Profitability Is an Operations Problem, with Sarah Still

Speaker A: Uh, welcome to the Agency Profit podcast, a show dedicated to going deep space on agency operations, which is just as nerdy as it sounds. I'm your host, Marcel Petipoff. I'm the CEO of Parakeeto, a firm that m helps digital and creative agencies measure and improve their profitability. Join me as I interview some of the smartest thought leaders and agency owners in our space and go deep into operations, metrics, and all the other things you need to get right so you can spend less time worrying about operations and more time executing on your vision. Hello, everyone, and welcome back to the Agency Profit podcast. I'm excited today to be joined by the partner and CEO coo. My apologies, partner and COO at Rainix. Uh, like a peer turned, now a friend, uh, and somebody that is been, been deep in operations and profitability and has helped, uh, female entrepreneurs, female agency owners, as well as many others, uh, go through all kinds of interesting transitions in their business, whether at scale, preparing for an exit, uh, getting things organized after a merger, uh, and ready to nerd out. Sarah, still, thank you for being on the show today.

Speaker B: Yeah, thanks for having me. Also, just quickly. It's Rain nine.

Speaker A: Rain nine. Course Roman numerals.

Speaker B: I should have spelled it out.

Speaker A: This is me being a bad host, not doing my research, uh, but I appreciate your grace with that. Uh, I'm excited to talk today, um, because you're a person that, um, we can really nerd out on this stuff. You've been in the weeds and I think have really felt, um, the tension that the operations role takes on in many different organizations in that it touches every part of the business. And so you have an interface with finance, with delivery, with new business, with every part of the business. And, um, all of those interfaces tend to be fuzzy and gray and amorphous, and they break every time that you scale. And so, uh, I'm just excited to dig into some of the war stories and some of the perspectives that you have that might be, uh, different than the conventional wisdom that people tend to, uh, think about when they look at this part of the business. But before we get into that, I want to give you an opportunity, in your own words, to describe what you do and who you serve at rain9.

Speaker B: Yeah, so with rain9, we work with women who are building valuable agencies. That's kind of the short of it. Um, long story is we really are passionate about helping women get the value out of their agency that we know that they can have. We don't want them to be limited. We don't want Them to feel like it's not possible for them. And so we look at that in terms of building value in their agency, increasing their agency performance, and then looking at how to increase their enterprise value. So when they are ready to exit, there is clear, obvious tangible value there. Whether that's something that they experience on their own, that they pass on, whether, you know, whatever the exit event looks like or when it is, it's up to them, but that that valuable is tangible and they're able to realize it.

Speaker A: So, um, I want to talk a little bit about backstory, like how did you come to do this work? And, uh, why specifically work with women?

Speaker B: Yeah, so I, my background's actually also in accounting and finance. Um, I graduated with my bachelor's when my son was six weeks old and with my master's when my daughter was, uh, two, two weeks before my daughter was born. And so I was not going to go the traditional CPA accounting route, um, and got connected with a friend of the family who needed somebody to come in and clean up their books. They were a tiny startup marketing agency, um, and their books were a disaster. So I was like, cool, I'll help with that. And as I got into it, and really in order to do a good job in organizing and keeping the finances clean, you have to understand the function of the business and get into the operations a little bit. And as I did that and started asking questions and started connecting with the team, I realized that the whole organization was a little bit of a shit show. And there was a lack of structure and consistency and um, stability across the board. And so that's when I think just the natural operations skill set that I, that I love and thrive in came out is problem solving. And what do we need to put in place from a process perspective or a template perspective or packages or, you know, whatever it is where we can make this more streamlined and easier for everybody so people aren't burning out and stressed out and all the things. So I started doing that. And as we grew and expand the size of our team, I was the go to person when there was a problem because either I was going to figure it out and solve it or I was going to help that person solve it. And so as we expanded, my role evolved to, uh, ultimately COO. And we over nine years scaled from that tiny startup to almost 10 million. We kind of fluctuated between 60 and 70 people. Covid was a weird time. Like all of that post pandemic stuff was weird. But, um, yeah, it was a ton of fun.

Speaker A: A lot of Fun, Wild Ride. And what was the genesis for then, uh, Brain nine and taking that leap in your career?

Speaker B: Yeah. So I left the agency after 11 years. Uh, there was some, uh, decisions that were being made and things that were happening within the organization between the two co founders that I just could no longer align with from a values perspective. And so I left to take the experience that I'd had to support women who were building their own agency. A lot of agencies got started in that five years, uh, following the pandemic, and a lot of people that had been burned by their own agency experience and thought, well, I can go do this myself and are great at the things that they do, uh, but don't necessarily have the business, um, perspective in terms of growing and running a healthy business that actually can give them a return on the investment of energy and attention and time and money that they're putting into it. So I started my own consulting firm, working with founders, doing that, and then through the course of that, met Kylie Peters, who is also building a very, very similar thing. Um, but she's more of that visionary mindset with a high operations integrator, um, perspective. I am, um, high operations integrator perspective with a visionary, uh, drive. So it's just a very complimentary partnership. And we thought, well, what if we did this together? And um, we could each sit in the spaces that bring us energy and we can really push forward individually in those areas, but towards the same thing. So that's what, that's what is triggering all of the rain 9. We're building valuable agencies together for women.

Speaker A: It's amazing. And so, um, you know, we talked very briefly about this before we hit record. But like, you've decided to really focus on working with, with women, which probably takes 90 plus percent of the firms that you could work with, uh, off the table. From a positioning perspective, that's a very deliberate choice. Uh, where did that come from and how did you arrive at that decision?

Speaker B: I think if we're being really honest and transparent, some of it is trauma. Some of it is saying, okay, we've been burned. We've, we've seen, uh, you know, we've helped build really great things. And then we've had, um, the experience where we didn't get what we should have gotten out of that. What, you know, whether it was promised, whether it was intentional, whether it was unintentional, and, and that's the position so many women founders are in, is they, they worked their butt off to build something and then didn't get the the ultimate reward that they should have, and now they're trying to build it for themselves. But there are so many things that get in the way. There's, there's your own mindset. The way that we're conditioned, you know, and have been conditioned for the last decades, coming, you know, coming into this, it's very, very recent and new for women to even have these kinds of opportunities and be in this position. Um, and then there's the, you know, all of the things that we handle on the outside. And it's not to say men don't also, or certain men don't also, um, have other responsibilities, but the mental load is very, very high for women, um, naturally. And so a lot of times that limits their perspective on what they're capable of and what they can build and what they can get out of their agency. And I, uh, think my background, having walked through growing an agency to almost 10 million in nine years, like, to me, like, this feels possible. Can you do it all in year one? No. Can you even see where it's going to come from or how it's going to evolve or what's going to happen in year one or even year five? No. But I know it can happen. You just keep going. You keep building. You do it in a really healthy way, in a way that supports the team, in a way that supports your clients, your high quality of service. And you do that, and the success is going to come. And so I think bringing that perspective and helping people see, like, you don't have to be limited in, in what you think is possible and where you think this can go. And, and we pivot. We pivot when things happen hard, it's going to be hard. Um, but the people that are really driven in that way, like, I, I just don't want them to feel like, well, I can't, I can't have it. I can't do it.

Speaker A: Well, I want to dig in now to, like, some of the fun questions for today that, that really get to, I think, like, the core of your experience and the first one is what is something that most people get completely wrong about building an agency that, uh, you've learned, you know, through these, these nine years building to 10 million plus, and then in your time since then, helping a multitude of different firms.

Speaker B: Yeah, I don't know if it's something that they get wrong, as in they, they have a choice or they, they see the choice and they say, well, I'm doing it this way instead of this way, and they make the wrong choice. I think it's more a matter of not even realizing what can be done and so then not intentionally doing it. And the core thing I'm talking about, and that's everything really. But the core thing that I see missing in agencies is operationalized leadership. And that starts with as a founder, as a leadership team, depending on the scale of your organization, defining the specific values and behaviors that are expected within your organization, and then aligning all of your standards, all of your best practices, all of your leadership cadences and conversations to those values so that they are enforced over and over again, they're advocated for, they are protected. And that's really what then, as you build out your strategies and as you build out your delivery systems, as you build out your admin systems overall, that's, that's the bubble that protects everything. But first off, people don't typically define exactly what that means and what that is, which means that then you hire people who come from all of these different backgrounds, all of these different experiences, often have a lot of their own traumas coming out of their own, you know, agency work experiences in your culture. Like, you might have these values in your head that you live and act by, but it's not, it's not what is clearly stated, clearly defined, and then everything's rooted in and attached back to. If you don't have that, how do you hold them accountable to it? And so defining that is, is core. And then operationalizing leadership, not having it be a, uh, fly by the seat of your pants, deal with a situation when it comes up, be being inconsistent. Like, this time I handled it this way. This time I handled it this way. Having very, very, very clear structures, uh, makes it easier for everyone because people struggle with hard conversations. They struggle when it's going to be awkward. It's hard to, like, get the words out of your mouth, and it's hard to get it out. Clearly. We get in the moment and we feel fuzzy and we, we feel blocked off. And then you get the response. You don't know what the reaction is going to be. So how do you stay very clear and focused? And how do you do it in a way that shows like, you care not just about the business success, but also about that other individual person's success. But it can all be systematized, just like a delivery system can be. And then that's what protects everything.

Speaker A: You know, I think that this is a really important perspective. And, um, my lived experience with this is it took me probably five or six years, uh, running Parakeeto to become aware of what our values were. And the result of that being a retroactive exercise was like, I woke up to a bunch of things that I had been tolerating that made me show up poorly. Uh, as a leader, I would get frustrated, I would get annoyed, I would react in a way that was not helpful or appropriate when my team would do things that really bug me. But without this explicit, like, pre acknowledgement of, like, these are my values, these are the things that I can't compromise on. These are the things that are, like, really important to me and for us to, like, have as an organization. I would get really emotional about these things, but I didn't know why and I couldn't clearly articulate and I couldn't, like, have a productive conversation about those things. And it's, and it's. Once we defined those things that even without, like, a lot of structure or a lot of cadence or a lot, it's like, that is such a strong foundation. And I think that there's a nuanced insight there where it's like the minimum effective dose, where the 10% of the work that you can do to get 80% of the sort of foundation from a leadership perspective, and it just gives you that filter. So even if you are dealing with stuff ad hoc because you're a startup and that's just how it goes, it's like you have a filter that is going to help you make directionally accurate decisions. And I think it's really, really easy to hear this and not really internalize it. But, like, my lived experiences, I wish that I could have gone back and been more clear about these things from the start because I would have made a lot of very different decisions. I would have, uh, not hired certain people. I would have probably hired different people. I probably wouldn't have hung on to the wrong people for as long as we did. I probably wouldn't have endorsed decisions or directions that we were going that weren't really line for as long as I did. Um, and ultimately, like, I would have advocated for my values more and been able to do that in a more clear way and in a way that was more, um, I'm going to say in a, in a way that was more appropriate with my team and not so emotional. Yeah, exactly.

Speaker B: Yeah. Okay, so your original question is, what do agencies get wrong? And as you were speaking, I was like, oh, that's what it is. I know what it is. They think culture is something they create. And it's, it's not. You can't, you can't Decide what your culture is. You decide what your values are. Your values are then the behaviors that your team lives by. Like, essentially, the way I look at you can call it culture values if you want to, because that's the buzzword. But essentially, culture values are these. This is the way we do things here. This is the way we interact with our clients. This is the way we interact with our work. This is the way we interact with each other. This is how we do things here. And then the result of whether or not you actually enforce and advocate and protect those values, that's your culture. Like, you can't just magically create your culture. It comes out of whether or not you're actually aligned with those values. And if there's misalignment that that's your culture, there's the way things are, is your culture. So if you have a clear, defined set of values, and this is how we do things here, and everyone's aligned on that. And when something gets misaligned, you're calling it out and you're having a very transparent, clear conversation because it's easy. Like, once it's defined, it's easy because all you have to say is, hey, this is our value. We were aligned on this. Like when you signed up with, uh, when you signed on to work with us, you said you were aligned in this. This is our expectation. Now it feels like something's off. We're not. This isn't how things are being done. So what's going on? What's behind that? Like, it could be personal things. It could be, you know, it, uh, could be big personal things. It could be stuff happening within, within, uh, the team or within your processes that you don't even know needs to be optimized and figured out. It could be something outside of their control. But regardless, you have to know what it is to fix it and to figure it out. So this gives you a baseline to say, this is what we expect. Now, why is it different?

Speaker A: There's something here that I want to touch on. And it is. It is a first principle that is, like, more abstract even than what we're talking about, which is just the importance of being clear about expectations in business. And this exists at so many different vectors. Like, we are. We talk about this constantly at Parakeeto in that it's like, what do most people get wrong? Well, they start with tracking the outputs, the financials and time tracking and utilization, instead of starting with being clear about their expectations. Like, what is our business model? What do we expect these values to look like, are we even forecasting for success? Which should be the first step. And then we're talking about this at like a values perspective. And when you talk about one of the lessons that I'm learning a lot at this particular moment is when you're holding your team accountable to metrics or when you're holding your team accountable to um, getting things done or completing projects. The first step is always setting expectations. And even we talk about exit plans and building enterprise value and it's like the first step is always to get really, really clear on your expectations. And that just feels to me like such an important first principle that shows up at all these different lay of abstraction at all in all these different places. Um, it's like beginning with the end in mind, beginning with the expectations. Uh, I just think it's worth calling that out. Like that is just such an important principle that has shown up in many, many different ways and that I've had to relearn and relearn and relearn so many times in my journey.

Speaker B: Yeah, well, and I think it's a combination that combined with the, you know, I'm sure a lot of people, most people are familiar with the extreme ownership principle where it's like it's everything is my fault as the leader. It all comes back to me. So if, if you did something wrong, either I didn't set the expectation clearly or I shouldn't have you on the team or xyz. Like it's my, I didn't put the resources in place, I didn't put the structure in place, I didn't put the timeline. Uh, like whatever it is, it all comes back to me. So I can take responsibility for that and I can go into it. Like, no matter what, always saying, I want you to be successful, I want the business to be successful, I, the client to be successful. So how do we get there? Can we get there? What is needed to get there, but then also thinking through the fact that you have to talk about it to, to figure any of this out or to say it. And so if we're not willing to, like, we may not have the clarity. Like you said early, when you're early, especially if it's a business you've not worked in before. Like I, I pivoted from COO of an agency to now a third party operations consultant. Like it's very different coming and working with clients from the outside in than when I'm hands on. Like, I can do it, I can affect the change, I can influence the team, I can, I can do it. It's not the same. So the values that I have for the business we're building now and, uh, the behaviors I want to define are going to look and feel and sound a little different than the values that I had for an agency. Similar in the foundation, but different maybe in some of the execution. So what do I know exactly what that is right now? No, I have to like, like you did. You kind of have to go and retroactively be like, okay, who has been successful here, what has worked well, what has not worked well? And so things are going to evolve over time. KPIs are going to evolve over time. Metrics are going to evolve over time. Someone's gonna be like, I know you have this number for me, but it's not realistic. I can't do it. But they can only say that, and you can only address it and make it the right KPI or metric or standard. If you have a conversation about it,

Speaker A: the next thing I want to touch on here is a point of view. Like, what, uh, is a point of view that you have on building agencies that most people might disagree with or you feel is a little controversial?

Speaker B: You said this earlier. You said, you know, when you're working with clients, they want to jump to tracking utilization, looking at the numbers, looking at the metrics, and you're like, we need to look at these things that come first. And have we forecasted and have we. Have we set a standard for what success looks like? And I understand where you're coming from, and I don't disagree that those things are important. But something that I think really helped me in a position of working with two founders who were visionaries, idea people, go, go, go, sell, sell, sell. It doesn't matter if we've done it before, let's just figure it out. And being somebody who's very operationally minded but also very flexible and very like, adaptable and able to problem solve, I think one thing that is helpful is just because you don't have all of those initial answers doesn't mean you can't get started and you can't start tracking and you can't look at the things. And so when I think, you know, for example, speaking to a visionary the other day who's thinking through pricing, and they're like, well, we have to know who our niche is. We have to know who our target market is. We need to know all of these things that are very sales and marketing, positioning, messaging, all of this. What's the problem we're solving? And I'm like, just pick a price and let's look at the data and let's look at the team members that are involved. What is the process? How much time is it going to take? What are the, what are the deliverables that are coming out of this? And I know this is the difference between my operations mind and a, uh, sales and marketing mind. But I think at, at some point all of it comes together and there's all of it's needed, all of it's valuable. But if we stop and say, well, we can't put together a, uh, rate sheet and we can't have clear packages and we can't know exactly what's included in these packages until we know this stuff. Why? Like, no, like we can put the structure in place and then we can pivot and tweak and adjust it as we go. But that's where having, I think a person who has that mindset and that operations like structural, we can, we can build something and then we can, we can pivot and start adjusting from there is, is a challenge sometimes for agencies because the founder is not typically that personality.

Speaker A: Yeah. So we'll just roll with this. Like the, the thing that I think, um, you're touching on here, it's an important nuance about this. And the point that we try to make around this thing is like, it should just be clear what the assumptions are. And we use the word assumptions very deliberately because inherently. Right. Like that's what this is. We're going to sell this for 100 grand because the assumption is that it's going to take about this much time and the client's going to not be a douche. And we're assuming that all these things are going to go right and that these things probably will go wrong. And so we're going to make some. It's like these are all of our assumptions. And to your point, I think what people. The mistake that people make is they try to have too much certainty. But like inherently, being in a leadership position in agency, you are dealing with uncertainty all the time. But the important thing is to define what were our assumptions so that when we do get to the end of that thing and we're measuring what actually happened, we have a relative thing to compare that to, because otherwise you just end up with like, the profitability of this project was 30%. Is that good or is it bad? I was like, well, what were we expecting? Did we sell this knowing that it's like, well, we're, we're assuming it's going to be 50. But we think the error bars are like 100%, give or take. So ultimately it's like we could break even, but we expected that that was a possibility that changes the conversation. And ultimately the exercise is like, you make some assumptions and then you measure what actually happened and, and over time for parts of the business that are maturing, that are not on the bleeding edge, you hope that you can start to close the gap between what your assumptions are and what reality is, because that's what creates something that is operationalizable with the understanding that the front line of the business will always be about dealing with a pretty high degree of uncertainty. But the skill of being able to say what assumptions is this decision based on so that you have a point of reference for the retroactive conversation later, um, I think is like a thing that is overlooked. There's not a sufficient amount of definition on like, what problem are we solving? Why do we arrive at this decision? And it doesn't have to be super scientific, doesn't have to be super precise. It can be like loaded with a ton of uncertainty. But just the articulation of that I think is overlooked.

Speaker B: Yeah, well, and I think people have this, I think people over complicate it. Like for example, our agency, we did time tracking because that's what agencies do. You're supposed to do time tracking, but nobody, um, it was very untrustworthy because first of all, the CEO didn't care. So there was no backbone, there was no consequence. If you don't track your time, if you don't track your time accurately, like, it doesn't matter. As CEO, I'm like, well, I would love to have that data because that would inform so many things. But if I can't trust the data, I don't want you spending time doing it. Like it's, it's a waste of time. It's a waste of time, my time to try and analyze data that I know I can't trust. It's a waste of your time to have to go in and whether you say it's a daily, weekly, bi weekly thing that has to be submitted, they're just cramming it. They're just filling it in. They're just doing, you know, oh, it was about this time. Okay, I'm, um, I'm not going to use that and I don't want you spending your time doing that. But there are ways to look at the data of the business and especially over time, get pretty close. And so then it comes back to conversations like, hey, I'm seeing That according to the last five years of data, I should be able, uh, to expect that a specialist can manage, you know, this much revenue because I'm putting their salary at 25% of revenue, whatever. Like, I can, I can have my benchmarks in my numbers, and then when it's off, have a conversation be like, well, it looks to me like you should have capacity. Why are you saying you're overloaded? Where's the problem coming in? But then as you do that and as you grow and scale and you're like, man, it would be so helpful to have this data and it justifies the complexity now, because you can, you can build out basic structures and systems that give you enough information to act on and make decisions on. And then over time, you can be like, we actually need to get more specific with our data because that's going to inform so many other pieces, can inform sales, going to inform marketing, it's going to. And inform team and delivery.

Speaker A: Well, this ties back really nicely to the assumptions conversation, because I think what you're pointing to is one of the tensions that surfaces in operations all the time, which is this tension between precision and accuracy. And I think what you described is a really good example of why time tracking is one of the best places to go look for precision traps that people have gotten themselves into, where it's like, we're trying to understand, you know, how much time was tracked on this subtask within a subtask.

Speaker B: Yeah, these incremental. Yeah.

Speaker A: And it's. And then, and then when you zoom out and you say, like, okay, well, what assumptions are we trying to validate? It's like, we just want to know if this project was, like, reasonably on track or not. It's like, okay, well, you could eliminate 90% of the complexity in your time tracking if that was the only question you're trying to answer. And also, there's probably other proxies that you could use to answer that question that wouldn't require people to fill out a timesheet as well. But until we're clear on, like, what are those assumptions that we're trying to answer, then it's really hard to actually know what is the appropriate level of complexity and operations that's required to close that feedback loop, um, and get a directionally accurate answer. And so this leads me to the last thing that I want to talk about, because I'd be remiss if I had a recovering finance professional turned operations professional on the Agency Profit podcast, and we didn't talk about the complicated relationship and Intersection of finance and operations inside of professional services and agencies. Um, this is like, the reason that our business exists, because in our experience, like, that is a, ah, very difficult soup of perspectives and job titles and roles and scopes and responsibilities and data and ways of talking about data and language that I think unfortunately gets in the way of a lot of firms feeling like they have a lot of clarity and alignment around what makes the business profitable. Um, as somebody who has been in both of those places and now works, you know, to try and solve that problem for a lot of your clients, like, why do you think that's so hard? And how do you think about getting finance and ops working better together?

Speaker B: Yeah, I mean, I think a big reason that I was so successful in my role and we were able to take the agency where we did in terms of size and profitability and health within the agency, is because all of my operational decisions were grounded in the finances. And I would have been bored out of my mind if I had just had a straight finance accounting job. I love the operations, I love the team. I love the, Like, I love the business, but I have to have the finances. Like, I don't feel confident anything that I decide to do if I don't, if I don't have it grounded in the finances. And so from, from my perspective, people struggle with it because a, it's a spreadsheet, and if you're not a numbers person, you can't. Like, I read a spreadsheet and I read the story in the spreadsheet. I'm like, okay, I see what this is telling me and how this is going to affect other things and how this affects my decision making. And that's not. That doesn't come naturally for everybody. So that's a big challenge. But ultimately, even spreadsheets can be set up in a way that make the story very clear and very obvious. And the, uh, we just need to get rid of all the extra. Like, if. If it's not informing a decision, it shouldn't be on there. Like, if it's not information or number that's telling us this is what we need to do with our team, with our packages, with our pricing, with our sales. Like, if it's not directly informing something, then why are we. Like, it goes back to what you just said. Like, why are we doing this? Why are we tracking our data at this granular of a level, if we just need to understand high level, if we're profitable? No, why are we looking at all of these different numbers? What can we simplify how can we use this to then inform our strategy as a business going forward? And that's the like for me. I. I drove the strategic planning for our agency, and it was all rooted in the numbers, because that's what told me, okay, how many clients. But you're also think. I think this is where the operational side comes in, is you're also thinking about the reality. You're not just like, well, if we do X, Y and Z, this is what it means for the numbers. No, it's like, no, we know that we can without crashing and burning and killing ourselves. We can hire this many people at this pace. We know we can onboard this many clients at this pace. Now, what is that going to do to our numbers? And if I know what that's going to do to our numbers, what do those numbers mean we can now do in things like, like our marketing and our operations and our investment and our, you know, investment in our team and investment in other things that as you're. When you're small, you can't do, but as you grow, you're able to do more of that. So it's kind of chicken and the egg. Like, it very much is blended together for me. I can't. It's very hard for me to separate it.

Speaker A: Yeah, Well, I think what you're pointing to is a thing that we say all the time at Parakeeto. It's our central philosophy, which is that profitability is an inherently operational problem. And I think the big misunderstanding is that people think that profitability is a finance problem, but it's like, there's no amount of bookkeeping, accounting that's going to fix your profitability.

Speaker B: You have to report.

Speaker A: Exactly. That's just the tip of the iceberg. But the rest of the iceberg is like, what did we do to get to this outcome? And that is an inherently operational question. And without marrying those two things, you just end up in this tennis match that I think so many agency owners have been caught in of. Like, you go to your accountant and they tell you you're overstaffed. And then you go to your team and they tell you that they're overworked and you're like, what the hell is going on?

Speaker B: How.

Speaker A: Uh, yeah, and so like that. That marriage is so important. Why do you think it's so difficult to bridge that gap? Because this is what I find is like, you have the finance person that's looking at this through a financial lens and they're, you know, or you have the operations person that's looking at this through an OPS lens, and you need one or both of those people to sort of reach across the aisle to get that overlap happening. But it tends to be a really challenging thing to make happen in many of the organizations that we've worked with. It's kind of. It's the reason that we come in and do what we do. Why do you think that that is so hard to, to close that gap and figure out, you know, which of those two sides is going to cover more of that ground and then, and then get them to like, not be completely disconnected when they meet in the middle, where it's like, you know, the accountant wants gross margin to be this way, and then the OPS person is thinking about margin in a different way. And it's like, okay, now we have all this reconciliation we need to do.

Speaker B: I mean, I think at the end of the day, like, what's on paper, like how the numbers are structured, what. It doesn't matter. So my perspective, like, the way that, the way that I functioned and, and it worked. So I can only speak from my experience and perspective, but the way that I functioned was the numbers inform my decision making and I have to have logic and justification for the decisions that I'm making. So if I, you know, and uh, I think a third role you need to include here is the founder, because they're probably not a finance mind and they're probably not an operations mind, but they very concerned about the value they're getting out of the agency in terms of dollars. Like they, they want to be getting. They want their profit at a certain level. They want to be able to pay themselves, they want to be able to pay their. Like, they have things they want to do that are dependent on the health and financial success of the business. So you've got that pressure as well. And I think the, the pressures come from finance personalities who are typically very, like, very rigid, very concerned about accuracy, very concerned about, like, it's black and white, it's this or that. Then you've got the founder who's like, well, I want it to be the best it can be. And so sometimes they're kind of influencing what the picture looks like because they want it to be framed in the way they want to see it. And they're also typically very urgent, like, okay, well, Profitability is at 10%. I want it 20% tomorrow. Like, what do we need to do? And operations is sitting here like, guys, this is not an overnight thing. Like, we will get there. And so my perspective as an operator was the numbers are Informing everything. I know where I want to go. I see the path to that. And now I have to forget about the numbers. Now I have to step away and be like, okay, here's my plan. Not forget about the people, not forget about the founder and the, and the finance person. But say, okay, I hear what you're saying, here's the plan. These are the initiatives, these are the projects, these are the things we're putting in place, these are the things we're building. And typically those things are not always within the operator's control. A lot of them are influenced by the founder. So if the founder is like, well, I want to go from 10% to 20% as the operator, I'm saying, well, in order to do that, you need to stop selling the shit clients and you need to sell the clients who are going to pay us margin and who are going to stick around with us long enough to actually realize the value in the long run. That's. I cannot control that. You are signing who you want to sign. And I can advocate and I can put, put protections in place where I have to approve and we have to have a scorecard and we have to do all xyz. At the end of the day, if you sell them, this is now what we're left with. And so we can do the best we can, but it's not going to double your profit margin. You know, and so as an operator, being able, being able to communicate and explain the story and explain the roadblocks and explain what's happening and then be able to say, okay, now I can't get stuck in that. I can't say, well, shit, I have to go double profit margin. And that's overwhelming and that's huge. And how I can't do it at the pace they want. It doesn't matter. You go, you have the conversations with your, with your leads, you go develop and optimize your processes, you go figure out where there's inefficiencies, figure out what you, you know, what, what expectations do you need to clarify so that things improve? Like, and you just do it. And it's just a day by day, like bite by bite. It is, it is not sexy, it is not. I think it's fun, but it's not, it's not the overnight, you know, transition that, that a lot of, a lot of people, I think on the finance side, they're like, well, why can't you just do it? Why can't, why can't it just change? Like, because these are people on both Sides, people on the team side and as people on the client side. These are, it's. You're selling things we've never done before. Now we have to go figure that out. You know, we don't all the, all the problems, we have to go fix that and figure it out. And the founder's like, why? Like idea, idea, idea, just go make it happen.

Speaker A: This is the thing that I think is really important to remember about profitability is, um, it can be very simple, but it's never easy. And this is true of a business in general. And I think what you pointed to here, this ties perfectly back to the first thing that we talked about, which is clarifying the expectations. And this is uh, I think what you're touching on, bringing the founder in to say, here's what I expect, here's what we want to accomplish. And hopefully what that can do is it gets everybody sitting on the same side of the table and to your point, having a management accounting conversation. I don't think we talk about this, this distinction enough where it's like the finance person is concerned about compliance, they're concerned about tax. It's like, which is important, you know, keep, keep everybody out of jail, make sure that you're compliant. That's good. But it's not the same job as, as an operations team. We need to understand, like, how these decisions that we want to make impact the performance of the business. We want to understand what, you know, how moving these things around are going to move us towards or away our object from, from our objectives. We want to understand, uh, how to answer these questions that we're asking ourselves every week in our leadership meetings. And that is a management accounting question. And to your point, it's like we need to be clear on expectations first and we need to at least try to articulate what assumptions we're making so that everybody can get on the same side of the table and say, okay, well what data could we bring together to help us with this?

Speaker B: We also have to be so clear about choices that we are willing or not willing to make and how that's going to influence what, what our goals are. Because if I say like, you know, I've had clients are, ah, like I want to have a 40% profit margin, but I live in New York and I want to have, have team members who live in New York and I want to pay them these salaries that allow them to live in New York. Okay, well, if that's the structure you want for your agency, I think, I think most people can have pretty Much anything they want, like the structure they want, the margin they want. Any, I think you can have almost anything you want. But there are times where certain things you want conflict. And it's just the choice you have to choose. Like you have to choose am I willing to accept and 40% dramatic obviously, but you have to uh, am I willing to accept having some virtual employees, whether they're us based in a lower cost of living area or they're offshore? Like, are you willing to accept that at any level? Are you willing to accept a reduction in your, in your profit margin? Like there, there are choices and this is a very dramatic example. But there, these types of things come in all the time where we say, even if it's increment, it's 1 or 2%. Okay, well we're at, you know, we're at 50%, um, margin, like uh, gross margin. And we want that to be at 45. Okay, that seems like it shouldn't be too hard. But if you're already a very lean team and you are trying to balance your senior level experts versus junior level staff, like if you're already so intentional with these things, you have, there's, there aren't as many levers to pull. So now where does that extra 1, 2, 3, 5% come from? And are you willing to choose whatever it means that's going to get you there? Like what is, what does that look like? And it's a choice. And if you can't, if you can't actually express as an operations person, if I can't express and clarify what this choice means, that's when I think that tension is constant. Because finance is like, well, we said 45%. You're always at 50. Why are you always at 50? It's like, well, because we have to hire in advance of sales so that we know that we have the team on board. So we're never actually using our team at the level if they, if they were just fully utilized and we never brought on clients, cool. But we're growing and we're scaling. We can't do that. So you, you have to understand if your numbers are even realistic.

Speaker A: This is why we always start with the model. Um, because I think most people don't have a model for their business where they could say, okay, like if we decided that we, we are not willing to have a utilization rate above x percent. It's like, okay, well, you have three levers left. You either charge more than the average bear, or you have a lower average cost per hour, or you have lower than average utilization. And so like all. And you could, it's just math. Like, that's really simple. But yeah.

Speaker B: And if you want lower than average utilization, how are you supporting that? So that. Because my, my ultimate bottom line is always people, it's always the team. Like, I, I honestly, and I don't know, I mean, uh, founders are our clients. Right. But I care about their team and I want to work with founders who care about their team so that we're all aligned, we're on the same page, there's not attention there. But the end of the day, if you compromise somewhere and it's compromising at the cost of the team, I'm going to have a problem with that and I'm going to say, what are the solutions we can put in place to support that? So if you're saying we need higher than normal utilization, okay, can we use AI, uh, can we use tools? Can we use. Huh. Where are the efficiencies? We can plug in. And so now we're getting granular in how the work gets done because we're going to burn people out. We're going to break them all for the sake of 5%. And it's not that that 5% doesn't matter, but these are choices we're making.

Speaker A: And unfortunately we haven't. We are in an industry that historically has been famous for deliberately allowing their employees to subsidize their business model with their evenings and weekends. Yeah. And unfortunately in a lot of cases that was just. We'll chalk it up to ineptitude, but in some cases it was deliberate. Um, and that's, you know, an unfortunate thing and one that I think, uh, the two of us are trying to change now with that, uh, I know we're getting to time, Sarah, for those that want to learn more about you and what you're doing and follow you online. Where should we send them in the shout outs?

Speaker B: Oh, yeah, you can just come chat with me on LinkedIn. That's, that's the platform I'm typically on. Um, rain9 is if you want to learn more about how we partner with founders. But yeah, I like talking. You don't have to be a woman for me to talk to you. I love talking about this stuff with everyone, everywhere, you know, all of it. Um, but yeah, LinkedIn is, is. That's where I make friends.

Speaker A: That's where you and I became friends. So, uh, with that we will leave links, uh, to Sarah's LinkedIn as well as the Rain9 website in the show notes with that, uh, thank you for making the time, Sarah. It's really lovely to chat with you.

Speaker B: Yeah, thanks for having me. Great to talk to you.

Speaker A: Hey, thanks so much for tuning in to today's episode. I hope you enjoyed it. And if you've ever found yourself thinking, man, I get so much value from this podcast. I wish there was something I could do to return the favor. Well, today's your lucky day because you can leave us a review wherever you're listening to this and it is incredibly helpful. Of course, if you haven't grabbed a free copy of the Agency Profit Toolkit, go and get that. It's got tons of free resources to help you improve your profitability. If you're looking to get in the fast lane and get help from experts to improve your profitability and measure your most important metrics, then apply for a consultation@parakeeto.com we'd love to chat with you and figure out how we can help with all of that. Thank you so much for being a listener and we will see you on the next episode.