Shownotes
Lifestyle is a Plan podcast is for agency founders who are done with the growth hustle, and want profitability over pressure instead.
In this episode of Lifestyle is a Plan, Kelly Molson is joined by FinOps Advisor Rich Brett.
After nearly a decade in agencies Rich took a leap into the world of advising after seeing first hand that agency owners needed someone to support them with FinOps. Much of his experience was gained at We Are Social, where he saw the business go from 50 to 150 people, leading a finance team of 6.
Rich fills the gap between what accountants and NED's offer, but with a focus on aligning finance with operations to enable better decision making and sustainable growth. For the past 4 years he’s worked with owners from £300k up to £10m and improving commercial understanding and helping them look forward, not just backwards.
Rich Brett and I connected over our shared message of building agencies sustainably.
I really appreciate the simplified way he explains Revenue Recognition and FinOps, which makes it easy to understand the advantage of joining the dots between numbers and the data.
This episode covers FinOps for lifestyle agencies, and why forecasting is the key to reducing stress and building a sustainable business.
You’ll discover:
- What FinOps is and why is it important
- The FinOps advice is most impactful for agencies with 1–5 or 1-10 people
- Why revenue recognition is important
- The key to proactive forecasting
- Rich’s Past, Present, Future" structure
- Understanding rate card margins to ensure profitability
Guest details
Website: agencyfinops.co.uk
Social: linkedin.com/in/rich-brett
Rich has been a very busy man since we recorded this episode, launching The Missing Finance Course alongside Harv Nagra. A completely free finance course built for EVERYONE working in agencies, consultancies and other types of professional services firms.
Podcast recommendations:
Brought to you by:
Lifestyle is a Plan is brought to you by me, Kelly Molson - an agency advisor on a mission to support solo founders build the agency they want. I’m here to show the agency world that ‘lifestyle agency’ is not a cop out. It’s the future of our industry’s sustainable growth.
You can join my Lifestyle is a Plan newsletter at kellymolson.co.uk
Subscribe wherever you get your podcasts, leave a glowing review and share it with your founder friends.
Edited by Steve Folland. stevefolland.com
Transcripts
Kelly Molson
Hey, I'm Kelly. How you doing? Welcome to Lifestyle Is A Plan, a podcast for founders who are done with the Growth Hustle. FinOps advisor, Rich Brett and I connected over our shared message of building agencies sustainably. I really appreciate the simplified way he explains revenue recognition and FinOps, which makes it really easy to understand and shows us the advantage of joining the dots between the numbers and the data. This episode covers FinOps for lifestyle agencies and why forecasting is the key to reducing stress and building a sustainable business. So let's go. Rich, thank you so much for coming on to join me on the podcast today. It's lovely to chat.
Rich Brett
You're welcome. Nice to be invited.
Kelly Molson
Tell me a bit about your background. So how did you end up in agency world?
Rich Brett
I got a job working in accounts 'cause I was doing facilities for a TV production company and then the job came open to do some accounts and they said, we know you, so do you wanna do it? And then I did that for five years and got qualified as an accountant and we got bought by Sony and then got told there's no job here for you. So I was like, oh, I'm qualified. So I then managed to get a couple of interviews and one of them was from an agency called We Are Social, who were quite new and small at the time. And I went to the office and they had a coffee machine and everyone had MacBooks and there was a ping pong table and I was like, okay, this is more interesting. And there were young people there and I was lucky enough to get a job there. And I went into a team of three people, in the middle. So I had an FC above me, financial controller above me in a sort of accounts payable person below me. And we were going through quite a good level of growth. It was the dawn of social media advertising. And we were at the forefront of it really. And then we grew to 150 people in the UK within five years, moved to a big new office. So as We Are Social for six years, joined as a management accountant and left as the Head of Finance, running a team of six and reporting into my CFO, who's still there. And then I went to another agency. I basically had children, my wife's a GP and we moved out of London 'cause she wanted to be a GP somewhere a bit nicer. So we moved back to Surrey where it's a bit nicer. About the same price to buy a house. And then we've had a couple of kids. So as I moved back, I didn't wanna do the commute anymore and started working for a Guildford agency and then that's where I got to,
Kelly Molson
We Are Social, you ended up working at the agency in Guildford, so I guess a smaller scale agency.
Rich Brett
Yeah, it was about 50 people. We were about 45 to 50 people. It was independently owned by the three owners. Been going for about 15 years. And I went in as a Head of Finance and Ops, and I guess in some ways it gave me that idea of, agencies need someone like this to get through growth. But I was prepared to take a pay cut and do all the work in terms of chase receipts, chase time sheets, but also sit in the board meeting and the strategy meetings and help with the budget. So they got, I guess in some ways, got lucky that I was willing to do that because what they then got is someone who knew how to do the work. But also had experience and insight from being at We Are Social through that growth phase, which was great, but I got to a point after COVID where I was just like, I don't wanna just do this anymore, or where am I gonna go? And I didn't wanna just go to another agency and do the same thing for three years and then move to another one. I didn't wanna work in London. I had two kids at that point. And that was when I decided that actually the thing, it felt like there was a good moment in the agency space to offer that... what I gave to that agency, to more people in terms of that sort of person between bookkeeper and non-execs. And before you hire that person to provide support and advice to grow FinOps, which wasn't really a thing in terms of a term. It's always been called business partnering or whatever, but it's become more of a term in which is, FinOps theory of trying to align Finance and Operations.
Kelly Molson
That's it. I've never heard that term business partnering before.
Rich Brett
Yeah, it was basically accountants are constantly trying to rebrand, try and make themselves relevant. So it would've been called management accounts or fp and a, and then they came up with business partnering and the idea being really that you... Instead of just looking at the numbers, you're connecting with the business and trying to partner with it so that you can get better insight but also support them. So I think I was a business partner at one point at We Are Social that was my job title. But it's FinOps has always been a thing. It just hasn't been labeled a thing. It was called Business Partnering before and it was called FP and a before, which has trying to provide better insight to the business about what the numbers mean, but also to use what's going on in the business to help finance understand what it means. So it's always been there, it's just that now there's a term's being given to it and it's actually been taken on by a lot more agencies and the wider space of finance actually, that there are now roles for FinOps people within businesses
Kelly Molson
And that is something that you have really been driving awareness of over the past year or so. 'Cause we met on LinkedIn essentially. It's where I meet all my favorite people now.
Rich Brett
Yeah, me too.
Kelly Molson
Yeah. Thanks. But you, for the past like year or so where I've... I guess I've been in like in, you've been in my orbit, I've seen what you've been posting. It's been very much around revenue recognition was the first thing. And then this talking about this kind of ops and why it's important. I think it might please you to know that, I think FinOps was probably the missing part of the puzzle at my own agency. Any founder has to have a level of understanding of their finance and their numbers, whether they like it or love it or not.
Rich Brett
Yep.
Kelly Molson
Yes. We had a level of operational procedures and stuff, but I don't think we ever married those two things together particularly well to understand the impact of one on the other.
Rich Brett
No, it's fairly normal. I've spoken to really big agencies or finance people within big agencies who aren't connecting the two. I think we were really lucky at We Are Social, that my boss who came in had agency experience and we were kind of fumbling our way around the finances and seeing stuff, but not necessarily knowing the right terms or right KPIs. And he came in and we really tried to embed that idea of being connected to the business and like understanding where does this number come from and how does it relate to what I'm seeing over there. And it's not just time sheets, like it's being connected to the marketing team and making sure that you know where they're intending to spend money and what the impact might be and when we might then see a new client come in and what size it might be and what roles we might be looking for. So it's really trying to embed that. But it's really common because most finance people come from a finance background. Most ops people are normally PMs who've been promoted into ops. They sort of talk, but you have a resource manager as well who joins those two together and it's what you're trying to do is join the numbers that you see with what you're seeing in your ERP system or your time sheet system. But it's common in small agencies because you either hire a really senior person who doesn't wanna do it, and it's doing it the old fashioned way, or you're a junior person who doesn't know that it's that important yet. And you might have someone who's really good at finance and someone who's good at ops, but they don't necessarily work together and combine. And you could sit in a board meeting and talk about 'these are the numbers' and then the next person might walk in and talk about, 'and this is how busy everyone was', but has anyone actually joined together those two things and gone, hold up if those are the numbers, and that's how busy everyone was, how come we haven't made any money? So you might see it, but it's not joined up or aligned in the past, currently and going forward, and that's the big change that needs to be made, I think, and it's... I think it's for everyone. I don't think it's a case of once you get to a certain size. It's once you get to a certain size, you have to do it. You haven't got a choice.
Kelly Molson
That's interesting. We'll come to size a little bit later, but what I'm keen to understand is what do you do when you come in and work with an agency? So you've got this framework that you use, like any good consultant, that you call the past, present, future structure. What is that and how does that work for agencies?
Rich Brett
When I go into an agency, I ask them for data and say show me what you've done as far back as possible, so you don't need to go too far back. 'cause what happened two years ago isn't gonna be that relevant to what happened, a month ago. So that would include your accounts. So something like access to Xero, so I can see what your numbers are. But also time sheet data and other data around what your clients have been and what projects you've sold. So that's the past is trying to then go, what's happened here and what trends can I see? Typically what that means when I look at an agency is, you'll see your P and L revenue go up and down all over the place, but your staff costs remain the same. And what that normally says to me is, you are not doing revenue recognition, you're just recognizing revenue when you invoice it. Which is fine. There's nothing wrong with that. But it does mean that if you go into a board meeting with that every month it's gonna be, we had a great month. Why do we have a great month? We invoice loads. Oh, why do we have a bad month? We didn't do any invoicing. That's not helpful data. So you then have to get to a three month period to look at it. So I'll try and get that and I'll put it into a shape of a P and L and go, this is how I see it. And there'll be a few metrics that I'll look at, but it's given me a sense for how the agency runs its numbers. And that's the first bit. So that's the past to the numbers, but also I'd layer that over the time sheet data and go, in this month that you were really busy, was everybody really busy doing client work? Because if they're not, then you know that there's no alignment between those two things. So it's trying to understand how utilized people are, but also look at recovery and understand how much over-servicing of clients has been done. So that's quite a big chunk of historical work, but it's something that has to be done. And most agencies aren't doing that because they might have that stuff, but they're not looking at it in that way. They're mostly just running it based on cash. So that's the past. The Present bit is then to build out a forecast and say, using that information that we've got, how can we build a system or a process that allows us to say, how do we get these numbers to be more accurate? So that might be updating how you record time sheets and just a few tweaks and how you do that. Getting a forecast set up where you can try and book revenue and understand how much revenue we've delivered each month, but it's using that past to say, what processes do we need to put in to give us a better understanding of what's happening right now and what we need to change to make it better. And once you've done those two things, it should help you in the Future to say, if we know what we did, we know how we do it, then we can now predict what's gonna happen further down the line. And that means that we can now make decisions that are more informed because we can look at what work's booked in, how much revenue we're gonna get for it, what the cost of the people delivering it is, and therefore what profit we're gonna make, which can tie into a cash flow forecast where you can see, are we gonna have enough money to do X? So it's using what you know from history, putting it into something that allows you to make decisions right now, but also use that to then make decisions going forward. So it's just an approach to take, the forecast is the nub of the whole thing. Most agencies do not have a P and L forecast. They have a new biz forecast or a cashflow forecast. And most of them can't predict anything more than a week in a in advance.
Kelly Molson
That has been my experience and it's interesting 'cause I always thought it was a smaller agency thing, but actually it's really not. Even some of the larger agencies that I work with have not had some of these things in place where they just haven't had any understanding of what comes next and what that looks like, and if we make this decision here, how does it affect certain things?
Rich Brett
Yeah, and that's, it's common when you separate finance and operations because Finance is doing their bit, they collect... most of finance is based on informed data, is that we are not responsible for the numbers, of making them good. We are responsible for reporting them and understanding them, but if numbers are bad, it's probably not our fault because we didn't not sell anything. We did not deliver anything. But what we can do is try and make decisions that help the team who are delivering that work understand what they can do to make those numbers better. If we forgot to include a cost for something that we knew was coming and we reported that we weren't gonna get it, then that is a Finance issue. But it still comes down to communication and being informed about that. But the more you can do it, and the earlier you do it, the easier it is to grow. Whether that's to grow huge or just to understand where you want to go, because then you're making decisions that are informed rather than based on what I know right now. Or what I know about what happened next week or what's gonna happen next week. And that's really the, important part of it. And that forecast becomes the driving force of what systems do we use? Who's responsible for this? Who would I speak to about getting that number to be more accurate? How could we get that number more accurate? Have we thought about using this system to do that? So it's not just a document, but it's led by that hub of information that how can we make this data that we've got as accurate as possible right now, but also as accurate as possible to provide us with more certainty one month, two months, three months ahead of time.
Kelly Molson
There's a couple of things that you mentioned that obviously we need to do to be able to create the data, to be able to analyze it and to put these things in place. And one of them is time sheets. I continuously hear how challenging it is for founders to get their team to actually do their time sheets. Any tips?
Rich Brett
When I was at We Are Social, I think the average age at one point when we had 120 people was 23. Those people did not give a shit about anything. They wanted to do great work, which is great. So what you wanna try and do is make them understand why it's important, but also make it relevant to them. And if you're gonna do it. Use them to then tell a story of what happened or what we understand and how we can then affect change. What a lot of people do is they just get 'em to do time sheets, but no one sees any sort of information out of it. So actually I would encourage presenting that data, like we talk about, your team was this well utilized, how come you weren't as busy on stuff this week? What happened? And I think you've gotta make it relevant. And one of the other things that you know, things we tried to do at We Are Social is that everyone when they came in, we tried to give them a better commercial understanding. And one of my sort of internal goals was that if someone left our business and went to another agency, I wanted them to go into that agency and for that agency to go, wow, We Are Social, really create smart, commercial minded people. And that's not just account people, that's designers, creatives. And it wasn't for everyone. But if you get people to understand the importance of it and why it's necessary for us to know it. They normally make a change and start to care a bit more, but it often it is just about the fact that not enough effort is put into showing why they're necessary.
Kelly Molson
Yeah, it is. it's something that you said there about bringing people into the team. There is, there's often a reluctance to overshare. In my experience, this is what I've been hearing. There's a reluctance to overshare too much. 'Cause we don't wanna cause I guess, unrest or unease within the team. But it is the only way to encourage your team to be more commercially aware, is to actually involve them in that process from the first instance.
Rich Brett
And that goes down from senior leadership team. If they're responsible for a team, they need to show to their team that it matters and it needs to filter down all the way. If you go into a new business in the first week and say, oh yeah we do time sheets, but it doesn't really matter, they're not gonna do it. Whereas if a team manager comes in and says, time sheets is really important for us to understand how busy you are, if you need additional support, that will show us. And although we'd like you to tell us, it also provides evidence that is the case. They're more likely to do it. There's a lot of conjecture around whether you need to do time sheets. If you're doing value or outcome-based pricing, you still need to know how much time people spend on stuff. Yes, you can sell it on a value-based approach, but you still need to know how much time it takes to do something. And if you want data to understand how we're making money, are we making money? It is the best method and making it as small a part of everyone's day as possible and making it clean and clear, should see that people do them. But you're always gonna have people who don't care. And that's just people that you just gotta work on. And try and find something that makes them, do them.
Kelly Molson
Try and find that motivation. The other thing that you've mentioned was like rate card. So I'm interested in terms of what is a good approach to take with your rate card that then feeds back into this data to help us.
Rich Brett
A rate card is a FinOps task. Where it wouldn't have been in the past in that Finance would say, these are the rates you're gonna use. They put 'em in a system and they'd get on with it. Now there is still an element of that is that Finance will take that task and do it. For me, a rate card is based on, your staff costs,/ you then need to understand how billable someone is going to be in the year. So you would say they're gonna, with planning for this person to be 80% paid for. So therefore that helps us drive an understanding of how much they're gonna pay for themselves and how much everyone else has to pay for them. And then you have to look at recovery in terms of, we've gotta build in some sort of overservice, we've gotta an anticipate that we're gonna overservice. Then once you've added a margin in and do a little bit of calculation, and that's where the good stuff comes in, is that you can then say, based on these things, we need to charge this person out at this rate. But by doing it in that way, you can then pass that information to say, look, senior team, we need your people in this team to be 60%... That person needs to be 60% billable this year. That one needs to be 80% billable. You only need to be 50% billable. If you can go above that, great, 'cause what that means is we're gonna make more margin than we plan to. But you build that in. But also it gives some metrics for the team to work to around, over service is that, look, we've built in a 5% tolerance around over service. It doesn't mean we should do it, but what it means is that we're allowing for the fact we know it's gonna happen. And although we're not gonna say to ops people and delivery people, you can over service by 5% every time because we're still gonna make margin. What it means is people have got a sense of understanding of what are the levers that we can control to just maybe eek a little bit out of that excellent, make delivery of a project even better than it was 'cause we've got a little of extra time. I think that just makes it a /lot clearer and I'm a big believer in not targeting people on profit of projects, targeting people on time and say, look, this is the amount of time you've got to do it. It equates to this amount of money. As long as you're staying within those numbers, it's fine because most PMs don't have responsibility for how much you charged the cost of the project. They don't have much decision making around who they have to use, so therefore it's quite hard for them to be controlling margins on projects. But if you can say to them, try not to over service by more than 5%. Try and keep everyone in your team busy. They're much easier things to manage than trying to hit a 55% gp, which has so many other factors to try and calculate that it becomes quite difficult.
Kelly Molson
A lot of your experience has been with what we would call larger agencies. And I think a lot of the, we talked about the lifestyle agencies that I tend to work with and, to be fair, a lifestyle agency could be 30, 40, 50 plus people. It just depends. But the majority of my clients sit within that one to 10 people kind of zone, which makes up a huge percentage of the agency sector itself.
Rich Brett
Yep.
Kelly Molson
Is there any of the advice that you would give any different for those agencies that sit within that kind of size bracket. And is it any different if they're choosing to grow, not by headcount, but actually taking that approach of staying small but growing profits instead?
Rich Brett
I don't think so. When I first started, I spoke to an agency that was about three people and they're like, do we really need to do this? And I was like, maybe you don't. But actually the earlier you do it. And start having that mindset around commerciality the better. Because as you all know, / changing stuff when you're bigger is so much harder. Like trying to get 35 people to do time sheets when they've never done them before or think about revenue recognition when they've never done it before, is much harder than asking one person to do it, or four people to do it. And actually the ultimate thing is, whether you're a lifestyle agency or a focused on growth and selling agency. The outcome is still the same, which is you wanna make good decisions that help you sleep better at night so that you know that when you make a decision, it's not gonna fail. Like ultimately that's the goal. One person is going to bed thinking, great, I know what's coming, so I'm gonna be able to grow another million pounds this year. The other one's going to bed thinking I know enough about my business that I don't have to go to work tomorrow and we're still gonna be okay. And if we hire that person, we're still gonna be okay. So it doesn't really make much difference what your goal is. It just is that once you get bigger. You have to do it because turning a massive freight boat around is much harder. Like the projects you have to win are much bigger. The lead time to win those projects is much bigger. Recruiting people is much harder. It costs you more money. When you're smaller, you can be a little bit more nimble. And if you are more nimble by knowing what's coming and what you need to do about it, you are gonna be better than the other agencies at that level because you are thinking in a way that allows you to maybe drop a price or hire that person a little bit earlier. Or do something slightly different. And that's the real, that's the real benefit of it.
Kelly Molson
Yeah. It all comes back to making better decisions and sleeping well at night.
Rich Brett
Yeah.
Kelly Molson
That's essentially it.
Rich Brett
And that's, the same for every business owner, regardless of size or what their actual goals are, doesn't wanna be stressed about decisions that they need to make on a Monday morning and that has to ask 15 people to provide them with data so they can make that decision. This is about going in on a Monday morning, going, I'm gonna look at these things I already know. I might ask a few questions to get a bit more narrative rather than just using the data and understand what's actually... does this make sense to what we're seeing? And I'll often say that when I ask people is, do these numbers make sense to what you are seeing on the studio floor? And if it doesn't, okay, why is that? What, are we missing? Oh, someone's coded at the wrong place. Let's fix that. So I think it's a lot of, it's just about trying to build a confidence in when you make a decision, it's not gonna screw you over. It still might, but maybe it mitigates that risk a little bit more.
Kelly Molson
Something you said earlier: 'revenue recognition'. So would you mind, just for some of our listeners that might not have a grasp of what revenue recognition is, can you just explain that in its simplest terms?
Rich Brett
Yeah. It is effectively booking the revenue that you, in your P and L, your Profit and Loss in your accounts, based on the value of work delivered. A lot of the times, and it's completely fine when you first set up it will be based on cash, which is the revenue that we've got in our P and L is based on when the money is received, which is good for when you're first starting, you basically just need to know about cash. The next step is to go to an accrual basis, which is, it's based on when you raise the invoice. So when you raise the invoice, that's when the revenue is in your month. Problem is, milestone invoicing. Retainers invoiced upfront. You often have ups and downs. If you invoice something for a million pound retainer for next year on the 31st December, the million pound technically goes into last year, and all the work happens in the following year. So what you're trying to do is recognize revenue based on the value delivered in the month. Normally you'd use time sheets or a sense of, we're 30% through that a hundred thousand pound project, so we're gonna book 30 grand. What that then means is that when you look at the staff costs, which is the time... the cost of the people who are working in the business in that month, it matches with the revenue that you're booking. Most smaller agencies make that adjustment at year end. So when they say, oh, we are doing revenue recognition and accrual accounting, you're probably not. You're just recognizing when the invoice is raised and adjusting at year end, which is completely fine, but it means that in your monthly report, when you look at it, it's not correct. What you wanna do is go to a board meeting where you've looking at revenue that was actually delivered in the month, and that's basically a judgment. You're gonna look at time sheets, you're gonna get a sense from your client services team and project about how much of this work have we actually done. And you book that in your accounts. You then should see a P and L that shows you true performance because that's how much work we did. This is the cost of the people that did it. The time sheets show that people that we are paying for did that work, therefore we can see we're making profit and that's where you wanna try and get to.
Kelly Molson
Nice. So it effectively evens out the ebbs and flows throughout the year rather than having these huge spikes of revenue coming in .
Rich Brett
It should do. And what you should see is if your revenue goes up, your staff costs should go up with it. And if you're, and one of the big metrics that I'm very keen to agencies to know about and if they could do this themselves, is divide your total staff costs by your revenue. If that is between 55 and 65%, you're in the right spot. If that every month goes 20%, 130%, you are not seeing a true picture of what your work does, because that staff cost should remain quite regular and constant. What you're trying to do is, a P and L, you're trying to just smooth it out so that revenue is consistent, staff costs are consistent and overhead's consistent, and a bookkeeper can do that work for you. What they can't do is get you to the point where you confirm that stuff, so you'd need to tell them, this is what I want you to post this month, and then they would do it for you.
Kelly Molson
Got you. I, have to say, I think that's one of the simplest explanations of revenue recognition that I've ever heard. It feels like a dark art, doesn't it?
Rich Brett
And I think people overcomplicate it and there is no answer for it. The point is, that there is no used time sheets because if you use time sheets and you over service a project, then you could book more revenue than you should do if you under service, because it's value pricing, it might look like you've done less work than you actually have. So the key part is to ask that person who's close enough to the project to say, look, if tomorrow or at the end of the month, the client said, we are gonna only pay you for the work you've done. Can you get to that number and feel safe that, yeah, we can confirm that we have done 30,000 pounds of this hundred thousand pound project, so you have to pay us for this. It's made up of these little bits and pieces. That's fine because it's where milestone invoicing doesn't always work either, because you could do 99% of a task and say zero revenue because you only recognize it once the task is complete. But if all the work and all the freelancers and all the time sheets are in that month where you did 99% of the work, and it's just that 1% the next day in the following month where you actually completed it, that's the month you booked the revenue. But all the cost and all the effort was in the month before.
Kelly Molson
Yeah, that makes total sense. Thank you. There'll be a lot of people out there that will appreciate that explanation, I know because I think it feels a bit scary.
Rich Brett
It does, and the earlier you do it, the better. 'Cause it builds the understanding within the team about this is how we do it. And trying to get people away from things about invoicing is really hard and you're constantly saying: I don't care what we invoiced, what have we actually done?
Kelly Molson
Yeah. And this isn't something that traditionally your accountant can do for you is it? Because we've talked previously, is that the accountants are looking at the past data all the time. They're not necessarily looking at the future.
Rich Brett
And most accountants have never worked in an agency. Most of them have worked at accountancy firms, so their job is to look at statutory rules. You might have a couple of accountants who've worked in an agency job, but they've not put a forecast together. And I was chatting to an accountant the other day who came from audit background, and she said, yeah, I know what one looks like, but I wouldn't necessarily know about how you put one together. And it's not just the theory of, okay, I need to predict. It's about how are we gonna do that? How am I gonna get better insight from the sales guys about when's this work gonna be delivered? How are we gonna make sure that ties to resourcing? How are we gonna make sure we've got the people that we need? If we're gonna have to hire a freelancer, I need to know about that so I can factor in that it's gonna be an additional cost that I'm gonna have to pay this person to do it. We're gonna have to find that person. And I think an accountant can't do that. It's also not their job. Their job is not to do this. And some of them are offering that as a service. And I get they're gonna be able to provide something...
Kelly Molson
if there's a founder listening to this. If they're sitting there thinking, yeah, I know that this is a challenge, I know this is a problem. I haven't got to grips with the numbers properly. I haven't got to grips with the ops properly. This feels like they're missing piece for me. What steps should they start to take?
Rich Brett
I think they should try and lean on what they've got already. I think there is no size to do this. It's often the point where you realize, this doesn't quite make sense to me. It's probably the time when you need to do something about it. And it's normally when you look at, it's normally that phrase of, 'why is everyone so busy, but we're making no money'?
Kelly Molson
Yeah. That's a trigger point.
Rich Brett
And if you say that to yourself, that's probably the point where you need to try and do something about it, because that's probably because your ops data isn't tied to your financial data. It's probably gonna be about revenue recognition. It's probably gonna be about the time sheet data system isn't set up correctly. And it's when you start finding it difficult to make decisions in terms of when should we hire, which creates decision paralysis where you just end up not making a decision because you just don't know. What I would say is a lot of agencies of small sizes have advisors, speak to them about it and see if they can provide a little bit of assistance. 'Cause if you're paying for it already, try and mine them for that information. I'm not expensive, but I'm not cheap either. So I would suggest speaking to your accountant. Your accountant might at least be able to help you do some of get that past/ data and financial stuff right. And speak to your team about trying to just be tighter on operations. If you still are struggling, that's when you probably do need to look outside and it won't be sold by hiring an FD or an FC or a Finance Manager. Those people will not go to a 10 person agency because they'll either cost you too much money. But they also won't be busy like... a more junior person would be good because they take over some bookkeeping and they do the day-to-day stuff, but they wouldn't have the knowledge and experience to provide that strategic insight. An FD wouldn't wanna do that stuff at the base level. So therefore we'd have to hire someone to do that bookkeeping stuff still anyway, but also they don't need to be in a business five days, and that's why the fractional FD or fractional CFO with an agency background is the one to approach. And I think you've just got to take that decision of a lot of agencies go to that advisor first, and you present them with these numbers. But if those numbers are wrong, the advisor is looking at something based on not the true picture. So get it right. So then you should get better support and better advice from your growth advisor or your advisor who's helping you grow the business better.
Kelly Molson
Yeah, I'm a really big believer in that, as an advisor myself, I was not excellent at every aspect of running my agency, and I don't think one advisor can be excellent at every aspect of it. So for me, I'm always keen to bring in... it's like having these conversations, right? I feel like I'm a bit of a, a... someone described me as a conductor the other day, and I thought that was quite a grand title, but it is, it's about understanding the needs of the founder and bringing the right people in at the right time. If your advisor is stronger on other aspects of this, then you might need to look outside of that as well.
Rich Brett
Yeah. And doing this adds value, right? Knowing, most agency owners, whether you wanna, is it a lifestyle agency that you're never gonna want to sell, or if you wanna sell it. If you are better on this stuff, it adds more value to your business because you know more about your business and there are structures and processes in place that support decision making and forecasting. Any acquisition will ask you to look at a forecast, and if it's complete nonsense, you'll look foolish. And I think it's just that bit of just taking a step back and going, does this make sense to me? And is there anyone in the business currently who can help me do this? And I think that's the big challenge is that... you just have to take an honest view of it and go, I don't think we quite get this. The accountant probably won't solve it. A bookkeeper probably won't solve it and a hire probably won't solve it, so I'm just gonna have to go to a different route. But there are lots of different people other than just me out there who can do this, but also can sometimes pick up the bookkeeping as well. So you might actually be able to find some people who can do a bit of that advisory plus the bookkeeping. And then you're solving two problems in one. 'Cause there's no point being a financial or a growth advisor and charging shitloads of money to agencies who are trying to grow and make money and screwing them over at the same time by costing. And I've often turned down clients because I think there's cheaper ways of them doing it, or they don't need to do it. Because there's no point in me charging them loads of money and then them not making any money. Because that's literally the opposite of helping an agency become more sustainably grow and make profit.
Kelly Molson
And that to me is the sign of a good advisor. Collectively saying, actually, I'm not the right fit for this project, but somebody else might be.
Rich Brett
I always try and find a few, there are different people I know and refer people to and say, look, this person might actually be able to solve that problem in a more efficient way. And it still might be, they circle back to me and that's fine. But it, you've gotta give the options. And often a bit like hiring people, you've gotta choose someone who you actually like. If you don't like someone, then don't work with them.
Kelly Molson
It really helps, doesn't it?
Rich Brett
It does. You know the advice around, oh, how should you know who the right hire is? For me, it was always, I don't like this person, so I'm not gonna hire them. They might be brilliant, but I've gotta work with this person every day and trust them. If I don't like 'em... And that's the same in advisor. If you don't like that person and don't like taking opinions from them, they're probably not the right person for you.
Kelly Molson
Yeah, agreed. Now you know that I work with a lot of lifestyle type agencies and I'm a really big believer in kind of building... what you're building out there has to fit your own kind of personal success goals and growth and scale and exit is not always, the determining factor for people. But you've been on a bit of a like lifestyle business journey yourself recently. Have you, I saw a really nice post on LinkedIn about actually booking less work or being less busy so that you can spend a lot more time with your children?
Rich Brett
Yeah, I mean it's 'cause I had to because there was no one else to look after them but...
Kelly Molson
Enforced. (laughs)
Rich Brett
I'm really lucky, my wife's a GP so she gets a couple of days off a week but works her ass off on the days that she's not and works so days as well. But yeah, I think I've got the flexibility in my job to be able to do drop off some pickups and that's really nice. And I think I, when I first started first year, I remember thinking I just need to bill as much as possible. And I was getting home, had meetings scheduled, had to put the TV on, then make dinner while on a phone call. And then, after doing the bath, put the kids to bed and jump on another call. And I just got to the point where I was like, this is just too much. Like it's, I'm not being a good parent. I don't think I'm enjoying it. And I didn't do this to just work my ass off. I did it to try and earn as much money as I needed to. And I think that was another point of realization was I actually don't need to earn as much as this to give me what I need and it won't stress me out if I don't. And actually I got to a point where I think I just got rid of a client that was causing a lot of that headache. And from now on... Today I do pick up at 2.30 and that's it. I might be on Slack on my phone a little bit, but I'll take the kids to tennis, swimming today, it's tennis on Monday, swimming, and then I won't really do any work. I might do something in the evening, but it's more because I want to do it and I wanna get it done. It's not because I have to do it, it's that I feel like if I do this, it clears up time for me to do that other thing tomorrow. And I think that's the place I got to and I think it's... I'm not gonna ever make loads and loads of money doing what I'm doing. But I'm okay with that. Obviously I'd like to make more and one of my mottoes is charge more, work less. Like I still would like to do that, but I've still got to add value to clients and I don't wanna be that person who charges astronautical amounts of money for something that they shouldn't have to pay that much for. And I think that is, unfortunately one of the problems with advisor is that it's such a crowded market now that a lot of people might be trying to charge big chunks of money to tide them over the month rather than doing a bit more little and often. And I think that's what I try and do is try and have a wide range of portfolio of clients that I can support and hopefully that's enough for me to live the lifestyle I want. It could be improved, I could definitely do better, but I definitely feel a lot less stressed about work than I did.
Kelly Molson
I think that's a really important message as well. I'm definitely aligned in the way that you've set up your advisory in the way that I've set up mine as well. I think, that there's an awful lot of value that I know that you would bring and we bring to clients, but it's done in a balanced way so that everybody gets the best of us, but we get what we need as well. I think it comes back to having that conversation with yourself about what is enough? What is enough for you? What would you be happy and content with? And it's probably a lot less than everyone actually imagines it to be.
Rich Brett
Yeah. It's not to say that you don't wanna push it, It's not like...
Kelly Molson
Not at all.
Rich Brett
If I can do that same amount of work and get paid 10% more, I'd do it. But then there's also that tipping point where you're like, yeah, but now I'm taking the piss around how much I should charge myself out for. But I think that's another challenge is that when you first start, it's hard to know where to price yourself. Actually, what I've realized is that it's not about the time I spend, it's the fact that I'm providing a level of knowledge and experience that you can't really get anywhere else unless you hire that person. At least when I started. Now, there seems to be about 55 people doing... But I think you've got to realize that if you are stretching yourself, you're probably not gonna be delivering as well as you should do because you're rushing everything. And I've definitely found that the less busy I am. I become busier doing stuff with my existing clients 'cause I'm able to spend a bit more time thinking about it and actually understanding it a bit more. And I have seven or eight board meetings a month. If I go into a board meeting and don't know why that number is, that number, that annoys me. So actually by having more time, I should be able to know about that and I'm more prepared for that question. I don't wanna go into a board meeting where I can't answer a question or I have no idea. That is the way I would like to do it. It's not the same for everybody, but that's the approach that I try and take.
Kelly Molson
Good approach. So what's next for you? What does the next 12 months look, like for you?
Rich Brett
I'm gonna try and keep pushing, doing what I'm doing and I've got a couple little projects to try and help agencies in the background. But just continue to try and give people the knowledge that they can get started. And most of it's gonna be more a case of if I do this little bit of work for you, you then might not need me anymore. And if you do, it might be quite small scale. So I think I'm still gonna try and keep that element of, do that bit of insight, guide people on the right path, and then let them get on with it, but then still be there at the side if you need me. And I think that's the approach I've taken the whole time. So it's not really do much different other than to just keep highlighting the fact that good advice is worth paying for.
Kelly Molson
Yeah.
Rich Brett
And if it's cheap, there's probably a reason why it's cheap.
Kelly Molson
Rich is excellent on LinkedIn. He, won't, appreciate me saying this, but he does put some really excellent posts out and there are also quite a few excellent rage posts as well that I really engage with. So I will put all of the links to where you can find and follow Rich in the show notes, please go and do that. I think you'll appreciate it. If you've enjoyed this episode, then there's a few ways that you can support it. Subscribe wherever you get your podcasts. Leave a glowing review and share it with your founder friends. You can even sign up for my Lifestyle Is A Plan newsletter at kellymolson.co.uk. This podcast is hosted by me, Kelly Molson, and edited by the excellent Steve Folland. Have a brilliant week.
