Being exposed to a single large client is well-known as a fundamental mistake for agencies. I had a consulting client who spent a year executing a new corporate identity for a UK Building Society Bank. Within 4 weeks of it’s launch and roll-out nationwide, the outfit had been bought by Santander Bank and was renamed. There was no repeat business, they’d spent over 80% of their energies on one client for whom there was no prospect of any more work = end of agency. and lost jobs.

So what should a modern agency to do?

1. The best answer is to have a range of clients, none of whom are over 20% of your monthly billing. Try to create contracts that don’t all end in the same month so you have overlap and won’t be very short of work all at one period if several clients don’t renew or projects don’t lead to more work. And also try to get longer contracts – aim for a year if you can; 6 months minimum. In this way your underlying revenues don’t change much month to month and you can take some uncertainty risk out of the business.
2. The second thing is look to get new revenue streams. There are two schools of thought about whether agencies should make money selling things that are unrelated to their core expertise. Some think it’s a good way to diversify and others think it dilutes the core skills of a creative agency.

A bad example of new revenue streams

For a while in the UK TV shows were paid for by “advertiser funded programming” i.e. brands paying TV companies to make the show. This wasn’t sponsorship or advertising, it was for product placements and other benefits. Both TV production companies and advertising agencies tried to get into this game. But few succeeded. The reason is that the skills to negotiate broadcast programme contracts and assess brand ROI are rarely found in the same people with the same experience. Many agencies spent a lot of time paying staff to chase these deals which didn’t come off and so ended up costing the agency a lot for no return on their investment.

A good example of new revenue streams

There are good ways to earn revenues from ancillary associated products and services.

How to find appropriate services to resell. The best way to appraise them is to ask two questions:

“ Are these products or services very close to the agency core skill set?”

“Are we using these services to deliver campaigns for our clients?”

And thus many agencies resell software licenses for cloud services which they use themselves

• Project/campaign management (Basecamp)
• CRM (Salesforce, Highrise)
• Email sending (Aweber, Constant Contact, Feedblitz)
• Web Content Management Systems (Hubspot, Contegro)
• Website hosting / domain management (eUKHost, Network Solutions)

Read the rest of the #FutureAgency series by following the category in our sidebar

Next time we ask, Is it appropriate to mark up services sold on to clients?

Image by Getty Images via @daylife

Big brands spend big money on advertising.  But this creates an arrogance of mind and self-indulgent attitude from agency staff that is unacceptable in the world of the Creative Agency of the Future.

Read this article in which the author suggests advertising agencies should mimic the El Bulli restaurant staff who lock the doors for 6 months and go away to create new recipes half the year.  Imagine your agency being offline for half the year.  The author suggests that this would deliver improved creativity for brands and more thoughtfulness in advertising.

What an utterly inappropriate thing to say at the height of a global recession and as the business world is reinventing itself with new tools and methods of working.

Here’s what I wrote in the comments:

David, I’ll buy you lunch any day. Your ideas are nice, if a tad self-indulgent.
Answer these questions
1 – What brand wants to pay an agency for 6 months worth of ‘thinking time’? What’s the ROI on that? Can you prove the campaign was better as a result?
2 – Should the agency owners pay for the staff to undertake thinking time [call it training, invested self-development or indulgence]?
3 – Can the agency world migrate as the food world has to a new mode like “slow food”? Is slow creative appropriate for cast-strapped times?

If you are free for lunch, I WILL buy and if you are prepared to answer these questions I’ll write them up on our blog – it’s about business development for agencies.

Attitudes like this can only be bought and indulged by the biggest budgets and the strongest global brands.  Few others can afford this attitude in either time or money.

The death of advertising will come – albeit slowly.

What will finally kill off their dominance and the self-serving, subservient advertising agencies who think like this is when brands and agency staffers recognise that attitudes like this are as inappropriate in today’s world as Marie Antoinette, the death penalty and gas-guzzling cars.

For brands who are growing  and becoming profitable there comes a time when you choose to professionalise your marketing.  Many businesses decide at this point that they have two choices: to hire a staffer or to buy in expertise from an agency.

Why you need better marketing

The needs are clear – you want more traction with your marketing, you suspect that there are better ways of doing promotion and marketing to get inbound leads and you can afford a budget just for marketing.  These are good signs.

You have identified clearly that your brand has a need and the possible shortcomings of your current set-up.

Hire versus buy: the dilemma

There are advantages and disadvantages – the internal member of staff will need to have well-rounded skills in a range of marketing disciplines (web, advertising, PR, copywriting, print design) and therefore a senior hire with this range of skills is more expensive than a junior.

Using an agency also requires decisions about their skills and area of expertise compared with the type of marketing and communications activity your brand has done in the past or plans to do in the future.

Costs are usually the determining factor

It may be less costly to hire external advisers compared to the cost of a senior member of staff – compare the full cost of hiring and paying (including office costs) a new senior marketer with the price an agency would charge you.

Have a couple of ‘chemistry’ or getting-to-know-you meetings with local marketing agencies and ask their advice.  Also ask to speak to a couple of their recent clients to see if they also made the same transition.

A third option worth reviewing is using a freelancer.  You don’t have the full hire costs of a full time person but can often get very experienced people at lower fee rates.  Check out the freelance hire websites like eLance.com and Freelance.com, Freelancer.com and guru.com.  I’ve successfully hired people for my agency and for clients using eLance.

Creative Agency Secrets has two current clients who use us for mentoring work.  They hired a junior marketer and we speak weekly to review their work, priorities and give guidance.  Could this work for you?  Give us a call – we always offer a free 20 minute first call.

In the meanwhile here are a few other articles that may help you figure out what to do

• Advertising – do it yourself or hire
• Hire a PR firm or do it yourself?
• Do it yourself internet marketing, or hire
• Hubspot offers inbound marketing tutorials for people using its website / content marketing system.
• Read Creative Agency Secrets’ assessment of Hubspot and how to do it yourself
• SEO do it yourself or hire a professional
• Small Business marketing – DIY or hire a pro?
• Web design – do it yourself or hire someone
• DIY or hire a market research company?

The language of conversations in business are now real and happening.

Already companies that speak the language of the pitch, the dog-and-pony show are no longer speaking to anyone.

That was written 10, yes TEN years ago.  It's numver 17 in the Cluetrain Manifesto .

I was re-reading it (helpfully scribed into a slide show by Micheal Specht thanks!) 

And here are some of the others that resonate

27.  Public Relations does not relate to the public.  Companies are deeply afraid of their markets.

 41.  Companies that do not belong to a community of discourse will die.

54.  There are two conversations going on.  One inside the company.  One with the market.

75.  We are immune to advertising. Just forget it.

96.  We are waking up and linking to each other.  We are watching.  But we are not waiting.

And some with a recessionary theme

32.  Networked markets can change suppliers overnight.  Networked knowledge workers can change employers over lunch. YOur own "downsizing initiatives" taught us to ask the question: "Loyalty? What's that?"

72.   Your tired notions of "the market" make our eyes glaze over.  We don't recognise ourselves in your projections – maybe because we know we are already elsewhere.

77.  We've got some ideas for you too: some new tools we need, some better service. Stuff we'd be willing to pay for.  Got a minute?

Nuff said, really.  But please do reappraise your own company website and other media.  How good are you at joining the conversation?  As I posted before,"If they don't do it themselves, chances are they aren't as knowledgeable about it as they should".  Would you hire an agency to do social media for you if they weren't active in social media themselves?  How about public relations, or direct marketing? 

There are new agencies being founded on this principle.  Check out We Are Social, Brando Digital and The Conversation Group.

and Flourish are using 'the art of conversation' as branding