Transcript of Why Agency Owners Get Stuck Between $1M and $10M (And Never Get Out)

There's a place between $1 million and $10 million where most agency owners get stuck. Nick Evaria calls it the swamp. He's bought and sold 7 agencies, and he says the swamp isn't a talent problem or a marketing problem. It's a missing middle problem. The systems, the data, the management layer nobody signs up to build. Today, he breaks down why up to 65% of middle managers Add negative value to a small business, why the manager you promoted from inside is quietly costing you money, and why lifetime value, not customer acquisition cost, is the number that actually gets you out. If you're an agency owner stuck in the swamp, this episode is your way out. This is The Vault. Let's unlock it. Nick, welcome to the show.

Thanks for having me, Kayvon.

Listen, for anybody that's listening right now, we are going to be deep diving into the pitfalls of how businesses struggle and they stay between that $1 to $10 million and agency owners. And if you have agencies, how you can get out of the day-to-day so you can actually be able to enjoy your life, get your time back, and still have the business in front of you. Nick, I know you're an absolute expert in this. Talking to you before, you've talked about, I think, selling multiple businesses, all profitable. But yeah, tell us a little bit more.

Yeah, so I mean, like, look, I've bought and sold, you know, 7 agencies by this point. Some of them were roll-up M&A kind of plays. And, you know, I've started or bought like other businesses as well, like pubs, like things in the wedding industry. Like, I used to hold a portfolio of real estate before I sold it recently. And in all of this, I think that it really comes down to the story that my uncle told me, which was like— and he's a serial entrepreneur, he owns more businesses than even his wife knows about because he just has that many. And he always told me, Nick, you got to be independent. And what you need to realize is that if you're the boss in a business, you're actually not independent because you're beholden ethically to your employees and you owe them something. So the only way out is to actually be the owner, not the boss. And so in all of these businesses, my goal is to work myself out of a job and install somebody that actually runs a business so I can be an owner rather than an entrepreneur.

Yeah, I love what you just said there, and I think it's so important. There's such a nuance there, as you just said, work yourself out of a job. And I loved how you said behold it to your employees. like so important that as a business owner, and I think you agree with this, is it is our job, is our duty to make sure that we keep the lights open. I mean, this is what being an owner sometimes sucks, right? Being an entrepreneur is hard because it's not just about you and your own personal family. It's everyone that works underneath you and you have the responsibility there. Yeah.

I mean, like you're putting food on the table for other people, right? Like it's like their salaries are what pays for their house, their kids, et cetera. Like, and you can't, You cannot take that lightly.

I couldn't agree more. And I love what you just said is, and if you're the one who's being the boss, you're not being the owner, you're being the boss. You might as well go work in corporation if you're doing that.

I think there's 3 different roles that entrepreneurs take on that they blend seamlessly. And like, this is the actual mistaken thinking. They look at entrepreneurship as being the CEO and being the owner. And I'm like, look, no, that's not what this is. There's a difference between being a founder versus a CEO. You graduate from founder to CEO. Then once you get to CEO, then you can get out of being CEO because you can then actually define what being the CEO at the company is, and then you can replace yourself. Right. But I want to be very specific about the difference between the founder and the CEO. The founder is a person that figures out product-market fit. You're super scrappy. You get your business to like $1 million a year at minimum, right? Maybe, maybe 2. The graduation from founder to CEO is can you attract and keep top talent that will actually build the business better than you can because they're smarter than you? If you look around your leadership or executive team and everybody there is not as smart as you, you're still a founder. If everybody is absolutely smarter than you and you're like, look, I could take a vacation for 6 months and would we grow?

Maybe, maybe not. Would we be slightly misaligned? Maybe, but it would be fine and we would still organically grow, just maybe not fast. Then you have the makings of like, okay, yeah, I'm a CEO now because here's the reality. If you want to attract this top leadership talent, like the strong follow the strong. And if you're not strong as a leader, like strong leaders follow a CEO, they don't follow a founder, right? Because founders are chaotic. They are— they lack emotional control. They hunt the shiny penny and they don't know how to say no. And therefore they just swing their companies around from end to end, making huge pivots. where you can't actually like make forward traction because you're too busy just like taking 3 steps forward and then 3 steps back.

I couldn't agree with you more. So then the question is, how do you go from founder to business owner and/or onboard?

And yeah, I think like the first step is really like, look, like the problem is, is when we sign up for entrepreneurship or we start this business, right, as a founder, We usually start these businesses because we're like, look, there's a gap in the market. I can do this better than other people. Like, I think this thing sucks. I'm going to just do it better. And so you're very like mission and vision driven. Like, look, I'm going to make the world better through my service. What— I don't care if that's like construction or an agency or whatever. You saw a way to make it better. And that works really well because like from a leadership perspective, you're very charismatic, you're very passionate about the thing, and you don't need to be charismatic in general. You don't You're just charismatic about like this topic that is your business. And so people are going to ultimately follow you. Like, this is not the hard part. Okay? The problem is, is that you're probably really good at delivering that thing, that product, that service. The thing that you didn't sign up for as being an entrepreneur founder is figuring out like what I kind of call the missing middle.

Okay? So the missing middle is really like that gap between strategy and planning at the top where you're like, this is the mission, vision, values, like your strategy, like how are you gonna go to market, like all that stuff, right? And then day-to-day delivery. And you're amazing at both, by the way, because like day-to-day delivery means like the product and service is like awesome and like you're passionate about it. And so that works and you train people up to do this stuff and it works really well. The problem is, is that because of your success, that success is gonna lead to failure. And this is the failure that's gonna happen. You're gonna grow because you're really good at the delivery and the planning and the strategy, but you're directly connected to the frontline. At some point, you're gonna need middle management. And this happens when you're like anywhere between like 5 employees to 10 employees, you're gonna get your first middle manager. And chances are you're probably going to hire somebody in that position that currently works for you. And this is where the problems actually begin. And to understand what the missing middle actually is, it's actually like behavior change systems that you can deploy for a middle management layer.

And the problem is, is that as you disconnect from the frontline, you're getting a whole bunch of qualitative data because you know how the thing should work. Now you don't have direct line of sight. So now you need dashboards and data systems to take that frontline stuff and funnel it back up to the top so you can actually understand what's going on. And then you need the behavior change systems and like systems in general to give to those middle managers so that they can actually implement the behavior change to the frontline without you being present. See, because like all entrepreneurs are the same way and founders are the same way. It's like if I talk to the frontline, I can fix it. And it's like, yes, you can, but that's not the point, right? If you walk around being the superhero wearing the cape on your back every single day, you are going to need to bail absolutely everything out. And this is why founders end up working like 60, 80-hour weeks, right? Because it's like you're the hero. It's like, oh, they did this poorly. Let me fix this. Oh, they did this this other way.

Let me fix it. And like, you basically let me fix it your way. into working insane hours. And then guess what happens when you're fixing things? You're not moving your business forward anymore, and now you're dead in the water. And this is why people get stuck.

And that's why you're kind of stuck in that— I was reading a book, I forget what it was, but it was like, they called it like between like that, what you're kind of saying, like that $2 to like $6 million, like you just can't get out of it. And it's the worst Parts of being in business. You don't have enough finances and room to get the big shots in. You're still stuck in the day-to-day and you just can't see a way out. And it's like, it's painful. And you're shaking your head for those that are just listening. So I want, and you're saying, and you're shaking your head with a smile. So I want you to, you know, break that down a little bit, 'cause you did say something earlier too before the show I wanna bring up, but I want to just finish with that thought. So why, you know, something came up for you there. You smiled and you're like, oh yeah.

Yeah, I was like, it's funny that you mentioned 2 to 6 because like the transition between 1 and 10, that's like the swamp. It's like, it's the worst of the worst. Like the absolute, like it's just like, yes, people get like, look, and I'm not going to tell you otherwise, like people do get stuck at like 6, 7, 8, even 9. Like after 10, by the way, it all becomes a sales and marketing problem. And there's reasons for this, right? So, when you hear other people give advice and like really big businesses, right? Like $50 million, $100 million plus. The reason that these guys come out and they're like, it's all about people and then your sales and marketing is because once you hit $10 million, that's the only problem to solve. There's only 2 problems. Top line leadership, like your most senior executive C-suite people and sales and marketing. That's your only limiting factor. Because here's the thing that nobody tells you. The things that you do between 1 and 10 will stick with you forevermore. Like, it's— that's, that's the reality of it. And 2 to 6 is like this formative time in a business where this is actually this missing middle idea of like improper data systems, improper behavior systems, improper systems in general, and how we manage through other people to actually get the results that we want.

This is the actual problem that we need to fix. And by the way, we never signed up to fix this, right? Because like we just wanted to make a cool product, right? Middle management, like the numbers out there are like crazy. Up to 65% of middle managers have negative value to the business. Negative. I'm not talking about breakeven value. I'm talking about negative value to the business. And for small businesses specifically.

Say that again.

In small businesses, Up to— like, this was a study— up to 65% of middle managers have negative value to the business, meaning like they're not even neutral. What is—

I hear that when you say small business, SMBs, or what are we talking about?

I'm talking under $10 million.

So, so think about it.

It's like if you have 10 managers in your business and you don't have these like missing middle systems, up to 65% of them are actually dragging you behind. And I want you to think about this through this lens. How many times? And like, for any of you listening, it's like you've hired a manager, okay? And you realized that you— like, the manager was supposed to free you up and it was supposed to give you back your time only for you to actually, like, check over all their work. You're still doing a bunch of their work, and because you're not doing it yourself, you're doing it through them. It's actually taking you more time. So before you were working 60 hours and now you're working 70 hours or 80 hours. even though you have this person in place. And by the way, this happens all the time. And so, and then it's like, well, tell me about the ROI of this individual when you're working the same amount, if not more, you're fixing all their work, and you maybe even have people complaining that they don't like their new manager.

Yeah, yeah, yeah, yeah.

And by the way, this is, this is why it happens, right?

The swamp.

It's 100%. And it's— the swamp is because moving even from like 0 to 1 million, like, look, I'm not going to say otherwise, it's hard. It is hard.

They say the first million is your hardest.

It is. But once you have the first million, it's like you technically have product market fit, right? Because like the market wants what you have. You figured that element out. 1 to 2 is actually like pretty simple at that point comparatively. And then you get to this like swamp part. And the reason it's the swamp is because there are so many things that need to be built out between 2 and 6 that it's crazy. And like, the thing about this swamp area of like 2 to 6 is that some people get stuck at 2, some people get stuck at 4. Like, everybody gets stuck in a different place. And it's generally because it's like a combination lock. You need the right combination to get out of this thing. And where people get stuck is because they hit the, maybe the first 3 numbers out of the 4 number combination. And so they get stuck at a little bit higher and some people maybe only get one number right and they get stuck at like 2.5. But what I can tell you is that the biggest mistake people make is that when they promote from within, they promote technical experts into manager roles.

Like, this is the number one problem that I've seen in every agency, every business, period. Like, I don't care. business it is. And it's because like this, you know, individual— like I call frontline people individual contributors, right? Because they're— they work individually. Yeah, they're part of a team, whatever, but they're individual contributors. They take an awesome individual contributor, like 10 out of 10, this person's amazing, you can count on them for everything. And then it's like, hey, uh, this person inevitably says like, look, I know I'm performing well, I need more money, I need a promotion. And in our infinite wisdom as like young founders, we say, great, like we'll just make you a manager. And the problem is, is that a lot of these technical experts should be promoted into a technical expert role. So quite literally, like somebody like, hey, like I'm the, you know, I'm the best at like Meta ads. It's like, great, you're the Meta ads lead. You don't need to be the digital director or the digital manager for the team. Right.

Yeah.

And so what you end up with is a whole bunch of these technical experts that actually you know, they end up as managers. And what does a technical expert do when something goes wrong? They fix it. And that's— you're like, Nick, like, but isn't it their job to fix it? It's like, no, no, no, no, no, it's not. It's their job to fix it through others. The key part is the through others part.

The through, the through.

And so this is what Fortune 500s have gotten right every single time. By the way, when you want to get promoted, What is the last task a Fortune 500 will give you before you get promoted? They're like, great, you're hitting all your numbers, you're fantastic. You need to replicate yourself. You need to recreate yourself in somebody else. You need to train your replacement. That is the last task because they know that your job in that promoted state of management, whatever layer that is, you got to be able to replicate your top-performing self multiple times underneath you in that new position. So, if you can't do it once, you sure as hell can't do it 5 other times or 10 other times, whatever is required of you. And so, this is why it's the last test. So, like, the number one fix you can do right now to figure out whether or not somebody should be promoted is like, can you replace— can you train your replacement to be autonomous? Because remember, they need to be trained on an ongoing basis, but they must be autonomous. If they're not autonomous, the problem that's gonna happen is that you're gonna end up doing their work for them once you get promoted.

And here's the problem, like, okay, you need to do 10% of this person's job. Does that sound like a problem? It's like, that's a low number. It's like, well, what if you have 5 to 7 people and you're doing 10% of everyone's job? So you're doing 70% of your time on other people's jobs. Your management position is 100%. So you have 170% work to do. How do you get out of that? Right. So it's like, okay, well, this is what happens and this is why the negative value of managers thing, right? The manager now has like 150 to 170% of work. They're not going to work a 60 or 80-hour day because they're not the owner. So where does the surplus of management work go to?

Nowhere.

It goes to the owner. That's why the owner works 60 to 80 hours, right? 100 hours. I've seen people work 100-hour weeks because they have to. Because I hired this manager and they're not doing their job and like I'm doing half their job still and they were supposed to give me back time and they don't. Right. And I think that people misunderstand what like management actually is. Like, do you need to train people technically? Sure. Like that's maybe 30% of your job, but the other 70% of your job is like completely different, right? Good managers are about setting expectations and accountability. Like what— teaching people what actually drives company results. How to manage time well. It seems like a BS thing, but do people actually know how to manage their time? Because that's the only resource that they really have control over as individual contributors. How do they work well with others? How do they hit objectives? How do they prioritize alignment to culture? This is 70% of a manager's job, right? It's literally cleaning up the mental models of the frontline and/or whoever they manage to be in alignment with what success and performance actually looks like.

And so when we talk about performance management, right, like a lot of companies are like, oh, it's all about performance management. It's performance management and technical proficiency are 2 totally different things. And the problem is, is that most people do the technical training. It's like, yep, I got my PPC guy up to snuff and, you know, Meta ads or SEO or whatever, like they're technically sound. It's like, my job's done. It's like, oh, you mean like one quarter of your job is done? Because the other three quarters is, can you teach them performance?

And manage them. And then actual like managing, like manage them and get the most out of them. The reason I say that is I run a sales agency and I took a chance. I had someone I knew that was just a winner. They had the winner's mindset and they They worked hard. They had no sales experience, never trained a salesman, like never been in sales management. But I watched them for 8 years always crush their jobs. And I finally reached out and I said, listen, I can do the sales training. That's the easy part. I was like, it's the day-to-day management of people that I don't do, that I can't do, that I can't be doing. I need you to do what you're doing over there. It's the same thing. You come over here and just do what you do. Don't worry about not being sales or that. My number one manager by far, my biggest, would you call it profitability center in the company by far. I hired from outside, had no sales management experience, and the best sales manager I have of all the managers I have.

But think about what you just said, right? And I think this matters a lot. It's like you basically hired, and this is why a lot of people say it's like you hire for attitude and like the technical comes later. Well, think about it. It's like what I just said is that a quarter of it's technical, 3 quarters of it is teaching people how to win, right? Because like, I mean, you can translate performance management, like, like teaching people how to perform, how to win, same thing. Technical is only like a quarter of it. Those things can be taught, but like teaching people how to win is its own skill. And like, this is, you know, and like, I think management language around training that are like change management and this and like all these. And they matter, by the way, like these topics do matter, but they dance around the core of what being a manager is. What the core of being a manager is showing people how to succeed, not only themselves within the business, but how that success that they themselves can generate for themselves in the business is gonna help the business and the customer all at the same time, right?

And like, I call this like triple net wins, right? So a triple net win is a win for yourself as the employee, which the manager's training you on how to do, a win for the company, and a win for the client and/or customer. And for a win to be real, it needs to be all 3 at once. So all 3 wins need to happen simultaneously, otherwise it doesn't count. Right?

Yeah.

And what the problem is, is that a lot of people don't structure this correctly. And like, if you're thinking like, oh, like this is really intangible and like rah-rah, it's not. It's quite literally how we structure people's jobs. Okay? So like, this is very tactical at its core. We need clear objective metrics and KPIs. And this is what I mean by that. You need a role in a business. You need objectives, you need measurements, and you need to then coach people against those measurements. So the role is the job description, right? It's like all the bullet points that they're going to do, all the things that they're going to do, right? More specifically, inside of the job description, there's going to be some key objectives, and this is going to be 3 to 5 objectives that is based off of their role. And these are going to be The objectives are not, hey, this is what your role is, and or like, this is how, like, these are the key items for you to win. These are the key objectives that will generate business and client-level wins. Okay? So like the number one mistake that people make in small businesses is that they tune those key objectives to like things that people have full control over.

And those things are very small. Like, it's like, oh, do your work on time and, you know, oh, like, you know, just make sure that like this thing is designed well or whatever else it is. And it's like, okay, but they can do those things and be a detriment to the business. They can do those things and not be profitable. They can do those things without actually doing good work that has a positive effect on the client and the business. So you need objectives that are aligned with business-level success that also dive into like client success. Then you need measurements for those objectives, right? Metrics and KPIs. Metrics are rearview mirror stuff. KPIs are front windshield, right? So a metric measures money and what happened before. A KPI is a key performance indicator. It's an indicator of performance, but it's not performance in and of itself. And then you use those measurements to coach the person. and behavior change them to be able to hit those numbers, right? And so like, that's why this actually works. Like in a tactical setting, this is what you need to set them up to win because here's the problem.

Everybody in their brain has a different definition of what winning actually is. And if you don't align what winning is, it will be misaligned and it will not work, meaning you're gonna get stuck in the swamp.

Yep.

Wow.

Okay. So let's, let's deep dive in here a little bit because what I, I kind of heard contradiction, uh, thoughts here, but I think I'm getting it is managers, the swamp is the worst place to be, uh, as an entrepreneur, 'cause you're stuck in the middle of it. What I'm hearing was most people were stuck in there 'cause they have a management problem because managements are not creating, let alone not even just being neutral, creating profit. They're actually costing money.

Yep.

But then in the same hand, you're saying when you do have the right management with the right KPIs and OKRs, you never said OKRs, but KPIs, OKRs, all of the, all of what, of which the understanding where it's going, the definition of winning, all those things, Then that's what gets you out of the swamp.

That's exactly it.

So the same problem—

the swamp is the middle management problem, by the way. Like, this is why I call it the missing middle. It's not just middle management. It's like, what are the systems? What are the data systems? What are like all these other things? That is the swamp. It's like people get stuck because of this missing middle part of their business. They have all the strategy, they have all the frontline delivery, but that middle piece is missing, and that is the swamp. And until you build enough of that middle piece of your business, you will never get out of the swamp. You will just remain stuck there forever.

So what I'm hearing from you is your genius, edifying here, is, 'cause you did mention before we got on the call, which I thought was great, was you said, you know, business is easy. Like seeing this is easy. And as you were talking, I was thinking, oh, this guy just looks at checkers or chess, I should say. Like you're looking at business as like a chess game. and you know how to move all the pieces properly. So, and then you mentioned, and then you kind of mentioned to me, so easy, anybody can do it. And I was like, no, not necessarily, not everybody can do this. So what I'm seeing is your genius that you've instilled. I think it sounds like from your uncle and from your past and from all your multiple mergers and exits and in all different industries is that you can walk into a business look at it like, I'm just gonna use an example, look at it as like it's a chess game and then know exactly when to move the piece or what pieces need to move to get past that $10 million. Because I love what you said.

You said at $10 million plus, it becomes easier. I've heard that multiple times, and I've been in businesses where it's beyond $10 million and it's so much easier. Like the cash flow's there, the systems are there, the people are there. You can acquire better people and things just, the duplication and/or the X, like the 2X of things happening quicker, faster results coming in just happens. How do you work with people or when you walk into normal, let's just say agencies and/or businesses and you see that they're in the swap, what are some of your KPIs that you're looking for or you're seeing that, you know, boom, like change those, changes everything?

Yeah, I mean, like, let's go super high level. Okay, so when I walk into a business, the first thing I want to understand is what the lifetime value of a customer is, like first and foremost. Okay. And people are like, why? It's like, well, your lifetime value dictates what you can pay for a new customer, right? It also shows me whether or not the product or service is good enough. Right. So, and by the way, this is relative to your type of business. And like, you know, I work with agencies, for example, like that's kind of exclusively what I do at this point. I've worked with like lawyers and accountants before, but their businesses are different. But ultimately every type of agency or every type of business has a different best practice lifetime value number and you need to figure out what that is for your industry like real quick.

Okay.

And like, this is stuff that's carried me even through like the pub time or like, you know, when I owned these other types of businesses, the first thing I would do, figure out what lifetime value is and then figure out, okay, Can I measure it? And if I can't, that's a problem in itself that I need to go fix. And if I can measure it, great. What is it and how does it compare to industry best practices for my industry? So like if I own like a content agency, it might be different from like a design agency, might be different from a strategy agency, might be different from a sales agency. All I know is that like I do need to beat that average because if I beat that average, I can pay more for customer acquisition cost. And if I can pay more for customer acquisition cost, I can beat everybody else, like at a very high level from the sales and marketing end. Like that's that side only. The other reason I look at lifetime value is like one of the very first things is because I want to understand if there's a product or service problem.

Okay? And those are 2 different things. I want to be very clear about this. I assume that if you're over $1 million, that you have product market fit and that your product is reasonable. And what I mean by reasonable is that when you're in a sales conversation, you're, you're making certain claims or promises that you can do certain things, you can actually do those things, okay, reasonably. And obviously in service-based businesses, it's not like 100%, but it's like, hey, can, can you do the thing 80 to 90% of the time or more because you understand your clients and you understand what elements they need to bring to the table for you to be able to render your product or service successfully? By the way, any agency out there that is not full service Like, this is what you need to understand. It's like you need to understand what are the brand elements that they need to bring. Like, if you're a lead gen agency, what's their closing process? Because if they're answering all their leads like 3 days later, like, it's not going to help you and you're not going to help them, right?

Yeah.

So you need to go beyond your product or service to understand like what are the success drivers of the client. Because remember, like when you're in kind of like any kind of B2B sale, your goal is to be strategic partner. It's not to be a vendor. And a strategic partner understands the business implications of their service beyond their service, right? So LTV helps me understand all of this because I'm like, okay, is this that the product sucks and it just doesn't do what we say it does? And if that isn't true, like meaning like we actually do deliver on the thing, then we have a service problem, which is like, okay, well, the product in and of itself is good, but the packaging sucks. Okay. And like, what I mean by this is like the metaphor I always use is Apple because everybody knows Apple. And I'm like, okay, does Apple's brand stop when you buy the phone? It's like, no, it doesn't. When you take the phone home in the box, you cut the little thing. It has a little peel, like little peel back, like zip tie cardboard thingy. And like you open the phone and like you grab it and it like slowly comes out because it's so perfectly designed.

that only a certain amount of air gets through it. So like the box opens super slow and then the packaging, how it's laid out in there is crazy. And it has like, it's very simplistic, but you can tell that they spent like unbelievable amounts of time designing the box. And then you turn the thing on and it's like, hey, do you want to transfer all your data from the other phone? Like it's— they've gone through this trouble to extend the brand experience beyond the sales and marketing aspect. Okay. And what most companies do an incredibly poor job of is onboarding their clients well, right? Especially in the B2B space. And I've kind of broken down this experiential layer because remember, I assume your— if your product's good to go, then it's this experience. There's other problems, right, to increase lifetime value. And this comes down to things like experience. So what is the experience that you're providing? Like, this is the emotional side of the equation. Number 2, expectation setting. What work do we do? What do you owe us as the client? So we owe you certain things, but you also owe us certain things.

And if you're sitting here thinking like, well, the client doesn't owe us anything, they're the ones paying us, it's like you are wrong. This is a strategic partnership and that's why your lifetime value is bad because you're not thinking of it as a strategic partnership.

Mm-hmm.

And then lastly is like the layer of like, do we actually generate results? Which is the logic part of the brain. Is there cost benefit to the thing that I'm buying? in a business-to-business setting, right? And all 3 things need to be true, right? Are we giving great emotional experience? Are we setting 2-way expectations? Are we actually delivering the thing right? And if you hit all 3 of those, your lifetime value is going to go up, right?

Absolutely.

And I want that lifetime value to be as high as possible because here's the thing, and I've had this conversation more times than I can count with an agency. Hey, Nick, so my customer acquisition costs $5K. I've talked to a bunch of people. They say that my customer acquisition costs without paying salespeople, just like on media, Should be like $2,500. And I'm like, okay, so they're like, well, it's a problem. I'm like, problem relative to what? And they're like, well, you know, they're paying back their customer acquisition costs in like a month and a half, right? Based on their sale. And I'm like, right. So why does— okay, if you retain a client for 4 years, Do you care if you pay the first 6 months of the entire top line of that revenue to customer acquisition costs? No, I don't care. I have clients that are agencies right now that have $40,000+ customer acquisition costs and people are like, that's insane. I'm like, yeah, except that their retainer's $8K a month on the low end and they retain clients for 36 to like 50 months.

Yeah.

It's— Like, who cares? It's like, oh, so you're not making profit off that client for the first like 4 or 5, like who cares? It's like you're gonna retain that client for like 3 more years after that. It doesn't matter. And here's the thing, like if that company is competing against you and you're like sitting, you're out here like, I can only afford like a $4,000 customer acquisition cost, these guys are gonna bury you.

Yeah.

Because it's like, oh yeah, like we just spent like, you know, $4,000 or $5,000 getting a lead, let alone a close. Like they don't care. They can do anything they want. They can pay for $200, $300, $500 clicks on Google for all they care. Doesn't matter.

They, they, like you said, they will, like, that's a big one is they will bury you. Like I got my competitors, they spend $2 million a month. I like, good luck competing against that. If you don't have $2 million a month to spend on ads to go after the same exact client on Facebook, by the way, right?

Yeah.

Good luck. You gotta get—

Well, here's the thing. Like, look, I've like, I'm not gonna name names, but I've seen under the hood of like Google Ads accounts for like big holding companies in the marketing space. And like, they're out here paying like $100 a click. A click. Okay? They don't, they don't give a shit. And they're spending a million plus dollars per month on clicks. Like no sales costs added yet. No sales process added, like nothing. It's just like clicks.

So how does the swamp company compete against that?

Well, that's the thing. It's like the advantage that you have is that because you're not this like 1,000-person entity or like this, like multiple hundreds of employees entity, you can deliver better service to these clients. Like you just can. And so the problem is, and this is why I go to lifetime value first, your lifetime should be superior to the benchmark. Because if you're telling me that a faceless corporation of like 1,000 people who generally pay their people not as well for certain roles can retain a client for longer than you, it's like, how? Like, why? Like, you should be able to white glove service.

Yeah.

So much better than them that you can retain clients for longer than them. Therefore, you can afford higher customer acquisition costs that they have. This is their version of optimized, by the way. Like, and you're like, oh, that's crazy. Like, that's a crazy cost. It's like, that's their version of optimized. They have to like pick like 3/4 of the tree worth of the fruit to be able to even like remain in business. You only need like the most bottom part of the tree and pick the fruit to feed your business. They have a monster to feed and you don't. And that gives you flexibility that they can only dream of.

The key is the flexibility. When you can move and you can pivot, you're lighter.

You're—

I mean, and with AI, all of that. Now, as we come to an end here, I think this is gold. I think we deserve another episode. So we'll put in the show notes and see what the responses are like. For those that are are into this right now and listening and in the swamp, and I think specifically an agency owner in the swamp, where can they find you?

Uh, you can find me on LinkedIn, Nick Avaria, N-I-C-K, last name A-V-A-R-I-A. Uh, just add me on there, send, send me a DM, tell, tell me if you found me on the show. Uh, always happy to chat and hop on a call. Uh, my website, agencyacquisitions And yeah, like, I mean, reach out if you have any of these kind of swamp problems. This is exactly what we fix.

Nick, thanks so much for stopping by. Appreciate you.

And yeah, thank you so much, Kevon.

If you're an agency owner, you know, and you're in the swamp, you know what to do.