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Everybody has a Jesse Gilmore agency transformation coach and founder of Niche and Control, author of the Agency Owners Guide to Freedom and the creator of leverage for growth. I’m the host of the leverage for growth podcast, and I know that in order for you to scale your agency successfully, there are multiple shifts that need to happen within your mindset, skill set, and leadership style.
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I am on a mission to interview marketing and PR agency owners on their journey to six, seven and eight figures and leverage the lessons from their journey to save you time, energy, and money to get your agency to the next level. If you find value in these episodes, watch the case study video to learn more about leverage for growth and how we successfully scale agencies at niche and control e-commerce assets that is niche in control.
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Decomp case study.
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US.
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Hey, everybody, this is Jess Happy Gilmore
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the founder of Niching control and the creator of leverage for growth. Welcome to the agency. Leverage edition. Today I’m here with Hayden Cox, the partner and chief product officer at Clever
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Yeah. Thanks for having me, Jess. I’m looking forward to it.
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Yeah. Yeah, absolutely. So, the brief overview on me, because that’s less interesting than climate prophets is, I have a background in auditing, financial statement auditing, working for a public accounting firm. Eventually got to a place where I realized I got into it because I was like, oh, you got to ask any question you want, and you get access to numbers.
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I feel like I’ve always been curious about, like how much things cost. And when I learned that I could see people’s payroll as like, that’s awesome. And then I realized, like, oh, this isn’t very much fun because you’re not looking at what’s happening with your acting as if all of the businesses around what’s already happened in the financial statements and when you would ask, talk to the business owners or companies, they’re just not even focused on that.
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So that’s when I wanted to shift and join Clever Profits. And, and became one of the partners here after a couple of years. And clever profits. I’ll try to make it simple as we, we actually just try to simplify the financials and the accounting of things so that business owners can make more decisions. I think, you know, while accounting isn’t going to be the person that helps you honestly acquire more clients, hopefully they can be the person that gives you better information so you can make better decisions.
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And I think that’s where clever process tries to sit with our with our clients and really partner with them in that.
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Yeah.
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Yeah. I think it’s specifically for like me, like having been somebody who thought every number was really important. If everything’s important, nothing’s important. I think that’s actually like a big issue for people is like, there’s so much built up around accountants and like, it is a profession that you do need to get licensing in for, depending on what kind of accountant you are.
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And and there is more rules and regulations around it, around it. And so I think the profession does it to themselves. And they create this big barrier to entry that makes it hard for people to feel like, do I actually understand it? And so then when you’re looking at 30 different lines of numbers, which one what are you focusing on?
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What’s what is this even a yardstick of? Is it good, is it bad? And so then it’s like, okay, I’ll look at my bank account because people know what the bank account means. And so I think that’s like a big, a big piece of it, I don’t know. How does that resonate with with you?
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Right.
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Yeah.
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Yeah. Yeah. Yeah. Like anything I would say a lot of it is like there’s layers to it. You can start high, you can go low. But I think having an understanding of, of where you are relative to everything. And so starting off like at a very, you know, bird’s eye view is important. And so I think, you know, for businesses it comes down to not comes down to, but can be summed up with what’s your cash in in the bank.
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And then where are you going and where you should probably drill into is where you’re going. And that should be informed by where you’ve been. And I think, you know, from a very high level, if you’re gonna look at three numbers at beyond, like the cash in the bank for like where you’re going and where you’ve been, it’s going to be on, what’s your labor look like?
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Right. That or really where is your largest expenditure going? Most of the time it’s going to be labor that’s the most finite resource. To everybody is their own individual time. And so that’s going to be the largest premium. However you package it, if you’re a software company, it’s going to be in that development. But so it’s in that piece.
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And then I would say also, you know, client acquisition or whatever that looks like, because, if you are solely dependent on just purely facilmente and there’s no, you know, new clients coming in eventually that candle’s going to burn out. And so how do you get another candle, get more wick, get more oil. And so I think those are the two big ones, you know, that I would focus on from a quick level and, and just continue to double click, drill down and and understand them more as a business owner.
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But you can’t do it all at once. Again, that’s my take at least. Like I’ve tried getting into things and like, yeah, how do you beat the elephant? One bite at a time is kind of my take on it.
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Yeah. Yeah. Yeah, absolutely. Yeah. So the the genesis of it really came out of, again, trying to, like, make sense of all the different numbers that there can be in accounting. And if you were to, to reduce it but still maintain the essence, how do you reduce that? And so what we did was our big focus actually is on, you know, trying to arrive at a cash balance that’s appropriate for the business and where it is at.
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So mitigating risks, I again, I’m not I don’t think there’s a silver bullet to business. I think that successful entrepreneurs out there are the ones who have, a propensity to fail and not care. And, and I’ve also figured out how to manage, you know, and mitigate that risk. So that’s kind of our approach is like the more cash you have, the more, you know, opportunities you have for failure that aren’t detrimental.
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And we we kind of worked our way back through the financials. And so we try to put things in common size meaning as a percentage of, of a number. That way if you’re at 50 K a month in revenue or 300,000 a month in revenue or 40 million, you know, the principle still should apply relatively. And so it’s going to be focusing on client acquisition, on your actual fulfillment, your your labor team, and then everything else of the business.
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And it kind of reads in a, in a story is how I like to think of it. So like, how much money did you make in a month? How did you do like how did you acquire those people? That’s going to be the client acquisition. How did you fulfill on that delivery? And then what are the other things that are kind of the glue that keeps things together and what you should be left over with is hopefully some profit.
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And then the amount of that is going to tell you. So to put a number to it, you know, for, for more done with you or done for you agencies, I should say it’s going to look like, clan acquisition could look a variety of different ways, the actual channels and mechanism, but typically a 10% of your top line revenue is going to be 45% of top line revenue is going to go towards, your, your team.
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And what’s included in the team is all the different departments. You know, it’s not just the people fulfilling or it’s going to be sales ops, marketing and your actual fulfillment, piece. And there’s a bunch of different things you can drill down onto there. And then the overheads, you know, like the glue that keeps things together, typically about 15%.
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That’s a very quick like litmus test. There’s definitely like, you know, nuance to that. And it’s not it’s the rule. But there’s plenty of exceptions.
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Yeah. I mean, I think like a necessity is to have, like, a historic, you know, so if you have an accountant, and hopefully you have a financials produced from that, probably reworking them a little bit. You know, oftentimes there’s like payroll labor, contractor labor. And so it doesn’t have to be exact. But the thing that I like about financials is they just don’t lie.
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Like that’s the ultimate source of truth. You know, working with accountants, they’re typically not the the vanity metric people. And so it’s hard for them to be like, oh yeah, like great job on this. And yeah, they’re numbers. So I would do that. And I really think so much of, of businesses come down to, like I said, like the fulfillment we talk about, like fulfillment and client acquisition as a golden ratio or like your labor.
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And so between those, you want to be at 55%. If you can be there regardless of your scale of business, your size, if you’re at 10,000 a month in revenue and your inputs can be about 5500 a month, you know that you should, in theory, be able to grow that business sustainably. Like there’s enough, you know, product market fit.
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So that’s kind of where I would start is like, if you have financials, then then kind of try to rework them so you can have an understanding of what that looks like. And maybe it doesn’t need to be on a one month basis, but a quarter like getting a three quarters, six or sorry, three months, one quarter to quarter sort of thing.
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We typically look at the full like the last 12 months to get a, a picture because there are ups and downs in businesses and their seasonality. You know, if you look at everyone’s, ad spend campaigns during the election season, it’s going to look very different. I like yeah, my take on it. So does that, does that kind of give a helpful like starting place for this?
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Yeah. Yeah. That’s a great call. It does make a big difference. Your, you know, kind of revenue cycle I would say. And so having a fundamental understanding of that like, okay, if you get all up front for one year, then looking at your revenue, you know, in December probably doesn’t paint the picture because you collected everything in January.
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So you need to look at it holistically. So great call out.
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Yeah.
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Yeah. I think it’s kind of like this, this guiding, star, if you will. It’s not to say that I’ll. I mean, look, I don’t know actually how to read the star, so maybe you can, like, read the stars and, like, pinpoint where you actually are. But I think it’s a general direction, you know, and, and when as a business owner, you’re just the summation of your, of your business is actually the summation of your decisions.
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And you’re so you’re making so many it’s hard to like, no, wait, did I just go for it? And I kind of feel like a lot of the times in business, it feels like somebody turn off the lights. There’s a ton of fog and and you get these little wins along the way. But then you never have, like, the world isn’t waiting for you to take a breath.
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And so how do you, you know, take a look and evaluate. Have I gone in the right direction or not? And like, I think as business owners, we always have this. Or we should always have a thesis or a hypothesis about what’s going to happen, then how do we know. And and so that’s where I think that the business model can really help is just like, a comment, you know, coming back to the center, this equilibrium, it’s like, okay, I’m winning this general direction, like the stars that way that’s north or like a compass almost.
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You know, it’s, it’s not perfect, but it definitely helps you kind of find some sanity. And, and what I think is a complicated and difficult world just shown by, like, the rate at which small businesses do fail, unfortunately. And so, I guess maybe I would almost shifted to be like, why wouldn’t you try to stack the deck in your favor when the deck already isn’t in your favor?
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You know, like everyone else is trying to, like, win. And it’s to some extent it’s a zero sum game. Not actually always, but, you know, there can only be one person that provides a solution and you can try to supplement, etc.. So, I don’t know, what’s your what’s your take on that. This.
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Yeah. Yeah, that’s a great time for me.
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Yeah.
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Yeah.
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Yeah. Totally. Totally. So this is gonna, generally be geared towards non-regulated and non heavily capitalized, you know, companies. So mostly it’s going to be service based off some, some, you know, nature of the other. I, I won’t go into like why I excluded those other two. But so with those, you know, it does depend on the volatility of, of what’s happening in general.
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And then also the business owners comfort level. We would say, you know, a business owner, depending on how they’re structured, shouldn’t start taking money out of the business. As a reward of, of being a business owner, definitely pay yourself for the time. You know, you are contributor. But for the benefits of it, typically wouldn’t want to start taking money out until you have two months of cash on hand.
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And what that means is, if you, you know, on an average monthly basis, you’re spending $50,000, two months, would be, $100,000 is what you want to have in your bank account. And, and you can kind of leverage that a little bit with credit cards. But we typically like to look at it as net, because you’re going to have to pay the credit cards or you’re going to pay, you know, 18% interest.
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Like it’s just doesn’t make sense. Better ways of financing. So if you have a 0% 12 month then fine, maybe excluding that. But again you’re not to pay it eventually. And so I think that as the, the lower barometer, and then I would typically we try to aim for like 90 days, you know, three months that gives you, you know, said differently, if you lose all of your clients at once, you have three months to continue to operate exactly as you are before you, you know, can’t make payroll.
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And typically, like, that’s not how business works. You usually lose a little bit at a time or even like you might have a big chunk taken out at once, but it’s not this rapid overnight sort of thing. And so, that’s where we would aim for. A lot of people would again say, you know, I’ve heard, Sam Ovens say, you know, closer to a year of cash on hand, which is totally fine.
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I think it’s the bigger thing is, as an owner, making sure that you’re getting rewarded because, like, burnout from owner is the worst thing. You’re the biggest asset, most valuable thing. And then making sure that that money is doing something like, you just don’t want to collecting dust, especially where, like, inflation is, is wild. That’s the worst thing to happen.
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So if it’s kept in the business, no problem putting it in something that that can get you a little something in return. And keep up with, with the pace of inflation is, is where I’d recommend over 90 days. But 90 days having like highly liquid is, is our general general thought on it. And it just kind of helps mitigate, you know, as in the flows that’ll come that you don’t know about.
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Yeah.
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And, I think that there’s, there’s always a storm that’s kind of brewing when it comes to disruption or technology or, you know, the kind of like the reorganization that’s needed within a business and especially right now. And, the reason why I talked about that is because I think cash on hand creates the,
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Right.
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Right.
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Yeah. Yeah. Yeah. So if they’re feeling things kind of drying up on the client side, I would say like first and foremost everyone should always focus on optimizing their, their offer of their product. I was thinking back of like if I had one thing I wish I had done more in 2024. I even previously is just doing more of that because I don’t think doing more of that yields in a losing equation.
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It’s and it’s a hard thing to do. Like people are always changing their evolving. And especially with clients you’re like always trying to win them over. And so like how do you stay for forefront. So I think that’s, that’s the, the best place. But you know, so if they’re, if they’re doing like 100 K, a month in revenue, but that’s kind of like there seems to be something coming where it’s going to be harder.
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You’re they’re going to have to fight more to get new clients or new clients or shopping more. And so, you know, they’re they’re driving down their willingness to say yes to certain price points. Things are going to essentially contract. I think it’s it’s really taking a serious look at where you currently are with, with your cash. So if you don’t have enough cash on hand, you know, that’s pretty concerning.
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It is just again, it’s going to be a really hard thing. And identifying that piece that is sucking, that money out or that is the biggest kind of, yeah, drain on the system and making sure that it’s, it’s optimal in terms of its return, you know, so if it is just taking, you know, money out of the business, like for myself, it’s probably my wife and kids.
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And so I, I’m not going to cut them off. Right. But like, understanding that that’s, a piece of the equation and, and I’m, I’m a big fan of having a line of credit with banks. You know, you don’t have to pull on it if you don’t want to, but it can be there as a safety net.
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And this ability to to take chances, entrepreneurs are our risk takers is my take. And so if you like fundamentally they’re they are risk takers and they’re going to be, you know, engaging with that. And if you take that away from them because they they’re worried about like where the money is or where it’s flowing, I think that’s also when businesses start to decline.
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So that’s not to say like operate within this like abundance mentality, like things will work. Well no, it’s that’s that’s part of the risk. But like you, you know, continue with the things that got you to that point. If it’s a macro market thing, because you’ve already proven that you can compete in the market and it’s a matter of like just, you know, staying with it.
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But I, I on the flip side, I would say if you have actually exploited a gap in the market and now that gap has been closed. And so you’ve gotten like sat on your laurels, it’s going to be really hard. And I would, you know, that’s I think like blockbuster, for example. Right. Like they were everywhere.
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And then Netflix kind of comes along and there was even a time where like, Netflix was around and they didn’t, you know, evolve into Netflix credit. They went from DVD to all streaming. Like, I don’t know if you can get a DVD from them anymore. And that’s an example of somebody who probably went with the tide 12 versus four blockbuster blockbuster.
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I’m having to go back in the archives. I need a fresh mouth. I guess.
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Yeah.
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Yeah.
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Yeah. Yeah.
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Totally.
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Yeah, yeah. We’ll have a, a call link in the show notes, but then you can also just go to our website. Clever profits.com on there. They’ll be, you know, you can see our social media links, YouTube, Facebook, whatever. Your kind of preferred medium of, of consumption is. But I think a good way is just talking to us.
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We’re, I think we’re pretty straight shooters on, on things, but definitely there’s plenty of resources out there to learn more about us as well.
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Just it’s an absolute pleasure. Really enjoy it. Thank you.
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Agency owners. If you want to transform your agency to sustain and grow without your direct involvement, where you can stop working in the business and start working on the business, where you can free up your time, delegate work more effectively, price and position your services to finally get paid for what you’re worth and have the team run the day to day.
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Go to niche and control dot com slash case study. Now to learn more about leverage for growth and also to book a free strategy session with us, we’ll look at your systems determine exactly what you need to do in order for you to scale this year and to create a strategic plan so that you can live the life of entrepreneurship you’ve always dreamed about.
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Go to niche and control dot com slash case study now.
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