Starting a business can be daunting. According to the U.S. Small Business Administration, only about half of companies make it through the critical five-year milestone.
As an accidental entrepreneur who started a digital marketing agency seven years ago, I have learned firsthand what it takes to achieve longevity while navigating times of rapid growth and economic uncertainty. It has expanded.
Over the years, I've seen many agencies, including long-time players and heavily funded startups, struggle and even close. Between an impending economic recession, slow sales cycles, and clients looking to cut back on budgets, 2024 brings new challenges for agencies looking to grow.
Let's explore the key strategies I learned about how to future-proof your digital agency, adapt to changing conditions, and foster resilience regardless of external factors.
Differentiation and diversification
Many consultants advise agencies to focus on specializing to improve efficiency and reputation, but I believe this may pose a risk in terms of long-term resilience. Masu. Specializing in a segment or platform that is experiencing a recession or recession can threaten an agency's survival.
Customer portfolio balance
To reduce risk, you should consider diversifying your client sizes, sectors, and channels as much as possible, but only if your team has the knowledge to serve these areas. That last part is important. For an agency to be successful, they should only take on jobs that they are good at.
Don't rely on one or two clients. Ideally, top clients should account for no more than 10% of your business. Things happen. If you're diversified enough, you can survive losing customers or even if they leave.
Think in terms of size, in terms of a bell curve.
- Some very large clients.
- There are many medium-sized customers.
- There are several smaller ones that could fill or increase capacity.
Ideally, small accounts should be strategic. Use them to gain experience in new channels and industries.
Small, medium, and large have different meanings for each agency. What's big for one person may be small for another, so it's a good idea to define your own thresholds.
There can be risks when hiring for large accounts. That's often the reason for the layoffs you hear about in agencies.
Again, this doesn't mean you should take on jobs that aren't properly staffed to manage them. When you are growing or trying to weather a storm, you may say yes to many things. However, in times of stability, you want to be able to say “no” to jobs where your skills are low or the benefits are low.
Work with your team to help them understand that great customer service isn't about saying yes to every customer request. Jumping in to help the board slide is one thing. It's another thing to do projects outside the scope of your involvement for free.
Differentiation based on values
There are thousands of digital marketing agencies in the United States, many of which offer the same services. So how can companies remain resilient when they are cutting back on marketing spend?
Obviously you need to have a great team and deliver on your expectations, but I believe that Maya Angelou's words are true:
“I've learned that people will forget what you said, people will forget what you did, but people will never forget how you made them feel.”
When an agency is going through difficult times, it's important to remember that clients are likely hurting as well.
Protect your relationships with your customers by being transparent and sometimes over-delivering when necessary. Become a partner. Make it clear that you are actually interested in helping your client grow.
One of the people on the private equity team said outside of the pitch meeting that they didn't want to expand the account until the tracking was in really good shape, even if it took a few months, so we couldn't win their business. he told me. He viewed this as an act of good faith and said it was clear that we wanted to be partners and not just to make a quick buck.
People will remember how you made them feel in your pitches, weekly meetings, and daily interactions.
Let's dig deeper: How to build a values-based agency that drives results
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A culture of adaptability and learning
One of the most important things is to hire people who adapt to changes in marketing (new channels, new technology, beta programs, etc.) and changes in the company. Your job as a leader is to foster a culture that embraces acceptable risk and continuous learning.
To grow and become more resilient, it’s also important to remain flexible to your clients’ needs.
In some cases, you may need to pause or adjust your budget in the short term, or the sales cycle may not move as quickly as you would like. It may be difficult to accept, but it's better to be flexible and keep the business alive than to lose the relationship forever.
By demonstrating a commitment that goes beyond profit, you can build deep relationships within your organization that will last beyond recessions and technological changes. Think about how you can best help clients sell their ideas to managers. We can help you build a business case or use tools to help.
Hiring with emphasis on grit and sense of humor
I was never a “traditional” sports athlete, but I grew up surfing 3-4 hours a day. That being said, I've always loved hiring college athletes. These individuals often have grit, mental fortitude, and the ability to persevere through difficult times, making them ideal for agencies experiencing rapid growth or experiencing adversity.
It's also important to hire based on the values you prioritize. Humility is ours. Your sense of humor is probably informal. A sense of humor and a little mischief help foster relationships and bring people together in far-flung worlds.
On the other hand, immediately cut ties with people who don't suit you. Even the best employees can be detrimental to the organization if they are not culturally aligned with the rest of the company.
Some people get the job done well but are passive and complain all the time, while others are very analytical but don't work well with co-workers and keep information secret. Having these types of employees around all the time can affect morale and make good employees wonder why they would tolerate such behavior.
There is a great quote that we have tried to keep in mind throughout our journey.
“Culture is not like a mission statement. You can't just set it and keep using it forever. There is a lesson in the military that if you see something below the standard and do nothing, you have set a new standard. There's a saying that says, “This also applies to culture. If you see something different from your culture and ignore it, you've created a new culture.”
That doesn't mean everyone has to be a shining example of every value on the list, but the closer the fit, the more likely they'll be part of the team long-term.
Use just-in-time hiring when possible
If you run your own business, you may end up using contractors for a while before hiring full-time employees. Just-in-time hiring can be stressful when pitching your business and straining your existing team, but it can also help prevent attrition and make your company more resilient.
Just-in-time hiring doesn't mean signing a contract or waiting until the team is struggling. That could mean hiring when you only have capacity for one or two more mid-sized accounts.
Transparency with your team
Building resilient government agencies requires caring for our employees, even during difficult times. Top talent has options for where they work, so be transparent about how your business is doing. Sharing what is actually happening limits the potential for team members to fabricate worst-case scenarios.
Similarly, during periods of high growth, companies need to be transparent about how they will overcome growth and what problems may arise as they mature.
Strategic operations and strong financial acumen
Lean and agile management
Typically, the highest expenses for a digital marketing agency are salaries, benefits, and contractor fees. But building a quality agency requires great people. To build resilience, you need to be mindful of salaries that cannot support your business.
So how do you balance the two? In our case, we used contractors and part-time employees to limit expenses, especially as we scaled our business. By maintaining a flexible staffing strategy, you can free up some of the time of your truly talented people, rather than all of your time.
Talk to your team about how their career aspirations have changed as the business has changed. Some staff may be interested in moving into a part-time role or becoming a contract employee. This occurs when an individual likes the idea of freelancing but wants to maintain benefits or simply want to change their work-life balance.
To stay resilient, you need to surround yourself with great leaders without being too top-of-the-line. It takes a great leadership team to navigate the adversity and change that often occurs among managers and senior manager-level employees.
During periods of high growth, leveraging a combination of FTE and a pool of trusted contractors can help you adapt to growth and new customers who need to get started quickly, especially if you're doing just-in-time hiring. Masu.
Closely monitored financial oversight
Whether your business is growing or enduring change, it's important to know your numbers and monitor your profit and loss. This includes understanding profitability at the account and business unit level, as well as employee utilization.
By focusing on these measures, we were able to grow a $5 million business without investing or borrowing money.
Avoid long-term contracts on software (especially if it's not core)
There are some lessons I've learned over the years. Especially related to software, which is the second largest expense.
I bought some software that I liked, but it didn't make much financial sense to delay adoption. When I signed the contract it seemed like it was worth it, but then I felt trapped. Similarly, there was software that seemed great, but it turned out that it didn't meet our needs.
If possible, avoid one-year terms. The exceptions are things like Slack, which I definitely know about and have no intention of moving away from.
It's OK to pay monthly, even if you don't have the lowest price
As you expand your business, many software are now priced on a monthly basis to protect your cash flow. This wasn't necessarily the best price, but it kept things flexible in case I needed different software or knew I might want to exit or switch to a different tech stack. It's done. This is especially true if you pay per seat.
Have a process in place to review seat licenses monthly or quarterly
If you use many contractors or freelancers, have a process in place to review your roster of licenses at least monthly or quarterly. Paying seats to inactive contractors can be expensive if you're not careful.
Negotiate renewal terms in advance or get automatic monthly renewals
A few months ago, I was caught off guard when, like the first year, I was asked to pay my annual contract with a vendor in six-month installments. Apparently, the original contract stipulated that auto-renewal would require a five-figure annual upfront payment for this software.
When we asked about it, they offered a 6% increase in the contract, payable every six months. This should be seen in terms of the original work order, but to them it feels like “just a number.''
Make your digital marketing agency a long-term success
As you navigate growth and downturns, it's important to set yourself up for success beyond one year, five years, and beyond.
Hiring right, adapting to a changing environment, having strong values, and being on top of your finances will help your digital marketing agency succeed in 2024 and beyond.
Let's dig deeper: Scaling your agency: Lessons for growth and change
The opinions expressed in this article are those of the guest author and not necessarily those of Search Engine Land. Staff authors are listed here.
