AI Is Killing Agencies. This Is How To Save Your Agency

Agencies everywhere are feeling the pressure right now, and it hits hard when you see clients walking away because they think AI can replace what you do. It’s tough watching tools pump out content in seconds while you’re trying to prove your work still matters. That kind of shift can make you question your value and wonder how long your agency can keep up.

• 0:00Speaker 00

  Small business owners, listen up. You started your business, but you can't do it alone. And that means you have to hire people to help. That's where Justworks comes in. Justworks is the payroll, benefits, and global hiring platform to unburden your brain from all the complicated small business stuff. They handle the things you can't afford to get wrong, so you don't have to worry. So you can focus on the parts of running a business that you enjoy, knowing everything else is running smoothly. You don't have to worry when it just works. Ever invest in something that seemed incredible at first, but didn't live up to the hype? For example, I really wanted to love the show Mad Men. I really tried to watch it and love it, but it just didn't do anything for me. As a marketer and business person, the show was a little bit of a disappointment.

• 0:45Speaker 00

  Marketers know that feeling. They optimize for the numbers that look great, like impressions. But then we don't see revenue. LinkedIn has a word for that: bull spend. Instead, you can get the highest ROAS of major ad networks with LinkedIn ads. Cut the bull spend, advertise on LinkedIn. Spend $250 and get a $250 credit. Go to LinkedIn.com/MBAShow. Terms apply.

• 1:11Speaker 00

  AI is killing agencies right now. Ad agencies, marketing agencies, design agencies. Clients are canceling every single week. I got friends with agencies that have clients walking out the door saying, "We'll just use ChatGPT." The truth is, AI is not killing all agencies. They're just killing the agencies that are selling the wrong thing. You gotta stop selling services and start selling outcomes. It makes selling a no-brainer. I'm going to explain exactly what this all means and give you real-life examples. Let's go inside to figure this all out.

• 1:48Speaker 00

  Welcome back to the $100 MBA Show. I'm your host, Omar Zenhome, where I deliver practical business lessons three times a week, Monday, Wednesday, and Friday, to help you start, grow, and scale your business.

• 2:01Speaker 00

  Hey, if this show has helped you in any way, it would be amazing if you dropped us a quick review on whatever app you're using right now to listen to this podcast. It helps me and my team bring you new episodes every week, and more importantly, more entrepreneurs will be able to discover the podcast, so you can help someone else start their journey.

• 2:20Speaker 00

  AI isn't coming for agencies. It's already killed the ones that aren't viable. The uncomfortable truth that a lot of people don't want to face right now is that people are paying thousands and thousands of dollars a month to agencies for things that a lot of AI tools can do in seconds. I'm talking about creating thumbnails, creating Facebook ads, writing content for their blog, writing content for their ads. You name it, AI can do it. And this is the conversation that's happening in your customer's head. They're saying, "Why should I pay an agency to do something that AI can do for $20 a month with a subscription to Claude or ChatGPT?" And they're right. Why should they? They have to ask that question, because every dollar counts in a business.

• 3:03Speaker 00

  And if they are looking for solutions, they're going to find the most economic solution, but also the most profitable one, the one that actually is going to get them results. And the data backs this up. 53% of agency owners are now seeing AI as a serious threat. And that's up from 44% from just last year, okay? The average agency-client relationship has dropped dramatically in a very short amount of time. So you gotta wake up here, if you're in an agency, because AI is killing anybody who's selling tasks. You gotta stop selling tasks. You gotta stop selling creating ads, or creating graphics, or creating a website even, okay? Stop selling tasks.

• 3:46Speaker 00

  What you need to do that AI can do is sell outcomes. And AI can't own an outcome. So in other words, stop selling what you do, okay? Start selling what the client gets, okay? That's all they care about. What am I getting out of this relationship? What results am I going to get by hiring this agency? And if you can get them results, they will happily pay you. Because an AI, chatbot, ChatGPT, Claude, you name it, is not going to guarantee any kind of results. It's not going to own or have any kind of responsibility over those results. In other words, you gotta start understanding that services, tasks, are becoming commodities because AI can do them now, all right? An outcome, on the other hand, is a result.

• 4:31Speaker 00

  And AI cannot promise an outcome, cannot own an outcome. I want to be super clear. I want to make sure this is crystal clear to everybody who's listening and watching, because if you have an agency, this is urgent. If you want to build an agency or build in some services in your business, you need to do this right. So to make this clear, we're going to head over to the whiteboard, and I'm going to show you what I call the vertical value ladder. So what's the vertical value ladder? Let's say, for example, you have an agency that creates images and ad copy for Facebook meta ads, you know, Facebook, Instagram ads. So this is the first rung, like, okay, I'm going to create the creative ad, creative. And you know, this is going to be like the image and some of the ad copy.

• 5:16Speaker 00

  You gotta ask yourself the question, "Why does the client want this?" Well, they want to run ads with this creative on Facebook, okay? Right now, the free version of ChatGPT can do this for them. They don't pay any dollars, and they can just do it. And it's not going to be super perfect, but it's going to be good enough for them to run some ads. So they need this so that they can run ads on Facebook or on Instagram, FB and Insta ads, okay? So that's the next level of value. It's like, "I will create the ads, and then I will run the ads on Instagram." Well, actually, unfortunately, Claude Cowork can do that as well. It can just take over your screen and run the ads in your meta account if you wanted to, okay? So what's the next level of value? Why do they want to run the ads? And remember, why are they doing this?

• 5:59Speaker 00

  What result, what outcome do they want out of this whole transaction? Well, they want somebody to run the ads and then analyze the data, and then make some suggestions and make some changes based on what they learned from the data. Okay, this ad is converting well, this one's not, let's let go of that one, maybe make some tweaks to this copy, or make some tweaks to the actual image on the ad. Why? Why do they need this? Well, because at the end of the day, they're trying to get leads. The business, the client, wants to get leads for their business. So at the end of the day, what they really want is leads. You need to sell them that. "I will get you 100 qualified leads every month for your business, so you can reach out to them, call them, and have that sales transaction."

• 6:44Speaker 00

  This is what AI can't compete with. If you actually sell the outcome, it really solves all these problems, and then you take care of the whole ladder of value for your clients. The vertical value ladder.

• 6:59Speaker 00

  So I just gave you an example of what a Facebook ad agency would do to sell outcomes rather than services. But let me give you a couple more examples, so that you get the full picture. Let's say you are in the business of designing YouTube thumbnails. And really, what you're trying to help your client with is to help people with what? To click through the actual thumbnail and watch the video. So what the client really wants is a higher click-through rate. So just go to the outcome, okay? So what do you need to do to get that higher click-through rate? Well, you have to own the whole thing, meaning that you're going to design the thumbnail, you're going to package the video, meaning you're going to also adjust the title, you're going to test things out, you're going to split test, which you can do inside of YouTube.

• 7:41Speaker 00

  And then from there, you're going to work your way up to the fact that people are going to click through on that video at 5% or higher. So if you can sell that outcome, "Hey, I will get you 5% or higher on the click-through rate, I'll take care of all the packaging, it's your job to make sure they watch the video after they click." That is a clear outcome that you're selling that AI can't promise. One more example, the content agency. Let's say, for example, you write blog posts for people. Well, why do people want blog posts? Well, they want people to find their website, or see some content on their website. Well, how do they find them? Well, they do a Google search. Well, let's just get to the outcome. Why do people want the actual blog posts to be written in the first place? Well, they want to rank on Google. So help them get ranked on Google by owning the outcome.

• 8:23Speaker 00

  "Hey, for your keywords, we'll make sure that your blog posts show up in the first three pages of Google." That is what owning the outcome looks like. This is what the actual customer wants. This is what they actually need. They don't actually need blog posts. Now, there's one caveat here. There's really an elephant in the room we need to talk about. In order for you to be able to sell outcomes, you have to be good at what you do, okay? You actually have to be able to feel confident enough to be able to own that outcome, and to be responsible to make sure that you can deliver. So this is why AI is killing a lot of the weak agencies, but the strong agencies that can deliver outcomes are the ones that are going to win. And they can charge a premium for it, because people are willing to pay a premium to get that outcome.

• 9:06Speaker 00

  So work on making sure that you can actually deliver for your clients. But this also means you've got to be selective with your clients. Make sure that you're choosing clients that you can actually help get that outcome for. Some people, no matter what you do, their business is just not one that you can work with, whether it's the product itself, whether it's the content that you're trying to put together, whether it's the offer you're trying to convert with the marketing of the Facebook ad, you've got to be selective about who you are working with, because as Seth Godin says, "Choose your customers, choose your future."

• 9:37Speaker 01

  To the millions of small business owners out there, we appreciate you. We see your early mornings, late nights, and all the hard work in between. And with the US Bank Business Essentials card, you don't have to go it alone. With unlimited 2% cash back on every purchase, because we know your community's counting you to be here, there, everywhere. So yeah, we don't just appreciate you, we support you. The creditor and issuer of this card is US Bank National Association, pursuant to a license from VC USA Inc. Some restrictions may apply.

• 10:06Speaker 00

  The holidays are the season business owners get pulled in six directions. More calls, more requests, more chances for things to slip through the cracks. Hoping you catch it all isn't a plan. That's why today's episode is brought to you by QUO, spelt Q-U-O. The business phone built so you never miss a call or a customer. Ever have a lead call or text at 10:00 PM? QUO's AI agent handles both 24/7. It answers questions, gets to the details, and can text them a link to book an appointment. By morning, you've got the summary and can jump right in. And nobody should have to ask customers to repeat themselves. In QUO, every call, text, and voicemail lives in one thread, so anyone on the team can jump in already knowing the whole story.

• 10:49Speaker 00

  If you have a business where your customers call or text you, this is a no-brainer. You must have QUO. Money is on the line. Always say hello with QUO. Try QUO for free, plus get 20% off your first six months when you go to quo.com/MBA. That's Q-U-O.com/MBA.

• 11:10Speaker 00

  Now we get to the best part of selling outcomes. It's one of the easiest things to sell. All right, it's a no-brainer sale. When you're selling outcomes, you don't have to sell anymore. People are just like, hey, yeah, I want that. That's exactly what I need. If you're going to give me that, I'm willing to give money. And if you want to even sweeten the deal more, you can delay reaping the benefit or asking for payment until you get the outcome. It's like so hard for somebody to say no to that. If I say to somebody, hey, I will increase your click-through rate on your YouTube videos by 3%, or I'll get you to 5% on all the videos I package, and you're not going to pay me until I get you a result. How can I say no to that? As soon as I get a result, that's what I want. That's the only time I pay? That's great.

• 11:55Speaker 00

  So this makes it a no-brainer for the client. It makes it easy for you to sell because you're not really selling. You're actually just delivering before you actually get paid. So it's a no-brainer for the business. I could say as a business owner, if I'm given this option, I will take it seven days a week, twice on Sunday, because it makes total sense financially, because I get the result first, then I pay, because I'm going to get something out of that result. I'm going to get traffic, I'm going to get customers, I'm going to get ad dollars through YouTube, or whatever it might be. So I'm getting an ROI before I pay for the service, or pay for the outcome, I should say. I need to make something crystal clear. When you sell a service, you're asking them, the client, to carry the risk. Hey, trust me, this is going to work. And they're taking a risk by paying for a service.

• 12:40Speaker 00

  But when you sell an outcome, you carry the risk. And that flips the entire conversation. And it also allows you to put the customer at ease. They have no risk involved here. All they have to do is pay you when you deliver. This in business is called a risk reversal. And it's one of the easiest ways to make more sales, because the client feels like they have nothing to lose. And when you have a no-brainer offer, they feel stupid. They feel silly not to take that offer. They feel like they're doing a disservice to their business if they don't take that offer. So when you offer this to your clients, it's going to be easy to sell. And if you don't like selling, you're going to... Just making a juicy offer makes it a process where you're not selling at all. They're just like, hey, please take my money.

• 13:24Speaker 00

  One of the biggest problems with agencies is churn. People don't want to pay for the service anymore. Why? Because they're not getting an outcome. People just don't cancel expenses for no reason. They go down their expense sheet and they say, hey, this is not serving me anymore. This expense is not helping my business. But if you're giving them an outcome, they can't cut you out. They're like, we're getting the results. How are we going to cut these people out? These people are actually helping our business, helping us grow, helping us get leads. So you become the last thing or non-negotiable. Like, we cannot cancel this service. We can't cancel this agency when things get tight, when the economy is tough, when people are trying to save money here and there. Like, hey, we'll save money on, you know, maybe no snacks in the office, but we're not going to save money and cancel this agency,

• 14:09Speaker 00

  because this agency is helping us get outcomes, it's helping us get customers, it's helping us make money. Start selling outcomes, and you stop being an expense, and you start becoming an asset for growth for that business. Now, there's one rule you must obey when it comes to this strategy. And that is only sell outcomes that you can actually control. This is critical, because you can't bankrupt your business by doing all the work, trying to achieve an outcome that you really don't have full control over. Let's go back to that thumbnail agency again, right? They are promising the outcome of 5% click-through rate. This is an outcome that they can control. Why? Because they're going to control the whole packaging, like I mentioned. The thumbnail, they're going to design it, they're going to test it, they're going to A/B test.

• 14:54Speaker 00

  They're going to also have control over the title and modify the title to make sure that, hey, when people see this video in their feed, let's get them to click. How do we get them to click? Beyond that, that's the stuff out of their control. They can't control viewer duration. They can't control retention rate. They can't control drop-off rate. They can't control how much money you're going to make through ads. They can't control that. Okay, so don't promise those things. Promise the things that are in your control, which in this case is the click-through rate. So to simplify this rule, set the outcome to sit closest to what you do in your expertise. So in this case, it's CTR click-through rate, not views. You can't control views, okay? Same for the ad agency. You can get qualified leads,

• 15:37Speaker 00

  because you know how to create an ad that will attract qualified leads. But you can't promise that these leads are going to convert into customers. That's their job and their sales team's job, okay? Remember, what's your expertise? How can you get them the result, the outcome that they're looking for, using your expertise? Nothing beyond that. If this episode is reshaping the way you're thinking about building an agency, awesome, that was the whole point. I want you to subscribe to the show, because we have an upcoming episode I don't want you to miss. It's called "Why creators that publicly share their income is absolutely BS." This is not marketing. This is not actually helping you in any way. It's not attracting the right customer. And we're going to explain why and what to do instead in that episode. So make sure you hit subscribe, so you don't miss it when it launches, when it comes out in your feed.

• 16:22Speaker 00

  Here's one of the biggest benefits of this structure, is that when you can give somebody an outcome, you can demand more money, okay? Let me give you an example. You might charge a base fee for your real costs of doing the work. And then you can also charge a performance reward for the outcome. Listen, if the business is getting the outcome, if the client is getting what they want, and you can give them more if they want, they're willing to pay more. So for example, you might have a base rate of $1,500, and then if you hit 15% click-through rate, that's what you get paid. But what if you hit 6% or 7%? For every percentage point, you might say, I want an extra $700. For them, it makes sense,

• 17:05Speaker 00

  because with every percentage point going up, that's more views. With more views, they're going to make more ad dollars, or they're going to get more clients that are going to watch that video and become customers, paying clients of their products and services. So as long as you are moving closer and you're increasing the result for the customer, they're going to be willing to pay you more. Some people say, never do 100% performance, meaning like, I only get paid when I get a result, and there's no base rate. Well, I'm not a big believer in that. I think that, especially at the start, when you're trying to prove yourself, when you're trying to get a reputation, when you're trying to build a client base, it's okay to go 100% performance. Make some money, earn your stripes. And then, once you've shown results, you can start saying,

• 17:49Speaker 00

  hey, we're now incorporating a base rate, because we're going to use some more resources to make sure that we maintain the results that we have. And then you can have those percentage point bonuses we talked about earlier, so that you can continue to push yourself and push your team to get better results for your clients and get rewarded handsomely for those results. Now, listen. The funny thing is that the agencies I know that do this and are successful by selling outcomes, they leverage AI to get those outcomes, okay? They are not just like, hey, AI is the devil. No, they're like, hey, how can we use AI to help us get those outcomes for our clients, so that we can lower our margins and make more profit? And you could do the same. So for example, if you go back to the YouTube agency

• 18:34Speaker 00

  that's creating those YouTube thumbnails and increasing the click-through rate to 5% or more, they can use the power of AI by maybe creating a few variations themselves, like a few designs of those thumbnails, and then telling AI, I need 100 of each of these designs. So you have like 300 thumbnails that you can test through YouTube, day after day, week after week, even hour by hour. And you can maximize your ability to get to that 5% using the power of AI. And by the way, the YouTube platform has AI built in, so that you can leverage it and make sure that you're getting the best results possible. So AI, the enemy that you hated, now becomes your friend, the one that's going to help augment your business, lower your margins, and increase your profits. This is why I've said this over and over. It's probably one of the main points I make

• 19:19Speaker 00

  whenever I speak on stages or at conferences, is that your product, what you offer your customers, really doesn't matter. Okay, what do I mean by that? Some people fall in love with their product. They fall in love with their service. They fall in love with their idea. All that matters is your customer. The customer matters, because your customers' needs will change over time, as you could see with AI. What they're willing to pay for will change. So as long as you're focused on the customer and you're willing to pivot and evolve, then you're going to be able to be all right in business. Your agency will survive, and it will thrive, and it'll do better. But you have to be ahead of the curve. You can't just wait until it's too late. You have to be willing to let go of what might be still working barely

• 20:03Speaker 00

  in order for you to take that leap and change the business model of your agency that you are actually building for the future, not just for the present or even the past, what was working. Change is hard, I know. You know, one of the jokes I make on stage is like, you know, I have this great idea that I could sell to businesses, which is just like this machine that does a carbon copy of credit cards. And then you have to call the bank to figure out if this person has money on that credit card or can afford this purchase. And then if they approve, I give them the actual product. That was a great idea in 1979. It's not a great idea anymore. Why? Because people's needs have changed. The customer has changed. They want Apple Pay, they want something easy, tap to pay, go. They want Afterpay even, all that kind of stuff. So don't fall in love with your business.

• 20:46Speaker 00

  And what it does, fall in love with serving the customer. Thanks so much for tuning into today's episode. I hope it was helpful. If it was, let me know. Drop me a review. And if you want to continue learning, we have an episode that we published recently called, "How to Set Your Prices to Make $1 Million in a Year." "How to Reverse Engineer Making $1 Million in Revenue Through Your Prices." Go ahead and check it out. Just scroll up on whatever app you're using, whether it's YouTube, Spotify, Apple, we're on them all. You'll find that episode. Again, it's called "How to Set Your Prices to Make $1 Million in a Year." If you found today's episode helpful and you want more practical business lessons to help start, grow, and scale your business, subscribe to the podcast. All you got to do is hit subscribe or follow on your favorite podcast app, the one that you're using right now.

• 21:31Speaker 00

  By hitting subscribe, you get our next episode automatically. It's absolutely free, and it's a way for you to commit to growing your business. I'll check you in the next episode.

• 21:46Speaker 02

  Introducing Fidelity Trader Plus, the next generation of advanced trading from Fidelity. Customize your tools and charts and access them seamlessly across desktop, web, and mobile for faster trades anywhere you go. Try the all-new Fidelity Trader Plus. Learn more about our most powerful trading platform yet at fidelity.com/traderplus. Investing involves risk, including risk of loss. Fidelity Brokerage Services, LLC, member NYSE, SIPC.