With the right formula in place, agencies can grow at an astonishingly fast pace. Take Jungle Creations and Byte, both among the fastest-growing companies in Europe, according to the Financial Times. Over a three-year period, the two companies grew their revenue by a staggering 3,863% and 2,300% respectively.
Some agencies can grow so fast they almost make it look easy. But, if you own or have owned an agency, you’ll know it’s anything but. The marketing sector is one of the most competitive industries there is, particularly in this age of near constant digital disruption. For every marketing shop that is a success, there are just as many that are falling by the wayside.
At Waypoint Partners, we specialise in advising agencies on the best strategies to increase their growth. Over many years, we’ve come to recognise the most common mistakes which prevent companies from reaching the heights that Byte and Jungle Creations are now enjoying. But, with the right processes and culture in place, agencies can quickly turn this around:
Build a robust sales engine
Few businesses can expect to grow without a strong sales and marketing function behind them. Unfortunately, agencies often make the mistake of taking an ad-hoc approach to bringing in new business. That usually means allowing themselves to get bogged down in the weeds with client work and working on what’s urgent rather than important. When they’ve finally got time to raise their head above the parapet again, the new business pipeline has stopped flowing. Many agencies suffer from the same sales challenges; ineffective sales people, misplaced budgets, lack of a defined sales process, a weak sales proposition, lack of commercial culture plus founders not having the experience/time to dedicate to the improvement and running of the sales team. All these should be addressed if an agency is to experience healthy and sustained growth.
Leverage your existing client base
As discussed above, driving growth through new business is critical for all agencies. However, there are often just as many opportunities to grow the business by using an agency’s existing client base. According to research, bringing in new clients is six to seven times more expensive than growing an existing one. As such, agencies should have clear plans for spotting and creating opportunities in their client base and have the capability and know how within the team to deliver on it. Having the wrong type of client service people – ones that only focus on moving project work through the business – should be replaced with more strategic or commercially hungry types.
Phase out low growth clients
If an agency has too many low-margin, low-growth clients on its books – the ‘long-tail’ – this will often mean their client service teams become too thinly spread, storing up trouble for the future. When this becomes the case, agencies need to be ruthless and start taking steps to phase the least profitable ones out and replace them with what we call ‘golden clients’ – high-margin and high-growth accounts. There are some less profitable clients that are worth keeping of course – for example, the ‘fame’ ones which have helped you to win awards or the clients which your people love working with. But, generally, agencies need to be shifting away from clients that aren’t going anywhere and are costly and painful to service.
Profit is sanity, revenue is vanity
It sounds obvious, but it’s surprising just how many creative and digital agencies focus too much on growing revenues and not nearly enough on ensuring they turn a profit each year. Maintaining a healthy balance between revenue growth and profitability is critical for agencies, particularly smaller, up-and-coming ones. It will determine whether an agency is able to meet its mid- and longer-term objectives and impact whether it can attract vital investment to help it grow the business. Exceptions occur through periods of rapid growth and investment of course, but always check your underlying profitability on a regular basis.
Adopt a growth mindset
Once they get comfortable within their niche, it’s quite common for agencies to get stuck doing the same thing they’ve always done. Marketing has changed massively over the last decade, and companies that stand still can quickly find themselves replaced by nimbler and hungrier competitors. That’s why agencies need to create a culture which allows them to be constantly open and ready to change. This should be reflected at all levels of the business, and not just at the top. Everyone needs to be encouraged to identify developing trends and empowered to spot aspects of the company which aren’t working, and which could be improved. It doesn’t mean ripping up the rule book, but agencies do need to be continuously evolving and growing to meet the needs of a changing market.