fbpx

Author: Gareth Healey

Does your agency have service-market fit?

Gareth Healey asks does your marketing agency have service-market fit?

Why don’t marketing agencies focus on service-market fit?

In addition to being a marketing agency mentor,  I’m active in the tech startup sector as both an angel investor and a mentor to tech start-ups. Understandably, the tech sector gets a lot of media coverage these days. Amongst other things, there is a vast amount written about start-up tech businesses and their pursuit of what people call product-market fit.  Which got me thinking. Why don’t you hear anything about service-market fit and why don’t marketing agencies and other service businesses focus on it?

What is product-market fit?

The term product-market fit was coined by Marc Lowell Andreessen the co-founder of Netscape. He described it as “being in a good market with a product that can satisfy that market.”

Over the years the term has had different interpretations and emphasis. I notice that people often now use it to denote when a start-up starts to gain traction i.e. customer numbers and sales start to increase. I don’t think this is wrong, but I find more use for the term in more of a strategic context.

For me, product-market fit is when a business has identified a specific market, defined a problem/need in that market and developed a concept for a product that will solve or satisfy these issues.

The building blocks of product-market fit

In order for a product company to achieve product-market fit, a number of core elements need to be in place:

a) A sizeable and commercially attractive, but nevertheless, very SPECIFIC market(s) has been defined.

b) The business has a clear understanding of their target market, their behaviours, their motivations and their mindset as people (not just as customers)

c) There is a problem, an underdeveloped opportunity and/or underserved needs within the market. N.B. Customers might not necessarily be aware of this, but the business has validated it. When UBER started in San Francisco, few of their first customers had really been crying out for their concept, however the market and the underserved need was there.

d) The business has or can create, a product that will deliver value by solving the issues above.

e) The product is so effective at solving the problems that customers are willing to PAY to access it. This is simple, but overlook it at your – commercial – peril.

f) The product outperforms competitive offerings or alternatives (if indeed any exist).

Whilst product development is an iterative process, and product-market fit should lead to market traction, the sooner the criteria for the fit can be established the better. 

 Product-market fit should not just be seen as a signal of success, more a vital component and a building block of it.

Which comes first, the product or the market?

When people refer to product-market fit, all too often the focus is placed on the latter part of the term (a product that can satisfy the market) and not the former (in a good market). Importantly, Andreessen emphasised that the market matters most.

When a great product meets a bad market, the market wins.  When a bad product meets a great market, the market wins. When a great product meets a great market, both win.

Conventional wisdom leads us to believe that most products are created before they are sold. Inventions and historic discoveries have of course resulted in millions of commercial products. And some products have also been created by accident (the Post It note is one of the most famous examples). Nevertheless, today’s product development is primarily about innovation, not invention.  That said, even the wheel was created to solve a problem! 

Today you have to identify a market problem/need first. Only then should you “sell” the idea to your selected market to ensure it is truly required and commercially viable. If the feedback is positive you can then build the product out properly. This is the essence of the MVP (minimum viable product) approach.

Time spent building a business around a product is pointless. Building a business around solving a problem and/or satisfying a need in a market is the key. The product is the vehicle, the means to the end. 

Find a market, identify a need and then develop a product.

Customer First

There is a danger in making the product development process sound incredibly simple. It is obviously not. In modern society, access to information, products and services is fast and easy. Finding a product-market fit for a new product or idea is difficult. Finding a large enough market, that has a need that is EITHER underserved by others OR is a need that the market itself has not truly come to appreciate can be a real challenge. 

The ability to find a great product-market fit, whether the solution uses tech or not, can make the difference between your company being a success or failure.

Tech start-up founders are looking to solve problems for a specific group of people by building scalable tech products. However, it is customers, not start-up founders, that decide whether a product meets their needs or solves their problems or enhances their lives. That’s why smart tech founders spend so much time defining and refining their target market(s). They analyse not just their customers’ problems, but their behaviours, attitudes and how they approach the rest of their lives. 

Achieving absolute clarity on who the target customer is, allows product teams to build and tweak their products with a clear understanding of who will be using it, what they will be using it for, how they will be using it and, crucially, why they will be using it.

The target market is often segmented and profiled using audience personas or persona archetypes (we used to call them “pen portraits” back in my advertising days). Whatever you call these things, they achieve the same objective. They provide a profile of the customers not just by the traditional methods of demographics, but by looking at how they think and behave using psychographics.

Tech start-ups have a very high failure rate, but one pitfall is easily avoided. Many founders become obsessed with the product, not the customer. Constantly improving or tweaking the product, adding more features and enhancing the user experience is a sure-fire way to burn cash without achieving any traction in the market.

Customer-first thinking and an obsessive focus on the value proposition is a way that most start-ups can avoid the pitfalls of too much expensive product development and not enough actual sales. 

Beyond Noise Product-Market Fit Diagram

Sell futures not features

My friend and business associate, Mike Killen, has a modern take on the old marketing adage, sell the sizzle, not the sausage.  Sell futures not features. In other words, it is what the product can do for the customer that is important, the results it creates and the problem it solves, not the features it has.

The “value” a product delivers is what people will pay for. This value is captured in a value proposition which should form the basis of all marketing and sales activities. 

The value proposition sits on the front line at the interface with the target market. If the value proposition of a product can effectively capture who the product is for, what they need it for, how they will use and why it exists and is better than a comparable alternative the battle for sales and market share is half won.

What is service-market fit?

So what has this got to do with marketing agencies and where does service-market fit come in?

Whilst product-market fit is a frequently used term, you rarely hear it applied to service businesses. Indeed, if you do an exact match phrase Google search for “product-market fit”, you get nearly a million results. Doing the same search for “service-market fit”, delivers only just over 3,000.  All terms are not created equal it would seem, or are we all obsessed with products and not services? 

Most tech products are – at their core – actually service providers. The very nature of most SaaS products and companies is that it is technology delivers an experience or service. The fact that such businesses don’t rely on people to deliver the service though means that they are more repeatable and scalable business models.

Regardless of what industry you are in, or what business model you are operating, service-market fit follows the same principles as product-market fit but, of course, applies it to service-based offerings. 

There is a school of thought that service-market fit should be analysed BEFORE product-market fit for SaaS businesses. In other words, you should find a target market, identify a need and/or problem and then analyse whether people would buy a service to solve it. Do this BEFORE you then build a product to automate/deliver the service using tech and you will save yourself a great deal of time and money. 

What this means for agencies.

The majority of marketing agencies use people, not products, to deliver their services to their clients. All of them use technology to support the delivery of these services in some way of course, but their clients buy the time and skill of the people in the agency.

Nothing wrong or surprising in this. What does continually mystify me is why agencies seemingly give so little credence to forming or re-shaping their businesses using the service-market fit model.  

As I have explained above, the first stage to achieving product/service market fit is define the target market.  Agencies spend a vast amount of their time looking at target markets and segmenting their clients’ audiences, but almost no time at all segmenting or defining their own.

Most agencies are extremely reluctant to target a particular client sector.  For a long time, my own agency had a market focus. Not a particularly tight one I admit, but we were retail specialists. Looking back I often reflect on the knowledge and power this gave us. I don’t think I fully appreciated it at the time. The ability to target prospects at their own industry conferences, the opportunity to become subject matter experts, the ease with which we could converse with and onboard new clients were just some of the many advantages this had.

Crucially though, by having a target market we had a head start in identifying what problems our clients had. What was keeping them awake at night?  What opportunities did they want to exploit? What industry-specific needs did they display?

Having this knowledge not only enabled us to target a particular audience, it enabled us to construct, develop and review the services we provided around those clients and the needs they had.

So many agencies describe their businesses in terms of the services they have to offer. Many still cling to that coveted badge of honour that is full service.  “We do everything for everybody” they shout from the rooftops!

Describing your agency with a list of services is like a product company listing out the features of their product(s). It is features, not benefits. The sausage, not the sizzle.

Having a more focussed market (client segments) with a more focussed product offer (services) gives you power.  It gives you deeper expertise and more control of your business.  

You can start to measure your results better and you can start to set your prices for delivering the services. You don’t have to accept the “costs” dictated to you by the market norms of what is adjudged to be acceptable hourly rates etc. You can also develop your agency by adding the services (talent) that will really benefit your clients and enhance their experience,  rather than adding people to simply satisfy workload or capacity issues. 

In summary…

If, as an agency owner, you embrace service-market fit thinking when building your business, you will identify what types of clients will benefit most from working with you. What issues or underdeveloped needs do they have?

How can the services you offer (or maybe some that you currently don’t) BENEFIT those clients? How can you improve their user experience? 

How are you BETTER than other alternatives they may have (N.B. awards and having an office dog don’t really cut it)? 

How can you bring these elements together in a compelling value proposition that communicates how your agency fits with your target market

What do you need to do to change your agency with service-market fit thinking?

 

Growing or Scaling – which one is right for your agency?

Growing or Scaling your agency

Growing or Scaling?

It seems to be the current trend to talk about how to scale businesses rather than grow them. Are you growing or scaling your agency? Many people, myself included, use the terms grow and scale interchangeably, but are they the same thing?

In short, the answer is no.

I spoke at a conference for 80 digital agency leaders this week. Part of my talk included a section on the difference between growing and scaling an agency. From the feedback afterwards, this seemed to strike a chord with many people in the audience.

My point on this was that growing and scaling are different things. They might exist to achieve the same goal (a bigger agency), but they require a different approach and growth plan.

Growing an agency is difficult. Scaling an agency is not only harder, but it is a different strategy that will certainly need more investment, and may even require a different business model entirely.

What defines growth?

According to the OECD, high growth companies are businesses that grow revenue by 20% or more for 3 consecutive years. Doing this in a business, in any sector, is a significant achievement.

However, even growth in revenue over this timeframe, whilst enviable, does not necessarily qualify a business as scaling (or more importantly, a business that is scalable). Despite the frequent commentary around scaling, I’ve found it difficult to find a definition.  So are you meant to be growing or scaling your agency? Here’s what I think…

Is there a difference between growing or scaling your agency?

Revenue growth is usually a good thing for any business, but for many firms top line growth often comes with additional baggage; a comparable increase in costs. 

This is particularly true for marketing agencies, where securing additional clients generates more revenue, but the costs of the business also usually increase. Being a people-based business model, agencies require more human resources to service the additional clients. In short, growth is achieved, but as costs can grow at a similar pace to revenue, profit only increases proportionally.

Scaling on the other hand, is where revenue increases at a much faster rate than costs. Incremental customers and revenue are acquired. The business does not need to increase costs to service or satisfy this growth. Economies of scale are realised. The gap between revenue and costs widens and, in theory, profit grows exponentially.

Growing any business is a challenge and agencies are not different. Scaling a business however requires more than just hard work, planning and rigorous execution; it requires a certain type of business model.

The traditional marketing agency business model, or any service business for that matter, relies on the quality and number of the people that it employs. The same applies for any professional knowledge firm including accountancy firms and legal practices.

In their traditional format (leaving aside the rise of online legal services platforms etc) for these types of businesses, growth in top line revenue fuelled by more clients, requires additional people resources to service the growth 

Growth in revenue therefore, is usually accompanied by a corresponding growth in business costs. Of course, action can be taken to control the rise in costs and it will rarely be as linear as the example shown in Fig. 1. Some economies of scale may well be realised, but broadly more clients means more revenue, means more people, means higher costs.

Fig 1 - Growing - Growing or Scaling

Of course, growth in both revenue and costs can translate into growth in profits, but the profit figure may well be larger based purely on size not on efficiency. In this situation, profits grow but profit margins are likely to stay the same.

 

On the other hand, scaling a business can result in bigger profits derived through increases to both revenue and margin.  If revenue grows but costs increase at a lesser rate, the gap between them widens (Fig. 2).  Improvement in profit margins, as well as profit overall, are the result.

 

In either the case of growth or scale, the speed with which they are delivered and the timeframe over which they are maintained is significant, but it is not a determinant of whether a business can be said to be scaling.

 

Fig 2 - Scaling Growing or Scaling

Different Business Models

It is not that marketing agencies can’t scale, it is just that some business models are more suited to scale than others. As a people-based service firm, the business model of a marketing agency has many advantages:

  1. It is easy to set up – few barriers to entry exist
  2.  Low investment is required
  3.  It is a relatively low risk business model
  4. Break-even can be achieved quickly
  5. Successful agencies can produce healthy profits for their shareholders
 

These advantages are in stark contrast to the tech firms that are so prevalent at the moment. Tech firms are higher risk. They usually require higher levels of investment and funding at the early stage of their development. Failure rate is high and the break even for the majority of these firms is much later in their evolution than a service business.

That said, they say where there is risk there is reward.  Tech companies have much more potential for larger upside than service firms like marketing agencies. Whilst risk is high, the upside in terms of profitability, sustainability and saleability can be much greater than a service firm.

The difference is in the business model. You can grow businesses that rely on people for the delivery of your service (particularly if the people are adding or creating value not just delivering a process), but they’re difficult to scale.

Tech based businesses have the edge when it comes to scaling. In order to scale, a business needs to serve many customers, frequently. Reach and distribution is vital. If technology can facilitate this then economies of scale are more accessible and realisable. 

Accepting the heavy initial investment, once a tech firm has passed break-even point and gained traction in recruiting new customers scaling is underway. This is demonstrated in the classic “J curve” (or “hockey stick”) trajectory (Fig. 3).

A service firm usually has a flatter growth trajectory, whilst a tech firm (or similar) is more of a rollercoaster. That said for a lucky few Tech founders at least, the potential for a much steeper scaling phase is more easily accessible.

Different Business Models

Different Businesses

To illustrate my point further, let’s take a look at 3 separate companies.

 1. Marks and Spencer is a British retailer established over 135 years ago in Leeds. It currently has 85,000 employees, with revenue per person standing at around £122,000.

2. WPP started life as a manufacturer of teapots and baskets, but after Sir Martin Sorrell took a controlling stake in 1985, he built it into a global advertising and marketing services group. Today it employs 130,000 people and has revenue of £130,000 per person.

 3. Facebook needs no further introduction. At less than 16 years old, the company employs – only – 40,000 people. They currently run a business that achieves revenues of £1.16M per person.

Three very different businesses built on 3 very different business models.  The difference in revenue per person between Facebook and the other 2 is remarkable (N.B. the profit per person figures are even more astounding) 

Clearly, Facebook is a tech platform and whilst there are several reasons for its phenomenal success, the scalability of its platform, and therefore its entire business is certainly paramount.

Scaling an agency

Growing an agency is not an easy task. Scaling an agency, whilst not impossible, is even more difficult and requires a different strategy.

Fundamentally, to truly scale an agency you need to embrace a different business model. The knowledge firm providing expertise/creativity through people is not scalable.

The scalable agency model must-have technology as a facilitator at its core.  It must be able to serve an increasing number of customers without a corresponding increase in costs.

It must be able to use technology to deliver reach. Today’s tech puts agencies in a unique position, the ability to more easily access clients and distribute value to a much wider audience.

Crucially I believe that to scale an agency, you need to have much more of a productised and systemised business. Consultancies are usually, by nature, small boutique operations.  To scale an agency you need to break away from the traditional agency consultancy model.

Is growth right for everybody?

I’m a believer in continuous growth and having a growth mindset. The maxim “if you’re not growing you’re dying” has always resonated with me.

However, I also believe that size, in itself, is not a strategy.

As an agency owner, you don’t have to be obsessed by size or scale. Neither do you need to be fixated with scaling. 

There is a great deal to be said for being small in today’s agency market. Small is agile and nimble. Small is personal and service focussed. Small is expert and artisan.

If you do want to grow your agency, make sure you have a vision for what that size needs to be and why the size is important.  Are you aiming for growth or do you want to scale the business?

If you do choose to scale then assess whether your business model is capable of achieving it. What needs to be changed, improved or adapted to give you the platform to be able to add more clients, more revenue but not increase your costs at the same rate?

The benefits of mentoring

The benefits of Mentoring

THE BENEFITS OF MENTORING

Since exiting my own agency, I’ve become known and recognised for my skills as a mentor. It’s a part of my business I enjoy, particularly when I’m working with marketing agency founders.  That said, I’m a massive advocate for the benefits of mentoring in all walks of life.

I believe we all need mentors, both informal and formal, and I’ve benefitted immensely from learning from some amazing people over the years (you know who you are!) The role of a mentor is multi-faceted and consists of at least 9 roles. So what exactly are these roles, and what are the benefits of mentoring?

The role of marketing agency mentor is only one aspect of Beyond Noise, but it’s often the one that I find I can deliver the most value.  Indeed, it’s the reason why I called the business Beyond Noise in the first place. I enable busy agency owners find time to get away from the day-to-day to think and plan. They say a quiet mind can focus more objectively (and we all need to do that from time to time).

Supporting an agency founder through mentoring not only benefits the individual themselves. It brings additional benefits to the people that work for them, people that work alongside them and, of course, the performance of the agency as a whole.

There are many different views on what constitutes mentoring and lots of debate around its relationship with the discipline of coaching. I think everybody would agree there are areas of overlap between both.

Personally, I prefer to refer to myself as a marketing agency mentor rather than marketing agency coach. Mentoring to me is more supportive and encouraging whilst coaching is more directive.  Both have a role to play in personal development of course, but when I’m working with agency owners I prefer the label “mentor”. 

My clients are experienced people who are very creative and entrepreneurial. I think it’s important to preserve the boundary that they are running their own businesses and making their own decisions.

My role as mentor is to support their decision-making using my own experiences to influence and guide them. There are many benefits of mentoring, including accountability, but I don’t see myself as a business coach that “trains” agency owners or keeps regularly checks on their delivery of tasks. My clients can do that for themselves.

As a marketing agency mentor, I find myself having to use a number of skills and perform a number of roles when working with my clients. I define them as the 9 roles of mentoring. Which role I am performing at any one time depends partly on the situation, but crucially on the needs and requirements of the client. 

Sometimes these needs are evident and something they are very aware of, other times I need to do a lot of listening to try to interpret from myself what role(s) is most suitable to help them solve there issue and make progress.

So what are the 9 roles, and how do they translate into the benefits of mentoring?

THE 9 ROLES OF A MENTOR (NO PARTICULAR ORDER)

1. Role Model – This is a primary role of any mentor. Somebody the agency owner admires for their qualities, behaviours and experience. Somebody who has been there and got the T-shirt as they say. As a title, “role model” sounds pretentious, but we all need great role models in our lives. I have benefitted from a many in my time. For me it’s an opportunity to share stories and experiences from my agency career in order to help others make a success of their own career and business.

2. Performance Coach – This role offers support in a particular area or areas. It is by name and nature more coaching than mentoring, but within a mentoring context it is short on timescale and focussed on selected topics or issues. Its purpose is to improve the performance and productivity of the agency owner in a particular area.  Business Development and Marketing the agency tend to be high on the list here. Importantly for me, as a marketing agency mentor I am not there to operate as a surrogate manager.  No agency owner, or any entrepreneur for that matter, wants that.

3. Challenger – One of the most valuable benefits of mentoring. As a challenger, I help the agency founder access a greater level of self-awareness and more of an open-minded approach to key issues.  This role excels when a good relationship has been established first and as a mentor I am able to use good, insightful questioning. Mutual trust is vital to success in this area as often it involves me playing the role of devil’s advocate and/or pushing the agency owner to re-think their approach or decision-making.

4. Professional Friend – The ability to speak openly and directly without judgement or fear of being seen as rude is crucial to the mentoring relationship. As a marketing agency mentor, I am able to address issues and concerns that the colleagues, family, friends and even the agency owner themselves, are reluctant to raise or maybe are avoiding.  Such issues and concerns must always be dealt with in a constructive manner.

5. Thinking Partner – Some people think better when they have somebody to listen to their thought processes and help them focus on an issue.  This demands great listening skills from a mentor. Sometimes just having an experienced ear to listen to their thoughts, allows the agency owner to clarify their thinking and decide on the best course of action for themselves. As a mentor, if I can guide the thinking a little and add value along the way, a better outcome is usually achieved.

6. Sounding Board – A vital role of any mentor and a key distinction from the coaching role in my view. My clients have often made, or at least formed, a decision on a particular subject, but they value the opportunity to sense check their thinking, validity, reaction and effectiveness. As a marketing agency mentor this makes perfect sense. It can’t be done for every decision of course, but for key decisions it is invaluable. As marketing agencies we A/B test lots of our output, so testing our decisions on the running of the business seems obvious.

7. Guide – They say you can’t coach knowledge, but as marketing agency mentor I find that experience is something that can really add value. As a mentor, I ensure all my clients make their own decisions and take ownership of them, but if I do try and guide them along the way with a few relatable experiences of my own in order to advise but not lead.

8. Accountability Partner – One of the key benefits of mentoring is just having somebody who you respect spend time with you on a regular basis. As outlined above, I don’t see the role of mentor to be somebody that cracks the proverbial whip, but I do see accountability and keeping my clients on track as a key output.  No matter how driven we are, we can all procrastinate and make excuses for our lack of progress. Having somebody meet with you and expect to see actions and progress from the previous session, can be that added bit of extra motivation that many agency owners need to create growth.

9. Cheerleader – Last but not least, I believe we all need a bit of encouragement at some points in our career and personal lives. Helping the agency owner feel supported, motivated and engaged with the organisation is a crucial part of my role. I often find that as people are so busy and working in a very competitive environment they can lose sight of what they have achieved or how successful they are. They can certainly lose focus on what opportunities lie before them. As we all do from time to time, some of my agency clients occasionally suffer from imposter syndrome. A timely reminder of just what they have achieved and just how much knowledge, skill and experience they possess is often all it takes to get them back on track again and thinking positively about the week ahead.

Summary

The benefits of mentoring are numerous and multi-faceted. The 9 roles of a mentor can be dialled up or down depending on the individual and even on a meeting by meeting basis. All these “hats” are used instinctively by great mentors to get the best out of their mentees, and in my case get the best results for my agency founders and the businesses they run.

12 ways to maximise the value of your agency

Marketing Agency Mentor Gareth Healey outlines 12 ways you can maximise the value of your agency

How do you maximise value when selling your agency?

I’ve spoken to many owners of independent marketing agencies over my 24 year career, and proportionally far more in the last 2 years since I exited my own agency. One of the most frequent topics of discussion is exit planning and how to get maximum value when selling your agency.

Whether they run a small lifestyle business or a larger growth agency, most agency owners want to realise the value in their businesses at some point. Nothing wrong in this of course,  I’m a big advocate of forward planning. Although, I have to admit it does annoy me when I speak to people who have yet to even register at Companies House when they start talking about “being out of this in 5 years time”!

It is difficult to sell a marketing agency.  Whilst there are thousands of great businesses out there, the market is saturated. Agencies are hard to value as they generally have a low asset value.  When selling your agency, its ability to generate cash will be the major driver of value and key to its attractiveness to a potential buyer.

There are a number of options you might consider when selling your agency. You may pursue a trade sale or aim to sell the business on to your management team. In any event, here’s my 12 key drivers – in no particular order – that will bring you a higher valuation and consequently a higher return when the day comes.

12 key drivers that will maximise the value of your agency

1. SPECIALITY – With so much competition, focussed expertise is more highly prized than ever. A specialist is far more attractive and valuable to potential acquirers than a generalist. There is a saying “the sharper the knife, the deeper the cut”. Try and make sure your agency has deep expertise in a particular area or client segment (ideally both!)

2. QUANTITY – To command a premium when selling your agency, you’ll need to reach a level of critical mass. Unless you’re in a particularly specialist channel, or have gained rapid traction in an emerging tech niche, make sure you grow your business to a size that will be attractive to larger acquirers with deeper pockets.

3. SYMMETRY – A major part of the value of an agency is its client list.  The  more relationships you have with bigger brands the better. Easy to say of course, but the value of larger clients is not just in their revenue potential. Acquirers may well view buying your agency as a stepping stone to access large clients they would like to work with. Crucially, a balanced portfolio of clients is vital.  Most agencies have a large key client, but no single client should represent more than 25% of your turnover (ideally less).

4. SENIORITY – Businesses looking to buy your agency will usually want to realise some cost savings (your own employment costs included!) This is ideal for you as the exiting party, so having a senior team already in place and running the agency is vital. Moreover, the better the senior team, the better the opportunity you have of selling your agency to them!

5. LIBERTY – Earn outs are an inevitable part of most transactions and are perhaps one of the most emotive issues for exiting agency owners. Buyers will want you to commit to an earn out in order to hand over key client relationships etc. Be prepared to fulfil your earn out obligations. If you want a quick exit, it will be reflected in the lower price you will ultimately receive.

6. SUSTAINABILITY – Agency revenue is increasingly moving to project work and recurring revenue streams for many agencies are difficult to achieve. Acquirers of cash generative businesses are looking to ensure the revenue has longevity. The more exclusive contracts you have in place and/or subscription based revenue you enjoy, may not just influence the price, but whether your agency is attractive to a buyer in the first place.

7. GEOGRAPHY – Where your business is based is not something you can easily change, but it will be an important factor for acquiring businesses when you’re looking to sell your agency. Naturally, circumstances will differ widely here, but in general agency major city centre locations are preferable and a footprint in London highly prized (as long as it operates client business and is not just a managed office location).

8. PROFITABILITY – The higher the profitability of the agency, the more valuable it will be. Agencies are usually valued using the profit multiplier. The multiplier side of the equation can be highly subjective (and influenced by the other drivers in this list) but the profit figure is more factual and controllable. Aim for at least 20% EBIT. Of course, if you’re running a very profitable agency, you might not want to sell at all.

9. TRAJECTORY – Agency life is often full of ups and downs. For many, looking at the agency’s performance over several years of annual accounts can often mirror the volatile nature of the sector. Buyers on the other hand, want stability and a smooth growth curve (the steeper the better of course). If you can demonstrate consistent year on year growth and profitability, it will be more attractive to a buyer looking to add your agency their business. If you can’t, be ready with a solid reason(s) why a certain year (or years) showed a temporary dip in your agency’s fortunes.

10. TANGIBILITY – The key assets in an agency are generally its talent pool and its client relationships.  Both require constant management and both can leave the agency if they wish.  Tangible assets and IP can dramatically increase the value of an agency (in addition to locking in client relationships).

11. TRANSPARENCY – Some ex-agency owners have pointed out that a “clear track record” helps to increase the value of an agency (or any business for that matter). What they mean by this is the agency has nothing that the due diligence process will highlight as a potential negotiation point for the buyer to reduce the value. Legal disputes that may still feasibly carry a risk of further action, employment law transgressions, financial issues such as the participation in tax schemes to minimise tax liabilities etc. We’re not talking skeletons in cupboards necessarily here, but anything that is not completely straightforward and transparent that might set alarm bells ringing for a buyer. You can’t necessarily sort these things out retrospectively of course, so the best advice is to avoid them in the first place.

12. PREDICTABILITY – An important omission from the original list. The ability of the agency to demonstrate a clear sales process that is predictable and systemised. The agency understands its sales funnel, and deploys an established sales model that creates revenue and business growth based on a formulaic process. Sales do not depend 100% on the exiting owner!

Summary

As much as these drivers are value creators, they can also be value detractors. If you excel in one area this will increase the value when selling your agency. On the other hand, if you have an issue or underperform in one or more of the factors, this could have the opposite effect. Indeed, this could negatively impact the value you achieve becoming a tool for a buyer to use to try and discount the price.

Finally, of course you don’t have to be thinking of selling your agency to utilise these drivers. Indeed, the earlier you address the factors, the better foundations you put in place and the more attractive and valuable your agency will become.

3 lessons for agencies from Gordon Ramsay

chefs-lighting-fire-under-agencies

What can an agency learn from a TV chef? 

I like Gordon Ramsay. He’s a very intense guy, and although he shouts and swears a lot, I love his energy and passion. I admire his high standards and drive for perfection. He clearly wants to be the best at whatever he does.

What has this got to do with agencies I hear you say?

Whilst I don’t think Gordon’s management style (essentially standing an inch from somebody’s face and bellowing swear words at them), would be effective in an agency environment. I do think Gordon has a few lessons for agencies in other areas.

For starters… 

Some years ago, Gordon made a TV series called Ramsay’s Kitchen Nightmare’s. It basically involved him walking into failing restaurants and turning them around within a matter of days.  I used to like watching these shows, but the format became tired quite quickly, probably because it was so formulaic. Essentially, Gordon turned up at a restaurant unannounced, tasted the food and spat most of it out, before proceeding to chastise and antagonise the owner. He then set about telling them what to do. Every other word he uttered generally began with F (and I’m not talking “Food”).

I’d long forgotten about this series until earlier this week when, whilst channel hopping late one evening, I came across a re-run of the USA version. It’s basically the same format,  but Gordon turns up in a poor quality disguise and for some reason everybody calls him “Chef Ramsay” at every opportunity.

The main course… 

Kitchen Nightmare’s followed the same format every episode.  Once Gordon had ruffled everybody’s feathers and got a few people crying, he set to work. 

His recipe for success was very simple and consisted of 3 main dishes. Each contain delicious lessons for agencies in my opinion:

1. REDUCE THE CHOICE – In every single instance, Gordon believed the menu in the restaurant was far too extensive. In EVERY episode he cut down the amount of dishes on offer. Not only that, he introduced a Signature Dish.  A speciality of the house. Something that the restaurant could promote and become famous for.

This approach brought MANY benefits. It made it easier for the customers to buy. It made it easier for the business operationally. It brought more CLARITY to the restaurant proposition. They were clearer on what they stood for and who they were trying to appeal to. Quality improved as they became better at preparing the reduced number of dishes they served. Costs reduced as waste reduced (not as many ingredients were needed and wasted). Supplier relationships and terms improved as the restaurants needed to buy fewer things but in larger quantities more regularly.  I could go on.

2. GET THE MOJO BACK & RALLY THE TROOPS – Gordon ALWAYS had a harsh word or two for at least one member of staff (usually more). Sometimes these people were the owners, sometimes they were employees. In any event they were all UNDERPERFORMING.  Standards were poor. They had often fallen out of love with the job. Confidence was low and it was having a detrimental effect on the whole team.  Gordon did 2 things. Firstly he confronted the individual(s) and gave them some – brutally – honest feedback. After lots of emotional outbursts from both sides (which makes great TV of course), the people either left the business or responded to Gordon’s “tough love” and rediscovered their mojo.  He built their confidence back up by re-lighting the fire in them and praising their efforts. He inspired the rest of the staff by cooking his new menu and getting them to taste it and be proud of it.

3. GIVE THE PLACE A FACELIFT – Most of these restaurants looked unloved and tired. The decor was out of date, branding was poor or non-existent, and the standards of cleanliness were not great. There was very little marketing going on. The production company paid for a complete facelift and overnight the restaurants transformed into a brighter, cleaner, more modern and inviting environments. Regular and lapsed customers were invited to experience the new menu and invariably everybody was impressed with the food, service and decor.  The restaurants were back on their feet again.

To Finish…

I sincerely hope your agency is not failing. I’m sure it’s not a nightmare (although like every business, I bet it has its moments).
 
However, regardless of the current performance of your agency, there are lessons for agencies in these TV shows that are now mostly consigned to the lower reaches of tertiary Sky TV channels late at night.
 
There are things we agency owners can take out of this and even take action on next week in our own businesses.
 
I’m sure you’re already ahead of me, but let me summarise:
 
1. ARE YOU DOING TOO MANY THINGS OR TRYING TO APPEAL TO TOO MANY PEOPLE? – Could your agency benefit from a more refined and focussed “menu”.? Could you develop a greater depth of expertise rather supply a breadth of services?  Could this make you more attractive to CERTAIN clients and even allow you to charge more?
 
2. ARE YOU OR YOUR STAFF UNDERPERFORMING?  – Have an honest look at yourself and your agency. Are standards as high as they were? Are there any weak links in your team? Who has lost their mojo?
 
I’m not advocating shouting and upsetting people here, but I am urging you to consider whether standards have dropped and every member of your team are at the top of their game. If not, they either need to be coached or, for the good of the rest of the business, maybe it’s time for them to move on?
 
 3. DOES YOUR AGENCY NEED A FACELIFT? – Have a look around your office, your website, your social media channels.  In fact, why not review your whole client experience at every touch point? Is everything as good as it was or could be? How do your compare to your competitors?  Have you grown complacent in any areas?
 
I’m not pushing for rebranding here, but I am suggesting that Chef Ramsay has some lessons for agencies in both his TV show and his approach to business. The restaurant sector is highly competitive. Choice abounds and customers can be very fickle. Like the agency sector, you need to continually assess whether you are operating to the highest standards in order to stay relevant and profitable.
 
Why not gather your partners or senior team together on Monday morning and ask them what improvements they would make?
 
PS – No shouting or swearing allowed!

 

 

10 Tips for Smaller Agencies Wanting To Win Big Clients

I’ve had a number of conversations with smaller agencies in the last couple of weeks asking for my advice on how to win big clients. 

When I ran agencies, I was lucky enough to work with some big-name clients. Many of these were household names in the retail sector, and a number were significant seven figure accounts.  It doesn’t surprise me that agency leaders want to learn what the secret of winning big clients is; and how they can land some bigger fish themselves.

Naturally there are many advantages of working with bigger organisations as clients. Bigger budgets and usually greater volumes of work are available.  A client with a high profile can be used to promote the agency’s own brand and reputation. Larger accounts can provide some stability and security for an agency through contracts or retainer fees.  Stability that can provide solid foundations for fuelling more agency growth. Crucially, even winning one big client can be transformational for an agency. The power of association often leads to other clients and other – bigger – opportunities.

Working with large clients can also come with some disadvantages, however.  A big client can soon dominate an agency, both financially and culturally.  Growing the agency can actually become more difficult, as the demands of the key client always take priority.

Larger organisations mean more layers of people to work with and often more limited access to key decision makers. Competition for briefs is intense and formal pitches are far more common, longer and more time-consuming.  The larger clients often have procurement departments and can be incredibly price focussed and tough negotiators.

Moreover, once the relationship is formed, many agencies find that larger clients are sometimes more risk-averse. They can be less inclined to support creative work or strategy that challenges the norm and/or previously tested activity than a smaller business. Creativity can be become stifled and growth in other areas of the agency can stall as a result.

 

BIG ISN’T ALWAYS BEAUTIFUL 

Whilst the marketing agency sector is increasingly competitive, arguably more opportunities exist for the smaller agency to win big clients now than ever before.  

Many larger companies are increasingly setting up their own in-house teams. Whilst that might be bad news for some, it does mean that opportunities exist for smaller agencies to work with these clients and augment their in-house capabilities. Whether it is a need for specific expertise, or for support with high workload, big brands are building rosters of smaller niche experts.

Indeed, it’s clear that the days when large enterprises would only work with giant advertising and creative agencies are gone. According to Campaign, Starling Bank has recently eliminated large agencies from its advertising pitch. The challenger bank now says it will now only consider small-medium sized shops.  A trend that will certainly continue as larger organisations seek more agile client-centric agencies.
10 TIPS FOR SMALLER AGENCIES WANTING TO LAND BIGGER CLIENTS
If your’re a smaller agency looking to win big clients, here’s my 10 tips for landing those bigger opportunities…

  1. BE AN INFLUENCER – Whilst you might be a smaller agency, it doesn’t mean you must have a small profile.  Technology and modern media affords us all the opportunity to build a bigger presence online and have a greater reach. You just need to put the work in and make it happen. Many agencies understand this principle fully, but find the execution of this incredibly difficult.
  2. BE AN EXPERT – Building a profile and attracting bigger clients is easier if you are an expert in your – or their – field. Big agencies have a breadth of expertise and experience, but lack the ability, and sometimes the will, to become experts in a niche industry or product category.
  3. BE YOURSELF – Don’t focus on small, focus on the benefits that being small brings. Outside the box thinking, a different perspective, new processes and approaches. Big brands don’t want to look and sound like big corporate businesses anymore. They can learn from smaller businesses like yours. Show them how.
  4. BE FLEXIBLE – Don’t let your location or other factors inhibit your thinking or the growth of your agency.  Technology allows us to work from anywhere these days and project management tools can be used to keep teams and clients up-to-date. Even if that big client isn’t on your doorstep, it doesn’t mean you can’t work with them (and they will not work with you).
  5. BE A BIG THINKER – Just because you’re a smaller agency doesn’t mean you have to act like one. Be bold and think and act like a bigger agency. Promote your best work and your best thinking online through your own channels and on social media. Become a thought leader (especially if you have a niche audience or particular field of expertise).
  6. BE THE “A TEAM”Large agencies often win large clients then delegate projects to their “B” teams once the pitch is won.  Quality of work, and creativity in particular, can suffer. In a small agency, the entire team is the “A” team. Always strive to produce the best possible work for all your clients. A big client may be just as impressed with a high quality piece of work you’ve done for a smaller brand (particularly if it is highly creative and/or demonstrates effectiveness and ROI).
  7. BE AGILE – Often large agencies can’t react quickly to client requests such as additional resource because they need to get sign off from higher up. Large brands want agencies that can respond quickly to their needs. They are often frustrated by their own internal bureaucracy. Ensure you communicate your agile attitude.
  8. BE PROACTIVE – Nobody likes doing speculative work, but if you target a big client it could be your opportunity to make them notice you. If you have started to build a relationship with them, the opportunity to really engage may well come from a proactive proposal or piece of work that shows them you can deliver. Try and spot problems that big brands have and put some effort into thinking how you can help solve them. 
  9. BE PATIENT – Opportunities can come from smaller beginnings. If you have the opportunity to work on a one-off, well-defined brief from a big client; take it.  If you execute it well, further opportunities may come along and you can gradually establish yourself over a period of time.  
  10. BE TENACIOUS – Often smaller agencies win work from bigger clients due to relationships they establish elsewhere.  If an existing client you work with moves on to a different company, make sure you follow them and keep in touch. They may land a role in a big brand at some point and spot an opportunity for you to show off your skills.

 

 
FINAL THOUGHTS

Still want to win big clients? Of course you do.

Hopefully my tips above will help secure some bigger opportunities. In addition to these elements, you’re probably going to need 2 other ingredients; luck and perseverance.

None of the above factors are substitute for a little bit of luck. A chance meeting with somebody that works at a big client, a referral, a cold call that happens to find a client that has been badly let down that very morning. There is no substitute for this type of luck but perseverance and hard-work come pretty close.  

If winning bigger clients is your objective, don’t give up. But, of course, do ensure you continue to build a solid business around the clients you have now. Maybe you can make one of them into a big client yourself!

 

 

Agency Awards – the DESIRE to win

Table of agency awards in an agency reception area

What a fantastic evening we had at the Prolific North Awards in Manchester last week.  Congratulations once again to all the winners and, indeed, all the nominated finalists!

As a member of this year’s judging panel, I was blown away by the quality of the work and agencies on show.  I was also surprised, and OK I’ll admit it, at one point slightly worried, about the amount of work that goes into judging the award submissions. The judges really do put the work in!

I’d like to share some observations I made judging these awards. I’m sure none of these are specific to the Prolific North Awards alone, and all could be useful for any agencies entering any awards in the future.

Entering awards is an art form, and I now realise why a number of consultancy practices designed to help businesses with awards have been created in recent years.  N.B. Whilst Beyond Noise doesn’t offer this particular service, I do know a very good award consultant if anybody would like a referral.

Gareth Healey of Beyond Noise presents the 2019 SEO Agency of the Year award to Candid Sky at The Prolific North Awards
Prolific North Awards SEO Agency of the Year - Candid Sky
MY KEY TAKEOUTS

If you have a great campaign/agency with some great results, you’re more than half way to winning any award you enter.  The other half of the equation is the award submission itself.  Sadly this is often where agencies often fall short.

Unfortunately, I know from experience that potentially award-winning campaigns/agencies have not been successful by falling at the last and most important hurdle; the entry form.

Some people may think the award submission is not that important and just a formality.  Others might leave it until the last minute and get a junior team member to ”coordinate” pulling it together. Either way this means the chances of winning the award are drastically reduced.

Why?  Very simply the answer is “time”.  As much as judges want to give every entry full consideration, when faced with so many, even a great campaign can easily be passed over if it is not supported by a great entry.

Indeed, rather than call them “entries”, our industry might respond better to the label of “written pitch”, because that is exactly what they are. The judge actually has two tasks at hand; firstly to try and understand what the campaign/agency is about, before then going on to decide exactly where it ranks amongst the other entries they also need to review.

I thought it was noticeable judging this years Prolific North Awards, that the quality of the award submissions from agencies involved in B2B marketing was of a consistently high standard. Perhaps a coincidence, but maybe a demonstration that B2B agencies are more experienced in communicating with business audiences. They certainly have experience in getting across complex issues in a simple and straightforward way.

Either way, its clear to me that whatever your reason for entering awards, you must have the desire to win, not to just enter.  Which means that  you have more work to do than just fill out an entry form and book your table.
Gareth Healey fo Beyond Noise presents the 2019 B2C PR Campaign of the Year award to Smoking Gun and Childs Farm
Prolific North Awards B2C PR Campaign of the Year - Smoking Gun & Childs Farm
THE DESIRE TO WIN

So how do you show you have the desire to win? Here’s my top 6 tips for agencies to think about when entering awards, handily constructed as a D-E-S-I-R-E acronym (well, sort of!)

DEMONSTRATE clear objectives. If you can’t clearly outline measurable objectives then consider whether it is right to enter this award. It’s the first thing judges will look for and evaluate you on.

ENTER the right award. Sounds obvious, but it can be tempting to enter the category you want to win, not the most appropriate category and one that you CAN win. If your entry doesn’t really fit within the category you select, it will be plainly obvious to the judges when assessing your entry against the competition.

SUMMARISE the strategy and output clearly and concisely. Don’t make the judges try and piece things together. They might want to, but they won’t have time. It might mean your entry doesn’t get the recognition it deserves.

INCLUDE additional information (if you are allowed). However, remember to keep it brief, easy to follow and impactful. A short video is better than 4 or 5 pages of copy of still images.

RESULTS and the return on investment achieved are critical (not optional) and must exceed the objectives. Indeed, like the objectives themselves, if you cannot clearly demonstrate the results and ROI, consider whether you should be entering at all.

EVERY award is a pitch. Its an opportunity to sell your work and agency.  Just because you can’t stand in front of people with a slide deck, doesn’t mean the award submission doesn’t need to “sell”. Indeed, it means it needs to work even harder. If given the opportunity to explain “why you should win”, do just that. Pitch your entry to the judges (don’t just write a sentence or two or add a client quote).

“AND THE WINNER IS…”

In summary, the winner is not always the agency with the best campaign.  The winner is the agency with a great campaign, backed by clear objectives and  clear measurable results. The agency who is prepared to put some real effort into their award submission and show they have the DESIRE to create an award pitch that will do justice to the work they have produced for their client(s).

Scroll to top