Here’s a fun fact for you: most owners who try to scale a marketing agency don’t realize that a typical agency will often “break” at certain, predictable inflection points—3 team members, 10 team members, 30 team members, and so on.
It’s something that Dev Basu, CEO of Powered by Search, Canada’s fastest-growing digital performance marketing agency, knows all too well.
Dev has grown his agency through each stage, and he’s coached many other agency owners on their own journeys from early growth to seven-figure revenues.
If your agency growth has stalled or you’re burned out trying to keep everything running, it’s easy to get lost tinkering with fees and marketing tricks.
But for Dev, solutions for getting past these natural breaking points are centered on employees—not lead gen, marketing tactics, referral strategies, or any of the other usual suspects in the minds of most agency owners.
As he detailed in our conversation, only the agencies that resolve the communication, compensation, and responsibility troubleshooting—that comes with hiring—can grow past those inflection points.
In this piece, Dev shares why agencies break at four key sizes—along with specific strategies and tactics to get past them and keep growing (like good hiring practices, when to hire managers, how to get out of stale profitability numbers, and what to look for in a client).
Bonus Action List PDF: Get our 1 page PDF summary of action items you can take to scale a marketing agency from 1 to 100 team members based on Dev Basu’s advice.
Stage 1: Scaling from 1 Team Member to 3
Most agencies start out with one founder or a pair of co-founders. Hiring becomes a necessity when there are just too many clients for one person to handle. But most young agencies don’t have a lot of money for good hires (as you’re probably well aware).
So, most founders hire “really eager people who are blank slates. You’re trying to train somebody to duplicate your time,” Dev explained.
Unfortunately, that results in a small collection of people who can do specific tasks—but who aren’t oriented toward future growth. In the meantime, the founder goes from being a “maker” to being a “transactional manager”: someone who’s checking off boxes in a never-ending to-do list, following up with people who haven’t completed their tasks yet, doling out pay as tasks are finished, and so forth.
To reclaim their time and reorient for growth, agency owners should take the following three steps.
1. Choose Your Specialization
Many agencies suffer from being too generic. Not only does this affect your ability to entice better, higher-paying clients down the road, it affects your ability to find the right people to build a stand-out team.
Dev says that most agencies begin as generalists out of necessity. They start as a one-man band collecting clients wherever they can find them, often servicing clients in multiple industries.
Some agencies use vertical positioning to better target their client acquisition efforts (ex: “We only work with life coaches”). Others choose horizontal positioning (ex: “We build websites”), focusing on the specific service they offer.
“Vertical positioning is better in general,” Dev explained. “It does have some drawbacks to it. For example, when you have one client, it’s good. When you have two clients, you have a conflict of interest. When you have three clients, they become your specialization.”
2. Find & Enable ‘Outcome Achievers’
The good news here is that finding ‘raw, unformed talent’ isn’t a bad strategy. The real problem is assigning tasks to these team members without an emphasis on outcomes.
“The way that you create future momentum is to say, ‘I’m not going to be a transactional manager. I’m going to be a transformational manager.’ What that means is that I will tell my staff member, ‘Here’s what I need to see from you. As a result, I don’t really care how long you work and I don’t care where you do that work. All I care is that you have all the support tools and time necessary to get the work done by X date.’
“And then, you check in and say, ‘Hey, do you need any support to get this done right?’ Rather than, ‘Where is it? Did you get it done?’ And so on. The line of questioning is an important nuance between transactional and transformational management,” he shared.
The idea here is to give new hires the tools they need to succeed and insight on the goals you need accomplished without micromanaging. When they’re focused on solving problems to improve their outcomes, everyone in the company wins.
3. Hire Slow & Fire Fast
Too many times, agency owners keep a toxic person on staff because they “don’t have a replacement” lined up with the skillset to take over the role. Dev admitted that he learned this one the hard way. Keeping someone who doesn’t align with company values will only drag down the whole organization. To overcome that problem, Dev outlined a few tips for better hiring (and easier firing).
First, consider that you’re hiring for a combination of attitude and skill. Whenever you can hire someone skilled, that’s extremely helpful in a small company. But someone’s skill shouldn’t come at the price of a terrible attitude. He thinks of hiring as a sequence: “Look for attitude first, then test for skill.” Ultimately, you can help someone grow their skills, but you can’t force them to change their attitude.
Once you’ve found someone with the right attitude and a decent skill set, set expectations from the beginning. Make it clear that hiring is just the first step: outline your goals for their performance within the first three months and make sure you know where they stand in return. Three months later, check in and see where things are. If they’re thriving, great! If they aren’t, they need to know it and you have some objective criteria to make a decision.
“I have a mentor who says, ‘To be unclear is to be unkind,’ and I’ve really taken that advice to heart,” Dev added. “If you don’t let your team members know where they stand, that is being unclear to them, and therefore it’s being unkind to them. You’re actually holding them back from being a superstar somewhere else.”
Stage 2: Scaling from 3 Team Members through 10
Revamping your hiring practices and pinning down your agency’s positioning is critical to getting things moving. But once you approach ten team members, communication starts to break down again.
One of the biggest problems at this company size is that there are too many people for one person to manage.
To grow past ten people, it’s necessary to start hiring managers, make adjustments to your compensation structure, and “lead from behind.” It’s also the point where many founders decide whether to drive marketing and sales or to be the head of operations. (Most founders, he notes, choose marketing and sales).
Whichever role you don’t choose is a role someone else needs to fill.
1. Hire Managers and Set Team Leaders
In most cases, your first hire needs to be someone who can manage daily agency operations. Then, you can hire managers as needed and structure your company as you grow past ten people.
In the meantime, it’s important to provide clarity around who’s expected to do what in the company. Whenever roles start changing (and they will, at this stage), you need to be clear about any new expectations with your team. Dev recommends assigning an experienced person to be a “team lead” when anyones team reaches 4-5 people.
In doing so, you’re grooming them for a management role while establishing a leader who is close to the ground, so to speak.
2. Adjust Your Compensation Structure
Creating and shifting roles comes with changes in compensation.
Dev strongly recommends that incentives be tied to specific objectives. Rather than offer a generic “Christmas bonus” that your employees grow to expect, tie bonuses to achievements. The moment an employee exceeds a set objective, reward them (and celebrate their accomplishments with the rest of their team).
“I’m setting quarterly objectives,” he explained. “The minute that they exceed those quarterly objectives, they should be recognized.” In addition, he tailors the reward to the specific employee.
“I believe in employing situational leadership when you lead and motivate staff because different things are important to different people. Look for equity instead because different things are important to different people,” he added. “Somebody might really value money. Other people value freedom or time off or they could have a different personal dream as well.”
“A friend of mine, Mary Miller, created a program called ‘The Dream Manager,’ which is a way of uncovering what your employee’s personal dreams are. Maybe they want to do a summer in Italy. Maybe they want to be able to buy an upgraded wheelchair for their grandmother. And knowing that, you would commit the financial resources to help them achieve that goal. How much more incentivized would they be to come in and really kill it for the company the next day? How much more invested would they be in the company’s future?” he asked.
Stage 3: Scaling from 10 Team Members to 30
Once you try to scale past ten people, chaos unfolds. New hires don’t know who to turn to for help. Processes are scattered. Tasks get lost. And in the meantime, leaders spend all their time shoring up their weakest links (rather than developing stellar talent). To combat these problems, Dev has two simple solutions.
1. Systematize EVERYTHING
No, seriously. Systematize everything. Make process docs for your process docs. If your company is going to maintain or improve upon the early excellence which drove your growth, your employees have to know how to do their jobs efficiently.
Start with the problems you’re having right now. Once you solve them, document the solution so that everyone knows how to handle it in the future. If someone has a great process, have them write it up. Keep documenting so that you build a solid knowledge base. Powered by Growth uses G Suite and Google Cloud Search to organize everything.
“The key is getting everybody to understand that it is everyone’s job. It’s not a specific person because that person’s going to go crazy if they need to create systems for the entire company,” Dev explained.
2. Nurture Your Best Employees (Not Your Worst)
Many of the leaders that Dev worked with would spend “all of their coaching time with the under-performers in the company (people who are noisy, negative, or toxic).” You know the type: the ones who routinely blame their problems on a client or an assignment rather than taking responsibility and actively problem-solving.
In the meantime, those same leaders would be blindsided when their best talent quit. “The quiet, no-nonsense high-performers will never come to you and say, ‘Hey, can I get a bit more coaching and mentorship?’ They just keep doing what they’re doing and then one fine day, they quit,” Dev shared. “And the agency owner is going to think ‘What the hell just happened?’”
What happened was that they didn’t get enough attention, and now they’re leaving for a new job where they expect to further develop their skill set. Instead of letting them blend into the background, Dev recommends prioritizing their professional growth.
Not sure who to spend that time on? Dev identifies their top performers by these five characteristics:
- Desire for excellence
- Bias for solution
- Sense of urgency
- Client empathy
Those are the characteristics they’ve identified as success indicators for their team members. Whether those are the criteria you use or not, it’s worth refocusing on your best (or most promising) employees to improve retention and promote company-wide growth.
Stage 4: Growing Beyond 30 Team Members
For Powered by Search, the final inflection point was 60 employees. Here’s what happened:
Dev realized that even though the company was growing, profitability was not. It seemed like more and more of his time was devoted to adding clients and growing the company, but all of that increased revenue was poured back into hiring more employees and promoting the ones he had. At the same time, he had so many people working with him that he couldn’t get to know them individually.
It’s a situation many founders face: do you go for pure size and find a way to squeeze more profit somehow, or do you scale back to a specific number? For Dev, the answer was scaling employee count back down.
“I was working more rather than less. It was not a sustainable pace. If I want results for my effort, I needed to think about things differently. And after spending some time thinking about how I’m thinking, we decided to framework before we worked. We went through a whole process of customization, breaking things out, and building the next generation of our company,” Dev explained.
Here were his takeaways.
1. Decide on Your Ideal Employee and Client Count
“Just like there’s a fixed amount of hours in every day, I can only have X number of clients and Y number of staff in my company that gives me the right balance for money, meaning, and freedom,” Dev explained.
So, for example, you might decide to grow your company until you have 50 clients and 50 employees. But at that point, growth will come entirely from scaling your fee for service (rather than adding in more clients at the same rate).
Getting to the number that works for you will take research and reflection. But at this stage, it’s worth taking the time to decide what you really want your agency to be.
That brings us to his second point: how to grow your income with a fixed number of clients.
2. Rotate Out Legacy Clients
Dev recommends structuring pricing per customer, as opposed to productized pricing. Because they forge a relationship with each client and develop customized solutions, not every engagement is going to have the same value as another.
Even so, your prices should increase over time as your team grows its expertise and finesse. But dragging legacy clients into new pricing (almost) never works: there’s always an excuse for why they just don’t have more money in the budget for what you do. Rather than keeping them on, Dev recommends rotating out your lowest-paying client every time you get a new, higher-paying client (assuming you’ve hit the maximum number of clients you can take on).
Continuing his example from above, he explained, “It’s okay to part ways with a long-term client. Sometimes you have to do that if you want to grow as an agency. This gives you the opportunity to bring on a new client who might be bigger or more profitable, which lets me then upscale staff or give current employees more responsibility and compensation.”
Just remember that as you scale your rates, your clients’ expectations increase as well. So part of your job will be managing expectations and helping them know what to expect; the other part will be delivering on those expectations.
3. Look for Clients with These 8 Mindsets
It’s important to clarify that Dev isn’t recommending onboarding any client willing to pay you more for your work. It’s also worth making sure that they have the right mindset to be a good fit for your agency. Dev prioritizes clients with the following eight characteristics:
- They have to be long-term thinkers.
- They have to be creating goodwill with their marketing.
- They should always be thinking about growing.
- They have to be open-minded.
- They have to be action-takers.
- They need to be a team player (to avoid a flat client-vendor relationship).
- They need to play to win, not just for defense.
- They need to have tribal reciprocity (willing to do what it takes to help each other succeed).
The result is a client “in the mindset of doing more” with Powered by Search, which in turn helps them do more meaningful work and keep growing the company.
Final Thoughts: How to Scale a Marketing Agency
Dev says that it’s common for founders to hit the six or seven-year mark and realize that they’re either tired of their team or tired of their clients. They’ve had some wins, they have a great team, they have the big office. But they’re not happy. And that’s where the reflection and rebuilding in stage 4 comes into play.
Implementing these changes is all about growing the agency to a point where you, as the founder, are happy with what you’ve built (or at least, are happy to keep building it). And in the meantime, his advice holds up for every stage along the way.
Bonus Action List PDF: Get our 1 page PDF summary of action items you can take to scale a marketing agency from 1 to 100 team members based on Dev Basu’s advice.