I’ve been working with several independent agencies on their business strategies and it’s striking how common their challenges are, particularly around how to grow from less than 50 staff to something larger. Leadership are so caught up in delivering great product it seems it’s easy to neglect what achieves longer term growth. GDC3 is a simple framework I use to focus on five key areas: Growth, Delivery and the three C’s: Culture, Clients and Capability.
Culture – The IPA estimate that member staff turnover is 30%. This makes retaining and attracting talent central to agency success. Alongside the actual cost (about 150% of an annual salary) there is the burden of hiring, training, the loss of expertise and dilution of culture. When you’re a small agency it’s easy to ignore culture. It comes ‘built-in’ because of the personality of the founders.
Communication is taken for granted because it happens naturally within a small group working together. Codifying and celebrating the cultural behaviours that have contributed to success is important if you are to carry this with you as you grow. These cultural ‘hard points’ suffer as an agency grows and its original staff are diluted by new hires, and the needs of bigger clients change ways of working.
KPIs to consider – staff surveys, profile index
Clients – Small agencies often have more project work than retained client relationships which influences their operational model. Retained relationships generally create closer working relationships built on mutual success. Changing to retained relationships can be a big challenge, but essential to grow from that small agency of say £1.4m revenue to one with double digits. While small agencies are often excellent at their product, their client account management is typically focussed on delivery rather than growth because of project work.
Taking a close look at existing clients, understanding how to grow them through understanding their needs is central to successful growth. An ‘on time on budget’ account team/culture is not capable of this. Big agencies tend to have a more mature account management team culture which is where to look for beefing up an account team. This can be a blind spot for small agencies, who focus on adding services to grow rather than changing account management culture. Experienced account management; people able to know and grow a client is often the quickest and most sustainable way to grow. Account management tilted towards delivery does not have the client intelligence to identify and sell new services.
KPIs to consider – quant and qual client feedback, account retention, account growth
Capability – Small agencies typically look to new services to grow which can be a mistake. It’s often the case that an agency’s best growth opportunity is to do more of what they do best. Innovating in a core service is more likely to drive growth than trying to sell a new service. Innovation also provides the narratives you need to build reputation and profile and make a noise in the market. Complementary services should be built out of this core service, ideally sold to existing clients from the get go so you’re not gambling investment.
This is why building a mature account management culture that goes far beyond ‘on-time, on-budget’ is so important.
KPIs to consider – profile index, award wins
Growth – Small agencies typically rely on word of mouth and repeat business. This is great for keeping everyone focussed on the quality of the product and the customer experience, but it distracts from making the time to develop reputation and credibility. The highest client retention I’ve seen in an agency is about 90% of annual revenue. This is exceptional rather than the rule. Agencies should expect client revenue churn of anything from 10-40%, so in order to grow, new business needs to fill this revenue and then add some on top. It’s hard to do this if you’re worrying about the trees, rather than the forest. Small agency leaders need to get their heads out of the day to day and focus on how to build reputation and visibility which will feed their pipeline; leveraging business partners and clients, alongside getting involved in their industry.
KPIs to consider: Pitch win rate, RFI/RFP success rate, profile index, existing account revenue growth, new business revenue, pipeline value
Delivery – This comes first or last. You either have it cracked, or need to fix it before you can sustainably grow. Small agencies are generally good at delivery. If an agency is operating anywhere from about 15-20% profit margin, and your clients value your work, then you’re getting this right and ticking industry standards. Small agencies often know they are only as good as their last job and that the next one comes from recommendation and repeat business. If they don’t get delivery right early on then they don’t get to a position from which they can really think about how to grow, because they are focussed on survival.
KPIs to consider – Margin
I’ve found GDC3 a helpful lens to consider an agency through. It helps plan activity and keep the focus on the things that create success. If you’re trying to grow an agency, and are not covering these five pillars, perhaps it’s time to start.
Mark Iremonger is an independent consultant, the former CEO and CSO of iCrossing UK and Head of Digital and Planning at Proximity London