Unlocking Potential: The Marketing Agency Blueprint for Success and High Valuations with Chris Martinez

Andy Splichal:

Welcome to the Make Each Click Count podcast, where we dive deep into the world of e commerce and digital marketing, offering insights and strategies to help maximize your business success. I'm your host, Andy Splichal, and today we're honored to have an innovator in the advertising industry with us today we have Chris Martinez, the CEO and founder of Bloompartners IO. Chris exemplifies resilience and entrepreneurial spirit, having grown his company to millions in revenue and earning a Stevie award in 2021. He's also the host of operation agency Freedom podcast and the author of three books, plus a new book that's just coming out, facts, not feelings. Chris has dedicated his career to empowering marketing agency owners to scale and thrive, turning adversity into triumph. And we're thrilled to have him on the show today to share his journey and wisdom. All right, welcome to the show, Chris.

Chris Martinez:

Awesome. Thank you so much for having me. How are you doing today?

Andy Splichal:

I'm outstanding. Thanks for asking. So let's start with you've had a journey from adversity to building a multimillion dollar company. Can you share a bit about the challenges that you faced early on and how they shaped your approach to business?

Chris Martinez:

You know, I think every entrepreneur faces adversity multiple times when you're growing a business because especially growing a marketing agency, it's very, very challenging. Over the years, through working, I would say working a lot on myself and with therapy, I've learned how some of the obstacles that I've encountered growing up have really helped shape me. And I've been able to find the positive, or I would call it. I call it the light in all the darkness. So, yeah, I had a very, very challenging childhood. Dealt with a lot of physical and emotional abuse growing up. And I think what I see as a pattern is that a lot of the times in Mendez, when you get into your thirties and forties, a lot of that starts to bubble up to the surface. And I started my marketing agency in 2012.

Chris Martinez:

So I was 32 at the time, and that's when all these things started to happen. And actually, it was kind of like this perfect storm of emotional challenges that I was facing because my dad also died of cancer in 2007, three days before I turned 27 years old. So I was going through all this grief, plus all these challenges that I faced growing up that kind of came to a head, and I've got this business, and I had had a business prior to that that had failed, and I lost all my money and everything like that. And so just kind of summarizing that, I would say those have been some of the most significant challenges that I've had to overcome. Some of the adversity that I've had to overcome. I would say of those three, the easiest one was being broke. And in the moment, you feel like you're never going to get out of that hole. Because I was one of those stories where I had less than $40 in my bank account, and I didn't know how.

Chris Martinez:

Actually, I don't have time to tell this entire story, but after my first business had failed, I lost everything. And I was talking to a bankruptcy attorney and trying to figure out what I had to do because I had all this debt, and I had a job. I just gotten a job, and I was down to my last 30 something bucks, and I had to get from the airport to my house in LA. I was living in Hermosa beach at the time, and we didn't have Uber back then. And so this was 2009, and I had to. I had to, like, I was like, how. How in the world am I going to get from the airport back home? And luckily, I got a paycheck from that new job somehow. Like, I fell into a pay period or something, and I got a check for, like, $300.

Chris Martinez:

And I was, like, so happy because even though it was just $300, I was able to stretch that out, and that gave me some breathing room, and I didn't have to worry about things like, how am I going to get from the airport back home? You know?

Andy Splichal:

So how have you taken that? I mean, that's. That's quite the adversity, but how have you taken that into what you're doing now? And how are you applying all this?

Chris Martinez:

Which. Which challenge?

Andy Splichal:

Well, just, I mean, your experience from. From being broke, and you're talking to agency owners, and I'm sure, I think.

Chris Martinez:

The first thing, and, I mean, if you have experienced something like this, please chime in. But I think the first thing is just recognizing that it's really not that bad. You know, like the darkest moments of my life were dealing with the grief of my dad dying and just feeling totally alone and not knowing if I wanted to be on this planet anymore and being able to make a decision and getting help and figuring out how to deal with the grief. And after that, not a lot of things are that bad. And I dont know if thats going to be the lowest point in my life. Who knows what will happen in the future? But after going through that and kind of losing all of my, who I thought were my friends at the time, losing all your money, and when youre broke and angry and going through grief the way that I was, and I dont think I handled it very well. And youre truly alone. Once you come out the other side, you realize its not that bad.

Chris Martinez:

So to answer your question about how that translates into working with agency owners, I think it helps me to give perspective so that when an agency owner is facing a challenge that they don't go too low. And on the other side, when they're experiencing a success, I don't want them to go too high as well. You know, let's just stay relatively even so that we can keep our composure and make, continue to make really, really good decisions. I hope that answers your question.

Andy Splichal:

Yeah. So I guess the journey continued, though. I mean, you ended up doing your own agency at that point after going from broke and then you decided to launch your own agency.

Chris Martinez:

2012, I started my own marketing agency. I was moonlighting. So at the time I was working for reach local in sales, and then they didnt do websites. And I had this team in Mexico, or, im sorry, in Mexico, in the Philippines. And I was like, hey, let's start a marketing agency, basically just doing websites. It evolved and we grew that business. And kind of a turning point for us was in 2015, we expanded into Mexico. So even though it was just nine years ago, I was one of the first people to build a team in Mexico.

Chris Martinez:

And I was living in San Diego at the time, and I set up a company in Mexico. I was driving across the border, like every single day to go to my little office there. And with that little team, we grew, we had over a couple hundred clients by the time it got to like 2017, we built that. Do you speak Spanish at the time? Not very well. I took a couple years of high school Spanish. Now my wife is mexican, and I lived in Tijuana for five years. So my spanish is much better, I would say I'm, like, I say I'm 80% yep. So I usually say that I'm, like, 80% fluent, but it also depends on the context of the conversation.

Chris Martinez:

So Mexicans are, like, notorious for a lot of slang that does not make sense when you translate it. And so if I'm in a professional setting and I'm like, a doctor or restaurant or I'm talking to something, like, I'm buying something from a, and I'm having, like, a normal conversation, then I understand everything. But when my wife is, like, with her friends and they're using all the mexican slang, I have absolutely no idea what they're talking about. It's really, really fun.

Andy Splichal:

And so then you were able to grow your agency, and then you sold it. So you ended up selling your company then after you're. After you grew it to a certain level.

Chris Martinez:

So I grew that agency, and then in 2017, I actually started an outsourcing company called dude agency. And at that time, again, remember 2017, you know, only seven years ago, but very, very different than today. So I had access to all this, what I call hidden talent in Mexico. Back then, nobody even thought you could find anybody in Mexico to help you with your agency. We started this outsourcing agency, and then I ran that, and that grew. That started to grow. Dude agency started to grow really fast, and then I ended up selling my agency in 2020, and then I ran dude agency up until we did our rebrand. So it's end of August now.

Chris Martinez:

We did a rebrand in July, and so now we're called Bloom. Just to kind of give you some context, in around 2022, our clients that were working with us for the outsourcing started coming to us and asking us, hey, how do you guys run your business so efficiently? How do you hire and train people? How can I improve my profitability? And so out of that came our consulting product, and as we saw, kind of like the writing on the wall where, you know, outsourcing is changing. I don't really know if this is a great business model, but then the consulting is really starting to take off. We're getting great results for clients. And on top of that, it's just a little bit more fun to work with the marketing agencies on the management consulting side and helping them to really scale and grow and ultimately do an exit. And so we just decided, you know what? Let's make this. Let's make the change. It's a different company.

Chris Martinez:

It's a different culture. Obviously, it's a much different product. And so that's kind of where we are today.

Andy Splichal:

So you're helping marketing agency scale and ultimately exit. What are some of the pitfalls that they're going to have to overcome to do this?

Chris Martinez:

Yeah, so, I mean, really, it depends on one having a mastery of the numbers. And I'm not an accountant, I'm not a CPA, I don't have an MBA. And so most marketing agencies, they kind of get started and it's just kind of flying by the seat of your pants. We're having fun, it's creative, whatever. I. They don't know the numbers. If you don't know your numbers, you don't know your business, you don't know your value. Now, I hear you talking about scaling, right? When I see all the advertising or gurus that are out there talking about scaling, it's mainly, they're mainly talking about creating a lead generation system.

Chris Martinez:

That's what they talk about scaling. Scaling is much more than that. It's about creating a business that can run without you. So you got to master the numbers. But the second thing is you gotta have all the boring parts of running an agency, like systems and processes and training and hiring systems and all these other things, so that you are not the center of the business. If you can't walk away from the company, if it'll break when you're gone, then you don't have a very scalable business that you can do an exit from. So if we're gonna like, just make it super, super simple, the first thing, we gotta know our numbers. We gotta make sure that we, our financials are healthy.

Chris Martinez:

And then we also have to have the systems and processes and also people to help run the company so that when we do that exit, everything still stays intact. And not only that, but the business will continue to thrive after we've sold it.

Andy Splichal:

How is the valuation on a marketing agency determined? I guess once we're going to put that caveat on there, they've already had the systems and processes in place. It's not owner reliant. But assuming it's not owner reliant anymore, how is the valuation calculated?

Chris Martinez:

Yeah, so I think a misconception that some people have is that it's going to be valued on revenue. Now, keep in mind, there's always exceptions to the rule, but what we're seeing and what we've seen is a lot of agency owners think it's just going to be based on revenue. It's not. It's almost always based on EBITDA. Some of the things that might, you know, give you a higher valuation be being in a niche, you know, so like you're super, super deep in one niche that can help you out the types of products and services that you offer. Your churn rate will absolutely have an impact. And then at the end of the day, they're going to look at the EBITDA and so, and for those that don't know EBITDA, earnings before taxes, interest, depreciation. Wait, ebit, the earnings before interest, taxes, depreciation, amortization is what it stands for.

Andy Splichal:

So basically your profits.

Chris Martinez:

Yes, profits before taxes, essentially. So they're going to give you a multiple of EBITDA for some weird reason. Like if you're under a million dollars in EBITDA, it's typically going to be around three to four x. If you're over a million dollars in EBITDA, it can be 567.

Andy Splichal:

Interesting.

Chris Martinez:

Although I do know somebody who did an exit. Um, I believe they're right around, uh, well, no, I take that back. They were under a million, uh, but they got like more than a ten x multiple. Now, you might be listening to that and wondering, like, how does that happen?

Andy Splichal:

How does that happen?

Chris Martinez:

They, they got purchased by a strategic buyer. So it was a company outside of the agency space that essentially wanted to buy a marketing agency and wanted all of their clients. They were very, very niched. So they said, hey, we're going to buy you just because it's cheaper to buy you than it is to go out and build this on our own. So that was kind of like a, that's probably the best multiple that I've ever heard of in my life. But it, you know, it is possible.

Andy Splichal:

How do you help agencies grow? I mean, you talked about the system and processing it. That is that, is that where you concentrate or I guess, what does your process look like?

Chris Martinez:

Yeah, so it's all marketing agencies kind of have different challenges depending on where they're at. And so the first thing that we have to do is analyze what is actually the problem, because sometimes the agencies come to us and they think, hey, it's a lead generation problem. I'll tell you, I would say eight times out of ten, when somebody says, hey, I have a lead generation problem, it's actually a product problem. And let me explain why that is. Okay, so if a client hires you for marketing, which I'm going to just throw it out there and just say, like, at the end of the day, if they're hiring you for marketing, they're giving you money because they want that money to come back with a lot of friends and make them more money. We are in the business of turning $2,000 into 1015, $20,000. Right. And so when you look at the product, if the client is giving you money to invest in their marketing and it's not generating a return on investment for them, they will cancel.

Chris Martinez:

And especially in this economy, when dollars are tight, ad costs have gone up, employee costs have gone up. Cost of doing business for everybody has gone up. They look at every single dollar. So that's why I say, like, if you have a lead generation problem, let's look at the product. Are you actually helping your clients to make more money? Now, some people will say, you know what? We're just doing the lead Gen. We can't control closing. So if they're not making money, it's not our fault. Well, guess what? If they're canceling, it is your fault.

Chris Martinez:

We have to figure out a way to solve that problem. So going back to what I was originally saying is agencies come to us, and we have to figure out what's the actual issue. So we'll look at their infrastructure, the team that they have. We'll also look at their financials, and we'll be able to analyze with facts and not feelings what's actually going on in the business and what do we need to fix. Maybe there's lack of sops and processes. Maybe there's a lack of a leadership team. Maybe the owner needs some training on leadership and how to manage people.

Andy Splichal:

Maybe that's got to be a hard conversation, of course.

Chris Martinez:

But the people that want to work with us, they are willing to have these difficult conversations because most of them have tried everything. They've hired every other guru out there, and they're like, this is not working. It's really frustrating when you've been working your butt off, but you're not seeing the revenue go up, and you're not seeing the Profit Go up, or you're seeing the revenue go up, but you're not seeing the Profit go up, and you're not making more money. Right. And so that's where, you know, people come to us and we analyze. We have to figure out what's going on. Kind of like if you go to a doctor, got to run some tasks, got to figure out what's actually happening, then let's dive in. Let's start solving any issues that you have.

Andy Splichal:

So you had mentioned facts, not feelings. I know that's the title of your new book.

Chris Martinez:

Yes.

Andy Splichal:

Let's talk about that. Let's talk about your new book?

Chris Martinez:

Yeah, sure. So my new book, which will be coming out soon, it's essentially the Story. I don't know if you've ever read the e myth before.

Andy Splichal:

Oh, yeah.

Chris Martinez:

Built to sell.

Andy Splichal:

Yep. I got it sitting right here on my Desk.

Chris Martinez:

Love it. So I love those books that tell a story, and I always wanted to write a book, like, in that style, and so I. Oh, what you gonna. Hold up. Let's see.

Andy Splichal:

Perfect.

Chris Martinez:

I love it.

Andy Splichal:

Right?

Chris Martinez:

So what's ironic is built to sell. Written by John Warlow. It's the story of a guy who's selling his ad agency. Right, right. And I love that style. So, my book is somewhat similar, and it's the story of a agency owner, and he's running this agency that is, like, looks all flashy on the surface, and everybody thinks he's doing great, but they're, like, one month away from going out of business. And so we take the reader through that journey, and he finds a mentor, and he goes, basically helps to turn around his agency in around 18 months and fix all these problems. And the first thing that his mentor says is that you've been making decisions based on just your gut and, like, what you feel and what we need to show you how to do is run the business based on facts, meaning data and numbers, and not just your gut instinct.

Chris Martinez:

And that's a core value that we have in our company with everything we do. I'm not saying ignore your feelings, because if your feelings can alert you to something that's going to help you to survive, what I'm saying is to validate with facts, because a lot of the times, your feelings will lie to you, and the purpose is trying to keep you safe, but your feelings will lie to you, and they will actually lead you down a path where you make a bad decision or that keeps you from growing in the business. And so that's essentially what the book is about. That's what we preach at Bloom, is, you know, you want to make your decisions based on facts and not feelings. So I'm super, super excited to share that in the book.

Andy Splichal:

When does the book come out?

Chris Martinez:

So we're looking at a launch date probably around October 1. That's what we're shooting for. We just got some final edits and stuff to make. And so the editing process is taking a little bit longer than what we would have hoped, but it's coming out soon.

Andy Splichal:

So it sounds like the book is really a story of almost, like, your service. What you're. What you're doing for your clients, it's.

Chris Martinez:

A story of a culmination of agency owners that we've worked with and basically looking at seeing all the challenges that they've faced and going through and explaining exactly how you can solve each one of these problems. So, to answer your question, yes, of course we solve all those challenges that are mentioned in the book. I just want to create value and give value to people. And so when you get the book, I promise you you'll get a ton of value. Hopefully, you can solve those problems on your own. If you can't, you know, what are.

Andy Splichal:

You, what are some of the common problems?

Chris Martinez:

Yeah, it's a really, really good question. So most agency owners are accidental agency owners. I'm not the first one to say that, you know, you just kind of stumble into it. But there's a number of other things that we see that they struggle with. Right. So sometimes it's discipline issues, sometimes it's leadership issues. Sometimes it's financial acumen issues. Sometimes they just lack a clear vision where they don't recognize what it takes to build a business that they can exit one day.

Chris Martinez:

And so anybody that we work with, just so you know, they want to sell their agency, usually it's within the next five years. The benefit of that is that you know what your end goal is. You know what the light is at the end of the tunnel. Right. And so, like, if you don't have that vision and you don't know where you're going, then that's where your feelings might dictate the decisions that you make. The other things that we see in successful agency owners is that they actually all have really, really good personal credit. That's an interesting stat that we see, is that most agency owners that are financially successful, they all have good personal credit scores, which is interesting. Now, I'm saying this because I once was somebody who had really, really bad credit.

Chris Martinez:

I didn't have a financial education growing up. I had to make a lot of mistakes. And eventually I got some good mentors and advice. And then I would say the other one, that.

Andy Splichal:

Why do you think that is?

Chris Martinez:

I think it's just good habits. Right. Your habits really do determine your outcomes. And if you want to embrace the facts, not feelings of philosophy, the numbers are paramount. Right. That's all. That's what we're always looking at, is like, how does this impact the numbers? And so if you're not comfortable with your own personal finances, those habits will carry over into the decisions you make in the business.

Andy Splichal:

How is AI disrupting the advertising space.

Chris Martinez:

Disrupting is an interesting word, because if you say that, I think it might trigger fear in some people and then other people, it can get them really, really excited. I would say that in the next three years, the marketing industry is not going to look at all what it looks like today. And just if you look at the past year and the way that chat GPT has impacted copywriting, I know people who own copywriting businesses where chat GPT essentially wiped them out within a matter of months. It's such an amazing tool. And so I think that the way that we leverage AI is totally going to transform the teams that we have, the processes that we have. It probably will impact the pricing that we have. It will definitely impact the value proposition that we all have. So in terms of disruption, it's going to disrupt the industry.

Chris Martinez:

It already has. This train is going and it's not turning back. For those that embrace that change, they're going to be so much better off. And I mean, we're always looking at ways that we can leverage technology to help improve results for the agencies, both profitability as well as production. And so I love AI technology. I think it's amazing. As you can see, like, I'm a Star wars fan, so I've always looked at AI kind of like having my own personal c three po. So I love that concept.

Chris Martinez:

I love that idea. But, yeah, I mean, dude, in terms of disruption overall, it's going to change everything.

Andy Splichal:

So you're representing and getting these sellers ready, who is typically the buyers of agencies.

Chris Martinez:

So you can look at strategic buyers. That's typically the best. There are other agencies that will look to buy you. That's probably not going to get the best valuation or the most cash upfront from those. And then you have the. Oh my God, why is the name escaping me? Private equity. Then you have private equity that'll come in and typically they're buying up. A lot of agencies can also be pretty challenging, but those are typically the three sources of people that will want to buy your agency.

Andy Splichal:

And when the purchase goes through, is there typically an earn out or not?

Chris Martinez:

Almost always there's some form of an earn out. I do have a friend, actually, who's looking to sell his agency right now. It hasn't gone through, but he's got a more than 50% cash upfront. I'm not going to give away too much, but more than 50% cash upfront with an earnout over the next, I think, twelve months, if I remember correctly. Um, but you know, that's not a significant. It's it's. It's a just higher than seven figure purchase. Um, and it's kind of one of those deals where, uh, he just wants to be out of it, you know.

Chris Martinez:

Um, but yes, most people are going to have an earn out. Um, so I would expect to get 50% plus an earn out over the next one to three years.

Andy Splichal:

And do you just work with marketing agencies?

Chris Martinez:

We just mark work with marketing agencies. So if somebody wants to sell, like, right now, like, we could obviously help them. Typically, the agencies have, like, maybe like a two to three year window, and that gives us a lot of time to actually put our team into your agency and start fixing some of the challenges so that, you know, if you were to sell on your own in two years, maybe you get 3 million. Um, we put our team in there. We are able to fix these, some of the, uh, I don't want to say weaknesses, but areas of opportunity. And now, instead of selling for 3 million, you know, you can sell for five or six. Um, so we like to have a couple years.

Andy Splichal:

And how do you guys get, get paid?

Chris Martinez:

Um, so there's a consulting fee that we charge right as we're building everything else.

Andy Splichal:

Like a monthly retainer.

Chris Martinez:

Monthly retainer, exactly. Uh, well, actually, the first step is just doing a business analysis or a business plan with us so that we can actually look at those issues. We decide that we want to take you on as a client, then we do the monthly retainer, and then eventually we'll get a bonus on sale. So we help you do the negotiation for the deal, help you find the buyer, all that good stuff, and then we take a commission.

Andy Splichal:

And what type of marketing agency do you guys specialize with?

Chris Martinez:

I mean, I don't want to say that there's a marketing agency that we wouldn't touch. It's really just the deal size. So on the low end, we're looking at, like 5 million, but what we're really shooting for is, like 10 million. The only reason is that the government's going to take 40% when you do the exit. And so we want to help you build the business so that when you sell it, you're getting a significant amount of money out of the deal.

Andy Splichal:

Nice. All right, well, that is all I have. Do you have anything else you'd like to wrap it up?

Chris Martinez:

Yeah, I guess the only thing is that I don't know when this is coming out, but we have an event coming up in December in San Diego. If anybody would like to come. We'd love to have you there. It's so it's, I don't even know, the fourth, 5th, maybe even the 6th time that we've run this event. It's called Agency Freedom Live. You can go to agencyfreedomlive.com, grab a ticket. And so this event, they're always a little bit different. So it's going to be December.

Chris Martinez:

It's December 4 to the 7th in San Diego. And because of all the changes, not only in our industry with things like AI, as you mentioned, but also the economy, right? Like, it was very unstable time right now, we don't know what the United States is going to look like in the next three months. Even so, this event is basically going to give you the plan, and we're going to kind of break down your agency back to the studs and show you how to rebuild it through 2025 so that you can survive everything. We're going to have some amazing speakers in there. We're going to be talking actually about lead generation for your agency as well as sales. We're going to go through all the financial model for you. You're going to go through the team that you're going to have to build for 2025. If you're going to thrive, everything will be covered so that you walk out of those three days and you have the exact blueprint of how you're going to grow the business in 2025.

Chris Martinez:

So if you're interested in that, yeah, come to the event is that it's.

Andy Splichal:

Going to be just in downtown San Diego.

Chris Martinez:

We're doing it in Mission Valley, so. Oh, my gosh. What's the name of the hotel? I have to put it in the show notes, but if you go to agency freedom live, you can see the hotel.

Andy Splichal:

Well, very cool. Yeah, we'll put that down in the show notes. Well, thank you for joining us today, Chris.

Chris Martinez:

Awesome. Thank you, sir. Have a great one.

Andy Splichal:

For listeners, remember, if you like this episode, please go to Apple Podcasts and leave us an honest review. And if you're looking for more information on connecting with Chris Bloom Partners or that event he had just mentioned, we'll put the links in the show notes below. In addition, if you're looking for more information on growing your business, check out our podcast resource center, available at podcast dot makeeachclickcount.com. we have compiled all of our different past guests by show. Topping included each of their contact information in case you like more information discussed in any of the previous episodes. Well, that's it for today. Remember to stay safe, keep healthy, happy marketing, and I'll talk to you in the next episode.