Welcome to 2023! I’m not sure why, but it’s taken me longer than ever to acclimate writing the ’23 as the date lately. I hope you’ve hit the ground running in the new year and have adjusted to the 23 much faster than me!
Running an agency is a hard business…
I’ve had this in the back of my mind for quite some time. After having now entered into the triple digits of agency owner conversations, I’ve noticed a few patterns that makes this sentiment resonate with me even more. There are quite honestly a good number of reasons this sentiment rings true. Let’s face it, running any business is hard, but here are the top 3 of why running an agency can be especially hard.
#1 – Low Barrier to Entry
It’s super easy to start an agency. You likely don’t need a single item you don’t already have, and with just a little bit of brain power you can likely go pick up a client or two pretty quickly. I started an agency (with a partner) within 48 hours of the idea after we swiped a credit card for $500 to buy leads, a trip to Staples, and a Chipotle burrito to hash out the details. The last two items obviously weren’t critical…maybe 😉 The reason why this is hard is because it allows an agency to achieve some rather quick success without solving some of the hard challenges a brick and mortar must solve to survive. Typically in the arena of how to consistently get new clients.
#2 – The Marketplace Doesn’t Know How to Differentiate
This is why you often hear from agencies the “we get all our business from referrals” statement. If the marketplace isn’t great at knowing what company can be the most effective, the default for choosing an agency is determined by arbitrary factors such as who do you know, how close are they, and have they done something before that I like (portfolio shopping). This one is going to hit hard, the referral syndrome isn’t the flex most make it out to be.
#3 – Creative Service Work is Tough
Just like art in a museum, some people love Starry Night, and some hate it and likely for no particularly sound reason. Getting a client on the right page, a team on the right page, and make the whole process profitable takes A LOT of rigor, experience, and nudging. This is why we see the “Valley of Death” when an agency tries to scale. Because the knowledge the principal likely has to deliver an effective process is watered down or not shared at all as the team grows. Most agencies don’t “die in the valley” they simply scale back to a manageable size. Oh and not to mention, you’re not just doing it for one company, but likely dozen(s).
Fear Not Friends
This isn’t to say you’ve chosen the wrong business. In fact many of you have found some level of success despite these challenges. The good news is that for these very same reasons, you rarely see agencies close their doors due to lack of financial resources. Which is not true for many other types of businesses. However, for the sake of not writing an hour long e-email, I’ll have to wait until next month’s email to share some things I’m seeing that negate or solve these particular challenges.
An Agency Story – Featured Episode
It pays to know your alcohol. Oana leveraged her experience as a sommelier to propel her passion for a different type of marketing service. Listen to her story of perseverance, pivoting, and motivation in this most recent episode.
That’s all for this installment. As always, I’m game for a conversation. I’d love to hear why you think an agency business is particularly challenging.
Enjoy your week!