Why All Agencies Should Feast At The Table of Operational Principles
In the evolving landscape of agency management, operational principles emerge as the key to success in 2024 and beyond. As agencies strive to scale amidst uncertainty, the challenge lies in managing the complex dynamics of a people-centric industry.
Now an Advisor and NED, the twice-a-dot-com entrepreneur and agency manager Andy West urges agency owners to prioritise introducing operational disciplines or innovation, regardless of their organisational maturity lifecycle.
Here are highlights from Andy's keynote at The Agency Growth Summit. To access his article, download your complimentary copy: The Agency Growth Book'24.
An Agency Marches on Robust Operational Principles
They say an army marches on its stomach. If that’s the case, I’d argue that an agency marches on robust operational principles. That’s my contention and one that I’d like to examine and hopefully demonstrate in this short article as I unpack some of the developments in how agencies are being run today.
Scaling an agency in these uncertain times can seem like an impossible task. The basic principle of selling time (we’ll come back to that shortly) to meet staff and overhead costs with some left over for profit is a simple business model. Agencies don’t have to worry about supply chains, distribution channels, energy costs, and the myriad of pressures faced by most other industries.
Our primary concern is to ensure that we sell enough of our services to cover a relatively limited number of fixed and variable costs and to achieve an acceptable margin.
If the business model is that straightforward, then why is scaling so difficult? I put this down to one core factor: People.
People. We Are A People Business
Agency types are mainly talented, creative, ambitious individuals—people with purpose, ideals, and opinions. This makes a career in the creative industries so attractive to many.
Working in a people business, however, is fraught with complexity. Human beings are, by nature, emotional creatures. Left to our own devices, we are both rational and irrational. We are passionate. We can be fickle. We tend to focus on the work we love and leave those tasks that don’t float our boat until last (if they are done at all). These are all reasons why ambitious agencies need robust operating principles.
In my own experience, it’s never too early to introduce operational disciplines or innovation. In those early months of start-up, when passion and excitement can seem to be the ingredients of success, the process is often overlooked. Running an agency and making money from it requires that financial metrics are set and tracked from the outset. Having a clear plan with the end-of-year targets introduces a focus that will become a learned behaviour as the agency scales.
Resist The Temptation: Introduce Discipline
Introducing discipline like this does not mean losing agility. Instead, it introduces guardrails that ensure an agency survives, thrives, and can bootstrap growth without outside investment. The temptation when starting out is to rely on Excel for all things operational. This is a mistake. Embedding fit-for-purpose accounting solutions into the agency from the outset creates those learned behaviours. It provides peace of mind by ensuring Founders can track financial health in real-time.
Growth is on most Founders' agendas from the outset, so introducing rigour into the business development and marketing approach is equally important. Growth can appear easy at the outset, as most start-up agencies can take advantage of past relationships, Founder networks, and start-up hype created by trade media interest. It’s sustaining that interest that is the challenge, and that’s where CRM tools come in.
Many agencies start out and then continue to operate by capturing sales lists on Excel and adopting an ad hoc approach to outbound business development and marketing. This is not a recipe for success. CRM packages such as HubSpot, Copper, Zoho, Pipedrive, and others offer a low cost for entry into the world of sales processes, data management, and outbound marketing automation. Mastering CRM skills at an early stage ensures that ambitious agencies can master systematic business development. This behaviour will continue to pay back as the firm scales over the years.
This returns us to the question of timesheets. There is a lot of debate at present around the need for PR agencies to change the hourly rate business model and move to value-based pricing. The challenge for fast-growth firms is balancing the desire for new work with the need to manage the stress that this creates on the team. Understanding from an internal perspective how many hours the agency has sold and how many hours remain unsold is, according to serial entrepreneur Rachel Bell, an essential business metric from the outset.
“Running an agency and making money from it requires that financial metrics are set and tracked from the outset. Having a clear plan with end-of-year targets introduces a focus that will become a learned behaviour as the agency scales.”
This is not to say that the fee quoted to the client needs to be calculated based on the number of hours; rather, it is based on the value it creates. But without having an internal method of tracking those sold and unsold hours, there is a real danger of missing the pressure points that lead to burnout, poor staff retention, and the feared poor review on Glassdoor.
Simple time-tracking software is now available to make this internal management process very simple and transparent. Products such as Harvest, Toggl, and Clockify, amongst many others, are designed for creative agencies to track time, scope work, and produce management reports. By starting small and simple, agencies can lean into the data these systems provide and manage pinch points, using data-driven insights to plan for recruitment and track campaign profitability.
Implementing a timesheet system can be a route to employing more comprehensive project management tools. Few PR agencies seem to adopt these tools, but the potential for business improvement is significant when rolled out and used correctly. For those with a focus on tracking and managing project delivery, team collaboration, client communication and resource management, tools such as Monday.com, Productive, Kantata, Trello, and Wrike are among many platforms that are designed to support scaling agencies manage all aspects of service delivery and client management.
Tools & Methods Aside... You Cannot Ignore The Impact AI Will Soon Have on The Creative Industry
One aspect that cannot be ignored in all of this is the impact AI will have on the overall Creative & PR industries. Operationally, AI is having a profound effect on the way agencies are being managed and the way PR is being delivered. In the most recent edition of FuturePRoof, Stephen Waddington presents a comprehensive description of how AI is being used in marketing, media, and public relations. The book has been crowdsourced and is a stark illustration of the impact AI is having and will have on our industry in 2024.
Operationally, therefore, agency Founders must plan for the AI revolution as it takes hold in 2024. To quote directly from FuturePRoof, Waddington suggests that “There are around 5,800 tools that have the potential to be applied to public relations practice ranging from stakeholder management to web analytics, and from content management to project management.”
This is an extraordinary moment in the history of public relations and represents a tipping point to equal the introduction of the Internet back in 1993.
Start-up and Scale-up Agencies Have Choices To Make Everyday
This operational rigour does not happen overnight. Start-up and scale-up agencies have choices to make every day about what task needs to be completed. Clients are demanding, and they pay the bills. The team is critical as they share the Founder’s passion and are the engine room of growth. They are, of course, critical to keeping the clients happy! The choice agencies can make in these early days is to pay sufficient attention to how the agency runs and sometimes make brave decisions on where to invest in tools and professional help. A typical barrier is the Founders' reluctance to delegate, step away, or commit funds to a tool or process that ultimately will make life simpler.
With all the developments in marketing technology we can use today, and with the future being AI-driven, there is a wonderful opportunity for agency management to enter a new age. AI-powered platforms will undertake more and more tasks, freeing up forward-thinking Founders to concentrate on what they are best at creating creative campaigns that deliver value to their clients.
“A typical barrier is the reluctance of the Founders to delegate, to step away, or to commit funds to a tool or process that ultimately will make life simpler.”
Those who feast on the table of operational disciplines and processes will march forward and experience the success they so richly deserve.
