Having a strong organisational structure in place is key to growing your digital agency.
Whether your agency is brand new or has 100 employees, the structure of the team is going to have a direct impact on your overall efficiency, culture, client satisfaction, and scalability. Without a considered organisational structure in place, many agencies suffer from poor communication and frustrated team members and clients.
So, what are your options when it comes to structuring or restructuring your agency? How do you know which structure is going to guarantee both employee and customer satisfaction and give you the permission to scale your marketing agency?
Get more brilliant advice from Janusz at the 12-month Mastermind group for agency leaders. Gain momentum, resolve and focus to achieve your goals, with the support, accountability and insight of GYDA experts and like-minded peers. Find out more.
1-Flat
A flat team structure is common in smaller agencies and start-ups. Flat structures have only a couple levels, if any at all, between management and employees. These organisations tend to require employees to ‘wear many hats’ and as such, often produce a lot of generalists but no specialists.
2-Functional
Then we have functional structures — in which teams are organised by services. For example, a digital agency with a functional structure could have a Social Team, an Email Team and a PPC Team, and so on.
A functional structure concentrates the expertise and knowledge within those services or groups. As such, this structure often falls down when the client requires more than one service from the agency, forcing disjointed communication between the executives in each team.
As the agency grows, communication and coordination between these teams is only more and more convoluted and scaling becomes very clunky and difficult.
3-Matrix
A matrix structure is similar to a functional one, with added levels of management and communication weaved into the mix, hence matrix.
This structure involves side-ways communication between team members, like account managers who coordinate other functions. Like the functional structure, the matrix is limited to a team of a certain size, as this web of communication is difficult to scale.
4-Holacracy
Holacracy organisational structure is where there are no clearly assigned roles. Employees are given the flexibility to take on any duty or role and move between teams freely. A holacracy can work well within some industries, but broadly speaking, this structure is a poor fit for all digital agencies as having expertise and specialism within your personnel is essential.
5-Pods
A pod organisational structure is where an agency arranges their teams by client type or sector, rather than the agency function or service.
This creates specialist teams, which function similarly to sports teams. For example, each ‘Pod’ would have a PPC expert, an SEO specialist, and a Social Media manager and this pod would service a particular category or type of clients, such as Automotive Clients or the Legal Sector.
Watch: A detailed look at Functional Structures Vs Pods (4min)
Utilisng a pod structure allows you to lean into your niche and achieve a deeper level of industry or sector specialism from each pod.
Pod structures also have no dependencies on other teams within the agency, thus there is no web of complex internal communication. This creates friction-free workflows within your teams and an enriched experience for your clients at the other end.
Finally, a pod structure creates accountability and responsibility among your team members. As employees are being regularly challenged by exciting projects within their specialism, they are likely to have increased job satisfaction levels.
At Digital Agency Coach, we advocate running weekly or bi-weekly workshops for all specialist executives, hosted by a technical lead. Keep the agency focused on strategy, process improvement and professional development and create a conversation the other experts from each pod.
Regularly hosting these casual, friendly and engaging workshops with employees of the same skill set promotes an easy and productive conversation with relevant learning and take-homes for each employee.
There’s no denying restructuring your digital agency can be a disruptive process in the early days and it probably won’t happen overnight. But once the hard groundwork is done, growing and scaling your agency can simply be a matter of copy and pasting a new pod.
This team structure eliminates the complex web of communication just as effectively as if you have a team of 30 or a team of 300 people.
If you are a full-service agency and your clients are purchasing multiple products or services from you, perhaps it’s time to reconsider your organisational structure.
Watch Our Quick Functional Structures vs Pods Explainer Video (4min)
If you feel you’d like any help or guidance with restructuring your agency, get in touch with Digital Agency Coach to arrange a consultation, we’d be delighted to help.
Get more brilliant advice from Janusz at the 12-month Mastermind group for agency leaders. Gain momentum, resolve and focus to achieve your goals, with the support, accountability and insight of GYDA experts and like-minded peers. Find out more.
GYDA Initiative is delighted to announce the acquisition of Very Good Digital and Digital Agency Coach. The acquisition, completed in January 2022, sees two of the UK’s most prominent business growth experts for digital agencies, Robert Craven and Janusz Stabik, join forces to create one of the leading business consultancies for the Agency sector.
Robert Craven says:
‘We are super-excited! Acquiring this business gives us more firepower to help a greater number of agency leaders. Janusz and his team of expert consultants bring even more breadth and depth to the GYDA Initiative team. 2022 will see us become the leading growth consultancy for digital agencies in the UK and Europe.’
Janusz Stabik says:
‘Having worked with Robert and the GYDA Initiative for three years on projects with Google Partners and consultancy clients, I am delighted that my business has been acquired by Robert, and to become Managing Partner for the GYDA Team. 2022 will be an awesome year for the GYDA Initiative and our clients!’
Launched in 2013, the GYDA Initiative is a specialist growth consultancy working in the digital agency industry. The team of been-there-done-it digital agency experts, led by Robert Craven and Janusz Stabik, helps clients to run the agency they really want to run.
Already working across 23 countries, the Initiative is tasked with one goal… helping digital agency leaders to grow and run their agencies, and to do this smarter and faster. Build the company you want to run… run the agency you want to lead… lead the life you want to live.
Robert is known for his no-nonsense approach to business growth; he has worked with agencies and platforms from London to Dublin, from Singapore to New York. He is the author of Grow Your Digital Agency, and founder of the GYDA Initiative and GYDA Member Hub. His strategy and marketing consultancies, The Directors’ Centre and GYDA Initiative, help agency owners and directors to run the business they want to run, so they can live the life they want to live.
Robert writes from experience. His work with Google Partners over the last eight years has made him the go-to expert on growing digital agencies. Working with 150 of Europe’s leading digital agencies, he has identified the key characteristics of the ‘above-average’, and how to implement this in other agencies. GYDA Initiative supports you on your journey and provides the toolkit for becoming one of the above-average.
Janusz is a consultant, coach and digital strategist who helps agencies to deliver more value to their clients and shareholders. He works to define their vision, to grow high-performing teams, to execute projects better, and to sell more of the right kind of work. With over 15 years in the digital agency industry, he’s built, grown and exited his own agency, and now works exclusively with agencies in the creative sector.
As the lead coach for the UK and Europe Google Partners Elevator program, Janusz continues to guide and advise agency leaders on their growth journey.
Janusz joins GYDA Initiative as Managing Partner. Running a team of over ten consultants, Janusz will take the business into 2022 with a real sense of purpose, resulting in our clients’ greater success.
To find out more, visit:
+44 (0)1225 851 044
For many of us, sales and business development is the one part of running a digital agency that just doesn’t come easily. Sales calls can feel awkward, forced and sometimes completely disingenuous, and so, we avoid them altogether. But what if the most effective sales calls weren’t sales calls at all?
In this article, I’m going to share my top tip for helping you conquer the fear of communicating with your potential, existing or lapsed clients to land sales. I’ll also prove just how well it works with my very own, very real example.
In my experience, some of the most successful, fast-growing agencies are led by innovative, intelligent and tech-savvy operators. These agency leaders were obviously so successful in their specialist field, that they were able to form their own agency and offer their service to businesses and brands on their own terms.
The trouble is – being a brilliant developer, software designer or digital strategist means you’re often very comfortable behind a computer screen and usually not so comfortable making sales calls. And after all, the best sales and BD strategies usually involve a lot of face-to-face conversations, networking events and generally spending time without your noise-cancelling headphones on.
The good news is, there’s a hack to checking in with your clients & prospects while still being able to avoid those awkward sales calls (this is where I get to the part about chicken wings).
At Digital Agency Coach, my fellow coaches and I don’t take an awkward role-play or scripted approach to helping agency owners develop their sales skills. For years now, we’ve been helping agency owners circumvent the system and land sales without making awkward sales calls.
The trick is to a) remember that your clients are human beings – they’re people with hobbies, favourite sporting teams, pet peeves and favourite restaurants; and b) communicate casually, genuinely and informally with them on a regular basis – chat about your common interests or things that are important to them in order to build a relationship.
It sounds simple, and that’s because it is – but it genuinely works. If you’re dubious, take this real-life conversation below as an example:
Just this week, I had reached out to a former client to simply ask about the name of a restaurant he recommended.
This short, simple and motive-free message nudged me to the front of his mind and prompted a response about coaching.
This simple example perfectly demonstrates how building relationships and checking in with your contacts to spark friendly and non-business related conversation is a great way to make sales calls, without making sales calls.
Pro-Tip: Like all sales efforts this one works best when paired with manageable KPIs. Set yourself a target of 3-6 messages, calls or interactions per day and keep yourself accountable. For tips on setting effective KPIs, check out this article about Lagging vs Leading KPIs.
At Digital Agency Coach, we understand that while agency owners are all brilliant, they are human too (just like their clients).
That’s why we use tactics just like this one to help all agency owners land more sales and achieve stratospheric growth for their agency to gain more profit, more time and less stress – no matter where their strengths may lie.
Those extra special legacy clients were the reason you were able to build your agency up to what it is today…but are they now limiting your continued growth? Hear me out.
In my experience, a lot of digital agency owners have a number of legacy clients on their books, clients they’ve worked with for years and years, with who they love and who have really positive relationships. The trouble is, these clients have been around since day-dot and all these years later, they’re still paying day-dot prices which are breakeven at best, and entirely unprofitable at worst.
This is troublesome for a few reasons, some more obvious than others.
Firstly, these clients are unprofitable and are costing the agency money – but the long-standing relationship actually means the agency owner feels beholden to them so they keep the work and grin and bear the cost of doing so – which impacts your bottom line.
Secondly, in an agency environment, the service on offer is essentially time – time spent by your employees to complete certain tasks for your clients. When these legacy clients, who are already getting an absolute bargain, start to encroach on their fair share of the agency’s team and billable time, the loss to the business compounds.
Suddenly these breakeven clients are costing money, and worse still, everyone in the team is tied up servicing them and there’s no capacity left to service the profitable ones.
I’m referring to the Pareto Principle (or 80/20 Rule). Which in this instance, means that 20% of an agency’s clients, should be generating 80% of the overall revenue.
While this is essentially just a model, in my experience the Pareto Principle absolutely rings true for digital agencies – if you have doubts, export your own client list and test this out for yourself!
With that in mind, and given what we’ve just unpacked in the paragraphs above, it’s clear that the revenue potential and the path to success lies in the hands of an agency’s top 20% of clients.
Allocating your resources (human or otherwise) to servicing those highly profitable clients, rather than the unprofitable/breakeven clients, is what’s going to grow your agency.
This doesn’t mean over-servicing these clients and doing more billable work for free. Instead, think about what your team can offer in order to maximise your client’s business. Perhaps you have a PPC team, who up until now were tied up servicing an unprofitable client – you could pitch your PPC service to your profitable client to complement the SEO work you already might be doing.
Offering more services to these clients will a) make your client’s know you have a genuine interest in the success of their business and b) generate more profitable revenue for your agency.
Raise your prices, drop your unprofitable clients & make the profitable ones feel like royalty.
Start by exporting your client list, sort them by revenue and then calculate their gross margins. You’ll be able to see quick-smart which accounts are profitable and which ones are not. From there, your next step is to raise your prices to a profitable level so that both your clients and your business are winning.
In my experience, there are three potential outcomes when it comes to proposing a price increase – so here’s my advice for every eventuality:
Everybody Says Yes – Great, now all your clients are profitable and your agency will continue to grow, and they’ll continue to receive high-quality service as you can now afford to do so.
Some Say No/Some Say Yes – Fine, losing a handful of unprofitable accounts won’t impact the profitability of your agency. The reality is, they were costing you money, so by letting them go, you’re still in the black.
The ones you have retained, have agreed to your price increase. You’re now making a healthier margin that covers the cost of any clients you had to let go of.
Even better, the time your team were spending to deliver the service for the unprofitable clients, can be reallocated so you can give back to your top 20% of clients who are generating 80% of your revenue.
Worst Case Scenario, They All Say No – Another positive outcome. These clients were costing you money and now they’re out of your hair. With fewer clients, you might have to slim some costs and reduce the size of your team – now you have a leaner agency that is easier to manage.
This might sound a little counterproductive, but you’re still guaranteed to be generating the same profit because you’re no longer losing out on the unprofitable clients.
What I’m trying to get at is, don’t fret about losing some clients who aren’t prepared to pay you the margin that a) your work deserves and b) you need in order to grow your agency. Chances are, your loyal, legacy clients will want to support your business and continue working together and will happily agree, which will cover the cost of any who might say no.
If you need any help increasing the profitability of your agency then Get In Touch with my team at Digital Agency Coach.
We’ve helped hundreds of clients achieve stratospheric growth through strategies just like this and we’d love to help you too.
Me and my team of experienced and dedicated Coaches are here to help you understand your business better and the best growth strategies for you, your agency and your team.
In a recent value-packed webinar about what the high performing agencies do, I shared the importance of knowing, understanding and keeping on top of your gross margins and the impact this has on your agency’s long-term success.
I’ve plucked out the key takeaways from the presentation and put together a valuable and actionable guide to gross margins, to help you accelerate your agency’s growth.
In this article, I’ll unpack exactly what gross margins are (and are not), what a good gross margin looks like and how to fix your gross margins if they’re not up to scratch.
When it comes to digital agencies, gross margin is a simple calculation using the direct costs of delivering a specific service and the price at which you sell it out – the gross margin is what’s left in the middle.
In a product-based business, like a chippy, the gross margin will be what the customer pays for the chips, less the cost of the potato and the labour required to peel & cut them. It might cost the chippy £1 to buy the potatoes and 50p in labour to prepare them, which means when they sell them for £2 the gross margin is 50p (or 25%).
Whereas in an agency, where the offering is service-based, the question is how much are we selling our time for and how much does that time cost?
It’s crucial you calculate your gross margin against the separate groups of revenue within your agency. For some, this might be geographically (UK vs US) or by industry (eCommerce or Lead Generation), while for others this could be the individual services (PPC, WebDev, Design etc.)
For example, if you’re an agency that delivers PPC, and you charge £1000 per month for PPC, and the salaries and freelancer fees for your PPC team are £500, then your gross margin is £500 (or 50%).
Your gross margin considers the revenue the service generates and the direct costs associated with getting the job done. What your gross margin won’t include, is all your general overheads, like your office, accountancy fees, utilities and so on. These still have to be deducted in order to understand your Net Profit.
In order to make sure there’s still plenty leftover in your net profit, you need to ensure your gross margin is healthy enough to allow for all your general expenses. If your services are unprofitable at a gross margin level, then there’s no hope for your agency to be making any money at a net profit level.
In my experience, a lot of agency owners muddle the waters when it comes to their gross margins, direct costs, overheads and net profit – which is how they end up providing unprofitable services and losing money.
The key learning here is that your salaries and contractor or freelancer fees must be attributed as direct costs to the associated service, not in your general overheads. Remember you can also factor in partial salaries of team members such as account managers, who spend only a portion of their time on chargeable client work.
This enables you to look at your services objectively and understand which ones are actually profitable. Rather than taking note of a huge gross margin number on your P&L sheet that tricks you into thinking your services are 95% profitable because you haven’t calculated the wage bill.
Now to the bit we’re all here for – what does a good gross margin actually look like, what should you be aiming for in order to grow your agency and become one of the high performers?
In our experience, agencies with gross margins anywhere above 50% are doing great. North of 60% and you are doing brilliantly. On the contrary, if you’re numbers are anywhere less than 40% then you have some serious work to do to ensure your agency is still profitable once you get to your net profit.
Now that you’ve calculated your gross margins and know exactly what each of your services is generating, you can take an objective view about what’s actually making your agency money (and what isn’t for that matter).
For any services that are underperforming – ie. the cost (salaries & tools) associated with delivering them are higher than the revenue they bring in, you need to ask whether you can fix them. If you can increase your prices and/or decrease your costs by making the service more efficient and your team more productive and grow your gross margins back up to 50-60%, then brilliant.
If you can’t make these changes, then it’s time to drop the service and refine your offering to focus on the services that are actually generating a healthy gross margin. Without taking this action, your agency won’t be growing anywhere.
Digital Agency Coach is a team of coaches, consultants and mentors servicing digital agencies across the globe. Led by me, Janusz Stabik, we’ve helped hundreds of agencies transform their agencies to achieve more revenue, more profit, more time and less stress.
My team and I use this blog to publish insightful, valuable and actionable insights on a weekly basis. To make sure you never miss a tip – subscribe to our newsletter to be the first to know once a new article arrives.
Building a great digital agency is no different to building any other kind of successful business — it’s seriously hard work, and if you’re trying to conquer it all by yourself, it’s damn near impossible.
Instead of battling it out all on your own, you’re going to need a team of people you are able to delegate certain functions within your agency toward. And, by delegating, I don’t mean directing or managing — I mean empowering and trusting them to do what they know best and to grow the business on your behalf.
This small team of people (otherwise known as a leadership team) will be brighter, more experienced and more skilled than you are, and they’ll know exactly what they’re doing when it comes to growing your agency, because (ideally) they’ve done it before.
In this article, I’m sharing what a good leadership team actually looks like, why you need to be the most naive person in the room and where to find the right kind of leaders for your team.
A strong leadership team will have a senior representative from each corner of the business and they’ll speak for their department during key business activities and meetings.
In a medium-sized agency, a leadership team might be made up of a Financial Director, Operations Manager, Customer Experience Manager, Head Of Sales, Marketing Director and a senior representative from your IT & HR departments. Then, of course, there’s you too — the founder/director/MD/CEO.
Your leadership team should be cohesive. While they will represent different areas of the business and will have their department’s interest at heart, they will share the same core values and will be well-equipped to make big business decisions that benefit your agency.
Building this empowered leadership team won’t happen overnight and it certainly won’t happen by accident.
Digital agencies, like any other business, go through life cycles as they grow. And with each new phase of business, there usually comes a need to recruit, restructure and promote your internal team. Agency leaders tend to offer promotions to high performing team members who are loyal to the cause and great at what they do (which is understandable).
But this is where the trouble lies.
As the business builds and time goes on, this process can repeat itself over and over until your senior management team is a loyal collection of overly-promoted technicians, rather than commercially skilled and strategic business people. And while this might have been great for the most recent growth cycle, it doesn’t necessarily mean this group of leaders will be equipped for the next stage of growth. Horses for courses so to speak.
A digital agency owner should surround themselves with a group of leaders, strategists and experts from each function within their agency who are more experienced and better qualified than they are.
The agency leader should be the most naive member of the leadership team.
If you’re in the market for new leaders, make sure you’re looking for talent from aspirational agencies, rather than your current competitors. You want people on your team who know how to grow, manage and lead agencies at the scale you’re hoping to achieve.
Growth is often measured differently from one agency to another — however, there are generally two metrics that matter to almost all agency leaders, revenue and headcount.
As an agency leader, the fastest and most sure-fire way to grow your agency, be it headcount or revenue is to surround yourself with a strong, experienced and brilliant leadership team from the outset.
When a digital agency is pushing a headcount of around 25–30 people, it’s time to implement a leadership team.
Surrounding yourself with a team of leaders (who are all much more brilliant than you are) when your agency is in its infancy, means you have a strong support network of experts from each function within your agency. This then allows you to tackle the next stage of growth with confidence, knowing that every corner of your agency will be considered and looked after as you gear your agency up for another round of growth and your headcount pushes toward 80.
By now, I’ve hopefully established that you need to have a leadership team in place in order to grow your agency and that everyone in your team should be more experienced and qualified than you are. So how can you go about finding these brilliant people and how do you build yourself a leadership team?
First, take a look at your existing senior management and ask yourself — are they over-promoted technicians or are they genuine managers and leaders?
If the answer is over-promoted technicians, you have two options:
1 — You can invest time (3–4 years) and money to train them and build them into the leaders you need in order to grow your agency. Or,
2 — You can go out and buy your leadership team from an aspirational agency (this is my recommendation)
When you’re recruiting for new senior leaders to join your agency, don’t look for managers from agencies on the same rung as you — make sure you’re recruiting from an agency that is the size and shape you’re aspiring to grow into.
These individuals will know what’s required to grow your agency because they’ve evidently already done it.
Make sure they’re loaded with management experience, experts within their function and who are downright better than you are. If you’re not completely floored by the excellence and the performance of your potential leaders, then don’t hire them.
Remember, the agency owner should always be the most naive person in the leadership team.
Just like growing your agency, building a great leadership team won’t happen overnight — so it’s never too early to start your search. Start connecting with leaders and managers who inspire and impress you now and keep them within your network.
That way when you’re ready to recruit or change things up, you already have a starting ground. Then, once you’re actively recruiting and gearing up for a new phase of growth within your business, call on Digital Agency Coach for expert advice on how to tackle (and succeed with) your plan.
Most agency owners are familiar with Key Performance Indicators (KPIs) — these are values that measure the success of your ongoing progress against a defined metric. In essence, a KPI will measure, or indicate, how an agency is likely to grow.
For most of us, KPIs have been a mainstay of working life since our internship days. However, what often comes as a surprise to many of my clients is that KPIs can come in two forms, Leading & Lagging.
In this article, I discuss leading & lagging KPIs, how and why you should measure both types and why the high performing agencies do just that.
As we all know, a KPI is a pre-defined metric or milestone which is used to gauge progress across all functions and departments. KPIs are tangible, valuable insights that help inform decisions about how an agency is run.
A Leading KPI is input related. Leading KPIs measure the current activity in your agency, whereas a lagging KPI only demonstrates what you’ve already achieved.
Lagging KPIs are important to monitor, as they give a good snapshot of the topline performance of your agency. However, if the numbers are a little off, and this is the only metric you have, it can be tricky to pinpoint and fix where things went wrong.
The idea behind Leading KPIs is that they create targets, focus and accountability within your agency on a daily basis. This helps to keep you (and your team) on track toward successfully meeting your lagging KPIs.
To get a good handle on your agency’s growth trajectory, me and my fellow Coaches always recommend tracking more leading KPIs than lagging ones — with a ratio in and around 4:1.
This is often the secret sauce to success — monitoring, reporting and acting upon leading and lagging KPIs is what sets the high-performing agencies apart from the pack.
Because I love an analogy, let’s imagine your digital agency is trying to shed some pounds. In this instance, you would have a Lagging KPI of ‘Total Weight Lost’.
Jumping on the scales once a month just to measure the outcome and see how much weight has been lost is going to make for slow, blinded progress.
Instead, you could measure your daily exercise, track your diet and weigh yourself on a weekly basis. These metrics would be your Leading KPIs and will give a more accurate reading of how you are tracking toward your weight-loss goal.
If you reach the end of your third month and you still haven’t lost any weight, then you can review all your KPIs and see where the shortfalls or issues might be. The more Leading KPIs you track, the easier it is to identify areas of improvement.
A key differentiator between high and underperforming agencies is how many, and what kind of KPIs they are measuring and learning from.
Successful digital agencies have more Leading KPIs than lagging. This helps them predict and prepare for their growth — they’ll know where their agency is heading before it actually gets there.
By monitoring both types of KPIs, you are able to see the relationship your leading efforts will have on your overarching goal. By keeping an eye on both figures, you’ll be able to attribute any issues with your Sales to any increases or decreases to your Call Tally or Event Attendance.
At Digital Agency Coach, we host bi-weekly Mastermind Groups for digital agency owners. These informal workshops are centred around peer learning — you’ll learn from other agencies who are navigating the same challenges as you and will pick up game-changing tactics such as today’s KPI hack, which improve the performance of your agency.
Get In Touch with myself or my team of friendly digital agency experts, we’d be delighted to help answer any questions about this article, our Mastermind Group or our Coaching & Mentoring Programs.
In my experience, growth and success looks different for every digital agency owner – and this usually depends on where they are on their journey in business.
For some, success might be increasing headcount, opening new offices, working less and/or earning more. While for others who might be a little further down the track, their ultimate goal might be to exit the agency.
No matter what the goal is – when it comes to growing your agency one of the best first steps you can take is to understand your agency’s value.
Over the years, I’ve helped hundreds of agency owners analyse the value of their business in preparation for the next step. My Digital Agency Coach team and I use a handful of tactics and strategies to do this, including measuring the agency’s EBIT & profitability.
This segues us nicely into the purpose of this article – how to calculate your profitability & EBIT, why it’s important to do so and 2021 digital agency benchmarks to measure up against.
EBIT simply means Earnings Before Interest & Tax. EBIT is a method that is often used to find the profit generated by a digital agency (or any company for that matter). EBIT is synonymous with Operating Profit as it doesn’t consider things like tax and interest expenses.
For obvious reasons, your EBIT isn’t indicative of exactly how much profit you’re bringing home. However, it is a great indicator of the profitability potential of the business which is why it is such a great metric when it comes to measuring the value of your agency.
EBITDA is almost the same calculation as EBIT however, it also brings Depreciation and Amortization into the equation.
EBITDA is a more complex calculation that takes time and resource to produce, so it’s usually used to prepare your agency for sale. At Digital Agency Coach, we recommend keeping an eye on your EBIT as it is a much more manageable calculation that can be produced for regular reporting.
The short answer? No, EBIT and Net Profit are two different things. Your Net Income is what’s left of your Revenue once you subtract the total costs of doing business. This ‘total cost’ includes taxes, interest, depreciation and all your other expenses and deductions
While your EBIT can be a valuable tool for agency valuation, it’s also an important metric to keep an eye on to measure the success of your ongoing efforts.
In this recent Promo Republic webinar, I share industry secrets about what the high performing agencies are doing and what makes them better than the rest.
One of the key takeaways from the webinar is that high performing, successful and growing digital agencies have their finger on the pulse when it comes to their profitability and their EBIT.
Pre-pandemic, if your EBIT was greater than 20%, you were in a good position and would have been up there with fellow successful agency owners.
However since the pandemic began, (broadly speaking) digital agencies have become more profitable and have nudged the ‘Good EBIT’ score up to around 25%.
It’s important to note that while 25% is a good EBIT score, there’s still plenty of room for improvement – some high-performing agencies are boasting an EBIT between 35-44%!
Now you understand what EBIT is and what the benchmark looks like, how can you calculate the EBIT of your agency?
There are a couple of ways to calculate EBIT, and your accountant or finance team will be able to help you do so. But, in theory, you can just follow the formula below:
EBIT = Net Income – (Interest + Taxes)
Once you have your magic number, measure it against the diagram in this article and see where your agency’s EBIT ranks among the industry benchmarks.
If there’s some work to do (and remember, there’s always room for improvement) – start by reading this quick guide to profitability on purpose and address the six key steps to maximising your profitability.
Watch: Profit On Purpose (7min)
Of course, if you think you might benefit from a deeper level of support, Get In Touch with our team and chat about joining our Mastermind Groups or Coaching Programs to help you grow your digital agency and become a high performer.
When it comes to digital agencies, a high percentage of inbound leads come from prospects who are seeking a new partner after their current agency has let them down. As such, most of these ‘new’ clients are frustrated, let down and/or have had a poor experience with another agency that has underperformed and underdelivered.
The trouble with this is that as an agency owner, it can be easy to forget that your competitors do retain a ton of clients who are happy and content with their service, and as the competition, you only see and hear of the negative experiences.
And if you (and every other agency out there) only witness the bad experiences and negative sentiment, and you base your sales pitch off this, then you’re saying the exact same thing as everyone else…
So, in order to be successful in the pitch room, you need to be realistic about what clients *actually* want to be hearing from your sales pitch.
As a digital agency coach, I’ve worked with hundreds of digital marketing agencies and have witnessed thousands of pitches over the years, and when it comes to the pitch room, it seems most agencies seem to be saying the same thing.
Thanks to comments made by their competitions’ former clients, agency owners can have a warped and distorted view of what the market needs, wants and cares about when it comes to choosing a new agency partner.
If the only inbound leads we receive are from the 1% of our competitor’s clients who are dissatisfied, disgruntled and traumatised by their past agency experience — our view on the world might be a little warped and we can be tempted to think that we should differentiate our agency based on this anecdotal insight.
In reality, it’s likely the other 99% of our competitors’ clients, and any prospective clients for that matter, aren’t tainted by a negative agency experience and couldn’t care less whether you’re a “trusted advisor” or “an award-winning agency” — they just want someone who knows their product and their industry and can help them grow their business.
With this in mind, you can appreciate that building your pitch around the negativity you hear about other agencies, isn’t going to appeal to the masses, and certainly won’t make you stand out from the crowd — despite your best intentions.
Bombarding your prospects with all the same ‘differentiators’ as your competitors like “we believe in partners, not clients” or “we’re platform agnostic” will get you lost in the wash, and any clients you do land, are more likely to be the notorious red-flag, difficult-to-please ones.
So, how can you beat this?
In order to be more successful in the pitch room and win more clients, start by changing your perception of what a prospective client actually wants from an agency. By doing this, you’ll be able to offer up genuine, impactful reasons for a client to work with you, rather than the same old reasons they hear from every other agency in the pitch.
To do this, start by concentrating on specialising. Niche down your offering and tightly define your market positioning and target audience. By doing this first, you’ll understand who you are really talking to, what their broader pain points are, and how you can connect with them by detailing genuine, meaningful differences between you and your competitor.
Then, build on this foundation and follow Doug Hall’s advice to redesign your sales pitch.
Hall advises agencies to ensure their pitch does three things: 1) Demonstrates an overt business benefit to the client, 2) Includes dramatic differentiators between the competition and 3) Includes proof that they’re qualified and experienced enough to deliver on the promise. Hall’s research of over 8000 propositions discovered that the high performing agencies who pitched with this approach had an average win rate of around 53%.
*I recently put together an article detailing Doug Hall’s three-step method to improving your sales pitch and winning more clients. READ: Increase Your Win Rate By Up To 40% With Doug Hall’s Advice
At Digital Agency Coach, my team and I have helped hundreds of digital agencies achieve stratospheric growth within their business by changing the manner in which they source and convert their inbound leads.
As agency owners, anecdotal feedback from your competitors’ disgruntled clients will distort your view on what your clients actually want and need from you. Instead of pitching the genuine uniquity and benefit of what you have to offer, you align yourself with everyone else in the pitch room and try to sell exactly the same thing as all the others.
Now I’ve shared the secret, it’s time for you to avoid this common pitfall, change your view on your client’s pain points and start to grow your agency — one successful pitch at a time.
If you need support or guidance growing your agency and would like personalised, 1:1 help achieving your goals, please Get In Touch — my team of dedicated coaches and consultants would be delighted to help.
Agency culture is something that is typically easy to manage and foster within a small, start-up organisation. When your team is small, you’re able to communicate your values and ethos more easily and directly encourage your employees to embody the right behaviour for your agency.
This becomes more challenging as your agency grows and your teams grow and disperse between line managers and agency pods.
At Digital Agency Coach, we’ve helped over 200 growing digital agencies overcome their company culture nightmares — and in this article, we’re going to tell you exactly how we do it.
First thing’s first — it’s important to note that a good agency culture is not about ping-pong tables and fresh fruit deliveries. A good agency culture is about the values and behaviour of the individuals within your team.
How your team behaves and interacts with one another, is dictated by the overarching company culture — and as the agency leader, this has to start with you.
As the captain of the ship — the behaviour of your agency and your people begins with you. With this in mind, the first step to creating a great agency culture is to embody this within yourself first.
Once you become the agency culture example, demanding and expecting this from your team becomes much easier.
An agency’s behaviour is defined by its values. It doesn’t matter what those values are, as long as you and your team can honour them and they’re the right characteristics for your agency’s purpose.
Some agencies are driven by philanthropic, social or environmental values, while others are heavily sales-driven and are motivated by competition and commercial values. These are two very different examples of strong values, both of which are equally as valuable when it comes to creating the right culture for your agency.
To define your values, think about the overarching direction of your agency (as above) and consider what your ideal employee or manager looks like.
We advocate thinking about those standout individuals in your current team or people you have previously worked for or with, and pluck out the key attributes that made them great. Use these to build a base of 7–10 core values and let these dictate the behaviour and culture of your digital agency.
Poor-fitting employees will impact the productivity and morale of people around them. Addressing any ‘bad apples’ within your team is key to improving your agency’s culture.
At Digital Agency Coach, we advocate using a ‘Cultural-Fit First’ approach within your recruitment process. Prioritise the cultural fit and core-values screening early on in your recruitment process, and if a candidate doesn’t fit the bill, don’t continue with the hiring process.
Building the right team, with the right values, from the very beginning is the easiest way to foster a sustainable, scalable agency culture.
With that being said, it’s never too late to address the values and culture within your existing team.
One of the key Coaching & Mentoring exercises we work with agency owners on is analysing the culture and values within your current team. This exercise helps to Identify any ‘bad apples’ that could be impacting the morale, productivity and ultimately, the performance of your agency.
To do this, we use an Entrepreneur Operating System tool called The People Analyser.
This is a simple template you can create yourself within a Google sheet or Excel workbook. Start by listing your 7–10 values along the top and a list of all your employees down the left-hand side. The trick is to make sure you set ‘The Bar’ as the minimum standard of what you require from an employee.
Once you have this set up, measure each individual against your values and determine whether this is something they Always, Sometimes or Never demonstrate. Once complete, you’ll have created a visual representation of employees who are a good cultural fit and those who aren’t.
Implementing these five steps will guarantee positive changes to your agency’s culture and ensure that you are able to scale your business and grow your team with the right people.
As always, if you have any questions about fostering a great agency culture or would like some help using The People Analyser tool, please Get In Touch with the team at Digital Agency Coach, we’d be more than happy to help.
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