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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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 Awards. UK 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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Is it time to exit the agency business?
Staying Positive
Green grass syndrome
In search of the perfect business model
How does your agency perform?
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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?
- 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.
- 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
- 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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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.
Interview with Gareth Healey
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?
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.
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.
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:
- It is easy to set up – few barriers to entry exist
- Low investment is required
- It is a relatively low risk business model
- Break-even can be achieved quickly
- 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 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?
12 ways to 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
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. But 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…
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
- 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.
- 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.
- 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.
- 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).
- 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).
- 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).
- 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.
- 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.
- 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.
- 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!