Don’t get ripped off by an agency. Do this!

Don’t get ripped off by an agency. Do this!

Don’t get ripped off by an agency. Do this!

Kenny Hanson
October 29, 2021

An excerpt from Nik Sharma's newsletter on May 2nd, 2021.

Outside of Sharma Brands, one thing I've been doing more and more is taking hourly calls with founders and marketing teams at companies through MentorPass. This allows brands to bypass the need to pay the Sharma Brands monthly retainer, and still get the same advice, introductions, and strategy that helps move their business forward. Interested? Sign up here.

A common theme I see among early stage companies is an overwhelming majority of them get ripped off by agencies, either recommended by their own investors, or drawn in from "thought leadership" they discover via Forbes, Twitter, etc. It's easy to talk about, but when it's time to put the work in, so many agencies drop the ball.

One of my MentorPass clients, a menopause focused brand, was charged 3x market rate for their website, and then told by their agency to deploy 6-figure marketing budgets into "reach and awareness" campaigns, only to then turn on retargeting campaigns a month later. How could someone possibly give this advice to a founder who just got funded, and blindly trusts the agency? It's criminal.

Here's my advice I give to founders I advise or invest in, who are looking to scale their marketing:

You just spent 12-15 months on the product, you need to spend at least half of that time thinking through the messaging, creative, and platforms you push your product on. As the brand, it is YOUR job to develop the strategy, and use your agencies as extra hands to execute. Do NOT rely on your agency to give you the strategy, unless that IS their sweet spot.

It's also important to understand that agencies make money [usually] off the media spend driven by the brand. Depending on how much you spend, it can be as low as 5% of media spend, all the way up to 15% of media spend, meaning their incentives are aligned around spending the most money they can (obviously with a goal to be optimized).

Knowing that, you also need to be aware of where YOU stand on their list of importance. If you go to a premiere agency, because it looks great on the outside, but they have clients like Nike or Pepsi, you can bet you're nowhere close to the top of their priorities. When the Nike CMO calls, they're rushing to answer that call and fix those problems, not yours.

So many larger agencies today have tried to replicate a "DTC-friendly" agency model, but it simply doesn't work, like in the examples with the menopause brand, because the DNA of the team internally isn't aligned with your business model, it's aligned with a Fortune 100 business model. There is nothing wrong with any of these agencies, it's up to you to make sure you are finding the right one.

Here are some things to consider when looking for an agency, or when you think you're ready for one:

How much money are you spending per month? If you're spending less than $100k, make sure that you have found product-market fit with your products before handing them to an agency. Again, strategy and testing should be handled internally, and handed to an agency to scale up. If you're spending less than $50k in advertising, you're definitely better off doing this internally: whether that means hiring someone, or learning off a paid course from someone like Andrew Foxwell. Most agencies that do great work START at an absolute minimum of $5k or 15% of spend, which is why if you're under $50k, it doesn't make sense to run with an agency.

Where do their expertise lie? Most agencies are good at one or two things, that's how they made a name for themselves. Is it creative? Media? Website CRO? Email optimization? Podcast media? OOH? Make sure that you don't just find an "agency", make sure it's one that has expertise aligned with your internal goals.

What's their DNA? Are they used to running large top-of-funnel brand marketing campaigns? That's probably not what you're looking for here. Do they understand building brand equity off your working performance media dollars? That's closer to what you want. Look at the executives there: do they have experience with brands like yours? Do they know the in's and out's of the platforms you use as a brand to advertise? It blows my mind how many times an Account Manager has never run a single ad on Facebook, Snap, or Search. They don't need to be an expert, but they should be able to get granular. That's how you nip problems quickly and efficiently.

How well do they understand conversion? If you're a DTC brand, you can bet the name of the game is conversion optimization, whether it's from your advertising media, creative, website, merchandising, offers, etc. If an agency is running traffic to your site but not talking to you about how to optimize the website conversion, that's not an agency partner to help with growth.

Again, this doesn't mean that the agencies who don't do the things you need are "bad agencies," it just means it's not the agency for you. Moral of the story: make sure the DNA, past experiences, and their current clients align with you. You can't fit a square peg in a round hole.

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