I’ve written about the various aspects of running an agency business. Like any other topic, the deeper you get into it, the more nuances and complexities you encounter. However, it’s worth taking a step back every now and then to revisit some core ideas even if they may come off as oversimplifications.
I present to you five agency business lessons:
1. Win New Business
- Winning new work from clients is what breathes life into the business, without this nothing else matters.
- Prioritize winning work from existing clients. Chances are, your win rate will be much hire and the effort and cost required to win that work will be a lot lower. Find clients who are likely to be repeat buyers.
- Design and offer services that solve people’s problems, helping them remedy a pain or find a solution.
- Price in ways that leaves room for margin but is also a good value for the client. Going too far in either direction will cause issues for the business.
- Show how you’re a low-risk option (e.g. have done this before, have deep expertise, etc.) and/or a very differentiated option (e.g. nobody does it like the way you do it).
- Identify and build relationships with people who’ll send you leads (see my blog post on lead sources) – this is probably one of the most impactful things you do in the agency business.
- Keep people updated on what you’re doing and share what you’ve been able to do for your clients
2. Deliver for Clients
- Always follow through on promises to the client.
- If you make a mistake, admit it right away and offer ways to remedy the situation.
- Overdeliver in making clients happy to the extent you don’t kill your margins.
- Your clients will most often be your best referrers of new business if you treat them well.
- Provide clients with opportunities to give you feedback, they’ll appreciate it.
- Find ways to provide clients value outside of the work you’re being paid to do (e.g. intros to help them network, sharing relevant resources, etc.)
- Delivering quality work is important but be sure to prioritize the overall client experience (see my blog post on client experience vs. quality work)
3. Keep Costs Low
- Don’t let your costs get bloated, especially your labor costs.
- Find ways to deliver at high margins using junior or off-shore resources where possible. The ratio of junior to senior team members can have big impact on your margins.
- Find ways to be efficient with less people through better planning and processes.
- Keep an eye on miscellaneous costs and ruthlessly cut back on things that don’t provide value (see my thoughts on cost controls from Agency Journey Episode 19).
- Headcount is a vanity metric – a lot can be done with a small core team with a network of subcontractors.
- Be cautious when hiring for non-billable roles – having too many of these hires without sufficient revenue or gross profits can sink the business.
4. Set Goals & Measure Progress
- Develop a scorecard (a set of KPIs) that gives you a good overview of the business. We track revenue, gross profit, EBIT, utilization, and new business bookings on a weekly basis and employee sentiment on a quarterly basis.
- Set targets that are realistic and conservative, tied to real activities (e.g. lead generation, calls, proposals, etc.). Hope/optimism is not a strategy!
- If you find it too difficult or onerous to pull the data regularly and get accurate measures, revisit your systems and do whatever it takes to make it easier.
- Communicate with your team (or at least the leadership team to start) on the goals and let them know how the business is tracking.
- Be a hawk for when the business is off-track and be quick to make necessary adjustments to get back on track.
- Have a regular cadence for reviewing, planning, and setting goals on a quarterly and annual basis.
5. Hire Well & Manage Well
- Lead by example – how you work, how you communicate, and how you treat others sets the tone for the culture.
- Build a team of hard-working people who are professional, eager to learn, and like getting things done.
- Be quick to identify poor performers and culturally toxic or disruptive individuals (e.g. gossipers, negative attitude, etc.) and do whatever it takes to eliminate them.
- Be clear on expectations around behavior, role, and responsibilities.
- Have periodic check-ins, be quick to provide support when necessary (e.g. bandwidth issues or struggling with a particular problem), provide feedback and encouragement regularly, and solicit feedback on how their working situation can be better.
- Build systems (e.g. processes, tooling & automations) and networks (e.g. relationships with academic institutions, recruiters, communities, etc.) to effectively attract, recruit, interview, and hire new talent (see my blog post on hiring).