Smart Marketing Firms Thrive in the Middle of the Road

Risk-taking is a crazy thing, right? This is me leading a lap at the Barber Motorsports road race course, but I’d never do that without a helmet, a full leather race suit, and knee pucks. I think you should make a lot of money, but I hate debt. I advocate ruthless positioning, but I don’t think you should grow too fast. I think you should never compromise on culture, but I think you should make some risky hires.

We all have a different tolerance for risk, too. Some of you move from one gorilla client to the next, and others can’t stomach any single client that represents more than ten percent of your business.

But if you want to build a marketing business that thrives over long periods of time, you’ll identify the risks on either side of the road and navigate a path between both extremes. You can’t eliminate all the bad fortune, but you can take smart risks.

Aiming for the middle ground is refreshingly brilliant, really. Firms who aren’t a flash in the pan know this and carefully construct their business with the right risk/reward equation. Let me illustrate how you can stay in the middle and out of the ditches on either side.

Number of Clients

Aim for 8–15 clients at any given time. Fewer than that and you’re going to struggle when one of them leaves because they’ll represent too much of your business. More than that number and you have a bunch of ankle biters who will wear you out. Don’t tell yourself that some work is better than no work, even if the profitability is compromised, and don’t assume that getting your foot in the door now will get you an invitation to sit at the adult table if you turn out to be a great waiter. Few firms have discovered how refreshing it can be to have fewer clients, yielding a setting where more of what they do really matters.

Number of Competitors

Aim for a positioning that yields 10–200 established competitors who are defining their marketplace the same way you are. Fewer than that and it’s a developing marketplace where you’re ahead of everyone else (not likely) or there’s simply not enough opportunity. More than that and you’re too interchangeable in the marketplace, unable to convert your positioning into a pricing premium. In almost every case the latter error is more likely. As you think about how this applies to you, remember that it’s the prospect or client who determines interchangeability and not you. It’s not how unique your work is–it’s how unique the prospect pool thinks it is.

Number of Prospects

Aim for 2,000–10,000 right fit prospective clients. You can’t ever count on locking up more than 1% of a marketplace, and this number of prospects gives you enough opportunity. If there are more prospects that would find it compelling to work with you, tighten your positioning. Have you defined your marketplace where there are tens of thousands of possible clients? Who want “branding services” for example? That’s not a compelling proposition.

Average Client Tenure

Don’t count on as much value exchange after an initial three and one-half years of a client relationship. That sweet spot of client tenure comes after you’ve done the first significant, strategic work for a client and they begin to see results. Repeating that sequence is increasingly difficult as you raise the bar while they listen to the pitches that your competitors keep making. Besides, clients tire of an occupying force after the initial invading force rescues them from the prior agency relationship they are fleeing. Familiarity breeds contempt, and there’s an expiration date on your relationship. You can manage this a bit by bouncing in and out of the relationship in a way that mirrors your narrow expertise, but the longer the tail of impact the more they take you for granted and question your fees and response time and accessibility. In other words, carefully evaluate every client request to ensure that you’re really a great fit in order to give your relationship a longer shelf life. Introduce them to the right advisors, train them to do the work themselves, and keep beating back the easy temptation to reflect their own orders in compliant order-taking.

Employee Workload

From experience, we know that an overworked team can struggle with morale, but that’s true for teams with too much time on their hands, too. The latter springs from a fear that not having enough to do will lead to dismissal. As humans we’re built to contribute and we get restless when we are not consistently doing so.

Space in Your Facility

What’s worse than seeing employees crowded into tight spaces and grouchy from the lack of physical (and thus emotional) space? Seeing them bounce around an empty space after a big layoff. Your office should be configured so that it fits the people you have so that it doesn’t look dead from too much space or frenetic from too little space.

Employee Tenure

There’s no magic formula for this one, but don’t despair when great employees leave. Some will come back, glad to join your culture again. Others will be eager advocates and great referral sources.

Cash in the Bank

Too little in the bank leaves you making constant compromises with new business as you feed the machine. Too much and you leave it unprotected, as the purpose of a corporation is to protect what’s not inside it–not what is inside it.