Insights

The one thing I know about the future…   

…is continued uncertainty. This means agencies have to work even smarter.

We’re partway through my ‘negotiating more profitably’ workshop when one of the senior agency attendees asked me “What would you do if you had a client on a rate card which hasn’t been increased for 8 years?”
“What do you think I’m going to say?” I asked.
She replied saying “Increase your rate card?”
“Absolutely” I said “and why haven’t you over the past 8 years?”
“We didn’t want to rock the boat”.
“Have you and your team had pay rises over the past 8 years”. I asked.
“Oh yes” she said.

This is an extreme case (hopefully) but unfortunately not an uncommon one. Why does this happen? Do we have so little faith in our value to our client or customer? Are we such a poorly differentiated commodity that our client will replace us at the drop of a hat because a competitor is slightly cheaper? Do we have so little confidence in our value?

What might be the cost to us of this lack of confidence and insecurity? Fear is not a good negotiator. Under-pricing comes straight off our bottom line, not simply just off the top line.

In addition to the financial cost there is also the impact on our confidence, mindset and motivation all of which keeps us on the back-foot.

With the uncertainty of Brexit, marketing budgets under increased scrutiny and agency business likely to be tougher over the next year or two agencies have to either continue, or start, working smarter.

So a few points for our uncertain future.

1. Spread your client base. No client bigger than 15% and ideally you want three or four around 10-12% each. This means if any one client stops spending you can cope reasonably well. Also beware of a long tail of scrappy clients.

2. Resolve unprofitable clients. These are what I call the Vampire clients who drain the agency of profit, mojo and fun. Develop a plan to solve the situation. Oh but they’re an investment client. Investment client cannot be an excuse for unprofitable clients. Do you have a strategic reason why they are an investment client? If not then they are not an investment client!

3. Be stronger, bolder and more determined with your pricing. Make sure your fees reflect your value to clients. Beware of being commoditised by clients or their procurement team.

4. Delegate down to the rest of the team tasks which can be carried out perfectly well by people at a lower cost than you giving you time to think. Give yourself more time to think smarter.

5. Do your financial housekeeping. Get Purchase Orders from clients as soon as they give you the go-ahead. A PO 3 months after the end of a project puts massive pressure on your cash flow, which is probably already under pressure.

6. Don’t accept unreasonable client demands: crazy deadlines, unrealistic expectations, unless you are going to charge rush rates and see this as an opportunity to make money.

7. Delegate down to the rest of the team tasks which can be carried out perfectly well by people at a lower cost than you giving you time to think. Give yourself more time to think smarter.

These and many more are examples of the practical advice agencies receive in my “Negotiating more profitably” workshop for agencies. I have many agencies I’ve worked with for over 5 years – why because of the value they’ve received and impact my workshops have had on their people’s confidence and behaviour to have grown up conversations with clients. If your people need some smarter thinking to help you be more profitable, productive and successful, drop me an email to chris@spring8020.co.uk