Over the course of running your agency, you are bound to make big mistakes. But the good thing is we can learn from these big mistakes agencies make and develop strong perspectives on spotting and rectifying them in the future.
Besides, there are many existing agencies and their major mistakes we can learn from. For instance, some of the obvious pain points in the world of agencies are project management, communication, and client retention.
In this article, I am going to talk about the 5 big mistakes agencies make and how you can avoid them.
Extended Projects – Scope Creep
Have you ever heard of the Denver International Airport (DIA) project? It got delayed by 16 months and exceeded its budget by 250%! According to a case study, there were 2100 design changes made over the course of this project and most of them were undocumented.
Now, this project had nothing to do with digital or web agencies but if you have ever worked in an agency or own one, you must have experienced similar major mistakes before.
More than 50% of projects experience scope creep and every time this happens, your profit margin depletes. As such, it becomes one of the major mistakes agencies make that you must handle.
Agencies must make sure their process always centers on strategy first, and output second. – Scott Baradell, Idea Grove.
A study by the Project Management Institute found that just 57% of projects are completed on time and within budget, and that scope creep affects 50% of initiatives. Project scope creep can be caused by a number of things, such as imprecise customer expectations or poor team communication.
Here’s how you can avoid scope creep – one of the major mistakes agencies make.
- One way you can avoid these big mistakes agencies make is this. Define the scope of your project – covering every minute detail of it, right at the beginning of your project. Make sure your project scope contains all the important elements like in-scop, out-scope, resources required, risks & dependencies, etc.
- Establish a clear and easy form of communication between your client and the team that is working on their project. This helps you to expedite the project execution process and to avoid one of the biggest mistakes agencies make. Also, make sure that your team understands the scope of the project.
- Keep your sales team on the same page with the project managers and the core team of your agency. It’s important to manage your client’s expectations and ensure that they understand the complexity of a project.
Lost In The Herd
There are thousands of agencies functioning in each industry. It becomes important to stand out in the crowd rather than getting lost in the herd – another big mistake agencies make.
It reported that more than half of new businesses fail during the first year of their business. According to the U.S. Bureau of Labor Statistics (BLS), this isn’t always true. Data from the BLS shows that approximately 20% of new businesses fail during the first two years of being open, 45% during the first five years, and 65% during the first 10 years.
Let’s say that you are an advertising agency in the entertainment industry. How will a company know if there are hundreds of other agencies offering the same services?
Differentiating your agency from your competitors is the key here. Creating an identity for your agency is important. People call this branding, market positioning, etc. but this can help you deal with this big mistake agencies make.
It is essential to set your agency apart in light of the fierce competition. Ideally, you should use every strategy at your disposal:
- Positioning refers to your identity and your values
- Branding refers to how you display yourself.
- Specialization refers to the skills, industry, or market niche that you specialize in.
Consistent branding across all channels increases revenue by 23%!
If you look at successful agencies and other businesses, you will find that branding has a major role to play in it.
Take ThomasNet RPM for instance. It focuses on the industrial marketing industry. Ogilvy, another example of a successful agency, handles marketing for the media and entertainment industry.
Here are a few other ways to stand out in the market despite hundreds of competitors and to avoid one of the biggest mistakes agencies make.
- Bring uniqueness to the table.
VaynerMedia, founded by Gary Vaynerchuk, recently launched a sister company – GrapeStory that helps companies create content specifically for social media platforms like Snapchat and Vine.
- Be the best in the market at what you do.
Sylvian Labs – a strategy and design consultancy, for example, has been able to attract clients like Spotify, Pepsico, Google, and many more with its unique & innovative ideas. It helped Spotify to stand out in its fight against Apple Music. Apple Music’s premium subscribers surpassed Spotify’s premium members.
- Collect information, predict trends, and publish the results.
If you look at any popular agency, companies look up to them for trends and insightful reports in the industry. For instance, Hubspot publishes the State of Marketing Report in Feb – March every year.
Not Focusing On Finances
This is one of the biggest mistakes agencies make.
Most creative agencies often make the mistake of overlooking their finances. It doesn’t matter whether you are a small or a large agency, balanced finances are super-important to ensure its sustainability in the long run.
Every agency should be familiar with terms like Adjusted Gross income (AGI), profit margins, cost of services, etc. If you don’t understand these financial terms, you are making one of the most common mistakes agencies make, and thus, your agency is bound to fail because the entire project pricing strategy depends on these terms.
Do you know which is your most profitable client? Do you understand the pain points in your pricing strategy? How much money does every salaried employee bring to the table?
You, as the CEO of your agency, need to understand the finances. If you don’t, make sure you have a reliable co-founder or a financial advisor whom you can trust!
Audit your Strategies to Bring in New Leads
By examining your new company plan, you can:
- Where did your last five clients come from?
- How long does it typically take you to acquire a new client?
- How long does it usually take to bring on two new clients?
- Do you have a list of contacts and leads?
- Exists someone commit to pursuing new business opportunities? Who manages new business if not you?
- What is your rate of turnover?
If your agency is like most others, you’ll discover that the majority of your clients come from non-scalable sources like word-of-mouth. Did you know that about 90% of agencies claimed in a HubSpot survey that they relied on such referrals to secure new business?
Ill-defined Agency Management Practices
I have discussed scope creep in project management as one of the major mistakes agencies make but there are many ill-defined practices that can impact your entire agency.
We have often talked about creating well-defined processes over hiring a great team on our blog. This might sound a bit offbeat but here’s a question for you.
How many of your current employees have worked with your agency since the beginning?
The most common answer to this is less than 10. Employees come and go. Now, this doesn’t mean that you shouldn’t hire a great team for your agency. That would be one of the mistakes your agency makes.
The single most crucial element in a new employee’s success is the appropriate cultural fit (attitudes, values, and ethics). 89% of new recruits fail within the first 18 months, according to Leadership IQ’s study, Why New Hires Fail, because of their negative attitudes that do not fit well with the culture of the company.
The most effective agencies we’ve come across have their complete business development/sales system and processes spelled out, documented, scripted, adhere to it rigorously, and are continually making adjustments to improve results. These businesses see double-digit growth. Additionally, they are able to staff up properly because they are projecting new business so well.
This means that defining a great process for everything – from meeting formats to client communication & delivery, is more important. Over the course of your agency, a well-defined process can save you from the trouble of micro-management so that you can focus on the big-picture stuff. Besides, it also helps you avoid these big mistakes most agencies make!
A few poor management practices that you should tackle to ensure productivity and growth are – miscommunication between coordinating departments, lack of meeting formats, poor clarity on individual roles, etc.
Not Partnering With White Label Providers
You, as a CEO, should be constantly looking out for ways to optimize the functioning of your agency in terms of operating costs, profit margins, overheads, etc. This brings us to another big mistake every agency makes.
The average cost of a bad hire is up to 30% of the employee’s first-year earnings according to the U.S. Department of Labor. However, one report from the CEO of Link humans put the average cost as high as $240,000 in expenses. The costs broken down relate to hiring, retention, and pay.
However, a report by Recruiter Jörgen Sundberg, CEO of Link Humans, puts the cost of hiring and onboarding as much higher around $240,000 for a new joiner.
Which would mean that the money spent on an employee who may turn out to be a bad hire, will end up wasting up to $240,000 as the total cost!
According to CareerBuilder, three-quarters of companies end up hiring bad hires which were reported as an average of $14,900 in wasted money. Over 74% of employers stated that they end up hiring the wrong person for the job.
Research by Gallup estimates indicates that those employees that are actively disengaged in the United States can cost businesses anywhere from $450 billion to $550 billion when it comes to the loss of productivity each year.
This is just one of the pitfalls of not partnering with white-label providers. To fuel your growth as a leader in your industry, you’ll have to face many other challenges!
Did you know that the revenue growth of agencies in 2019, at 1.9%, was the lowest of the entire decade? So, now more than ever, you should partner with a white-label service provider and avoid one of the major mistakes agencies make. A white-label provider can
- help you scale.
- Increase profit margins and reduce operating costs.
- Reduce your agency’s bottom line.
Resourcifi is a white-label provider of web & app development, digital marketing, and software testing services. Partner with us to reduce service delivery costs and management overheads of your agency. Contact us to know more!
