The Cost of Mediocrity: Why Investing in Quality People is Key to Agency Success

My lead analytics guy cost me $12,000 a month and my lead video editor costs me $2,000 a month.

You could find virtual assistants who supposedly could do those roles for $500 a month. But if you’re fielding a NBA team, would you rather have 1000 random people off the street or 7 players from the Golden State Warriors?

What if I gave you access to 10,000 players in a city. Certainly one of them would be able to beat Steph Curry in a 3 point contest, right?

Here’s a quote my mentor told me when I came to him, after a client complained about us being too expensive. He said to tell that client,

“You think we’re expensive? Try incompetence!”

Young agencies don’t have much cash, so they think they need to hire “cheap”.

Would you go to the cheapest heart surgeon? And would that even attract the client you want?

Your immediate issue only appears to be financial – to be able to pay for your people.

But the cost of your people is not actually the issue. I can track the direct impact these folks are making – not just in terms of what we earn off them, but what the clients earn. And for every dollar we generate for the client, we can earn approximately a nickel to a dime.

If you’re helping the client make an incremental $20,000 a month, then you should have no problem charging $1,000 a month ongoing, even if you put in marginalized effort after the first 90 days.

We are losing money the first 90-120 days with clients because of the investment we put in, which clients often don’t see or appreciate. After a year is when both the client and our agencies are making money – since we’re multiplying their leads and our corresponding fee. Thus, the quality of your people and the value of your offering go hand in hand.

You know what kills young agencies?

“Good” people – since these are the folks who aren’t quite bad enough to get fired, but aren’t exactly A-players. They will hold you back – deterring A-players from joining your team, distracting you from what matters, and bringing in their C player friends. You cannot afford to have mediocre people. Even though most workers are mediocre, by definition – nobody wants to think of themselves as such.

Here’s a thought that got my head spinning.

The most “expensive” people on our team are the ones with the lowest labor cost.

Why? Because these folks take up the most time of the senior people – distracting them from their work. They make the most mistakes, which hurts the client and hurts our ability to bill at top rates, or retain clients. They also prevent us from hiring A-players, who don’t want to be working with C-players.

But just because someone costs a lot of money doesn’t mean they’re world class, either.

I once hired an executive from Yahoo! for $20,000 a month, under her promise that she could run my entire company for me without me needing to lift a finger.

Super attractive to think she could triple my revenue, 10X profit, handle all operations, and send me a weekly report. The reality was that we lost half our clients, ballooned payroll with her unemployed friends, and created a fiefdom of people loyal to her, instead of focused on client results.

If you’re doing performance-based work – like driving leads or running ads – then you already know that the best PPC guy is not just 10% better than the average PPC guy.  He’s literally 20 times better.  Same for every area of performance work – building websites, doing SEO, writing content, editing videos, closing deals, etc…

So when you come across one candidate who is “expensive” but incredible and someone who is so-so, but half the price, now you know who is actually expensive. Especially if you expect to grow – which means the team you’re hiring now must be senior enough to manage the new people you’re hiring.  They must not only be good at their current role, but be able to play at higher levels when the time comes.  If you hire B-players now, you’ll have to eliminate that team when it comes time to scale, as you’ve probably heard from other agency founders who have gone from a dozen team members to 50+ team members.

While many of us know this is true, it’s often hard to do because of cash flow.  Hiring someone at $5K a month when you’re only making $10K a month overall might put you upside down.  So build up cash from doing the work yourself and save up until you can afford one quality player instead of 3 random VAs.

That said, I love VA’s and believe they have an important role in operations. And that anyone who can demonstrate they can achieve performance targets should be paid accordingly, no matter their nationality or what position they initially started.

Because software is now “eating the world”, accelerated by AI tools replacing the low wage laborers and even some senior folks, the need for people who can think is even higher.

Take a look at our VA Hiring Guide for more tips on hiring your next VA’s.