Profit First for Agencies, With Mike Michalowicz

Points of Interest0:00 – 0:14 – Introduction to Pricing Framework: Marcel introduces a universal pricing formula that applies across all billing models, setting the stage for simplifying agency profitability assessments.0:54 – 1:38 – Solo Episode Overview: Marcel explains that the episode will draw from his All Agency Summit presentation, covering how to price profitably and choose optimal pricing models.1:50 – 3:08 – The Best Pricing Model: Marcel emphasizes that the "best" pricing model is the one that consistently delivers the best margin, not a specific method like value-based or hourly billing.5:22 – 6:59 – Differentiating Pricing and Scoping: He defines pricing as determining what the client will pay and scoping as calculating what the service will cost the agency, advocating for separating the two.8:00 – 10:03 – Introduction to Delivery Margin: Marcel presents delivery margin as the cornerstone metric for agency profitability, explaining how to calculate it using agency gross income and delivery costs.11:02 – 12:34 – Setting Delivery Margin Targets: He recommends targeting a minimum 70% delivery margin to achieve healthy profitability after accounting for overhead and utilization inefficiencies.13:15 – 15:14 – Finding the Minimum Price: Marcel shares a formula to calculate minimum pricing: dividing delivery cost by (1 - margin target) and adding any pass-through expenses.16:39 – 17:16 – Introducing the Pricing Model Quadrant: The two vectors—client-perceived value and delivery risk—are introduced as key factors for determining the appropriate pricing model.17:49 – 19:17 – Understanding Value in Positioning: Marcel explains how niche positioning increases perceived value, affecting the pricing strategy and client comparisons.20:08 – 22:02 – Accounting for Delivery Risk: He discusses how accurately agencies can predict project costs and why risk significantly impacts pricing model selection.23:00 – 24:55 – Matching Pricing Models to Risk and Value: Marcel outlines when to use models like time-and-materials, abstracted time billing, flat fees, or value-based pricing depending on project risk and value.Show NotesAll-in Agency SummitChris Dubois & Dynamic Agency OSFree Agency Profit ToolkitFree access to our Model PlatformParakeeto Foundations CourseLove the PodcastLeave us a review here.

Points of Interest0:30 – 1:31 – Meet the Guest: Marcel introduces Mike as a prolific author and entrepreneur, best known for Profit First, and previews their deep dive into simplifying profitability for service businesses.2:00 – 3:36 – From Struggle to Simplification: Mike shares how his own entrepreneurial failures led him to journal his learnings, become an author, and dedicate his work to simplifying business for fellow entrepreneurs.4:00 – 4:58 – A Framework for Entrepreneurs: Mike explains the core business needs he addresses in his books—sales, profit, order, impact, and legacy—and how each book offers practical tools to tackle one of these pillars.5:06 – 6:31 – Rethinking Growth: Mike critiques the glorification of VC-funded hypergrowth, advocating instead for right-sized, owner-aligned businesses that are profitable and purpose-driven.6:38 – 11:02 – VC Realities vs. Bootstrapping: The conversation explores the downsides of venture capital—loss of control, high pressure, low founder pay—and makes the case for customer-funded, bootstrapped growth.11:18 – 12:11 – Constraints Drive Innovation: Mike explains how constraints, like taking profit first, can push businesses to become more creative and disciplined, leading to stronger, more sustainable operations.13:01 – 14:18 – Profit First in Practice: Through his investment work, Mike mandates implementation of Profit First in struggling businesses, using profit constraints to expose inefficiencies and force needed changes.16:00 – 18:23 – The Envelope System: Profit First functions like an envelope budgeting system for businesses, with multiple bank accounts directing funds to specific purposes—profit, taxes, owner’s pay, and operations.21:03 – 27:59 – Customizing for Agencies: Marcel and Mike discuss how to adapt Profit First for agencies, reverse engineering spending from lifestyle goals and avoiding industry average benchmarks.31:26 – 34:57 – Smoothing Lumpy Revenue: Mike recommends “drip accounts” to normalize cash flow for businesses with irregular income, ensuring income is recognized and allocated over time.35:03 – 37:35 – Tools and Support: The episode closes with a preview of the new Profit First app and a global network of certified professionals to support business owners in applying the framework effectively.Show NotesNew Profit First AppProfit First ProfessionalsMike’s new ImprintLove the PodcastLeave us a review here.

Points of Interest1:02 – 1:38 – Intro: Marcel introduces the session as a condensed version of his All-in Agency Summit talk, aimed at equipping agencies with the key levers to diagnose and improve profitability.3:05 – 3:18 – 80/20 Profitability Focus: The goal is to give agencies 20% of the knowledge that provides 80% of the insight needed to take control of profitability, regardless of market conditions.4:28 – 6:27 – The Growth Trap Cycle: Agencies often get stuck in a cycle of hiring during growth, losing profitability, scaling again, and repeatedly encountering the same financial challenges at larger scales.6:42 – 7:01 – Identifying the Real Problem: Founders are urged to identify whether their agency's issue is inefficient delivery (indigestion) or lack of revenue (starvation) to avoid insolvency.9:01 – 10:06 – Financial Metrics Foundation: Understanding core financial metrics—especially agency gross income (AGI)—is essential to making better business decisions beyond tax reporting.14:24 – 18:05 – Delivery Margin as the Core Metric: Agencies should aim for delivery costs to stay under 50% of AGI, enabling better spending on overhead and stronger profitability.21:44 – 26:44 – Lever 1: Average Cost Per Hour: Lowering the average cost of labor through delegation and improved processes helps reduce delivery costs and increase profitability.28:03 – 31:55 – Lever 2: Average Billable Rate (ABR): Maximizing revenue per hour of delivery time, regardless of billing model, improves margins—either by pricing higher or working more efficiently.34:17 – 38:24 – Lever 3: Utilization Rate: Utilization measures how much team capacity is spent on client work; improving it by selling more work or adjusting staff size directly affects profitability.42:01 – 44:45 – Utilization Benchmarks: Weekly and annual utilization targets vary by role; producers should aim for 75%+ weekly, and teams should average 50–65% annually including all roles.45:27 – 49:26 – Impact of Levers on Profit: A case study illustrates how modest gains in utilization and ABR can shift profit margins from 10% to 40%, increasing valuation by up to 500% without hiring or cutting overhead.Show NotesAll-in Agency SummitChris Dubois & Dynamic Agency OSFree Agency Profit ToolkitFree access to our Model PlatformParakeeto Foundations CourseLove the PodcastLeave us a review here.

Points of Interest1:04 – 1:46 – Introduction of John Meyer: Marcel introduces John Meyer, highlighting his experience as a successful agency owner, seller, and current business coach.2:10 – 2:30 – John's Current Focus with Leadmore: John explains his mission with Leadmore: coaching agency owners to avoid solopreneur traps and scale their businesses.2:30 – 3:11 – "No More Solo" Coaching Program: Details of John's group coaching for agencies in the $100k-$400k range focused on delegation and growth.3:11 – 3:37 – Coaching for Scaling Agency CEOs: Information on John's one-on-one coaching for CEOs aiming to delegate and further scale their agencies beyond $500k.4:32 – 5:30 – The Founding Story of Lemonly: John recounts the pivot from a broad digital agency to specializing in infographics for better focus and impact.5:36 – 6:50 – Strategic Niche of Infographics: How Lemonly's focus on infographics led to recognition and work with major brands like Netflix and MLB.8:38 – 9:25 – The Challenge of Scaling a Niche: The episode transitions to discussing the dilemma of staying niched versus widening services for continued growth.14:51 – 15:03 – Introduction to the Product Ladder: John introduces his framework of four ways service businesses can generate revenue.15:03 – 17:18 – Levels of the Product Ladder Explained: A brief overview of the custom, done-for-you, done-with-you, and DIY service levels.17:54 – 18:08 – Utilizing the Ladder for Increased Profit: The concept of moving clients up or down the ladder and repackaging services for better retention and profitability.26:58 – 28:31 – Avoiding Custom Work at "Done-For-You" Prices: John cautions against providing bespoke services while charging for standardized offerings.Show NotesConnect with John:Johntmeyer.comLinkedInInstagramYouTubeLove the PodcastLeave us a review here.

Points of Interest0:00 – 0:23 – Small Cuts, Big Impact: Marcel explains how trimming small recurring expenses added up to $7K/month in potential savings.1:32 – 2:44 – Market Uncertainty Hits Everyone: Carson highlights how client indecision is stalling agency pipelines across the industry.3:04 – 3:23 – Opportunity in Unstable Times: Marcel frames uncertainty as a chance to optimize, streamline, and future-proof the business.4:02 – 4:36 – Sales Slowdowns and Staffing Pressure: Agencies must balance shrinking pipelines with existing team and overhead costs.5:02 – 5:25 – Avoiding Cost-Cutting Traps: Downsizing without strategy can hollow out delivery capacity and worsen long-term profitability.6:02 – 6:36 – Overhead First, Not Production: Carson shares a personal lesson on the importance of reducing overhead over core delivery staff.8:05 – 9:56 – Balancing Optimism and Cash Management: Founders must weigh hopeful projections against real cash reserves to avoid crisis.12:04 – 13:19 – Trigger-Based Decision Rules: Carson suggests creating clear, data-driven thresholds for when to take action—before it’s too late.17:03 – 17:22 – Austerity Exercise Yields Results: Marcel’s audit of seemingly small expenses uncovered significant monthly savings.21:01 – 22:37 – Smooth Transitions Are Possible: Fears around losing key people are often overstated—teams adapt and grow stronger.27:12 – 28:13 – Use a Payroll Grid for Clarity: Marcel introduces a framework for assessing roles, costs, and time allocation to guide decisions.34:10 – 35:06 – Profitability Benchmarks to Follow: Aim for ≤50% of income to delivery, ≤30% to overhead, and utilization of at least 50–60%.Show NotesConnect with Carson via LinkedInGet access to this model tool in the toolkitParakeeto Foundations CourseFree access to our Model PlatformPodcast on benchmarkingLove the PodcastLeave us a review here.

Points of Interest01:01 – 01:46 – Meet Today’s Guest: Jason Peck: Jason, a certified financial planner at EverWise Wealth Management, joins the show to share how agency owners can build wealth, protect their families, and stop relying solely on their business for financial freedom.05:00 – 06:10 – Unique Challenges for Agency Owners: Jason outlines what makes agency finances different—volatile income, illiquid equity, and a heavy reliance on the owner’s involvement in day-to-day operations.08:56 – 10:21 – Why You Must Build Wealth Outside the Business: Jason explains the risks of having all your financial eggs in the agency basket and how diversifying can protect you from unexpected life events.12:27 – 13:56 – The 9 Core Areas of Personal Financial Planning: From relationships to estate planning, Jason walks through the key components of a comprehensive financial plan tailored to agency owners.21:57 – 22:46 – The Tax Efficiency Trap: Marcel and Jason discuss the downsides of over-optimizing for taxes, including poor business visibility, unnecessary complexity, and missed opportunities for growth.27:03 – 29:12 – Estate Planning & Partner Protection: Jason shares how to safeguard your agency and your loved ones with wills, powers of attorney, insurance policies, and buy-sell agreements.30:53 – 33:36 – Planning for a Smooth and Intentional Exit: Whether selling or passing the business on, Jason explains how to align exit planning with personal goals and financial security.Show NotesConnect with Jason:LinkedInEverWiseLove the PodcastLeave us a review here.

Points of Interest00:51 – 01:14 – Meet Today’s Guest: Carson Pierce: Carson, a fan favorite at Parakeeto, joins the show to discuss a key challenge for agency owners—transitioning from expert to CEO while managing financial complexities.02:01 – 03:10 – The Common Agency Struggle: Many agency owners are incredible at their craft but struggle with the financial side of running a business, leading to inefficiencies and profit loss.05:01 – 06:40 – The Knowledge Gap in the Agency World: Historically, there hasn’t been much comprehensive content available to help agency owners understand the financials of their business, making it difficult to navigate profitability challenges.09:01 – 11:00 – Breaking Down Agency Finances: Marcel and Carson introduce a simple but effective model that helps agencies determine whether they are set up for financial success or destined to struggle.11:01 – 13:30 – Understanding the Delivery Margin: Why agency profitability is largely determined by how efficiently they deliver client work and how much of every earned dollar is left after delivery costs.16:01 – 18:40 – The Impact of Small Pricing Adjustments: A 10% drop in billable rates can significantly affect profitability—why agencies must be intentional about pricing and scope.18:41 – 21:00 – The Payroll Grid: Your Agency’s Financial Roadmap: How to break down staff costs, expected billable hours, and rates to create a clear financial model for your agency.21:01 – 24:00 – Expense Allocation & Overhead Costs: Understanding where your money is going and ensuring overhead stays in check without cutting the things that drive business growth.24:01 – 27:30 – Profitability Benchmarks & The 50/30/20 Rule: The ideal breakdown for agency spending—50% on delivery, 30% on overhead, and 20%+ in profit—and why most agencies don’t hit these targets.27:31 – 30:00 – The Dangers of Underpricing & Low Utilization: Why agencies that don’t charge enough or struggle to keep their teams busy end up running on razor-thin margins (or even losing money).32:41 – 35:10 – Why Agency Owners Must Know Their Numbers: Financial clarity leads to better decisions—knowing what’s working and what’s not is the key to running a sustainable agency.Show NotesConnect with Carson via LinkedInGet access to this model tool in the toolkitParakeeto Foundations Course Books Mentioned:Digital Dollars and CentsFinancial Management of a Marketing FirmSoftware as a ScienceLove the PodcastLeave us a review here.

Points of Interest01:09 – 01:46 – Meet Today’s Guest: Mari-Liis Vaher: Marketing pro, entrepreneur, and author of The Greatest Marketer in the World, Mari-Liis is here to help agencies prove their value and keep clients happy.03:04 – 03:40 – The Big Marketing Trust Issue: Ever had a client drop you out of nowhere, even though you were hitting all their goals? Mari-Liis explains why so many agencies struggle to prove their worth.07:10 – 07:57 – Marketing Is More Than Just Ads: Think marketing is just running social media and ad campaigns? Mari-Liis breaks down why it’s actually a full system that needs to align with sales and leadership.11:51 – 12:36 – Scaling vs. Burning Out: Mari-Liis shares the hard lessons from running (and exiting) a seven-figure agency—why she left behind endless client work to build something more sustainable.17:04 – 17:46 – The Power of the “MIP Hour”: Setting aside an hour of focused, distraction-free work time each day can be a total game-changer for your productivity and stress levels.24:47 – 25:26 – Don’t Just Take Clients at Their Word: When a client asks for SEO, Facebook ads, or a website, do you ask why? Mari-Liis explains why digging deeper leads to better results.28:24 – 29:06 – The #1 Killer of Good Marketing: Most marketing doesn’t fail because the ideas are bad—it fails because of bad communication. Here’s how to make sure everyone’s on the same page.37:41 – 38:30 – Why Keeping Clients in the Loop Is Everything: If you’re not giving your clients updates, they’re making up their own (usually bad) stories about what’s happening. Avoid that trap!42:42 – 43:07 – Freebies & Book Launch: Get Mari-Liis’ free productivity guide, take a DISC personality test, and get early access to The Greatest Marketer in the World!Show NotesFree Productivity Guide for Overwhelmed Marketers - Learn how to work smarter, not harder: Download Here Free DISC Personality Type Test to Boost Your Impact in Communication – Understand how to communicate effectively in sales and marketing: Get It Free With Code MARCEL (this is a paid tool but with the coupon MARCEL, it is possible to download it for free.)Book Coming Soon: TheGreatestMarketer.comConnect with Mari-Liis:WebsiteLinkedInInstagramFacebookTikTokLove the PodcastLeave us a review here.

Points of Interest00:55 – 01:14 – Meet Today’s Guest: Carson Pierce: Carson, a fan favorite at Parakeeto, joins the show to chat about a big shift in the agency world—why more agencies are ditching big teams in favor of lean, contractor-driven models.01:34 – 02:29 – Agencies Are Shrinking Their Core Teams: Carson talks about a growing trend—agencies are keeping their leadership and strategy teams small while outsourcing most of the production work to contractors, freelancers, and offshore talent.03:08 – 05:05 – Why Agencies Are Outsourcing More Work: Marcel breaks down the big reasons behind this shift, including rising salaries, AI shaking things up, a tough economy, and the fact that clients no longer care if their agency is local.06:04 – 07:26 – Why Old-School Utilization Metrics Don’t Work Anymore: Carson explains how traditional utilization numbers can be misleading for agencies using more contractors, and why focusing on average billable rate (ABR) is a better approach.08:03 – 10:44 – The Next Big Agency Trend: Internal Specialization: Marcel introduces the idea that agencies should focus on what they do best and outsource everything else—just like other industries have done to stay profitable.12:02 – 14:04 – What Should You Keep In-House vs. Outsource?: Marcel shares a simple way to decide—play to your team’s strengths, keep control of the most critical parts of your client experience, and let experts handle everything else.18:02 – 21:08 – Pricing Without Overcomplicating It: Marcel simplifies pricing strategy, explaining why agencies should stop obsessing over markup and hourly rates and instead focus on three things: revenue, pass-through costs, and delivery costs.25:08 – 28:26 – Offshoring: The Good, The Bad, and The Smart Way to Do It: More agencies are hiring offshore talent to save money, but success depends on having solid processes and clear communication—Marcel and Carson share tips on how to do it right.30:51 – 32:44 – The Future of Agencies: Smaller, Leaner, and More Specialized: Marcel predicts that agencies will continue breaking down into specialized teams, just like airlines and grocery chains have done, to survive in a market with shrinking margins.34:22 – 35:04 – Final Takeaways: Marcel and Carson wrap up with a big reminder—profitability isn’t just about working harder; it’s about working smarter. Agencies that embrace internal specialization and strategic outsourcing will win in the long run.Show NotesConnect with Carson via LinkedInGet access to this model tool in the toolkitLink to Pie Chart VisualizationParakeeto Foundations CourseBooksDigital Dollars and Cents by Jody GrundenFinancial Management of a Marketing Firm by David C. BakerSoftware as a Science by Marcel, Dan Martell, Johnny Page & Matt VerlaqueLove the PodcastLeave us a review here.

Points of Interest0:00 – 0:32 – Show Introduction & Guest Introduction: Marcel introduces Tim Thompson, Owner and Chief Revolution Thinker at RevThink. He shares how they met at the MYOB conference, where they bonded over deep discussions on agency profitability and creative business management.0:33 – 2:25 – Tim’s Background & The Journey to RevThink: Tim shares his career transition from Hollywood production, where he worked with legends like Ridley Scott and Steven Spielberg, to consulting creative studios. His firm, RevThink, now supports 750+ creative agency owners worldwide in building financially stable businesses.2:26 – 5:00 – The Challenge of Balancing Creativity & Profitability: Tim explains how many creative entrepreneurs struggle to balance financial discipline with artistic freedom. The industry often pushes efficiency metrics like utilization rates, but creative businesses need a different approach to pricing, budgeting, and decision-making.5:01 – 7:32 – The Shift from Cost-Plus Pricing to Value-Based Models: Marcel and Tim discuss the shift from hourly billing and cost-plus pricing to value-based models. Agencies that fail to adapt often undercharge and overdeliver, leading to profitability struggles.7:33 – 10:55 – How Agencies Can Ensure They’re Charging Enough: Tim introduces The Splits Method, a framework that separates costs into direct (project-related) and indirect (overhead). This helps agencies better understand where their money is going and ensures that profit is baked into pricing from the start.10:56 – 14:25 – The Power of Profit as an Expense: Tim challenges agencies to treat profit as an expense, meaning it should be allocated first before deciding how much to spend on project costs. This ensures business sustainability and long-term financial stability.14:26 – 17:00 – The Seven Ingredients for a Thriving Agency: Tim introduces RevThink’s Seven Ingredients framework—Creative, Production, Sales, Marketing, Operations, Finance, and Entrepreneurship—which helps agency owners optimize their business holistically as they scale.17:01 – 19:50 – Overcoming the Fear of Raising Prices: Many agencies negotiate against themselves, fearing clients won’t pay more. Tim explains how agencies can increase their rates or adjust project scope to maintain profitability without sacrificing client relationships.19:51 – 23:30 – The Production Roll-Up: A Simple Meeting to Keep Projects on Track: Tim shares his method for a weekly production roll-up meeting, where agency teams quickly review: Creative quality, Client relationships, and Profitability.23:31 – 26:55 – The Importance of Profitability for Business & Personal Freedom: Marcel and Tim discuss why profitability isn’t just about numbers—it’s about freedom, growth, and legacy. Many agency owners unknowingly sacrifice their financial future because they aren’t pricing or managing projects correctly.26:56 – 29:30 – Why Business Owners Must Stop Negotiating Against Themselves: Many agency owners undercharge out of fear that clients won’t pay more. Tim encourages owners to ask for what their work is truly worth and, if needed, target better clients who understand the value they provide.29:31 – 32:10 – The Role of Entrepreneurship in Agency Growth: Tim discusses the entrepreneurial mindset required to scale a creative agency while managing financial risks. He explains how business growth, personal wealth, and legacy planning must be aligned.32:11 – 35:50 – How Agencies Can Adapt to Industry Changes & Maintain Profitability: Marcel and Tim analyze industry shifts, including advances in technology, changing client expectations, and pricing pressures. They discuss how agencies can innovate and stay competitive in a rapidly evolving market.35:51 – 38:20 – The Moral Argument for Running a Profitable Business: Marcel and Tim discuss why being profitable is a responsibility, not just a goal. A profitable agency provides stability for employees, fosters innovation, and allows owners to reinvest in their vision.Show NotesRevthink.comRevthinking PodcastCommunity1-1 consultingAccelerators