A digital agency is a complex and difficult thing. You can have a plan on Monday that can be completely turned on it’s head by Tuesday, and through no fault of your own – an unexpected client decision, a member of staff deciding to leave and you are then chasing yourself and trying to steady the ship while the fallout from what’s just happened is going on all around you.
And even when things are going to plan it’s not easy, in the words of Marshall Goldsmith – ‘What Got You Here Won’t Get You There’, and that’s true whether you are a 2 man start up or a 100+ strong established and successful agency. Although the basics of what you do are the same, the clients are different on the next rung on the ladder, and the bigger you get the more processes you need to make sure your business runs efficiently – and that means from both a client/delivery perspective as well as your own business performance is concerned.
Bigger has always been presented as better – whether that’s about turnover (or even that old misnomer of ‘billings’!), your headcount or the square footage of the office space – but there isn’t always logic in that. For example, I always look with interest at the agency league tables, in particular those that publish turnover AND headcount, I then do some simple maths by dividing one by other and then scratch my head when there are agencies turning over £30,000 per member of staff per year! How can that be? What’s going on? Who/what is bankrolling those businesses?
I do, of course, appreciate that the league tables are based on selective and often limited information so I am not going to labor that point any more. However it does lead me on to a fundamentally important KPI when running a successful agency – revenue per head. There’s a holy grail of £100,000 per person per year which in my opinion is achievable, very difficult but achievable nevertheless. And by having a real focus on delivering against this KPI agency owners will build a better agency, not necessarily a bigger one in terms of headcount and some of those other vanity measures, but certainly a more profitable and rewarding business.
To elaborate a little – if the focus is on this level of revenue per head then it has to start with having a top quality product as there is no way you’ll be able to charge at these sort of levels if you are creating and delivering mediocrity. Top quality is not easy – you’ll need to be absolutely clear about what your great at doing (not ‘good at doing’ – good is the enemy of great!), who will buy off you and at what price. This is the heart of a strategy for the business.
If you then hook that into solid and robust operations and tight commercial practice you’ll stand a pretty good chance of developing and growing a better agency. These 3 things are all critical and interdependent, take one out of the mix and the other two fail to be anything like as effective.
I’ll be talking more about this on the 27th April as part of the Leeds Digital Festival – there are still some spaces available, please just contact me if you would like to come along.
This article was first posted on LinkedIn