TL;DR
- You can grow an agency by focusing on a few core capabilities: Leadership & Communication, Service & Industry Specialization, Brand & Positioning, Revgen Systems.
- Be careful though, because they’re all interdependent systems, a change in one will affect the rest.
- There also isn’t a single “right” solution.
- You have to address the human aspect if you hope to make any real change.
What’s it take to grow?
In my last newsletter, I reviewed some fundamental capabilities that agencies must build if they want to grow. Those capabilities can be distilled down into these seven areas. What follows is a working list that I’ve been developing since I started helping digital shops in 2015. In one way or another, I’ve seen each of these become a growth limiter.
- Leadership & Communication
- Service & Industry Specialization
- Brand & Positioning
- Revenue Generation System (sales, marketing, account management)
- Value Creation & Delivery (devs, marketers, project managers, etc.)
- Support (managers, human resources, finance, legal)
- Systems & Procedures
At first glance, that doesn’t look too tough. Seven items, solve those, and you’re running an eight-figure agency in a few years. Dig deeper into any of them, and you’ll find some endlessly deep rabbit holes.
That list has some tough challenges:
They’re interdependent. Changing a dial in any one of them will affect the others. This can make running a shop feel like an incredibly frustrating game of whack-a-mole.
There isn’t a singular “right” solution. This one always trips owners up. Agencies are surprisingly unique. The specific blend of talent and expertise alone is enough to create significant variation, but once you layer in connections, resource availability, goals, and outlooks, each one is different. This variation means that any specific solution will only be X% effective. The trick is finding the right mix of strategies and processes that work well together.
They’re people-centric. Finally, we get to the real challenge. The value of an agency comes from its people. Agencies don’t have meaningful equipment, mineral rights, proprietary chip designs, or anything else really on their balance sheets. What makes someone willing to pay 5-8x EBITDA is the ability of the people in an agency to work together efficiently to unlock something valuable for a client. Because people are at the core of those initial capabilities, you can’t meaningfully improve any of them without addressing the human aspect.
The Minimum Viable Agency
Much of my work involves identifying where an agency can improve and then helping prioritize those fixes. My discovery phase typically results in a rather large list of potential fixes. What’s interesting though is that the expected impact of each fix varies drastically.
Most agencies only need to fix 2-3 core challenges and then level up to “proficient” in the others.
Those core challenges tend to exist in some combination of:
- Leadership & Communication
- Service & Industry Specialization
- Brand & Positioning
- Revenue Generation System
I’d normally put Value Creation & Delivery at the very top, but so few shops have an issue there that it’s almost a foregone conclusion. If you want to grow your agency and build something valuable, you have to do good work.
The most common challenges
You’ll improve your odds by focusing on a few core challenges rather than fighting fires on all fronts simultaneously. These tend to be the highest-impact challenges.
Leadership & Communication
By far, the most common issue here is a missing vision. Everyone on your team (from the owner down through delivery) should have a concise answer to the question: “What are you building, and why are you building it?” That’s right, the old mission and vision statements again. Check out this old email for more info.
Service & Industry Specialization
Aside from not specializing at all, the most common issue I see here is a lack of rigor in understanding what truly ails your buyer. This is what ends up separating the good shops from the transformative shops. You can build a decent business solving the common challenges, but those are what will be commoditized away first. If you can build a team that understands a client’s pain points better than they do they’ll flock to you for advice. You can build this capability by installing a rigorous research and documentation system in your agency. Something more than just the occasional Accenture article posted in #General.
Brand & Positioning
I mainly see issues on the positioning front. Even if a shop is well-specialized that doesn’t mean their copy is descriptive enough. Most agencies can fix this by being more forward with their site/ad copy and ensuring that it aligns with their target market’s pain points.
Revenue Generation System
There’s such a gap here that I wrote (and am currently rewriting – if you’re good at this and want to be featured, lmk) an entire guide on how successful shops operate their revgen systems. There are too many issues to list here, but the most common one I see is a lack of standardization around how agencies approach revgen. Almost any system will be better than the ad-hoc slow pipeline > all in on sales > too much work > don’t focus on sales > slow pipeline rollercoaster of doom.
Unlocking sustainable growth
It’s pretty easy to grow 15-20% Y/Y, but real growth, the kind that’s profitable and sustainable, is what we’re after. That kind of quality growth is what these capabilities unlock.
The challenges of growing an agency are interconnected, flexible, and deeply rooted in the human element that defines the industry. It’s about more than just implementing best practices; it’s about finding the unique solution that fits your agency’s mix of talents, resources, and ambitions. Your journey won’t be identical to any other agency’s, and that’s good. Those unique solutions are what set you apart in this competitive landscape.
What’s been the most impactful thing you’ve done for your agency’s growth? Send a reply and let me know.
