About This Episode: 

Welcome to our 29th edition of the Agency Profit Podcast. This installment features Keith Scandone, of O3 World and 1682 fame, sharing his inspirational (if a little unorthodox) beginnings. Plus, enduring the 2008-2009 recession, and the importance of being cordial with the competition!

His invaluable insights will highlight what you need to know about growing an agency from a team of three into a team of 60 awesome employees.

About Keith:

Keith Scandone is co-founder and CEO of O3 World, a 15-year-old Digital Product Agency. Additionally, he’s co-founder of O3 Ventures – a spin-off of O3 World dedicated to investing in, and partnering with, existing Digital Product companies, aiding them to accelerate their businesses.

As well as being a busy go-getter, Keith is co-founder of the Forge Conference, a 300 person UX and Design seminar. If that wasn’t enough, he’s co-founder of 1682; an invite-only Business of Innovation Conference, which they hosted this year. Wait, there’s more!

Last, but certainly not least, he co-founded the Philadelphia chapter of the Awesome Foundation, and has sat on countless boards and committees, most notably the Philadelphia Global Identity Project, helping Philadelphia’s global position.

Time Stamps: points of interest

• Intro   0:00

• Keith’s unorthodox beginnings   2:43

O3 World’s business culture and their services   7:00

• Identifying and overcoming agency ‘growing pains’   12:00

• Importance of managing cash-flow  16:20

• Knowing your strengths   19:27

• Understanding the competition   24:05

• Decision making plus executing strategic changes   30:01

• Scaling your agency    35:12

• Outro    47:22

Blog:

Keith Scandone is proof you don’t need a degree to start a string of businesses. A successful partner of O3 World and co-founder of 1682, Keith shares his humble start; the many challenges the ’08 recession brought the company; and how they overcame it. Most importantly, he pinpoints how to understand your company’s strong points while building a niche market.

Before Keith found business success, acting was his passion. He was cast in a play while attending Loyola University, Maryland, and was swiftly bitten by ‘the bug’, resulting in a move to Los Angeles. 

However, after seven years in showbiz, Keith realized he preferred working behind the scenes. Packing his bags once more, he headed to Philadelphia, whereupon he was hired as a marketing consultant for an online entertainment city guide. His soon-to-be business partners were freelancing at the same company…

While their employers weren’t keen on working for bigger clients, Keith and Co knew they could do more. Spotting a gap in the market regarding client expansion, he and his partners set up O3 World 15 years ago, and haven’t looked back.

Being involved in a tech-related industry means having to adapt to a continuously changing environment – a challenge for any tech agency owner. Humbled by his company’s tenacity, Keith reflects on how some of the businesses he used to aspire to no longer exist.

O3 World at work

O3 World’s Business Culture and Services

O3 World currently has in the region of 50 full-time in-house employees, with Keith saying the company’s culture and collaborative nature plays a massive role in producing quality work. With innovation at its core, O3 World adapts to new technological changes and career opportunities.

Constantly pushes boundaries with regards to new business and opportunities, Keith and his team ensure they’re astride their game when providing their range of services, including…

• Brand Communications

• Identity Development

• API Development

• Custom Integration

• Account Strategy

• Digital Content Strategy

A go-getting and detail-oriented office culture is important, with Keith saying: “We don’t really like working project to project. We want to have more impact and influence on the work that we do…”

It’s well documented that acquiring new clients tends to be more expensive than retaining existing ones (unless, of course, you’ve been letting ‘scope creep’ kill your margins that entire time).

Another important consideration is that a mix of long-term or recurring income is critical to bolstering an agency’s valuation and creating a strong foundation for cash-flow long-term. 

So, how are you going to extend the relationship with a new client once the project is over? Great question! Keith says you should reach out to your current client/s to consult with them on their future needs.

With this in mind, O3 World honed an account strategy layer, selling on to clients, which turned out to be a successful venture.

Identifying and Overcoming ‘Growing Pains’

Unfortunately, there are no shortcuts in life. I can’t think of an agency that hasn’t encountered challenges. In fact, facing difficulties in your business is normal – the result actually depends on how you handle these issues. 

In Keith’s case, his biggest challenge was going through a recession.

He recalls 2008 and 2009 as one of the toughest periods in his career  – when he almost went out of business. Like many business owners at the time, he remembers sitting down with his partners, looking at each other, and having no idea how they were going to make payroll.

It’s tough enough building a business, but it’s obviously more challenging during a global recession. Not only will there be difficulty in finding new investors or clients, but it’s also tough risking whatever money you may have in your business.

Luckily, while one of Keith’s partners was looking into their bank account, an unexpected deposit of $5,000.00 landed. This turned out to be a referral fee they had no idea was coming. According to Keith, it was the “closest we’ve ever come to being out of business.”

When building a business, people usually play to their strengths – whether they’re a great writer, a great designer, or a great developer – while finding the right talent they’re comfortable working with. And that’s just for starters.

As Keith puts it: “Most people don’t realize that running a business is a lot of the things you don’t like doing.”

There are lots of operational pieces, the most obvious being finance. Managing finances appropriately – in conjunction with legal documents, and staff benefits – is paramount. Plus, you need to understand the ‘scope creep’ every agency deals with.

Keith adds: “The only way you get better at managing your agency is by getting burned by it a bunch of times.”

Another beneficial point; it’s worth investing time, energy, and money ensuring the right people are in place for non-billable roles – it’s something too many agencies procrastinate on. One of the more imperative moves is hiring a project manager to help you keep track of your business progress.

Importance of Managing Cash-flow

Having a successful agency means taking smart risks while managing cash flow. Being critical and objective when working with clients is necessary to fulfill a job successfully. Therefore, try putting realistic budgets on certain projects, while maintaining it in line with a client’s usual work process.

Additionally, manage your resources appropriately and strategize ahead to have solutions available if/when the project experiences setbacks. Fluctuation in business is normal, but it’s best to try avoiding potential layoffs by having enough runway!

It’s important to hire someone who has a background in finance and operations, so you can properly elaborate on various strategies that will work within your agency.  Again, an agency owners’ goal is not solely to make money and pay money; there are a lot of metrics associated with knowing when you should hire people, when you may have to lay off people.

Knowing Your Strengths…

Being completely honest with yourself when recognizing your strengths or weaknesses it key, says Keith. All too often, businesses avoid being honest with clients as they fear losing business, that’s not the case, however. Learn how to communicate and define your remit, as simply saying ‘YES’ to everything may result in unrealistic client expectations. 

Keith wants to dig in on that point specifically, as he’s currently going through this with an agency: I’m on our next call and planning to sit the team down and give them the feedback; ‘You guys are doing an amazing job over here. But, you really shouldn’t be doing these other two things, cause I’ve had to rewrite the copy you wrote and I had to find a designer to fix the designs that you did. But, you’re doing really good on this stuff over here. I would still pay you the same amount of money if you didn’t do this other stuff’.”

From an operational perspective, this is not a good look for your brand… You say ‘yes’, you can do the job and get it done, but you may not have a process for it and, all of a sudden, the scope on that goes out of whack.

You may not make a profit on this particular project because it ties up your team, taking their time away from working on other things that actually make more money or gross margin.

Understanding The Competition

Finding the right balance in scoping or scaling your agency can be tedious. Did you know that being open to working with other agencies will help you find that balance?

Keith says they partner with many complimentary agencies, so they can work on things they’re not as experienced in. He and his team have no problem being brought in to work with different agencies as long as there’s a level of respect and a clear understanding of who’s doing what developmentally.

Remarking on this, Keith says that “It’s very, very helpful for them and helpful for us, and vice versa. There’s also an aspect of not being greedy. Sometimes we’re okay coming in and not having to be the only agency. As long as we’re respectful of one another.”

He adds, “In general, it’s important to be friendly with a lot of agency owners in town and actually outside of town, and be open with one another.”

Keith has his own ‘leadership philosophy’ but admits he’s still inexperienced – in life and business. Therefore, meeting with other industry minds inspires him, and – by extension – builds the company’s existing skillset and burgeoning ideas.

Having spoken to a lot of people from the same field, it’s great to cultivate conversations and connections, so you can navigate your niche. Through this, you will be able to further understand your strength and use it to your advantage.

As time goes by, your company will evolve as will your competitors. Therefore, it’s very important to adapt to new technologies and advances – while still being open to ‘the competition.’

Decision Making, Plus Executing Strategic Changes

An agency owner must implement strategic changes or decision making on an ongoing basis. On this point, Keith says:

“I don’t think there should just be like the end of the year thing that you focus on. It should be ongoing… Everybody should be curious. They should be curious about how they can do things better, things differently, how they could make their clients happier, and how they can make each other happier.”

Before you start implementing changes it is important that business or agency owners are mindful with regards to the following… 

“Everybody should be curious. They should be curious about how they can do things better, how they can do things differently, how they could make their clients happier, and how they can make each other happier.”

Before you start implementing changes it is important that business or agency owners are mindful with regards to:

  • Client engagement: communication is key; ask if they’re satisfied with the end-product of your collaboration?

  • Revenue: were you able to bring in additional revenue? Do I need to hire a person who has a great background in finance?

  • Employee satisfaction: do your employees still enjoy working with you and your company?

  • Employee and company performance: did your company deliver on your client’s expectations? Do you need to hire additional experts in certain fields? Will you need to acquire new technology – such as software, tools, or machinery? Do your employees require additional training?

Answering these questions will help in deciding the next step your agency must take.

A combination of teamwork, keeping eyes and ears on the ground, and being aware of what’s happening within your organization can contribute to radical change. Be mindful of what’s happening with your clients, and what’s happening across the industry.

Keep your curiosity going!

Want to See More of Keith? Follow him online via…


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.