36:1 Managing debt in your agency

Welcome to the Agency Trailblazer podcast. This is your host Lee, and on today’s show, we are sharing my journey of debt in agency life and how we were able to get through it. Hopefully you can take inspiration from the tactics we used to get out of debt. But I would caveat all of this with you do need to get financial advice.

So any of the ideas that you get from this episode, you need to sanity check with a financial adviser. You need to take action that works for you and for your business based on professional advice. So with that disclaimer out of the way and a thank you to our awesome sponsors, Cloudways who you can find over on cloudways.com. Let’s share with you the edited down live stream that I did last week. Remember, if you want to be updated of all of the lives that I do five days a week, you can find them over on leematthewjackson.com/live.So on with the show.

Do you have debt in your agency? If you do, please stay tuned. If you don’t, freaking awesome. Stay tuned anyway to learn how to avoid getting there. Let me set the scene and be totally honest. In the late 2000s we were struggling and this was my old agency and we had a business model that relied on us also doing the print management. This means we would do the designs, the designs would get signed off. We would then work with a supplier to get all of the print work done and delivered. This meant we were carrying the can for some very big bills, which was definitely no fun. We would pay the supplier of print but would have to then chase down the client for final payment of that invoice. And in the industry that we were in, or the industries that we were serving, very often those terms were up to 90 days. Therefore our printers were requiring us to pay them within 30 days and we were not seeing the actual cash from our clients for a further 60 days.

You can imagine that this would put an immense amount of pressure on an agency who had two offices, we had rent, we had rates, we had tax bills, we had staff to pay. We were also operating in that feast and famine cycle of projects would come in. We would deliver them, and then we’d be trying to work out where the next projects were going to come from. So you can imagine how quickly that can build in an agency, that supplier debt, tax debt. Whatever sorts of debts, it’s very easy for that to build up and for that to happen. Throw into the mix as well, that we’re dealing with a global recession at the time, which lasted for at least three years. And we had clients who had worked with us and then dropped off the face of the earth because they went bust. So we were then left again, holding the can for supplier debt where the client had ordered and was no longer in a position to pay. They had gone into administration and you know how administration works. We were at the bottom of the queue to get paid. Everyone else was getting paid way before we were, even if we got a penny. In fact, I’m pretty sure the offer was once a penny for one of one of the debts. So you can see it’s quite a stressful picture.

An agency that is trying to push forward is trying to help people, is trying to solve their problems, trying to help them achieve their aspirations and their goals, and at the same time has the pressures of all of that debt. And that was a self-feeding debt cycle. As we continued doing the same thing, expecting different results, we would continue to build up more supplier debt. We will take on new clients. We would manage their debt and low and behold, the same problem would repeat.

So that sets the scene. I hope you’re not feeling stressed out by that. I was pretty stressed out by that. But I want to share with you how we handled that. The first thing that we did was we talked with our suppliers. We recognized that we were in a position where we owed a lot of money out and the cash flow was not going to allow us to pay all those invoices on time based on the fact our clients were paying us ninety days later and we also had staff to pay and other responsibilities.

So we talked to our suppliers and we explained the situation. And believe it or not, if you are in trouble and you do speak with your suppliers, that policy of honesty goes a long way. We found that about 90 percent of our suppliers were more than happy to come up with some sort of arrangement. Some extended the terms to match the clients of ninety days. Some allowed us to pay a small amount each and every month until the debt was paid off.

What we also, though, explained to them was that we were stopping the print management, we would no longer do the print management and we would put that on to the client. So any new client from that point onwards would not only get the design from us, but then be responsible for ordering the print. If they wanted us to manage that process, we would be paid for our time to manage it, but we would represent the client and all the billing, the invoicing, et cetera, would go from the printer directly to the client.

So that took that pressure away from us. So given that offer, given that conversation, our suppliers were more than willing to be flexible. At the end of the day, they wanted to get paid and they understood that if they gave us that wiggle room, if they gave us that grace, they would get paid. If, on the other hand, they decided to try and push us, then the worst may have happened and we may not have even been there anymore to pay them.

So that’s the first one it was to have that conversation and to start to create a little bit of space to breathe. I would say if you do have those conversations, if you are in debt and you do have those conversations with regards to supplier relationships, please be brutally honest with how much you can actually afford each month. The last thing you want to do is come up with an arrangement and then break that because you will lose the trust and then things can turn sour. So we were very honest and we kept with the repayment plans that we had.

Next thing that we did was to cut out all of our irrelevant costs and there are a lot as an agency we don’t recognize. Just think of all of the software as a service subscriptions you may have. We had a whole ton of software that we were basically not utilizing and we were paying monthly for. So we we got strict with ourselves and cut out all of these monthly costs. These were subscriptions, these were software, extra services at the office that we didn’t need. So we cancelled those, etc. We just found every single way we could to cut irrelevant costs, things that were not helping drive our business forward and were just simply an expense, something that we just did not need to work with.

Next, what we did as directors was look at cutting our personal costs. We were having to draw money from the business as directors, as we were pulling a salary and that salary was putting pressure on the agency and because of our personal spending decisions, the salary was of a certain amount. Therefore, if we could change things in our personal lives, if we could reduce our costs there and make better decisions, that would reduce the amount of money that we had to draw down from the agency thus benefiting the agency in that way.

Next, what we did was reduced what we drew down from the company. We cut out those are irrelevant costs. We cut our personal costs as well, allowing us to reduce the pressure that we as directors were putting on the business.

Next, we consolidated some of the debts that we had. So we had to borrow money at times. We had some on a credit card so that we could pay certain things. There was bits of money here or there and all of those had interest rates. So it was very obvious for us to get some fixed, low interest rate loan that would allow us to consolidate all of those things. And that’s what we did. You need to take business advice with regards to that if you do have multiple loans and credit cards, et cetera, with your business. But be sure to take a look at that. That’s what we did. We consolidated everything into a lower interest loan. And the still pressure on that because with those loans, they are still guaranteed against your homes. So if you do not do well in a business and your business does collapse, then your homes are liable. So you got to be careful what you doing with with loans, etc. We were certainly in that position at the time. It was really super stressful, but we were able to trade through it because we made all of the necessary changes in the business model. We cut all of those necessary costs so that we could get that breathing room and rebuild. And, you know, the rest is history. We were rocking and rolling.

Next, we converted some of our staff to contractors. We had a few members of staff who already wanted to you know, they had that itch to be entrepreneurs they already wanted to do something bigger and wider beyond what our agency was doing. And we were also paying them a lot of the time to sit waiting for the next project. So it became a perfect opportunity to have that conversation with them and see how we could support them into the transition from being an employee to being a contractor. We allowed them to use our space and resources etc, for their new business. We also became one of the clients that got rid of salaries for us and also allowed us to support them as they continued to build their own businesses. Right now, there’s a couple of very successful agencies out there who were originally employees of us.

Next is we switched to a supportive accountant. The accountants that we had never spoke to us and we had no relationship with them, the only time we would have a conversation would be at the end of every year when we find out what our tax bill was. And that was always the scary part. We had no support. We had no understanding of how we could be more effective with our business, how we could manage our money better, or what grants or support was available to us as a business. We had no idea. And where we’d move to, we actually reduced our office size as well, and we moved to a serviced office environment rather than having our own two buildings within that complex was an accountant that we had access to every single week. We actually took the account on into the new business. So he’s still with us. We were able to speak to him every week, get advice, get support and really just help us to completely restructure the business and the finances so that we could pay off all of the debt and then continue to grow.

And you’ll remember that we talked about how we reset our thinking as an agency with regards to who our target audience was and the problems we solved and what we sold to those people. So as that side of the business grew, all of the decisions that we made that I’ve explained today helped us to eliminate all of the debt that we’ve got ourselves into and then grow beyond and eventually split into two successful companies. We’ve got Elliott Young and you’ve got Event Engine who are both rocking the events industry.

So I want to I wanted to share that with you really as some hope. Let’s just do the recap. No matter how much debt you’re in, especially if it’s supply debt, that then the first thing I would recommend is and all of this, you need to take some advice from an accountant etc, but make some arrangement arrangements with where you can with your suppliers, cut any irrelevant costs that you can out of the business. Do the same in your personal finances so that you can next reduce what you draw down from the business if you can, and if it’s advised to consolidate some of those debts.If you have staff make some tough decisions, I’m afraid you may have to.

Finally, if you’re not being supported, then find someone who can support you and your business. And there is so much more. We only have a few minutes on these live streams. I want to share with you two resources that will help you out. And then we’ll have a look at the comments, because I can see there’s been quite a few. Episode number 255 is all about managing your agency finances.So check the links in the description of this live stream and you can go ahead and check that out on trailblazer.fm.

Next resource is managing your personal finances over on episode number two six one. Again, there is a link in the description. And remember, there is a Facebook group trailblazer.fm/group will redirect you there for extra support, excuse me, from all of the community.

So Tristan says good morning. I hope you are well. I am well. David says good morning, smiley face. Rick says good morning. My morning, Rick. Nick says, man, that’s rough, even if they pay on time. And how often did that happen? Well, that’s a good question. So, yeah. 90 days terms and then we were still chasing them. Oh yes. It’s on the next payment run quote on quote. When’s the next payment run. Oh well that’s at the end of the month, but it’s the 1st of January. Yes. Well you’re on the payment run on the last Friday of the month. So not only had you hit 90 days, but then they were telling you you are on the next payment run or we have to wait for the cheque to be signed. Even ten, fifteen years ago. I’m like, come on, cheque? But anyway, Tristan says businesses need to realize they get to choose their customers and set the payment terms. This is very, very true. Something we didn’t do, but something that we did do. Marcus says hello. Hello, Marcus, my fellow bold friend. Yes Grant, I agree with you here. True but you can’t control when they actually do pay. Absolutely mate, it was an absolute nightmare. And Grant also backing us up here on the account and having the opportunity to do having the right accountant is super important.

We pay by the month and that covers our annual expenses as well as the great advice they provide me. Same here. So, Sunil is a friend of mine. If anyone is looking for an accountant, then Sunil is our accountant with his company Esitas etc. So we pay a monthly retainer and we can email them, we can call them. They’ve got a great team of people that I often speak to, Jacob, at least two or three times a month with questions, etc and they sort it out. They’re responsive. There is nothing better than having a reliable accountant who you have access to. You can ask some of the tough questions, get the support, etc..

So, folks, that is it. That’s my time sharing those rough times of agency life and debt and how we got out of it. And if you are struggling with your finances, hopefully you can take some inspiration from what I shared, remember, everything I’ve shared is what worked for as you need to make your own decisions and take your own advice, etc.

If you need extra support, if you are struggling with debt as an agency or even as a freelancer, contractor, etc., and just need somebody to talk to, please feel free to slide into our DMS on this Facebook page and I’ll have a conversation with you or join our group trailblazer.fm/group. It’s a safe space for you to share what is going on in your life and to get some real support, folks. Thanks very much for hanging out with me today and we will see you tomorrow.

A reminder that you can access all of the daily lives I do via leematthewjackson.com/live. Thank you so much for listening to this episode of the Agency Trailblazer podcast. If you enjoyed this episode, we would really appreciate a review on your podcast Player of Choice. Remember our Facebook group trailblazer.fm/group.

If we don’t see you in the group and if we don’t see you on the lives, we will see you in next week’s episode.