Episode Description

The digital world is a big place to grow your business in. There arelots of marketing opportunities that we could recognize on different socialmedia platforms. Scott Harkey talks with the Founders of Fanntastic Media, Colton Collins and Jacob Fann, about finding the right blend for yourcompany in executing marketing strategies for business growth. Colton and Jacobshare their professional expertise in building websites, generating leads,boosting sales, and creating value in the business. In this episode, they alsodelve into their specific consumer-based core values that enabled them tosucceed in their professional lives and how generating a return on investmentis the key element in identifying success.

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Episode Transcript

Thanks for coming on. This is freaking random. We are talking on the phone, Colton calls me and he's like, “Scott, you are in the ad business. I'm in the ad business. I want to pick your brain.” I’m like, “Yes, let's talk.” We started talking. I was like, “This is good stuff because you are scaling a digital agency, you worked at Facebook, you partnered up with your boy.” I have had this conversation probably a dozen times with ad agency owners or digital marketing owners. I saw myself in that same spot. I'm like, “This would be great for a show. We will connect again.” I want to get you on the show because it's a cool story. Tell me about your story. Tell everybody about what you have going on, how you have scaled this agency and where you are at. Let's talk through this business a little bit. There are a lot of learning people can take from it.

Without going too far into things, I have been in sales for many years. What got me into this business is that I had a lot of call center experience. There's a company out here that contracts with Facebook. I landed a sales and marketing role at their office.

What's that company called?

TTEC.

I think I have heard of that company.

When you are a conglomerate that big, you have these other companies that you will contract with. They represent the company like a satellite office. We had access to all of their internal systems. They brought me to understand a lot of paid advertising, Facebook Ads Manager and how that stuff works. About six months after being with the company, I was promoted twice. I figured out that I could nerd out on the Facebook Ad portion. I started pulling clients outside on a freelance basis. Another employee and I started tag teaming some of these accounts and working together on them. That took off. One client turned into fifteen. I was on my lunch break in my car closing deals.

What was your specialty there? Was it the ad platform and serving the ads to the right people at the right time?

Yes. Probably the biggest takeaway that I have from the time that I spent at that company was the diverse amount of businesses that you will get. You have ten phone calls a day for 30 minutes long.

It's like a plumbing company.

It's like a mobile physical therapist, a gym, a yoga studio, a law firm. You get a lot of experience.

TTEC’s marketing to a small business that we can help you with your advertising deal.

You probably get the emails, too. They say that you can book a call with a Facebook marketing expert. That's what I was. There’s an algorithm that Facebook has that could be based on the spend on your ad account or it could be based on lack thereof. You book a call with me and I help point you in the right direction.

What budgets are these ad campaigns?

I saw companies like Smile Direct Club. They were people on the phone with law firms that were spending $1 million a month. The largest budget that I have ever seen is Smile Direct. They had $70,000 to $80,000 daily budgets. We handle some crazy stuff but you will get the mom-and-pops.

What is the mom-and-pop spending a month?

$300 or $500 a month.

Average accounts probably were a couple of grand a month.

I would say that the average account is anywhere from $2,000 to $4,000. That's part of our job, too. If they are not spending enough, we point them in the right direction as to why they need to spend more to see some traction on their ad account and certain things.

If you're going to do anything less than $20 a day, you should probably save your money and put it somewhere else.

I have seen a lot of ROI depending on what segment. I was looking at a consumer product segment. We are going to get about 6 to 1 ROAS. Instagram specific spent $1,000. We are going to sell $6,000 in the product. What do you think, based on the industry, if it's home services versus a product versus a clothing company?

Generally, if you are going to be doing paid advertising, what we were taught is that if you are going to do anything less than $20 a day, you should probably save your money and put it somewhere else. I’m not saying that you have to spend $10,000 a month but I'm also not saying that you are going to see good results with $500. It’s one of those things where the interest, demographics and behaviors, the targeting has to be on point. Paid ads operate off of the bid and auction system. If you are not spending that much, you are going to get eaten alive in the ad auction.

I would say in eCommerce, you can get away with spending quite a bit and guaranteeing yourself a return. eCommerce is supersaturated but it's also popular. I saw a lot of businesses that were home service that maybe it's an insurance agent that wants to get some leads. Lead ads can be expensive. The cost per lead can go up. Your CPMs and your cost-per-click can be through the roof. It depends on the time too, though. Facebook Ads are affected by the economy, politics and all that.

I saw a big opportunity with Facebook when they were getting hammered on the media. We had to pull out some of our clients but other clients are like, “Game on. It's half off now. Let's go.”

It's pretty crazy. That's how I started there. I parted ways with the company and then I met him. He can go into what he does and then we partnered up.

I started while I was in college, my senior year. I was going to NAU in Flagstaff. I was doing real estate because my grandparents taught me, “When you turn eighteen, go get your license. School is not going to get you where you want to go.” I’ve got my real estate license and I was doing real estate deals every weekend to pay for college, $500, $300 rentals. I have no experience in marketing whatsoever. There was a mom-and-pop shop cafe in Old Town Scottsdale that I was going to every week. No one was going in there but I loved the owner. I looked at his website and looked at his stuff. I went up to the owner, without any experience and I said, “Let me help you. Give me three months. If I don't help you grow, you don't owe me anything. If I do then you can reward me.”

In three months, I taught myself how to code, build websites, do Facebook Ads and do everything. In three months, I tripled his sales. From there, I went from 1 to 35 businesses in a matter of two months. I remember my dad calling me. My dad is a CPA. My dad was like, “How many clients do you have and what are you charging them? Do you have an LLC?” I was like, “What is an LLC?” He's like, “Jacob, you have a business.” That was one of the biggest things that I learned. There's this thing that Millennials are entitled to. Stuff like that, you do see that a lot. There are a lot of people that we employ who believe that because of who they are, they should get this type of retainer.

My first ten clients were practically free to build a portfolio to show what I can do, and then when you are good at what you do, the money will come in. That's what I believed. We connected. I had someone I took from Facebook and was an employee for a while. He knew him and he told me a story. He's like, “You guys should talk.” All of my business was organic through Facebook groups. I was building dummy accounts or Facebook accounts to get in mom groups and stuff like that. I was acquiring a next-door house to do those things.

Digital World: If someone wants to get out of a contract, they're going to get out of it. If you deliver good work, they'll keep paying you. You always need to have something written up.

I was doing all these things to create organic leads. I hated Facebook Ads because my clients couldn't pay a retainer plus a Facebook Ad. I was like, “I’m going to utilize Facebook groups.” I acquired about 10,000 to 20,000 Facebook groups. I created dummy accounts to get into mom groups, depending on the clients. When he found out about that, he started having us work on his accounts for his clients. We talked about it and we are like, “You offer something that I don't.” We partnered up, joined forces and started growing.

It’s like a little match made in heaven.

What's the name of the agency?

Fanntastic Media.

How long have you been together?

We have been partners officially in 2020. I was operating as a separate entity since 2018. He was operating since 2016.

Fanntastic Media was homey because my grandparents came to Arizona in 1950 and started the first dealership here called Fann Toyota. In their commercials, they would say, “My Toyota is FANNtastic.” My last name is Fann. I started Fanntastic Media. When we partnered, we were talking about the name and stuff like that. I was like, “We work with the living rooms. Big-time clients know the name Fanntastic. I want to keep it that way.” He came into Fanntastic. He brought his clients on board and we joined forces.

Both of you have been doing. Officially, you are together and now you have scaled up to 35 clients and 12 employees.

About 45 clients. We have about twelve employees from a full content team that does our daily content every single day for our clients to a daily manager that handles the account to generate leads every day. We have an office manager. We have an assistant to our lead gen that is in Facebook groups every single day generating leads and stuff like that.

This is what I love about the marketing business. This thing is the Wild West. Anyone can play if you hustled. This isn't about your degree or fancy clients. Put in your time, grind it out. That's how I started. My business partner and I started the agency in his condo in Scottsdale. We were too embarrassed to have people come to the condo with two cats in his kitchen. We would make excuses to go meet people for coffee. I came from the media world and we hustled and figured out how to get accounts and figure out how to make the small business accounts so we had money.

That's what it comes down to. Can you make businesses money through marketing? Can you prove it? I still see that. I met with a big Fortune 500 advertiser and was like, “Talk about your agency teams. I’ve got 72andSunny. They are all creative. This person has this. I’ve got this boutique digital agency that does this.” I was like, “That's pretty cool. You could hire anyone in the world.” He's like, “Yes.” What I noticed is this big multinational agency, I would have these calls. He used to run a big deal in Europe before. I would have twenty people on the call, two people saying something. I know I'm billing out on each person. I know what the hourly rate is. It’s like, “This is insane. I want speed and value.” Now is the time, especially digital is the media of choice, social specifically. It's the time now for anyone that wants to be in this business. It's not for the weak-hearted.

One of the biggest things that we run into is everyone is either a real estate agent or doing social media, “I can build your Instagram.” At the end of the day, what I have learned is that no matter if a client is spending $50, $5,000 or $10,000 a month, if you are not generating ROI for them, there's no point. That's how I look at it. We meet many people that are like, “I can create great content. I can do this.” That's great but are you getting that in front of the right people? Are they generating conversion? Especially with our clientele because we are small businesses, you are taking 20%, 30%, maybe 40% of the profit they are putting into marketing. You need to generate an ROI. You need to do that for them.

That's one thing why we want to talk to you as well because we are learning. One thing that we are learning is we are month-to-month with clients. I hated marketing firms and that's what a lot of our clients. They would be like, “I’m on a three-month agreement. I'm spending $2,500 a month. I have not generated one single lead.” As a small business owner myself, it gives me the chills. That's why we are month-to-month. At the end of the day, it sometimes bites us the butt.

Everyone is either a real estate agent, or everyone is doing social media.

It's funny you mentioned this. This is one of the things you wanted to talk to me about. I have mixed opinions on this because, on one hand, long-term contracts are good. I have made a lot of mistakes around contracts, whether it has been business partner contracts or client contracts. I don't like negotiating at the end of the day. I don't like contracts. I want to do marketing. I want to grow someone's business. I want to create things with a team that makes people loved other people and they make money. That's what I love doing. The contract stuff, I don't like it.

At the end of the day, we are moving into a new world of connection and people. This is me, maybe I'm in my dream world here. We are going into a place where there's going to be a good vibe people. They are going to be doing business with other good vibe people. There's going to be a clear separation between people who did it the old-world way and people who are doing it more enlightened way. The enlightened way is exactly what you say, which is like, “We are going to be good people. We are going to do good work. If it's not a fit, we are not going to hold someone to some bullcrap contract. We are going to work it out. We are not going to get legal. You are going to get a couple more months of billing.”

We have huge contracts. The first big contract we won was the Arizona lottery. It was a $55 million contract for five years. At the end of the day, if they are mad at me, they can fire me. If anyone is mad at someone, you are going to find a way to get out of that contract. Maybe we could make some more money on it. I have other long-term contracts. I would do year contracts with 30-day or 60-day outs. Get it papered so you don't have to keep going. As you get more institutional clients, they are going to want it on both sides. You are locked, we are locked in but give an out.

I hate these bullshit deals of any contract or any partnership that doesn't give people an out. I have learned a ton about this to pay attention more to contracts, especially business partner contracts. For advertisers and your clients, what are you going to do? Sue your clients so you are going to be the ad agency that sues clients. Let’s see how much business you give. Screw that. Let's be the good people in the industry and do it the right way. We know how this world works. If you do good work, you get more clients. You do shitty work, you lose clients and you lose employees. People talk and all of a sudden, you are out of business. This business is too competitive. You are either one way or the other. I don't know if that answers your question.

It’s super insightful to hear you say that, too. His father is a successful CEO in the Scottsdale area. My father is the CEO of four large companies across the valley. The largest companies have over 75 to 85 employees. The company is 50-something years out here. The point I'm drawing home is that I’ve got a lot of my business logistics and knowledge from seeing him growing up as a child. He told me exactly what you said, “If someone wants to get out of a contract, they are going to get out of it. If you deliver good work, they will keep paying you.” I do agree that you need to have something written up even if it's a month-to-month term, 30-day cancellation and what have you.

When I was working at Facebook, I used a lot of the time that I had there as an internship. I knew that I wanted to start my own thing shortly after working. When I was on the phone with all these different businesses, I was asking them questions to create that handle time or the call time, “Let me pull up your account.” They hate it when you have dead air. I would be asking them questions like taking notes for my agency, “What are you frustrated with now? How much are you paying? What makes you not satisfied with your current company?” The things that I heard were, “They overpromised and underdeliver. They lock into a contract. They treat me like I'm a number. They only care about what the invoices do.” When I met him, I'm like, “If we are going to partner, these are the core values.”

Your core values are completely consumer-based. You have found out the consumer pain points and you have built a company to solve that problem.

The biggest thing is that we are emotionally connected with them. We start group chats. We are in the group chats, even as owners, we are there.

What do you mean by group chats? Do you have group chats with all your clients together?

Yes.

We want to over-communicate.

You have all clients on a group chat together?

No. Each client has their own group chat.

Is it like a G Chat?

It’s like Slack or text message. We use Google Hangouts and stuff like that.

For example, let's say we close an account for a law firm. What we would do is, depending on who's the account, who's in charge of their content and things like that. We create a group chat, email chat and schedule a weekly call with them. We are big on over-communicating. That was one thing that we talked about. We want to make sure that no matter what, we are checking in with them every couple of days. That's why each account has a daily manager. We have three daily managers that handle the book of business and they have their content team for that account. They can communicate with them and generate leads. For some of our accounts, we are generating 150 to 200 organic leads through Facebook groups and stuff like that. They need to be communicated with. I was told this when I first started. The biggest accounts that you will have will be the least amount that will drive you nuts because they are so busy.

I talk about business all the time, the 80/20 Rule. I'm big on this as I have scaled up from 2 employees in a condo to over 175 employees. When I look at my book of business, I'm always like, “In almost all businesses, 80% of your revenues are from your top 20% of your clients.” That can go insane. You are like, “How do you get bigger clients?” The brutal truth of the business is that your smallest clients are a pain in the ass. You’ve got to have real conversations with them and think about replacing those clients.

That’s a good thing to bring up. I agree.

Digital World: Every client is different. No matter if they're in the same market, they're all different—all their goals and perspectives.

It’s not a disrespectful thing. If you have small clients, they know they are small, cool as shit, play by the rules, they are easy, they know their place in a good way. If you are getting a good deal, good service and great work, be happy and be cool with it. If you are a small client and you are causing problems, that energy is killing you from servicing your big clients and getting more big clients. That is the biggest problem I see. The second biggest problem I see with marketing professional service companies is they get too concentrated with their big client. You have a client that's worth more than 20% of your business. All of a sudden, you aren't an entrepreneur anymore. You are working for that client.

It’s like you only have one client.

They know it, they feel it and feel the pressure. Now you have people in livelihoods and families that you are responsible for as an entrepreneur. You have twelve people that you have to put food on the table for them. Clients know that. They feel the pressure. You feel the pressure. I have always worked hard in getting other clients to make sure not one client is more than 20% of my business. That doesn't mean I don't love that client, I do. It causes problems at times because clients love you, you love clients. It's a relationship but it's also a business and you’ve got to protect your business. I see that problem all the time because you are busy servicing your shitty clients who don't play by the rules and who aren't profitable. You feel pressure because your biggest clients are worth a lot of revenue. Where are you prospecting to get other big clients?

For lack of throwing out a retainer number because that doesn't matter, it's almost like you are overworked and underpaid at that point and then you are overworked on the other clients.

What I have done in the past is I have gone through my list of clients. I always go through my list of clients. I know who's my biggest client and smallest client. I know my average rate per hour, all the stuff. My lowest dollar clients are also the clients I probably lose money on. I have a conversation with them. I'm like, “We are losing money on this account. Here's why. Here's where we are at. Here's where I need you to be profitable. I love you. If this isn't a fit, I will find another smaller agency I will refer you to. I want to be friends with you for life. I'm not trying to be a jerk here.”

Either you raise them to a level, you lower their services or they are going to be mad and they leave. This is about relationships in general. How do we have authentic, brutally honest relationships, whether that's our girlfriend, our kids or a client? This world needs more brutally honest relationships. That could be with our clients, too. I learned this a while ago. The way I get away with it is I ask permission. I'm like, “Can I have a tough conversation with you? Can I say something weird? Can I get something on the table?” They are like, “Yes, for sure.” You then can go into this vulnerable conversation.

I'm a lot blunt and upfront to have those discussions that need to be had. He's a little more passive.

Good cop, bad cop. I'm probably like you, too.

It's one of those things where it makes for a healthy partnership.

This thing works all the time. My business partner and I do this all the time. He's the bad cop and I'm the good cop. He's tough.

My dad is always like, “It's a healthy partnership the way that it works. I would take a bullet for him and vice versa.” It's one of those things where we know our strengths and weaknesses. There are certain clients that he can talk to. There are clients that I can talk to. Some clients and employees don't want to talk to me. They pull one of us aside but that's how it is. If a conversation needs to be had, whether it's increasing retainer, having a difficult discussion or something like that, I will be the one that does it and we always do things together. There are a couple more questions that I have. As far as the marketing agency, it would be interesting to run it by you. I'm sure with how big you are, it's probably different for some clients. That's not to undermine us but retainer business model versus paying per lead. How do you feel about that?

Clients and people want options. Anytime I lean towards one or the other, a client wants something different. If your client wants steak, don't say you only serve chicken. A retainer is easier to manage. If I was a client, I would want to be on retainer but I'm not the client. Personally, a commission is more profitable but has more risk to the agency. Clients have a hard time understanding that the bigger the budget, the more work at times but there are also efficiencies. Clients are smart and we would be doing the same thing.

I try to put myself in empathy. I have learned this over the years. I try to put myself in my client's shoes. You have to be a good business person and negotiate good deals for your organization. What I have learned is people always have a fear of getting ripped off. It's not even so much about the money. It's emotional. No one wants to feel dumb. For me, I like to put it on the table and what I have learned is I say weird things. Honestly, it surprises them a little bit, especially in negotiations. I don't want them to feel like I'm trying to get one over.

Building great client relationships gives your business stability and growth.

This business is too hard. Some too many people do what we do. There are too many agencies out there. There are many choices. We have to go to another click level of authenticity, vulnerability, openness and transparency. It’s like, “Here's what it would be for a retainer, what it would be for commission and a blend.” I don't like the per lead bullshit because the lead gen people are not marketing brand people. I don't believe in lead gen. I believe in marketing. I believe marketing produces great lead gen. The direct response happens when you have good marketing programs, a good brand and services.

I'm not the one producing leads for you because I'm smart. I'm helping you as your agent to craft better communication for you to get leads all over the place. If we want to get down and start slicing and dicing where they came from and, whether I'm doing it or you are doing it, that's going down a relationship wormhole. It’s like when you go into a relationship and you are scorekeeping, that's not a good relationship, “I did this for you. You did this for me.” To me, that’s lead gen and I don't like it. I have never done it. I know people have been successful with it and made a lot of money but it never lasts.

That’s making me think about some of the clients we have. The scorekeeping thing is interesting. If you are working with a client for a year and you were getting them, let's say, $30,000 a month and 50 leads. Now they are doing $150,000 to $200,000 a month and you are getting them 100 leads. Sometimes they are like, “From this month, these are the leads that came directly from you. These are the other leads that came from another source.” In my opinion, everything that we have been doing, all the leads are from us. That’s like pulling teeth sometimes.

We are arguing over who did what? Marketing is a team sport. Driving leads are great. I love direct responses. I love doing programs that do that. How you do the compensation model has to be in good spirit. If it were me, I would do some retainer and smaller amounts on the leads. All the lead gen people I know, they are doing great until someone says they can do better and then they are with that person.

It's a price shot.

I like retainers especially when you have employees and you have people you want to know that you are making a certain amount and things like that. Even with the lead gen blend of social media management, it's all retainer. That was the cool thing about what we did differently. He didn't understand. When he was doing paid ads and when I showed him what we can do organically to blend the two, his ads now can go into all the Facebook groups that we are joining. You can share them all and it's organic reach. That was the cool thing about that.

If I'm a CMO, I'm doing a retainer with bonuses based on specific KPIs that we agree on.

We call it a performance bonus.

I love the performance bonus. You want to be accountable for doing good work. Making up KPIs based on direct response or leads, I don't fully agree with.

I asked this question and all the questions that I will throw out because our business, as he said, we have a couple of clients that are a performance bonus with retainer but pretty much it's all retainer. There are multiple reasons for that. Every client is different. If we have a chiropractor and we know that if they get ten leads that they convert that month, depending on what service they signed up for, they are making a shit ton of insurance. If they are going to make $10,000, $15,000 off of getting that many leads throwing out some random numbers, I'm going to want to charge them $5,000 or $4,000 instead of $1,500 to $2,000 like some of the other clients that we have.

For me, it's one of those things where we were doing the retainer business model, especially on the month-to-month results-based formula. Sometimes, if you were to do a commission only, what people don't understand and I tell people this all the time as part of my sales pitch if a marketing company is going to guarantee results every single month, I want you to work with them and not us. That's unrealistic. If you are in a commission-only business model, you are not going to get paid that month. It creates animosity. It’s more like, “Why are you making money when I'm not getting results?”

I get that CFOs who want that and a lot of CEOs are like, “I will pay for performance.” I get that, of course, everyone wants that. “I want a relationship that's all about me, that serves me and does this.” It's not realistic. For us, I like doing projects first. We are in a project world. What I do is I have this dating, courting period. I don't know why I relate clients to dating. I like a couple of projects early on. It’s like, “Let's get to know each other. Let's see if this is a fit. Let's do some good work, and then let's think about a retainer.” As a client, that’s like, “Put me on retainer.” It’s like, “This sounds like an expense. There are a lot of risks. I don't know if everyone is saying the same things. Everyone is trying to sell me things.” Maybe there's two months trial, “Give me two months. Let me show you what we can do and it's X amount of dollars.” A client should get a little bit of a discount because it gives you some stability so it’s not per lead. There are a ton of ways to do it. I like options and open conversations. I would prefer a blend.

Do you have packages?

We have gone back and forth on this. At the end of the day, agencies are custom manufacturing marketing services. When you get down to packages, you become more like an ad-tech company or a media company. That's fine. Mass production of cars or a lot of things are great. You have to decide. Do you want to be a product that is mass-producing something where you could probably make a lot more money? It's more scalable and sellable. Are you in the custom world? Are you going to be a high-end custom? Are you going to be mass-produced manufacturing?

Digital World: Communicating well with clients will be the best way to understand how to create the best media for their business.

That was one thing that we agreed upon. I hated the package model. Every client that we have, no matter if they are in the same market, they are all different, all of their goals and things like that. We go into about two meetings before we sign the client. The first meeting is like getting to know you. What are you looking for? What have you done? Onboarding and stuff like that. We don't even throw out a price yet. We don't even know our price. That’s the biggest thing with these other agencies. There are other agencies that before I partnered with them, they want to buy me out. They are like, “This is the booklet of our pricing. If you want six posts on Facebook, it's this.” Every client is different. For some clients, we post every day. For some clients, it could be two times a week. It depends on their customer base and their client.

If you want to be reached locally and sell for $300 million and have a process and package, it’s fine. That is a business segment. I don't think that those business segments are going to be hot in the new world that I talked about. Do you want to go to The Cheesecake Factory or do you want to go to that cool, authentic, custom, underground spot? People are like, “Screw The Cheesecake Factory. It's a nice place. You know what you are going to get.” In the agency world, we need to be honest about that. Can you have some general packages and pricing that you are mix-mashing? It's good for agencies to have a couple of products within their organization. It's like, “I have Facebook 365 and it does X, Y and Z.” You are helping provide solutions that are proven that are part of a product because I do think people like products because they produce things.

Services are something that you have had a bad experience with. Sometimes, you have had a great experience with home services or professional services. People forget that we are in the same business as consultants, lawyers, accountants and professional services. I like mixing in some products that provide some security and some predictive things that will happen. At the end of the day, we are professional services, depending on what market segment you want to go after. If you want to go after small businesses, low-end, turn and burn stuff, that might be a great segment.

I have this chart that I talked to people about a lot of times. I make this chart, the Lamborghini is here and the hooptie is here. As a business, where do you want to be? For us at our agency, I felt that small clients take as much time as big clients. I worked with some great creative people that wanted to work internationally, win Cannes Lions or have national creative work that would make people cry, that would be respected. To me, I watched agencies that I love like Droga5, 72andSunny and Wieden+Kennedy. These agencies work the type of creative work that you are doing that could change society.

Say what you want about the Nike campaign, what they have done with Colin Kaepernick. The world is different after a freaking ad campaign that they did. They did it earlier with Nike, too. For me, the segment that I wanted to play in was high-end Fortune 1000 clients. How do you do that? You do work for big brands cheaply. You don't make money on creative campaigns. We have done a lot of campaigns that we have lost money on because we want to get known for doing that work. That's a strategy.

Other people can be the Honda Civics of the world. Produce a lot of great advertising that works well for people that's affordable. They can have a ton of clients and make a lot of money off of. Picking the kind of car or watch that you are from a brand standpoint is important. That's why a lot of times in any brand launch before your business plan gets built, I want to understand your brand. What brand are you going to be aspirational five years from now? Who are you and what market segment are you serving? It sounds like you understand your segment already.

Piggybacking off of what you said, a good company that a lot of people don't think of or maybe they think that they are truly an energy drink company is Red Bull. Red bull is a marketing company. From what I understand, they even outsource all the production of their products. They are not manufacturing. They are a marketing company through and through. In my opinion, they have some of the greatest content.

Red Bull was producing content before social media was a thing.

It’s funny too because they are an energy drink company. The segment that they are going after is extreme sports. They are a marketing company through and through. Going back to the packages, the reason I brought that up because it's exactly like what you said. It's our job when we bring in a client, whether it's a Zoom, phone call, consultation, in-person meeting at the office. Out of our portfolio of clients, I would say probably 80% to 85% of them are local. The other 10% to 15% are in other states, other countries and certain things like that because it’s never easy.

Having open conversations with clients builds more trust and greater connection.

You get all the services that we offer for one retainer but there are some services that we might not do because it's not going to help optimize your account. We create a marketing strategy, that's all the services that we are going to do. It could be paid ads, Facebook groups, next door, organic, lead gen and content creation. On top of that, you also can have things changed on your website. We can create social profiles for you. That's what we do. That comes from having a staff that you are paying salaries to so that you can get a website built for you, whatever your hourly rate is.

You have probably more opportunity than agencies like mine for that process, specialized product world a little bit, especially the market segment that you serve. That will probably produce a little bit higher percentage profit and happier clients. If I'm at a restaurant, I want to know what am I getting. You are not competing against other ad agencies. Sometimes, you are competing at nothing or something whereas I'm competing with other ad agencies. I know exactly who I'm competing against. I have put solutions, products and marketing together for that. Businesses like yourself are way better than businesses like mine.

I don’t know about that.

For me, I handle client relations, sales, business development and logistics. He understands all the backend stuff. We are trying to get to that next level. If you look at your business and what you are doing revenue-wise every month and you are doing the same thing for eight months, that's good because it's sustainable but it's not growing.

I have talked to a lot of private equity and I have wanted to understand the business that we are in, what our value is and what we are creating with our businesses. Smart businesses do have exit strategies. I love this business. I don't want to exit but I need to think about 10 or 5 years from now. Businesses like mine sell for 3X to 5X EBITDA profits or a multiple of our gross profit. If we are going to do $10 million in gross profit, then we would probably sell it for between $0.7 and $1.4 or we would sell it for 3 to 5 times profits. Professional service profits are different because you have car expenses, this expense or entertainment. Profits are a choice a lot of times in professional service.

For you, if you build some IP around the process, in which you create results for your clients in a digital world, you can sell for 7X to 10X EBITDA. Size doesn't matter. If I maybe have 80 employees or 7 employees and I'm a regional agency, it's probably 2X to 3X. If it's at where we are, I'm probably like 6X, 7X because I have international clients and we have 200 employees range. That's the delta. Think about the value you are creating in your business. That's how I would look at it. It's a choice. I never wanted to be a regional agency. I saw how crowded it was. My whole goal was to be a national agency. Now, I'm finding out the competitive set for national agencies to win creative work. It's insane. It was a choice to compete in that arena. That's the cool thing. We all have choices to figure out where do we want to compete in the business. That's why it's wide open too. That's why you and I are talking. There's not a competitive thing. There are many clients out there and it's crazy.

That's one thing that we like to do and we’ve got away from it because of how busy we are. We like to network with other marketing firms. When they find out the Facebook group stuff that we are doing, they are like, “That’s awesome.” It was honestly thinking outside. One thing that I thought about marketing is you've got to think outside the box on some stuff. Every client can do Facebook ads. How do we reach moms in a different area? Let’s create dummy accounts to get in mom groups. Those neighborhood groups on Facebook, how do we get in those neighborhoods? Let's create dummy accounts and say they live in their areas.

That’s smart. That blew my mind.

That’s a neighborhood app that we are manipulating through leads.

The thing is when we meet with a client and we sit there, we are diving into their brand and understanding who they are. I'm the one that creates the strategy. We make recommendations so I have a rep that gives them. I thought, “It doesn't matter.” She’s like, “What area do you need? The next-door account will create the dummy account. We get them.” I start acquiring next-door accounts from other friends and people, and gathering lists. We are partners in a window coverings business. It's called Scottsdale Window Coverings. They went from 1 location to 15 all through next door. That’s no ads, nothing like that.

That's one thing that we are big on. We meet with the clients and we create a strategy with them depending on their customer base. This is something that we thought about. If we are going to say we want to charge $3,000 a month, how many leads or qualified leads through what we are doing do you need to get? Do you need to get to pay that retainer every month? That's something that they love because a lot of other marketing firms don't ask that. It's like, “We are going to take over your Instagram. We are going to get you 1,000 likes, and then we are going to retarget them every three months.” I hear that every day.

Digital World: With money-back guarantees, you’re betting on yourself.

Doesn't it feel cool when you grow someone's business?

That’s why I fell in love.

That’s why I love the business, too.

I have someone that I know that he tried to do more. He tried to start this and do stuff, and help businesses. He could never get a client for three years. I told him, “You are going in there and you don't believe. You don't love what you do. You are doing it for the money. You see the dollar amount.” That was the biggest thing when I grew that café. I was a part of a process that took it from here.

That's such a good point. I want to go back to that. You have to believe with every bone in your body that you are going to make money for this client. I remember I was talking to a personal trainer and we were maybe three years into it. He had an agency for twenty years and I knew the agency wasn't doing that great work. I said, “If I don't do better than what you are doing now, in six months, I will give all the money back. I will even pay you extra money. I know and believe that I can help you and I can make you money.” It took me six months to try to convince this guy and I did. I made this guy a lot of money. I know I would. I would break my back to make sure. I had all these little things of how I would negotiate media differently and digitally differently. That's what it's all about.

We have done the money-back guarantee and stuff like that on something that we are obviously insanely confident about. It’s not to undermine something that we don't have a money-back guarantee on with our confidence, especially being on a month-to-month as well.

You had that experience. You worked at Facebook. You know exactly what to do and how you can make somebody money. We are all worried about money-back guarantees.

You are betting on yourself.

People feel that energy. We can say whatever we want. We can have packages or whatever. I have had the other side of the coin too where I wasn't confident. I'm pitching it and like, “I don't think we are going to get the account. My energy wasn't right.” We don't get it.

I have a question for you. We are dealing with some clients. You can tell me if I'm wrong. Some clients want to work at that level of talking to me. They want to work with us because of my strategy in my head. I'm trying to get out of that because I want to help him build the company. We have clients that are like, “We want to talk to you. We want this.” There are a lot of clients that we have that want me on the call. I was talking to my dad about it and I'm like, “How do I create that medium of understanding I'm still there but you have a daily manager that's managing your account.”

They are looking from an employee to a CEO.

This is hard. I'm glad you brought this question up. I still struggle with this. Gila River is one of my biggest clients. I love these guys. I want to be with them all the time. They know they have a team. Your role as an agency owner, at least my role as CEO of our agencies, is to make sure clients know I'm there. I'm not absent but I'm not day-to-day. This is a weird thing to say but I'm going to say it anyway. When you can step back and have another layer, you can help save things too. I have seen Superman Syndrome happen like crazy with a lot of CEOs where they come in and save everything. Save the day. If you don't create processes and create people to service that, there's no next line of defense. Superman failed, you are fired.

Being upfront with anything in life, it’s like, “You have a day-to-day manager. I'm here for you. I'm not going to be day-to-day. I have to run a company.” They get that. I'm learning this so much and it still trips me out. There are a lot of people that get little jealousy vibes all the time. I don't think we realize it. I don't consider myself that much like a jealous person. People are like, “Why aren't you on my account? Am I not good enough?” Other competitors are like, “I don't like you.” Some insecurities have been knit and have nothing to do with us. It's all insecurities of other people.

The biggest accounts that you will have will be the least amount that will drive you nuts.

Don't take it personally. For me, it took me a long time. It’s like, “I'm here for you. I'm not day-to-day.” They get mad about it. Go somewhere else. Go work with another agency. I'm building a company here. I will be there for you. I will take your call. If you call me at midnight, I will answer the call but I'm not day-to-day. If you want my day-to-day, it's not happening. Go work with another agency. I'm scaling a legit company here.

We had that discussion with a client because we are talking and they are like, “We wanted to work with you because of Jacob.” We are sitting here and we are like, “I'm not day-to-day.”

As the business owner too, you have to let your employees do their job.

I'm at the point now where there are many clients. They don’t even work with and they don't want to work with me. Many people at the agency are ten times better than me. In every area, that's an a-ha moment. I have done every job of the agency and I have fired myself for someone better each time because I'm not that good. I'm a master of all but there's better. I'm a great media person and media planner. I've got ten better media planners than me. In every area, I have fired myself with someone better, especially with their specialty. Now, I'm getting jealous here. I was like, “What do you mean they don't want to talk to me? They don’t want to talk to me, seriously?”

When we first started this, we were hiring friends and people that we went to college with. Our fathers were like, “You need to hire people that don't know you and that are smarter than you.”

Scaling agencies from 5 to about 40 people is the hardest thing to do.

That’s one of the things, are you overstaffed or are you understaffed? I brought that up to you. You don't know.

I look at the analytics every day. I have a person whose entire job is to look at that. It's hard because one moment, someone is billing 60 hours in a week and the next one, they are at 30. Stuff is out of scope and we are either overservicing or underserving.

Would you rather be overstaffed or understaffed? Hire as you need it or have the people all the time?

In our business, the new model, especially work-from-home and with all this stuff going on, our agencies need to be a portion of full-time and freelance. We need to master that world because the ebbs and flows of clients coming in and out are impossible to predict. Hiring good people quickly is hard, especially where you are at now, scaling, you are going to make mistakes hiring. Now, you are trying to find mid-level managers that are tough. I would try to find a good freelance option that can help me scale up and down. I would be a little understaffed but have freelance options. As deals come in and out, I have that stopgap and then I can hire.

I like to get deals and then go higher but you don't have time to do that. Freelance can help you come in. I have this altruistic viewpoint of our market of let's say Phoenix. We have an office in Vegas too. We all know each other, agencies and freelancers. I see freelancers, agencies, creative people and digital people all working together in this ecosystem. With Zoom, Slack and all this stuff, we need to get good at this world. Having all freelance is a disaster. I have seen a lot of business models that way. Having all full-time doesn't work either. You need to find the blend that works for your company.

That comes with charging the right price to a client. That's the one thing that we have dealt with when we are hiring. Let's say a full-time videographer, the first thing there is like, “I can get paid what you are wanting to pay off one client.” It’s coming up with those prices.

Digital World: As the business owner, too, you have to let your employees do their job.

You need to negotiate good deals with vendors. You may lose money for two months but the work will get done, and then you will hire full-time once you have enough work. Freelancers understand that like, “I need you for 2 or 3 months. As this goes along, I feel confident this client that I'm going to hire that job in-house.” That's the new world. Freelancers should give you a little break. You should have twenty freelancers you use all the time like your boys and gals that you trust. We have a network of freelancers. I have people I have worked with within this business now. I probably have 100 people that I will hire randomly that worked for our agency.

By the way, agencies should be okay with people leaving your agency to go start agencies or to go freelance at some point. I have hired people to do projects that have left our agency all the time because I know what they do, their work output and they are good. Even if you have another job doing whatever and you can make $5,000 or $10,000 on a deal, they like that. That's going to be the new world. It's going to happen more. We need to figure out solutions for that. We need to create a good vibe for all of our deals so people know who they should be doing freelance work for because they will have choices too. It's all over the place. I want to connect with you again and know more about what you are doing, anything I can help with or whatever. What would you say to an agency owner? What's one piece of advice would you say to an entrepreneur or your younger self as a business person? What have you learned in this thing? What's one thing that comes to mind?

I would say that if you are not failing, you are probably not learning. You have to fail. It's like if you are learning how to skateboard if you are not getting bruises and cuts, you are probably not learning.

You need to hire people that don't know you and that are smarter than you.

I have a lot. One of the biggest things that I have learned is you have to love what you do. It's about finding a purpose in life. We meet so many people. Young people like us are like, “I'm going to do this. I can make this much. This is what I am.” Who's telling you that you deserve that? Do the work, be good at it, love something and the money will come in. In nowaday’s society, people pay for anything. If you are good at what you do, you can create a monetary value for that. There was a story about a kid that's selling shoes to athletes. He's pretty well-known. It's all because of shoes. He's creating these things where you meet thirteen-year-olds that are killing it because they love creating YouTube videos. They are putting in content. In nowaday’s society, you can do anything. You have to love what you do.

You are a tattoo guy. I’m a tattoo guy. One thing I was wanting to put right here on my wrist is purpose. Every day, I wake up and I think, “Am I living my purpose now? What is my purpose? I’m visualizing that?” Great things are going to happen because I'm freaking fired up. I know exactly what I'm doing. People feel that. I love what you said. I agree, love what you do. It is a cliché. Especially now and in a world of autonomous vehicles and AI, the creative field and things that we do, you will need to love it.

I have one more thing. For example, my girlfriend sees other people and they are like, “You are 26 and you have a business. I want to do that. I need to start that.” They can come at 40 years old. Look at Mark Cuban. He was sleeping on some of his friend's couches until he was in his late 30s and became a billionaire.

There's more on that. When all these people started their businesses, it was late. Some of the biggest billionaires in the world like Henry Ford and all these guys. You don't need to be Mark Zuckerberg, Mark Cuban or Elon Musk.

People look at other people and they are like, “I should be there.” When I started this, it was a click. The more you try, the more things that you do, you will start to learn what you do. Tomorrow, you can find something that will change the rest of your life. That is the process.

Thank you so much.

Thank you so much for having us.

Tune in, share, do whatever you do. It was great having both of you guys on. Hopefully, you have some takeaways in your own business and your own life, and people helping people. Peace.

Thank you.

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Scott Harkey

Entrepreneur & Podcaster

Scott leads a stable of marketing agencies and services offering the world's biggest brands speed, value and results. OH is an independent agency built to serve today's brands through consumer-centric marketing and strategy.