Is there an agency recession coming?

It’s about that time again. Big clients slowing down spending. Softening budgets. Pitches with more participants. Decisions being delayed.

It’s worrying.

You already know that the agency game is one of feast and famine, sometimes wild oscillations in revenue, pitches and wins. And because these oscillations are unpredictable, it can be a wild and deeply stressful ride.

This is especially true of you’re at that critical middle stage: you’re twenty or thirty people, you’ve survived well past the early entrepreneurial growth through sheer force of will, and you need to consolidate and gear up for serious scaling.

This is the territory I’ve specialised in as a Non-Exec Chairman, working with many groundbreaking agencies to bring in order and smooth out the rollercoaster.

This growth phase is a fun time, but it’s also precisely the most critical – what you do now (or don’t do now) defines whether you will survive and grow fast, or not survive; or perhaps worse: you’ll survive by the skin of your teeth and have delayed your exit plans by yet another five years.

No-one (other than the bottom-feeders) wants to acquire an agency that doesn’t have a steady track record. So whenever you decide to sell you’ll need to have at least a couple of years of steady progress to show in order to get a decent price, and two or three years of organised, stellar growth to get the best price.

The key to this organised stellar growth is structured planning. I did a podcast a while ago with the wonderful Small Spark Theory team which outlines exactly how this process works in practical steps (you can listen to it here). The podcast resonated with thousands of owners and entrepreneurs around the world. The techniques are disarmingly simple.

First, get your positioning nailed so you are clearly and crisply differentiated from the thousands of agencies a client could hire. With the right framework it only takes a day’s workshop to get it right. But what you want is true competitive differentiation, so that when a potential client is looking at a list of agencies yours leaps out.

My two favourite examples are Alpha Century (which went from a seven-person ad agency to number one in Campaign’s new business league with £35million in billings) and Impero (which is The Drum’s 2018 Agency of the Year):

  • Alpha Century – “The Creative Agency for Entrepreneurs”
  • Impero – “We Make Tired Brands Famous Again”

Clear, differentiating and hyper-qualifying. With nothing else they attract business. Then the teams worked on building a new business machine and consistently winning most pitches.

Second, you need to sort your strategic goals out. Again a simple process, using something called a Strategy Map, defines where you want to get to and what kind of company you want to be, and what the ingredients are. If you work backwards from where you want to get to it becomes much easier to understand what pillars and structures need to be implemented and put in place to get there.

Out of this comes the Execution Roadmap, derived from Verne Harnish’s excellent Scaling Up, which tells you which things need doing in which order and by whom. The senior management team (including the CEO) takes this on, and a non-exec chairman holds the team to account ensuring the plan stays on track. This delivers:

  • Senior clarity on how to create and sustain excellence in processes ranging from hiring A-Players to generating consistent leads
  • Ability to translate the differentiated proposition into high pitch win rates (perhaps 70% or better)
  • Clarity in the senior team on how to manage and build the company (including a process for succession)
  • Rapid fixing of the usual problems (scaling culture, new business, client retention, staff motivation etc.)
  • Fanatical loyalty from existing A-Players
  • Exceptionally high-functioning management team
  • Rapid, sustainable growth.

In fact, most of the companies that I work with that have implemented these two frameworks double their revenue in the first two years. MomentumABM (which went from £3m to £6m) and Impero were both nominated for Most Impressive Agency Growth awards. And Impero has just won three Agency of the Year awards.

The common factor in all of these agencies is strong leadership that’s ambitious enough to bring in outside help. Non-execs come in two flavours:

  1. Advisors who answer questions and act as mentor, and
  2. Advisors who deliver active growth planning and execution.

The former is (if I’m being ultra-cynical) to some degree about ticking a box, having a ‘name’ on your board who makes sure you don’t do anything stupid. A good one will mentor the owner.

The latter is responsible for holding the CEO and their senior team’s feet to the flames, while providing relevant training and specialist connections. They know what to do to drive stability and growth, and (because that’s what experience is for) deliver proven best practice. The owners who seek active chairmanship want someone external to help articulate strategy, build consensus in the senior team, then ensure they do what they have decided to do.

In the context of recession this all becomes increasingly important. Having an agency that exactly meets a client’s needs (which is why understanding your own positioning is as critical as articulating it), and has a robust management plan partly focused on client happiness, is crucial. You need to be that agency. If you get all your ducks in a row, stop hoping things will work out and start proactively building from a blueprint, you can become one of the agencies that flourish in tougher times.

I did it from the sharp end for twenty-two years as a founder and CEO, and have spent the last few years working with some brilliant entrepreneurs helping them do it too. They have ignited exceptional growth, and some have sold at a premium. All have outperformed their competitors.

So is a recession coming? It has been ten years so it’s probably overdue, and we’re seeing the signs starting to appear. Whether it starts on Monday or in a year’s time, when it hits and agencies start shrinking, growth is all about survival of the fittest. Getting fit is a structured process. It takes commitment. And – in my view – experienced help. If you’re going to double your revenue and maintain a consistent 20% profit you will need real focus, structural resilience, laser-focused positioning, and a proactive strategy. If you’re going to survive a recession, and prosper while others fail, now is the time to make some decisions.

Felix Velarde

Feel free to contact me to arrange a coffee or a chat.

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