth. But it’s important to start now. Absolutely, a buyer is definitely going to look at your financials, and they’re going to look three years in the rears. They’re going to look at your past trailing 36 months, and they’re going to look at what’s been happening. Because they want to see, is this a sound investment? It’s not like they’re bad people. It’s just like, if we’re going to give you a lot of money, I want to make sure that this is a safe investment. Now, what’s really interesting right now is that there’s a lot of people, this is like the next get Which quick scheme is that they’re saying, Instead of starting a business, go out and buy a business.
[00:58:36.360] – Chris Martinez
There’s these gurus that are talking about how all these baby boomers are retiring, and so all these businesses for sale, and you can be a millionaire overnight just buying another business. While there is some truth to the opportunity, it’s not easy to run a business, and it’s definitely not easy to run a marketing agency. You do have to know something about the business. With that being said, whoever is going to buy you is going to look at your numbers. We advise you to start planning for that at least two years in advance, ideally sooner. But the thing is, the best time to sell a business is when you don’t need to sell it. So build the business that you never need to sell because when that day comes, they’re going to give you a lot of money for it. I’m telling you, it’s going to be worth it.
[00:59:22.660] – Jonathan Denwood
You were talking about this between a million to 10 million. What is the at the present moment, is it? I’ve seen it for those two to one, which I think is ridiculous, but I’ve seen some ridiculous multiples. I think traditionally three to one, maybe four to one multiple.
[00:59:43.380] – Chris Martinez
Yeah. So we’re talking about EBITDA, not revenue. Nobody’s going to give you a multiple on your revenue. You need to have healthy revenue. But it really comes down to your EBITDA, earnings before interest, taxes, depreciation, amortization. It’s a little funky right now. This gentleman that I was speaking with last week who sold for 32 million, the magic number used to be a million dollars in EBITDA. You would be able to get a 5, 7, maybe an 8X multiple on your EBITDA. And anything below that was anywhere between 3 to 4. It’s a little bit tricky, and also it depends on who you’re selling to. If you sell to a strategic I have a friend that sold to a CRM. He was in a niche. I can’t give away exactly who it is, but he was in a construction niche, and a CRM came in and said, Hey, we don’t have a marketing agency arm. I want to buy you. They gave him a very, very good multiple, like over 10X. He got lucky. His EBITDA was at a million, but it was a strategic buyer, so they gave a bit more. Now, if you have 2 million in EBITDA, then you can seriously get 6, 7, or 8X.
[01:01:10.750] – Chris Martinez
The goal post has moved a little bit, unfortunately. 2 million is now the new 1 million. That being said, there’s always exceptions to the rule. If you’re under a million in EBITDA or 2 million in EBITDA, whatever number you want to use, you’re typically seeing around 3X. Right now. You would be lucky to get four. It’s just cash isn’t flowing as much.
[01:01:34.510] – Jonathan Denwood
Yeah, I think you’re totally spot on there. I was listening to, I don’t agree everything this guy says, but I don’t agree with everything that I say. It’s normally when I get a bit hectic. I was going to say, get the sauce a little bit. It’s Professor G. He has a great podcast, Professor G, Galway, Professor Galway. And he sold, but it was… He had a load of Fortune 500 companies, and it’s up to 100 million, and he sold it to another multi international company. And you said they got a multiple of 10. I don’t know if he’s spinning it a bit or I sense that he wasn’t, but that’s so rare in the service business, isn’t it? To get a 10, isn’t it? But you sold it at the height of the market before the cash got a bit more expensive to borrow.
[01:02:45.230] – Chris Martinez
Right. Yeah. I was at a conference just last week in Las Vegas, and it was all about buying and selling businesses. And there was a business broker there, and he actually gave out a valuation calculator that he uses. And so his valuation calculator, it’s in real-time. They’ll pull deals from the past two years, or I can’t remember if it was two years or one year. They’ll pull all the actual data from all the deals that have been sold in your industry so that when they go to sell your business or you go to buy a business, you can see if it’s a fair market valuation. I got his calculator. And so now we can see what the valuations were up to, I don’t know what was last week, November seventh, of all the previous deals. And yeah, I mean, for us, they’re falling within those ranges.
[01:03:33.710] – Jonathan Denwood
Because I think you were spot on what you said is, I think with this business I’ve just mentioned, they had really great figures, but the business that bought it, really wanted it. They really… Because they wanted to book a business. And funny enough, I just lost a client that had been with me eight years. It was a company that was in the market marketing space, but we were doing all their WordPress work. And the founder built it up to a 200 person business. It was around where you live, and he sold it to a very large multi international company. And you always get a bit twitchy when it happens. But it continued for another two years. Obviously, he signed He got a ton of money. He never told me what he got, but good luck to him. But he probably signed a two year agreement with him. When it got right to the above, they partied company with him, and they had just signed a year’s contract with me, renewed it, and I tried to get out of it, Chris. They tried to squeeze me, but I managed to get them to honor it, and they really, really do want to honor it.
[01:04:59.020] – Jonathan Denwood
They wanted to get A bit of me as quick. And I’m peanuts. This is a Fortune 500 company, and they just… It was like I was literally doing brutal dental work on them. I got that feeling they would just love to get out of this, but they saw it and they tried to weasel out of it, but I must have given the thing up. It wasn’t worth the effort. I don’t know why they backed down, really, because they had an army of lawyers. They just screwed me. But in the end, they chose to honor the contract, but they tried to get out of it, though.
[01:05:33.830] – Chris Martinez
Yeah, good for you for standing your ground, right?
[01:05:36.460] – Jonathan Denwood
Yeah, but I’m not saying… I don’t think it was any special. It caused me a few late nights, but I found a few customers to replace them. But it’s funny, isn’t it? So how this fits into what we’ve been talking about is, are you valued more if you got 2-3 Fortune 500 customers Or are you valued more if you just got a load of smaller clients? Or is it best to have a mixture?
[01:06:08.220] – Chris Martinez
There’s this term called key client risk. I don’t know if you’ve ever heard of this term before.
[01:06:12.390] – Jonathan Denwood
No, I haven’t heard that one.
[01:06:13.420] – Chris Martinez
So key client risk basically means that if this one client leaves, is it going to be detrimental to the business? This is me personally. I like to have smaller clients, let’s just say in the $2,000 to $3,000 a month range in a niche that are very easy to service, and we just have a lot more of those. That’s personally what I think is easier because you’ll never run into that issue with the key client risk problem. When a buyer is looking at you, of course, they’re going to be like, Well, what happens if the big, giant contract leaves and we lose? I had another client, actually. They had a $60,000 a month retainer walk out the door three months ago. Now, luckily, we helped them to replace that person, and so now they’re back whole. But man, if If you lose a $60,000 a month retainer, you’re going to have some sleepless nights. That’s not a fun position to be in. I personally don’t think that having those big, massive whale clients are great unless all your clients are massive whales. If you have 15 massive, let’s say, $50,000, $100,000 a month retainers, okay, cool.
[01:07:26.660] – Chris Martinez
It’s going to hurt when one leaves, it’s going to hurt when two leaves. But really, you don’t want any one client to be more than 20% of your total revenue.
[01:07:34.210] – Jonathan Denwood
Yeah, so I had another friend because when I sold my dry cleaning business, I was doing some freelance work after my degree, and then I decided A year later, I decided to do MA in Graphic Design. I did that at the London School of Print and Design. It no longer exists. It was an old print trade college. And then I was just doing some freelancing, funny enough, in Flash. Aging me, isn’t it?
[01:08:09.070] – Chris Martinez
I was going to say, I haven’t heard that term in a long time.
[01:08:10.940] – Jonathan Denwood
And then I moved to the UK, and I took a year off, and then I got a job with a regional in Northern and Vada, one of the largest digital agency as their WordPress person. They were using the expression engine and Drupal. I got Drupal.
[01:08:33.610] – Chris Martinez
All these terms that I haven’t heard in a long time. I did like Drupal, but then I was the WordPress person.
[01:08:44.510] – Jonathan Denwood
But there were a hundred person agency, and I’ve never seen such dysfunctionality in all my life. I managed to keep there for three years, but Luckily, and I didn’t actually need the money. I had a fair ton of money. Unfortunately, that went to my divorce. But those years working for this large agency, and they’re still going. I don’t know that… He would take a call from me, but I don’t think he’s got much love for me because I was a little bit bolshe. And he was a maniac, and his wife, she was pretty maniacish as well. But fun times, actually. But it’s just the madness of a digital agency, isn’t it? They burn out in the end, don’t they?
[01:09:41.900] – Chris Martinez
Well, I wanted to mention this on the actual interview, but there’s a term, because I know these guys that played soccer here in the US, and there was a term that we had here that one day you wake up and you don’t want to wear shorts to work anymore. All the professional footballers would say that. It’s the same thing with marketing agencies. One day you wake up and you just don’t want to do this anymore. It just wears on you. It’s so freaking difficult. That’s why I think it’s so important that you have an exit plan from the beginning.
[01:10:14.230] – Jonathan Denwood
Yeah, but it was a Because Northern Nevada, and I think a lot of regional agencies that are reliant on their social-political contacts in their region in there because they had a lot of… Because of Lake Tahoe and the Sahara Mountains, they had a lot of tourists, and they were doing a lot of overflow work for agencies in San Francisco because they could hire developers cheaper in Reno, in Northern Nevada. But they had these tourists, but they also had an enormous amount of well-financed nonprofit quasar government, private enterprise work. That normally nonprofit is not that attractive because normally they don’t have any budgets, but there are a number of these quasar state private enterprises that are extremely well-funded, and they got their claws into those big But they had to do a lot of nose, brown nose sniffing, as I call it.
[01:11:37.610] – Chris Martinez
Yeah, exactly.
[01:11:38.590] – Jonathan Denwood
They had to be buying and dying these local politicians all the time.
[01:11:42.770] – Chris Martinez
That’s not the type of business I want to be involved in. I don’t want to be in somebody’s pocket like that to each their own. But I will tell you that I have a client who ran an agency for years in Riverside County, down here in California, and they had a lot of government work. It was mainly government project work. They were doing a couple of million bucks a year. They were living fat and happy and sloppy. And they had a government contract that came through, and it said that if you want to get this contract, you have to have a certain number of employees. So they staff up thinking the government agency or whatever is like, Yeah, you guys will get it, of course. Just hire these people. They don’t get it. They got all these people on the payroll. They don’t get the contract. There’s another one that comes up. Oh, yeah, you’ll get this one. They don’t get that one. And they try to keep it working because we’re friendly agency owners. We want to keep these people employed, drain the bank account, and leave business.
[01:12:38.590] – Chris Martinez
Luckily, I’m helping them buy another agency so they can start again. But yeah, I don’t particularly appreciate relying on those types of projects. I’m big on monthly recurring revenue as well.
[01:12:49.800] – Jonathan Denwood
In Northern Nevada, there are about three major agencies. They all hate one another with a passion, and they’re all competing for They have their outside-of-state book of business, but they’re also all competing for these high-worth quasar state private enterprise jobs. And that’s why they hate one another with such pleasure. But I’m out of it because we just specialize in membership and community. I get my clientele from all over the place. I’ve got some more prominent clients, so I’m trying to diversify. I think we’ve had a tremendous off-podcast chat. We covered a ton of stuff in this interview, haven’t we? I’ve done it a couple of times, my English humor. I think I lost you a bit. I think you got used to it now. It’s rather dark humor.
[01:13:53.110] – Chris Martinez
So when I was living in Los Angeles, I lived in Redondo Beach, Hermosa Beach area, if you know where that is. There was a pub where we would always watch all the games. It used to be owned by George Best. It was called Besties back in the day. It’s called the underground. It’s called the Underground now.
[01:14:13.030] – Jonathan Denwood
He died as a sad death. He had a great time dying. He drank himself to death.
[01:14:19.500] – Chris Martinez
The sad part is that he ended his career too soon. Then, he bought this bar in Hermosa Beach, California.
[01:14:27.860] – Jonathan Denwood
That was when the alcohol he should buy.
[01:14:30.200] – Chris Martinez
Drank himself to death. I met people who knew him, and they would hang out with him at the bar. He’s always fun to hang around with, but at the same time, you’re like, Why is he doing this here? Why is this the path that you’ve gone down? The rumor was The night that George Best died, there was a picture of him over the bar in Hermosa Beach, and he had moved away. And so the night that he died, the image of him fell off the wall, and that was his farewell; I saw him play as a kid at West Ham.
[01:15:02.600] – Jonathan Denwood
He was getting on. It was the last few seasons before he moved to America, but you could still see some of the magic. He was the most dynamic magic player. If you watch, any of you just destroyed opposition teams. He just for him to bits.
[01:15:22.650] – Chris Martinez
Kind of like a Lionel Messi.
[01:15:24.430] – Jonathan Denwood
Pardon?
[01:15:25.000] – Chris Martinez
Kind of like a Lionel Messi.
[01:15:26.700] – Jonathan Denwood
Yeah, it’s only half a dozen, like Pelley Messi, those players that can destroy a whole team in front of you.
[01:15:36.920] – Chris Martinez
Yeah. And you can do nothing. There’s nothing you can do about it. You’re like, this is just going to happen.
[01:15:42.240] – Jonathan Denwood
I’ve enjoyed the chat. Thank you for coming on, Chris. We’re going to end it now. We’ll see you next week, folks. Bye.
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