Annual Checkup: 9 Markers to Diagnose Your Agency’s Health

Sei-Wook Kim (00:06.094) On today's episode, we're taking agencies in for their annual checkup. Not because something is broken, but because the healthiest agencies don't wait for symptoms to show up. We'll walk through the core markers that reveal whether an agency is structurally healthy, financially resilient, and built to grow healthily in the future. This isn't a quick fix hack or a list of tactics. It's about identifying underlying signals before small issues become systemic problems. Peter Kang (00:32.101) All right, Sei-Wook, when was the last time you had your annual checkup? Sei-Wook Kim (00:39.018) Once a year, so probably been six months. Peter Kang (00:43.013) Yeah, actually, I get my blood checked about three, four times a year, so a bit more often. But yeah, I'm due for another one soon. Today we're taking folks to the doctor's office, so to speak. And really, this is a preventative measure. Agencies often only change when they're forced to — the pain gets so great that they'll seek out help. But this kind of annual checkup routine can really lead to some preventative actions so that people could be proactive instead of reactive. Even when things feel good — for example, people are looking at their finances towards the end of the year, and it's like, hey, we had a profitable year, things look good — they can be ignoring some of the risks that might be building up underneath. This is a way for us to share a system-wide checkup for agencies to dive into, and from here they might be able to diagnose some areas that they can improve on. So we've come up with these nine markers of agency health. Let's just dive in. With each of these, we've corresponded to a body part that we thought was analogous to what we want to talk about. Sei-Wook Kim (02:06.693) Yeah. All right. The first one is positioning — having alignment with your positioning. That's like checking your vision and your eyesight: looking ahead and making sure you're clear on the future. What you're really diagnosing here is who the agency is positioned for and whether the market at large understands what you do. Positioning is the core decision that an agency needs to make. Every downstream decision — how you do your work, how you go through your sales process, who you're targeting, who you're hiring — flows from that. It's the core choice an agency makes before diving into a lot of these other areas. Peter Kang (03:10.167) Yeah, when positioning is healthy, one of the things that happens is a natural filtering — the type of clients the agency attracts is higher quality, and therefore they're going to get better opportunities that are a good fit for the type of work that they do. But when positioning is not healthy and it's failing, there's a lot of downstream impact: the sales team has to work extra hard to over-educate or over-persuade or even over-promise on things. And then on the delivery side, you're going to have some bumps too, because you're just not going to be as adept at servicing clients that you're a poor fit for. Sei-Wook Kim (03:56.77) Yeah, if you have strong positioning, you'll have fewer but stronger leads that know exactly what you do and want to work with you. The sales process gets easier, or should get easier, from that perspective. Peter Kang (04:11.043) Yeah, great. I'll take the next one. Client fit ratio. When we came up with this one, we liken it to diet and nutrition — basically, are you feeding yourself in a healthy way? In the agency context, are the quality of the clients fueling the agency high or low? A lot of this is downstream impact of the positioning. When you think about client fit ratio, you're looking at how much of the revenue is coming from your desired ideal client profile versus the legacy or "we're just doing it for the money" type of clients. It's a very simple way to calculate that. Sei-Wook Kim (05:01.661) Yeah, and exactly to that point — in a healthy agency there's a higher number of clients that align with their positioning, align with the future direction of where you're trying to go. Whereas if you have a less healthy agency, they're still tolerating or keeping a lot of clients they've had for a long time without making the hard decision to move on and change that makeup. Peter Kang (05:34.274) Yeah, this reminds me of instances back in our day of operating the agency where, just because there was an opportunity at hand, somebody refers someone and you just know deep down this is not a good fit client, but they have money to spend, they come from a warm intro, and you just take the deal. It's almost like eating junk food — you're sacrificing nutritional value for that quick short-term hit. Sei-Wook Kim (06:02.155) Yeah. Sometimes when you're hungry, you got to make the tough decision to eat the junk food or whatever it is. But long term, obviously it's not healthy for you. So the next one is client trust and retention. That's like your heart — checking your heart rate. When we think about client trust and retention, it's: what's the real durability of your client relationships? Is it clients that stick around for a really long time, or are you having to keep finding new clients and replacing those relationships? Peter Kang (06:46.818) Yes. I took this one almost literally, because in a healthy agency you're going to have a lower resting heart rate. You've built good systems, you're delivering work in a really reliable way, your relationships with clients are good, so the stressors are a lot less. You maintain that — you're cool, and you have this nice steady boom, boom. It shows up in getting more work through existing clients, referrals, growing client lifetime value, and longer tenure. But in an unhealthy situation where there's lack of trust, there are a lot of fires coming up all the time. Your heart rate starts to spike — you just have an abnormally high heart rate. You're always pulled in a million directions just trying to keep it going, but clients are churning left and right, people aren't happy, you're getting calls from unhappy clients. It really puts it into perspective. Sei-Wook Kim (07:57.361) Yeah, it's literally like your heart skipping a beat, because there isn't that consistent pattern to the relationships and the revenue. Peter Kang (08:11.391) Yep. Well, speaking of revenue, the next one is revenue stability. We liken this to blood pressure — it's about the predictability and stress profile of revenue over time. One piece is client concentration: you're going to have high blood pressure if you have one or two clients that make up a majority of your revenue. The other part is about the mix of the work — is it more recurring, predictable, contracted work so you can see revenue ahead? Or is it just one-off projects? Sei-Wook Kim (08:57.209) Yeah, we've seen this over the years where if it's very much project-driven and you don't have that base of recurring revenue, it's stressful when you're not winning as many projects. Your heart rate literally races trying to figure out: do we need to adjust the team size? Are we going to have stability? Do we have to pull from reserves? You start stressing about all these other things when that base isn't covering you every month. Peter Kang (09:26.633) The blood pressure rises, right? And just to add the client concentration aspect — if it's a big project with one particular client and you see that coming to an end, that's also a double whammy. You've got some trouble ahead. Sei-Wook Kim (09:52.371) Yeah. All right. The next one is pricing. We liken that to your metabolism. With pricing, it's really thinking about how you're valuing your services and how you're converting that into revenue for the agency. Pricing is a reflection of all the things we just talked about. If you have strong positioning, you have a stronger position in the market, and typically what you can do is charge more for your services. It all starts there. Without the positioning, without the client knowing exactly who you're targeting, you can't just jack up prices or drop prices. Pricing shouldn't be used as a negotiation tactic, but rather to represent the value that you're bringing to the market. Peter Kang (10:49.533) Yeah, a healthy agency is just going to be able to state pricing with confidence and not have to negotiate — and that is the mark of a healthy agency. But an unhealthy one is going to continually discount, or be very lacking in confidence when it comes to naming the price, and end up working at a lower base of potential margin for that project. Profitability decreases and a lot of things put a stress on the system. Sei-Wook Kim (11:25.341) Yeah, and in the annual checkup, pricing is really about stepping back and asking: we've been doing pricing the same way for the past 12 months, but how does that reflect in our margin? Is it an execution issue? Do we need to increase our prices? Can the market bear that? Just taking a step back and looking at pricing realistically. Peter Kang (11:46.557) Yeah, exactly. Okay, so delivery systems is the next one — number six. We liken this to the spine, because it's all about the structural integrity of how the work gets done, especially under pressure. As you get busy, what is the system you have set up? This is the literal backbone of the agency, and the strength of it really matters. A lot of this is about delivery system design with a smart cost structure in mind so that it supports the budgets coming through — how the services are packaged, what the process looks like, and whether it's repeatable and reliable with some degree of predictability. Sei-Wook Kim (12:36.22) Yeah, just like a spine keeps everything together in your body, without strong systems everything falls apart — everybody's scrambling to get projects done and through the business. It's really thinking about everything from the service delivery side and how you execute for your clients. Peter Kang (13:03.145) Yeah, and one symptom of structural weakness is when an agency continually requires the founder or someone senior to keep jumping in and intervening just to get things through the door. That's something to look out for. Sei-Wook Kim (13:25.063) Yeah, for sure. All right, the next item is business development sustainability. We liken this to the lungs in your body. This is looking at how the agency generates more growth for itself over time — all the sources of demand that bring leads and opportunities to the agency. Thinking about that capacity, and also thinking about growth beyond what's typically very founder-dependent. When the founder gets pulled into the work, that's a symptom that biz dev isn't sustainable for the agency. Peter Kang (14:22.27) Yeah, one analogy I'd like to dig more into — it's the lungs. Whenever I think of cardio training, I think a lot about lungs because you're breathing hard and really stressing them. How do you think about the cardio training analogy with business development? There's something called zone two, which is a walking pace or a light jog where you can maintain a conversation. You should probably do a good chunk of zone two every week. If you take this to the biz dev analogy, it's the ongoing demand creation, nurturing relationships, building your reputation, the thought leadership you put out — this is the stuff that compounds over time. If you have a strong base of zone two, you're going to have really good lungs. And then there's the other kind of training, the VO2 max type of stuff — where you go all out for a few minutes, take a break, do another set. On the agency side, this is where you achieve growth through launches, outbound campaigns, really intense partnerships, co-marketing, event planning, or really focused sales efforts. These are things you're not going to do all out all the time, but you're going to have these spikes of opportunity. If you take this analogy to heart, you've got to do both. You can't just do zone two and not do VO2 max, and you can't just do VO2 max because it's just going to be so much harder without that zone two training. Sei-Wook Kim (16:17.478) Yes, it's interesting in that way. If you haven't exercised your lungs and you suddenly try to do a big thing, you're going to crumble. So what are all the baseline things you have to do for your lungs? Just taking a look at what are all the baseline activities we're doing consistently so that we have the capacity to handle some of these bigger undertakings. Peter Kang (16:44.208) Yep. The next one we're calling team leverage. We're likening this to muscle mass. What we're diagnosing here is the output per unit of leadership attention and the amount of money you're spending on talent. For smaller agencies, it's really about how much is bottlenecked by the founder versus how much has been delegated so that the team could carry the day. Leverage is about how effectively people, processes, and the delegation of decision making translate into real results, output, and results for clients. Sei-Wook Kim (17:38.214) Yeah, this exercise is also about taking a look at your org chart and seeing, as you're growing, do you have the right structure in place — an appropriate number of managers supporting people, or is one person managing 30 people, which is just unsustainable? Do you have the capacity for growth? Have you worked on your freelance network, the ability to take on more there? Peter Kang (18:08.732) Yeah, I like the org chart idea because when it comes to building muscle mass, you can overdo certain parts of the body. Let's say you're just doing bicep curls or working on your chest, but you have muscles in other parts — you could get uneven. If you're thinking about leverage in certain areas but not others, you're going to have an imbalance. You really have to look at it holistically. You've got to keep your leg base going as well as the push and pulls. It's important to be holistic in your approach to getting leverage. Sei-Wook Kim (18:52.517) Awesome. All right. The ninth marker is risk and resilience. That's like your immune system. What we're diagnosing here is the company's ability to withstand shocks to the system. Shocks could mean people leaving, a client issue where a client is unhappy and you might be in a legal matter, or you might lose a lot of accounts and have a cash flow issue. When we look at this, it's thinking about how much cash buffer the agency has, whether you have the right insurance in place for situations where you just never know what's going to happen, whether you have continuity plans — what happens if a client churns, if team members leave. It's really just planning out all of the possibilities and making sure you're covered so that any of these shocks to the system don't break the company overall. Peter Kang (20:02.398) Yeah, just as with your own immune system — you might have a strong immune system, but you're still going to get sick every once in a while. The immune system's resiliency is all about how quickly can you fight off the infections and recover. Your agency is going to take lumps — that's a guarantee. Nothing is ever smooth; there are going to be unexpected surprises and setbacks. This is all about what you have in place to be able to bounce back from that, and making sure nothing is fatal or anything that will jeopardize what you've built. Sei-Wook Kim (20:42.838) Yeah, and like health — when you get sick, your body gets slightly stronger every single time. So organically, the immune system of your company will continue to get stronger. But the more you can plan ahead, get those flu shots and things to help either stress your system in a controlled way or plan ahead as much as possible, the better. Peter Kang (21:07.234) All right, well, Dr. Kim — it's time for us to recap the nine markers of agency health from this annual checkup. Just going to quickly list them again for everyone. We talked about positioning and the importance of alignment there, the client fit ratio, client trust and retention, revenue stability, pricing, delivery systems, business development sustainability, team leverage, and lastly risk and resilience. As you take time out to do an annual checkup of your own agency, keep these different areas in mind, and best of luck diagnosing the health of your agency. All right, until next time, thanks for joining. Take care. Sei-Wook Kim (21:59.638) Thanks.