Growing Faster Than Average

by Sep 18, 2020Strategy & Planning

On average, digital shops grow 15% annually. That’s the price to play the game. If you grow slower than this, your firm loses market share. But if you grow too fast things start rattling.

The sweet spot for healthy growth in this industry appears to be between 20% and 40% per year.

The goal for this post is to provide solutions to some of the growth challenges we identified in our How Digital Agencies Grow research. These solutions are based on strategies we’ve implemented or studied at successful digital shops over the years. Addressing these key points upfront enables sustainable above-average growth.

Strategy & Leads

There are two core aspects to growing any digital agency: a well-planned strategy and repeatable lead generation. Getting these in alignment allows digital shops to achieve higher growth rates with less friction. Unfortunately, many shops have trouble with both.

Strategy

A well-planned strategy is a force multiplier. It makes almost every major aspect of running an agency easier. Lead gen, project selection, closing deals, hiring and motivating staff, are all made easier by having a solid strategy. If you want to grow your agency faster than average, it’s crucial to spend some serious effort here. 

We may be biased since a large part of our business is helping digital shops with strategy, but it’s difficult to overstate its importance.

At its core, strategy is about prioritization. When done well, a good strategy acts as a guide for everyone in the company. Employees at every level can check portions of this “guide” to understand how their actions will impact the success of the firm.

Developing Strategy

This is how we work with clients to create winning strategies. Use this process to build or check your own strategy to make sure it’s in order before you move on to the lead generation portion.
First, we need to understand what the owners of the firm want to achieve. What are their goals and how quickly do they need to reach them?
We then want to understand and categorize all the firm’s available resources. This lets us know what tools that we can use to build a strategy.
Next we collect market data on the digital agency industry. By understanding the relative positioning of firms in the marketplace, we are able to identify opportunity gaps.
Once we identify potential opportunities, we can dive more deeply into each possibility by sourcing market research on the relative vertical, technology, or service.
By this time, we’ve been able to narrow down the options to 2-3 potential paths. This is when we do the bulk of our forecasting work to compare each path and see how closely each aligns with the owner’s initial goals and timeline.
There are often gaps between the firm’s current abilities and resources and the abilities and resources required to successfully execute the 2-3 paths. This is where we determine the requirements for each path and perform feasibility studies to see how possible each path really is.
This process allows the path of least resistance to naturally float to the surface. Now we can build an action plan, timeline, milestones, KPIs, and budgets to help the client visualize the implementation of this path.
Finally, it’s time to roll out the necessary changes according to the strategic plan. Gather feedback and watch KPIs closely and adapt as necessary.
That’s essentially all there is to building out a quality strategy. Barring any significant changes in the industry, we recommend running through the full process every 2-3 years with quarterly reviews to ensure you’re staying on track.

Leads Provide Options

I can’t count how many owners have said that they like to be selective about who they work with. It’s an attractive position. They talk about client fit and how critical it is. How bad experiences with prospects have influenced them and now they won’t take on those clients. Unfortunately, when we dig deeper into their client list, we often find that the firm has not been as selective with its clients as ownership would like. The reason why is simple. Agencies normally don’t have enough options when it comes to new projects. Most operate on a kind of feast or famine roller coaster that places undue stress on the entire team.

The solution to roller coaster is building a repeatable process of lead generation. It doesn’t need to be complicated or expensive, but it does need to be continuously implemented. Unfortunately, this is an area where a majority of shops under-invest. Either through inbound or outbound efforts, digital leaders need to invest appropriately in this area.

How much should a digital agency invest in marketing?

While it will vary depending on the specific strategy employed, we often recommend that a digital agency should plan to invest ~10% of their overall budget in marketing and new business generation. This level of investment will typically result in generating enough leads for the business to be selective about who it works with.

There are three aspects to revenue generation: Business development, Marketing, and Sales.

Business development is the creation and management of strategic relationships. It is creating partnerships with other organizations that open new opportunities for your firm. This can range from filling gaps in your service offerings (e.g. white labeling), to partnerships that expand your audience, or even joint ventures that affect your positioning.

Marketing is communication. Essentially, your marketing department’s role is to describe the value your firm offers. Marketing communicates with everyone, clients, prospects, leads, internal teams, target markets, prospective employees, potential partners. Furthermore, marketing is tasked with understanding your customer’s and competitor’s goals, challenges, and industry trends. They then distill these findings into positioning, go-to-market, competitive analysis, and other components of a marketing strategy. When looking at marketing through the lens of repeatable revenue generation, we are mostly concerned with the “top of the funnel” activities. Once a lead as demonstrated the intent to purchase, they are transferred from marketing to sales.

The job of your sales department is to convert leads to clients and then manage the relationship going forward. While marketing is tasked with much of the top of the marketing funnel, sales is responsible for the bottom of the marketing funnel. The sales funnel is separate from the marketing funnel. At successful shops, sales is responsible for sourcing and driving their own leads. The top of the sales funnel is eventually handled by a specialized position, a Sales Development Representative (SDR). This person’s job is to find accounts to target based on your company’s ideal customer profile.

The five most common revenue generating strategies for digital firms are:

  • Cross-selling current clients
  • Cold outreach
  • Pay-per-click
  • Inbound marketing
  • Partnerships

We suggest checking out our guide for an in-depth evaluation of these strategies and on implementing a repeatable revenue generation process.

Working On Your Business 

Focus on getting your strategy right, then building out your lead generation process. These two are the bedrock of agency success and they essentially unlock above-average growth rates. While it isn’t difficult to do the work, it requires time which can be hard to come by. We often recommend clients carve out a set time weekly to work on their firm. These kinds of regular working meetings often pay for themselves after the first month or so.

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