As an agency, it’s easy to leak profits down the drain. In this post, we share tips on how to protect your agency’s profitability with ease.
I’m sure your agency focuses on the money it brings in—but how well does it pay attention to the money that goes out?
If you’re serious about your agency’s profitability you need to keep track of that latter bit.
Chances are that you are leaking money because of small day-to-day decisions. Those decisions seem reasonable on the surface but have a bigger, longer-term impact and one that will eventually strangle the life out of the business.
And many times, these decisions come down to the clients you have on your roster. If you don’t recognize those issues now and do something about them then you could well be taking on clients who are, daily, sucking the blood out of your business.
So where are the leaks with clients and how can you plug them?
I’ve looked at this closely over many years working in social media. I’ve also picked the brains of two agency experts: Luke Brynley-Jones, managing director at OST, and Cemanthe McKenzie, founder of New Media Angels, who are working day in and day out with clients. We can all learn from their insight and advice about putting a stop to profits being squeezed by clients.
We’ve all been there … You take on a new client and you want to wow them. It’s easy to get caught in the trap of putting in more hours to keep them happy and to cover off all those little bits and pieces that come up. But, those small, unexpected, tasks so add up.
And if you aren’t keeping a careful eye on the hours side of things then you’ll not spot that the client is actually draining the business rather than adding to the bottom line.
The issue is communication and agreement about the scope of the work you will be doing for the fee you are charging.
Of course, there needs to be flexibility on both sides and you probably feel uncomfortable with the idea of raising this as an issue with a client.
But, a little tough love is needed here. Otherwise, your hourly rate will just continue to fall–those are hours that are inefficient and being taken away from other clients as well as other important tasks needed to run the business.
It’s common sense to set down in black and white the scope of the work you will be carrying out.
To make it really work you have to go through that with your client and also review it regularly. Otherwise, scope creep will appear and set in, and it becomes an everlasting battle to get back to the core activities you should be focusing on.
Where you feel that working beyond the agreed scope is an issue, look at the processes and systems in place to support your client work. Determine where the hours are going and how they split out against the core areas of work you are undertaking.
You need to report on that in a way that makes it clear that going beyond the scope needs addressing. Then it’s a natural next step to have the conversation with the client (“time allocated to agreed activities is being spent elsewhere”). They will soon see the impact this will have longer term, why it’s unsustainable and the need to thrash out how to move things forward.
As Cemanthe McKenzie, Founder of New Media Angels says, you have to be comfortable with being tough and having that conversation: “I think the leaks in profitability have been where we have worked for clients and done more and more to support them with tasks coming up. It’s difficult sometimes to say ‘no’ and then you can slip into trying to keep them satisfied but going over on allocated hours. That eats into our profitability for sure and where clients are on a low cost package that then becomes a real issue. I’m now much more strict about the time allocated and what that means in terms of the service we can deliver. It’s better all round to be tougher on that.”
You know full well that social media marketing is complex. So, if your clients don’t understand exactly what is involved then you will always be running to catch up. They will demand more of you … more activity, more involvement, more results and all more quickly than might be realistic.
That can put a huge strain on your working relationship and one that will continually undermine what you are seeking to do.
I know, from personal experience, that clients often see social media marketing in a bubble. Social media without content doesn’t work and content without promotion doesn’t work either. And if the social media and the content is in place and working but the website is rubbish then all your efforts are being undermined.
Without that big picture, clients will struggle and they will continually be putting pressure on social media activities when other parts of the puzzle need addressing too.
Luke Brynley-Jones, Managing Director at social media and digital marketing agency OST, sums it up nicely: “The biggie here is client expectations, which is connected to the clients’ understanding of what we do. Most clients have no idea (at first) how long it takes to do social/content marketing properly. Part of our job is to demonstrate what we do and how time consuming it is, but also how worthwhile it is. After 3-6 months, we find we’ve aligned expectations with fees and deliverables.”
It’s your job to educate your clients about social media marketing so that they have a clear understanding regarding what you can do, how long it will take, how outcomes and results will be assessed and analysed, and how activity will be refined along the way.
Your clients need to be patient, but it’s down to you to give them the knowledge and insight to help them understand the results and outcomes as they happen and what that means in terms of the strategic ‘big picture’ and the overarching aims of the work you are doing.
And, putting a realistic timeframe in place, according to Cemanthe McKenzie, is also crucial: “The biggest impact on our profitability really comes down to clients not having a clear idea about how social media works. I think there is also an issue about the value placed on it, what it takes to get results and the need to take a longer term, and more strategic view, to get results. It’s not about a few posts or tweets and sometimes clients struggle with that.”
I’ve seen it time and again. Huge amounts of time and effort put into pitches and meetings with potential clients that didn’t go anywhere. Of course, being out there meeting potential clients and pitching is crucial but if you’re not being smart about it then you will find that all the effort is going outwards and not much business is coming in.
Over servicing too is a big issue and can happen for any number of reasons. You have to drill down and find out where those hours are going and what the cause is. Systems, processes, staff knowledge or skills, essential tasks or non-essential tasks … where can efficiencies be found?
Before you even get to the point of discussing a piece of work you need to be confident that this client would be a good fit and is serious about working with you on their social media marketing.
It’s worth taking the time to screen potential clients–to save yourself time, effort and money in the long run.
Anyone serious about working with you will have the answers to these questions.
And, for those clients you are already working with then asking the right questions is crucial. Is the time you are spending effective, is it focused on the right results-based activities? You need to be smart about your time but, most importantly, you also have to have absolute clarity about what work you need to do and that it us aligned with what your client needs.
Face to face contact is still very important but make it work for your business rather than against it.
Luke Brynley-Jones, OST, has seen this first hand and now works differently as a result: “We used to spend a lot on wasteful design time and traipsing around the country to client meetings. We’ve tightened that up by requiring better briefs and having a ‘conference call first’ approach to communications. This saves us thousands each month.”
It’s not unusual to dive into doing work for a client and then discover that additional social media, design, editing, or SEO tools will be needed to enable you to deliver on your promises. Even though those additional costs are essential to see this work all the way through, they are costs you might not get back.
It’s likely that you’ll need a handful of affordable tools to support your social media management, such as Agorapulse. Have a close look at whether you have the right tools, systems and processes in place to support your review, analysis and reporting. Ask whether these are the right ‘fit’ for your new client. And, if possible, build in a contingency for possible unexpected costs based on your experience.
It’s also a good idea to review client work, after the event, a nod to these additional tools. Capturing and keeping a running list of unexpected costs will prove invaluable in future client negotiations.
Start by identifying where your Agency is leaking profits and then get cracking on plugging those leaks so you can move from “survive” to “thrive.” After all, that’s why you came into this business in the first place, right, to do great work and to be recognized for it?