Agencies need more retained client work to support growth
Too often small to medium-sized agencies are content to settle for a project here and a project there from clients when the real necessity for agency growth lies in picking up retained client work from clients who pay a guaranteed monthly fee for delivering strategic and creative work for their brand.
Taking on a small project for a new client to get your foot in the door is often a good business development tactic, but if that type of agreement/relationship is allowed to go on in the long term then it gives you little financial security and makes forecasting and planning your agency’s growth in a strategic manner very challenging. It’s difficult to take on staff and build a larger team that is capable of delivering more complicated campaigns if you don’t have a good handle on how much guaranteed revenue you have coming in to the business each month. Worst case scenario is that a few projects get pulled at short notice leaving a hole in your monthly revenue, which leads to laying good people off, which can have a very detrimental impact on your growing business.
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The Wow Company's 2015 Benchmarking Report showed that almost a quarter of the agencies that responded to the research had no retained clients contributing to their monthly billings. That ultimately means that every month those agency owners are starting off with a forward sales revenue figure of £0, which gives them a huge mountain to climb and can cause unnecessary stress and strain.
At the start of 2015, 66% of agencies said that they were actively looking to increase the amount of work that they had on retainer, as opposed to only 7% that preferred to work on a project basis. Is the amount that you have on retainer a stat that you track as an agency? If you'd like to see where your agency ranks against others from across the UK on this metric (and many others) then you can do so by completing Wow's Agency Survey 2016. Everyone who takes part will get a free advanced copy of the final report in April.
As part of last year’s Benchmarking Report Wow asked agency owners to give their thoughts on getting more retained work from clients. One agency responded to the question, “what’s the best way to get more retainer work?” simply by saying “ask them for it, if you don’t ask you won’t get!” He has a good point. Often agencies simply don’t ask the clients for a regular retainer contract. They may not want to rock the boat if it’s a relatively new business relationship or they may think that the client simply won’t put them on a retainer. But there are advantages for both parties if a retainer is put in place. So, just ask the question. The client may decline, but at least it shows that you want to be in the relationship for the long haul.
There are tactical ways to move towards a retained relationship, as another agency owner outlined last year, saying: “We have built on-going email and social media campaigns into every brief. This gives us the chance to have a conversation about the on-going relationship.”
Another agency responded by advising: “Start with informal retainers. We make sure we have quarterly meetings with all clients to spot opportunities for additional project work.”
“Network your way around the client – often there are good opportunities in the department across the hall,” was the view of another respondent last year.
Another downfall of many small to medium-sized agencies is failing to charge for amendments. In fact, in Wow's Benchmark Report last year, they found that 43% of agencies rarely charged for clients making amendments. Only 7% of agencies said that they ‘always’ charge for amendments if it falls outside the original scope of the brief.
You will find it very difficult to become a top performing agency in terms of profitability if you don’t charge for changes that clients make to your work. Giving away your time and expertise for free is difficult to sustain over a long period of time. If you don’t value your time, then how can you expect your clients to? Wow revealed a fascinating stat in their Inside Track Webinar on this very subject. Listen from 15:43 to see for yourself what difference it could have on your profitability.
The deadline to take part in this year’s Benchmarking Report research is looming (31 March) and we would love to hear your views as an agency owner. To take part and be the one of the first to see the results when they are published click here.