David van Schaick, CMO at The Marketing Practice, shares insights from the Business Marketing Club (BMC) event on what makes a profitable agency in 2019.
What is it that you can be truly brilliant at?
The message from the recent BMC event with Kingston Smith, top 20 accounting and business advisory firm for many of the top agencies, was clear. To compete on something other than price, you need to be in the top three in your market for what you do.
Average operating profit is 12%. But, according to Kingston Smith, agencies can and should be aiming for 15%. Eight of the top 50 independent group of agencies exceeded 20%.
Their secret, we were told, is to be crystal clear on what makes them different and how that creates value for their clients. They know what they do brilliantly. And they stick to it.
Digging further, the folks at Kingston Smith shared research on the behaviours that separate the ‘thrivers’ from their less successful competitors (‘survivors’).
The findings support the same conclusion. As you can see from the ten characteristics of ‘thriver’ agencies:
- Don’t procrastinate about clients or staff
- Choose clients carefully
- Be clear on your proposition. If you want to compete on something other than price you have to be in the top 3 in what you do for your target market
- Recruit for the agency you want to be. The best agencies all hire when there isn’t a vacancy if they find talent
- Engage your people authentically
- Focus on strategic work
- Lose any long tail of scrappy clients
- Work out what to STOP doing
- Take time to think about your business and your clients’ business
- Don’t get complacent. As soon as you stop looking over your shoulder, that’s when you are overtaken, as someone said. (Someone who presumably had a few run-ins with lampposts in their time).
It’s the same lesson repeated over and over. Focus wins.
Figure out what you do brilliantly and keep pushing yourself to do it better. Figure out who you work with brilliantly and don’t chase revenue for its own sake. Figure out how you add value and be straightforward about that.
And then be brave. Make those bold decisions. Rule number one after all is don’t procrastinate.
The times are changing
There was an interesting subplot too: the significant change in the market. The explosion of data and digital is forcing agencies to re-skill. Traditional market silos based on discrete disciplines like content and PR, digital and advertising are collapsing in on each other. The shift to big data and tech is drawing in new competitors like Accenture and Deloitte Digital, and ‘frenemies’ like the performance marketing giants.
We know this of course and much hand-wringing it is causing. But I left feeling heartened. The rapid change in technology and growth in data means we also need to be adaptable.
But choppy waters or not, the lessons for good captaincy remain the same. Focus on what you can do brilliantly and make those brave decisions.
The Business Marketing Club is an association for B2B marketers who are passionate about moving the industry on and who want to move on in the industry. We run regular events for agencies and client-side marketers, as well as a highly successful mentoring scheme. We also share research and best practice regularly with our members. Get in touch if you are interested in joining our growing community.