The idea of selling your creative firm some day might be far-fetched, but there are some surprising changes in the M/A (merger/acquisition) landscape recently that are upending decades of business as usual:
This process starts by getting an idea of what....
I’ve now surveyed 20,000+ employees in the marketing field, and there are some real gems in the findings about all kinds of things. I was struck recently by how one issue had surfaced repeatedly in many ways over many years, and it’s worth mentioning to you here.
The one thing you might do differently is to pursue a strategy of measured involvement. That means that when and how you’ll insert yourself at work is predictable.
Employees don’t care too much about less than normal involvement or more than normal involvement as much as they don’t like surprises. They like your input, usually, but they absolutely hate it when you swoop in at the last minute and put everything on a different path, whether that’s how a client problem is being solved or an employee situation is being handled or whatever.
This whiplash style is disrespectful because....
Even the most confident agency principals (and consultants) experience self-doubt if the pipeline runs dry. What was previously a genuine confidence now stands behind a quickly erected facade of bravado. While agencies in the US are generally doing well, some of you experience this every few years and others are experiencing it now for the first time since 2008. And outside the US, the agency market is generally flat.
But everything changes when the pipeline goes dry, right? Not only do you lack some of that killer instinct that stems from confidence, it all rolls up to further impact your psyche.
Times like these are when you should be able to reach for the switch to make it rain. Here are the things that you’d ideally be able to do:
There are two big mistakes that creative firms are making when it comes to account management:
Let me explain the mistakes in more detail, the implications that flow from the mistakes, and how to fix them.
At ReCourses, we have studied 21,000 employees in the creative services field. Each of those individuals has completed a lengthy qualitative/quantitative survey, participated in a personality profile exercise, and been interviewed for 20–30 minutes. We’ve compared that data with agency performance to surface these two results when an employee with a project management mentality is put in charge of a client relationship.
Effective client relationship management requires the right people, and that job may be....
Sometimes waiting is fun, like that interval between when you decide to go on vacation and when you actually go. The planning that takes place in that interval can be as great as the trip. Most of the time, though, waiting is just irritating, like waiting in the line to renew your driver’s license or sitting in traffic.
Smart agency owners know how long things take and are always planning ahead. They are usually really good about planning for one of those decisions, anyway, and that’s their facility. It’s a huge commitment, for one thing, plus blowing that decision will be impossible to hide. If they don’t think ahead, the team will work standing up, because there’s no place to sit down, and they’ll do it in the parking lot.
Contrast that with positioning decisions, though, and the consequences are more insidious but less obvious. Everyone will still have a place to do their work, but few of them will notice margins slipping, less effectiveness for clients, and so on. You can put off a decision about your positioning and life will go on.
There are other areas where you do a passable job of making decisions, like hiring the right person. Usually you think carefully about it and plan accordingly. You socialize the decision and spread the word within your networks. You’re patient during the testing and screening phases, and you’ve also gotten better at incorporating new employees well.
Where you really struggle is making big, important decisions about your future where there is no external deadline. Positioning comes to mind, especially, because of these three reasons:
When I commissioned this illustration, I thought the accompanying insight piece would be fairly easy to develop. The idea was to write about your competitive advantage and how to protect your agency from competition.
Not so much! Writing it has taken three times as long as normal, and it’s forced me to reexamine how I think about the topic. I will think out loud about the five things I tossed on this journey and then we’ll settle on the three that make sense.
As the principal of a creative firm, one of your duties is to defend the agency from external threats, similar to how a moat protected a castle. It was the first line of defense against invaders. Back then, though, the enemies were few and easily identified. Now they chip away at the walls from all directions. Some are actual competitors (other agencies), some are sea changes (client-side work replacing the very castles themselves), and some are existential (how we think about marketing). You aren’t repelling a huge mass of marauding cretins every decade; now the competition is a way of life, hitting the castle walls around the clock.
Your moat (competitive advantage) cannot be:
So after eliminating two early options for the sort of protection that a moat can provide, we’re still searching for an answer. Here is where I think we need to add “sustainable” to qualify the search.
Your moat (sustainable competitive advantage) cannot be:
I regularly hear agency principals boast of two things. It seems cruel to burst their bubble, so I don’t say anything in the moment, typically. But I’ve now heard these two things said so many times that it’s probably worth a quick discussion. The first one goes like this:
“We’ve built our agency entirely on referrals. We’ve concentrated on doing good work and our reputation has just spread over the years and we can hardly keep up with the opportunities that come our way organically.”
I do understand the sentiment, which seems to be a combination of these things:
There’s more going on behind the scenes, though, and I’ll offer an alternative interpretation of a firm that relies largely on referrals:
Most aspects of your business will run better without you. Your people will thrive when you aren’t lowering prices all the time or blowing up creative two hours before a presentation.
But over the long term, it will be a disaster if you step away. The effects will be insidious and nearly unmeasurable, but here’s what will happen if you don’t show up over long periods of time:
Time to talk about clients. Not specific ones, though, but rather what an ideal client base looks like for a smallish, privately-held firm in the marketing field. I doubt that this would apply outside this field, so use with caution if you are a different type of firm.
Start by listing all your clients in a spreadsheet, from largest to smallest in descending order, like the illustration above. One very important note: if you have the data, list just the fee income from these clients. That’s what’s left after pulling out all the external cost of goods sold like media, printing, and contractors. Don’t pull out internal salaries as those are never properly categorized that way.
I’ve numbered the graphic to direct your eyes to what you might look for.
First, note the relative size of your largest client. If you are working for multiple departments or divisions of the same larger entity, they should be listed as a single source of work. For more on dealing with a client concentration issue, see the position paper here on "Qualifying Clients" (it's free).
You want that largest client to represent 15–25% of your total fee billings. Larger than that and most of the clients that follow will be too small to generate profit and to let you get deeply enough into their situation to move the needle on their behalf. Larger than that and your firm could also suffer harm when that much business is lost as the client moves on. But the larger the better as you nudge up against 25%.
Second, see how many clients....
Our recent analysis of ca. 300 firms found that around 98% of them weren’t getting paid fairly for their work. It comes from some degree of underpricing, defined as intentionally pricing a project at less than what an objective pricing would suggest, or over-servicing, which is intentionally over-delivering what you and the client agreed to.
Underpricing occurs before the project starts and it’s usually motivated by a fear of not getting the work, either because you don’t want people sitting around without enough to do or because you honestly believe that landing this project will open some opportunity for you (that’s a lie that’s easier to tell yourself).
Over-servicing occurs during the project itself and its motivations are more complex. A creative might land on something interesting to explore, and they might be excited enough to pursue it on their own time. Or the client might express some disappointment with your work as it unfolds and so you try to repair the relationship. Or the client begins flirting with a competitive alternative and you stretch to impress them. Or your positioning simply hasn’t created enough power in the relationship and you feel vulnerable. You might even care more about effectiveness than the client does!
Now here’s why underpricing is so dangerous. You follow a certain research method and creative process that cannot easily be compressed. You know this, too, because....
I’ve been wondering about this. Some of you are content to have a job, essentially, where you can be your own boss. That’s so critically important that you’ll take on more risk, make less money, and do many things that you don’t like (managing people?).
It doesn’t have to be that way, though. Nor does one overriding goal have to stomp the life out of the other goals that are important to you. However you express that hope for your business, I’d like to suggest that the hope is best comprised of a healthy balance between multiple things that are important to you. Here’s a stab at how you might phrase this in one single sentence, comprised of multiple themes:
When you....
Most entrepreneurial creative firms are busy these days, despite their (lack of) new business efforts. But most wish that they could upgrade their client base. They’ve come to believe, albeit sub-consciously, that it’s the work of new business to convert prospects to clients and the work of account service to turn those clients into great clients.
There is no such distinction. No amount of great account management will convert an average client into a good one, and that’s why new business goals have not been met unless the revenue stems from a price premium based your predictable effectiveness for those new clients.
New business is not about getting more clients–it’s about getting a certain kind of client who will pay a pricing premium and do it gladly. That’s why the new business problem is most applicable to firms who are already busy with average work rather than starving for any work at all.
Your positioning, your lead generation, and your sales expertise deliver on that promise of a pricing premium, and here’s a component checklist that you can run through as a firm at that dreaded next meeting of the new business team.
