The 10 FTE Wall: How to Scale Your Agency Past 10 Team Members
Key Takeaways
- 10ish people is a sticking point for most teams and 30 is the next one. Gray calls 10 to 30 the messy middle for professional service firms.
- At 10, sales still runs through the owner, they're still the strategist on key accounts, and monthly payroll is often close to what they used to earn in a year.
- The skills this stage builds: prioritization, forecasting, deciding and committing with incomplete information, and clear, kind communication.
- If you want to keep growing, 40 to 50 percent or more of your time needs to go to growth. The first thing to exit is delivery.
- Hire a head of delivery who owns client success. Letting everyone also report to them creates an accidental COO, which breaks by 15 or 20 people.
- Growing 30% a year is easy at six people and hard at 20. Hire a salesperson based on the deal volume you need, which is a function of deal size.
This episode has no outside guest. Kuba Grajcar hosted and interviewed Gray MacKenzie, ZenPilot’s founder and the show’s previous host, about one stage of agency growth: the point where you reach 10 full-time employees (or 12, or 13) and the way you’ve been running things stops working. Kuba framed it as a handbook for someone right before or right at that point. Gray split it in two: what’s happening in the owner’s head, and what’s changing operationally.
What the agency looks like at 10 people
Kuba asked Gray to describe the typical org chart first. Gray assumed a first-time owner.
They still have their fingers in a lot of different pots. Almost certainly most of the sales are going through either the owner or a partner in the business… Most likely they’re sitting in the account management position or strategy position at a minimum for at least a couple of key accounts, and then most of what’s happening operationally is falling on their shoulders.
Seven or eight of the 10 are usually in client services. The number is fuzzy (some owners feel this at seven, some at 12), but 10ish is a sticking point for most teams and 30 is the next one. The first symptom is overwhelm. The second is that results have slipped: you got here by delivering a really good service yourself, and now “results are not as good as they were originally for many folks.” The early hires were bets on upside, and they need coaching the owner doesn’t have time to give.
It’s all fragile, so treat it as skill-building
Gray added one stressor Kuba hadn’t named yet.
They also have a payroll that is equal to or higher than any amount they’ve made annually before, in a lot of cases, or close to that, on a monthly basis. And so they’re feeling the fragility of, in some cases, boy, this grew really fast. I got here in two years or I got here in a year and a half. Shoot, what if the revenue goes away? And now I’m responsible for these people.
Kuba asked what he’d say to that owner. Gray didn’t try to talk anyone out of the fear.
Absolutely true, it’s all fragile. Absolutely true, you’ve done great work to get here. Congratulations for this. Absolutely true, you can play much bigger. All those things are true. The bigger lesson is what’s the skill sets that you’re learning… I might 10x this business and be at 100 people in two years… Also this could all crash and burn, and either way I’m developing a skill set.
Kuba asked which skills. Gray named four: prioritization (there’s no version of life where you show up perfectly at home, at work, and in your fitness all at once), forecasting, deciding and committing with incomplete information, and being more direct, clear, and kind with everyone you deal with. He pointed back to the earlier Clarity is Kindness episode for the last one.
Get out of delivery and put 40 to 50% of your time on growth
On the operational side, Gray’s first prescription was about where the owner’s hours go.
You can’t get out into a world where 10% of your time was going into growing the business. If you’ve got ambitious growth goals, that needs to look more like 40, 50 plus percent of your time going towards the growth side of the business. So the piece to move out of is client services, what we call delivery, as quickly as possible.
This depends on what you want. If you love the craft and would rather stay a designer or developer, do that and minimize sales instead. But he was blunt about the trade: take 100 firms, 50 run by owners who love doing the work and 50 run by owners who focus on growth and hire a team, and the second group ends up with “a much higher growth rate, a much higher ultimate enterprise value of the business… We can argue whether that’s right or wrong. That’s just the truth.” An hour of the owner’s time is also worth more than the blended rate the agency bills at (his example: 30 hours of work priced at $4,500 a month).
Hire a head of delivery, then make the system consistent
The hire that makes the exit possible:
You need a strong hire who can be your head of delivery, whatever you want to call that… You need somebody who can be ultimately responsible for all of client success. When I made a promise to a client that we were going to do this, I handed it off to this person ultimately, and their team delivered it, and we kept that promise. And when issues pop up and we can’t keep those promises, they can deal with that and I am the very, very last resort.
The common mistake is letting that person become the COO, with every team member reporting to them on top of client success. Better than the owner in that seat, Gray said, but it won’t scale, and the roles need to split by 15 or 20 people. A great head of delivery is also rarely the “tool nerd” who should build your project management setup and SOPs. Those unicorns exist, but don’t plan on one. The system matters more now because you’re hiring a second person into the same role.
Now we’re also at the point of hiring redundancies for the same role. So, hey, we’ve got so many website projects coming in, we need to hire more developers. Well, now that process being consistent becomes super important. So this is where we’re managing all of our work inside a project management platform, our processes are defined and they’re easy to follow and they’re easy to find and deploy in the system. We have an eye on capacity.
Whoever leads delivery also needs a clear scorecard: how you measure customer success, and how you measure upsells and renewals.
Lean into your unfair advantage, and hire sales based on deal volume
Gray said he’s least prescriptive on growth because agencies differ so much. For a marketing or lead-gen agency, though, the channel you’re excellent at for clients is probably how you should generate your own conversations too. Most 10-person agencies he talks to aren’t doing that.
More often than not, the folks who I’m talking to at 10 people, they’re still running the classic agency playbook, and it’s primarily referrals and network that is leading to their sales… So maybe they’ve gotten to 10 people, they’re somewhere between a million and two million in revenue, and they’ve grown over the last couple years 30% a year. Well, that’s not hard to grow 30% a year when you’re at six people. When you’re at 20 people, that’s a different number and a harder growth to achieve and sustain.
At some point you’ll want someone else in sales and will probably fire yourself from it. Whether that’s now depends on deal size. With 10 clients paying $200,000 a year and a goal of adding three to six more, Gray said it usually doesn’t make sense to hire a salesperson: you don’t need many conversations, you need high quality ones with right-fit prospects. A lower-value, higher-volume business is different. His rule: base the decision on the deal volume you need, which is a function of your average deal size.