At MAP we’re big advocates of making the most of what you have before you consider growing any further. Over the years you’ll have built a team and you will have delivered some fantastic work for some top clients.
Despite that, the chances are that at present you won’t be maximising the revenue and the profit that you could be returning. You can’t beat yourself up over it because it’s very difficult to do – you have to be winning the right amount of the right work to perfectly match the skill sets and the resource that you have.
Your pricing and operational processes have to be extremely effective to make sure that there’s no leakage, projects are being delivered within budget and the teams time is highly recoverable.
Before you continue to grow further it’s important to have gone through the motions of understanding where the current shortfalls are and to have plugged the gaps. Otherwise, it becomes increasingly difficult to do, and all you’ll end up doing is extending the fundamental problems you have with them becoming harder and harder to fix as time goes on.
Your business model has to be bang on. Once you’ve done that though, it’s time to embark on a sustainable growth plan.
Unless you’re primarily retainer-based, you will continuously struggle with peaks and troughs of growth. You know the score, you’ll win a few significant projects, hire more team members and the focus switches from sales to operations.
The team has all hands on deck delivering the work and the owners of the business get dragged into that too. They take their eyes off the ball when it comes to new business. Before you know it, the projects are finished, you are committed to a significantly increased cost base with your new team and the sales pipeline has dried up.
It’s a very common cycle for agencies of all shapes and sizes to fall into and it’s not sustainable. Here’s what to do to get out of it:
#1 Start with the End in Mind
It’s a bit of a cliche, but one of the first things we do with all our clients is to understand why it is that they are in business in the first place. The number one reason always has to be to give you the personal life that you want.
Start with considering what that means for you, which can generally be split into two distinct areas – time and money. Firstly how do you want to be spending your time both in the business in terms of your role, and outside of the business? What hours do you want to work and what flexibility do you want that will allow to you spend time with your family, friends and doing the things you want to do.
Secondly, how do you want to be financially rewarded for owning and running your own business? You’re taking on a level of risk that you wouldn’t have if you had a job somewhere, so it’s important that risk is offset by you being remunerated properly. We come across far too many businesses where it’s not the case and the owners are cutting their own pay to sustain an oversized team. Sure, do it for a period of time, but be very clear with yourself that it can’t continue for more than a few months without changes being required in the business.
When you’re clear on what position the business needs to be in to give you the personal life that you want, you can look forward 2, 3, 5 years from now and plan the shape of the business. Think in terms of the clients you’re working with, the services you’re delivering, the team you have, and the financial position in terms of profit and cash.
It’s important to have real clarity on the position you’re aiming for as it allows the step by step plan to be built – without that you can end up growing for the sake of it, just because it seems like the right thing to do as a business owner. It’s this plan which allows you to make the right decisions which aren’t reactive based on what is going on around you.
#2 Understand the Key Drivers
As I touched on above, the peaks and troughs of a project based agency can be incredibly difficult to manage. That’s where understanding the key drivers of your business come in. In this case, by key drivers I mean what are the day to day activities that you and the team need to be engaging in that is going to result in your desired financial performance. For Sales & Marketing, that could be the number of blogs posted, the number of networking events attended, the number of prospects meetings held, proposals produced, etc. For Operations it could be your weekly team meetings, the project washups, the time tracking the team do, etc.
They are different for every business and you have to understand yours and be able to measure and track them. The beauty of having them across all areas of the business is that it gives you the confidence as the agency owner that you’re working on the right things with all the fundamentals are being covered, no matter what the current distractions might be. The prime example here is maintaining new business activity even when the agency is stacked with work. It’s the only way to prevent a drop off when those projects are done and have enough opportunities to be able to select the right work and continuously raise your prices.
#3 Stay Flexible & Stick to the Plan
Finally, stay flexible in what you’re doing. Try to avoid falling into the trap of becoming over eager with hiring, taking on additional overheads, giving pay rises to the team etc. All of which are difficult to reverse and easy to do when the projects start flowing in and the cash in the bank starts to rise. Link everything to a plan and to performance, rather than being based on gut.
When it comes to the team, consider how freelancers can be used to give us the skills and resource we need for particular projects without taking on a long term hire. The worry that freelancers are more expensive is often unfounded when you consider that they’re 100% utilised, and often it can be worth taking a small hit in our margins to retain an element of flexibility.
Remember that the financial plan was built for a reason – to give us the business that we want to have a number of years from now. With each move that you make, think longer term and building a robust, stable and valuable business. While it’s important as an entrepreneur to be able to adapt quickly and make the most of opportunities, it can also be at your detriment to jump around too quickly and be too reactive, so make sure to get the balance right. Surrounding yourself with the right characters and advisors can be a really good way to help keep that balance right.