Six years ago, we began our agency benchmarking report - BenchPress. The aim was simple; to take an...
What Wow's top performing agencies do differently
As accountants specialising in creative businesses, we've worked with hundreds of agencies over the years, from start-up to £5m turnover. We're constantly fascinated by the difference between those that make it big and those that just tick along, so we thought we'd find out what separates these two groups and share with you some of the things you need to be thinking about if you're serious about growing your agency.
Get cash in quicker
Cash is the oxygen that keeps your business alive. Without it, even the most creative and innovative agencies won't survive. So, here are some quick tips to get your cash in quicker:
- Ask for deposits – Do not start work on a project until you have been paid a deposit. If the client is not willing to work in this way, walk away. They will only be a nightmare further down the line.
- Staged payments – Don't leave a massive payment to be made at the end of the project. Split the project up into its key milestones and look to invoice regularly throughout.
- Reduce your payment terms to 'by return' – If you give 30 days credit, you cannot start asking for the money for 30 days. This is crazy - it is the banks that should be lending to businesses right now, not you! Change your payment terms on invoices to 'by return' and you're then able to ask for the money sooner.
- Be upfront – State your terms in your pitch document. It won't stop clients trying to negotiate, but at least you can start the discussion on your terms, not theirs.
- Retain leverage – Don't send the website live or courier the new branding over to the client until they have paid for it. Once the project is completed, you've got no leverage.
- Have a system for getting cash in – Review your debtors at least once a week and allocate time to make phone calls to get the cash in. If you're not comfortable doing it, find someone that is.
Have financial information at your fingertips
We've noticed that our top performing agencies have taken the time to setup dashboards which contain their Key Performance Indicators (KPIs) available at the click of a button. Having this key financial information at their fingertips allows them to make better business decisions and ultimately leads to more profit and faster growth.
Get in touch & we'll help you setup your Agency Dashboard.
Prioritise sales & marketing
We're accountants, so we're not going to start dispensing marketing advice (especially not to agencies). However, when we did our research, we noticed that all the agencies that had reached £1m+ mentioned that a key turning point for them in their growth journey was when they decided to prioritise sales and marketing. We spotted a number of common traits amongst the top performing creative agencies. They all had the following:
- An individual responsible for sales and marketing (it didn't fall in between 2 directors).
- Time allocated to complete sales activity. If you try to fit it around project work, you'll fail every time. Sales & marketing requires ring-fenced time.
- Targets for generating opportunities (not just sales figures), e.g. number of meetings or pitches completed - these are leading indicators of future success.
- Sales statistics, e.g. where the client heard about them, pitch value, conversion rate, final project value. This helped them work out how many pitches they needed in order to hit their billing targets - the stats don't lie.
- A plan – Obvious, really. And vitally important. When was the last time you reviewed your sales plan?
- An engaged team – It wasn't just the directors' job to generate new business or additional fees from clients - the whole team were aware of the targets and were on the lookout for opportunities to help clients further (and bill for it).
- Speculative time – A small amount of time each month was set aside for speculative pitches to existing clients. Agencies would pick a client (one with potential to grow) and get their team to come up with new ideas to pitch to them - this helped expand accounts to other departments, geographies and even subsidiaries (at low cost).
Make your projects more profitable
It's one of the biggest challenges that agencies face: Delivering an amazing project, whilst still making a profit. We see so many agencies walking the tightrope between keeping the client happy and ensuring the job doesn't overrun as a result of additional client requests. The reality is that there is no simple answer to solving this challenge, but there are lots of little things that you can do to help you achieve more profitable projects. Here's some things that might help:
- Use technology – If you're using spreadsheets to manage projects, or have jobs scribbled on a whiteboard, it might be time to use some of the great technology that's available to help you run more profitable projects.
- Scope it out – I know it's boring, but unless you properly scope out exactly what work you're going to do (and what you're not going to do) it'll only come back and bite you on the backside further down the line. A day spent scoping a project and getting it signed off by a client will save you two days further down the line, or will mean that you can bill for these two additional days, where previously you'd be working for free.
- Limit amends – As part of your scoping document, it's important to be clear about how many rounds of amends there will be. This avoids the situation where clients are constantly tweaking. If you state at the outset that the fee includes two rounds of amends, then when they request the third round, it's chargeable. Simple as that.
- Group changes together – If you have clients that send you change requests every 5 minutes, it's incredibly costly to make all these changes individually. You have to stop what you're doing, switch projects, make a small change and then switch back. A much better way to do it is to get your clients to send you amends all in one go. If they still send you things every 5 minutes, you'll need to have the internal discipline to group all these changes together - it'll save you tons of time.
- Have a minimum fee – If you don't charge clients for amends, they'll have you flitting between different shades of blue for an eternity. By having a minimum fee for any changes, e.g. £250, you'll force them to think about how important it really is to "make the full stop a bit bigger." When there's a price tag attached, there's a good chance they'll decide it wasn't that important after all. And if they do want to make the change, then at least you get paid for it.
- Be upfront – It's important to let clients know how you work right at the outset. If you lay down the ground rules in your initial project scoping document, you've got a chance of ensuring your projects are profitable. If you don't, you'll have no recourse with the client and you need to be prepared for your profit to slip away.
You don't have to be a Wow client to get some Wow magic..... we can complete an Agency Profitability Review to help identify ways for you to increase your profits. Just get in touch.
Get out of the day-to-day
This is easier said than done, but unless you step away from the coal face, you've got no chance of building a £1m+ agency. We noticed that the top performing agencies we surveyed were masters at delegating and building teams around them that could do the work. The founders were brave when it came to recruiting (they did it early) and were constantly looking ahead to help plan what freelance resource they'd need.
If you feel that you've not got the right team around you to delegate to, then you need to do something about it… and fast. You're also going to have to get really good at letting go of the day-to-day tasks, to allow you to concentrate on the bigger picture.
Do you really want to grow your agency?
This isn't a trick question. There is nothing wrong with remaining small, especially if you can work with clients that you love working with, on projects you love working on. Being bigger does not necessarily mean bigger jobs, cooler clients, more money or working fewer hours. Before you embark on growth, think carefully about what YOU want to achieve from your business. Whether that’s fame & fortune, or just an easy life, it’s important to understand what you’re in this to achieve. Once you’ve worked that out, you can then build the agency that YOU want.
Are you clear on the purpose of your agency? Have you got it written down? It might help you focus on the changes you need to make to achieve your objectives.