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10 Mistakes Agencies Make That Hurt New Business Efforts

Posted by Mark Duval on May 18, 2017 7:59:53 AM
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I recently had the opportunity to catch up with Drew McLellan, CEO of Agency Management Institute (AMI) and get his thoughts about where agencies typically go wrong when it comes to winning new business.  AMI works with hundreds of agencies a year, offering agency training, consulting and agency owner peer networks specifically built for small to mid-sized advertising, marketing, PR, digital and media agencies.  Drew is the only agency consultant who still owns and runs his own agency.

During our conversation, Drew identified ten common mistakes he sees agencies make every day. Read on to find out if you are inadvertently making any of them at your agency.

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10 Mistakes Agencies Make That Hurt Their New Business Efforts:

  1. They are inconsistent about chasing new business.

  2. They underestimate the sales cycle.

  3. They blur the lines between marketing and sales.

  4. They haven’t identified their ideal client with precision.

  5. Their numbers game is off.

  6. Agency owners don’t hold weekly new business meetings.

  7. Agency owners struggle to serve the agency while also serving the agency’s clients.

  8. Though most of an agency’s new business should come from existing clients, they hire AEs who are very “green” and don’t teach them how to upsell.

  9. The agency owner demonstrates they have no confidence in their team during client interactions.

  10. They don't talk about solving business issues.

Keep reading for further detail about each of these ten mistakes excerpted from our interview transcript, or click through the list above to jump to a specific mistake. (Interview has been edited for length and topical relevance).

Agency Mistake #1: They are inconsistent about chasing new business.

DREW: In most small to mid-size agencies, the agency owner is the primary business development guy. Some agencies will have a biz dev person, but quite honestly, those people are set up to fail because they’re not given enough time or resources to do it. And, either they are a great agency person (which means typically they are not a great salesperson), or they’re a great salesperson, but that means they can’t have the business-level conversations that they need to be able to have with the prospects. So, in many cases it’s really the owner doing biz dev; it falls to them, and they just don’t take the time.

Agency owners are basically firefighters. The minute they walk in the door of their office or they open up their email, they are putting out whatever the biggest fire of the moment is, and they do that from the time they start work until they go to bed. And, unfortunately, new business is rarely—unless you know that one of your biggest clients is about to walk—it’s often not on fire at the same level as a client crisis or an employee crisis is. So, even with their best intentions, agency owners don’t really carve out enough time in the day and they don’t spend enough time doing new business.

MARK:  Yes. That’s a great point. New business is often an afterthought when business is good. So, let’s go back to the agency owner who’s putting out fires, and here she is, done a great job of growing the agency from working out of their basement to 20, 25, 30 employees—and they’re still heading up their business development. How can they carve out more time and concentrate on new business? How do they make it a priority?

DREW:  Well, in my experience for most agencies, it is literally carving out the time, so, having it on the calendar. For many agency owners, they have to do it before they go into the office. Because the minute they walk in the door, they are bombarded. Or they have to have some signal, whether it’s a closed door or something that says, “Don’t interrupt me for an hour.” But they have to have a defined period of time.

MARK:  Right, and I agree, that’s the best case scenario, is make a commitment to it, put it on the calendar, and no excuses, there’s no interruptions. But I also just heard you say (from the agency owner perspective) that it’s like, “Well, that’s great. I would love to be able to do that, but there’s no way that I will be able to with all of my other responsibilities,” so realistically, with everything that you just mentioned, how much time—if it was very consistent, and targeted—how much time would a CEO have to commit to on a weekly basis?

DREW: Even if an agency owner could carve out an hour a day, and then an hour-long meeting sometimes, so let’s call it six hours a week, that’s a significant improvement over what they’re doing now.

Now that doesn’t mean that they’re writing all the blog posts and doing all the other stuff, that’s them really pursuing opportunities to have conversations with a list of 25 or so prospects. That would be a vast improvement over what most agency owners are doing today. Which is doing nothing for weeks and then, when an opportunity presents itself—whether it’s a good fit or not, something came in the door—and so now, all of sudden they’re going to carve out eight hours or ten hours in a day to pursue that, or timeline that piece of business, and then they go dormant again.

The consistency, I think, is more important than the number of hours. Just doing something every day and having a plan for you to touch that list of 25 prospects on a regular basis.

MARK:  Right. And I think that if they can put this process in place, something that may start out as six hours a week, in time, they can probably peel off an hour or two because they become much more efficient.

DREW:  Maybe, but also, hopefully, the quality of what they’re doing and the depth of what they’re doing is increasing. I mean, when you think about it, if you were my prospect, and I can get a hold of you and have a forty-five-minute conversation, that’s a really great use of my time as an agency owner...but it still doesn’t resolve the other five to-dos that were on my new business list for today. So, as I get better at it, yes, there’s efficiencies, but hopefully it’s a more robust, interactive process as opposed to the monologue version of that, where I’m just doing all of the calling or the emailing, or the sending of the book, or whatever it is I’m doing. Hopefully, sooner or later, people are responding and having conversations with me which will actually increase the amount of time I spend because now I’m actually talking to the prospects.

Agency Mistake #2: They underestimate the sales cycle.

DREW:  Another mistake agency owners make that’s related to this is that they really underestimate the sales cycle. So, they don’t start chasing business until they really need it, and then they’re frustrated that nobody makes decisions quickly even though they know perfectly well that nobody makes decisions quickly. So, they need a quick win, and there is nothing typically, I mean, there’s always the exception to the rule, but there’s nothing quick about agency new business.

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Agency Mistake #3: They blur the line between marketing and sales, then mistakenly think they have checked off the sales box when in fact they have only completed marketing activities.

DREW:  I think one of the challenges of new business for agency owners is that they blur the lines between marketing and sales. I think they’re getting better at marketing. I think technology and social media, and all of that makes it easier for them to create content or do an e-newsletter, or have a Facebook page. And so that can feel like new business activity. But the reality is, it’s marketing activity. And so in some ways, the fact that agencies are better at marketing makes them worse at sales because it allows them to check a box. But they have erroneously put two things in the same box that should be in separate boxes.

In terms of sales, do I think agencies are getting better? No, I don’t. What I hear every agency say is, “If we can get across the table from somebody, we can make the sale.” And what that says to me is A, they’re probably swinging below their weight class because nobody wins all the time. And B, that again, they’re waiting for opportunities to present themselves as opposed to going out and creating an opportunity that really is the right kind of client, the right fit, the right industry, the right size.

What a lot of agencies have is they have one or two big gorilla accounts that may represent 50% or more of their AGI. And then they have a bunch of little guys that they’ve used to fill in the difference. They’re always in pursuit of a client who will balance out the gorilla, but they don’t actually put together a proactive effort to go after the client that would balance out the gorilla.

MARK:  Right. I’ve learned that “just get me in the room” is a huge red flag. Because I would agree, agencies are getting better at marketing, but that doesn’t correlate to sales. And to your point, it’s almost like they may have gotten worse at sales because they’re leaning so heavily on this marketing.

DREW:  It gets them off the hook.

MARK:  Exactly. And the thing is, great; we’re going to get you in the room. What are you going to do there? You have no process, you have no questioning strategy, and often agencies are looking for people just to get them in the room or a seat at the table, but it’s not qualified. We’ll have conversations with agencies, and we’ll say, well, our close rate is really low, which is a huge indicator, and it has nothing to do with closing. It has everything to do with qualifying or disqualifying early on in the sales process. You were never going to win that pitch because you had no right in pitching it.

Agency Mistake #4: They haven’t identified their ideal client with precision.

DREW: So, in other words, everybody out there may need an agency, but everybody out there does not need your agency. Who are the clients that you can consistently delight on a regular basis? So, that’s going to be a list of criteria, maybe 10 or 12 points in total. Some of the list criteria are going to be very quantifiable, like a size, or industry, or budget, and others are going to be more qualifying. Like, “We’re not good with clients if we’re their first agency,” or “We’re great with clients when we’re their first agency.”

I highly recommend that you figure out what sophistication level of clients you are awesome at. So, everyone always wants to shoot for the clients that are super big and super sophisticated, but the reality is, most agencies don’t have the internal tools and resources to help those kind of clients. So, “Am I best working with a client that’s between a four and a seven in terms of sophistication level, in terms of marketing knowledge level?”

Look at your existing clients, figure out how you can create a “sweet spot filter” that you are then going to grade every prospect against. If they don’t get a 75% or more, then you don’t go after them. And I would argue that as you get more successful, you increase that percentage to 85% or 90%. But if they don’t check off the boxes of the kinds of clients that you can delight for the long run, then skip it—because it’s not about winning, it’s about keeping. Because nobody makes a lot of money the first year that they have a client. You got to keep them around for long enough that you can make some money. So you would build out that nano list of 25 target prospects using the sweet spot filter to sort of vet the folks.

MARK:  That’s great. It’s interesting that —I think the theme through this conversation is really about the strategic upfront work that needs to be done building that foundation, if you will, in order to go out, and to do all of that activity that needs to be done for agency new business, but it’s not being done.

Agency Mistake #5: Their numbers game is off. Their prospecting net is cast too wide, and their appetite for closed business is greater than what they can realistically absorb.

DREW:  I think another big problem agencies have is, when I’ll say to them, “Show me your prospect list or your sales list,” and its 300 people long. I’m like, “Okay, well that’s insane. A, I’m guessing that most of these people probably are not even a good fit for your agency, and B, you can’t possibly actively pursue 300 people. So, get it down to 25 that you’ve been rigorous about, drilling down into and making sure that you actually could win their business, and then what are we going to do to try and get in front of them?”

MARK:  Yes, I think that the one sales message that most agency people have heard is that sales is a numbers game. So, it’s like, “Oh, we’ve got to go after 300 people and just keep hammering them with messages.” That’s a real shotgun approach, as we both know.

DREW:  Well, it is a numbers game; they’re just looking at the wrong number. So, the reality is for most agencies, two or three right-size wins a year is all they can onboard effectively. They can’t do more than that. And when an agency tells me, “We want three new clients this month,” I’m like, “Holy crap, how are you going to sustain that?“ When you think about it, if you‘re targeting just 25 or 30, now all you have to do is land 10%, and you’ve got a great year. That’s the kind of numbers I want them focusing on, but you’re right agencies think of it as a numbers game meaning volume, volume, volume. And the truth is they set themselves up to fail.

Agency Mistake #6: Agency owners don’t hold weekly new business meetings.

DREW: The other thing agency owners have to do is they need to hold weekly new business meetings with a small team inside their agency who are also involved. So, it might be the people who are doing the marketing, or the e-newsletters, or the case studies. It might be the head of accounts service; it might be the admin who’s helping the agency owner keep the database or the CRM system updated as he or she is doing all of these activities.

But they need the accountability of having to say to this group of people, “I made those calls,“ or “I had lunch with so and so,” or “I booked my airfare. I’m going to that trade show that so-and-so is speaking at,” whatever those things are, that’s how it gets done. If new business is not a priority, if it’s not calendared, if it’s not every day, if it’s not something where they’re held accountable— if all of those elements don’t exist, it’s not going to work.

Agency Mistake #7: Agency owners struggle to serve the agency while also serving the agency’s clients.

DREW:  Well for agency owners, the problem of “I just can’t get to it” is because you have not built a team around to get you out of the day-to-day work.  One of the biggest challenges for agency owners is that most of them grew up in agencies. So they’re very good, and they’re very comfortable at agency account servicing, writing, or direction, or whatever it is, and that’s the default. It’s so easy for them, they’re so brilliant at it and it feels good to be that good at something.

And so, for a lot of agency owners, they haven’t stepped out of the day-to-day, many of them are still servicing and dealing with clients, and it’s almost impossible to serve both masters. Either you are serving the agency, or you’re serving the agency’s clients—and it’s very difficult to do both. So, in the ideal world, an agency owner would spend about 50% of their time on some aspect of marketing and sales of their agency.

I hear a lot of agency owners and what they say to me is, “I’m the only one who can do strategy for clients. I’m the only one who can do something else sophisticated for a client. I’m the only one who can have that kind of conversation.” My comment back to them is, “Well, then hire someone else who can. Because if you don’t, you will never get out of the day-to-day, and you won’t be able to do anything in terms of running your business well—whether it’s new business, or it’s just the administrative side of running a business, or it’s really crunching the financial metrics to see how you’re doing and how do you tweak the financial metrics to build a more profitable agency. You can’t do both all day every day.”

Agency Mistake #8: Though most of an agency’s new business should come from existing clients, many hire AEs who are very “green” and don’t teach them how to upsell.

DREW:  So, are there things that an agency owner could do right now, implement right now, where they could begin to address their new business woes?

Well, the first one would be to look at your existing book of business and figure out how to mine more opportunity out of them. So, “What problems do they have that we are not currently helping them solve?” And 70% or so of an agency’s new revenue should come from existing clients. That doesn’t happen by accident. Some agency owners get very frustrated with their accounts service people because they’re not upselling their clients. Well, odds are you haven’t taught them how to do that. They don’t have the business acumen to do that because everybody hires AE’s that are 23 years old and right of college. So, you can’t really expect them to have a sophisticated business conversation without teaching them how to do that.

But that’s the lowest hanging fruit, is these are people who already like you or are giving you money, and you’re just asking them for more opportunities to serve, and therefore make more money.

MARK:  It’s a bit of a vicious cycle. You mentioned earlier you’ve got someone, that 23-year-old fresh out of college who hasn’t had the business experience. And the agency owners are so stressed out with so many things and fighting fires and dealing with their big clients that they may not be able to either give the new AE the proper training or spend a proper amount of time with them. And missed opportunities happen or certainly opportunities for asking some questions that could lead to some sort of organic growth. Do you see that as a real problem with some of the smaller agencies?

DREW:  Yes, so here’s how an agency typically starts, right? The agency owner goes out on their own, they start serving clients because they don’t have anybody else to do it. They’re taking care of clients. And then they’re ready to make their first hire because there are too many clients and they can’t service them all, but they don’t have a lot of money. So, they hire a kid right out of school thinking, “I’ll grow them into being a good account person.” But, the owner is still busy servicing the clients they serve and staying at the office on the nights and weekends to actually do billing and all the other stuff they have to do.

So, the kid really doesn’t get a lot of training or help. They don’t really grow in their sophistication level. And until an agency gets to a point where they can hire someone at a mid-level, somebody who has done this for another agency or has worked on the client side, or whatever, and really does understand business issues, there’s this big gap in knowledge.

MARK:  So, that agency owner may not have the finances, or they may have the finances, but it’s going to hurt the margins of the business to hire that mid-level individual. So, they can only at this point hire the less-experienced talent. And ultimately, I guess, what do you do? Do you just kind of hold your breath and take the leap that ultimately it’s going to work out? I mean, there’s that fine line between where the finances can possibly justify bringing someone in with a little more experience, but it’s still— what happens if it doesn’t work, then that’s really trash through you.

DREW:  Well, but continuing down a path where you are the barrier to growth and profitability is probably not a great path either, so, at a certain point in time there has to be a gamble.

Agency Mistake #9: The agency owner demonstrates no confidence in their team during client interactions.

DREW: So, what happens is in every new business meeting you go into, it’s you and the little junior woodchuck AE and he or she doesn’t ask a single question; they basically take notes, and when the client hires you they say, “I want you, agency owner, because you asked all the great questions and you really get my business. I don’t want the little junior woodchuck because they have not demonstrated value.”

You have to have somebody else who can sit in those meetings, and ask smart questions and demonstrate some business acumen. Otherwise, everybody’s going to only want you. And if everybody wants you, again, the problem is that you have not done a great job of getting yourself out of the day-to-day so that you can actually run the agency. So, you’re working in the business, not on the business and you can’t grow your business if you do that.

MARK:  Yes, it’s interesting that scenario you just painted, because when we talk to agencies about pitching new business and who should be in the room, I always say, “There should no office furniture,” meaning someone who’s just going to sit there and observe. If they’re going to get in the room, they should have a role. And if they don’t have a role, if they’re not good, well, then they don’t belong in that meeting.

DREW:  Well, and even if the junior AE, the kid, is going to run the business day-to-day, is going to be responsible for the business the agency owner is still in the room and so A, the agency owner knows the questions to ask in a much faster, more articulate way, and B, the agency owner doesn’t really have confidence in the kid anyway. So, even if the kid does try to talk, the agency owner talks over them or asks the questions before the kid can get it out of their mouth.

So, now the agency owner has basically shot the poor kid in the foot in terms of their credibility even if they have some prowess. So, oftentimes, the greatest offense that the agency owner makes in a new business pitch or meeting is that they clearly, by dominating the conversation, prove to the prospect that they have no confidence in everybody else around the table.

MARK:  Right, exactly. They take all the air out of the room and yes, everyone on their team is left just looking at them.

One thing I see too is a scenario in the smaller agencies where they have a pretty good director of business development, and they’re in there pitching business, and then it turns out—the client wants them to be the account person as well. And so I see a little—with the smaller agencies, I see a little bit of this dual role where someone is heading up business development efforts, but they’re also an account person.

DREW:  And as you know that doesn’t work because A, if somebody is great at sales why in the world would you clog their day with client service stuff so that they can’t sell? There’s no harder person to find in an agency than somebody who is really good at selling the agency to right fit clients, right?

MARK: Yes, I would agree. I say business development is the toughest job at the agency. I think it’s the toughest job to hire for, that’s for sure.

Agency Mistake #10: Not talking about solving business issues.

DREW: Regardless of the sophistication level of a client, the reality is every business needs to grow, and they need to sell more stuff, whatever their stuff is. And so, part of it is, marketing people, agency people learning to talk about business rather than marketing.

A lot of times in a conversation with an agency person, the tail is wagging the dog. They go in leading with marketing tactics as opposed to going in with, “Here are the business objectives or the business goals and here’s how we think we can impact those goals, and, oh, by the way, here are the marketing tactics we’re going to use to impact those goals.” I think the more successful agencies go in and they have business conversations about regeneration and sales and recurring sales and upselling, and retention of clients —and all those are business issues—and customers.

One of the big places where agencies are spending a lot of time today with clients is customer service issues like ratings and reviews online and dealing with those. How many reviews will someone read, and at what point on a five-star system is a score too low for anyone to even pick up the phone and call you? All of that stuff, so that agencies must get better about solving business issues and talking about business issues. That’s where they can really align with clients—regardless of the client size—because while your smaller clients may not understand the nuances of procreated media buying, for example. They do get that they need more customers and they need to drive more people to their website or whatever that trajectory is.

Parting Thoughts

The underlying themes of these ten common mistakes are largely these:

  • Agency owners need to get better at removing themselves from the day-to-day client work so they can run their agency business.
  • More upfront work is required to lay a foundation for new business strategy.
  • Agency owners can build on this foundation by consistently devoting time to the right new business activities directed at the correct prospects.

These steps will pave the way for greater efficiency and effectiveness with agency new business efforts.

Special thanks to AMI’s Drew McLellan for generously sharing his time and insights with the Duval Partnership’s Agency New Business Blog. 

To learn more about Agency Management Institute or to contact Drew directly, visit www.agencymanagementinstitute.com

You can listen to Drew McLellan's chat with Mark Duval about "Why You Need a New Business Process Program" on the Build a Better Agency podcast.

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