Scaling a Digital Agency: 5 Challenges Growing Agencies Face
2019 has been the worst year for agency growth since the great recession.
Last year alone, the average agency’s revenue grew by only 1.2%.
And to add more fuel to the fire, agencies cut 36,400 jobs this past April.
That’s the macroeconomic view, but on a personal level, it’s another story.
When you run an agency you can end up feeling like you’re always maxed out.
You need more time to hire people—more designers, more copywriters, more project managers—the list goes on and on…
But, you also need more money to hire pros (and to retain them)—the clock’s ticking ⏳….
And (now or eventually) you’ll need to expand the space in your office (if you work at a physical location)—so your team isn’t packed in like sardines…
In order to scale your digital agency, you’ll need more time, more money, more people, and more space.
But, that’s quite a challenge.
Luckily, there’s a solution.
In this article, I put together the most common challenges agencies like yours are facing when looking to grow.
Because those are the exact same problems we solve for many of our clients (who are also agencies).
Today, I’ll show you…
- 5 (not talked about) agency scaling challenges you face every day (those are the same pain points we solve for our clients who are agencies).
- How even if you think your business is on its last legs, you can always find ways to grow and succeed.
- A simple tool that can help your agency solve almost all its scaling problems.
After reading this blog post, you may discover what’s holding your agency back and solutions to power through those challenges…
Agencies Scaling Challenge #1: Getting Qualified & Long-Term Clients to Minimize Churn Rates
Scaling a digital agency is tough.
And getting qualified clients for agencies is a real problem.
In fact, according to Wordstream, 37.3% of agencies say the single biggest challenge for them is to acquire new clients. And 8.7% say retaining clients is their biggest challenge.
This research also shows that the main source for acquiring new clients is client referrals.
You see, getting new clients and retaining them is a real struggle.
But there’s a solution.
The same way you must qualify leads before getting on a call, you must better qualify clients to weed out the ones who aren’t a fit for your service.
This will help you reduce churn rates.
You see, to stay profitable, you need to compensate your team and cover all your expenses without running out of cash.
And to not run out of cash, you need a steady stream of clients to remain profitable.
This is especially true for smaller agencies, which actually make up the bulk of all agencies.
In fact, according to Promethean research, over 70% of the agency marketplace is made up of clients that generate less than $1.5M per year.
And not only that. But you actually need to retain clients in order to stay profitable.
Qualified leads improve ROI (return on investment) over an extended period of time according to Marketing Insider Group.
In order to better qualify clients, first determine what types of clients are the best and worst fit for your agency.
- How big or small their businesses are
- What products or services they sell
- The industries and markets they’re in
- Their company’s cultural philosophy
- The personality of the individual you’ll work with most closely
- The challenges they face
- And why they’re looking to hire you in the first place
That last point is specifically important when scaling a digital agency because you need to understand what problems your agency will be solving for your clients and if you can indeed help solve them.
For this, be transparent about your scope of work, pricing, and how you can better address your clients’ needs.
For example, clearly communicate if there are any hidden fees your potential clients may later find out about, or if your pricing is based on a monthly or per project basis.
According to Promethean research, this is the breakdown of how most agencies price their services…
Additionally, based on research by WordStream, 64.3% of agencies set up fees for new clients.
And 22.2% does not charge fees.
Two of the Laws of Sales Funnel Physics are critical when acquiring new clients.
First, the Law of Clarity says that before people become interested and decide to buy your product or service, they must first understand what it is you’re offering.
And the Law of Alignment says that people will convert more often on offers that aligned with their needs and problems.
Take the graph below as an example.
If your agency offers any of those services, your potential client must be clear about them.
If you’re not upfront about your pricing, your service offerings, or scope of work, your clients may be left unsatisfied and have a negative experience if their expectations weren’t in the right place.
And that can lead to an inevitable increase of your churn rate.
In my experience, the clients who have stayed the longest in our monthly service have been the clients who were better qualified during the initial sales calls.
So the bottom line is look to work with clients that have the budget to work with you, that are committed to a long-term relationship, and that really need and understand your business model.
Agencies Scaling Challenge #2: Focusing on Revenue (Not Profitability)
Revenue is important.
We all care about it.
After all, you have bills and employees to pay.
Total U.S. revenue for the more than 400 agencies and agency networks tracked last year amounted to $55.2 billion.
And revenue for U.S. ad agencies increased by 1.2% according to Ad Age.
And despite 2019 being the weakest growth since the Great Recession, the industry is actually growing.
According to HubSpot, most marketing agencies generate between 300 and 800 sales opportunities per month.
And in total, U.S. ad agencies are expected to generate over 45 billion U.S. dollars in revenue in 2020. This according to Statista.
But listen, focusing on revenue without knowing if your agency is actually profitable pulls you in a bad direction.
Here’s what I mean.
You’re desperate for money (especially now with business reopen).
So you say yes to all clients that want to work with you and take as many new accounts as possible because more clients mean more revenue, right?
More clients doesn’t necessarily mean more money.
Because if your team is not capable of taking on a given number of clients, then 2 things could happen:
1) Your team could be overloaded and won’t be able to submit the work on time, and if they do submit it, they could be of low quality and clients won’t be happy.
2) Your clients will not be satisfied with your service and therefore they’d cancel your service.
And that’s where you start seeing the churn rates go up.
And as a result, you get anxious and try to look desperately for more and more clients.
See the cycle?
Now, focusing on profitability instead of revenue is as simple as determining what types of clients will be less likely to increase the churn rate.
For this, understand metrics like the lifetime value of each client and the cost to acquire a new client.
Find out which client accounts are costing you time and resources that could be jeopardizing your growth.
While handling increased revenue seems like a good problem to have, the sign of a healthy business lies not necessarily in its bottom line but in its margins.
Agencies Scaling Challenge #3: Lack of Documented Processes & Systems
Lack of documented processes and systems result in myriad costs that you, the agency owner, will have to pay out of pocket.
But why is documenting processes and systems important?
Because it lets you register in a very detailed way every step of a specific process and how it’s supposed to be executed.
It’s like a business process management that each team member documents.
And they could be mapped out in the form of a flowchart, video, guide, or however works best for your organization.
Well, documenting processes and systems will actually help you train new hires. They will help them visualize and understand workflows in a more effective and convenient way.
Well, at this point all processes are documented and your new hires only have to go through those training to learn more about the job position, the possible pitfalls to avoid, and how to execute on the work.
It’s like self training.
You’re basically asking your team members to train new hires through documents.
And not only that. But process documentation can lead to improved efficiency (new hires will be self-trained) and will push those new hires to meet customers’ expectations effectively.
Because at the end, it all comes down to pleasing your clients.
If they’re unhappy with your service, they can always find a better service elsewhere.
And you obviously want to avoid that at all costs.
We’ve actually been documenting every single process and system within our company.
We’ve created templates, checklists, training videos—all to help new hires learn from both mistakes and successes and to refine the process.
And this has actually helped us standardize the steps and actions taken on each client project to make things more scalable.
Agencies Scaling Challenge #4: Growing Too Fast Too Soon
Growth is a good thing when it comes to scaling a digital agency.
But it’s only good as long as you’re prepared for it.
You see, you can’t grow at the expense of your foundation falling apart.
According to research by Promethean, there’ll be an unquestionable growth in digital marketing services through 2021.
This is their expected growth for next year…
Excessive growth in your business could outpace your capacity to account for the changes that come with more clients.
What I mean here is, if your agency is small, you have more control over the numbers and finances in general.
But once your agency starts scaling and you start seeing millions of dollars coming in, it could be harder to keep track of it and require more specialists, processes, and systems.
Growing too fast can also mean having more clients, which translates into expanding the team.
And of course, if you don’t have your systems and processes documented, it could end up being a disaster.
According to research by Promethean:
- Over 73% of agencies are composed of 10 employees.
- About 21% of agencies have between 11 and 50 employees.
- And combining both shows that on average, 94% of digital agencies have fewer than 50 employees.
And part of the reason why most agencies are made up of fewer employees is because it can be incredibly difficult to hire, train, and manage more employees in order to scale.
So keep track of your budget and understand your cash flow to make sure you don’t make a mistake you can’t solve later.
And make sure to stay organized while hiring more people into your team.
Agencies Scaling Challenge #5: Hiring Staff You Can Delegate Your Clients’ Marketing Projects to
Listen, I know scaling your business is tough.
I once owned an agency too.
In 2010 I first started AutoGrow as a conversion-focused web design agency.
The company went on to generate over $19 million for clients before I rowed the boat and started selling info products in 2018 like my 6-Figure Sales Funnel training.
But I struggled with all of the above challenges outlined in this article.
And the most powerful lesson I learned was: I needed to delegate.
You see, delegating is essential for any growing business.
There’s no way you can do it all by yourself.
Just take a look at the graph below to see some of the different types of work marketers struggle with…
And listen, your time is valuable.
But when you’re maxed out from being the CEO wearing all different hats, you’ll need more people to do the work for you.
More designers, more copywriters, more project managers—more of this, more of that.
BUT in order to find all of those key team members, you need to hire and you need more hiring managers to do all the hiring for you.
In fact, 15% of digital marketing agencies feel that hiring and training new employees is the biggest challenge they will face this year.
On top of that, you’ll need a larger budget.
AND hiring all of these people means you need to expand on your office space.
When scaling your digital agency, you’ll need more time, more money, more people, and more space.
Thankfully, there’s one tool you can delegate all those things to in order to scale.
AutoGrow is like your project management software but with proven pros already inside, ready to work on any digital marketing projects.
Because as a growing agency, you can’t take care of all the demands from your clients.
That’s why we take the hassle out of your digital marketing projects.
With our easy-to-use and innovative web app, you can submit unlimited requests for emails, landing pages, funnels, graphics, ads—anything.
Then it’s done for you.
All while you save $10,000’s.
Scaling a digital agency is tough.
BUT it’s a growing industry so I hope you’re growing with it too.
Hopefully, this article helped you clarify which are the not-so-talked about challenges agencies like you face when scaling.
Here they are for your review:
- Agencies Scaling Challenge #1: Getting Qualified & Long-Term Clients to Minimize Churn Rates
- Agencies Scaling Challenge #2: Focussing on Revenue (Not Profitability)
- Agencies Scaling Challenge #3: Lack of Documented Processes & Systems
- Agencies Scaling Challenge #4: Growing Too Fast Too Soon
- Agencies Scaling Challenge #5: Hiring Staff You Can Delegate Your Clients’ Marketing Projects to
All you have to do is identify those challenges and take action so your agency can thrive and scale.
And if you want to delegate all the work because you can’t take on any new clients, reach out to AutoGrow and we’ll get your clients’ work done in a blink of an eye.
Now tell me something, after reading this blog post, did you discover what’s holding you back from growing your agency?
Are there any other challenges you’ve been facing that I didn’t cover in this article?
Let me know in the comments below.
Keep AutoGrowin’, stay focused.