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How agencies can achieve sustainable growth
With a period of slow economic growth forecast, and small businesses being crucial to the UK economy, business resilience has never been more important. While many agencies see increasing sales as their main priority, doing this without building resilience won’t achieve sustainable growth. In the 2007-08 recession, the agencies that fared the best were those that were scalable, not the ones that were the fastest growing.
The Wow Company recently stress-tested the resilience of UK agencies in five key areas – mindset, cash flow, people, clients and adaptability. Central to the findings was one common theme – change. The most resilient agencies are better able to anticipate and exploit change, as well as adapt to it.
Alongside advice of experts, here are some of the findings across these five key areas to create Wow’s guide to sustainable growth.
It was fantastic to see confidence among agency owners is high, with 78% expecting 2018 to be better than 2017; supported by their eagerness to recruit and increase wages and prices.
However, it’s important to remember that a positive outlook is no substitute for solid business foundations and personal resilience.
Rory MccGwire, the founder of the Donut websites, says that if this is something you’re struggling with, he recommends getting an advisor whose experience can provide you with increased decisiveness and confidence.
Cash flow is crucial to sustainable growth, and Wow’s survey results showed that the situation many businesses find themselves in is alarming. Many agency owners are just one bit of bad news away from going out of business completely.
There was good news also, as agencies are getting paid quicker than ever before: 27 days on average.
Jason Neale, managing director of The Agency Works, says the big thing for agencies is always keeping control of costs. A large part of this is doing a regular cash flow forecast. You should be fully aware of what your costs are in advance and know what fee income you need to achieve.
Cash flow is all about building solid systems, being smart with technology, forecasting, and getting advice early from your accountant.
Given a choice, 12% of agency owners said they wouldn’t re-hire the majority of their team, meaning they’re unhappy with the performance of over half the people they currently have.
The businesses that are the most resilient are the ones that are investing in their people, through formal performance assessments and personal development plans.
To stay on top of the training and development of their team, Kelly Molson, co-founder of Rubber Cheese said: “We’ve seen a higher retention rate through initiatives like offering two additional paid days of annual leave to be used as inspiration days.”
For 27% of UK agencies, one client makes up more than 30% of their revenue, which creates a disproportionate reliance on them. What would happen if you lost that client tomorrow? Additionally, 31% have over 50% of their clients in one industry. While there are benefits to having a niche, it can be a liability if that sector is impacted.
By developing two or three key niches, you aren’t constrained to one should that sector be significantly impacted. This also improves targeting and referrals, meaning new business is easier to come by.
Get serious about customer satisfaction. Peter Czapp, co-founder of The Wow Company recommends formally tracking customer satisfaction at least twice a year, by using a Net Promoter Score (NPS). Not only will you be able to compare yourself to well-known brands, but you’ll also get some great feedback about what you need to do to improve those relationships.
It’s also a great idea to produce a plan for all your key clients that covers their strategic objectives, who the key people are, and how else you can help them. From there, grade your clients with a simple ABC and make sure you spend more time with your A clients, nurturing the relationship and really understanding their business and how you can help them.
20% of agencies aren’t making a profit month-on-month, and 15% of agency owners are living on the edge of their personal finances, meaning that any drop in income would result in them being unable to pay the bills at home.
Emma Jones, the founder of Enterprise Nation, advises that if you find yourself in this position, you should seek advice right away. There are so many opportunities to grow a business in 2018; from exporting to taking on staff and selling to bigger brands. Achieving results in any of these areas is best done with help from others.
Emma also recommends mapping out your business in as much detail as you can, writing down your top three objectives for 2018.
Read The Wow Company’s full guide to sustainable growth here.
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