I’m lucky enough to have spent my entire working life in the industry I dreamed of joining as a child. As the son of a marketing professor, I’d always wanted to follow in my father’s footsteps but didn’t fancy a lifetime in stuffy academia. The 70’s and 80’s of my childhood were the halcyon days of British Advertising, which seemed for more glamorous.
I spent 3 decades in this space and had the pleasure and privilege of leading some quite successful agency brands in the UK and N Europe for over half of that. It’s a career I’ve enjoyed immensely and like the Rutger Hauer end scene in Bladerunner, I’ve seen and done some fantastic things. I was lucky enough to pivot my career at the start of the global pandemic and have spent the last 3 (turbulent) years as an agency NXD and consultant, bringing my skills and experience to bear in helping independent agency owners on their growth journeys. I’ve worked with over a hundred agencies in the UK and beyond across a wide spectrum of marketing disciplines, in every case helping to deliver both business and personal growth.
In the same way that I was never a Covid denier, I am not a recession denier, but after 13 months of commentary on a recession that hasn’t yet materialised, I do still think there are some important disciplines I’d advise all agency owners to observe in what will undoubtedly be a more challenging trading period.
We often talk about the 4-5 (very obvious) pillars of an agency business but the one that is often overlooked is the mindset, this underpins everything that you do, if you don’t think that you will succeed and grow your business it’s highly unlikely that you will. With the incessant obsession with crisis and bad news it’s hard sometimes, but remember the Henry Ford quote “Whether you think you can, or you think you can’t – you’re right”
As creatives and marketers, we have a responsibility to innovate and continue to market during tough times, or else it’s a race to the bottom. You cannot cut your way to growth
2 Cobblers Shoes
To that end do not take this idiotic government’s advice to businesses to cut their marketing expenditure during a ‘possible’ downturn. Agencies even in good times are classically bad at ‘taking their own medicine’, and do not fall into the trap of stopping marketing activity and expenditure, if you do, you can’t really blame your clients from doing the same. There are sectors and activities which are less impacted (public sector, healthcare, international markets) by downturns which can be targeted if you are exposed to ‘leading indicator industries’, and downturns also provide agencies an imperative to evolve their offering moving ‘upstream’ into less executional and more business critical activities.
3 Commercial Governance
Whilst I believe fortune favours the brave, tougher trading conditions are a good reminder of some of the more basic financial governance disciplines; making sure you’ve got the right credit lines (it’s always easier to secure when you don’t need), having a clear and current view of CF, making sure that you are heavily focussed on credit control (change your terms to less than 30 days, it’s not a sacred cow) and make sure your rates increase along with your input costs (every other sector is passing on its cost increases).
4 Don’t try and cut your way to growth
One of my favourite ever bosses and colleagues used to say ‘never send the chocolate biscuit memo’ that’s the one where you put an embargo on the use of chocolate biscuits (except for client meetings) or some time of similar cost-cutting measure. I’m a big advocate of doing an annual overhead walk (reviewing every single expenditure) as it always throws up some unnecessary subscriptions you are no longer using but don’t focus your emotions on this you need your effort targeted at revenue (and or margin) growth plus it sends out the wrong signals to your prospects and staff.
5 Don’t scrimp on financial resource
If you don’t have this in house make sure you have external advisors that are fit for purpose across finance, tax, payroll, credit control. There are some great and easy to access fractional CFO’s out there who will pay for themselves many times over
6 Have the right software and systems in place
And a simple dashboard of 10-15 financial (and indeed non financial KPIs) so you have a simple, accessible view of business health.
7 Record your time and understand where it’s going
Most agencies are still predominantly time and (some) material cost businesses. If you aren’t recording what you are spending your time on, how can you understand what services, clients and people are profitable or not? As a rule your team (including any non fee earners averaged into the calculation) should be between 60-70% utilised on billable work (and more importantly this time fully recovered).
8 Don’t panic
We’ve seen pipelines slow down towards the end of last year and I’ve heard a hundred opinions on why that is, but across most, if not all of my clients this stasis freed up as we came out of holiday season. Panic and desperation in new business create terrible dysfunctions, it makes people cut their rates, it makes them take on projects outside of their capabilities and work with people they shouldn’t. More importantly, desperation manifests itself in behaviours and body language that our clients and prospects pick up on, it’s why we’ve all encountered both losing and winning streaks in our careers. Going back to point 2 and 3, don’t turn off your marketing as it creates a boom bust Kondratiev cycle – it will take 3 – 6 months for you to see it return if you do this.
9 Do not reduce your focus on talent/people
Agencies are people businesses, they are our principle cost (make sure not more that 65%) and primary resource. I spent the last 2 years telling clients (see above) to not turn off their marketing while they were busy (and the agency sector was experiencing a talent drought). As we’ve seen this cool in recent months (in part as the tech businesses have stopped hoovering up agency talent) I think it would be catastrophic if agencies abandoned the talent strategies they so nobly invested in.
10 Get Support
I always felt that being an agency MD was a lonely job and that was in agencies large enough to have mature management teams and the luxury of network infrastructure. In smaller independents this is even more accentuated. Having external counsel whatever form that takes is hugely valuable.