Presentation - Thriving Agency Businesses in Q4, 2020 – What To Do And Why!

podcast Aug 02, 2022

AUTHOR: Robert Craven

Thriving, Surviving, Struggling or Dying? Which are you?

More businesses will go pop in the next quarter than at the height of the epidemic. So, what do you need to do?

The dinosaurs may become extinct but there are plenty of reasons for most of us to be optimistic. Robert will look at what the survivors of earlier recessions did differently, and how they prospered. Combine this with what the current batch of high-performers are doing and we will be able to see a way forward.

NB: This presentation was recorded in September 2020! 




Robert Craven  00:06 

Hello, my name is Robert Craven and today I'm going to talk about thriving agency businesses in Q4. What to do and why delighted to be here. I am on the board of three agencies, my business, grow your digital agency guide, runs masterminds for 40 agencies, and we've got 150 agencies at the moment on training programmes that we run. I'm only telling you this to let you know that what I'm talking about comes from experience comes from skin in the game comes from talking to agencies having that whole view.  


Robert Craven  00:43 

So this presentation, which I'm delighted to, to be able to give to you, is a quick run through your slides, not my normal style, but I think it supports the argument. And the argument is pretty straightforward. For myself, understanding the world where agencies are, whether they're thriving or dying, or or in between understanding what the options are understanding what in previous recessions people have done, and what people should be doing in this recession, too. So to survive, just a little bit of background, the, the agencies I work with are primarily in that sort of 10 to 100 range, some smaller, some, some larger, but they're primarily independent agencies. So without further ado, let's switch over and show you the dreaded power. But I think it's slides which are worth explaining what's actually going on and what we're talking about. So typically, 12% of agencies will die in a year with 100 agencies 12% will be gone, some will die gracefully, some will die, painfully, but typically 12% will go. So that would look roughly like that.  


Robert Craven  01:55 

Now, this year is a different year, I reckon the death rate is going to be about three times the normal year, which would put it at about 30-35%. So now we see not just to our present time, but we see literally a third of the room evaporating, the week will die, the those who are vulnerable will die, but those who are strong and good. And then there's also the notion that some will sort of be able to push themselves from the struggling into the surviving camp. And I think that is totally doable and totally possible for many agencies. Not all, but for many, I'm not under any illusions about about how difficult it is for some agencies. So which are you? Are you thriving, surviving, struggling or dying? Well, we've talked to our 160 agencies. And we've just asked them in their opinion, where they are, whether they feel it's a best year yet, whether they're basically above breakeven, and they've got some cash coming in, or they feel they're still 50/50 and struggling or whether they're actually dying. 


Robert Craven  03:00 

 The interesting thing, of course, is that the the rising tide lifts all boats so so in the good days pre COVID, when we talked about how difficult it was getting customers and how difficult it was, you know, charging 15-17000 pounds now. Everything seems to be rosy. I'm afraid that's not the case. Now, these are the numbers we have 15% of thriving, doing really well. 35% surviving, so 50% above the line. And then 40% are struggling finding it really tough. I suspect many of those are finding it really tough, because they've never seen a recession before they don't know what working for three years really hard is like they think it was always like it used to be you know, like, our business has been like, you know, if you've got a balloon and your business is in terms of market share, it's a circle and blue. As you blow the balloon, everything increases. But that's that's not the case. Now the balloon is contracting, and 10% dying. And I suspect that number will increase as as the recession digs in is normal for recessions, in recessions for more businesses go bust after the recession in the middle of it.  


Robert Craven  04:08 

And that makes sense. Because what's happened is that people have done everything they can they struggled really hard to keep everything together, they've maxed out the credit card and then can't do anymore. So the differentiator between the above the line and beneath the lines, really straightforward. I'm going I'm not telling you anything you haven't figured out already. The successful agencies are the ones with the deep pockets. And why do they have deep pockets because they've saved money and why did they save money because they're profitable? They're financially prudent because they're charging decent prices. The successful agencies also have a healthy pipeline. Why do they have a healthy life pipeline because they're good at marketing, they don't do the the famine and then pushing them famine type thing. They are constantly marketing and their marketing is really good. Their marketing is really good. It's actually good. cheaper for them to acquire clients and for other people good marketing is relatively cheap because it is right the way through the business.  


Robert Craven  05:08 

And the other thing they have is they have contracted revenue, contract to recurring revenue, because they tend to be larger businesses, they tend to be have larger clients and larger clients tend to have deeper pockets. And larger clients tend to work on longer term contracts. So there's a there's a kind of benevolent cycle, which kicks in above about 30 or 40 staff. And likewise, the agencies that have done well, they tend to have a decent market spread. If you've got a bad market spread like all your all your eggs into one basket of hospitality, then all airlines, it's gonna be really tough. But those people who've got a market spread meant that they could take them. And of course, some people had the perfect market spread when they if they would have bike shops and grocery stores and online gambling. Gosh, they were, yeah, that was the time to be there.  


Robert Craven  05:56 

But circular argument, the healthy agencies have been on the whole being healthy going into the, into the into the recession, because they were prepared and they're ready for it, and they knew what to do. Because it's only when the tide goes out that you discover who's been swimming naked. And that's what we've done, we've figured out who's been swimming naked. And that's been being paid for everyone, for every sense, the equivalent of the research pain point about this is those who are pretty aggressive at marketing and selling ended up being the winners, they ended up performing considerably better than those coming out of the 7 8 9 recession, by holding back and closing down.  


Robert Craven  06:38 

Likewise, research from McKinsey support exactly the same thing. They called them the resilience and the resilience to way better than the non resilience as time went on. Because at the time, and as a symptomatic of the type of business that they were they did cut some muscle, but they were always engaging and always trying to market as opposed to closing down, whereas these people at the bottom closed down. So this gives you kind of four options. This comes from vain. If you consider your business as you went into the recession that you either you had strong strategic position, you had customer loyalty, you had good market share or weak, and you either had strong financial strength, strong financial strength, in other words, relative to your peers or weak, then you can see there are four boxes you could be in, if you're in that bottom left hand box, yeah, then it's really go big or go home, it's like bet the farm or go home now go home now rather than death by 1000 cuts, but you've got to be really aggressive, make some tough calls, it's going to be a gamble to know whether you survive. And that's a really vulnerable place to be.  


Robert Craven  07:46 

Second place is this top left hand corner, which is you've got the strategic position people know and love, you've got the customer loyalty, but you've not got you've not got the deep pockets. And in that case, it's urgent cost transformation that must have taken place by now. And that will enable you to scale back on the non essentials and get the processes and systems sorted out. So you can focus on those core strengths. It sounds a bit business school talking, but I think it's just nice that the two by two box explains where we may be. Third boxes is bottom right hand one where you've got the money but weak strategic position, you've got to invest in becoming, becoming. In sorting on that strategic position, you've got to redefine the business. You've got to invest grow, again, cost transformation. And the final in the top box, which is whether those cool players are that all the ones who did really well is deep pockets and people love you. You just invest to enhance the product and product of acquisition. That's the that's the take. So those are the four kind of options depending on how much money you've gotten, how and how your strategic position says. So what should you have done, which is a bit like you know, hash tag starting with the end in mind, was the thing that runs through and what should you have done, you know, one, restructure your costs without cutting the muscle, that's a clue restructure the cost without cutting the muscle. 


Robert Craven  09:14 

Never waste a good recession. Okay, so make sure that you've, you've got a more powerful stronger and more value adding team use this opportunity to clean out anyone that you maybe didn't, don't want to be there. Second, put the financial house in order. That's about pricing that's about costing that stress testing the p&l and balance sheet, going from quarterly to monthly to weekly cash flow forecast and p&l to make sure you're totally on top of the costs because it's not just you in your business environment, which is vulnerable now. So you need to be collecting money and you need to know exactly who's able to pay you and when they're gonna pay you play offensively by reinvesting selectively for commercial growth. So be careful where you put your money. But where you do put your money, make sure that it's about growth and it's relevance. It's all about relevance. It's not about gambling wildly is bad rather than relevance. And for those of you who can, with the deep pockets pursue a proactive m&a, it's the m&a pipeline, which becomes the interesting way of looking at the future of the agency. And that's what we kind of need to think about, in effect, I think is about switching the button to, to agency warrior mode. And by warrior, I simply mean being clear being being strong, not being we got to be resilient, we aren't American, it's gonna take time, it's about being strong and clear, and committed and enthusiastic and passionate and bold. As opposed to just waiting to see what will happen. The pandemic has been like an asteroid strike, but there are reasons to be cheerful, the Earth will survive. But some dinosaurs will die. Simple as that. So let's just keep going. That is more stats about about the way forward. So one, global ad spending is expected to be 10%, lower in 19, than it was in 19. That's from group MC, that's good to hear. Ad spending may fall by less this year than the 11% that it fell in the financial crisis of 2019. That's group and again, they're starting to wish they may not have they hadn't said that. But point is, it's not going to add spending isn't going to drop 1,000% q2 is was the time when that would have happened. So let's look at what happened to ad spending in q2. So this is from the P&Lof Google. The quarter ended June 2030. Google search and ad spending went down roughly 10% year on year. So it did but it wasn't dreadful. Meanwhile, in that same quarter, if I look at our 150 odd agencies, on average, they their belief is that their PPC ad spending went down 28%. So someone's doing well, to flip that average. But we just need to think about about the fact that that is 10%, on average. So as the dust settles a reshaping advertising world is emerging. Offline ad servers have long been in decline. The creative agencies is a middleman business and it's being pinched from both sides. And the argument is it's it's facing gradual extinction. So just let's look at some more some of the figures. This is from MoffettNathanson.  


Robert Craven  12:51 

Most advertising that was pulled in 2019 never came back. But this time, they believe that the advertising will return as early as next year. Look at the look of the uplift they've got there, this is going up. Cause and I think this is important thing, the difference is digital advertising. And speaking out primarily to the digital advertising those who, who who ever focus on digital advertising, it's the new rent is what you paid to be trading. And that recognition is coming in. Not only that digital digital transformation is required. But also that digital advertising is the new realm. That's the point that are our clients need to are starting to really get. So there is also this decline of offline, we can see that companies pulled radio and print in the past downturns because they realised they didn't need them. And the same may be true of TV advertising, just look at how that that predict those predictions are going in the United States. And again, digital ad spending has become resilient has become resilient because it is far more aligned with the way that people spend their time. So we can see that in 2010 there was a kind of dis disparity between how people spent their time in the advertising spending well now to the cause of 2018 you can see that the time spent on advertising spend is almost is almost matching so there's this close alignment means that digital advertising becomes more powerful than ever.  


Robert Craven  14:29 

TV advertising will start to crack everyone's always thought it's gonna crack is this year is this the year but Google and Facebook are on track to increase their share the worldwide did ads ad business to 70% and they have loads of capacity to display more ads. So again, we can see the grass pointing out there's tonnes of opportunity for digital advertising revenue shared increase worldwide. So this takes us to a back to basics piece for you. What should you be doing in your agency. This is an opportunity to redesign to refresh and reposition your agency. Okay, redesign, refresh and reposition your agency. Right now is the time that you should have really thought through what is it your client really wants? What is it that they want right now? What position should we take relative to other people around us? As we look at what our clients are going through? What is it that they need from us? Do they still need a narrow focus? Or is it the case that they're looking for more support and assistance and digital transformation? My argument would be to try and go up the food chain, try and do more digital transformation, try and do more strategic work or more, more strategic marketing work, that's where they want their help. More importantly, it's not commoditized, because stuff like PPC work can be shipped out to Bangalore. And you want to be adding value to be where the value is added. So you need to think really carefully about where you can add the most value to your clients, refresh your agency and redesign your agency around engaging your clients in solving a specific problem. And I talk about a specific problem, because I think we need to be really clear about the problem that we're solving. Because too often we we don't think about the problem, we're moving easy. Think about what is the problem? What problem do you sell? For whom? And how do you help them solve this, and give me some numbers and data. So three R's.  


Robert Craven  16:40 

I say do not compete on price. Really what I want to say put your prices up the bold P agency is the agent at the top are putting their prices up because they can demonstrate they're delivering awesome value for money. Try and stay away from a price war a price war is not where you want to be. To try not to compete on price. Think about this warrior mentality about being being assertive rather than aggressive. Being clear about what you want clear about what you can deliver clear about how you're going to make it. Don't wait for stuff to come to you. Don't be passive. Don't think we're going to survive the long game, but you don't really push because other people won't be pushing as hard as you and ask yourself, why should people bother to buy from you? Why should we even bother to buy from you is the question. Yeah, hashtag customer is king.  


Robert Craven  17:33 

Why should we even bother to buy from and they can buy from the competition and the competition is faster, smarter, brighter, friendlier, ruder, but why should they buy from you and you need to be really clear about what your proposition is not just a value proposition, but a quantifiable value proposition. And even more on top of that, what makes you different from the rest because everyone says they're award winning? Look at our numbers. It's the units. It's how you make people feel. And that's why you need to engage with people to actually help them run better businesses. So what does this mean very quickly in terms of strategies, going up the food chain, think about 12 week business plans short and tight, that warrior startup mentality and think about how you can how you can engage your staff and your and your clients and the industry in the marketplace. In terms of finance, it's about being ruthless. Hold up price point. For some of you, it's about acquisitions and with the cheap cash which is around at the moment, and for many of us it's about cash first profit second, remember is businesses focusing on cash. 


Robert Craven  18:42 

On focus on on satisfying the customer making the sale and the profit tends to come afterwards. But that needs to be linked with the rooster's cost control. In terms of marketing, you must compete on value add expertise and strategy going up the food chain try not to compete in price. Everyone is getting a lot more success from cross sell and upsell than they are with business development is dead is it seems to be much tougher at the moment because people aren't in the market so much they're more likely to buy from a supplier they like at the moment. However, there is incredibly cheap cost of customer acquisition at the moment when it was because we're not running events. We're not running shows we're not going to conferences, we're not flying. We're doing everything online. So think about how you can how you can pinpoint your your target customer with a proposition that they find so seductive and sexy that they actually want to work with you about engagement. It's about engagement. It's about engagement about how you make people feel in terms of operations, research, KPIs and clarity and really get their systems and processes sorted out.  


Robert Craven  19:47 

And under underpinning all of this, people and culture which makes everything happen again, a relentless focus on on going back to your people making sure that the values that your agency believes in are all rolled out and delivered on about I'm going to use the word again engagement, about going back to your values and your purpose and making sure everyone understands what the job in hand is. So it's back to basics. Three R's the opportunity to redesign refresh and repurpose duration. So I will repeat this again, it's worth repeating, do not compete on price. What you need to do is compete on bing, bing, that awesome value for money on awesome value add I think this idea of the warrior mentality and keep thinking hashtag customers came, you know, why should people bother to buy from you? Why should people bother arguing they can borrow from the competition. So my concluding slide says, the pandemic has been like an asteroid, asteroid strike. But there are Reasons to be Cheerful, the Earth will survive, but some dinosaurs will die.  


Robert Craven  20:55 

Agencies are like cockroaches are not like dinosaurs. We scurry around, we figure out the new world. The opportunity for all of us is to figure out the new world is a different world. The old rules don't apply. And it's about figuring out how we can make that happen. And I think we've seen from from from the agencies, we've worked with those that kind of apply the common sense rules are the ones who actually do okay, they they do better than they've done before. So on that note, I'm going to wish you every luck. I don't remit it say that it's easy out there. But I think if we look at look at how agencies have behaved in the past and recessions, we look at how the successful behave now. And if we apply good common sense, then we'll make it. Thank you very much for listening. My name is Robert Craven. It's been a pleasure to talk to you.