NC Niall Cotter On Build a Better Agency Podcast

“You could be a cash flow czar and profit poor. And at some point it comes to bite you. There's a big difference between a company that makes a 25, 20% margin at $5 million and one that makes 5% at 20 million. Because the company at 20 million doesn't have far to go to zero.”

Build a Better Agency Podcast · Agency Business · November 2026

Context

They were discussing agencies that bill retainers in advance, so the bank balance looks healthy while margins are thin. He explains why a thin margin on a big revenue base is fragile.

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Transcript

Build a Better Agency Podcast Around 23:24 into the episode

Niall Cotter

Yes.

Drew McLellan

Yeah.

Niall Cotter

Yeah. You could be a cash flow czar and profit poor. And at some point it comes to bite you because I'll go back to my earlier example. So there's a big difference between a company that makes a 25, 20% margin at $5 million and one that makes 5% at 20 million. Because the company at 20 million doesn't have far to go to zero.

Drew McLellan

Right.

Niall Cotter

Right. Five goes to four, goes to three, goes to two, goes to one. If you're at a 20% margin, you can go to 15%. And that's kind of the caveat that I'm kind of always preaching to. Make sure that you keep an eye on that compensation over AGI number at all times. And if you get to a point where you…

Drew McLellan

Yeah. I want to talk about that, figuring out profitability by. Client and service line. Let's take a quick break and then let's come back and talk about sort of the right way to do that and then the poor man's way of doing it. So let's take a quick break and we'll come back and dig into that. Hey…

Speaker names come from our own diarization. The position is estimated from where the line sits in the episode.

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“Having been on the purchasing side myself, it's quite easy to poke holes in the story of a business. Your numbers need to meet the story that you're telling. If it's a growth story, you need to have shown that historical growth. If 40, 50% of your clients are from five to 10 companies, that's a weakness. And is it the owner's relationships that are holding this business together? Am I buying the business or am I buying the owner?” — Niall Cotter, Build a Better Agency Podcast

“I think it's about 10 or 15 people. That's when an agency owner no longer knows everything that's going on inside the agency. When you're five people you're like a unit that just moves together, but you get to double digits and all of a sudden you have people working on work that other people don't see. The owner can no longer keep their finger on the pulse, and you need checks and balances that you did not need at four or five people.” — Drew McLellan, Build a Better Agency Podcast