Reinventing Your Agency & Breaking the Plateau

Sei-Wook Kim (00:03.323) On today's episode, we're talking about reinventing your agency. Many agency founders we've talked to have similar stories. Their agency grew rapidly in the early years, they experienced a setback, and they eventually settled on a revenue and team size that hasn't budged in several years. We'll get into why this happens and how agencies can break through to starting up growth again. Peter Kang (00:23.765) All right, so before we dive in, this is a common occurrence that we've observed in many of the convos that we have with agency founders, and it comes up a lot in our M&A deal flow as well. Typically these are agencies that when you look at the last three, four, five years of revenue, they've stayed in a very close range. Maybe they go up a little bit, down a little bit, so it's within this small band. But then EBITDA sometimes can be pretty good — there's profitability happening. And for whatever reason, it just seems like this is where the agency has found this equilibrium. This is something that's not new to us personally, because we had stretches like this during our time running Barrel where we felt like — I think it was around three million — we were stuck at that level for some years and we're just like, my god, this is where we end up. I think a training analogy is a good one here, like in fitness. You're doing the same program, your body adapts, the progress stops, and you just try to grind harder within that program. But it's really tough to do that on the same routine. What you really need is a brand new program, not more effort. That's one way to think about the analogy. Sei-Wook Kim (01:49.605) Yeah. A lot of agency owners we talk to seem like they're the only ones stuck at this level. But you talk to enough companies and it's the same story over and over. It's the thing we went through — you're flat a few years and you're working hard. You can't put a finger on what's not working. But if it's a pattern, there's something you can do about it. So let's dive into why these agencies hit plateaus. There are four forces we've identified when thinking about why agencies reach this plateau, and none of these are immediate — they're things that grow over several years. Let's start with the first one, which is external trends. The reality is that clients' needs shift over time, whether it's platforms changing, AI — obviously a big one that's been introduced — or even the buying behaviors of clients changing. So while your offer that you've had for ages may still be working, the market could be slightly shifting in a direction that's taking away some of your business. Peter Kang (03:08.839) Yeah. A lot of agency growth is about riding different trends, whether that's client industry cycles or different technology and platforms that are hot. I can remember even back maybe fifteen years ago, when Drupal was all the rage — all these enterprises were adopting Drupal as a CMS — and it's a very different story today. There were shops that really rode that wave and got big. Another one is more on the industry side. You could see something like the crypto bubble, which produced a lot of agencies that were catering to that sector, with lots of work and money flowing. But that ran its course. You also see cyclical stuff across different industries. Tech funding cycles are notorious for that cyclicality. Even in the early days of Barrel, I remember we had this run right around the great financial crisis where there was a lot of investment going into solar energy in the US, and we happened to have a lot of clean energy clients that were spending a lot of money ramping up. We rode that wave for a bit, and that industry evolved a lot as well. There are always a lot of external things that are going to play a role in agency growth. Sei-Wook Kim (04:37.269) Yeah. When you see your agency growing, sometimes it's really just your clients' industries growing. There are a lot of macro external trends that you're capturing. So when the cycle turns, it's easy to see that as like, maybe we did something wrong, but actually it's just the whole industry where your clients operate that has declined. All right. The next area is competitive forces. The reality is there'll be new entrants to the market that compete against you, and new competitors who have specializations could outposition you to your target market. Let's say you had strong positioning and differentiation in 2018 — that could be table stakes now, and people could be offering more compelling offerings. It's really something you always need to keep on top of. Peter Kang (05:37.722) Yeah. To add to that — competition also brings pricing pressures because you have new entrants that are willing to charge less and undercut what you're charging. A lot of that comes from upstarts that have lower cost structures, or maybe different ways of working that are more efficient. I remember this is a clear story for us — we had primarily US-based talent that was getting more expensive every year, and then you had new entrants coming from Eastern Europe, Asia, and they were able to do quality work but charge half the price, a quarter of the price. That changes the dynamic of the work you're able to charge for and the way clients value that work. Competitive forces are real and you have to be on top of them. Sei-Wook Kim (06:26.057) Yeah. You'll end up seeing it mostly in your close rates. It's not gonna be overnight, but you might see your close rate ticking down over time as your clients end up choosing one of these potentially lower cost or better positioned competitors. All right. The next area is talent. This could be attrition — your best people just end up leaving over time — or there's stagnation of people that stay. It's interesting when you look at both sides, because a lot of your capability growth often comes when you hire and bring on fresh new talent with fresh perspectives and skills. But if you retain your team, loyalty is important and retention is important, yet that comfortable team you've built can also have a comfortable output of work that doesn't necessarily innovate for your clients. Peter Kang (07:28.951) Yeah. This is where the importance of having fresh blood matters. You want that, and this is especially reflected in the more senior roles that you might hire for. If you've been super cautious about investing in senior hires and your last senior hire was many years ago, or somebody that you promoted from within, you've robbed yourself of that outside impactful perspective that might come in and shake things up a little bit. There's that aspect of stagnation that happens just by not infusing your team with new fresh talent. Sei-Wook Kim (08:07.398) Yeah, for sure. The fourth area of force is client turnover. We've definitely seen this where there's a natural leak of clients that happens from things like budgets getting cut, your main point person and champion at the client leaving, or a project ending. All of this can happen even though you're executing and feel like you're doing everything right. Your revenue can, over time, just stay flat because you're losing clients and winning some new business, but you're only refilling what you lost. It feels like you're always working hard but on a treadmill — you keep doing the work but you're just staying in the same place. Peter Kang (08:56.149) Yeah. This is such a tell when we look at some of these agencies on the M&A side. Hey, we had a fine year because we held things steady and the profits were fine, but then you look at the retention stats — wow, you only retained sixty to seventy percent of clients year over year. You had to refill that, and it's probably a big lift to do so, because we know from our own portfolio of agencies that typically you want to be over seventy percent, maybe over eighty percent, to really give yourself a chance to grow the next year. This is a classic case of a leaky boat, and just because it looks like you didn't go down in revenue doesn't mean you're in the clear. Sei-Wook Kim (09:47.373) Yeah, for sure. Peter Kang (09:49.128) All right. So we're talking about the causes of why agencies plateau, and we should talk about the mindset and mentality of the agency owner when this happens. As they experience setbacks — and sometimes plateaus feel like setbacks, or sometimes you have a moment where revenue actually shrinks a bit or profit takes a hit — you really see it in how it impacts the overall mindset and perspective that agency founders have. Let's say they get punched in the mouth one year. From then on, some agency founders have a tendency to say, I never want to experience that again. Hey, I almost missed payroll, never want to let that happen again. Had to do a layoff because some of the investments we made didn't pay off. Or, never want to swing for the fences on a senior hire because they were very expensive, didn't work out, and it took forever to let them go. All these things start to make them question the way they're running things. The tendency is they get very conservative. Sei-Wook Kim (11:20.162) Yeah. I don't think anyone chooses to be conservative — they're not one day saying, all right, I'm just gonna be really conservative about how I run the business. It just really compounds. You have one bad year or one bad instance and it really sits in your mind and it shapes your thinking every year forward from there. Peter Kang (11:44.37) Yeah. And there's another factor playing in as well, which is this idea that you actually have more to lose. The longer you've been running an agency, you have more to lose. Sei-Wook Kim (11:53.195) Yeah. If you're young in the agency, in it for a couple of years, you still have that scrappy mentality where you're building, you're trying everything, and it's fine if you lose here and there. But if you're in it for ten-plus years, your lifestyle has changed. How you operate personally, you have mortgages, you have responsibilities, and all of this rides on having consistent distributions. So you're less willing to take on those big risks that can put those in jeopardy. Peter Kang (12:28.858) Yeah, exactly. At the end of the day it just comes down to some numbers and a sense of responsibility that you feel like you now have. One side of this is you have this company and you've employed people for many years, maybe some eight or ten years, and in many ways you do feel loyalty there. You want to treat these people well, and so protecting their jobs feels like good leadership. Then there's also the path of least resistance. Once you're in the groove of serving your existing clients — you've had the same client for five, seven, eight years, they give you referrals, and you never had to market — then you feel like, why take the scary bets? This hasn't been working for us. And so you end up getting a little complacent because it is the path of least resistance. Sei-Wook Kim (13:35.87) Yeah. All of these decisions that combine — they're all rationalizable, they're all defensible. It's hard to snap out and take a step back and realize what's going on because it's the reality of what the founder has to deal with day to day and how they got there. Peter Kang (13:58.124) And here's the thing — these years of decisions can really add up to what we think is a bit of a quiet resignation. In the back of their minds maybe it's like, hey, I guess we're a two million dollar shop, that's just who we are, or, hey, we're small but we're a senior team, we do good work. This becomes a narrative and an identity, and in many ways it becomes a self-fulfilling prophecy. Sei-Wook Kim (14:26.671) Yeah. You hear it all the time where it's like, we're intentionally boutique, we want to stay small. And sometimes that's real and that's a deliberate decision, but usually it's something that happened to you. It wasn't an intentional choice, but you're just living in it, saying, all right, we're boutique, we're small, we're XYZ — you're defending the situation that you're in. Peter Kang (14:54.765) Yeah. Going back to this conservative mindset — you're playing not to lose, and this feels responsible. It feels like the adult move because there are jobs, there's your family, you want that stability. But our argument on a lot of this stuff is that this is actually the riskier posture. Especially in the agency space, there's always change — the nature of this business is all about change. By playing defense, you're slowly putting yourself at risk of eroding whatever advantages you might have had. Sei-Wook Kim (15:37.764) Yeah. In fitness, as you get older and you do more maintenance training, you actually decline, because your body has minor muscle loss and bone density loss due to age. So it's not that you just need to maintain your same level of training — you actually have to train against it and train through it. Doing the same thing actually means decline versus staying the same. Peter Kang (16:09.057) Yeah. Goodness. All right. So let's get into reinvention. What are we talking about when we talk about agency reinvention? We're not saying, hey, burn it all down — it's less about that and more about how do you deliberately build the next version of your agency. How do you create that new workout program, that new training program? We're really distilling this into four moves that we think are important for agencies to focus on if they want to reinvent: the market thesis, the vision, the strategy, and the team changes — which is a very important one. Oftentimes founders do maybe one or two of the four, and then nothing changes and they go, man, I wasn't able to reinvent the agency. It's really important to nail down all four. So let's dive in. Sei-Wook Kim (17:13.082) Yeah. The first move is building your market thesis with an outside-in lens. The order of this is really important — building your thesis before having a vision, because you really need to know where the market is headed for the clients you want to serve. We talked about this outside-in lens in episode thirty-five, where instead of inside-out, you get out of the building, talk to clients, talk to people, and really understand where the market is to build that lens. Then you apply that to the whole company — what's the direction you should head in? This isn't something you do in a silo within your own team in a conference room. It's really about getting out there and understanding where the market is heading. Peter Kang (18:03.529) Yeah. The inputs here are very much conversations with clients. You want to hear from them on where budgets are headed, what's on the minds of their bosses, what next year's mandate is for the client company overall. Also, if you're in a partner ecosystem, understanding what the platforms care about, what they're thinking about on their roadmap and how you fit into that. There are also other inputs — you might want to look at patterns in lost deals, because sometimes there are signals from those prospects about what they're looking for that you might not be providing. And look around. There are other competitors entering the space or ascendant agencies that you can observe, learn from, and get more signals from. Sei-Wook Kim (18:53.249) Yeah. All of those inputs — the output should be a written paragraph that you would defend out loud, saying something like: in three years, our best fit clients will need X from us, the value will shift from Y to Z, and here's who we need to become as an agency to serve that. Peter Kang (19:14.823) Yeah. Just to call out the job that Lucas, our CEO at Barrel, has done in evolving the market thesis for Barrel — even after the two of us stepped out of the business. One thing Lucas has done really well is observing the shifting behavior of consumers and how content, buying patterns, and repeat purchase behavior require an integrated digital strategy, an omni-channel strategy, for Barrel's CPG clients. This has come from conversations with the brands, talking to different founders and other people in the space, and really understanding that Barrel — which used to focus just on the direct-to-consumer sliver — actually needs to help clients think about the entire customer journey, and even whether they show up on brick-and-mortar retail or different marketplaces. Being able to help stitch all those things together has meaningfully helped Barrel evolve their service offering. Sei-Wook Kim (20:17.163) Yeah. If you think about the thesis you put together, if you can argue with it, it's really doing its job. If you develop a vision without going through that exercise or understanding the market, you're working in a silo — it's navel gazing. Peter Kang (20:33.435) Yeah. All right. The second move is establishing a new vision. This is one where you really have to take a step back, get out of the business, get your head out of the day-to-day for a bit. Usually an offsite or some kind of protected day — sign out of email, Slack, and text messages — and just give yourself time to have an open mind. One popular method is a one, three, ten year framework where you're envisioning what the business can be. The ten year gives you permission to think really big because so much can happen in ten years that you can't see beyond it. The three year — and we'll get more into why we think that's where a lot of the actual visioning can happen. The one year makes it even tighter and forces you to make specific action choices. More on the three year: the two of us have aligned on three years as a very good vision framework, and part of it is that we're inspired by this book, *The 10x Is Easier Than 2x* by Benjamin Hardy. Really great book on this need to go super bold — on the order of a 10x difference, not an incremental 20 or 30% better. What does it look like to 10x your agency in three years? The reason this matters is that when you set an incremental target, you make incremental decisions to get there. But when you anchor on a 10x target, the choices you can make to get there are really narrow — you have to do things drastically differently and pick very specific things to get to that 10x. And here's the beauty of it: 10x is very hard, but even if you don't get there, just getting partially there is probably going to be way more than the incremental growth you had planned conservatively. We think it's just a powerful way to plan, and it's been really helpful for us even at the Barrel Holdings level to use this as a vision framework. Sei-Wook Kim (23:01.179) Yeah. If we think about an incremental goal, it's almost like just asking the current agency to try harder. You could probably get there with some effort and evolution. But with that 10x goal, you probably need to build a very different agency than what you are today. One of the biggest things in going through that exercise is — if you're building a completely different agency, you have to be excited about the direction you choose to go. It's going to require a lot of energy and excitement to get to that future, and I think it's really important to take a step back and be honest about whether that's something you want to do and whether you should still be the person leading that effort to the new future state of the business. Peter Kang (23:51.658) Yeah, honestly. This begs the question — and you see it a lot now with agency founders and why there's so much M&A activity — because a lot of folks, especially with AI and the prospect of needing to reinvent in some way, it's just not everyone's cup of tea. They've already done it once and sometimes it's a lot to want to do it again. Sei-Wook Kim (24:14.661) Yeah. And let's say you commit — it's something that can't just live in your own head. You have to co-create, co-own it with the team to help shape it, pressure test it, and make sure everyone is aligned so that when you're not in the room, they can repeat it and really march towards the same vision. Peter Kang (24:35.093) Yeah. Yep. Sei-Wook Kim (24:37.647) Yeah, so let's move on to the next area, which is new strategy. You have the market thesis, you have the vision — now how do you implement that and take it into action? The first is deciding where to play and who to serve. This is really the positioning exercise. You're picking the category and the buyer for the new version of the agency and not anchoring that on the work you've been doing or the clients you've already had. There could be some of that mixed in, but that's not your anchor point. It's really a forward-looking bet. You're not going to have all the proof yet, you're not going to have all the experience, and that's fine. The plan is how do you close that gap and how do you position the agency as who you are becoming, not anchoring on who you've been so far. Peter Kang (25:34.974) Yeah. So definitely where to play, who to serve. And then on top of that, what is going to be your new service offering mix? You have to do a couple of different things here. One is a kill list — what are you going to stop doing? The offerings that might have made sense when you first designed them five, six, seven years ago — you want to revisit them. Are the margins still good? Are clients finding value there? How has pricing evolved, and does it still make sense for the value the client is getting? You definitely have to scrutinize and evaluate the services you currently offer. And on top of that, you want to add new offerings that map back to the thesis. This is all about: what will your best fit clients pay for now and into the future that you are not selling today? This is where a lot of the magic is going to happen, because once you figure this out, you start to have, all right, this is what I can go to market with and start to generate new revenue and growth. Sei-Wook Kim (26:46.23) Yeah. The way to take that into action is thinking about your ways of working — how are you delivering on the work? How are you thinking about AI and your workflow, pricing, team structure, org structure, all to accomplish this new service offering? A lot of the challenges that agencies run into fail right here, where you have the positioning, you have the marketing, the website is updated and you're saying these things, but you're not changing how you're delivering the work underneath. You're still trying to fit this old delivery model into the new approach for the agency. Peter Kang (27:27.291) Yeah. Maybe an example of this in action for us is BX Studio, our Webflow agency. Their initial few years were focused on web dev, just providing Webflow website builds for their clients. One of the opportunities they saw was that SEO is evolving — this AI search discoverability aspect is becoming really key to how clients are thinking about their digital presence in general. They couldn't just be making websites. They had to think about how that relates to additional services they can offer to help clients show up more on these searches. That necessitated personnel changes, a different go-to-market, and in fact helped BX really hone in on their ICP, where they said, hey, we need to go after B2B tech clients of a certain size and scale that actually value this, can afford it, and will want us to help them work on it. Sei-Wook Kim (28:46.495) Yeah, that's a good example. If your strategy doesn't really change who you're pitching to, what you're selling, who you hire, and how you do the work, then you're not really going through the repositioning exercise. It's just new marketing. It's a new website. Peter Kang (29:07.695) Yeah. All right. The fourth move — and this is arguably the hardest or most important one — is the team and the changes you need to make. Most reinventions don't happen because founders want to keep the band together and think, hey, we can do it together. But experience tells us that if you're trying to do something different, you most likely need a different team around you. One metaphor we like to use is the Ship of Theseus — the story of a ship that leaves port, and if on its way to its destination you change all the planks one by one, is it still the same ship by the time it arrives? We believe it is still the same ship. Agencies work this way as well. The values, the reputation, the standard of work, the client relationships — those things might stay the same. But the things that might change with all these planks are the roles, the seats, and the people sitting in those seats. Sei-Wook Kim (30:28.765) Yeah. There's a lot of fear in this — and we've gone through this over time — where when you change the team, it may feel like you're losing the agency's identity. But you have to take a step back and realize that the company's identity isn't necessarily in one or a few of the people. It's tough work. Replacing team members while the ship is at sea, while the plane is flying — there's no opportunity to just stop and reset. It's a continuous moving project where every change you go through is a really hard conversation. It's going to be tough and emotionally draining. Every single one, before and after, is going to be a tough journey all the way through. Peter Kang (31:28.597) Yeah. Founders definitely avoid this — not because they can't see what's needed, but because they don't want to have to do it. They want to avoid this replacing of planks. It goes back to that conservative mentality we talked about earlier. You have something going. It's not like you're building from scratch. You have a going concern, a profitable business — why shake the boat literally and embark on this really hard, slow, and emotionally expensive task of rebuilding the ship? That's where a lot of the inertia around doing this work comes from. Sei-Wook Kim (32:16.89) Yeah. When you're trying to go for a 10x change, a new direction, you'll almost always need planks that you don't have. There'll be roles you need to hire for that don't exist now. Sometimes you'll need to bring on senior people and it could hurt your P&L in the short term, but as long as you have that vision in mind, it's worth the investment. Peter Kang (32:40.138) Yeah, totally. And the thing is, let's say you figure out your thesis, you establish the vision, you even establish a strategy and share it with your team — chances are, very high probability, not everyone is going to be stoked about the new direction. They're going to be like, hey, what's wrong with how we're doing things? We have good clients, we have a good business, why would we want to change? By nature, many of us are resistant to change. That's another reason this part is so hard, because you might have to really figure out who's on board, and those people who aren't energized likely may have to be transitioned out. Sei-Wook Kim (33:21.507) Yeah. The framing of this is tough — we've been through this several times. It's not about team members being disposable, but you may attach to loyalty and wanting to keep people around. It really cuts both ways. You might feel like, all right, I'm trying to be kind to the person by keeping them on the team. But if you keep someone in a role where the business has outgrown them, usually that person knows. So they know you're doing them a disservice. And you could also be holding back the other team members from growth and from other opportunities. It's a lose-lose. Yeah. A lot of the new people you bring on board — often senior hires — will bring new energy and set a new bar for the team. It's not just skills you're bringing on. An outside hire can really move the needle toward that new vision. It resets what the team thinks is possible, and you really feel it — within a few months, within a quarter, within a year for sure, you'll feel the difference in the team. Peter Kang (34:42.097) Yeah. Ironically, a fun example to share is our own experience being the planks that were removed. When we handed Barrel over to Lucas, who took over as CEO a few years ago, we were the eighteen-year-old planks that were essentially removed. It's been incredible seeing what Lucas has done to reshape and energize that organization without us there. We've experienced it firsthand and seen it in action. Sei-Wook Kim (35:19.254) That's true. And the new plank doesn't need to come from external — you can move the planks around and it can achieve a similar thing. And then the last thing on this topic is, if you do need to let people go, do it humanely. Be really clear on what's going on and why it's happening. Severance, helping people land — because your reputation really rides on how you handle these tough situations and these exits. The agency world is small, so do right by the people you work with. Peter Kang (35:59.983) Yep. All right. Let's wrap this up. When we talk about agency reinvention, we're really talking about a potentially multi-year process. It's not just like you go on an offsite and come back and you're all of a sudden reinvented. The offsite is maybe day one, where you're thinking about a few things. Going back to the analogy we've used throughout — this is a new training program. You're going to have this stretch where you're going to be super sore before you get stronger and start seeing gains. You really have to have those expectations set: this is not easy, but if you can make it to the other side, it's going to be well worth it. As maybe a homework for folks to give a shot at — try to write out: what will my best fit clients need in three years that I can't deliver today? That should really clarify things, because if the answer is nothing, business as usual, you're probably not thinking hard enough — three years is a long time and a lot changes. And as part of maybe the strategy work that you do, check out foundation.agencyhabits.com, because that's a good place to first test your current positioning for any gaps, and then as you come up with new positioning, you can upload it as a doc or a landing page mockup and get some really good gap analysis there. We've covered a lot today. Thank you all for joining. Till next time. Sei-Wook Kim (37:45.385) Thanks.