New Business Intel

» For New Small Agency CEOs: First Time Managing New Business

The good news is that everything is measurable

A reader recently wrote me, saying that he's a new ad agency CEO, but has never managed a new business department. What objectives should I set, he asked? What should I measure? As many agency principals are thinking about next year, now's a good time to make plans for a successful new business process.

In our reader's small agency, the biz dev department consists of one full-time person, which is pretty common. Let's look at the numbers he'll need to build a new business funnel:

1. How many clients do you want or need to win in the next 24 months?
2. What percent of your initial client meetings result in a win?
3. What percent of prospects you target do you meet with?

Let’s assume that your numbers are the following:

• 2 new clients needed.
• 10% of initial meetings result in a win.
• 10% of the prospects we target meet with us.

You can create a sales funnel to illustrate what you need to do:

• 2 new clients / 10% win rate = 20 initial meetings needed
• 20 initial meetings / 10% of targets = 200 prospects needed

Your next step is to identify the resource you'll use to identify your potential prospects. Rather than repeat a prior post that addresses this, click here to read more. The one thing I'll emphasize, though, is to be sure you pick a resource that will allow you to make calls without having to do further research, not one that requires you to wait while they try to find what you're looking for.

At the same time that you're selecting your business development database resource, determine the activities that your new business person needs to do in order to secure 20 meetings. Using a CRM system, I recommend that you track all the outbound activities between your new business person and potential clients, which are typically the following:

• Emails Sent
• Emails Received
• Quick Chat (example, "I'm sorry I've caught you at a bad time, I'll call you tomorrow.")
• Good Conversations (this is a substantive conversation that moves the prospect down the sales funnel)
• VM (left voicemail message)
• DNLVM (did not leave voicemail)
• Received VM (received a voicemail from a prospect)
• Meeting Set (set up a meeting with a potential prospect)
• Meeting Held (meeting was held with a potential prospect)
• Business Won

With these activity measurements, you can create metrics that will allow you to determine what's working and what's not. Here are those I find to be the most valuable:

• Total outbound activities = emails sent + quick chat + conversations + VM + DNLVM. You should use this daily, weekly, monthly, etc. to measure and ensure that activity is taking place.
• Activities per day = total outbound activities for the month / # work days in the month (or week, quarter, etc.). How much is enough? Someone in new business who's charged with outbound prospecting to a significant number of potential clients should make at least 30 outbound calls per day.
• Calls : Conversations = total activities / total conversations. This is a measure of how many total activities it takes to have a good conversation with a prospect. These days, having one substantive conversation out of every five or six calls is good. 
• Meetings per Conversation: Total meetings set / total conversations. This tells you how many conversations it takes to secure an initial meeting. The lower the number the better your new business person is able to establish rapport, ask relevant questions, and establish a reason to meet. I think you should aim for a 1:2 ratio, or one meeting from every two good conversations. If you find that the ratio is higher, I recommend doing role practice to improve your new business person's skills.
• Meetings Held % = meetings held / meetings set. This is a measure of the quality of the meetings that are set. Over time, you should aim for nearly 100%, as this will mean that your new business person is doing an excellent job of identifying a need and establishing your agency's relevance to satisfy it. If meetings regularly don't take place, then they weren't quality meetings in the first place.
• Business Won% from meetings held = business won / meetings held. This will tell you how well you convert initial meetings generated from proactive outreach. Recall that in the above funnel, we used 10%. You should be able to do better. However, a note of caution: I can't tell you how many agency CEOs have told me over the years, "Put me in front of a prospect and I'll close the business." The exact same number have been terrible at moving an initial meeting along the process to actually winning. The objective of a first meeting is...a second meeting. Don't try to win on the first meeting. For more on this, read here.

These steps should help you measure and manage your business development process. Please let me know if you have questions or comments.

» New Digital TV Service Can Help Generate New Business

Introducing Leap Media

Small and mid-size advertising agencies can now offer their clients Digital TV services. A low-cost, turn-key solution, which you can offer as your own, is available to drive new business.

Leap Media Group, founded by TV industry veterans, was created expressly for "smaller, and mid-size agencies looking to develop an interactive TV capability", reported Joe Mandese in MediaDailyNews at the end of September.

Mandese describes digital TV advertising as, "any ad unit on TV beyond the traditional commercial spot. Some examples include interactive TV spots, video on demand messaging, and program guide ads." (Full disclosure: Leap became a client of The List after the article was published, but we have no stake in their business.)

Says Leap co-founder Chris Pizzurro:

"Wouldn't you just love to have something on the TV set where the consumer can just press a button and enter your sweepstakes or make a request for more information?"

Leap offers agencies free planning, buying and executing interactive TV campaigns. Leap generates fees "directly from acquiring advertising inventory from cable and satellite operators and from other interactive TV platform providers", so agencies don't have to bear the cost.

When I read the article in MediaDailyNews, I immediately thought of ways that agencies can offer this service to help generate new business. First, you'll need to work out a deal with Leap so you can "white label" their service, i.e. brand it as your own. Next, your new business and account services staff will need to bone-up on digital TV: educate yourselves about what's going on, what the future holds, and what's in it for your clients.

Once you have the service in-house and fully understand it, here are three ways that offering a Digital TV capability may help you drive new business:

1. Include digital TV in prospect conversations. If you've done your homework (as described above) and fully understand what's in it for your prospect, ask them smart questions to reveal their potential interest in digital TV, and then match their need with your new capability.
2. Enhance your next pitch. Digital TV may provide some powerful benefits to those you're pitching, and this capability has the potential to differentiate you from the competition.
3. Generate organic growth. As a small to mid-size shop, many of your clients won't expect you to have this capability. This could be a new service to enhance an existing relationship, or perhaps even help you retain one that's looking for new ideas. For flat-fee clients, this represents a way to charge for an additional service.

Additional insight: Chris Pizzurro provided me some additional information about how consumers and digital TV are evolving: Video On Demand (VOD) and Digital Video Recorders (DVRs) are expected to penetrate 50% of U.S. households by 2011. Consumers with digital TVs now know that their TV remote can do more than just change the channel. For example, consumers use their program guides many times a night, and banner ads are appearing on the guides. Same for VOD, where consumer usage numbers are growing year-over-year. Consumers are exposed to :30 second ads, but fewer than on traditional TV, so many prefer it.

I hope some of you see this as an opportunity. If you pursue it, I'd love to hear how it goes.

» A Hint of New Business Team Conflict = No Win

Good chemistry means learning how to have difficult conversations to maintain harmony

You've seen it happen: two members of your team aren't getting along. You've tried to repair the damage, but everyone knows it's there. While everyone tries to cover it up in the pitch, it still shows. You don't win (instead, you come in "second"). The VP Marketing cites "chemistry" as what made them choose your competitor.

Hopefully, you hear "chemistry" as the reason why you lost.

Discord in a marketing services company is felt by everyone around those who are out of sorts. It's therefore critical that we all know how to skillfully and effectively diffuse and repair relationships.

As I was faced with one of these situations recently, I gravitated to a Harvard Business Publishing article by Peter Bregman called "The Martial Art of Difficult Conversations". Peter emphasizes the importance of really listening to those who are upset until you completely understand the issue.

He suggests Three Things to Do to Communicate Listening:

1. Ask questions. Ask open ended, exploratory questions, such as who, what, when, where, how, why, etc. These will clarify what the other person is saying and feeling. Stay away from leading questions and statements that pretended to be questions but won't fool anyone, like "You don't actually believe that, do you?"
2. Actually listen. Shut up and hear what the other person has to say. Avoid thinking about anything except what the other person is saying. Try to hear what they're NOT saying, but are implying: the desires, fears, and assumptions behind what they're saying.
3. Repeat and summarize. Recap what you heard, trying to use the same words they did, and check to be sure you understood them correctly. If you didn't get it, ask the other person to repeat what they said so you hear the whole thing again. What you really want to know is what you got wrong. Ask what you missed. Once they've told you, repeat that part again and ask them if you got it right this time.

This sounds easy, and like most things it's harder to do than it is to write or say. But it works, so it's worth the effort. If you try this approach, I think you'll find that you develop the habit of asking questions instead of jumping in and suggesting what should be done to fix the problem.

We all want to be heard. Once we know that we've been heard and understood, we're generally much more willing to compromise and find a solution that works for everyone involved.

For new business teams, getting back to a stable state of affairs is critical, since chemistry is a critical ingredient to winning new accounts.

» First Meeting Self Destruction: Happening Today

How one agency is turning an opportunity to win into a likely loss

Agencies will do almost anything to get a first meeting with an ideal new business prospect. But once the meeting is secured, optimism often turns to disappointment, and too often it's because the agency drops the ball.

Here's an example that's in play today. A good agency located in the Southwest had a meeting with one of its high-value prospects. The meeting went well and the agency left with the promise to submit a proposal for an initial research project. It was a foot in the door, for a small project estimated at $50,000.

Once back at the agency, the usual client issues surfaced, and delays ensued. The discussion also turned to the small size of the initial project, and internally (without conversation with the prospect), the project scope started to expand.

Three and a half weeks later (!), which was last Friday, the agency sent the proposal to the client, with a price tag of $191,000.

The result: sticker shock (to say the least).

I can't predict what will happen next, but odds are the project - any project - is in jeopardy.

Let's summarize what went wrong:

• Not meeting expectations: When you promise to submit a proposal, doing so more than a week later for a small project says only bad things about your agency. For example, if it takes you three+ weeks to create a proposal, later on will you be able to deliver work on time?
• No sense of urgency: Are you hungry for new business? Do you really want to work with this client? Are you thinking about them, or about yourself? Are you willing to go the extra mile for your clients?
• Greed: As you know, value is in the eye of the client. Projects have three potential prices: what it costs to produce; what it's worth; and, what a client will pay. I'm not sure what $191K represents, but there's no doubt it's not what the client expected to pay.

Client relationships are built on trust. Establishing your credibility from day one - doing what you say you're going to do - is paramount. While this story may seem extreme, it's actually a common refrain.

So why not change your new business process to one based on meeting expectations with a sense of urgency, and win more new business?

» We Cut Our New Business Team [to increase revenue?]

It's a bit like cutting off your nose to spite your face

It's my birthday (it's not divisible by five, just another on the short march towards the big five-oh), and I've given myself permission to rant after hearing this comment one too many times from an agency principal,

We've decided to eliminate our new business department.

Did you hear the news? HP has laid off it's entire sales force! Home Depot is letting all its store associates go! Starbucks is going self-serve (sorry no more humor from behind the counter as they make your favorite concoction).

In a recession - or anytime for that matter - why would you cut the people responsible for generating your agency's future revenue?

Now, I know there can be legitimate reasons. For example:

• Poor performance. Provide training; do role practice. If that doesn't work, replace them.
• Not a good fit. Quickly hire someone who is.
• Ethical issues. Replace them immediately.

But, "budget" should never be one. A good new business person should only be let go when the agency is closing its doors. Period.

If you see this happening in your agency, jump up and down and raise an enormous fuss. New business is an investment in your agency's future.

If you disagree, recognize your risk: cut your new business staff and your demise may be as close by as the unexpected loss of a client.

End of rant.

» 5 Reasons New Business Change is Hard, And How to Avoid The Common Traps

Real change requires real effort

A recent Harvard Business School article addressed why it's so hard to change, which is a good follow up to my last post on the need for constant change and improvement in ad agency new business.

The authors of the article, Marshall Goldsmith and Dr. Kelly Goldsmith, outline five reasons why change is difficult. What follows is their research in their words, to a great extent, though I've reduced the amount of copy and made a number of edits.

1. Ownership. For your effort to change to have a chance of success, you have to take personal ownership and have the internal belief that "This will work if, and only if, I make it work. I am going to make this work."

2. Time.  Most of us set goals and then underestimate the time needed to attain them. We have to learn to be realistic about the time we need to change habits. Those that have taken years to develop won't go away in a week. Set time expectations that are 50% to 100% longer than you think you'll need to see results — then add a little more.

3. Difficulty. Not only does it take longer to achieve our goals than we think it will, but it also requires more hard work than we anticipate. It's important to accept the fact that real change requires real work. Plan for change to be more difficult than you think it should to help prevent the disappointment that can occur when challenges arise later.

4. Distractions. We have a tendency to underestimate the distractions and competing goals that will invariably appear. Plan for distractions in advance. Assume that crazy is the new normal. You'll probably be close to the reality that awaits.

5. Maintenance. Once you've put in the effort needed to achieve a goal, it can be tough to face the reality of what's needed to maintain the new status quo. If you don't, however, all your effort will be in vain.

Real change requires real effort. The "quick fix" is seldom a meaningful one. Distractions and things that compete for your attention are going to crop up — frequently.

» Perfection in Ad Agency New Business Is…Change

A call to action

You've probably heard the expression, "Change or Die". Winston Churchill had another take on it that, to me, is even more powerful:

To improve is to change; to be perfect is to change often.

A speaker I heard last week talked about this quote in the context of leadership. In particular, that change is critical to organizational growth and development.

Many ad agencies and marketing firms are quite good at innovation when it comes to marketing - most likely because it's a requirement for client retention. It therefore makes sense that they're comfortable with this type of change.

However, as the speaker continued it occurred to me that you really don't see that much experimentation and change in new business. And, even when you do, what appears to be a new idea is often just one that's been recycled or re-purposed from what worked 10, 20 or even 30 years ago.

And this thought raised two questions:

1. What does new business improvement look like?
2. What change is necessary?

The low-hanging fruit of new business change and improvement for most advertising agencies includes:

• Developing a one-page new business plan with both proactive outreach and reactive marketing objectives and tactics.
• Working the proactive outreach plan every week.
• Implementing planned marketing tactics every week.
• Measuring activities weekly and summarizing results weekly, monthly, and quarterly.
• Making changes as soon as results don't meet plan, and then measuring the impact of the change(s).

If your agency implements these five steps, your new business process will show significant change and improvement. However, rather than striving for perfection, first aim for continuous improvement that is both manageable and measurable.

» To Defend or Not To Defend - It’s a New Business Decision

And it needs to be a sound business decision

A few years ago I was faced with a decision about whether or not to file a lawsuit. As I considered my options, an old friend related to me what his even wiser lawyer once counseled him about lawsuits:

You have to decide if this is about business or about pride. Because if it's about business, the cost outweighs your potential return. But, if it's about pride, then I'll happily take the case and you'll help put another one of my kids through college.

I thought about this advice after reading a recent article in Ad Age, which reported that only 5-10% of incumbents successfully defend an agency review. And yet, as Judy Neer of Pile and Company estimates, incumbents are asked to participate in nearly 50% of their reviews, and most of the time they do. (Which means that those agencies are losing a lot of money.)

Let's turn that statistic around:  Your agency has a 95% chance of losing a review.

Before making a decision about whether or not to participate in a review, I encourage you to do two things:

1. Determine the following numbers: your average cost per per pitch? Your win rate? Your cost per win? You need to know these numbers so that you can make a smart business decision about what you'll likely spend defending the business - before you're faced with the emotion that comes with actually losing a client.
2. Decide as an agency: do you want to set a firm policy about whether you will or won't defend? The Ad Age article cites examples of how agencies like Crispin (won't defend) and the Richard's Group (usually won't defend) handle it.

When to participate?

• Mandated reviews (e.g. government contracts; rules set by procurement or purchasing departments).
• Roster reviews.
• Agency consolidation reviews.
• When you have very strong, deep relationships and the results to back them up (and there's been no change in management).

When not to participate?

• When there are serious concerns (from either side) about the agency relationship or business performance.
• Management changes, particularly when you know that the incoming leadership has successfully worked with other agencies.
• Announcement of an unscheduled review.
• Announcement of a non-roster review.

Like the emotion of wanting to get even, defend yourself, or inflict equivalent harm that you might feel when thinking about sueing someone, it's easy to get caught up in the emotion of wanting to fight and "spend whatever it takes" to keep your hard-won or long-tenured client. However, the smart new business decision may well be to spend the money winning a new piece of business.

» $40,000 Off Our Fees. Your Next New Business Pitch?

($ Canadian, that is.)

How many of us are willing to offer $40,000 off agency fees to bring in a client? Well that's what The BrainStorm Group did at the end of May. And it worked.

Ron Telpner, chairman and CEO of the independent Toronto-based agency, was asked by a reporter from Canada's National Post newspaper (read interview here), "Have you won any clients?" and he responded,

Yes, and we exceeded the other, equally important objectives we established for this campaign -- increasing the number of RFP invitations, dramatically increasing visits to our new website, and generating increased exposure and awareness through media coverage, which we saw in Canada, the U.S. and even in Japan.

They also did what he calls Walking The Talk:  they advertised.

Telpner refers to the "inherent hypocrisy of an agency that would recommend advertising to its clients as a strategy while not having enough belief in the power of advertising to use it for themselves." So, they ran their $40,000 off coupon in newspapers and online, and it worked exactly as intended.

At first I thought this was just a terrific promotion, and then I thought about it from an ROI standpoint. Consider this (and mentally add to the list or feel free to comment, below):

• How many RFPs do you respond to each year?
• How many pitches do you participate in?
• How many of them do you win?
• How much do you spend on submitting RFPs? On pitching?
• What's your average cost per RFP submission? Per pitch? Per win?

If you do the analysis, my guess is that a $40,000 off offer isn't as expensive or outrageous as it first might seem.

While it has now been done, what other innovative ways might you generate new business leads, publicity, and buzz - that really aren't that expensive?

» Do Retainer or Project Clients Build an Agency’s New Business Pipeline?

What's the right mix?

Ad agency clients regularly ask us this question, "What's the best mix of retainer vs. project work?" I think the answer can determine how successful you are at creating a sustainable new business culture and a healthy revenue pipeline.

Retainer-driven agencies

Most agencies strive to land retainer clients for many good reasons, not the least of which is that they represent a predictable revenue stream. A sufficient retainer helps to cover overhead, allows you to hire good people, plan for the future, and hopefully do good work. Having a handful of retainer clients normally equals profitability. However, it may help you be lazy about new business, and it can be risky.

Case study: a family friend was, until recently, the chief creative officer at a 40-person, well-regarded regional agency. They'd had one big retainer client for 10+ years and felt very confident about keeping them. This client represented 70% of their agency's revenue. About 18 months ago I started pushing him to get his team to start prospecting for new business, but they never did. Of course, we can all guess what happened next: CMO turnover, new agency hired. His former agency is now a small fraction of its former size, my friend is out of a job, his family had to move in with his in-laws, and they and their many former coworkers are struggling.

The sad part is, while the client loss may have been unpreventable, an active new business program could have kept the team intact and avoided the massive upheaval that impacted dozens of lives.

Project-driven agencies

Most agency principals I know who run project-driven shops are always trying to land retainer-based clients. They dislike not being able to predict revenue more than a few months out. They also dislike the constant hunt for new clients, and the never-ending need for talented account managers to grow existing clients. That said, they're often very good at new business. They're good networkers, aren't afraid to pick up the phone, and understand that there aren't any "silver bullets" or quick fixes. As one such principal said the day before yesterday,

New business is a numbers game, and it takes time.

The ideal mix

From a strictly new business perspective, I think the ideal client mix is something like this:

• 50% retainer-based clients, with no more than 20% of your revenue from any one client.
• 50% project-based clients, representing as many clients as you can handle above your minimum project size.

My rationale is this: having 50% of your revenue coming from project work requires that you're constantly prospecting for new business. If you are, some percentage of your projects clients are likely turn into retainer clients, which will allow your agency to grow. When this happens, however, resist the urge to alter the 50/50 balance, as that will reduce your "hunter mentality", which is the lifeblood of your agency.

I'd love to hear if this balance makes sense to you.