Starting an agency any time is difficult; succeeding today is even more challenging. Tips for success from a venture capitalist
by Todd Knutson | published on March 27, 2009
I stumbled upon a post by Paul Graham, venture capitalist, titled "How Not to Die". It's the notes from a talk he gave at a dinner for the leaders of companies his firm had invested in. As someone who has been intimately involved in four start-ups, I find his comments right on the mark, and highly applicable to any agency or marketing services company trying to get started today, as well as any agency fighting for survival in the recession.
When we haven't heard from, or about, a startup for a couple months, that's a bad sign. If we send them an email asking what's up, and they don't reply, that's a really bad sign. So far that is a 100% accurate predictor of death.
Do you or your founders have an advisory board? Investors? Who do you report your progress to? One of the benefits of having your own company is being the boss; however, the biggest drawback is not having someone to report to. The act of reporting to someone is accountability, and accountability spurs the activities that drive results. If you don't have someone to report to and don't have investors, create an advisory board, join Vistage or some other group that will act in that role.
Another approach is to schedule regular lunches or dinners with business associates. Perhaps you have 3-4 people you know who will agree to each meet with you once a month for the next year. Report your progress to them as a group, or to create a faster pace, meet one-on-one on a specific day of the 1st, 2nd, etc. week of every month. Consider each meeting a board meeting and drive activity during the week to meet specific objectives of the meeting.
Paul also suggests staying in touch with other startups. Find others in your city or town and meet with them monthly. Business challenges are shared challenges, regardless of the industry. You will learn as much or more from someone outside your industry as you will from someone in it.
His last two points really hit home.
The underlying cause [of failure] is usually that they've become demoralized.
How many agencies are suffering from low morale as a result of the recession, overdue accounts receivable, or lack of new business? Whether you're in a start-up or mature agency the leader's role today is to lead their troops successfully through the challenges of the current environment.
Founders are more motivated by the fear of looking bad than by the hope of getting millions of dollars.
All you've got is your reputation. Put yourself out there and say to the world that you're going to be successful. Keep evolving your services until you land a few clients who are true believers. Provide superb customer service. Most importantly,
Don't give up.
Any excuse is a good excuse not to make prospect calls
by Todd Knutson | published on March 23, 2009
Just last month an agency president told me, "Over 20 years I've made up every possible excuse in order to NOT make the new business calls I needed to make."
Here are 4 common forms of new business procrastination:
- You find a great opportunity to talk to someone down the hall rather than picking up the phone.
- You schedule meetings during time you blocked off for contacting prospects or networking.
- You discover another interesting web site to "research"...
- You take part in a new business committee meeting that doesn't accomplish anything except make everyone feel good about doing something.
I've seen the following tactics break the procrastination habit:
- Create monthly, weekly and daily new business objectives for yourself.
- Don't leave work until you meet your daily objective(s).
- Block time on your calendar. On schedule, close your email, put your phone on DND and focus on what you need to do.
- If you must attend a meeting during your dedicated new business time, immediately reschedule it for later in the day or another day that week.
- Set a maximum amount of time to research a company (minutes, not hours).
- Decline any new business committee meeting and ask for the minutes instead.
The only way to be successful at ad agency new business development is to actually do it.
Right-size your agency instead of eliminating your sales and marketing effort
by Todd Knutson | published on March 17, 2009
The day before yesterday a Midwest agency CEO called and told us that they cut all new business spending at their 40-person full-service agency. I cringed when I heard the story.
What would you say to your packaged goods client who called to tell you that they were firing your agency and eliminating their sales and marketing staff? Hopefully, it would be that they were ensuring their company's demise.
Is eliminating all spending on agency new business any different?
Here are 11 ways to NOT CUT new business spending and grow during the recession:
- Conservatively forecast your revenue from existing accounts for the next 6-12 months.
- Identify your fix expenses (leases, etc.), and then forecast how much you can reasonably cut them.
- Identify your variable expenses (payroll, contractors), including benefits costs.
- Determine the expense level you can afford to maintain at a profit margin that will allow you to make payroll.
- Determine the number of people you need by department to service your existing accounts.
- Rank your top-performing people by department, and note which of them has grown new business organically.
- Identify the new business people, tools and resources you need to guarantee new business growth with a solid ROI.
- Build your recession-proof business model, and note key milestones that must be met.
- Immediately cut the people and expenses in order to meet your targets.
- Establish the activities that will need to be done on a daily basis to reach your milestones and ensure organic and new business growth.
- Measure your progress weekly and adjust as necessary.
I completed just such a review yesterday with a company president. While cuts are painful and can be difficult to make, it is far better than the alternative.
Spending money on what you don’t do well is as important as spending it on what you do well
by Todd Knutson | published on January 21, 2009
Last week an agency principal from the West coast called and said, "I haven't forgotten you, we just got busy (months after his initial call). But, now we're ready to move forward with new business and purchase The List."
Instead of following through after initially calling us, he and his staff had gathered together various internal lists, grouped companies into target categories, and started calling (sporadically) each company to see if the contacts they had were accurate. They weren't.
Finally, after almost 6 months he realized he wasn't making any progress and called us back. Five minutes after looking at our online database, he realized he'd wasted tens of thousands of dollars and hundreds of man hours trying to do something that wasn't his core competency.
In his attempt to save money, he had actually spent more, and wasted valuable time. The opportunity cost of his decision was huge.
Many agencies have fallen into this trap - at least 35-40% by our estimate.
Consider the pieces to a good proactive new business program:
- Someone in charge who's a true sales person, who really knows your agency and the industries you serve
- Solid agency positioning that appeals to your prospects
- Identified industry categories to pursue
- Prospect list - with the specific people you want to talk to
- Networking list - friends of the firm, past and current clients, etc.
- Collateral materials: work, emails, letters, case studies, testimonials, website, blog, etc., etc.
- Smart questions to ask prospects at every step of the process
- CRM program to track prospects, calls and next-actions
- Identification and training of your traveling team - those who will attend first meetings
How well do your competencies match this list? Or, think about it this way - why did you get into the agency business? For many agency people it's because they want to do great work with a great group of people in a really fun environment.
Most agencies' core competencies don't match the requirements of a good new business program.
3 questions to think about:
- What is your agency best at?
- What parts of your new business process are perpetual struggles to complete or do well?
- How else might you get those parts of the process done without having to do it yourself?
I put this out there as a thought-piece. In another post I talk about ways traditional and emerging shops are outsourcing their way to new business success.