The adage, “The more things change, the more they stay the same,” typically withstands the test of time. Fashion and design trends recycle. Generations display similar developmental patterns. It’s like many facets of life are on repeat. But if you own a digital agency, your work is an outlier to this cycle. The future of running a digital agency looks to involve almost continuous change and realignment.
Successful digital shops will strategically manage the challenges of this ever-changing landscape. And they will create measurable growth opportunities and a thriving future.
Challenges of Running a Digital Agency
The days of easy profits are gone for digital agencies. As digital services become increasingly essential to success for every business size, competition in the sector has grown exponentially.
Marketplace crowding produces some strategic challenges to consider:
- Attracting and Keeping Talent. Great agencies build cultures that attract, engage, and retain the best talent in the business. Having the right people in the right places for a fair and reasonable salary can catapult your agency into a higher realm.
- Ever-Expanding Knowledge. The basics were enough for start-ups to find success. Today, continued growth requires evolution, constant environmental scans, and multi-faceted expertise.
- Alignment. Strategic planning for digital shops is daunting because the industry can seem like one giant moving target. Measurable goals that get you where you’re going are fundamental to future growth and sustained success.
- Dynamic Team Building. Every member of your team contributes to your success. Siloed departments that don’t understand the value of other contributors’ work tend to fail. Creating an environment of shared understanding and appreciation goes a long way. Your team must value the skill sets of other team members.
Growing Pains When Running a Digital Agency
Stretch goals change as companies grow and mature. You can expect to experience size-appropriate milestones, depending on where your agency is in the growth process.
Milestones for organizations with 10 or more employees:
- Master Sales. Sales are not only about building your client roster. Carefully maintained data can tell you what services clients seek the most and which services are profitable. If the two data points do not align, training to upsell profitable services can boost your bottom line.
- Find Your Niche. You don’t have to be everything to everyone to be successful. In fact, we don’t recommend it. Figure out what you do well, and move toward being the best in those areas.
- Excel at Your Craft. Digital marketing is here to stay in some form or another, so there is reason to be optimistic. Invest in activities that allow you to continually improve the products and services you offer.
Expectations for organizations with about 25 employees:
- Management Expansion. Once your business reaches this level, you need a second layer of management. The owner can’t manage it all. They also will likely have a growing task list outside of day-to-day management responsibilities.
- Strategic Hiring. Hiring experts for more specialized roles allows your team to wear two hats instead of 10. But the pay for specialists is higher, and bringing in domain experts can create conflict. The tenure vs. expertise conversation is difficult.
- Cultivate Respect. The ultimate goal is to develop the organizational skillsets to lead teams to respect and rely on one another.
- Operational Excellence. Efficiency for medium-sized organizations is key to maximum profitability. Well-deployed processes also create an engaging environment where employees know what you expect of them and how they contribute to the organization’s overall success.
Moves for organizations with 50+ employees:
- Define Your Growth Strategy. Are you going to grow your business organically or through mergers and acquisitions? Organic growth is typically a long-term strategy, while M&A can expand your organization almost overnight. Your service/industry mix and product offerings are additional considerations in strategic growth planning.
- Differentiate Yourself. Decide how your shop wins in five to ten years. Since you are running into enterprise budgets here, you must clearly articulate what differentiates your agency.
Running a Digital Agency Well
The future of digital ad agencies will involve a focus on excellence and efficiency. To continually satisfy current clients and capture more market share, you need to tell your story in ways that clarify your return on investment and highlight your expertise, innovation, and agility. Your “elevator pitch” can help define your brand and focus your workforce on the goals and strategic objectives that will sustain your organization for the long term.
Metrics that Matter
It’s true that you can’t manage what you can’t measure, but it is also true that you need to make sure you measure the right things. Establishing and sharing key performance measures can guide your organization toward future success.
Key performance measures to consider:
- Employee Utilization. Getting this right requires a solid revenue generation engine, appropriate staffing, and solid operations. If you’re doing well in those key areas, utilization will naturally fall within the 70-90% sweet spot for production employees.
- Cash Flow. Capital accelerates growth. The more efficiently your firm converts revenue to cash, the more capital you’ll have to invest in growth initiatives.
- Operating Expenses. Careful tracking of projected versus actual operating expenses will give you a good handle on how much cash flow you need to keep the lights on. This metric is helpful for forecasting multi-year budgets that support your strategic growth plans.
- Employee Turnover. You should track voluntary and involuntary employee turnover to provide a gut check on culture. Some turnover is healthy, but too much can signify serious issues in hiring, culture, or management.
- Project Metrics. What’s your closing rate for new projects? How many projects fit your target service mix? How many projects did your team complete on time and on budget? By tracking and understanding your project mix, you can determine where to spend your effort to have the biggest impact.
- Production Level Metrics. Each department should have metrics that show how they support your daily operations and overarching strategic plan. Industry and best-in-class benchmarks can help move beyond levels and trends to meaningful comparisons for these measures.
Ultimately, your metrics should indicate whether you are on the right track or tell you where and how you should course-correct.
Promethean Research Can Help You Grow.
As you consider what the future looks like for your digital agency, remember we are here to help. Contact Promethean Research to help you build a strategy to help your agency move into the future.