“Agencies that do not grow will fail,” says Peter Levitan in a recent HubSpot report.
Those are some scary words from a man who ran business development at Saatchi & Saatchi, one of the world’s most prestigious advertising agencies.
But, don’t think of them as a death sentence. Instead, view them as a wake-up call.
If your agency has turned stagnant, it’s time to prevent it from failing by determining why. Here are 8 reasons your digital marketing agency might not be growing.
1. Your unique selling proposition is out of balance
Your unique selling proposition is a statement of value to your audience that differentiates you from the competition. Does your SEO agency market itself as the fastest way to get to page one of Google? Are you known as the best PPC manager for dental offices?
Creating one means figuring out where you fit in your industry and why people should choose you. But, as co-founder and creative director of Grow Marketing, Gabrey Means describes the process isn’t always as simple as it sounds:
When defining your value proposition, it’s important to be clear on your sweet spot without making that definition so specific that it limits your opportunities as the market shifts and changes.
If you’re having trouble growing, it could be because you’ve gotten a little too specific with your USP. You might need to expand your PPC agency’s focus beyond dental offices to include other professional services. A broader focus means a bigger pool of potential clients.
It’s also possible that you’re not specific enough. If you’re a copywriting agency that specializes in crafting persuasive email campaigns, accepting offers to write long-form articles or social media posts might not be in your business’s best interest. It’s additional revenue in the short-term, but in the long-term, it could lead to unmet expectations and lost contracts. Working too far outside your area of expertise is never a good idea.
In part, Means credits her agency’s growth to that balance between a defined USP and a broad one:
Because we did not tightly define whom those experiences are for or how they come to life, we’ve seen our business grow from mainly consumer programs to include B-to-B and internal campaigns, opening up new business categories. Had we written that business plan when we started, we might have unwittingly cut ourselves off from these opportunities that have helped fuel our continued growth.
Finding a middle-ground that’s firm enough to dig into, but still easy enough to shift from, is what’ll put your agency in a position to adapt and evolve.
2. Your fees are too low
While being too busy is a problem many agencies would love to have, it could be an indicator of a more serious issue: you’re not charging enough. More work + less money = slow growth.
According to HubSpot, most monthly retainers fall in the $2,500 to $5,000 range, and some even exceed $20,000:
If your agency isn’t charging this much, it could be because you’re not fully aware of how to structure your pricing. Focus on value over cost. Tailor your pricing to each client by learning their cost of customer acquisition and customer lifetime value. How much will you earn them? How much will you save them?
Crunch the numbers and try to make promises based on top-of-funnel metrics — traffic, leads, etc. Bottom-funnel results like sales are tied to your client’s ability to close the leads you generate, so it’s wise not to match your pricing to them until you know your client can convert what you’re delivering.
Then, calculate your costs — overhead, utilization rates, and production – and come to a number that ensures you’re generating a profit that will launch you toward growth.
3. You’re working in your business and not on it
Inventor and Shark Tank personality Lori Greiner says “Entrepreneurs are the only people who will work 80 hours a week just to avoid working 40.” Ask every agency owner and they’ll tell you that’s true. But, ask them how productive they are during those late nights at the office, and chances are they won’t be able to give you the right answer.
That’s because owners who measure their productivity in hours worked on client projects aren’t benefitting their business as much as they think. If your agency can’t function without your 80 hours’ worth of copywriting, then it won’t stand a chance at growth in the long run.
To scale effectively, you need to work ON your business, not IN it. You need to, as a blog post from IT Business Edge perfectly puts it, “evolve from being a doer to a manager of employees, and then eventually to a manager of managers (a leader).”
But, that’s easier said than done, claims author and business expert:
Most entrepreneurs don’t like to give up control of any aspect of their business. Facing the fact that they can’t do it all on their own and that they must learn to rely on others to complete certain tasks (and not necessarily exactly how they would do them) can be a very hard reality to swallow.
Though, it makes sense. Train your employees to do your job, and you’ll have more time to optimize your business. Eventually, you’ll make yourself irrelevant, and at that point, you can watch your agency grow on its own.
4. You’re not hunting down top talent
The saying “you get what you pay for” is true even when it comes to hiring employees. So many entrepreneurs concern themselves with cutting costs that they forget, when you spend more, in most cases you get more.
When it’s hard to justify luring top talent to your agency, consider the alternative. A designer willing to accept minimum wage may save you money up front, but long-term it could mean a net loss for your agency.
How much time do you have to spend fixing their mistakes when you could be working on your business? How many clients might you lose as because of their inability to deliver the quality product your agency has become known for?
Creating processes and replicable workflows will help your organization operate more efficiently, but only if your staff can execute them well. You’ll never reach the day your business can operate on its own if you constantly have to micromanage your employees.
5. You’re not developing that talent
While hiring top talent is a good start, developing it is what’ll take your agency to the next level. Invest in the growth of your staff and your business will follow.
Give employees the opportunity to work on projects that will expand their skill set. Make space in your budget for industry conferences and workshops at which your team can learn. You’ll not only boost your agency’s efficiency but keep your staff happy as well.
According to a survey from Great Places to Work, the “opportunity to grow” was identified as one of the biggest things employees look for in an employer.
The reason, executive coach Jeff Boss says, is because humans have “a fundamental need to self-actualize.” He adds, “With opportunity comes autonomy, because the more freedom you have, the greater meaning your decisions will have for yourself and the company. That means (ideally) the motivation to perform well increases, too.”
For agencies, it’s a win-win — so much so, that some businesses even require several hours of paid professional development per week. If you’re serious about growing your agency, you have to be serious about growing your employees’ skills, too.
6. You’re obsessed with generating revenue
Revenue is a metric every business should be monitoring, but it’s not the only one. A more accurate indicator of success is profit. How much do you make after subtracting the cost of your office space, employees, and the tools required to develop your finished product?
If you can’t answer that question, you’re not alone. More than 90% of agency owners say they track revenue, but only 74% monitor profit:
If you’re one who doesn’t watch both, that could be why you’re not growing. Calculate your expenses, gross profit margin, and net profit. You may find that at the end of the day, you’re earning much less than you thought.
Currently, many agencies find their profit margins range between 10 and 11%. What are yours?
7. You can’t maintain a steady flow of cash
Your marketing agency, like any business, depends on cash flow to thrive. Bills have to be paid on time and employees need to be regularly compensated. For that to happen, you need to be paid promptly by your clients. Unfortunately, that’s not how things work in the agency world.
Past research has shown that 62% of invoices take an average of 60 days to be paid in full. And some clients take even longer — waiting years to pay up, if at all. To make sure you don’t get stiffed $150,000 like we know at least one agency has, it’s in your best interest to incentivize clients to pay on time. Consider…
- Using cloud-based services to make payment easy.
- Switching to a retainer-based model to allow your client to set up recurring billing.
- Offering a small discount for invoices paid within a week.
- Writing late penalties into your contract.
- Billing more often.
The easier you make it for customers to pay, the more likely it is you’ll have the cash you need to keep your agency running smoothly and growing steadily.
8. You’re not upselling or cross-selling
A common misconception among business owners is that in order to grow, you need to constantly generate new clients. But, statistics show that by maximizing customer lifetime value, you can build your agency without spending the bulk of your time chasing prospects. Just a 5% increase in customer retention has been shown to boost business profits by as much as 95%.
Using techniques like cross-selling and upselling, you can convince your current clients to spend more on your services. If you’re an SEO agency like Swell Marketing, explain to your customers why they should upgrade from your silver to your platinum package:
If you’re a full-service agency, like the Marketeering Group, explain why conversion optimization services and outreach assistance are worth spending additional budget on:
In both cases, focus on the value of your services over the price. For example, “Investing in conversion optimization services will help you turn more of your website visitors into customers. We’ve found that clients who take advantage of our offer generate 10% more customers on average than they do without it.”
Come prepared with case studies that prove the service you’re upselling or cross-selling is effective, and you might find maximizing the value of your current customers is easier than you thought.
Is your agency growing?
What have been your biggest obstacles to growth? How did you overcome them?
Share in the comments, then create a landing page that generates more leads for your digital marketing agency and your clients, using the Instapage designer-friendly software.