The Agency Growth Blog - For Owners Who Want Growth

You might have noticed that it's getting harder and harder to make money in the agency business. Salaries are going up, inflation is pushing up costs, pricing is getting forced down, and investments in your culture and technology are rising. 

About the only expense that might be on the decline is your office—if you’ve gone to a distributed model. 

The days of 30% net profit are long gone. Today, data from Promethean Research supports a 17% net profit as average for most agencies going into 2022.

What You Do Next Will Shape Your Agency For Years To Come

I’ve talked to over 100 agencies over the past few weeks. Some I’ve spoken to via email, others on Zoom and a few on one to one calls or chats. The story is very similar. Yes, a few agencies in a few unfortunate industries are closing, but most are making it through.

We’ve weathered the initial wave of the storm and are now trying to figure out what’s next. But what’s next is what concerns me, because your agency will have to be retooled to deal with what’s coming over the next few months and beyond.

What worked last year won’t work this year and what you planned for 2020 needs to be thrown out and you need a new plan. Not an annual plan, but a plan that you can adjust every week and a plan that goes out no more than 30 days. A plan that is flexible, but based on data and a plan that ensures your agency will be around for the next 10 years.

Now More Than Ever, We Need Real Information From Real Agencies

Over the past few weeks, I’ve sat in on several agency consultants’ webinars on the future of our industry. Most of them are filled with worst-case scenarios that include cutting staff, hoarding cash, working for free and taking any business just to stay working.

All these ideas are solid and designed to challenge us to make the hard decisions that might be required to keep our businesses open.

But if we’re encouraging our clients to push through then shouldn’t we push through too?

Here’s exactly what’s going on at Square 2, so you also have insights from someone who still has an agency to run.

Everyone At Square 2 Is Working From Home

Last Wednesday I sent this chat to our team:

Square 2 Team Members, I understand this is an uncertain time for all of us. We are in uncharted waters. I think it makes sense to be proactive instead of reactive and I want our family and our extended families to be as safe as possible.

So, I'm asking the Philadelphia office folks to work from home for the rest of this week and all next week too. We'll suspend any travel to client sites for the time being as well. Our company is well-positioned to work remotely. We've been working like this for the past few years, so all meetings will go on as planned via Zoom.

Since the situation is changing daily, we'll reassess toward the end of next week and I'll share the next steps as they become clearer. If you have any questions or concerns, please drop me a line. I'd be happy to discuss it with you.

I’m not an alarmist, but I am a planner and I believe in having Plan A, Plan B and in some cases Plan C.

When HubSpot canceled Partner Day, it became clear, there will be an environmental impact to our businesses over the next few months, if not longer.

While I’m not suggesting anything dramatic, I am suggesting you think through the possible outcomes and be prepared. There are some very specific areas where it’s likely your agency will be impacted.

You’re not running an ad agency. When you get a new client, you can’t pull your creative team into the conference room and start banging out ideas for print ads or a billboard campaign. You can’t treat every new client like they’re your first and only client.

Perhaps even more challenging, if you want to scale and grow, you can’t be the bottleneck, you can’t be in every meeting for every client and you can’t control every process.

When it comes to growth, the agency owner is almost always why the agency isn’t growing.  

The answer to this is systems, processes and a defined, differentiated methodology. Think McDonald's. Not the fast part, but the scalable, repeatable and trainable part. Want to know how to make French fries at McDonald's? There is a manual for that. Want to know how to wash the window? There is a manual for that. Want to know how to greet the customers? You guessed it—a manual. Today it’s probably a video tutorial, but you get the idea.

We started transforming Square 2 into an agile agency back in September of 2014. As one of the first agencies to adopt the Agile Methodology (back then there were only two other shops that I was aware of who ran agile), today we have buckets and buckets of experience making agile work.

Last week at HubSpot’s Partner Day in Boston, being agile was again noted by a few of the presenting agencies as one of their “secrets” to success.

But the agile we practice is not even close to the agile we rolled out in September of 2014. Almost five years later, the way we use agile to service our clients has changed dramatically.

It’s an ongoing battle with clients. How do we get them better results for the level of investment in their engagement? We know we can do more, but we can’t do more because they have a budget.

Some clients understand that, and others will push you to do as much as they can get you to do. Other clients, while not malicious about it,  are just unclear about where to draw the line.

Over servicing isn’t the answer but better processes, systems and methodologies around delivery is the secret to getting clients better results within the limits of their engagement.

I’m fascinated by what’s going on in the agency ecosystem. Study after study supports the move by companies to take their digital marketing in-house. Agencies are reporting it more challenging to sign new clients and clients are not looking for long-term relationships with a single agency anymore.

If one thing is true, the changes taking place in the agency community are real and they’re happening quickly. You can’t put your head in the sand or think this won’t impact your agency. Instead, you should be prepared for slower growth, more challenging sales cycles and downward pressure on pricing.

How did this happen? What can you do about it? What should you be thinking about to position your agency for the future?

Most agencies are already aware of CASL and GDPR regulations, especially the European agency owners who are part of the Agencies 2 Inbound Cohort programs. While the markets outside of the US are behind from an inbound marketing perspective, (12 to 18 months), they are way ahead in terms of privacy, and protection from unwanted electronic marketing.

If you’re a US based digital marketing agency or inbound marketing agency,  get ready because the regulations are coming, and they are going to be challenging. How do I know? Why I am I writing about this today? Spend 5 minutes watching Mark Zuckerberg, CEO at Facebook, testify in front of the Senate committee investigating the Russian situation and you’ll see what I see.