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The secret to growing a small agency

Tools to grow a small agency from Beyond Noise

Growing a small agency

Whilst my own experience was running a big business (£12M+ Turnover and 175 staff), as an agency coach I love working with people growing a small agency. Owners of smaller agencies are usually bright, driven and eager to learn. What’s more, they can make decisions and act fast. They don’t need to consult or engage other people. As a consequence, I can usually make a bigger difference, more quickly, to their business

Whilst small agency owners share some positive traits, they also make similar mistakes. Growing a small agency is hard. Each business is unique, but you can fall into the same traps or run down the same blind alleys. One of my roles as an agency coach is to help my clients avoid these. A mistake I often see is the fixation people have with the concept of working on the business not in the business. The mistake is not in embracing the idea itself, it’s the way people often misinterpret the concept. They also overlook a fundamental challenge they need to overcome first. Before you can work on the business, you first need to get to a position where you are running the agency (and not delivering the work).

The Emyth

The concept of working on the business not in the business is well known, but fewer people are aware of its origins. The idea was from Michael E. Gerber in his 1986 book The Emyth. Whilst the book is over 35 years old, the concept is the most famous of many ideas it promotes that still apply today. Working on the business i.e. spending time thinking about the future of the business growth and development of the agency, is a sound concept. But for people growing a small agency it’s difficult to achieve.

 

In The EMyth, or Entrepreneur Myth, Gerber claims it’s a fallacy that most businesses are started by entrepreneurs (people who go into business with a vision of a company they want to create that doesn’t rely on their own ability to produce results). I find this particularly true for agency owners.

The Practitioner's Curse

Most agencies are started by what I call “practitioners”. People who create a business so they can work for themselves. This is a very different mindset to the entrepreneur who creates a business to work for them. Practitioners assume that understanding the technical or creative output of their business means that they’ll be able to grow an agency around their skills. It’s an assumption that’s not true.

 

You may be a great graphic designer. You may have the technical skill to produce brilliant visual communication through type, photography, and illustration. But it doesn’t mean that you understand what it takes to build a graphic design business. Nor does it mean you will be great at managing other people doing graphic design for you. Neither does it guarantee you have the technical skills, or desire, to operate the finance, marketing and operational functions of an agency.

 

Gerber claims the Emyth is the primary cause of the failure rate of businesses. According to Fundsquire, 60% of businesses don’t make it past the first 3 years. Twenty-three per cent of these fail because they don’t have the right team running the business.

 

Agencies have an advantage over many types of startups. They don’t have a capital intensive business model and can operate with more agility than other types of businesses. I’m sure many agencies have failed for the reason Gerber suggests. I’m certain many more are trundling along with founders that have lost their passion, or aren’t enjoying work anymore. The “Practitioner’s Curse” as I call it is why people struggle growing a small agency into anything of significant size.

The key to growing a small agency...

If you are intent on growing your small agency into a larger business, you must do 3 things:

 

1. Change your mindset – If you’re in practitioner mode, you will never grow your agency. You must except that to grow your agency you need to grow yourself. You must do things differently. What got you to this point, will not get you to the next stage. You need to escape the Practitioner’s Curse.

 

2. Come off the tools – Before you can work on the business you must get to a position where you’re spending most of your time running the business. If you’re a practitioner you must first come off the tools. A friend of mine runs a construction business. He built it from the ground up. Years ago he worked for other people laying paving stones. Skilled and physically demanding work. He refers to his own progression, and those of the people he now employs as foremen to manage his teams, as coming “off the tools” i.e. managing not delivering the work. Many smaller agency owners overlook the difference between running the business and delivering the business. They exacerbate their situation by making the wrong hires. I know small agency founders who have hired operations and admin people whilst they themselves remain as the key point of delivery. They wonder why they can’t grow the agency, but they’ve created a business where they’re effectively working for the people they employ. They are on the tools themselves and are being fed more and more work creating a capacity and management nightmare. I know other agency owners who don’t want to come off the tools. They’re afraid that if they don’t design or code they’ll lose their technique or be passed in skill by others. They might be right, but if they don’t stop being a practitioner, they never start growing a small agency.

 

3. Work on the business – Once you are not delivering and running the agency, you can’t start to think about growing and developing it. Beware though, this is a transition. Many agency owners I meet try and change their role completely. They make the mistake of thinking that, overnight, they should delegate all operational tasks and focus solely on the future. This is foolish and almost impossible to do in a small people-based agency. As a founder you will have to find the time to do both. The key to devoting the time to thinking about the business and the future is prioritisation. You can’t always let operational work get in the way. This is where an agency coach or mentor can help you.

 

 

Are you working on your agency or in your agency? More importantly, are you working for the agency or is it working for you? Are you still trapped on the tools yourself? If so, your first job is to escape the Practitioner’s Curse.

If you want to grow your agency, you must spend time away from running the day to day. But you must first ensure you fill in behind you and make sure you’re not delivering the day to day. Don’t paint yourself into a corner where you remain the key point of delivery. Your priority must be to extract yourself from the delivery in favour of the running of the business, then move from running to managing the agency. Only then can you think about developing and growing it.

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Gareth Healey
Gareth is the founder of Beyond Noise. He has 25 years experience in the agency sector. A business coach and mentor, he works exclusively with ambitious owner-directors of established independent marketing agencies.
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Agency Leadership – 10 Lessons from 25 years Experience

Agency Leadership Featured Image

Agency leadership in challenging times

Thankfully we appear to have light at the end of the tunnel with regards to controlling the spread of COVID-19 here in the UK. The last 12 months have been a battle for all of us on so many levels. Running any type of business has been a huge challenge. Agencies have struggled, but unlike people in hospitality, at least we’ve been able to trade during the lockdowns (albeit in very challenging circumstances). The impact of Coronavirus has tested our agency leadership abilities to their limits.

Throughout the pandemic I’ve seen so many examples of agency owners stepping up and leading their business through the dark times. Not all have succeeded of course, but I know plenty of agencies that have not only survived but thrived. Regardless of their performance, all agency leaders have my admiration for the way they’ve stepped up.

Sadly, the tough times are not over. As yesterday’s budget illustrated, the post COVID-19 economy will take years to repair. It’s not politicians that will do this of course, it’s business people and their staff that will fuel the recovery. Many skills will be required to make it happen, but leadership will be paramount in getting agencies, and the country as a whole, back on its feet.

Agencies need leading more (not less)

Despite their increasing utilisation of technology, agencies are people businesses. The business model relies on the talent of its staff. The expertise and ability of its people is vital to the success of any agency.

Regardless of how talented they are individually, all successful groups of people need great leadership. Lack of effective leadership is one of the major reasons why agencies fail to achieve their potential.

Some people would have you believe that modern business with its digital technology, flat organisation structures, agile methodologies and the attitudes of the younger workforce, means that leadership is not as important as it once was. I fundamentally disagree. Leadership remains a critical success factor for any organisation. It will be paramount in surviving and thriving commercially in the years to come.

 

Leadership can be learned

Leadership is not for everyone of course. Many believe leaders are born not made. I certainly think that it helps if you have a natural aptitude and desire for leadership, but leadership skills can be developed over time if the desire and need exists. 

Some agency owners find they reach a ceiling when their business grows to a certain level. They started their agency for different reasons than to lead a group of people. Many never aspired to be the leader of an organisation at all. Success has forced them into that position.

Whilst natural talent is important, leadership skills can be learned. Expensive courses are not necessarily required for this to happen either. Experience counts for a lot, but I always think the catalyst for great leadership is self-awareness.

If you understand and appreciate your own strengths and weaknesses you can improve, compensate and utilise other people to support you in leading a business. Developing self-awareness as a leader will strengthen not only your individual performance but your agency performance as well. Self-awareness is a journey that doesn’t have a finish line. It’s an ongoing process of learning and adapting.

Top 10 Agency Leadership Lessons

In my 25 years of working in and leading agencies, I’ve certainly become more self-aware. I’ve also learnt a few things about leadership over the years (mostly from observing other people and their leadership qualities). I’ve taken my leadership lessons from all sorts of sources both inside and outside of agencies. I’ve even looked to people like Sir Alex Ferguson, who, as an ardent Manchester City fan I struggle to like, but can’t help but admire.

I’ve excelled at some aspects of leadership (and struggled with others). In a time when effective leadership is more important than ever, I’ve listed my Top 10 leadership lessons below. They’re in no particular order of importance, but they’re ALL important:

1 – BE CONSISTENT – Agency leaders are bright people who are full of ideas. This can mean they’re often flying around in all different directions. Unfortunately, this can lead to inconsistent working and decision-making. Consistency builds trust and trust in any leader is vital. Develop what I call a leadership rhythm. Weekly and monthly habits where your people can expect to hear, see or interact with you.

2 – REMAIN FOCUSED – Working “on” the business is important, but there’s a fine balance here. Don’t get bogged down in the detail, but don’t expect what you don’t inspect. Make it your business to periodically look under the bonnet of the agency to make sure you like what you see.

3 – RETAIN OWNERSHIP – The people that own the client relationships own the agency. Delegation and empowerment of the team are vital (as are contractual agreements), but don’t remove yourself too far from the client base that you become invisible. You never know when you might need to step back in.

4 – STAY ACCESSIBLE – Don’t distance yourself from your people. Even if you have an effective management team, don’t build barriers between yourself and the people in the agency. “Come to me with solutions not problems” is an overused phrase in my opinion. The day that people stop coming to you with their problems is the day you’re no longer an effective leader.

5 – COMMUNICATE (LIVE) – Always communicate in person whenever you can. Don’t hide behind email, Zoom or Slack. Technology cannot beat getting the agency all together in a room and speaking to them (when that’s possible of course). Do this regularly, even if it’s not in your comfort zone or something you enjoy.

6 – INSPIRE DON’T CLONE – Diversity in all its forms is a wonderful thing. Be clear on what attributes and personalities work best in your agency, but don’t try and recruit everybody in your own image. The values need to be more or less aligned, but not everybody needs to be the same type of personality. You’re amazing, but your way is not the ONLY way. Inspire don’t dictate the agenda.

7 – RESIST COMPLEXITY – Great leaders are great simplifiers. Your team will get frustrated with the added complexity of constant shifts in direction. They’ll thank you for making their lives simpler and easier.

8 – EMBRACE CHANGE – As your agency grows your leadership style must grow with it. Some tried and trusted methods and approaches must remain, but you must adapt. As your agency gets bigger and more complex, you can’t lead it in the same way you did when there was a handful of you sat around a few desks. 

9 – EXPECT LONELINESS – The responsibility of leadership is often hard to bear and a lonely occupation. Try and surround yourself with trusted partners or advisors to help share the burden and allow you to discuss your ideas and vent your frustrations in a safe space away from the wider team.

10 – ENJOY YOURSELF – Have fun. Don’t always try and run at breakneck speed or take it too seriously. Don’t always be chasing the next client or looking to the future. Relish what you have and enjoy the people and business you have around you.

What have you learned about agency leadership?

So there you have it, my Top 10 agency leadership lessons. It’s not an exhaustive list and I’m sure I’ll have missed some important factors.

If you can think of any glaring omissions, let me know at gareth.healey@beyond-noise.com. I’d love to hear about them.

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Gareth Healey
Gareth is the founder of Beyond Noise. He has 25 years experience in the agency sector. A business coach and mentor, he works exclusively with ambitious owner-directors of established independent marketing agencies.
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Agency Coaching – making and breaking habits

Agency coach Gareth Healey uses his experience running agencies to good effect with his agency coaching

Running habits...

Through the wonders of modern technology, I’ve been able to deliver my agency coaching throughout the recent lockdowns. In fact I’m pleased to say I’ve been busier than ever. 

When I’ve not been on the end of a Zoom call, I’ve tried to do my best to keep up with some form of exercise.  My local gym has been closed of course,  so this digital agency coach has become something of a runner.

I can’t say I like running. Those that know me well will know that I’m not exactly built for it. I do however, like the buzz and satisfaction you get after a run. I also appreciate the opportunity it gives me to clear my mind and focus on something very simple; just putting one foot in front of the other. I guess I’m not alone in gaining satisfaction from either of these things, but one aspect of my running does appear to be a little unusual. I like to run the same route every time I go out. 

My determination to stick to the same routine surprises and infuriates every other runner I know. My wife for one is incredulous that I don’t want more variety in my running repertoire. “I just don’t know how you run the same route day in day out!”, she says. Maybe it’s because I’m a creature of habit? Maybe it’s because I’m too focussed on just getting it over with?  

Whatever the reason, I’m guessing you’re asking yourself what this has to do with digital agency coaching and running agencies? Well, read on, I’ll try and pick up the pace a little.

Good habits...

As a digital agency coach, the people I work with people are not only marketing experts, they’re also entrepreneurs. There are many positive qualities of being an entrepreneur, but one thing that can hold them back is an over active mind. Like most business owners, agency founders are often excited and stimulated by new ideas and new thinking. This is drives them to take risks and innovate. It’s crucial to success. But this mindset also comes with drawbacks. I’m often forced to confront my clients with the fact that being a “magpie” and always looking for shiny new things, is not the key to running a successful digital agency.

The key to running a successful agency is not constantly coming up with new things and changing direction. It’s having a plan and executing it consistently. Setting a running route and putting in the miles day after day if you like. Running a set route keeps you on the right path. It keeps you focused and stops you getting distracted. Equally importantly, is putting in the miles day after day. It’s habit forming and brings consistency. It enables you to constantly learn and improve on what you do (and how you do it). 

Not everybody welcomes this news, but as James Clear puts it in his excellent book Atomic Habits, “The greatest threat to success is not failure…but boredom”.

Breaking habits...

A key part of my agency coaching then is helping my clients establish clear goals, plan a route and, crucially, help them to stay focused and on track. My task is to help them avoid the stresses and distractions of the day-to-day agency obstacle course and keep them focused on grinding out those daily miles and improving their technique and performance. 

Is this the end of the running cliches then? I’m afraid not. 

You see my lockdown running experience has taught me something new. Its taught me that developing good habits is important. Its taught me that having a goal and a route to achieve it is vital. But its also taught me that occasionally you need to break things up a little. You have to avoid stagnation.

During my running I’ve noticed that as happy as I am to run the same route day after day, after a period of time, rather than become easier, it starts to get harder. The daily route seems longer. The hills seem a little steeper than usual. 

I’m not sure what causes this, but I do know how to stop it. Whenever I start to feel like my running is becoming difficult, I make a change. Even running the same route the opposite way around a couple of times, helps to break the cycle and reinvigorate my tired muscles (and mind). I get even greater results from running a slightly different route and pushing myself a little further or higher. 

In short, I’ve learned that change is as good as a rest. After making a change, when you then get back on the tried and trusted path you feel stronger, both mentally and physically. 

Agency Coaching

Unfortunately, its not always possible to spot when you need to make a change. When you’re running for exercise its easy to spot when you’re feeling fatigued. When you’re running an agency, it’s not always as easy to identify when you’re stuck in a rut or have reached a plateau. Sometimes you need some help to spot the symptoms. Sometimes you need some encouragement to make that change. That’s where my agency coaching comes in.

My primary role is still to enable my clients to focus on an objective, develop a strategy and keep them accountable for delivering to a plan. This won’t change, even if it means encouraging and pushing them to do some of the dull and boring stuff exceptionally well week in week out.

My secondary role is to challenge them when the time is right. To not allow fatigue to set in and to help them switch gears now and again.

When people ask me what I do I usually say “agency coaching”. But you could say that I’m in the business of making – and breaking – habits for people that run agencies.

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Gareth Healey
Gareth is the founder of Beyond Noise. He has 25 years experience in the agency sector. A business coach and mentor, he works exclusively with ambitious owner-directors of established independent marketing agencies.
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What is a mentor?

What is a mentor?

I’m often asked what is a mentor, why do I need one and how is it different from a coach?

Mentoring and Coaching are 2 separate disciplines but of course the share some commonalities and a degree of overlap. There are grey areas between the disciplines and the subject often provides for some heated debate

To cut through the terminology I developed a list of 9 roles a mentor can perform for you and your agency leadership team. Some of them overlap with coaching, but they are all powerful mentoring tools. More importantly, they are incredibly valuable to somebody that is willing to embrace them.

1. A Role Model 

What is a mentor if they’re not somebody you can look up to and aspire to be like? It’s immensely valuable to have someone who’s been there and done it on your side. Someone who’s got a business or a business model that you can emulate. Or whose own style and approach you can be inspired by. Maybe they’re somebody who is further ahead of you and whose experiences you can learn from (their successes and their mistakes).

2. A Performance Coach

What is a mentor if they’re not somebody who improves your personal performance? I see this as a crucial aspect of mentoring. A mentor can be somebody who can cast a critical eye over how you are performing. Somebody that can observe your attitude and approach. and tell you when and where you might improve. It should not be confused with delivering performance coaching to underperforming employees. It’s about rating the bar, not about reaching it.

3. A Challenger

What is a mentor if they’re not somebody who can challenge you? You sometimes don’t get challenged enough as a boss.  People expect you to be the guru, the expert and the person with all the answers. But what you occasionally need is to be challenged. It keeps you sharp and encourages you to review your own assumptions more and think things through. You need someone who’s pushing back and not accepting what you say as gospel all the time.

4. A Thinking Partner

What is a mentor is they’re not somebody that can spend time with you and help you think about new ideas and strategy? Someone who can do some of the heavy lifting and some of the consideration for you. Someone who may be able to short circuit or increase the effectiveness or the efficiency of your thinking so that you can get further faster.

5. A Sounding Board

What is a mentor if they’re not somebody that can act as a pair of ears to listen as well as somebody to give advice. Mentors can be great for bouncing ideas off and checking your thinking, particularly when you’re making big strategic decisions.

6. A Guide

What is a mentor if they’re not a guide? Somebody that can show you a map. Somebody that can tell you that this is the route that most people go on so (and warn you about some of the pitfalls they experienced). A mentor can warn you of things that might occur in the future and show you how to avoid or embrace them.

7. An Accountability Partner

What is mentor if they’re not somebody who can hold you to account and help you meet deadlines in order to move forward. Most of us need a little help and support to deliver our own goals and achieve our aspirations. I find this is particularly true for newer agency owners, but also those that have many years experience but have lost a little momentum. 

8. A Professional Friend

What is a mentor if they’re not a friend? But they’re not like your other friends.  Someone who also understands the trials and tribulations and the demands of running an agency. Someone who’s there you can pick up the phone and talk to. Who can listen sympathetically but objectively to what issues you are dealing with.

9. A Cheerleader

Finally last but not least, what is a mentor if they’re not somebody that can pat you on the back once in a while? Running an agency is a lonely job and stressful even at the best of times.  You probably spend only about 5% of our time focussing on the good stuff and the positives. You spend 95% of your time worrying about what is wrong in your businesses and how to fix it.

So there you have it, the 9 roles of mentoring. Which ones are more important I hear you ask?

The answer is that that depends on your situation, the challenges you are facing and even your personality. No role is more important than another. They are equally effective and can be dialled up and dialled down as the situation and relationship requires.




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Gareth Healey
Gareth is the founder of Beyond Noise. He has 25 years experience in the agency sector. A business coach and mentor, he works exclusively with ambitious owner-directors of established independent marketing agencies.

How to win agency awards

How to win agency awards – 10 top tips 

Even though the events themselves are currently restricted due to Coronavirus, the awards schemes have been in full swing online. I should know, I’ve judged the Prolific North AwardsUK App Awards and the Northern Marketing Awards in the past few months alone. Awards are here to stay. But how to win agency awards? It’s a question every agency owner has asked themselves at some point. 

Despite my judging exploits, you might be surprised to learn I actually I have a love-hate relationship with awards…

I love the awards themselves. They’re great for the industry and great morale boosters for the teams that win them or get shortlisted. And let’s face it, we all need as much good news as we can get right now. 

I hate it when agencies use the fact that they have won awards as the central part of their value proposition though. Please don’t do this. There must be something more unique or distinctive about you than awards. I do believe that awards can add authority to your offer. They can certainly act as a point of interest. They just shouldn’t be THE thing about your agency.

So what advice would I give agency owners on how to win awards? Building on the piece I wrote about the D-E-S-I-R-E to win last year, here’s my 9 top tips based on my recent judging experience.

1. Enter Awards(!)

The first piece of advice I have in how to win agency awards is simple; enter them! You’ve got to be in it to win it as the saying goes. The awards I’ve judged recently have generated a good number of submissions, but there was certainly room for more. Some categories were under represented and a lot of the same agency names appear year after year. All credit to these firms, but make sure you’re in the mix to give them some competition.

2. Enter a category you are capable of winning

There are usually plenty of categories to enter in the various awards schemes. Please choose your categories carefully. Whilst you might aspire to win “Global Agency of the Decade”, if you’ve only been in business for 18 months it’s unlikely to happen for a couple of years yet. However, that B2B campaign you’ve just completed for your biggest client that achieved stellar results on a modest budget is definitely worthy of entering “B2B campaign of the Year”. It might not be quite as high profile or glamourous, but its an award you can win. That’s how to win agency awards!

3. Enter award-winning material

Another obvious, but nevertheless an important piece of wisdom comes in the form of quality. Make sure your entry represents great work. At the very least make sure its the best work you’ve done.  As much as I’m advocating that you enter awards, they will still be around next year. If you don’t have something that you believe worthy of not just getting you on the shortlist, but carrying home the prize (or at least getting it posted out to you), maybe wait until you have.

4. Objectives – Have them. Make them measurable. Exceed them.

It’s number 4 on this list, but it’s the number 1 frustration of both myself and all the award judges I speak to. To win agency awards, your campaign or agency simply must have clearly defined SMART objectives.  In your entry, you must not only communicate these effectively but also clearly demonstrate how the objectives were reached and – ideally – exceeded. Without question, poor objectives lead to lower marks.

5. Make your submission count

A close second to poor objectives on the judges’ list of frustrations is when an agency goes to the time and expense of submitting an award but doesn’t make it count. Most awards have some form of word count on the entry form to stop the entries being too long. This is understandable, but the number of times I’ve seen the word count not even met frankly astounds me. It’s not about the number of words of course, but the quality of the submissions is often poorly thought through and lacking in impact. Get a copywriter or award consultant to write the entry for you, if you don’t think you can do it justice. Treat the entry form like a pitch, not an application form!

6. Answer the questions

Another simple piece of advice is to make sure you answer the questions(!) Your entry will be judged on your answers, not how much you want to tell the judges what a great team you have or just how much the client likes you. Just like in an exam, if you miss the main point of the question and go off on a tangent, you can easily lose vital marks.

7. Supporting material

Some award schemes allow you to supply supporting material in addition to the award entry form. Always do this if you are permitted to do so. Your entry will look poor and unfinished if you don’t submit additional material and the other agencies do. Remember to keep it short and to the point though. A single-page summary with some visuals is far more impactful than a 12-page pitch deck or strategy document.

8. Challenges – make them big and make them unique.

 

Some agency awards ask you to demonstrate how you’ve overcome challenges during the year. COVID-19 is likely to dominate this subject for a few years to come. If you do choose the impact of the pandemic, remember to show how you’ve done things differently to your peers. If you want to use other challenges to demonstrate your agency’s resilience then please choose an important subject. I’ve been through enough office moves to know they’re a pain, but changing offices is hardly a major test for a business like an agency these days. 

9. Make it Simple for the Judges

I’m going to let you into a secret. I’ve judged 3 agency award schemes in the past 3 months. Each one has taken me over a day to complete the judging. At first, I thought it was just me until a fellow judge volunteered the fact that they took a day over a particular scheme as well. I’m not looking for sympathy here, my point is to make your entry as easy to understand and as brief as possible. Judges don’t have the time to sift through lots of complex information. If you help them to digest the entry easily, you will secure more marks.

10. Read the criteria

Finally, following on from my point above, you can make the judges lives a lot easier by reading the judging criteria. All award schemes publish these. When judging you can really tell which entries are from people that have read the brief and understand exactly what criteria the judges will be looking for. 

Industry Rewards

The events sector is going through a particularly tough time at the moment. Although we can’t enjoy the social benefits of getting together over a few beers whilst we hear who has won, entering awards is still important for the industry and for your agency profile. I hope this article has given you some tips and reminders on how to win agency awards.




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Gareth is the founder of Beyond Noise. He has 25 years experience in the agency sector. A business coach and mentor, he works exclusively with ambitious owner-directors of established independent marketing agencies.

Is it time to exit the agency business?

Maybe it’s time for me to exit the agency business and do something else?
 
I’ve heard these words more than a few times in the past few months. It’s understandable. The pandemic has not only disrupted our personal lives, it’s affected every business. 
 
COVID-19 has brought few positives. If there are any, it’s the way it’s encouraged us to reflect more. What do we want from our lives? Are we happy? What’s important to us? What are our priorities now?
 
The virus has led all business owners to take stock. Some of you will be more positive about your business than others. But it’s not surprising many are considering making big changes. Including taking their agency, or even themselves, in a completely different direction.

Staying Positive

They say there’s always somebody in a worse position than you are. Whilst the agency sector has been hit hard, at least our business model allows us to react quickly to things. Even when those things are unprecedented global pandemics.
 
Whilst I’m sure it’s little comfort for those of you in survival mode and/or facing difficult decisions, there are industries with more challenges than agencies. You only have to look at the hospitality, events or travel sectors to see this. Agencies are fortunate in that we’ve been able to furlough staff and reduce a large part of our running costs. We haven’t had to sit and watch perishable stock spoil and become worthless. We’ve not been closed down or forbidden to trade by law.
 
There are positive signs for the future for us  too. We’ve seen a massive acceleration in the adoption of digital technology. Businesses that were previously operating without digital capabilities, have made huge strides. The general public have become more digitally savvy. This digital leap forward is bound to present opportunities for agencies in the coming months.

Green grass syndrome

Agency folk are a resilient bunch. They have to be. Even without a pandemic to contend with, the life of an agency owner is a rollercoaster ride. Massive highs are punctuated with significant lows. High profile client wins can be soon be followed by sobering client losses. The euphoria of winning an award can be quickly dampened by the unexpected resignation of a key team member.
 
Sadly, even before COVID, it wasn’t uncommon to hear agency owners thinking of making a change and coveting greener pastures…
 
“There must be easier businesses than the agency business?”
 
“I want to run something that is scalable and less hands on”.
 
Sound familiar? I’ve heard these sorts of statements many times. And yes, I admit, I’ve uttered similar things myself in the past (usually after a few beers at the end of a particularly tough week).
 
I understand these sentiments, but it’s taken me 25 years in business – not a pandemic – to realise that they’re misplaced and wasted words. The grass is rarely greener elsewhere. A global recession or not, no business is easy. Whilst other types of businesses might be more scalable, it is possible to grow an agency. Most importantly, I’m a passionate believer that no successful business can be run with a “light touch”.

In search of the perfect business model

It’s never been easy and it’s rarely dull. Running an agency requires guts, determination and resilience. Whilst most of you will have dusted yourselves down, summoned these traits and already be going again, what about those that are feeling that the agency business has lost its allure? What are the alternatives?
 
Earlier this week I started to ponder the perfect business model. If the agency business wasn’t it, what is the ideal type of business to run? Whilst I quickly concluded that the perfect business doesn’t exist. I did draft a set of 12 criteria that if, if satisfied, would get you pretty close.
So if I was aiming to find the perfect business – any business – in 2020, what would it look like? 
 
What attributes would it have? 
 
Can an agency business measure up?
 
1. It would sell a product that people need or desire at almost any price. My son is doing Economics A Level and tells me this is called inelastic demand. Clever lad, it’s a big ask though!
 
2. It would sell to an unlimited global market. A little easier to achieve. The world gets smaller everyday. Better suited to service based businesses too.
 
3. It would sell a product that cannot easily be copied. Or at least it can be copyrighted or patented. Unique products are hard to find, but IP can be established and protected.
 
4. It would be a business that is moveable. It would not be fixed to a single location and could move with the business owner or be operated remotely. Flexible working even extends to business ownership these days.
 
5. It would enjoy low overheads. It wouldn’t need large amounts of raw materials or a large stock inventory etc. A business with high overheads is less agile and can’t adapt to changing circumstances or environments.
 
6. It would satisfy the intellectual needs of the owner. Boredom is the scourge of many business owners. There is nothing better than being fascinated by what you do.
 
7. It wouldn’t be capital intensive. It wouldn’t require large capital investment in equipment, R&D or product development. Funding is not going to be easy to find in the next few years.
 
8. It would be relatively easy to get paid.  A perfect business shouldn’t have to wait too long to get paid or use complex credit terms. Cash has always been King but this applies now more than ever.
 
9. It wouldn’t be reliant on large numbers of people to operate it. The fewer people the better. Less headaches, less management time, less cost.
 
10. It wouldn’t be limited by the personal input of the owner (time and attention). A business that can operate and grow without you at the helm 24/7. 
 
11. It would be – truly – scaleable. It can serve 10,000 customers as easily as it can serve 1. Scalability is not the same as growth.
 
12. It wouldn’t be heavily regulated. It would be largely free of government restrictions, laws or regulations. This is not as straightforward as it was 6 months ago!
 

How does your agency perform?

So there you have it, the 12 ingredients of a perfect business. Does your agency business perform against all 12 criteria? 
 
Congratulations if it comes anywhere close. The reality is even the best businesses will struggle to tick all those boxes.
 
When I did this exercise, what surprised me wasn’t that I couldn’t think of a business idea that met all those lofty expectations. What surprised me was that I felt that if I ran an agency business at the moment, I would actually be quite pleased at how well it stacked up.
 
Whilst clearly most agencies are reliant on people and their owners, the agency model has its benefits. Low overheads, low regulation and flexibility of location are all strengths of an agency. They don’t need high capital investment, there are low barriers to entry and they can sell to anybody – even global markets – with relative ease.
 
What stood out for me most though was the importance of the intellectual challenge. Owning any business is certainly not dull at the moment. What I think matters most in running an agency business is that you love the work. If you’re fascinated by what you do, or could be again, it’s one of the most important and satisfying factors of running any business
 
So what is my message to those people who are thinking looking outside of the agency business for their futureIt’s very simple. Please make sure you’re not being tempted by green grass syndrome and that your agency mojo has completely gone before making a big decision. These are tough times for everybody, but agency businesses are very flexible. If you4 agency doesn’t quite meet every criteria above, which ones could you work on? Could you develop your own IP? Sell to different markets? Structure the agency so that it could at least run with not quite as much of your input in the future?
 
Whatever you do or decide….enjoy the journey.
 
 

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AGENCY HEALTH CHECK

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Gareth Healey
Gareth is the founder of Beyond Noise. He has 25 years experience in the agency sector. A business coach and mentor, he works exclusively with ambitious owner-directors of established independent marketing agencies.

Challenges, opportunities and priorities for agency leaders

I was a guest on The Digital Marketing Hub monthly webinar last week. The brief was to give my views on the challenges and opportunities for agency leaders both now and beyond the crisis. A – very – tough brief.

Here’s a summary of my thoughts: 

Where to start?

To begin with a positive, I certainly think that this crisis has brought the agency sector together more (as it has our society as a whole). Despite the restrictions, I’ve seen more agency owners talking and trying to help and advise each other than ever before. Nobody would want these circumstances, but it’s great to see this in what is a very competitive and often protective industry.

People have said to me that agencies are all in the same boat. I don’t agree. I think we’re certainly all in the same storm but each agency (and business) has its own unique circumstances. Some are in small agile boats but without a lot of fuel, others are larger vessels that are harder to manoeuvre. Most are somewhere in between. 

As things stand…

Because of this dynamic and the unique situation, it’s extremely difficult to offer general advice or guidance to agencies. This is far from a factual study, but from the people I’m talking to, numerous webinars I’ve attended and several surveys I’ve seen both here and in the US, the sentiment amongst agencies appears to me to be as follows:

60% think that they’re (sort of) OK. It feels like just over half of independent agencies are – reasonably – comfortable. Don’t get me wrong, I don’t know anybody that’s happy or thriving, but these agencies think they can weather the storm.

30% of agencies are struggling and are in survival mode. They’re taking drastic action including furloughing large numbers of staff and cutting costs. These agencies are either usually relatively new or have had significant client work paused or cancelled altogether. 

10% of agencies are already in big trouble. They’re already saying that it will be a miracle if they can survive, if not the lockdown period, but certainly the economic conditions that are going to follow. Lack of cash is the main reason for their sensitivity to the situation.

This is broadly how I see the market at the moment. Whether you agree with my “temperature check” or not, I hope your agency is in the 60% group (or at least can make it into it). Sadly I’m sure that in the next 12 months we’ll see many agencies struggle and the 10% group may well increase.

Challenges & Opportunities

Individual agencies in unique situations are facing a perfect storm that the entire world is locked in.  General advice is difficult but despite the nuances and complexity of the situation, I’ve attempted to capture what I see as the Top 3 challenges and the corresponding opportunities for independent agencies.

1. Leadership

Effective leadership is an important ingredient for any successful business of course, but in testing times it can be the thing that decides whether the business survives or not. There has never been a bigger challenge for agencies than there is now. Leadership could be the difference.

Providing leadership is extremely tough at the moment though. It’s incredibly difficult to plan at the moment. Uncertainty is literally everywhere and providing your team with a vision for the future is hard many of our lives practically on hold.

Leaders know that this is a situation that will not be over quickly. Even when some sort of normal working conditions return, the economic backdrop will be extremely tough. It’s going to be a long haul and agency leaders will need immense stamina, guts and determination to see it through.

A leadership role can often be lonely, but the current crisis exacerbates this. For agency leaders, the stress of trying to make tough decisions whilst remaining motivating and optimistic can be difficult to cope with. For agency staff, the future of the business is important. For agency owners it’s often their entire hopes and dreams.

Working from home under lockdown has been difficult for most, despite what technology has enabled us to do. I’ve spoken to agency leaders though that are finding it a real challenge. They want to be with the team in person, they’re working harder than ever, and as many have pointed out to me, they feel they’re always in the office. Even when they’re away from their home desk for a few hours, people have said they feel guilty as they wonder if they could be doing more to support the business.

On a brighter note, this period is a challenge but also an opportunity for agency leaders. If your agency can survive this situation, the experience and knowledge you will have accumulated will make you a much better leader for the future. Personal growth often comes out of adversity.

Whilst nobody is happy, I’ve seen some agency owners energised by the situation (to some degree). I’ve seen enthusiasm come back from people running agencies that were perhaps a little demotivated and coasting before all this happened. The fire is back in their bellies. Long may that continue, it will be needed.

2. Operations

Clearly there are some huge operational challenges for anybody running a business at the moment. As agencies, unlike say the hospitality sector, we are at least able to operate from home and at a distance reasonably well. Nevertheless, it’s a real balancing act.

People are the lifeblood of agencies, and looking after them in these difficult times is a priority for every agency owner. Furloughing and other measures have been adopted by many, but it is incredibly difficult to choose the right course of action for both the agency and the people within it.

Most agency leaders I speak to have had their clients pause work in some way. Either retainers/fees or project work. Some agencies have been heavily impacted by this, others only mildly so far. All agency leaders understand their clients’ situations and emphasise with them. Nevertheless, it’s causing huge difficulties in deciding what people resources an agency needs to operate effectively during the lockdown.

Agencies have all been forced to review their entire cost base and do some really detailed financial planning over the past few weeks. Most now have a clearer idea of what cash runway they have and what steps they need to take. Unfortunately, we all know this crisis will have many twists and turns before it is over. Many agencies will find the forecasts impacted by clients failing to pay when they said they would. Some clients may not even survive themselves, of course, leaving a hole in the agency cashflow and future revenue.

Agency leaders are facing really tough decisions, but as an owner of a business, there’s a real balance between making tough decisions and being optimistic and positive.

The opportunity here is to come out of this with a different business. One that may be smaller than before, but will also be leaner and more efficient. This is inevitable for most, as the world will not go back to complete normality. Many of us will come out with different businesses, different business models even. All of us will come out with different ways of working.

I know a few agency leaders who were quite sceptical about utilising remote working before the crisis. I admit to being in this mindset myself a few years ago. The power of the agency has always been the interaction of the team all together in the office for me. These agency leaders though are now often buoyed by their team’s approach and attitude during the pandemic and some have become complete converts to the remote working model. That said, on this particular issue, a do think there is a bit of honeymoon period that is starting to falter. People and productivity are becoming a little strained in some cases.  

3. New Business

Finally, last but by no means least, the third major challenge I see is the need for new business. Franky, new business would have featured on my Top 3 list of agency challenges before the virus. It’s a constant issue for all agencies. Almost overnight, it’s suddenly become even more important, and – if it were possible – even more competitive than ever.

I’m seeing all agencies up the ante on new business. Many of them are not necessarily desperate to gain or replace new business right now. They simply recognise the challenges ahead and know from experience that new business is often a long sales cycle.

I’m also seeing many agencies reporting that whilst their new business pipeline has not completely dried up, there has been the inevitable pausing of decisions. What was once warm leads have suddenly gone quiet. Just like existing clients pausing work, agencies can appreciate the reasons for this of course. Prospective clients are, like the rest of us, are occupied with operational issues and trying to get their company through the lockdown.

Perhaps the most distressing thing I’ve witnessed is agency owners realising that their new business pipeline, and maybe even the people and processes they have in place in this area, are not what they thought they were. Having reviewed all aspects of their operations, some agency leaders have been shocked to find the pipeline wasn’t as healthy as they thought – or were being told – it was. That said, I also know many people that have got a good pipeline and they’re pretty positive about it. Indeed, I’ve seen agencies pitch for and win some significant new clients and projects in the last few weeks alone.

I think the opportunity out of this is to come out with a sharper and more focused business. An agency that is better positioned more effectively targeted. A business that is more strategically aligned but also more executionally sound and fit for the future.

What to prioritise?

What would I be prioritising as an agency owner right now? 

  1.    Planning – All agency leaders and business owners I’ve met have developed some sort of emergency plan for COVID-19. Most have a had a decent go at planning the next 3 months. We all know these plans will change, but it’s vital to have some sort of roadmap. Whilst I see lots of people with a Plan A, I don’t see as many with a Plan B or a Plan C (different scenarios based on further account losses, pausing or none payment of invoices). This clearly involves both more work and confronting more scary outcomes, but I believe its a worthwhile exercise to be better prepared. Whatever you do as agency leaders, even if you have a robust plan, stay close to the detail for the foreseeable future. Now is a time for stepping in, not stepping back.

 

  1. Regular transparent communication – You can’t over-communicate to your team, clients or suppliers/partners at the moment. Even if you’ve not got anything particular to tell them, make sure the channels of communication stay open.  If you just don’t know what to say, I suggest briefing your team on some scenarios to explain what might happen i.e. if x happens then we’re going to do y. People, in particular Gen Z members of your team, would prefer to understand the full picture than being left in the dark. Don’t protect your team from the realities of the situation you are in. They need – and want – to understand 

 

  1. Lead Gen and New Business – If you had previously stepped back from the frontline of this and/or are less than 100% satisfied with your sales team then as the agency owner any remaining time you have would best be spent in this area. Even if the lead gen work is covered, re-thinking and improving the new business strategy and providing input into current opportunities are all time well spent for agency leaders under the current restrictions.

Final Thought

The Stockdale Paradox is a quote by Admiral James Stockdale, a POW in Vietnam. It was referenced in Jim Collin’s book Good to Great. Admiral Stockdale said:

“You must never ever ever confuse faith that you can prevail in the end with the need for the discipline to begin by confronting the brutal facts, whatever they are.”

The people who own and run agencies tend to be a positive, optimistic bunch. It’s one of the reasons why I love the agency world and it’s what makes agencies great places to work.

In times of hardship though, whilst you have to be able to retain a sense of optimism, you can’t let it cloud your judgement or stop you confronting and acting on issues quickly and decisively.

Referring to his time as a POW, Admiral Stockdale said that the ones that didn’t make it out of the horrors of captivity as well as he did were the optimists. He said “The optimists…they were the ones who always said, ‘We’re going to be out by Christmas.’ Christmas would come and it would go. And there would be another Christmas. And they died of a broken heart.”

Optimism is crucial when you leading a team, but I don’t think we’re getting out of this situation – fully – by Christmas. Balance your optimism with the courage to confront the challenges your agency faces swiftly and head-on. You will get through this crisis and you will be a stronger agency and leader for it.

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Gareth Healey
Gareth is the founder of Beyond Noise. He has 25 years experience in the agency sector. A business coach and mentor, he works exclusively with ambitious owner-directors of established independent marketing agencies.

Coronavirus Advice for Agencies

Disclaimer…

This is a summary of our understanding of the current support being proposed by the UK Government as things stand 21st March 2020. It is intended as a quick guide for UK based SME agencies only and does not constitute financial advice.

You should check the details yourself or via your accountant before acting upon any of the information listed below.

This article is intended to make sense of the current support and give UK agency owners a helping hand as they cope with the changing world around them.

Wage Bill

The UK Government will cover 80% of the salary of furloughed workers (to a max of £2,500 per month) through the Coronavirus Job Retention Scheme. Currently, this will cover 1st March to 31st May (but may be extended). Employers can choose to top up the salary (or not). Furloughed means that staff have no work and are not working for you. They will effectively be on a temporary leave of absence (they are not sick or on annual leave). You will need to designate affected employees as “furloughed workers” and notify them of this change. You will then need to submit information to the HMRC (details coming next week). It appears that the payments will be reimbursements i.e. you will need to pay staff first and claim back from HMRC.

Cashflow

If you have an existing loan, contact your provider and enquire about a repayment holiday and/or the Coronavirus Business Interruption Loan Scheme. The scheme will be administered by the British Business Bank but provided by 40 accredited lenders. You may have a relationship with one of them already. Finance products such as term facilities, overdrafts, invoice financing and asset finance will be available. More details will be available next week.

Eligibility criteria will apply but it’s designed for UK SMEs who will be unable to meet a lender’s normal lending criteria for a commercial loan or other facilities (but whose agencies are considered viable in the longer term). These facilities will be debt and the borrower will remain 100% liable for the debt. The Government will guarantee 80% of each loan giving lender’s security to make quick decisions. The Government will also cover the first 12 months of interest payments so businesses will have lower initial repayments

Tax

Agencies in financial distress with outstanding tax liabilities or those that are unable to make their next payment may be eligible for the HMRC’s Time to Pay scheme. Call HMRC’s dedicated helpline 0800 0159 559.

VAT

Payments will be deferred for 3 months (covering 20th March until 30th June). No application is required. You will not need to make a VAT payment during this period.

Sick Pay

Some agencies will have employment contracts offering more than SSP. If your agency only pays Statutory Sick Pay (£94.25 per week) this now comes into affect on day one of the employee not reporting for work due to COVID-19 (or choosing to self-isolate). The Government will refund up to 2 weeks SSP per eligible employee who has been off work due to COVID-19. Employers will need to pay the employee and reclaim from the Government.

Business Rates – If you are a small agency and already qualify for small business rate relief (SBBR), you may be entitled to a one-off grant of £10,000 to help you meet your ongoing costs.

Business Rates

If you are a small agency and already qualify for small business rate relief (SBBR), you may be entitled to a one-off grant of £10,000 to help you meet your ongoing costs.

Gareth Healey
Gareth is the founder of Beyond Noise. He has 25 years experience in the agency sector. A business coach and mentor, he works exclusively with ambitious owner-directors of established independent marketing agencies.

Interview with Gareth Healey

Agency Coach Gareth Healey standing

Robin Williams of Data Hive recently did an interview with Gareth Healey. Here are some of the highlights:

What point in your career led you to do what you do now?

I’ve been involved in agencies for nearly 25 years. For 15 years I was CEO and joint equity partner of my own £12.5M agency.  I successfully exited that business in 2017. It was a tough decision as it was a great agency and naturally a big part of my life. I guess the main reason was a desire for change and to experience something different. I thought at one stage I would leave the agency sector for good, but I’ve found my passion for agency life still burns too brightly. I’m now helping other agency owners grow their businesses. The variety of work, people and being able to have a direct impact on my clients all make my current role very fulfilling.

What do you love most about the digital agency industry?

I started my career in below-the-line Sales Promotion agencies (the term has largely disappeared, think Sales Activation or Shopper agencies). Whilst I’ve always acknowledged the importance of brand building, it was the ability to quickly influence sales through marketing that first got me excited. Digital agencies remind me of the earlier part of my career which, despite the absence of technology, was more measurable and focused on ROI than other marketing disciplines.

In your own business development, what’s been the game changer for your success?

In both my agency and consultancy career, I’d say that focus has been my game changer. For a time we had a niche focus in my agency and I would say it was the period when we were most successful. When I started my consultancy I left the target audience undefined. This was a mistake. As soon as I clarified that I wanted to work with agencies, the opportunities opened up. People want to work with you because of your specific experience and expertise. 

What technology or product could you not live without for your business?

The short answer is a mobile phone of course. In terms of software and tech, as a former agency owner used to having a 40+ design person studio at my disposal, it took me a while to come to terms with being out on my own. I’ve found Canva a great tool for easily creating simple pieces of design for blogs etc. It also gives me some perspective, as it reminds me of the challenges that some designers and small agencies face from this sort of DIY solution. 

With hindsight, is there anything you’d go back and do differently for you own business growth?

Hindsight is a wonderful thing. There’s many things I’d do differently. That said, I have few regrets. If you’re not making mistakes, you’re not trying hard enough.  One of the key things I would do more of us networking. I used to hate it but I’ve come to love it and its opened so many doors for me in my new venture.

So far, what’s been a highlight of your career?

The messages of support and gratitude I received when I exited my agency were quite overwhelming. I’m not somebody that likes to make a fuss, so I left the business in quite a low key way, but I’ll remember the kind words I received forever. Very humbling.

So far, what’s been a highlight of your career?

The messages of support and gratitude I received when I exited my agency were quite overwhelming. I’m not somebody that likes to make a fuss, so I left the business in quite a low key way, but I’ll remember the kind words I received forever. Very humbling.

What book are you reading at the moment, and why?

I’m not reading any books at the moment, I’m writing one(!) I love reading and learning from others, but there is an incredible power in writing to clarify and develop your own thoughts and ideas.   I learned this from a friend of mine, Daniel Priestley. He’s written 4 books. They’re all brilliant.

In your opinion, what needs to change most in the agency industry?

I think ambition needs to change. The game has changed. Most clients no longer need to engage agencies in the way that they used to. Those that do struggle to navigate their way through the vast options they have. I still see too many agencies thinking they can just take part. They need to have the ambition to be the best. It’s a very competitive sector and you need to have the desire to stand out and deliver for your clients. Winning new business is not good enough, you need to have the mindset that you’re going to create something so special, people will be queuing up to work with you.

Who do you look to in the industry as an example of someone who’s doing things right?

A friend of mine, David Gilroy, runs an agency in Bristol called Contagious. He helps law firms market their businesses. David and his team have great digital marketing expertise, but they also have massive credibility and expertise in the legal sector. A great example of how focus and a niche can give you the competitive edge.

What's the best piece of advice you could offer an agency starting out?

Don’t start an “agency”(!)  There are thousands of agencies in the UK. Start a business that has expertise that can solve the problems and grow the business of clients in a defined sector. If you want to call it an agency then fine, but it needs to be a solutions business. Think outputs not inputs.

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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.

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.

 

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.

Scaling your agency

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?

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