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News & Views

The rise of the Northern agencies: Zeroing in on profitability

by Steven Mallon
Insights
|
6th February 2020
The rise of the Northern agencies: Zeroing in on profitability, post image

In the third article in this series Steven Mallon, Director at Waypoint Partners, unveils what some of the most successful northern agencies are doing and why there is a fantastic opportunity for them to be the next northern success story.

At Waypoint Partners we have run and scaled agencies, walking in your shoes. With this experience we partner with agencies knowing what it’s like to be an independent agency owner, as well as being the buyer.

The route to success for Northern agencies and others like them are founded in 4 common and replicable factors that provide strong sign-posting to growth and value realisation for the leaders of Northern agencies today. The next set of Northern agency success stories will be those that adopt, plan, embed and drive these factors to increase agency value. We have already discussed the importance of a growth plan slowing you to realising value and the value proposition challenge; this time we look at the importance of Profitability.

A focus on Profitability
Many agency leaders are focused primarily on top-line growth through new business wins and increasing revenue. For agencies in the late startup and early scale-up stages this is entirely natural as they seek to progress. Real growth and resulting agency value come not from top-line growth but from a focus on driving bottom line growth through managing for profit. This is the key metric of agency valuation and is the primary measure that potential buyers will place on an agency.

“Real growth and resulting agency value come not from top-line growth but from a focus on driving bottom line growth through managing for profit.”

In conjunction with developing and selling a value proposition to gravitate towards higher value client engagements, equal focus for leadership teams should be placed on maturing the operating model of the agency to attain higher levels of profitability. Many growing agencies are characterised by a client portfolio that is made of a handful of high value engagements that deliver the majority of profit and a long-tail of smaller clients that, whilst adding to top-line and consuming valuable resource costs, provide little in terms of bottom line growth. Leaders in Northern agencies require a laser focus on operational management with a clear focus on managing for profit to satisfy the key requirements of the buyer market, or indeed achieve maximum dividend.

This is the topic of a masterclass ‘Driving Profitability & Sales Transformation’ we are hosting in Liverpool on 26th February. This is specifically for agency leaders and is a highly practical session which will provide the tools to affect some real change in your business. Taking you from planning for profit to unpicking your sales & marketing and client services to the role of culture in driving a higher margin. You can reserve your place here.

The other blogs in this series look at the other common and replicable factors:

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