The Biggest Challenges Facing Agency Leaders

I spend most of my working life with agency founders and leaders talking about the challenges that they face in leading, developing themselves and their business and how we can address them together. ?

In this series of posts, I summarise the major challenges that agency leaders tell me that they’re facing right now as we move from an extremely tough and difficult period of economic instability into an uncertain but ?gradually improving outlook:

1.????? Fatigue

A big one up front. There are a lot of very tired agency leaders out there.

Running an agency for over the last 12-18 months has been a tough gig. External economic factors have led to a sluggish market characterized by reduced (or removed) budgets, clients demanding more from less, pressure on profit and costs……

Leadership thinking has had to pivot from long-term sustainable growth and development to month by month managing for stability,? in some cases, scrabbling just to stand still.

For many this has meant wearing many hats – ?forensic management of the finances, leading the sales push for new incomes, frantically ensuring the best delivery and output, all the while leading the agency and its’ people in testing times.

One agency owner I spoke with formed an agency in 2004. Since then they have had Credit Crunch, Covid, and Cost of Living to contend with and navigate through.

Barely 2 or 3 years of consecutive favourable economic conditions in the lifetime of the agency! No wonder that many feel a sense of fatigue and question when the hell it’s all going to get (and feel) better.

It’s understandable.

The main thing I talk through with agency leaders is a simple one but one that, in the midst of the firefighting and pressure can be quite hard to get / keep hold of.

Remember the long-term goal.

Don’t lose sight of the ambition and reasons for being in business in the first place.

Acknowledge that economic circumstances impacts all agencies and that difficult times are experiences by (nearly) all across the sector.

But, those that weather storms and come through the other side will be more robust, more resilient, and better able to shape their future.

The focus will shift from reactive firefighting and month-by-month pressures to planning for the future with a focus on growth and development and meeting that ambition and goal – the reason that agencies were started in the first place.

?2.????? Forward Planning with Focus

Regardless of the ambition of an agency – whether that be aggressive growth to sell, steady and stable performance ?– there has to be a solid plan in place that devises and outlines the strategy and key actions to support the attainment of the key aims and goals.

This is particularly important as we move from a period of economic uncertainty and managing short-term pressure points to a more optimistic period where development and growth of the agency becomes priority.

Yet most agency owners and leaders tell me that either:

a)????? ‘We don’t have a plan in place’

b)????? ‘We have a plan with some high level objectives and actions but we’re too busy doing day-to-day stuff to get round to it’

c)????? ‘We have a plan detailing the 125 key initiatives that we will complete this year’

But none of these are particularly effective in supporting and guiding the decision making of agency leaders.

A medium term plan (3 years consisting of key financial and strategic initiatives / agency development needs) with a high-fidelity view on Year 1 is hugely beneficial in supporting agency leadership in managing the business and in aligning the short-term needs with the long-term ambition.

A strong focus on a handful of priority areas that have a direct, positive impact on the net position of the agency will balance what’s needed with that is achievable.

De-prioritise anything that does not directly contribute to the net position or aids the platforming of the agency in support of the ambition and goal.

This helps to provide directional focus and eliminate distractions and define key actions for the senior team.

Agency owners and leaders can lead from a basis of focus and clarity with clear priorities and expected outcomes – specific and measurable.

A clear and communicable plan that directly supports the progress and development of the agency towards the desire goal(s) is a first stepping stone in platforming the agency for growth as the economy gradually recovers.

?3.????? Decision Making

‘Making more of the right decisions’ has been a key theme in my meetings with agency owners and leaders lately.

The economic stagnation and resulting uncertainty over the last 12-18 months has brought with it challenges in making the right decisions that are in service to the long-term plan and needs of the business whilst recognizing the current situation and immediate outlook.

What do we invest time / resources / money in?

How do we react if we fall short on the planned financials?

How do we balance the need for progress and development with the need for stability and contingency?

Good decision making is informed by the information and context available to us at any time. The best resources to aid decision making are assets that every agency should have:

·?????? The Agency Strategic Plan (see previous post #2 in this series on Plans)

·?????? Robust Forecasting and Financial Management (benchmark of performance versus plan)

The plan helps us to clearly understand the direction of travel – both financial and other business functions and can inform us what is critical in supporting that.

The financials helps us to identify how close or far away from that direction of travel we are in the current moment.

Both, combined, can help inform decision making that balance immediate need with long-term development.

Frequent measurement of our net position versus our forecast position will inform and drive decision making.

Agency leaders need to balance that in context of and in service to the long-term plan to ensure that ‘more of the right decisions’ are made.

Important decisions should be made quickly – particularly those relating to costs and people (regrettably).

Delay will introduce more risk to the position and stability of the agency, potentially moving further way from the Strategic Plan and ultimate ambition and goal.

Progress and development of the Agency Strategic Plan toward the overall goal has to be based on stability. That is, at times, a necessary platform for growth and development.

The see saw of cost-control and investment will swing periodically in both directions so attaining that balance via a fully informed, clear and specific view of short and long-term planned versus actual is key to driving more of the right decisions.

?4.????? New Business: No Pipeline

A largely universal theme in my chats with agency leaders is the lack of new briefs and budgets throughout the sector.

Income pressures, through a lack of new business opportunities, are a main concern for agencies and perpetuates a host of downstream uncertainties.

Lead generation sources for agencies are hugely variable but over-reliance on inbound leads from immediate networks is still a major issue for the sector (particularly in scaling agencies).

In the balance of investment and cost management, one area where more investment is often needed is marketing and sales. Additional time and resource on marketing activity that drives lead gen and supports new business is beneficial to both short and long-term needs.

Many agencies are not quite proactive enough in marketing and sales – awaiting briefs and RFPs from known sources, previous clients, or roster clients. This is self-limiting to a degree as a network of potential new business sources is finite without proactively building it out.

Agencies that are proactive in communicating with target clients are building a more sustainable approach to income and revenue growth.

This does not mean spamming the hell out of every CMO on Linked In and via email but does involve a series of steps to build out the awareness and relevance of the agency more widely within the target audience:

-????????? Be clear about the ideal client profile (ICP) of the agency and the value that you bring to clients (what are we great at and what outcomes does that create for clients?)

-????????? Devise content and messages that create a value exchange with potential prospects – thought leadership, market analysis – to differentiate and be meaningful in your comms

-????????? Use the above to specifically target and grow the network of followers for your agency to include more potential ‘buyers’.

-????????? Identify prospect (ICP) contacts of your clients and former clients and ask for introductions. As your clients and former clients know the value that you create and have respect and trust in you, this can help with making introductions beyond your 1st party network

Adopting this approach is more proactive and serves to create a long-term source of pipeline. Do not expect an abundance of immediate opportunities (unlikely) but a more focused approach to outbound sales and marketing activity will be critical to growing pipeline in both lean and more buoyant times.

?5.????? New Business: Not Winning New Business

With fewer leads out there to compete for, winning the available leads becomes all the more important. A key concern raised to me by many agency leaders of late has been low win rates on new business.

Improving win rates on qualified leads in a time of reduced pipeline is key to income security, revenue stability, and path to growth. Without it, the financial pressures that we have seen over the past year and more will pervade.

There are short-term and long-term ways of addressing this issue:

Short term - double down on prospects. Devise an approach and form a team to do your very best sales work on fewer opportunities.

This should involve spending additional time (yes, there are pressures on time and resource but new incomes are a top priority) on:

-????????? Understanding the client pain, needs, and wants (outcomes) from the work

-????????? The impacts on the client business (commercial and or strategic value derived from or contributed to by the work)

-????????? Crafting your solution to drive these valuable outcomes for them

-????????? Ensuring that these are developed with, positioned with, and agreed by senior stakeholders within the client

There is still a common behaviour across the sector of agencies positioning their services (who we are what we do) – instead of their value (how we will positively impact your business).

At times where budgets are tight, sales cycles are longer and selection criteria is more stringent, the points of difference between a winning agency and the one that comes second can be marginal. The more an agency can show how they can solve a client problem / meet an opportunity and drive desired business outcomes through their work the more likely they are to succeed.

Long term – invest in an end-to-end capability, methodology, and best-practice approach to sales that becomes habit – repeatable and scalable. This will serve to create and embed a singular, successful approach to ‘doing sales’ that will enable sustained growth.

?6.????? Clients: Client Revenue Concentration

As well as a reduction in new briefs and revenue opportunities, the last year and more has seen a lot of clients remove, cut, or shift budget to the right.

The resulting challenge for some agency leaders has been the realisation that the agency may be overly dependent on one client (or small number of clients).

Of course, for agencies in early stages of growth this is a necessary evil – winning your first client or clutch of clients is a major benchmark on the start-up to scale-up path.

But it’s something that needs to built upon further in order for the agency to be sustainable and protected (as far as is possible) from the affects that a volatile markets have on our clients and their appetite / willingness / ability to spend.

Building out from this core of 1 or more key clients, diversifies the client portfolio, de-risks against the market dynamics and provides some assurances and predictability on key financials. It provides a stable basis to make balanced decisions factoring both long-term plans and short-term circumstances.

Without that build out and diversification of client portfolio and spread of income, we have fewer controls at our disposal and less direct autonomy on decision making.

Realistically, for agencies right across the board and of all sizes, the only way to safeguard against this is to grow your ways out of it. Reducing concentration of revenue and risk means growing overall revenues – specifically with higher value clients.

To that end, an effective approach to marketing and sales (see posts 4 and 5 in this series) are much needed investment areas in terms of time, resource and available funding to help ensure a stable basis with ever reducing dependence on small numbers of clients.

Lowering customer concentration beneficial not only in core agency performance but is also a factor in the long-term, strategic plans for the agency. Any investor or potential buyer, if a trade sale is an ambition, will consider client and revenue concentration as a risk factor.

?7.????? Clients: Retention & Profitability

There is a classic chicken and egg scenario occupying the minds of many agency leaders.

‘How do we service clients who are demanding more from us for the same / less budget and ensure our profitability?’. I have heard this many times in recent conversation with agency leaders.

Client retention has been a top priority recently as agency leaders have moved to safeguard existing revenues and secure a degree of certainty and stability.

Ensuring excellence in delivery and service levels for existing clients has been critical to supporting the core financial performance of the agency.

But, as agencies have doubled down on exiting client, coupled with increasing demands from clients for more from same / more from less, what has been necessary in protecting revenue has often been offset with a reduction in profit.

Profit performance is the real measure of health of an agency and so, any detriment to profit has knock on effects – available investment, staff and shareholder remuneration, valuation of the business….

However, happy current clients are often the most likely source of growth opportunities – both short and long term.

Demonstrating the value and impact that you bring to clients, as well as the excellence in delivery and service levels, will firstly protect the existing revenues but also provide a platform to explore opportunities for further growth.

Where agencies have an invested mutual partnership with clients, it is often worth taking this considered and balanced approach provided that, as agencies we are also identifying efficiencies to maximise profitability and proactively exploring relevant mutually beneficial growth opportunities with the client.

Continually demonstrating the value that we bring to clients (senior stakeholders) in commercial and strategic outcomes, measures and metrics is pivotal to ensuring that there is a basis for this value exchange.

?8. Effective Client Services

When I talk with agencies about the purpose, role and objectives of their client services people and function, the answers vary considerably.

What is universal is that client services provides the conduit between the agency and the client – a vital interface that can determine the success or failure of our client relationships and resulting revenues.

But, a number of agency leaders are uncertain whether their client services function is successful. How determine that?

In my years of agency leadership, the most successful client services people and teams Service, Protect and Grow clients.

Service – ensuring that the agency work meets the needs of the client and creates the outcomes, results, and metrics required. Make sure that the agency is meeting the desired objectives of the client. Demonstrate the value that the agency is bringing to the client. Ensure that is accepted and acknowledged by the senior stakeholders inside the client.

Protect – add value beyond the core services. Help to elevate the position of the agency from service provider (commodity, dispensable) to that of a valuable strategic partner (valuable, hard to replicate and replace). Ensure continuous understanding of the client organizations goals and objectives, their challenges and pains and how as a strategic partner, you can continue to assist them in overcoming barriers and attaining objectives. This requires consistent, regular communication with senior stakeholders.

Grow – through understanding of the emerging / future needs of the needs of the client, proactively explore, in collaboration with the client, opportunities for grow and development of the partnership. Doing so will affirm the strategy partnership and create opportunities for further mutual value creation – for the agency that means retention and expansion of services and revenues over time.

An effective client services function plays a front-line role in attaining the commercial objectives of the agency.

The highest-performing client services functions are usually targeted and measured on retention and growth but, too often, agencies limit the purpose and objectives of CS teams to ‘Service’ measures.

Whilst this is essential, it is limiting for both agency and client, providing only one dimension of a fully fledges value exchange that makes agency-client relationships partnership based.

It is these types of client relationship that results in higher value, long term relationships with clients offering predictability and stability in revenue as well as growth opportunities from existing clients that are often easier to secure than new business equivalents.

?9.????? Senior Leadership Team Capability

Agency owners have been seriously tested over the last year and more. It’s during tough times that we learn about the strengths and capabilities of those immediately surrounding us.

For many agency leaders, particularly those have matured beyond start-up and into scale-up phases, this has led to a point of reflection.

Perhaps the leadership team does not have the bench strength to take the business forward.

Developing a capable senior leadership team is a necessity for a variety of reasons:

-????????? Gradually reduce owner / founder reliance to focus on business strategy and plan

-????????? Experienced specialists become required to manage and drive critical business functions e.g. finance, HR, sales, operations

-????????? Organisational maturity and development may require leaders who have been there and done it to augment the leadership team

For agencies with an ambition to sell, merge or attain growth through investment, the presence of a strong and complete Senior Leadership Team will be a an essential factor in valuation.

Any investment or acquisition is dependent on the leadership team to deliver upon and show return on that investment.

Regardless of objective or stage of the agency journey, there is an ongoing requirement to develop the senior leadership team in line with the growing and scaling of the business.

The economic situation of recent months has told agency leaders a lot about the strength, capability and resilience of their leadership teams.

As agency leaders come to plan for a more favourable economic outlook, there need to be confidence in the capabilities of the senior team to own, drive and deliver upon those plans.

Development of the leadership team itself, should be a component of that plan – how bring in the right skills and experience or develop and support the existing team to ensure success in the next phase of the agency journey.

?10.? Realisation – What Got Us Here Won’t Get Us There

The economy is still in (very) early stages of recovery and times remain tough for many agencies. Many agency leaders, though, are sensing signs of improvement and feeling a degree of optimism that has been largely absent for some time.

As the pressures of day-to-day stability (survival for some) alleviate, attention and focus is gradually turning from firefighting to thinking about the future – about plans for the agency moving forward.

This is a common theme in my work with agency leadership. The 1st port of call on starting out on that path is generally a period of reflection:

·?????? What did that last 12 months or so show me as an agency leader?

·?????? What did it reveal about the agency, it’s strengths, and gaps?

·?????? Do we have what it takes to make it to the next stage?

·?????? What do we need to put in place, to be have and do to achieve our goal?

Generally this results in healthy realistion summed up by the old cliché ‘What got us here, won’t take us there’.

For agencies who have growth as a central ambition, this tends to be especially true. A business that has emerged through the start-up years and has shown resilience through a tough economic climate has potential for growth.

But the things that made the business a ￡1M / ￡2M business can’t be relied upon to help you get to ￡5M and beyond.

The challenges that have been described in this series of posts have to be addressed to ensure the sustainable growth and stability of the agency:

·?????? New business growth has to be assured with a more sophisticated, end-to-end marketing and sales capability. Reliance on network and inbound wont; be sufficient.

·?????? Costs will increase – more senior people, leadership additions to develop the agency and put in place platforms that support growth and scale.

·?????? Client relationships will need to be more strategic, long-term and valuable, not commoditized, service-driven engagements.

·?????? The path forward will need to have structured plan for development, with a capable leadership team to own, drive and deliver upon it.

And owners / founders will need to be able to spend time ‘on’ the business, they will need to re-energise, shake off the fatigue brought on by the pressures of the last year and get excited again by the future – the strategy, the plan, the key activities and measures.

To lead the next phase of their agency.

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