Top 5 reasons agencies fail to achieve greatness

Ben_1_BW (2).jpgBy Ben Fletcher (pictured), managing director at Generate

Out there in agency land there are a million variants on a theme. Different models, different products and services, different management styles and different levels of success. Whilst all these agencies might appear different from the outside, when you look under the hood they actually tend to share many things in common. This is especially true when you look at how the business and their finances are managed.

I've been fortunate enough to work as an advisor with many successful boutique agencies over the years and thought it might be useful to turn what these guys are doing on its head to explain what less successful agencies might be doing wrong. With that in mind, here are my top 5 reasons why agencies can fail to achieve (financial) greatness.

1. Failing to plan
A common problem for agency owners is spending all of their working hours, and many more at home, working IN the business rather than working ON the business.
Why is failing to make plans in your business such a big deal? Presumably you started your business with some kind of goal in mind, some higher power that was drove you to take the risk of going out on your own and I'm willing to bet that goal wasn't "work 90 hours a week for less than I was getting paid before".

This is where planning comes in. A good business plan will outline the reason the business exists and will then detail strategies that can be implemented to achieve your goals.

2. Poor cash management
It's been reported that two thirds of businesses fail because of cash related issues and the vast majority of those failed not because they were operating at a loss, they were profitable, but they weren't managing cash properly and they ran out of money.

Don't be a statistic! Managing cash effectively isn't complicated, it just requires proper systems so make sure you've got the following systems covered off at a minimum:

• Cash flow forecasting
• Debtor management
• Client contracts
• Expense approvals

You can grab some more detailed information on cash management for your business here.

3. Lack of a Unique Selling Proposition ("USP")
For every genuinely unique business offering like Uber that comes to market there are hundreds of people opening yet another graphic design agency or social media advisory or whatever. These businesses are started without any real thought as to what differentiates them from the hundreds of other players in their market that they are now competing against. Failure to differentiate your offering means that your business is likely to get lost in the noise of the marketplace and whilst it may not be doomed to failure, it's unlikely to ever achieve the success you initially envisaged.

This is where having a unique selling proposition (or "USP") comes into play. You don't have to be the next Uber, but what you do have to do is clearly identify what makes your business unique. What is it that makes it stand out from the competition? What is your niche? What makes you different from everyone else?

4. Lack of clear leadership
Most people who start their own business are great at what they do and so they figure they could run their own business doing the same. However, those same people don't always have experience at successfully managing and leading a team.

A good leader is able to create a vision and direction for the business, sell that to their team and then have them deliver on it. However, often what you find is someone who has started a business either lacks vision for their business, or lacks the ability to drive that vision into reality.

This lack of vision can cause staff to tune-out and become disinterested because they are unable to see the bigger picture (perhaps because there isn't one).

5. The wrong partner
Another common problem is being distracted from greatness because you're spending your time untangling the mess that's left after a less-than-successful business partnership has come undone. There are many issues involved when a business partnership goes south that you're going to want to avoid most of which involve time, money and lawyers.

Not always, but many times this situation could have been avoided if the partners had done a bit more due diligence before getting into bed together in the first place (I suppose that could apply in all areas of life!). Whether it's a new business venture, taking on a partner or investor in a new business, allowing staff to buy a stake in the business or something else, it's crucial to the long-term success of the business that you all understand what you're getting into before signing the contracts. Make sure your plans and values align on day one.
 
Written by Ben Fletcher, managing director at Generate. Generate provides operational and strategic support to creative and innovative businesses including agencies of all stripes and colours. The above article is a condensed version of this post taken from its Better Business blog.

6 Comments

And said:

6. Losing good people
Overworking and at times exploiting very talented employees to the point of burn-out and eventual resignation.

And also said:

7, Employing too many external consultants

Michael Porter said:

So how are you differentiating Ben?

Tim said:

Great article. Simple and spot on.

Generate? said:

Sure put them on the map...

And another thing said:

8. Aussie clients are cunts.

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