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Topics include: Direct to consumer / E-commerce / Data & privacy / Martech

Brian Child on 2009

McCann-Erickson man spares a thought, or seven, for the agencies he expects to suffer most

I read the article in the last issue of The Drum, ‘Feeling the Temperature’, which highlighted the findings of the magazine’s State of the Nation survey, and two things immediately registered with me.

Firtsly, there was a lot of good sense coming from the agency bosses who offered vox pops. Secondly, there were a lot of agencies quoted and they were the tip of the iceberg!

In my experience, what usually happens in a recession (and I have lived through a few) is that the big get bigger and the small survive.

It is the agencies that traditionally fit into the middle that most often get squeezed, so if you are “piggy in the middle” watch out!

Typically the ‘M’s’ in the SMEs are agencies where the principals are still heavily involved on a day-to-day basis, they have been around a few years and have done well. Perhaps a few months ago they were contemplating a step change or even selling out – dreaming of a happy retirement in Dubai or Marbella! Sorry guys, just like those with money in Iceland, your equity has been well and truly frozen.

So, here are my observations, not seven deadly sins, that might strike a chord.

Get into the real world

Too many agencies are wildly optimistic about the state of their finances. Put on “reality glasses” and examine every client’s income and then re-forecast. If there is a gap between what you see and what you need (usually disguised as TBG or new business) then deal with the situation today!

Too many people?

Agencies make real money when they do not have the staff to handle the business. Think about it - it is true. Every agency I have ever been in (and that is hundreds) are at least 10% overstaffed. People just creep in over the previous year and you end up with more people and less income per head. All the metrics work against you and that is before you factor in “le crunch”. You need to look at your payroll now.

Are you Too loyal?

Now we are in emotional territory with this one. Never has it been more important to have the best talent on board. Talent will grow your company. The agency with the best people will always win. Big agencies have more “better” people, it is how they got big. Trust me, in a recession the big boys will pick off your stars. So, you need to decide who is vitally important and who is not. You should also look to outsource as much of the “mechanical” work as possible.

You are going to loose all you clients

It may be next month or in five years time, but you will loose them. Sometimes it will not even be your fault. So the mantra must be ‘New Business, New Business, New Business’. Everything stops for new business. Running the agency is your night job. Running clients is your day job. If you do not have a USP and a measurable/repeatable/effective new business programme in place you are in big trouble. There is a six to nine month lag before activity converts to income. So get on the case now.

Got to grips with Digital?

Digital is having a profound effect on our industry. It is a new and different channel. In the sixties commercial TV created an imbalance in the regions with TV campaigns staying in London, where the production facilities were. Digital has no geographic bias, but currently London is doing better. Crack digital and your agency can go global!

Merge, Sell or Buy

I hate to see good agencies go out of business because of a bad debt or running out of cash and it is happening. Critical mass is important, so before trouble hits why not consider a merger. There are plenty of agencies out there with complimentary skills and the “sum of the parts” does apply. Also, I know companies that have cash to invest in good agencies and are actively looking for opportunities.

Reasons to be cheerful

Unless you have 100% market share, you do not. There is an infinite pool of new business available. Take the opportunity to to rethink your agency vision. You need to become famous for something! Then measure your actions against this vision, add new skills and new talent. Clients are looking at the ROI on their marketing spend. The future will be fee and project based. Can your agency deliver or do you think it is still only about great creative?

If you have any thoughts or opinions you’d like to express based on the State of the Nation results please email richard.draycott@carnyx.com.

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