Fullmoon Digital is a small PPC ad agency by all accounts. We are a 100% distributed search marketing company with people working from around the country and a few across the world — all at home.
We are not venture-backed, and have not taken any external financial investments…
…OK, except maybe for a loan from Fundbox.com, which helped me tremendously when I first started the agency. That has been paid off and we haven’t drawn any advances since last year (Whew!).
Let’s face it folks. One of the biggest challenge when launching a new business is cash flow. Actually, not just for startups, but even businesses who have existed for many years still worry about cash flow.
Businesses Rely On Consistent Cash Flow To Stay in Business
It doesn’t matter if a company is funded or not, businesses needs cash flow to function — product development, hiring engineers, software subscription, etc..blah blah blah.
But how many VC-funded startups have you seen blown up in smoke? A simple search in Google for “funded startup closure” or “funded startup failures” will return enough results for your bedtime stories for months!
I can’t make this stuff up!
The reasons for startup failures is vast, but a common denominator is cash flow. It’s rare you’ll find funded startups shut their doors because the ping-pong table broke, or the free lunch wasn’t gourmet, or the free sodas ran out.
It’s cash! Cash is what keeps the lights on, makes payroll so employees come back every day to work, and pays for sales guys to go to conferences to sell and close more deals, and so on and on.
Don’t kid yourself. The fundamentals of business is 1-2-3. Easy-peasy artichokee!
No money = No business.
So the only difference between a large agency and a small one is their financial tolerance — yes, how much they have in the bank to keep them afloat.
Smaller Agencies Are More Sensitive to Delayed Payments
Yes, it’s true. The smaller your agency is, the more you’re dependent on clients paying on time. How else can you make payroll, right?
On the surface, I’m sure you agree with that approach. But if you step back for a moment…clear your mind…you might just realize that you have been misguided.
There was a recent article published in AdWeek about small agencies being affected because payments are delayed by clients. I enjoyed the article…a lot actually because it shed light on the hardships of smaller agencies trying to hustle, survive, and thrive.
At the same time, that article infuriated me. Let’s just say that it is so lopsided with a total lack in accountability.
It lists 3 Key Insights (screenshot directly from the article below).
The insights are obvious statements for any small agency owner.
But it’s biased towards pointing fingers at the clients. UNFAIR! IRRESPONSIBLE! 100% SELF-INFLICTED.
It goes on and on about the downside of getting paid late as if that’s a surprise. Yes, when MOST businesses do not get paid on time, it’s difficult to plan and budget for just about anything. It’s not rocket science.
But what really irks me is the one-sidedness of this article. So let me shed light on the other side of the story…
Why Small Agencies Get Late Payments
Look, I run a small PPC agency as well so I understand the burden when client payments are delayed.
But let’s talk about our own responsibilities, as small agencies.
We created a self-fulling prophecy of late payments for your services.
How??? Glad you asked!! Here are 3 reasons.
#1. You are chasing the money. Yes, you. You drive your sales people to close as many deals as they can, without regard to the quality and fit of your prospects. You want to be written up as the fastest growing agency of the year in your city, county, state, whatever…
…so stop complaining when some clients suddenly can’t, won’t, or delay payments. You demand your sales team sign any deal with just about anybody who can hold a pen to paper.
#2. Your team is not aligned with the right client. Your team is the most important asset. Period. You owe it to your team to find them the right clients to work with. As the agency owner, there is no excuse for you to mislead your team when it comes to your clients. It’s unreasonable for clients to push beyond 45 or 60 days, but it is absolute abhorrent for you to put the burden on your employees.
If your gut instinct tells you that a prospect will not be a right fit for your team, no matter the size of the contract, have the decency and respect for your team to step away from the deal. Both your team and your prospect will respect you for making right decisions, albeit tough ones.
#3. There’s a lack of planning for the obvious. Late payments is nothing new. As a business owner, of any size, think that you’ll receive payments all time, all the time, you’re just choosing to be naive.
Small agency owners should not be surprised if a few clients do not settle their invoices on time. As a business owner, you have a fiduciary responsibility to put a worse-case scenario plan together. Not that you’d ever hope to execute it, but it’s there IF you need it.
As Clients Take Longer to Pay Bills, Small Agencies Need to Wise Up
Look, I’m not saying that Fullmoon Digital is not susceptible to financial challenges.
Hell, I was in the hole for 9 months when I started two years ago and it punched me in the gut over and over again.
Entrepreneurship punishes anyone who dares, it’s like playing with fire.
Running a business, any business, means being responsible for your actions and choices. If you make the wrong choices that affect your bottom line, then accept complete responsibility and make it better next time.
Delayed payments from your clients is not just your clients fault. It’s yours as well, when you decided to sign the dotted line.
It takes two to tango.
