What the Q4 SAGA Survey tells us about agency talent

Agency Leadership Podcast

In this episode, Chip and Gini discuss the findings from the SAGA quarterly survey of small agency owners. They cover insights on optimism in business outlook despite recent challenges, with a focus on talent-related issues such as compensation, retention, and recruiting.

They delve into some surprising statistics, such as one in five agency owners not paying themselves regularly and over 30% having reduced headcount in the past year.

The conversation highlights the importance of agency owners paying themselves a fair salary, balancing employee compensation, and maintaining efficient business practices without overworking staff.

They also discuss the significance of flexible work arrangements and employee benefits in improving retention.

Key takeaways

• Chip Griffin: “I think just about every agency owner out there could go and get a six figure job. So why are you taking on all the risk and stress if you’re not compensating yourself for that risk and stress?”
• Gini Dietrich: “You should be paying yourself a living wage. And an employee should not be making more money than you do.”
• Chip Griffin: “Working overtime should be because something legitimately came up that was out of the ordinary, an emergency of some kind. It shouldn’t be the only way we can do this work profitably.”
• Gini Dietrich: “Reducing your pay as an owner while giving raises to your team is hurting you. It’s hurting your business. It’s hurting any ability to be able to sell in the next three to five years.”

Resources

• SAGA’s Q4 Small Agency Owner Survey finds continued optimism, reveals talent trends
• Richard Dawson on Family Feud “Survey says”

Related

• An honest conversation about agency owner compensation
• Ways you can compensate yourself as an agency owner
• The difference between agency owner compensation and profits
• When owners do work below their pay grade

View Transcript

The following is a computer-generated transcript. Please listen to the audio to confirm accuracy.

Chip Griffin: Hello and welcome to another episode of the Agency Leadership Podcast. I’m Chip Griffin.

Gini Dietrich: And I’m Gini Dietrich.

Chip Griffin: And Gini, as they say on Family Feud, survey says.

Gini Dietrich: Is that show still on? I think it is.

Chip Griffin: I believe it is. I believe it is because I see little reels that pop up in my Facebook and Instagram occasionally with funny moments, from it.

Gini Dietrich: Survey says.

Chip Griffin: Survey says. I don’t, I don’t know that they say survey says anymore, but.

Gini Dietrich: We just showed our age.

Chip Griffin: Yes. Okay. It is what it is. I mean, there’s probably been three or four hosts since.

Gini Dietrich: Yeah, I think so. Yeah.

Chip Griffin: I don’t remember who that was, who did that, but anyway, very distinctive. In any case, we will stop making ourselves look and sound old.

And instead we will talk about the SAGA quarterly survey, because once again, we have talked with small agency owners to see what they’re thinking and what their outlook is for the next 12 months. And on top of that, we took a deep dive on talent questions. So compensation, retention, recruiting, those kinds of things, so that we have a little bit of an understanding of, of how they’re approaching the, the labor side of the equation in their businesses.

Because the more we learn about each other, the more useful that we can be, or the more productive we can be.

Gini Dietrich: And it’s super interesting. There’s a couple of things in here that are a little bit mind blowing that I think we need to talk about.

Chip Griffin: Yes, there are certainly some things in here. I mean, the overall outlook seems to be positive, although once again, very similar numbers to what we saw in Q3 in terms of overall satisfaction with their business and anticipation of revenue and profit increases in the coming 12 months.

Just as it was in Q3, I’m not entirely sure of why there is this optimism and this satisfaction.

It is certainly something that, I mean, look, there’s, I think there are potentially good things on the horizon. So there is, I’m not saying it’s an irrational optimism. At the same time, I suspect, and as we dig into some of these, the talent questions, we’ll see, that a lot of agencies cut back their head count over the last 12 months.

So in part, some of the optimism might be, we can’t get any worse, right? So it’s got to be better. It’s got to improve. And so that may be driving some of that optimism. But the overall satisfaction, the score was 6. 94 out of a, on a 10 point scale. So that’s, that’s not terrible. I mean, it’s not, it’s not overall excited, satisfaction with their businesses, but it’s not dissatisfaction either.

Gini Dietrich: But as you also point out that about 20 percent rate their satisfaction at five or below, which is some real concerns. But I thought it was really interesting because, only 1 percent expected to reduce their team size, which is a drop from 11 percent in quarter three. So that’s, that’s a good indication that maybe things are starting to stabilize a little bit.

Chip Griffin: Yeah, I think, I think from a, from that perspective, I think that’s probably the, the, the best piece of data, that we saw there was that there was, there was no longer, because what we, what we commented on in Q3 was, you know, there’s optimism that, that revenue and profits are going to increase, but people are talking about holding steady on their headcount or even reducing.

And so, you know, that sort of, that was concerning because that suggests that they’re going to try to balance the books on the backs of the employees. The fact that, that there’s no longer an inclination to reduce at least, I mean, we’re not seeing people, you know, saying we expect to increase either, but the fact that they’ve moved off of decreasing headcount is certainly a good sign, I think, and something worth noting.

Gini Dietrich: Yeah, I totally agree. It, it is, there is some optimism. It is tempered by the fact that, while we’re not, we’re not going to reduce our staff size, we’re not necessarily going to increase it either. So there’s some optimism to increase revenue and profits a little bit. There’s some optimism in terms of not having to let people go, but there’s also, it’s tempered, I think, a little bit by saying, yeah, but we’re probably not going to be adding people either.

Chip Griffin: But I think the really interesting stuff comes when we start digging into some of these talent questions. Yes. And so, and, and, and the talent by the way, includes the owner. So we’ve got some things about owner comp that we, that we need to talk about here as, as well. But you know, one of the things that I think feeds into what we were talking about as far as the overall outlook is that one in three of small agencies have reduced their headcount in the past 12 months.

So. You know, when you, when you start to see they, you know, they’ve already been cutting numbers in substantial percentages, that suggests one of the potential reasons why they may not plan on reducing any further. And so, you know, that they may have weeded out the issues that, that they had from a cost perspective.

Maybe they’re improving their, their profit numbers, and so that’s, that’s causing them to feel like they’re in a better position. For the year ahead. So certainly it’s, it’s been a tough 12 months. There’s, there’s no doubt about it and longer than that really, but the, the survey looks particularly at the last 12 months.

And as, as we look at that, that I think informs some of what’s, what else is going on that’s even more troubling, particularly when we look at, at owner comp. Because one in five small agency owners doesn’t pay themselves regularly at all. They just take money out of profits as and when they can. And, what is it I think about, 39 percent, are, are paying themselves under a hundred thousand dollars a year.

Gini Dietrich: 39 percent are paying themselves less than a hundred grand. That’s not okay.

Chip Griffin: No, in, in fact, more agencies, I, I think I’m correct in saying this, or saying it correctly, more than half of agencies have at least one employee who’s making over a hundred thousand. Nope. Less than half pay themselves over a hundred thousand on a consistent basis.

Now that doesn’t mean that they may not be harvesting that out of profits, you know, by doing a big dump here or there, but you’ve got to be paying yourself consistently. And, and really, I think just about every agency owner out there could go and get a six figure job.

Gini Dietrich: Yeah.

Chip Griffin: I won’t say easily, but without a huge amount of difficulty.

And so why are you taking on all the risk and stress if you’re not compensating yourself for that risk and stress?

Gini Dietrich: Why, exactly, like, why are you doing this? I say this to, to my clients all the time. If you were to go get a job with your level of expertise, your number of years of experience, and what you, your skill that you offer to an organization, how much money do you think you could command?

And there’s usually some hemming and hawing, and I really push this, like, really and truly. What do you think? And if they can’t give me an answer, I do a screen share and we pull up job descriptions and we look to see if you took this job, here’s the range. And it’s always six figures, always. And the person’s paying themselves like 50 grand a year or 45 grand a year.

Why are you doing this? Because you have all the risk. You have, you’re putting everything into it. You should be paying yourself a living wage. And an employee should not be making more money than you do. Now, is it honorable that you want to make sure that your employees are paid? Absolutely. But they should not be making more money than you make.

So you’ve got to figure that piece out. You have to.

Chip Griffin: Yeah, because look, even, even if you’re doing it because you’re like, Well, I got a talented team. I need to keep them around. It’s tough times and all of that. The reality is that if you’re not making measurably more than your highest paid employee, you will end up resenting them.

It may not be in those first three months. But over time, you will come to realize, it’s human nature, you can’t sit there and think, I own this business, I’m, I’m, you know, I’m struggling to meet payroll, and yet I’m paying you more than I’m paying myself. It is not a healthy place to be, you’re unlikely to make good business decisions when you’re in that position.

And particularly because, the owners in the survey, they’re, they’re not paying themselves well, and, and about 40 percent of them are paying themselves less now than they did a year ago.

Gini Dietrich: No.

Chip Griffin: So, so, so they’re not paying themselves enough to begin with, they’re cutting their pay and yet most of them are reporting that they gave raises comparable to what they’ve been giving in the past to their teams.

Again, admirable. I, you know, I, I love that you feel that way about your teams and you’re trying to be helpful to them, but, but ultimately that’s not a healthy business choice. Because it’s not like you’re making 10 million a year and you took a pay cut to 8 million, right? Right. I mean, if you’re the CEO of a giant company and you take that kind of pay cut to, you know, to be symbolic or whatever, fine.

Gini Dietrich: Right.

Chip Griffin: But, but when you’re making 80, 000 and you start paying yourself 60, 000 because that’s how you can come up with the money to give raises or bonuses or to keep an employee around, that’s not healthy.

Gini Dietrich: No.

Chip Griffin: And so you really need to be thinking about these things as you go into the next 12 months and thinking about, how do I make sure I’m paying myself a fair salary for the work that I’m doing. And remember, we always talk about this. You need to have two revenue streams from your business personally. One is your compensation for the work you’re doing because you are an employee of the business. And you also need to have a profit stream separate and apart from that.

And that’s for your risk taking as an entrepreneur. And if you don’t have those two revenue streams, you’re not building a healthy business and you’re not ultimately building something that I think you will be satisfied with five or ten years down the road.

Gini Dietrich: And you aren’t building something that if your goal is to sell it eventually, you won’t be able to because it won’t be there.

The numbers won’t be accurate and you won’t have been paying yourself. And so there’s all of those things that go into it as well. So you, I, I love the idea of thinking about it from the perspective of a salary as an employee and then profit as the risk taker. And so the salary as an employee is a non negotiable, just like it’s a non negotiable for any other employee that you have.

The profit sharing. Now that, that piece is, you know, up to you, whether or not you’re, you’re bidding projects or retainers appropriately, whether or not you’re actually making a profit. All of those things come, come into play. So you can start to work on, gosh, I’d really like to have more profits come into my bank account.

Then you can start working on the things that you need to, to increase that. But the salary is a non negotiable. You have to pay yourself at least what you would be able to make somewhere else.

Chip Griffin: Right. And, and

Gini Dietrich: Or that if you had somebody come to you and buy, to buy the company, they would say, are you making enough money?

Like if we replaced you, how much would we have to pay a CEO of this business to replace you? That’s what you should be paying yourself.

Chip Griffin: And that’s one of the big, the big gotchas that a lot of agency owners have when they start thinking about selling the business and something that, that is always tough to explain to an owner, particularly if they’re in the position of, I want to sell now.

And they haven’t been thinking about this because, you know, they think that they’ve got, you know, 200, 000 in profit because that’s what they put in their own pocket. And the reality is that no acquirer is going to look at it that way. They’re going to assign part of that 200, 000 to salary and part of that to profit.

And all of a sudden your profit is now in the toilet. And so what you thought you were worth, you are not. And before anybody starts emailing and commenting and ranting, well, my accountant told me not to pay myself a salary for tax purposes, not talking about that. When I say salary, it’s just fixed compensation.

However, your accountant tells you to do that. It could be a, you know, a guaranteed income. It could be salary. It could be just regular draws that you take on clockwork and, and you’ve got allocated on paper and in your mind as compensation for the work you do versus profits. I don’t care how you do it.

Absolutely do it in the most tax efficient way possible, and that will be different based on how your business is structured and where you’re located. Even two very similarly structured agencies in two different states, they have to pay it differently, right? You can be an S corp in one state and an S corp in another state, and your accountants will tell you that you need to either pay yourself a generous salary or not.

Yep. Whatever. Do what they tell you to do. Yep. But you still need to have in your mind and on paper a proper salary for the work that you’re doing, however you account for it.

Gini Dietrich: I, like I said, it’s a non negotiable and it’s, it’s shocking that one in five in the survey, one in five don’t pay themselves a regular salary opting to instead to draw from profits.

Okay. If you don’t have profit, then that means you make zero, which sucks. Among those who do pay themselves fewer than half reported earning six figure salaries and 39 percent acknowledged reducing their pay over the past year. The, the thing about it is that they’ve, to your point, it’s admirable because they’ve reflected a commitment to rewarding their teams, but it’s in, it’s, it’s hurting you.

It’s hurting you. It’s hurting your business. It’s hurting your future ability to be able to do the right things. It’s hurting any ability to be able to sell in the next three to five years. If that’s a goal, like you have to really think about these things. And it’s not just In the here and now, it’s, and listen, it’s been a crappy year.

It’s been a crappy two years. I get it, but you have to figure out how you can, how you can pay yourself first and then build your business around that.

Chip Griffin: Right. And I, I think there’s, there’s other data in the survey that, that points to small agencies perhaps not structuring themselves appropriately. Either because they’re not pricing correctly, they don’t, they don’t have efficient processes in place, those sorts of things.

Because you know, when we look at the data, one out of three small agencies are having their employees work overtime at least monthly. And so if, if at least one out of every four weeks your team is being asked to work overtime, that’s a problem. So that really suggests that you have a problem in terms of how you’re resourcing for the work that you’re doing. Which usually is because you’re not pricing it enough.

And so you have to find a way to squeeze out as much labor as you can. And, and at first blush, you sit there and say, well, it’s, it’s, it’s only once a month, right? And that doesn’t sound like that much, but that’s 25 percent of the time, right? Just four weeks in most months. And if at least one out of four, they’re working more than 40 hours a week, typically.

That’s a problem. And, and you know, I, I know that most of us grew up in a world where we worked more than 40 hours a week every week . When I started out in agency world that’s, that’s what everybody did. Sure. And that’s why agencies have such a bad reputation. Yes. And you, you can’t build your business expecting that that’s going to be the way that you do things.

It doesn’t mean that it won’t happen from time to time. Like, I’m not saying that you should never have employees work more than 40 hours a week. Right. There’s always, but it ought to be rare. It shouldn’t be part of your usual regular practice. Because that makes it harder to retain your employees, particularly today. Particularly where people are valuing, you know, work life balance much more and and they’ve seen the way things can be and they want it that way.

And we can sit here and say, well, that’s not the way we did it. We don’t, we don’t think it’s right. You, you know, you just need to buckle down and do it and pay your dues and all. You can say that all you want. Good luck in, in being able to staff consistently at a high level if that’s your approach.

Gini Dietrich: Yeah.

And I will say, I will tell you that the younger generation, Gen Z, will not have it. They’re like, yeah, no, I’m not doing it. So figure it out because this is not the way of the world anymore. And yes, you and I are of the generation that we did, and 100 hour work weeks were not uncommon, but that, that’s not how things work anymore.

And the fact that if you think that you’re going to build a business, to use a phrase that you use all the time, on the backs of your employees, you’ve got another think coming. You’ve got to figure this out because that’s, that’s not anybody that’s younger than, that’s probably 35 or younger is not going to work that way.

Chip Griffin: Yeah, I mean, working overtime should be because something legitimately came up that was out of the ordinary, an emergency of some kind. It shouldn’t be that’s the only way we can do this work profitably or even minimally profitably. You’ve got to be thinking about those kinds of things. And we see that, I mean, the small agencies in the survey.

Every single one of them is either remote or hybrid. There wasn’t a single respondent that said that they had gone to, to fully in office work again. And, and so that it surprised me a little bit that, that not one was an all in office agency. Cause, cause they are out there. There aren’t very many anymore, but, but they are out there and we are certainly seeing bigger businesses who are trying to force their employees back into the office, usually with a lot of resistance.

But the, the fact that employees are now mostly remote entirely or hybrid and, and the survey also showed that you’re also giving them a lot of flexibility to define what their hours are, when they come into the office and when they don’t. Most agencies are not saying this is our set schedule in the office or out of the office.

Even when you’re remote, not saying it’s got to be exactly nine to five so that you’re aligned with the rest of the team. Most are giving flexibility. And that’s great, but just because you’re giving that flexibility doesn’t mean that you can also say, Oh, and by the way, you’ve also got to work 45, 50 hours a week on a regular basis.

So be consistent in trusting your employees, be consistent in finding ways to help them. And frankly, with most agencies giving raises and, and, and doing them at, at or near previous levels. Frankly, a lot of employees would be maybe not just as happy, but they would be very happy if they were not being asked to work overtime.

Right. Yep. Well, we, we consistently hear from employees that they’re more interested in that work life balance than they are in how much is going into their bank account every two weeks. Doesn’t mean they don’t care about it, but if you ask them to rate the relative significance, oftentimes it’s the amount of time spent and

not the actual compensation.

Gini Dietrich: Absolutely. That and the flexibility. Giving them flexibility. Like, don’t say they have to be sitting at their desk for 10 hours a day and, and making sure that they are. Like, giving them the flexibility to be able to go to the doctor’s, a doctor’s appointment in the middle of the day or running to the DMV to renew their driver’s license, whatever it happens to be.

But that, I think those two things are really, really important. And so if you’re thinking about how do I make sure that I’m going to have a consistent paycheck for myself, or how am I going to give raises and bonuses? Perhaps the quote unquote raise or bonus is not monetary, it’s not financial, but it’s in more flexibility or the ability to do things that they’re not able to do right now.

I mean, there are lots of things that we do for, for my team that, you know, we don’t necessarily pay for. We close the last two weeks of the year, every year. Nobody has to take their PTO for that. And, people love that. They love that. We have the whole week of Thanksgiving closed. We’re closed. They love that.

They don’t have to take their PTO. You know how much money that cost me? Nothing. Nothing. And people are willing to give up a bonus, a year end bonus, because they get three extra weeks off. So there are things that you can do to ensure that you’re getting yourself paid and being able to keep your employees happy too.

Chip Griffin: Yeah, and, and I think if you take a look at, at some of the other, data in the survey there, there’s also, I mean, we’ve only really skimmed the surface of, of what it covers, when it comes to talent, but I, I think if you start looking into it, there are a lot of things that you can do in terms of, of, helping your employees with, benefits, helping your employees, with, improving their skill sets. A lot of things that you can do that don’t cost necessarily a lot of money. Even things like, you know, the, the survey showed that, that only about 80 percent of, of agencies with full time employees are providing health insurance as a benefit. That was a little surprising to me that it wasn’t higher, and I get that health insurance is expensive, but, but you can provide health insurance even if you’re not subsidizing it at all.

Yep. And I, and I would encourage you to, at a minimum, make it available to your employees if you can. Even if you’re not offering even if they have to pay 100 percent of it, because it’s a way to access something that is different from what they can get in the public exchanges, which, depending on where someone lives, may have some good choices, may not.

And so, you know, I think that there are creative ways that you can go about these things, even when you’re afraid of the cost of things, to do them creatively in such a way that it helps your team. And, and all of those things will help with retention and if you dig into the data, it shows what percentage of employees are leaving to go to agencies versus other places, who’s going to work for clients, you know, what percentage of agencies have had to do layoffs or have had to terminate employees for cause, all sorts of stuff in there that I think will help you to gain some additional perspective on your own teams and your own policies and practices.

Gini Dietrich: Yeah, for sure. I mean, it’s, I think the one non negotiable is you have to pay yourself a salary, and the rest of it is there to help you figure out what you should be thinking about for next year, especially the first quarter. And it does seem like things are starting to stabilize a little bit, so that is good news, but approach it with some cautious optimism.

Chip Griffin: Yeah, it will be interesting to see how the first quarter of next year develops and, and where things go from there because in the first quarter we’ll be looking back at, at overall performance of the agency in the past calendar year and, and look at some bigger trends like that. Really looking forward to that as well. But, I would encourage you to, to download a copy of the results.

They’re available for free at smallagencygrowth.com and, you can dig into them and see what you might find in there that would be useful to your own business and, and give you some ideas for what you might do with your own teams.

Gini Dietrich: Absolutely. Go study it.

Chip Griffin: So with that, that will draw to a close this episode of the Agency Leadership Podcast.

I’m Chip Griffin.

Gini Dietrich: I’m Gini Dietrich.

Chip Griffin: And it depends.