The Downstream Impact of New Business Decisions on an Agency Business

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Last week, our leadership team at Barrel spent 3 full days aligning on goals and priorities for 2020. We came away with some concrete assignments that will improve processes, enhance our service offering, and deepen relationships with our clients.

A recurring theme that’s become clearer to us in the past year is that all the problems and all the successes of an agency business, when you get down to the root of things, really boils down to two major components: who we hire for the team and the new work we take on.

In this post, I wanted to dive into the latter component and highlight the downstream impact of new business decisions on an agency.

Qualifying New Work

When we come across new opportunities to work with clients, whether they are existing clients or new prospects, it’s very easy to get excited about the size and potential profitability of the engagement. Assuming you’ve vetted the engagement for budget (it’s ample and can lead to profitable outcome) and timing (the deadline is manageable), there are still important factors that can determine the long-term impact of the project on the agency.

These factors are:

  • Match with agency’s positioning
  • Clarity of project scope
  • Duration of project
  • Client’s time and attention

Ignoring these factors can lead to all kinds of problems that manifest in different ways later on. Some of these factors are easier to vet early on while others may be harder to know until you’ve already signed. The following sections detail the downstream impact and how an agency can avoid making these mistakes.

Match with Agency’s Positioning

The types of projects an agency takes on today will most often determine the types of projects it gets later on. This is because today’s projects will inform tomorrow’s case studies and referrals. If the agency takes on work that it doesn’t want to be known for, it is doing a disservice to future business development.

The reps gained from doing certain types of projects also determine the agency’s expertise. For example, if an agency continues to do e-commerce website projects, it will, assuming there is employee and knowledge retention, become more adept at building these types of websites, often gaining valuable insights and developing processes to create speedier delivery times and more robust work products. Another example of expertise is in the types of clients the agency takes on. If the agency focuses on clients in a certain industry vertical, like media, it can develop expertise around all the unique needs the client may require (e.g. content management, digital asset management, email marketing, ad tech, etc.).

Positioning, at a basic level, simply comes down to this: what are you good at and what have you done to prove it?

An agency that is unfocused or unclear about its positioning will take on projects without much discrimination and end up with a portfolio that makes it difficult to sell prospects on why they’re a credible option. This, in turn, can make business development less efficient and lead to an uneven pipeline, where there are busy moments followed by lulls of low client activity.

When you have a full-time staff and low utilization, this is a very precarious business situation for any agency. Pressure to land new work can mount, and this may lead to lowering the standards on budget and timing, taking on work that is not only not the right type of project but also low on budget and crazy in timeline. This can quickly compound into a stressed out team, turnover, and diminishing margins.

One thing I’ll add here–there are different levels of sophistication when it comes to positioning and this can determine the type of business model the agency ends up adopting and the amount of competition it faces. For example, a broader positioning in being “the digital agency for growing direct-to-consumer brands” may attract a lot more leads but also face a lot of competition (which could mean less pricing power) vs. narrower positioning as “the CRM & loyalty agency for beauty brands” which may get less volume of leads but confer specialist status that allows the agency to charge more and compete with less firms. One is not necessarily a better business than the other as other factors and objectives come into play, but this is a topic for another time.

Clarity of Project Scope

A big risk factor when taking on new work is being 100% aligned on project scope. This hasn’t been a rampant issue for us at Barrel, but when it does become a problem, it quickly spirals into a big headache.

At the business development stage, this problem typically germinates when the prospect and agency sides are both eager to get things started and don’t spend the necessary time to map out the deliverables, process, timeline, and other expectations. What feels like a fast and easy win for the new business team can quickly become a burden for the project team that’s assigned to move things forward.

The problems start when the project team isn’t quite sure what it is the client wants and the client team, often different from the people who signed the deal, is also unsure. Distrust and frustration build up and it’s highly likely that someone on the agency project team will say, “The client is disorganized and has no idea what they want.”

In the best scenarios, a couple of calls and meetings will get things back on track, but in the worst scenarios, the relationship is doomed from the start and even if a few deliverables make it out, the project is eventually abandoned. These situations are morale killers for the agency and also a blow for the agency’s reputation.

Even if a client prospect is incredibly excited to sign and get things moving, there’s value in taking things slowly and going through all the necessary steps to ensure a more harmonious long-term union. In some ways, I prefer doing smaller test projects and getting a feel for the client–basically the business version of dating–before committing to a larger engagement.

Duration of Project

In our agency history, we’ve worked on projects that have taken a few weeks, a few months, to over a year. The projects that take the longest often are the most complex with the largest budgets, but this isn’t always the case. Other factors, such as delays on the client side (e.g. manufacturing issues, changes in personnel, waiting for legal approval) can take a 3-month project and drag it out for 9 months.

At Barrel, we’ve found value in taking on projects of varying duration as it has allowed us to staff our team more strategically. For example, a designer or developer who’s had to focus solely on a single client for 6+ months may then be assigned to a quick 4-week sprint to launch a marketing campaign before being put on something more complex.

The nice thing about short projects is that they also allow us to generate case studies more quickly and gives us the opportunity to publicize new work, which is good for marketing and recruiting. I remember times when we were in the midst of several large scale projects that took forever to launch and it had the impact of sapping some team members of energy and also making our agency not feel as prolific from the outside. These days, thanks to the varying sizes of our projects and staggered timing of larger ones, we’re always launching something every month and announcing them through our Recent Work emails and on LinkedIn.

Client’s Time and Attention

Is the client able and willing to put in the time and attention into the project to help it move forward at a reasonable pace? This is a legit question that can be answered by aligning upfront with the client’s availability and expectations for turning around feedback and required materials.

One of the biggest killers to both profitability and team morale has been when clients, for various reasons, ghost us or keep delaying feedback/decisions. I’m ashamed to admit that we’ve sometimes accepted these situations with relief because it actually bought us more time to spend on another project that wasn’t going well or taking long on our end, but in our better moments, when we have our stuff together, delays are real killers.

Experience tells us that clients who lack a dedicated point of contact with bandwidth to communicate with us weekly if not daily will fall behind. There are some stellar founders who put in massive hours to keep things moving with us, but many founders usually get backed up with other fires and quickly fall behind. Things get better when they typically hire a marketing director, head of ecomm, or even an operations lead to become our day-to-day contact. Those who have too many responsibilities and manage more than a few vendor relationships typically fall behind as well. We try our best to qualify for these situations ahead of time but most people during new business discussions will always say that they will give the project their undivided attention.

The bold thing to do when a client has repeatedly shown that the project is not a priority is to get them on a call and either put the project on pause or resign from the account. It’s not the easiest thing to do, but it saves a lot of headaches long-term.

New Business is Business Strategy

I’ve come to believe that the way we approach new business is the way we implement business strategy for the agency. It’s where so much of the agency’s direction can be set by the type of client we engage with, the types of projects we end up working on, and the type of experiences we end up setting up for the team. The output of these engagements then signal to the world what type of agency we are, setting off a feedback loop that either turns into a virtuous cycle or a vicious one.

The game is not too different than it is with investing: avoid making disastrous mistakes at all costs (don’t take on troublesome work that can blow up) and combine thorough analysis with patience to make winning bets with a margin of safety (hold out for work that’s a great fit long-term).

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