We see these issues all the time with agencies we’re looking to buy for clients. If you can solve these issues with your agency first then you can really start to focus on the bigger picture and building a much larger agency business or group of companies.
Do you have time absorbing customers who don’t pay everyone else’s prices?
Almost every small to mid size agency business has these types of clients, they negotiated a low price years ago and constantly stick to it refusing any cost increases. Usually these clients are the biggest time sink and complain the most. They keep your staff in a busy state doing busy work or sneaking stuff in to the project.
Solution: Use the Pareto Principle. 80% of your revenue comes from 20% of your clients. Regularly review the bottom 80% of your client list, if they’re time wasters who’re paying last decades prices, let them know you are closing that price band down, offer the new pricing and if they don’t budge. Lose them.
Do you have crappy margins on work?
So many agencies we speak to have tight margins on work they regularly do for clients. This could also go hand in hand with problem clients, but quite often it’s right across the agency and hampers growth in the business.
Solution: Put your prices up! Look at your margins, take out all your costs from your fee and see what is left and then reset the price so that there’s lots of margin. Aim for 30% profit. Don’t feel like the customer is going to be pissed that you’re earning a profit, you can bet your life they are doing well themselves. Price for your best clients, who will be willing to pay a bit more for a great service.
Are you a founder who is too busy firefighting or doing delivery to focus on growth?
Get out of delivery! Don’t even touch any delivery in fact, only offer feedback to your staff responsible for getting work to the client and empower your people to get the work done well. Step back from the day to day and spend your time looking at the big plans for the business and see yourself as the chairman or investor in the business and hire for all the positions below you. Book a day off / OOO / somewhere you can’t be disturbed every week to focus on the big problems of growth, services, profits. Block your calendar out and don’t be available to anyone.
Get these 3 things fixed first before you make your first acquisition!
