In this eye-opening episode, Nick Avaria, Founder of Agency Acquisitions, shares why many stage 4 founders get trapped in the missing middle. If you're growing revenue but profits are shrinking, complexity is overwhelming you, and your team feels misaligned, you won't want to miss it.

You will discover:

- Why growth rewards you with more problems and a dangerous chasm called the missing middle

- How to stop promoting individual contributors and build real middle management systems

- What it takes to transition from founder to CEO so you stop being the speed limit

This episode is ideal for for Founders, Owners, and CEOs in stage 4 of The Founder's Evolution. Not sure which stage you're in? Find out for free in less than 10 minutes at https://www.scalearchitects.com/founders/quiz

Nick is a serial agency owner and strategist who’s scaled multiple marketing agencies beyond 7- and 8-figures, bought and sold 7 firms, and built a system that’s helped countless agency owners finally get their time and sanity back, all while growing profits significantly. Nick’s not just another “consultant.” He’s still in the trenches. He owns two agencies today that run without him (under 4 hours/week of his time), and he’s now on a mission to help 100 agencies scale to $10M+ or hit $1M in profit annually while building workplaces where people thrive.

Want to learn more about Nick Avaria's work at Agency Acquisitions? Check out his website at https://www.agencyacquisitions.io/

Connect with Nick through his LinkedIn at https://www.linkedin.com/in/nickavaria/

Mentioned in this episode:

Take the Founder's Evolution Quiz Today

If you’re a Founder, business owner, or CEO who feels overworked by the business you lead and underwhelmed by the results, you’re doing it wrong. Succeeding as a founder all comes down to doing the right one or two things right now. Take the quiz today at foundersquiz.com, and in just ten questions, you can figure out what stage you are in, so you can focus on what is going to work and say goodbye to everything else.

Founder's Quiz

Hello, hello, and welcome. Welcome once again

to the Start, Scale, and Succeed podcast, the only podcast that

grows with you through all seven stages of your journey as a

founder. I'm your host, Scott Retzheimer, and we have got to

talk today about the gut punch that nobody warns you about.

It's that moment that your business becomes so successful

that your profit margins start going backwards. Yes, you heard

me right. You get so big that your profit starts going

backwards. It's a total head scratcher, because you've done

the right things. You've hired managers, you've added people to

your org chart, you've got your team selling more than ever,

revenues typically going up, setting records either year in

and year out, or even month in and month out. Yet, despite all

this, and despite the fact that you're working harder than ever,

you're making less and less, and most founders blame sales or

staffing or something else, but the real problem is usually

buried in your operations, and most owners can't see it because

they've never had the right system to diagnose it. Well, my

guest today has built that system. He's bought, sold,

scaled, and all the other things - seven agencies along the way.

Nick is here with us today. Nick is a serial agency owner and

strategist who scaled market multiple marketing agencies

beyond seven and eight figures. He's bought and sold seven firms

and built a system that's helped countless agency owners finally

get their time and sanity back, all while growing profit

significantly. Nick's not just another consultant, he's still

in the trenches. He owns two agencies that run without him,

giving less than four hours of his time per week, and he's also

on a mission to help 100 agencies scale to $10 million or

hit 1 million in profit annually, while building

workplaces where people thrive. He's here with us today, Nick.

As we were getting ready for this episode, we were

commiserating around the challenges of this, this stage

four for business owners, and you call it the missing middle.

Why is that?

The missing middle is basically the things that you

know, mean to put in a bit of a cliche, what gets you from point

A to point B doesn't get you to point B to C, and like so forth

and so on. So the problem is, and like I think you said in

your intro very well, is that you've done the right things,

and now you are rewarded with more problems, and you know,

like, I hate to be the bearer of bad news, if anybody thinks

differently, but your reward for fixing problems in business is

growth, and growth rewards you with more problems forever, so

you never outgrow this, right? You, the problems just change,

and the team that comes along with you changes, and there's

going to be parts that maybe you like in certain parts, like in

certain areas, like where you could make all the calls

unilaterally, versus like now having a team and relying on

them, but the constant is problems, no matter which way

you really look at it, and the missing middle really is the

fact that you made the right calls when you were, you know, a

founder entrepreneur, you were the only manager for a while,

maybe you had like a second in command or something like that,

but now you're building these middle management systems, or

the middle management layer, if you will, and all the things

that made you successful, and all that vision and culture that

you were able to directly inject into your frontline employees is

now gone, and that's a really tough transition.

Folks watching this in particular at a

disadvantage, because I know at least I'm cursed with looking

like a 22 year old still, and they're probably like these guys

are too young to like it can't be that bad. How do they know?

But you've done this, it's not like this is something that

you've made up or read in a book somewhere. You've been through

this multiple times. When was the first time you recognized,

oh, this is something that actually happened, as opposed to

feeling like just the world was falling apart.

Yeah, I mean, like, for one, it happened to me

various times, like personally, and also like just in working

with others, like in the sense of when we were looking to

acquire agencies, right, especially like very early on,

and I'm going back more than 10 years now to date myself a bit,

but 1015 years ago the problems that we were seeing when we

were, you know, writing LOIs, like letters of intent, and like

taking a look under the hood and seeing what was what, we just

saw this problem over and over and over again, because people

were like, I've thrown the kitchen sink at it, it's like

me, my co-founder, me, like second in command, like we've

gotten this business like 1520 people, or whatever, like you

know, couple million bucks, and we've tried to grow. We once

grew to 3035 people, and it's almost like it chewed us up and

like spit us out, and now we're back at, you know, 15 to 20

people again, and we've done this like over the last like

seven years. We've tried to go, and we get to like 3035 and then

we shrink back down. It's like, yeah, like that's exactly what

I'm talking about. There's like this chasm where you either

complete the missing middle and get to the other side more

profitable than ever before, meaning like similar profits

when you're super lean, like in terms of percentage points, but

now you're like three times as big on the top line, so you

either make it to the other side or the missing middle, like

quite frankly, it's kind of like a chasm, it chews you up and

spits you back out and puts you right back where you started,

except that now you've successfully wasted a ton of

money and probably around like 18 to 24 months of your time

just giving it a go, and then you're gonna have to reset for

another 12 to 18 months, and then basically like preparing

for the journey once again through this chasm, and either

you're going to make it the next time or not, and a lot of

people, frankly, never make it, and it's not just my opinion on

this, the numbers suggest it, right, because the number of

firms that reach a million dollars versus the number of

firms that reach 10 million, the numbers kind of tell themselves,

so like they're,

yeah,

they're the success rate on a million bucks per

year, which I mean is a great accomplishment. Don't get me

wrong, it's good. It's something like five to 10% depending on

what industry you're in, right? But the success rate of 10

million is like point 3% so it's three out of 10,003 out of

10,000 people, I think, is like the actual number, so it's a

massive, massive chasm that you actually need to cross, and very

few people actually make it. Yeah, so what I look at this as

is the data need delivery. You've done really good things

there, you've built up a client base, you've built out like a

service-based, loyal customers, whatever type business you're

in, you've built that, and the delivery is good, meaning like

there's some word of mouth there, there's good reputation

happening, good things are happening. Then you say to

yourself, like, great, this is too much from your manager, let

me bring in some managers, and I'm just going to focus on the

strategy and planning, I'll put out fires as needed, et cetera,

et cetera. The problem is, is that I think a lot of

entrepreneurs are entrepreneurs and founders, they're not

necessarily CEOs quite yet. So, like, I can get into that a bit

later, more deeply, but they're not CEOs, and they haven't made

the transition to CEO. They're founders, and number two, they

were managing the business by feel, so for example, like,

you're going in, you're like, you kind of know when things are

going wrong instinctively, because the business has grown

organically around you as this founder, and when you detach

yourself from the front line by instituting middle management,

that feel is gone, and you can't actually predict things before

they happen the way that you did, because you don't have

proper data systems in place, right? So, the data you need to

understand how to actually operate the business, what is

day in danger before it's actually in danger, like things

that predictively can tell you what's going wrong aren't there.

And number two, before you were just amending the behavior of

the people around you by giving them feedback, and when you saw

the right behavior, or like that, that's the thing. Keep

doing that thing. Now you don't have direct access to those

behaviors, and you haven't built any behavior change systems to

enable your managers to actually amend the behavior of others.

So, just because you can amend the behaviors of others doesn't

mean that the person below you, who's now a middle manager, can

do the same, and so those two are the primary things that are

missing, but it's beyond that, like the problem is, is that

generally the first managers in a business are not actually

managers, they are individual contributors that you have

promoted to a management role, because they're good at doing

the frontline things, but here's the problem, in small business,

around 65% of managers are negative, meaning they are of

negative value to the business, and then there's probably like

another 10 to 15 that are neutral, and it's all because we

are placing technical experts in management roles, and what we

don't understand, because, like, I think a lot of founders are

very humble. Is that we teach people how to succeed in the

business, meaning like how to set expectations, like what

actually drives results, how to do time management properly, how

to work well with others, how to hit objectives, how to

prioritize, how to align with culture. None of these things

that I just mentioned have anything to do with the

technical skill required to deliver whatever product or

services, so in my head a manager's role is 30% take care

of the technical stuff, teach the technical delivery items,

and 70% is teaching people how to perform, and when we promote

somebody who is a doer into a manager role. What do we get? We

get the 30% technical, but the 70% performance is nowhere to be

found.

Yeah, it's so fascinating. We didn't talk

about this ahead of time, but there are three different levels

that happen here. There's this level three reluctant manager.

Which most of these folks have been through. There's level

four, I call it the disillusioned leader, which is

this kind of messy middle that you're talking about. And then

the fifth stage is CEO, exactly like you said, they are not CEOs

yet, same language, there's fascinating, but the thing about

what you learn in level three, and you get past that reluctance

as a manager is to get great players, right? And then who do

we keep the best players closest to us? We move up a level, but

they don't necessarily move up with us.

That's exactly,

and yeah, and it's just.. it's yeah, it's

stunning. So,

here's the problem. Like, I think that it's like,

look, if it's not my problem as CEO, I can't control it. So,

like, it would be really easy to sit here and say like these

people let me down, it's because of them that I'm not succeeding.

However, that makes us feel good, but it doesn't get us the

results that we actually want. So we have to figure out how

it's our fault to be able to actually take control the

situation and make it better moving forward, and so this is

where I think that, yes, we have potentially promoted the wrong

people, but I know for a fact we haven't given them the right

systems to succeed. So, yes, did hire the right people, would

they succeed where these people have failed? And so, the

question that I get all the time is, like, how do I know if my

actual middle management team, or even my senior leadership

team is the problem, or my systems are the problem, like

there's only one way to find out, unless it's like glaringly

obvious qualitatively, because like these people are nightmares

culturally, which is like a different problem, but if you

put the systems in place and they can take ownership over

said systems, and like basically like shepherd the rest of the

company through these systems, they're not the problem. It was

the systems, now the systems are in place. We're good to go.

People turn around on a dime, but if it's the people, even

with the systems, they're still going to fail. Like, how far is

far enough to get these things into place?

Yeah, and it's just, and it's work, it's real

work, it's hard work, it's people work, it's messy, it's

challenging. You've, you touched on this a little bit, and I've

got another question that I want to ask for you, but before I go

there, I really want to give you a moment, because, like, you've

done this, and you've been to the other side a few times, and

I think one of the things that we lose when we're in the middle

of all of this. Muck is a vision for the fact that it can

actually be better. So, what is on the other side of this? If we

can develop that management layer, if we can teach folks to

be good managers, if we can step into that CEO stage, why is that

worth it?

Well, I mean, like it's worth it if you like that,

and like, look, I'll put it to you this way. I am horrible at

starting new businesses, like I am, like I am not a natural

salesperson. So, like, I've great difficulty getting

businesses to a million dollars in revenue. I am very good at

transitioning companies from one to 2 million into 10, that's

like actually my sweet spot. After 10, I don't like the

politics that happened, blah blah blah blah blah, et cetera.

I know other people should run these businesses for me, right?

So, like, first of all, you got to get clear on like what you

are good at, and then fill the gap in between. So, you have to

have a clear vision, not only for the business, but firstly

yourself, so that you understand where you can provide value to

it or not, right. And what I tell people is, like, first you

need to make this clear vision. Step two is what numbers after

the vision is clear. What are the numbers that make the vision

possible, that make it real? And then what are the behaviors from

the organization and specific individuals, not just ordinary

organization itself, but also the individuals inside of it.

What behaviors are needed to make the numbers real, right?

And then what is the current reality versus the current

difference to those behaviors? So, like, we have our behaviors

today, what our behaviors should look like in order to hit those

numbers, and what those numbers are to hit the vision, and

ultimately, how we get the behaviors is how do we build new

habits inside of each and every single person within the

business to be able to like make the whole thing go. So breaking

it down, high level vision is clear, numbers to make it real

is clear, what behaviors we need to make the numbers real. What

is the difference between current state behaviors and

future state behaviors? And then basically rank ordering the

habits in order to build those behaviors, like that is how you

make it real. And like, to me, a vision people are like, oh, you

know, like to quote, like Microsoft's like old one, it's

like, you know, a laptop on every desk, it's like, okay,

great. What numbers make that real? It's like, well, they

could quantify that, right? And then it's like, okay, well, what

do we need to be able to do to do that? And like, I don't think

people go far enough on the vision. To me, the vision isn't

just, hey, like, we're going to expand across North America,

like that's not a vision, it's what backs that up.

Yeah, yeah, so good, so good, having the goals

along the way as well. Nick, there's a question before I let

you go here that I have to ask, and the question is this: What

is the biggest secret you wish wasn't a secret at all? What's

that one thing you wish everybody watching or listening

today knew?

I think the biggest secret is, is that good leaders

only follow strong leaders. So, the problem I've seen this

happen a lot. It's happened with me previously, like, like a

decade plus ago. You know, I couldn't attract top talent

until I became a really, really strong leader. Like, you're not

going to hire other leaders in your business that are that are

going to be stronger than you yourself as a leader, so you are

the ultimate speed limit of the business, and the most important

thing to be able to attract good leaders is making the transition

from founder to CEO, because good leaders work for CEOs, they

don't work for founders.

Yeah, yeah, yeah, Nick, we could turn this

into a very long conversation. I've got about 19 different

things that we could talk about, but to stay true to our

commitment to keep these nice and short and sweet for our

guests, I've got one more question for you, and it's an

easy one. If folks want to find out more, where can they reach

out to you? How can they find out more about the work you all

do?

You can find me on LinkedIn at Nick Averia, that's

N I C K space A V A R I A, or you can look me up on Agency

acquisitions.io

Fantastic, fantastic! We'll get both of

those in the show notes for you all, so you can get right to

them. Highly recommend it, Nick. Thank you so much for being on

the show today. Really was a privilege and honor having you

here. Fantastic conversation, and love the way that you

approach it. For those of you watching and listening, you know

that your time and attention mean the world to us. I hope you

got as much out of this conversation as I know I did,

and I cannot wait to see you next time. Take care.