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The balance of bringing on new clients, hiring more staff to cope with the work and then going through periods of client churn

The question:

One of the agency owners asked this questions

"Looking for some advice please! When you hit the £50k/month plus mark for your agency and you’ve got a small in-house team - how do you deal with the constant balance of bringing on new clients, hiring more staff to cope with the work and then going through periods of client churn? I feel like it’s such a balance and there can be really tricky months where you’re heading towards minus profit!"

Whenever you scale you'll have moments of stagnation and a "flatline" as you need to invest (team, assets). And you invest not only $ but also time, and that means a lost potential profit.

So making sure the foundations are there - LTV, long-term contracts, profit margin per client, time spent per client, cash cushion in the bank, operational efficiency are all CRUCIAL as this is what makes your business lean and agile and ensures you're not carrying any extra, unnecessary weight.

Remember, there will always be friction whenever there is a gap between capacity and demand. And that gap can be on both sides of the spectrum. (1) When you have too much capacity and not enough work - in this scenario your fixed costs (salaries) are dragging you down and you're not leveraging the assets you have (team members). You're losing money. (2) When there is too much demand and not enough work - in this scenario you cannot service clients, your quality goes down, you're losing potential revenue. Both scenarios will create friction. So you need to make sure the gap is as small as possible.

Now, this was a bit of a generic/philosophical...So to answer your question "how do you deal with the constant balance of bringing on new clients, hiring more staff to cope with the work and then going through periods of client churn? ":

  1. 1
    Forecast growth (we chatted about it) to make sure you have enough capacity to take care of the clients
  2. 2
    Make sure you keep tabs on the processes/SOPs as you need different processes and team structure (your role included) when your biz is $20k/mo and when it is $50k/m
  3. 3
    Find reasons for the client churn - this is CRUCIAL. Was it your fault? Did you drop the ball? Or is it Covid or iOS? All problem fixes start with auditing the situation and finding the upstream cause of the problem so that you can fix the cause and not the symptom.
    -- if you find that the churn rate is high and it keeps happening, analyze what's causing it so that you can stop it
    -- be strategic and apply a PESTEL model (https://mikekoziol.com/business/pestel/) to analyze factors that might be impacting your churn rateList Element

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