It’s an extra-special one this week… We have the utmost pleasure to bring you the expert’s expert, David C. Baker, as he discusseses how best to fix your positioning and lead generation.


About David:

Author of several books (five, in fact) – including The Financial Management of a Marketing Firm and The Business of Expertise you may recognize him from the countless conferences he’s spoken at, including TEDx talks.

In addition to being featured in The Wall Street Journal, Fast Company, USA Today, NY Times, Inc Magazine, Forbes, CBS (the list is endless), he’s worked with over 900 firms in this space.

When he’s not helping experts and agencies, he’s teaching motorcycle racing at the Superbike School, Flying Planes and Helicopters around the world to shoot photography or doing custom woodworking at his home in Tennessee.


Points of Interest…

Behold the following ponder points…

  • David’s Definition of ‘Expertise’ 2:26
  • Why Do Agencies Struggle to Place Themselves as Experts? 6:04
  • Knowing When To Position Yourself as an Expert 7:28
  • Leveraging Your Expertise for Profitability 8:44
  • Financial Timekeeping to Gauge Utilization Rate 10:35


David’s Definition of Expertise

You can’t invite David C. Baker onto your podcast, fanboy about him being “the expert’s expert”, and then fail to ask him to define “expertise.” So, straight out of the blocks, we discuss how he views expertise, why it’s so important for firms, and how it can help you become more profitable.

Defining your agency’s expertise is one of the fundamental building blocks for executing the behaviors that lead to profitable outcomes.

“I would define expertise in this context as selling your thinking to people who are losing sleep, trying to find those answers.”

Finding your niche, or expertise, is critical in the current climate, and here’s why. In the past, there were limited resources available, so people were being hired to execute all manner of services. Now, with a range of tools readily available, what we can actually make money from is becoming more minute.

“We’re slowly left with this small Island, which is essentially our brain. And that’s where the value to our clients lies.”

Placing yourself as an “expert” in the market, as opposed to more of an implementation agency, is of the utmost benefit. However, it is dependent on how many other “experts” there are available in any given field. In short, if your expertise is essentially interchangeable with those in your field, then you won’t have any pricing power in the marketplace…

David delves into this further around the 4:15 mark of the Podcast.


Why Do Agencies Struggle to Position Themselves as Experts?

Now we’ve established that search engines are essentially responsible for making people super adept at locating specialized services at speed – and usually for free – how can you best place yourself as an expert in your respective field? You know, without it being a major struggle!

Well, you need to narrow your focus. Avid readers of this blog will note we’ve touched off this topic before (during our discussion with John Jantsch, for example), so – if it’s not been drummed home at this point, let us beat the drum once more!

“Instinctually, we think narrowing our focus we’ll narrow our opportunity when, in fact, the opposite is the case. Part of it involves us being afraid of not being busy enough, and we don’t want to say no to too much opportunity.”

Additionally, as agency owners, we want to constantly learn new things born from an innate curiosity. Unfortunately, however, that could be to our detriment. To put it another way; you don’t see architects, lawyers, or physicians struggling with the same creative FOMO fear. Their natural assumption is that must be very specific in their expertise in order to build a strong practice.


Knowing When To Position Yourself as an Expert

So, what is the major indicator that your positioning game is somewhat lagging?

According to David, one of the easiest ways to identify if your agency is challenged in the positioning department is often dependent on whether you have a really effective lead generation plan.

If you feel lacking in this regard, it might be a case that – while you’re well-positioned in your field – things just aren’t quite as disciplined as they could be in the marketing area.

However, if it’s a case that you’re happy being passive, simply doing the work that comes your way, David says…

“In which case, you’re probably not ever going to feel like you need a different positioning.”

Question is, is that the best tack for your agency longterm?


Leveraging Your Expertise for Profitability

Now that you’ve defined your expertise, and ascertained if indeed you’ve positioned yourself correctly, it’s time to dig a little deeper and define how to leverage this knowledge in a way that affords us the ability to be profitable.

The first thing you need to do is, identify the competition. In order to do this, there needs to be enough of an established marketplace so you can pinpoint them. As for the required amount of competitors? The optimum number is between 10 and 200.

The idea behind these numbers is that they should yield much more opportunity than we need. Think about it… usually, in the early stages of a conversation, you know if a prospect good fit or not. If it doesn’t feel like a great fit, we’re reluctant to say no to the work – unless you have something else in the immediate pipeline. Therefore, there needs to be an abundance of opportunities so you can keep saying no until you find a good fit

“That represents the gap between what we can do, and the opportunity in that tells us we can keep saying no. Then, we can keep pushing our prices higher, and that’s when a prospect says, ‘Oh, I’m sorry, that’s too much for us. We can’t do that’… When you look at what drags performance down at a firm, it is almost exclusively relationships with clients who keep fighting your budgets.”

In short, don’t undersell your expertise.


Financial Timekeeping to Gauge Utilization Rate

It’s time to collectively nerd out, folks. You ready?

Traditionally, when we think about utilization, we tend to turn to timesheets as a way to ascertain that number. Unfortunately, many don’t have the luxury of having a backlog of reliably tracked time. Don’t fret, however, for David has found another way to glean your utilization rate.

He poses an interesting solution in his book The Financial Management of a Marketing Firm (a download is highly recommended), where he discusses financial timekeeping as a means to obtain your utilization rate. What is the high-level idea of how one gets to that number?

You multiply several numbers together (don’t worry, there’s a free calculator on his website) those being…

  • Total number of people you have – billable and nonbillable.
  • The number of hours those people are working over a set period of time.
  • Your average billable rate (even if you never talk with clients about it, even if you don’t use a billable rate, normally you still have something in your head – think somewhere between $160 and $200)
  • Multiply that by the number of weeks people are working in a year – usually somewhere in the 45 and 46
  • Then, multiply that by 60, and those things added together tell you what your potential fee revenue is
  • Compare that with your actual

If that potential is 60% and your actual is less than that, then figure out what that percentage is. Then you have a gap…

“The first thing to do to fix that gap would be to say, ‘Do I have a very qualified efficient team put together?’ They just don’t have enough work to do. In other words, some of them were sitting around some of the time. Well, that’s a different problem to fix, but in most cases they are usually busy, but they’re not productive from a financial standpoint. And that’s because you don’t have the right kinds of clients that we’ve been discussing.”

Want to hear David run through this again? Listen from the 11:23 mark.

Key Takeaway…

Calculations complete, perhaps you’ll deduce that you need to position yourself to start commanding higher price points. Maybe there are some clients on the roster you should transition out. How do you now start thinking about executing on that strategy?

Surprisingly, David would urge you to leave well enough alone, saying…

“Figure out how unhappy they are with that in the first place. If it’s more of this intellectual curiosity or this sense of unhappiness that comes and goes, then I wouldn’t mess with it… If the firm has a good culture and is meeting your financial needs then I probably wouldn’t change it.”

However, in the event you’re consistently frustrated with your firm, then David suggests the following – in conjunction with adjusting your positioning and solving your lead-gen issues…

  • Perhaps make some tough choices around staffing
  • Streamline your client service offerings
  • Be satisfied with being a premium, defined provider
  • It’s OK not to be constantly chasing growth

It’s a familiar trap people find themselves in; increasing the staff, increasing the overhead, and then struggling to close enough revenue to just meet those financial obligations, ending up with a lot of clients and a lot of work that just isn’t flowing through the organization – which isn’t really serving us as much as it should be…


Want to see more from David? You can do that via…

Did you learn anything new from this episode? Let us know in the comments below – feedback is king! Our next installment of #APP, on November 25th, will see us chat with Chris Evans (not Captain America). While our previous blog with Rob Harr is over hither


Agency Profitability Tool Kit

If you’re looking for more resources to help you improve your agency’s profitability, then check out the Agency Profitability Tool Kit – it’s full of the same templates and checklists we’ve used with consulting clients to help them improve their profitability by over 100% in under 60 days.