This is part 1 of a 2 part series on recruitment and retention. This article focuses on the recruitment process and part 2 will focus on retention strategies.
I hear this every day in my coaching practice. Agency owners hire new employees who either don’t make it past the probationary period or leave before their one-year anniversary is up. In some cases, an agency goes through hours of interviews without feeling confident enough to extend a job offer.
It’s true that currently it’s super challenging to find good people, especially in an uncertain economy. When overall conditions are bad, everyone clings to their job like a life raft. No one’s going to jump ship when the chances of sinking are too high. When times are good, there are more opportunities for them to choose from.
Many agencies believe that their location is a key barrier but truth be told, it doesn’t matter where you’re located. If you’re in the city, there’s a bigger talent pool but a lot of competition from other employers. In more rural areas, your hiring choices are more limited and, even if you extend your reach, you may not find someone willing to relocate.
Chances are that as an employer, you’ve been through this seemingly endless cycle of job ads, CVs, and job interviews that are soon followed by exit interviews or no hires at all. Not only is it frustrating, but it’s also expensive and can affect morale among staff who have to shoulder extra duties until you bring someone else on board.
How can you fix it? By optimising your recruiting process.
A streamlined and consistent hiring strategy is a vital element in any successful recruiting programme. When you can access the right talent, set up interviews promptly, and extend the job offer soon afterwards, you can realise the benefits outlined below.
According to the Society for Human Resource Management, whenever a company replaces an employee, it costs an average of six to nine months’ salary. If you’ve engaged a manager at £40,000 a year, that's up £30,000 in recruiting and training expenses.
The cost of unfilled positions is also significant. A vacant revenue-generating role, such as an account manager, represents money lost. If you have to pay freelancers to do the work in between hirings, you could be facing high costs. Lost productivity and diminished quality of customer or client service can also translate into reduced company earnings.
These are all financial challenges that can be eliminated when you use a more effective recruiting strategy.
When you have access to higher-quality candidates and can present them with a job offer soon after a successful interview process, you can prevent competitors from scooping up the talent that could take your company to the next level.
The delay between interview and job offer is bigger than most employers realise. A survey by the Accounting Principals revealed that over half of the U.S. hiring managers and HR personnel polled said that it took them over a month to complete a typical hire. In the UK, it can take up to three months. When an ideal candidate waits too long to receive a job offer, it gives a poor impression of your agency and increases the likelihood that you will lose top talent to a competitor.
Poor hiring decisions can have legal consequences. If a new hire doesn’t work out, they may accuse you of misleading them into accepting a role that wasn’t a good fit or claim that you dealt with them in bad faith, or the way you exited them was not fair. Since dealing with employment tribunals can cost a UK employer £8500 on average, preventing a wrong hire in the first place can protect your company’s bottom line as well as its reputation and internal staff morale.
These are all reasons why you need an optimised recruitment strategy. Now let me show you how to make it happen.
Be clear on what you want before you start looking. I’m not talking about the job description, which you probably know by heart. I’m referring to the ideal candidate.
Candidate profiles are blueprints that map out your preferred skills and personality traits for the role. Do you want someone who is an independent thinker? Savvy on social media? An outgoing people person? I liken these profiles to the customer personas that sales and marketing professionals use to define the ideal customer for their product or service.
An accurate and appealing job description can attract candidates with the right hard skills, but soft skills are equally important, and a candidate profile can help enhance the quality of your shortlist.
If you’ve ever had to sift through tons of rubbish CVs, you know what a huge time waster the DIY hiring route can be (both in terms of your time and ultimately, money). This is not a time when you want to be cutting corners: working with a recruitment company will save you time and money.
Many of the most successful agencies use recruitment companies to assist them in finding and keeping top talent. Reasons include:
Access to the quality candidates. Recruitment agencies can help you reach both active and passive candidates. Those who are actively looking for a new job tend to register with agencies, who often have access to highly-qualified passive prospects who could be tempted to join your team. In addition, these companies know how to optimise a vacancy advert so that it ranks highly for the appropriate job search.
Shortlisting management. A recruitment agency will sift through all incoming CVs for you, rejecting unsuitable ones and responding to any queries about the role. You won’t have to waste your own time and resources dealing with unproductive hiring duties.
Assistance with speciality occupations. Sometimes you need an employee with a unique or specific skillset. Engaging a recruitment agency that understands your industry can ensure that all shortlisted candidates will be fully qualified ones.
Many recruitment agencies also offer specialty services such as salary benchmarking, which helps ensure that you’re offering a competitive wage, and psychometric tests, which give unique insights into the natural talents and abilities of prospective hires.
Now I acknowledge it can be hard to find a great recruitment agency so make sure you meet several and pick one who ‘gets’ your market space and doesn’t over promise.
When the agency has sent you a list of pre-screened candidates, it’s time to interview them. If you’ve worked with a reputable agency that understands your needs and your industry, you can feel reasonably certain that you’ll be interviewing people who have the necessary education, experience, and qualifications for the position. Now you want to focus on who they are, and why they should want to work for you.
Here are some tips for conducting a strategic interview.
Avoid the standard questions. If possible, avoid typical questions like “Where do you want to be in five years?” or “Tell me about your proudest accomplishment.” Chances are that you’ll get a rehearsed response. When you ask something that they won’t anticipate, you’ll have a good idea of how they deal with the unexpected. Do they freeze and stutter? Or do they think about the question before giving a good response?
Have them expand on their answers. In most cases, the first answer they give you is one that they’ve practiced. Encourage them to expand by remaining silent or asking, “What else?” Unrehearsed answers will give you insights into how they really think, especially under pressure. Silence can be your friend here – if you don’t fill the gap then they will (a tip I learned from my PR days and a tool that journalists use to get the juicy inside gossip!).
Obtain practical information. Scenario-based questions are an excellent way to anticipate how the candidate will react to a variety of job-related challenges. If you say to a prospective manager, “How do you motivate an employee who is underperforming?” you’ll have a better understanding of how they manage people. In addition, questions like “What obstacles did you face on your last project and how did you overcome them?” can give you insights into accomplishments that may not be on their CV. Also don’t be afraid to ask them to do some ‘homework’ and have them present to you (and dig in to understand HOW they went about preparing the presentation)
Screen for cultural fit. Every agency has its own culture, and ideally you want to hire someone who shares the same values as the company. They’ll be more engaged, and studies have shown that an engaged workforce can improve business performance by 30%.
Don’t forget to sell yourself and the agency during the interview too. A key part of your company brand is the benefits that you offer, such as:
Don’t forget the emotional benefits too. Tell the candidate why your employees enjoy working for your agency. Talk about any valued traditions, such as sports teams, volunteer organisations, and employee-driven initiatives. You can even have one of your employees join in at this stage of the interview to share their positive feelings about their job and the company.
If you feel positively about a candidate, don’t wait too long to extend an offer. According to ERE, the highest-quality job applicants are off the market in an average of 10 days. If your company waits too long, you’re going to miss out.
As an employer, you may be wary of making a quick hiring decision, but if your preferred candidate is going to be in high demand because of the value they will add, cut out any unnecessary stages of the recruitment process and be prepared to hire sooner. High performers in the top 5% of a company’s workforce can deliver 26% of its total output.
Finding top talent presents a challenge for employers across the globe. While the right hire can make a huge and positive contribution towards the development of your company, the wrong one will hold it back. By optimising your hiring process, you can source the top performers needed to stand out in the most competitive industries.
I hope you found this article useful. In the next one, I’ll discuss the ways that you can increase employee retention and develop a work culture that increases loyalty and job satisfaction. In the meantime, if you have any questions, please post them below and I’ll be pleased to answer them.
This is part one of a 2-part series on recruitment and retention. In the next installment we are going to focus on strategies to keep your staff for the long term.
I want to share with you 2 recent podcasts that I have been interviewed on. I know you will find them really useful (& get to know me a little!) since they cover two of the biggest topics I frequently talk with clients about:
(interview with Lee Jackson from Agency Trailblazers)
(Interview with Bob Gentle from Amplify)
I know you will find them useful and I love to hear from readers so please leave a comment below and let me know whether these are challenges for you too?
Your Free Download
We’re going to cover a lot of ground in this article. If you’d like to have a permanent copy for easy reference (plus access to an exclusive One-Page Action Plan to help you put this information into practice right away), just click the button below.
Most agencies go through the “Feast or Famine Cycle” at some stage in their development. But it’s only through learning to break free of this cycle that you can take your business to the next level, scale it to greater heights, and reduce the stress you face every day as an agency owner.That’s why this month, we’re going to dive deep into how you can put a strategy in place to break free of the Feast or Famine Cycle for good.
Let's start with a definition of “The Feast or Famine Cycle”:
When you don’t have a full order book, you’re compelled to try everything you can to win new business. If you do the right things (a topic for another blog) then the process of focusing on biz dev eventually brings you to a place where suddenly, all your time is taken up with delivering work to clients. For a little while, things are going great!
This is the Feast part of the cycle - where you have plenty to eat with no clear end in sight. And because you have enough work to keep you occupied, you stop pushing quite as hard in the area of biz dev. You have no time and right now it’s more important to service current clients than to look for new ones.
But there’s a cyclical rhythm to all things in life, and your business is no different. Big projects end. Unexpectedly, you lose a client through no fault of your own and your order book depletes. Before you realise what’s happening, you’ve been hit with a business famine.
Wondering how you’re going to pay your mounting bills, you take on any work you can get (even if it’s with the wrong kind of client, or heavily discounted). And through your rekindled dedication to the process of winning new business, you eventually put yourself back on the path to feasting once more…
And thus the cycle begins all over again.
You’ve probably experienced this before: it can happen at any stage of an agency’s growth. Many solopreneurs/new businesses are hit with this in their first year or two of business… but honestly, it could strike at any time if you’re not careful about avoiding it.
It’s something I’ve seen many agencies struggle with in my time as a coach. And to be super honest, it’s an issue I’ve faced too.
My first “famine” hit when government funding my clients had relied on disappeared overnight, taking over 50% of my monthly revenue with it.
After that happened, I had to have a tough conversation with myself. This feast and famine cycle with my coaching business was much too stressful to sustain - something had to give.
I dug deep and committed to a more strategic approach to business development… and using that, I was able to build much-needed stability into my business.
I know that consistency of business is a key issue of challenge for agency owners everywhere:
These kinds of setbacks can completely derail your business if you’re not careful. And although you can recover from them, there’s no good reason to subject yourself to this stress on a repeated basis, if you can avoid it!
Specifically, here’s what we’re going to talk about:
I can tell you it’s possible to stop this cycle repeating - and in this article, I’ll show you how in five easy steps.
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As we covered in the introduction to this topic, the Feast or Famine Cycle is an issue that plagues agency owners everywhere...
But through working with hundreds of agencies over the past 13 years, I’ve learned that there are certain telltale signs that point to the Feast/Famine Cycle being in full effect. And in helping my coaching clients to identify these signs, they were able to solve their problems & build some much-needed stability into their businesses.
Remember, I’m not delivering any of this advice from up on my high horse. I suffered through a few business famines of my own before getting to grips with these concepts - but believe me, this is worth the effort.
The Feast or Famine Cycle is characterised by an agency that fluctuates between fully booked and completely under booked. When things are good, they’re great! But when times are bad, their agency is in serious danger of going out of business!
In my experience, I’ve learned that a business which fails to keep a consistent focus on biz dev (even when they’re fully booked) is one that’s in danger of experiencing a stressful famine if some bad luck should happen to come their way or just through the natural life cycle of a client.
This is Risk Management 101. We’ve all heard the old adage that we shouldn’t put all our eggs in one basket. If something happens to those eggs, or a few of them fall out while you’re carrying them, it just makes good sense to have some spares to replace the broken ones.
Similarly, an agency with its back against the wall is at risk of making very poor decisions. The cash flow issues that arise from a few big clients parting ways with your firm (for whatever reason: successfully completing a project, the client needing something different than what you can provide or just feeling it's time for a change) incentivise you to go out and chase after any business you can find. Even if the client is a poor fit, or you have to discount your rates, you might justify working with them as necessary to your survival - after all you have bills to pay and mouths to feed.
But because you’ve taken on work that’s not a great fit (or because it’s not very profitable), it’s difficult to please those clients. So you have to focus extra-hard on delivery…
And naturally, you’ll start to reduce your biz dev efforts, as all your time is needed to satisfy these existing (and potentially, wrong type of) clients. And before you know it, the cycle has begun anew.
When I begin working with a new client, I immediately look to see what kind of business development processes they have in place. Even if things are going great, they need to pay attention to this: I’ve seen too many agencies suffer needlessly because they neglect to keep their pipeline filled.
That’s the single most telling sign of an impending business famine - a lack of focus on good diz dev practices. But of course, there are many things that demand your attention as an agency owner. With everything you have to do in the day, it can be hard to find the time to keep inquiries coming in.
That’s why you should familiarise yourself with…
If you take a step back and look at what you do in the business on a day-to-day basis, you’ll probably find that all your tasks relate to one of these three areas:
And when we dig in to where you’re spending most of your time (using the time-tracking exercise I’ll outline in just a minute), you’ll probably find that you’re spending far too much time on activities you don’t really need to be doing (e.g. client work that could be delegated, time-consuming admin, etc.)...
And not enough time on the vital tasks that will help you to break free of the Feast/Famine Cycle once and for all.
We have to spend a certain amount of time tending to each of these areas of business each week to keep things running smoothly, of course - but it’s the question of how much time that makes all the difference.
Now, you might have read the above and realised that you’re not quite sure where your time is going each week. If so, that’s fine! Because I have a very simple solution, while we’ll cover in the next section.
As I outlined above, there are three main areas of your business that you have to pay attention to as an agency owner. Simply put, these are:
No matter what kind of complicated labels we try to apply to our work, pretty much everything we do falls into one of these three categories. But while each of these areas matters, they don’t all matter equally. Particularly not for you: as the agency owner, your time needs to be spent in a deliberate manner for maximum impact.
When I ask my coaching clients what their weekly schedule looks like, they’ll often point to their calendar and show me a list of appointments they’ve kept. But there are lots of gaps in that kind of system, and it’s easy to think you’re spending time in one way, when in reality, it’s completely different.
To overcome this problem, I like to have my clients complete a simple (but highly effective) exercise to track their time.
I don’t need you to track every minute detail of your day. Instead, I ask my clients to reflect on how they spent their time at the end of the workday on a daily basis for 2 weeks.
As for what I ask them to track - I get them to think of their work as being made up of three main types of activities:
Once per day, they deliberately cast an eye back over their work and see how much time they spent in each area of their business. I’m looking for either a rough ratio (e.g. half a day spent doing x), or a rough number of hours per day (e.g. four hours spent on admin)...
And once we have a decent picture of how they’ve spent their time, we can figure out the proportion of time they dedicate to each area of their business.
This is an enlightening exercise for many business owners. If you think you have no time to spend reaching out to new clients, but then learn that you’re spending 30% of your time on admin tasks, it’s easy to see what you should focus on fixing.
Odds are that your current ratio isn’t as good as you’d like it to be. So how can you go about improving it?
If your agency isn’t where you want it to be, it’s probably because you’re spending too much time on Revenue or Admin activities, and not enough time on Strategy.
No matter how busy you get in these other areas, it’s important to remember that, as the agency owner, you have a responsibility to spend your time wisely. The growth of your business depends on it.
The ratio of time you spend in each area will vary depending on your particular situation. However, as a rough rule of thumb, I’ve found that a 50%/40%/10% split between Revenue, Strategy and Admin is a good goal for most agency owners to aim for. Whatever your ratio is, the exercise above will probably show that you’re not quite there yet. Luckily, there are a few different things you can do to improve it.
One of the biggest things overworked agency owners struggle with is delegating work. Learning to give up total control over the day-to-day stuff (like client deliverables, managing finances and more) can be painful, but it’s a necessary step if you want to free up more time.
You have some different options at your disposal for delegating work:
Fundamentally, it comes down to figuring out (and being honest with yourself) as to what only you can do. For anything else… you need to consider whether you let someone else do it, or if you’re just holding on because you’re afraid to let go of it.
A mindset shift many of my clients find valuable is to consider their target hourly rate. For instance, if they value their time at £100 per hour, there’s no good reason for them to do work that they could outsource for £25/hour.
Look at your schedule, and identify how you can start moving towards your ideal Time Pot Ratio. Automate, delegate, or stop entirely - do whatever it takes to get closer to your target. Getting disciplined at sticking to this time split will help to ensure your limited time is being put to its best possible use.
To make tracking your time in this manner as easy as possible, I’ve created a simple template for you to use (see the Resources section below for more info).
Of course, figuring out your ideal time split is just the first part of the equation. The second part is to then figure out the best things to focus on in those given time periods.
Once you’ve determined your ideal time split, it’s time to focus on the most important activities you can complete in order to maximise your impact in each area of your business.
When it comes to Revenue activities - this is all about client delivery. This is probably an area you excel in as an agency owner. After all, you set up your own business because you were so good at delivering great work to your clients.
As you already have a good grasp of these activities, I’ll just give you one takeaway tip...
Don’t be the bottleneck in your agency. Make sure the brand is not YOU! Otherwise every client will want YOU to work on their account and you will never be able to delegate work to your team. I have seen this issue time and time again. What helps you get your agency going and growing (YOU) because the very thing that stops you growing.
How do you overcome this? Introduce team members early on, let them build credibility with the clients. And in the end, push the client to that member of your team (don’t think ‘it's quicker to do it myself’), even if they are asking for you.
Admin is an area that many agency owners dislike, but most understand its importance. However, there’s more to Admin than just signing paperwork and conducting weekly staff meetings.
In my experience, the three most important Admin activities you need to attend to are:
Ensuring invoices are sent on time
Monitoring your cash flow to spot any potential issues arising
Managing staff effectively, so you retain top talent in your agency
We’ll cover each of these areas in more detail in future articles and videos. For now, let me make a few quick & easy recommendations relating to the above.
First - there is a huge number of software products on the market that will help you to get invoices out on time. Accounting packages such as Xero and Quickbooks are fantastic apps that are easy to use and integrate directly with your bank account. And when you combine them with a powerful CRM like those offered by Pipedrive or Zoho, you can easily streamline this process for good.
Aside from this, make sure you set aside a block of each month to send out your invoices, and have auto-reminders set up so you can chase late payers. If you are so busy delivering client work that you have no time for invoicing (yep, i have heard this before!) then you are setting up future cash flow issues for yourself.
Managing your staff effectively is a huge topic, but one principle I’ve seen many successful agency owners abide by is to touch base with their staff every week. Ensure everyone is on the same page as to objectives (and ensure they are SMART objectives) and they all know the agency’s (and client’s) priorities.
Of course, this is more doable in a smaller agency. If you have a lot of staff, then make sure to delegate it to a manager. Either way, making sure someone has their finger on the pulse will go a long way towards keeping top talent and clients happy at your agency.
The area of Strategy covers everything to do with how you plan to make money in the future. It includes sales and marketing, but it also includes planning, business strategising and time spent getting clear on your vision. On a day-to-day basis, the Strategy activities you focus on are geared around winning & retaining new clients, as well as selling additional services to existing clients.
Sadly, there is no magic bullet when it comes to winning new business (despite what you might read on the Internet!). Ultimately, it all comes down to focus and hard graft - building processes, then consistently working to implement them.
Finding the perfect business development strategies for your agency is not an easy process, but it is a critical one. You might find it helpful to think of your activities in terms of whether they’re short-term, medium-term or long-term.
Short-term activities include networking, reconnecting with old clients, and identifying opportunities to upsell current clients to higher levels of service.
Medium-term strategies could include building and maintaining strategic partnerships with other businesses. For instance, a good partnership might result in three or four extra clients per year - much easier than having to go out there and win those customers yourself!
Long-term strategies include activities you complete to boost your standing in the marketplace. These activities include creating videos, producing blog articles, building up your social media profiles, and more. These methods take longer to have an effect, but when done right, they’ll help you generate many more inbound leads - a great asset to your business!
As for the specific strategies you should employ? That comes down to:
What has worked well for you in the past
What works well in your sector in general
For instance, a content marketing agency might find that their audience responds well to in-depth articles, whereas a graphic design firm could leverage “behind the scenes” style videos to great effect. Ditto for short and medium-term options, too. If you’ve previously had success pursuing strategic partnerships with a particular type of business, work on identifying opportunities for more of them. If you find that all your clients in a particular niche are easy to upsell after three months of regular service (as opposed to the six months it takes to upsell other clients), then double down on that.
Whatever you do, remember that it’s better to do a small handful of activities really well and consistently than to do lots of things poorly. Falling prey to Shiny Object Syndrome will do nothing but waste your time, so avoid this.
My final comment on business development is this:
build your list.
Having a list of subscribers you can build a strong relationship with is invaluable for any agency, so if you’re not currently doing this, start immediately.
This doesn’t pay off instantly. You first need to ATTRACT new subscribers to your list, then you need to build authority with them by TEACHING them something useful and then and only then can you start to SELL to them. Maybe only one person in 100 is ready to buy when you email out an offer. But you can still engage the other 99 by adding value to their businesses with useful content. And when the time comes for them to buy? If you have communicated with them regularly with value added content then you’ll be the first agency they think of.
Spend the time now to figure out what business development processes will work best for your agency. Doing so is a critical part of escaping from the Feast/Famine Cycle once and for all, so any time you spend doing this won’t be wasted.
To give yourself the best possible chance of overcoming the Feast/Famine Cycle, there are several different things you can focus on. And in this section of the article, I’d like to share with you some of my favourite resources for simplifying each part of the process.
Improving your client retention is a fundamental part of breaking free from the Feast/Famine Cycle. When you increase retention rates and decrease churn, you reduce the likelihood of another business famine coming your way.
In last month’s article, I broke down the topic of client retention in great detail. If you’d like to read that, just click here.
Additionally, I’ve also written some other powerful materials on this subject before. If you’d like to get access to a powerful five-part framework you can put to use in your agency right away, you can get a free copy of my Client & Account Management eBook here.
As well as learning how to retain your current clients for longer, you should also focus on winning new (highly profitable) business. But that’s easier said than done. Many agencies struggle to consistently sell their services at rates that support their growth moving forward.
Hands-down, one of the single most important skills you should master is communicating and selling based on value. In my experience, I’ve seen that agencies who sell based on value consistently enjoy better profitability, stronger client relationships and a less stressful workload - all highly desirable!
Getting focused is crucial. Knowing what is important and what you need to consistently do, no matter how busy you become (e.g. business development) will ensure you avoid drop offs in client revenue. One book that had a big impact on my focus and productivity is Free to Focus by Michael Hyatt, so I highly recommend reading it.
If you want to get a quick summary of ideas from the book plus my top time management and productivity tips then download my FREE eBook on “Winning back time”.
No matter what system you end up choosing, learning to batch tasks is an easy way to skyrocket your productivity. For example, if you need to record videos, draft some emails or write blog articles, batching them into groups will be a lot faster than doing them one at a time. If you’re interested in learning more about what this means, give this podcast by Amy Porterfield a listen (I love her positive but practical advice - she is a regular on my iPod at the gym!).
While there are many tasks you’ll be able to delegate (or just stop doing entirely), there are certain things you might want to keep doing.
These tasks can be time-consuming, but luckily, there are several tools you can use to automate them to a large degree.
Email marketing solutions such as ConvertKit (my personal favourite), Infusionsoft and Mailchimp all streamline the process of keeping in touch with your subscribers, segmenting your list, and automate your outreach.
Thrive Architect, Divi and Beaver Builder are all simple, flexible WordPress builders that let you tweak your website and set up new pages with relatively minimal effort and without the need for programming skills - perfect for getting new offers out there quickly!
No matter what time-consuming task you choose to keep performing, there’s sure to be a tool out there that will help you to automate it.
To run a successful agency, you have to wear many hats...
But switching between these hats too often can cause problems, making things drag out far longer than they need to due to the cognitive switching penalty - apparently when we get distracted from a task it takes 23 minutes to get our “heads back in the game”!
To avoid being hit with this penalty, you need to create and maintain a good schedule: one that gives you ample time to do everything required of you as an agency owner. If you are brave use a tool called Freedom that locks you out of apps and the internet (e.g. Facebook)for set periods of time to help you focus your mind!
Batching tasks is a great help, as you can avoid switching contexts more often than is necessary. Another thing to keep in mind is the Three Time Pots Model we discussed previously.
Of course, before you can allocate time effectively, you need to know how you’re spending it at the moment. That’s why I shared a specific time-tracking exercise earlier in this article: it’s very effective in helping you do this.
To make completing this exercise as easy as possible, I’ve created a simple downloadable template you can use to start getting a grip on your schedule. You can get a free copy of the template here.
Finally, here is a short video I made shot on this subject.
We’ve covered a lot of ground in this article... but if you can put this information into practice, it’s practically guaranteed that you’ll be in a better position than ever to escape the Feast or Famine Cycle once and for all.
If you’d like to have a permanent copy of this article for your easy reference (plus access to an exclusive One-Page Action Plan to help you put this information into practice right away), just click the image below.
No matter how big or small you are, every agency faces a number of consistent challenges. One that keeps many agency owners awake at night is client retention.
I know this is a significant problem because it’s something my coaching clients ask me about over and over again. And, much like value pricing and selling or choosing a well-defined niche, this is a subject you can gain mastery over by implementing the right strategies.
Of course, learning what these strategies are is easier said than done. While there is much written about client retention, finding actionable information on this topic is quite difficult – but I aim to change that with this blog.
Contrary to popular opinion, there’s a lot more to keeping customers happy for the long haul than bending over backwards to meet their every need, or forgetting how to set boundaries (that will put you on the fast track to unprofitable work, overservicing and burnout).
These behaviours aren’t sustainable – you can’t build a business around them. You need to take a strategic approach to satisfying your clients today, tomorrow, six months and a year from now.
That’s what we’re going to cover in this article – everything you need to know about the process of keeping clients happy with your agency (without overextending yourself) resulting in long-term relationships and revenue growth.
Specifically, we’re going to talk about:
If you’re interested in getting a handle on this crucial topic, then read on for more info!
We’re going to cover a LOT of ground in this article so in the spirit of TL:DR, you can get instant access to a summary and top takeaways in a free One-Page Action Plan. Just click the image below.
Let’s get down to business. First things first: what do we take for granted when we’re talking about customer retention?
Well, we assume that if you’re in a position where you’re confidently pitching your services to clients, then you’re capable of delivering on your promises to them i.e. you know what you’re doing on the technical side of things.
Beyond this, the key skills you need to keep clients satisfied with your service are:
That’s it. If you master these four core competencies, then you’ll be well poised to boost your retention rates, increase profitability, reduce churn, and build a more stress-free business experience for you and your employees.
Let’s dig a little deeper into these four skills before moving on with the rest of the article.
Hands-down, the most fundamental skill you have to master to ensure great client retention is being able to communicate well.
Addressing these issues in a timely manner (and via the appropriate channels) is key. You don’t want to bury your head in the sand and hope that they go away of their own accord… because they won’t!
Additionally, there’s no surer way to frustrate clients than by failing to keep them up to date with how your work for them is progressing. Creating solid plans for the work you’re carrying out is all well and good, but if you don’t keep your clients in the loop (communicating often, and ensuring they understand what’s going on), it’s all for nothing.
Keeping them up to speed doesn’t have to be difficult. You can do something as simple as checking in via regularly scheduled emails or go more complex with a project management system such as Asana or AgencyHub.
Regardless of what you choose to do, remember this: communicating with your clients appropriately (i.e. via their preferred medium) and in a timely fashion is key. Failing to do this is a surefire way of losing a client.
Mantras like “the customer is always right” have programmed us (as service providers) to be overly accommodating to client requests. If we think there’s a chance we can help them with something, we agree to it. We’re eager to please because we think this is a good way to keep a client.
Thankfully, there’s more to client retention than simply becoming a ‘yes man’. If that was all it took to keep clients happy, businesses would be trapped in a race to the bottom, each competing to deliver as much extra work to their customers as they could possibly manage without charging for it!
Being able to say no when a client is asking for something entirely new or outside the agreed scope-of-work is key to avoiding difficult situations (or saying “YES but we need to drop something else”). Additionally, you have to be able to resist when what they’re asking for is not going to help them achieve their objectives. By acting in this consultative way you’ll help to position yourself as a trusted partner (rather than just a supplier).
Train your staff in setting boundaries and sticking to the original scope of their projects. Doing this will ensure you avoid getting caught in the Overservicing Trap (discussed in more detail below).
Of course, there’s nothing inherently wrong with saying yes to additional requests – just ensure your staff know to change the scope-of-work or fees being charged, as needed.
This is a simple skill, but one that many agencies struggle with from time to time.
Being able to deliver work when you said you’d deliver it is a small thing that goes a long way towards keeping clients satisfied with your service.
There’s a principle in software development known as the “ninety-ninety rule”. It goes something like this:
“The first 90% of the code accounts for the first 90% of the development time. The remaining 10 percent of the code accounts for the other 90% of the development time.”
This is obviously tongue-in-cheek, but the point remains: things often take longer to complete than you think they will.
When you’re agreeing to deadlines with clients, be sure to allow yourself some wiggle room. Inevitably, some other client could walk through the door with a crisis, a key member of staff could need time off, or things could just get busy.
And when you can’t meet those deadlines? Refer back to skill #1 and communicate. Odds are your clients are reasonable people, just like you.
Many agencies have fallen for the age-old Overservicing Trap. They think that keeping customers happy is all about going the extra mile and giving them more than they paid for.
Overservicing is a major issue for many agencies, for a few different reasons.
Firstly, it conditions clients to receive more than they’re paying for any time you work with them. Going the extra mile quickly becomes the norm, and you end up going even further next time to satisfy your clients (or else maintaining your standard level of overservicing to keep them feeling neutral towards your business).
Secondly, it creates stress in the agency and lower profits – all because of the belief that “if we don’t say YES then the client will leave us” – which is NOT TRUE!
Thirdly, it devalues the work you do as an agency. If clients can get some of your additional services for free (or get them for less than they should cost), they will never value this work (think about it – anything for free is rarely really valued).
Being able to deliver a great client experience without overservicing is an art. The other three skills listed here help (as do the strategies we’ll detail later on in this piece), so be sure to reread this section and figure out which areas your agency is falling down in.
The four skills listed in the previous section are critical to successfully retaining your ideal clients – but how do you know which ones to focus on developing first?
To make this information easier to use, I’ve created a straightforward grading system you can use to score your performance in each of these areas.
Consider each of the competencies we’ve just talked about and grade your mastery over them on a scale of 1-5 (1 = your skill is non-existent in this area, 5 = you have absolutely zero problems in this area).
Over time, your goal should be to improve upon your weak points, maintain your strengths, and fully develop the skills you need to master client retention.
Now that we’ve finished talking about the core competencies you need to satisfy clients effectively, let’s see what we can learn about customer retention from companies who don’t care about it at all.
I often like to frame these articles with a case study or story to explore the topic, but this time around, I want to talk about a particular industry (not just one company) that is going about this all wrong.
I’m pretty confident that you’ll agree since we’re probably both frustrated customers of this industry. And that industry is?
The mobile phone market.
Here are some quick stats for you to consider. According to The WDS Mobile Loyalty Audit:
In today’s competitive mobile phone marketplace, service providers can’t afford not to take care of their clients. New UK legislation has made the process of quitting your current provider as simple as sending a text message!
They’re not the only offenders, of course – broadband providers are often just as bad. How often have you seen an ad that promised a great deal, only to see in the fine print it was for “new customers only”?
These ads are designed to attract new customers, but offer nothing to loyal current customers… a common theme of these businesses.
Why do they continue to do this?
The sector is highly commoditised. Every provider offers a broadly similar product. Without anything else to compete on, they compete based on price – which is a race to the bottom.
Consider what would happen to your agency if you behaved like your services were a commodity. You’d probably do the following:
These three mistakes are more bearable in an industry where consumers almost expect these behaviours (as is the case with mobile phone providers). But for an agency like yours?
Focusing on acquisition above retention, forgetting about being strategic and failing to deliver a high-quality service will spike your customer churn rates…
And pricing with too much regard to your competitors will limit your profits and see you caught in a race to the bottom. Read my blog on pricing to get some help here.
With all this talk of acquisition vs. retention, you might be wondering: which one should you be spending your time on?
When it comes to your focus on acquisition vs. retention, it’s not a case of “either or” – it’s more a case of figuring out the best strategies for attracting your ideal clients, then holding onto them.
Client retention problems often stem from winning the wrong type of client in the first place. The wrong client is much more difficult to satisfy, creates a challenging relationship and retaining them is exhausting and challenging for even the best agencies.
Research from the Harvard Business Review has indicated that increasing customer retention rates by 5% can increase profitability 25%-95%.
Other studies have shown that it costs 5-25 times as much to win a new client as it would to keep an existing one. That’s a staggering statistic (one that you should take to heart if you’re spending a lot of money on outbound marketing).
According to smile.io, boosting retention rates increases profitability for a few different reasons:
Getting a handle on client acquisition is a separate topic – one that we’ll cover in more detail another month. For now, just remember that the key to getting your relationship off on the right foot is to find the ideal type of customer and sell based on value, then measure your delivered work against that value.
Keeping clients satisfied is a game of expectations. And the single biggest chance you have to set a good tone for your relationship with a prospect is before you start working with them.
The four core competencies we discussed previously lend themselves well to set the stage for a positive, productive relationship with clients. Honest communication helps – as does the ability to say no, being able to meet deadlines and satisfying without overservicing.
When you commence working with a client, everything that you agree to deliver as part of your service to them can be considered a “standard” (i.e. part of your arrangement), and anything outside of this can be considered an “extra” (beyond the scope of your current deal).
The terms of your work together are set out in a scope of work agreement. You need to have this clearly defined before starting out on a new project. Without this, you could be left trying to deliver on the client’s vague vision, wondering if the price you initially quoted them is going to cover the ever-increasing demands they’re placing upon you.
With a scope of work in place, you’ll be able to look back on it and figure out if what the client is asking for is a standard (i.e. already part of your agreement), or if it’s an extra (it’s beyond the scope of the current agreement).
It’s important that you and your team understand that you shouldn’t feel obliged to deliver extras for free. Doing so will condition clients to expect the same in the future. Before you know it, those extras have become implicit standards. And if you suddenly decide to skip out on these extras one month, what’s the likely result?
Client dissatisfaction, as their expectations have not been met. Going the extra mile is all well and good, but when that becomes the norm, it ceases to be extra… and is soon seen as par for the course.
A clear upfront agreement, laying out what’s part of a monthly retainer or project (and what isn’t) is key. Your agreement should also contain details as to how any ‘extras’ will be billed. The most common approach would simply be charged a flat rate per hour or per additional deliverable completed.
Beyond the work itself, you should also consider expectations/service levels around deadlines and response times. Once again, this is an area that junior staff often struggle with (so we must explicitly train them). The impulse to agree to a client request without thinking or to respond instantly to their emails/instant messages/phone calls is one that needs to be trained out of them.
If a client’s fee level means that you respond within 3 hours yet they are conditioned to expect a response within the hour – because the team always responds immediately (who has ever thought “oh I might as well answer this email now since I can”), they’ll be disappointed when you take three hours… even though that is what they are paying for!
Expectations are everything. It’s important that your staff do everything they can to ensure client expectations remain reasonable. Sometimes, that’s going to mean letting client calls go to voicemail, or allowing emails and IM’s to sit unanswered for a while. Staff may be eager to jump in and respond right away, but make sure that enthusiasm is tempered with understanding: expectations matter, so they need to be managed correctly (more on time management and productivity in a future blog).
I don’t want to imply that you should never overdeliver. Occasionally doing a little bit more for free (if it’s valuable to the client) can be a good strategy to boost long-term retention, or to help set the scene for a later upsell to a new level of service.
The key here is to ensure that they understand they’re getting something for free and that they’re not under the impression that it’s going to be a standard from that point on.
Once again, clear communication is key.
An example of how you could deliver an extra without being put on the hook for delivery in the future: “This month, at no extra cost to you, we’ve produced x report/deliverable. This would typically cost in the region of ___, but as we feel your business will benefit from it (given that ____), it’s yours for no extra cost.
If you’d like to discuss adding x to your monthly service plan, just let me know and we’ll set up a time to talk about it.”
The above is just an example – tailor it to fit your business, but remember the spirit of it: extras are great, but doing more work for no additional payment is not.
On a month-to-month basis, I typically tell my coaching clients it’s okay to overservice by about 5-10% (as you can probably make that up in a quieter month anyway). Going much over this tends to put you in a bad position moving forward and can create all sorts of capacity issues in your agency, so I don’t recommend it.
Customer churn rate is an easy metric to measure for your agency – and it’s one that has a big impact on your bottom line. Decreasing customer churn by even 1% can have a significant influence on your agency’s profitability, so it’s worth talking about.
Now, it goes without saying that a certain amount of customer churn is inevitable. Anything can happen: a change in personnel at the client, you might fail to deliver a satisfying experience, or their objectives might change – making your service obsolete. Whatever the case may be, some customers will always leave your agency over the course of a year. The question is… how much is too much?
Churn rates vary dramatically from industry to industry. For instance, churn in the mobile market is around 40% (which would be absolutely atrocious for an agency). However, churn rates could be under 1% for a company like Verizon in the US, due to their contract structure.
In my experience, I think 20% churn is a good goal for agencies to aim for. Depending on your industry, you may be able to get that figure as low as 7%. Maybe 25% is more realistic for your sector. Whatever your starting point, know that every little improvement you make in this area can have a huge impact on your profitability.
Now that we’ve covered the fundamentals of great client retention, I’d like to offer you six quick tips you can put to work in your agency right away to help build a loyal, low-churn client base.
If you want to retain clients for the long-term, then you need to deliver results. And without first understanding what it is they care about and setting appropriate objectives, how can you hope to deliver results they want to see?
When you understand what they hope to achieve for their business, you’ll be able to align that vision with the goals of your campaign.
This isn’t just something you do at the outset, of course – goals can change over time. The key here is to discuss with the client, revisit periodically and adjust your approach if and when appropriate.
Communication was another one of the core competencies discussed earlier. The point of this strategy is to illustrate that you should report back in the manner that clients prefer (within reason).
And within reason, you should understand and accommodate their preferences.
Another point here that is really important: most clients don’t care about having you report back on tasks completed (sending a very long list of tasks does not translate into delivering great results). Report with reference to outcomes – talk about how you’re delivering against your goals, and how this feeds into the achievement of their business goals.
The process of retaining clients starts with attracting the right kind of prospects in the first place. When you have a crystal-clear image of your ideal client (see the resources section below for more info), this gets much easier.
The best kinds of clients to work with are those that:
Working with these kinds of clients is a dream compared to the opposite. The wrong kinds of clients for your business (I’m sure you’ve encountered many in your time!) drain your time, are usually dissatisfied with the results you deliver and are bad for your business growth overall.
Retaining the ‘right’ clients is easier than retaining the wrong ones. Focus on finding and winning your ideal client type and you’ll reap the benefits of longer customer retention.
If you want to keep clients satisfied, you have to regularly reach out and seek feedback on your performance. If there are any issues, don’t bury your head in the sand – confront the problem in a timely manner and work on solving it.
Seeking feedback doesn’t have to be complicated. It’s easy to tack a question or two onto the end of your regular meetings, soliciting any concerns they may have and create a relationship based on honest and open communications.
Don’t assume everything is okay because they haven’t voiced a concern on their own initiative. Be proactive and seek out issues before they can derail the relationship entirely.
Changing the personnel assigned to a client account can be a tricky situation to navigate. In my experience, I’ve seen agencies making a few mistakes in this area:
I generally advise my coaching clients to be upfront when something like this changes. Let the client know in plenty of time when changes are coming, introduce their replacement and ensure that they have plenty of opportunities to show they are capable. Finally, stress that the quality of service they’re receiving won’t change.
My last tip is to take a strategic approach to account development. Set aside some time in your calendar to carry out regular reviews of your key clients (and of your own business too).
With regards to your relationship with the client – review your strengths and weaknesses, and figure out how to mitigate the challenges/risks (while maximising your advantages).
With regards to your clients – review their situation, and identify areas in which you could add more value to their business. This could be an upsell to an additional service, a strategically chosen freebie (to give them a taste of something else you offer), or even just a quick consultation to impart some ideas you have about their strategy moving forward.
The key takeaway point here is to take the time to focus on developing your key clients. Doing so will allow you to boost retention rates, increase profitability and have an easier time satisfying them… all good outcomes for your business! See below for my free template you can use for your client development planning.
In this article, we’ve been digging deep into the topic of client retention.
We’ve covered a lot of ground up to now, so let’s switch gears for a minute. I’d now like to share my favourite resources for maximising your client retention.
Developing crystal-clear customer personas is the first thing you need to do if you want to win your ideal client and boost retention rates. If you intimately understand your customer then you know what “makes them tick” and therefore give yourself the best chance of retaining & growing them. You can download a free copy of the Customer Personas workbook here to help with this process.
In my 13 years as a business coach, I’ve come across many different client management techniques – and learned which ones work best for real businesses just like yours. If you’re interested in getting your hands on these techniques, you can download a free copy of my Client and Account Management eBook here.
I’ve always been a fan of Hubspot’s content. They put out great articles on all aspects of running a high-performance agency, but I particularly enjoyed this one on some different customer retention programs you can put to work in your business right away.
As mentioned in the last section, periodically stopping and taking a strategic view of your clients is vital to head off any potential issues and looking for upsell opportunities. So I want to share with you something I normally only give to my paying clients and that is an Account Development Planning template. This will enable you to capture useful data about your clients and help you address any weaknesses whilst maximising opportunities.
You may want to use a CRM system to help you monitor clients and ensure you are not dropping any balls. There are many you can use but I found this list to be both useful and comprehensive.
Finally, I recently published a guest post over on Hubspot on increasing customer retention rates (including details on how to carry out crucial “Strategic Reviews” of your biggest clients). You can read that here if you’re interested.
We’ve covered a lot of information in this article. At this stage, your head is probably spinning!
To help you get started with the process of better client retention, I’ve outlined the very next steps you should take in a handy One-Page Action Plan.
To get your copy for free, just click the picture below for instant access.
That concludes our in-depth breakdown of client retention.
I hope that you’ve learned something new here (and please ensure any of your team read the article), as an understanding of this topic is a crucial part of scaling your agency sustainably. Without having good customer retention rates, your agency will suffer from the Revolving Door Problem – clients come and go, leaving you scrambling to close new business just to stay afloat.
Winning a new client is great… but closing the deal is just the beginning of the journey.
This is a trap that many agencies fall into. They work hard to win the client, put their best foot forward and then move on in search of the next win, hoping the accounts team do a good job of keeping the client.
To win in the long-term, you need to take a more strategic approach than this. You have to take client retention seriously: it will have a major impact on your bottom line, so it’s worth focusing on.
I hope you found this article useful. If you have any questions, be sure to post them below and I’ll get back to you with my thoughts.
When I reflect on the work I do as a business coach, I like to see if I can spot any similarities in the businesses of my highest performing clients.
Success leaves clues, as they say – learning what one business does to win in their specific market often gives an insight into what it takes to win in general too.
Last month, we talked about the power of establishing a clear niche for your business (you can read that here if you missed it).
And yes – across time, I’ve seen well-niched agencies outperform their generalist competitors 9 times out of 10. But there’s more to running a high-performance agency than simply choosing a good niche – if only it was that simple!
As for the other commonalities…
I was preparing some case studies for my website recently and came across an interesting example I’d like to share with you.
PR agency Pedroza Communications sought me out to assist with their business. They had been around for five years but were facing challenges around growing the agency sustainably.
Bear in mind this was an agency that had defined their niche, won plenty of customers and established a respected position in the marketplace…
But despite having these wins under their belt, they were still struggling to shift to the next level.
I got to work, digging deep to find out into what was holding them back from achieving the results they sought. It quickly became apparent that their pricing model was a key issue. Upon review, we decided that the business needed to move from a time-based pricing model to a value-based one (more on that a little later).
With some bravery on the part of the MD (to make this shift), this process – coupled with some other interventions on my part – helped the agency grow their profits by 66% in just over a year.
We’ll return to this case study a little later in the article, but for now, just bear in mind that big improvements often come from taking small corrective actions, including shifting your mindset.
As an agency coach, I’m used to helping clients deal with a variety of problems. Staffing, strategic planning, winning new business and client retention – I’ve had clients contact me to assist with all these areas and more.
But hands down, one of the most valuable things I do as a coach is to help my clients get their pricing right.
Value pricing and selling is a huge part of building a successful agency, but most of the information floating around online doesn’t truly teach you how to implement a value-based pricing and selling strategy.
In this article, we’ll be diving deep into the topic of value-based pricing and specifically HOW you can implement it in your agency.
Here’s what we’re going to cover:
So if you’re ready to break free of time-based pricing, start earning the fees you deserve and dramatically boost your agency’s profitability, read on!
Want to get an instantly actionable list of takeaways from this article? Click the image below to download the Value Selling One-Page Action Plan.
Before we get onto the topic of value pricing, I think it’s important to first get clear on the standard agency pricing models you can choose from. Here are the three most common pricing strategies you could employ in your business:
This is simply where you charge your clients based on the time you spend working on their account. You might have an hourly or daily rate, likely different hourly or daily rates for different team members that work on the account. The prices you quote to clients are based on:
Simply put, it’s a direct trade of resources (i.e. labour hours and materials used) for pay. It’s a standard model, one that many agencies employ when they’re still finding their feet in a market.
There’s nothing wrong with it, per se – but tying your income to your time will hold you back as you try to scale your agency.
There are only so many hours in the day that you can work. And depending on your market/niche, quoting high hourly rates can be a huge turnoff for prospects (when you’re selling based on time, at least).
Of course, charging higher hourly/daily rates is a viable strategy. That’s essentially what the next model allows you to do.
On the face of it, this might look similar to value-based pricing… but the difference lies in where your focus is.
With a “Cost Plus” or fixed fee pricing model, you focus on inputs and outputs i.e. the resources you use to complete work for the client.
For instance, a web developer might figure out the price for a particular project by outlining the various components of a project. That could look like the following:
And so on.
Once that’s done, you would then move to assign a cost to each part of the project.
For instance, maybe you estimate that developing the wireframes will take two designers four workdays to complete. Perhaps the initial meeting requires two hours of preparation on behalf of the Creative Director, etc. Essentially, you’ll figure out how much time & resources the project will take, then assign a cost to each.
When you have completed this step, you’ll have an estimated cost for the total project. And this is where “Cost Plus” pricing diverts from value pricing.
In this case, the final price quoted to the client is dependent on the cost of time/materials used, plus some fixed percentage (e.g. 20%).
For example, if you estimated it would take 10 hours of a designer’s time and their internal cost to you is £600 for this time, you would charge the client £600 + 20% mark up resulting in a total cost to the client of £720.
(We’ll return to this web design example a little later on in the value pricing section, so keep an eye out for that!)
This “Cost Plus” approach can sometimes be used to negotiate a fixed fee for the project. This is a double-edged sword: if the project goes to plan, you’ll make as much profit as you forecasted (or even more if it goes well). But if it should happen to drag out longer than you planned for? You’re left with two choices…
Neither scenario is great. When you also consider that the fee you quote could simply be based on a fixed hourly/daily rate + a fixed percentage, it’s easy to see how you can end up working on projects that aren’t beneficial for your agency.
The next pricing model on our list is another common one that takes the idea of charging a fixed fee and improves upon it slightly.
A retainer is where you agree a fixed monthly fee and outline the work you will do for that fee. For example, say you run a PR firm. You could negotiate a fixed monthly PR retainer of £3,000 per month with a client. For that amount, you might agree to the following deliverables:
A retainer-based agency can often be more profitable than ones using the previous models. This is because their income is independent of their time. With this approach, you get paid the same whether it takes you 10 hours or 100 hours to complete the work required.
The price you quote for a retainer is often derived from how long you estimate a standard deliverable will take to complete but allows some scope for variance depending on the client (which is good).
However, while it’s a step in the right direction, it’s not the best option for your agency. It’s still an exchange of resources for money – just in this case, the resources in question are the various deliverables you’re obliged to work on (and not your time).
Additionally, most agencies will still get sucked into quoting a retainer price that reflects the effort they have to put into the work (and not necessarily the value it creates – more on that shortly).
When we look at these approaches presented so far, what’s the flaw common to each of them?
They focus on inputs and outputs… not outcomes and impact.
Not sure of the difference between these terms? Read on to learn what they mean (and why you should care).
All of the pricing models we discussed in the previous section are acceptable choices, but they each share the same common flaw…
They are based on YOUR agency and what YOU are doing i.e. your inputs and outputs.
This is a problem because clients only really care about their own business. By this, I mean:
That’s not to say they don’t care about quality or deadlines (these things obviously matter), but what really matters are the OUTCOMES and the IMPACT of your work.
Let’s take a second to define precisely what these terms mean.
When we sell to clients, we sell four things:
Inputs and outputs are easier to quantify, but they matter a lot less than outcomes and impact.
Focusing on the former two is a hallmark of agencies focusing on the wrong thing and therefore likely to lead to misunderstandings and shorter-term relationships. Rather than framing their work in terms of how it will benefit the client, they instead spend their time worrying about the stuff that’s easily measured. Sadly, this is one of those cases where choosing the simpler upfront option holds you back in the long run.
A press release might take five hours’ worth of labour to complete. The inputs and outputs, in this case, are easy to measure (‘research’, ‘time to write’ and ‘the press release’). But how do you go about articulating the outcomes & impact of that positive press release? Of coverage achieved (outcomes) Of a stronger brand? Or a more receptive market (impact), thanks to your efforts?
I’ve lost count of the number of agencies I’ve encountered over the years who fail to spot the mismatch between what they’re selling (inputs & outputs) and what the client is truly buying (outcomes & impact). This lack of alignment costs them new opportunities, profits and a chance to build a much bigger business…
And rectifying this mismatch is where value pricing and selling comes in.
As we just discussed, there’s a variety of standard pricing models you can employ in your business, but in my experience, the best pricing model for agencies is a value-based one.
There are many reasons this is your best approach. Consider these two quick stats:
So the facts are clear – value pricing is the way to go if you’re running an agency. But what exactly is value pricing?
Simply put, it’s buyer-centric (not supplier-centric like the other methods).
The price you quote is based on the value delivered to the buyer (the outputs & outcomes), and is not based on how expensive it is for you to deliver (i.e. the inputs). It’s often referred to as outcome-based pricing for this very reason.
Value pricing allows you to get paid based on the value you create for clients (and not just on the resources you expend in creating deliverables for them).
Consider a web design agency. If they employ a time-based pricing model in quoting a project to a prospect, they might find it hard to justify more than £5,000 based on the hours it will take.
This might feel frustrating for the agency owner, but that’s because we’re still trapped in a limited paradigm (i.e. time-based or “Cost Plus” pricing). By shifting to a value pricing approach, we can begin to charge more than £5,000.
Let’s say that you’ve worked with similar clients in the past, and were able to increase their on-site conversion rates to the point where they were earning an average of £200,000 more per year directly from their websites.
That’s £200,000 in profit directly attributable to your interventions. In this case, it would be very reasonable to charge say 10% of that as the project fee (i.e. £20,000).
By learning to frame the project in terms of value for the client (and not just simple inputs and outputs), this web design agency could earn four times as much from a single project.
(Note that this £200,000 figure doesn’t have to be an average or even a figure you’ve personally produced for a client. Ultimately, your goal is to get the prospect to tell you the value of your proposition by exploring with them the goals of the project and what ‘success looks like’. If you do this, you’ll be framing a value-based price).
Hypothetical web design agency aside – how well does this approach work for real businesses?
You’ve already read about the success of Pedroza Communications above (who boosted profits 66% in a year after implementing a value pricing model). This experience isn’t unusual – I’ve seen other clients snap out of slumps and boost their profits by double-digit amounts in a matter of months.
And even as a coach, I know that the day I shifted towards value-based pricing was the day I started getting paid the fees my work deserved.
You’ll read more about my personal (hard-won) experience with value pricing later in this article. For now, let’s address the question that’s been at the front of your mind since you started reading this article…
How can you put value pricing to work in your agency?
Now, you might have read the previous section and thought, “There’s no way I could justify charging x% of my client’s earnings as the project price”.
And yes, sometimes that’s true…
But when you think about it, value pricing is everywhere.
It’s more obvious in some sectors than others, of course. For instance, consider the fashion industry. The same basic material is used to manufacture Primark shoes and Nike ones – but Nike shoes can retail for 5-10 x the cost of their cheaper equivalent. All that separates the two is belief in the value of the brand.
Another example is seen in the construction industry. No one prices based on the cost to build + a margin of profit… it’s all down to what people are willing to pay. In a way, that’s the ultimate value sell!
Selling clients based on value requires you to take a different approach. Rather than focusing on yourself, you need to become intimately aware of what your client is hoping to achieve.
You can’t possibly hope to deliver value to them without first understanding what they value. How can you succeed if you don’t know what success is? More importantly, how can you create value for their business if they don’t truly know what they want themselves?
The quality of the questions you put to your prospects will determine how much value you can add to their business. Your goal is not to figure out how much you can charge them – it’s all about determining what a valuable solution is worth to them.
Inputs and outputs are secondary. Outcomes and impact are what you need to be worrying about. Getting a crystal-clear picture of how they will gauge success is of the utmost importance.
Once you’ve figured out:
You’ll naturally be able to align your proposal with their desires. That goes for pricing, too – once you know what they need & how much value that can bring to them (financially), you’ll be able to give them a price that works for both of you.
In our web design example, the agency in question had experience and a track record of delivering results to similar businesses. That made it easy for them to pitch their value – they had evidence to point to their impact, and a compelling story to tell about their value proposition.
If you’re in an industry where it’s harder to quantify these things, there are two other methods you can employ.
Whatever the case may be, remember that figuring out the true impact you can have on their business is what will enable you to get paid value-based fees…
Don’t take their stated goal of wanting more website traffic as their definitive goal. Dig deeper: look for the true impact you can deliver for them (keep asking ‘why’ questions so you can align your project to their business goals).
If you’re interested in learning more about having effective (value-based!) sales meetings, check out the resources section below for a free copy of my Value Selling eBook. Additionally, you’ll also find a link to a webinar I recorded on the topic.
Using this material, you’ll find it easier than ever to figure out what clients really want – so you can be the one that supplies it to them.
Let’s consider the realities of value pricing by changing tack for a minute.
Consider one of the most widely available substances in any shop in the world – bottled water.
If we apply the pricing models we’ve previously discussed, we can see how we could come to very different values for the same product depending on how it’s presented to us.
Let’s take a simple 500 ml (16 oz for my American readers) bottle of store-brand water.
If you have a time-based pricing mindset, you might estimate how long it took to manufacture the bottle, and how long it took to locate the spring it was filled from. Say the end cost is 60p.
If you were a little more generous and used a “Cost Plus” model, you’d add a margin of profit so the seller has an incentive to work with you. Let’s say the end cost is £1 in this case.
Both fairly modest prices, but they’re quite in keeping with what you’d expect to see. However, what would happen if we applied a value pricing paradigm?
To consider how this could happen, imagine the following situation:
You’re walking through the desert. With the sun beating down on you, the sand beneath your feet feels like it’s on fire. There’s nothing but dunes for miles around…
But worse than the burning sand is your thirst. You’re desperate for a drink, and you’d pay any price for it right now.
Then in the distance, you see a figure on the horizon. It’s another lost traveller, just like you – but they seem to be in much better condition. As they get closer, you see why: they’ve got a bag filled with little plastic bottles of water on their back!
In this moment, how much would you pay for one of those little bottles?
As the sun beats down on you with no reprieve in sight, wouldn’t it be fair to say that a little bottle of water could be worth far more than 60p?
Odds are you’d pay whatever you could just to get your hands on it. £10, £20, £100 – it all depends on just how thirsty you are.
And if you were thirsty enough to hand over £100 to this well-stocked traveller but they only charged you £20, how happy would you be?
Likely jumping out of your skin at the great deal you got!
That’s what value pricing is all about: figuring out how badly your client needs a drink, then giving them that drink at a cost that excites them (i.e. that makes working with you a no-brainer).
Granted, the situations you face as an agency aren’t as life and death as a wander through the desert, but the moral of the story still applies:
Clients don’t buy time, effort or input.
Clients buy results.
Once you internalise this lesson, you’ll be in a much better position to both deliver great results to clients and get paid much more attractive fees.
To drive home the importance of this shift in mindset, I’d like to share with you a story from the very early days of my coaching agency.
Let’s take a trip down memory lane together as I recount a tale from the early days of my coaching business.
I remember it like it was yesterday…
I had met a great prospect, and things were going well. They were receptive to my pitch – they were even interested enough to ask for a quote.
Without giving the matter much thought, I quoted them a day rate I felt was reasonable for both of us. I didn’t have much to base this on bar a little research I had done on some of my competitors.
The price didn’t seem to concern them (in hindsight, this was a red flag: I should have seen that I was clearly too cheap) – they said they’d think about it and let me know.
A few days later, that prospect got back in touch with me. They were eager to work with me, totally sold on my proposition and offer to them…
Except there was one little hitch.
They had been in contact with another coach whose day rate was £100/day less than mine. And unless I was willing to price match, they were going to go with my competitor.
Being new to the coaching game, I felt I had no choice but to discount my prices to win that first client. There was no escaping the Price-Match Trap in this instance…
But as I established my business, the lessons I learned from that first encounter proved invaluable, namely:
Let’s expand on these three points now.
Time is a commodity. When you quote a price to your client based on how long something will take you to complete, you leave yourself vulnerable in two ways:
In either case, it’s very easy for prospects to compare your proposal to what other agencies are offering too. And not only is pricing based on time easy to compete against – it also fails to take the client’s true desires into account (i.e. the outcomes and impact they’re after).
In my case, there was no discussion of the value my competitor and I could bring to the table – it was purely a matter of cost. Because I had chosen to quote a day rate (and hadn’t taken the time to properly articulate my value), I was bargained down.
Being able to perform some technical task isn’t what sets you apart from the competition. Copywriting, web design, SEO, PR management – these skills are commodities. There are hundreds of other businesses out there that can do those same basic things.
What sets you apart is your experience and your creativity in generating great results for your clients… but so often, agencies get bogged down in the technical side of their work.
Your skills are a prerequisite but remember: the real value you can offer clients comes from your experience and creativity.
A run-of-the-mill web design agency is competing with cheap freelancers in Eastern Europe & Asia, website building software such as Wix and GoDaddy, and a dozen other local firms all offering the same services. In this environment, it’s easy to see how competing based on price is a race to the bottom.
However, if they can learn to use their experience serving a particular niche (or their creativity in delivering great results) to their advantage, they can more easily stand out from the crowd. Discussions of price will fade into the background in the face of the new reality:
All your competitors could be cheaper upfront, sure – but what you’re offering is so much better.
As we’ve already covered in this article, clients don’t really care how much the work costs you, how long it will take you, or if you’re proud of the final results.
All they truly care about is the value you can create for their business.
If you can learn to frame your relationship in terms of value (and not just how much you cost), then you’ll be in a position to earn far better fees for your work.
These three truths were hard-won for me (to be honest, this wasn’t the only client I let talk me down to a lower rate!), but I’ve been able to spare my coaching clients plenty of headaches by passing these lessons on.
If you find yourself competing based on price, bargaining with clients (and losing), and even losing out to other businesses that don’t deliver as much value as you do…
Then consider how you could best sell your value to prospects.
Develop systems for communicating your worth, and for figuring out precisely what your clients are looking for.
If you can internalise these truths and use them in your dealings with clients, you’ll be in a much better position than your competitors.
In the next section, we’ll look at a relevant case study that will show you how effective using a value pricing model could be for your agency.
I’ve mentioned their name a few times throughout this article already. That’s because I think you can learn a lot from this case study if you’re currently trying to implement a value pricing structure in your agency.
Pedroza Communications is a PR company working in the education sector. They took me on because, despite being pretty well-established in their niche, they felt they were not growing as much as they could. In fact, they felt as if they constantly taking one step forward and one backwards, never getting any closer to that endpoint they were aiming for.
My work as an agency coach is rarely a simple “one and done” proposition. We dig deep and look to see what’s really going in the business. Oftentimes, the client is surprised when we find the real cause of their troubles.
In this case, we made a few minor changes to the operational structure, workflows, and the like… but the single biggest area of concern was their pricing model.
Like many other agencies, Perdoza Communications employed a time-based pricing model when pitching to new prospects. And while that helped them to secure plenty of business, the work they were doing wasn’t as profitable as it could be.
We looked at their pricing model and identified a few key changes they could make (maybe you could use these too?):
With a little bravery, the MD committed to making these changes. We worked together on the next brief, and by using this approach, we came to a price that was substantially higher than they would have charged previously…
But despite this increase in price, they were still able to easily land the prospect as a new client. It was almost a no-brainer, considering the value they brought to the table.
Just one year later, they had switched over to using this approach with all their prospects. And the results?
Their profits were 66% higher than they had been just 12 months prior.
I’ve seen results just like these happen for agencies in many other markets too. The same rules apply, regardless of your niche: learn to sell based on value (and not just on time), and your business will reap the benefits.
In this article, we’ve dug deep into the topic of value selling and pricing.
Switching to a value-based pricing model can seem quite challenging with lots of questions and excuses including:
Answering these questions can be tough…
But luckily, I’ve got some great resources to help you with the process.
First off – you can get a free copy of my Value Selling eBook (click here), which outlines the 10 steps you can take to implement value selling and pricing in your business. Inside, you’ll get the exact steps for selling based on value, how and when to have the value conversation with prospects, and much more.
Additionally, Hubspot has some great content on value pricing frameworks. You can read more about that here.
In case you’re sceptical about how well these techniques will work for your business, here’s a case study of a small design agency that revolutionised their business by switching to a value-based pricing model.
Finally, here’s a link to a book called “Breaking the Time Barrier”. Published by FreshBooks, it’s a short read, but very valuable. And best of all, it’s free!
We’ve covered a lot of information in this article. At this stage, your head is probably spinning at the possibilities before you!
To help you get started with the process of value pricing, I’ve outlined the very next steps you should take in a handy One-Page Action Plan.
To get your copy for free, just click the picture below for instant access.
Switching to a value-based pricing model is one of the best things you can do to grow your agency sustainably and improve your profits…
And with the information shared in this article, you’ll be able to make this switch faster and easier than ever before.
I guarantee you that taking this approach will have the biggest impact on your profits more than anything else you can do in your agency.
My aim with this article was to teach you everything you need to know to start implementing a value pricing model in your business today. And with everything we’ve discussed here, I’m confident that you can:
I’d love to hear about your experiences with value pricing, so please reply in the comments below with your thoughts to these 2 questions:
What pricing model do you use in your agency, and what do you think the advantages/disadvantages of doing so are?
If you don’t currently use a value pricing model in your business, what’s stopping you?
I look forward to reading your answers below!
P.S. Don’t forget to download your One-Page Action Plan. Click here to get instant access.
Yet in business, I see time and time again, agencies trying to sell their prospective clients a vitamin pill. This is not a good way to sell.
Imagine going to your best friend’s wedding and having too good a time and waking up with an almighty headache the next morning. Would you reach for a pain killer or take a vitamin pill? Well a pain killer of course!
Clients who are in pain have an urgent need to solve that pain (with your solution). Yet many agencies are trying to sell their prospective clients a vitamin pill (something that is nice to have but not urgent) rather than a pain killer!
So when you are marketing & selling your product or service, are you addressing the client’s pain or are you telling them your product is something that would be great to have in their business?
A real bugbear of mine is that many websites make this mistake by starting out selling the vitamin (which looks like telling the client how great YOU are and what YOU do on your home page) rather than recognising the pain (which looks like building empathy with your client by showing you understand the pain they are in).
This could well be the case with your own website?
They are trying to sell the client something they may not be aware that they currently need (the vitamin pill) because although it might enhance their business, it doesn’t solve one of their major pains right now (the pain killer).
Let me give you a real example of this – something that happened to me last week. I got a cold call from a company that can track visitors to your website and give you detailed info on them.
Sounds great right?
The issue is that this isn’t one of my current pains. A current pain for me (regarding web traffic) is that I would like to get more traffic to my site. Only then would it be worth investing a monthly fee on visitor tracking software. Meanwhile, that product is just a vitamin pill for me, so I am not going to buy it! The guy on the phone wasn’t really listening to me and just tried to tell that spending £500 / month on their software was a good investment. Not if it doesn’t solve one of my key pains!
They needed to better target by understanding who they were calling first.
If we start by identifying the client’s pain then we ‘stand in the client’s shoes’ and demonstrate we understand them (which builds empathy, a crucial part of the sales process). The language we use when we discuss our product or service will then be geared to show the client how we solve that pain rather than just discussing the features of our product (which we can do later).
If we do this we are much more likely to build empathy with a client which will lead them to say ‘tell me more’ and then you have started a dialogue that can more easily lead to a sale.
They contacted Da Costa Coaching after listening to Rob gave a talk at a local networking event. They had worked with a coach previously but saw that Rob’s service-based agency experience together with his no-nonsense and pragmatic approach would be a good fit for Cityzen.
Charlotte Smith Director commented “From our experience, we saw that many coaching firms tend to have a predefined approach that they use with all clients, regardless of need or size. The first thing Rob said when I met him was “I’ll listen to you and address the underlying needs of the business”. True to his word, Rob did listen and adapted his tools and processes to fit our needs. For us, he has been a coach, mentor, trainer and at times, a shoulder to cry on! He has created accountability to help drive our practice forward.”
One of the conundrums Cityzen faced was trying to service both domestic and commercial clients. This meant within one working day they could be designing homeless housing for a Council and a domestic loft conversion. It was clear that the domestic clients needed a lot more account management (hand holding, explanations, more frequent communications and so on) than the commercial clients, who had a better understanding of the process and also trusted fellow professionals to get on and deliver their work.
The coaching process led many discussions around identifying ideal target customers (customer personas), enabling Cityzen to define and focus on profitable and more enjoyable clients. But it soon became obvious there was a need to niche. Like many companies, there initially was a reticence because of the potential for lost business. After spending time researching the market and analysing time spent on customer work, it became apparent that (a) The commercial market was plenty big enough for Cityzen to solely focus on (b) the way to engage with this sector was by building face to face relationships and (c) the domestic clients took approximately double the amount of account management and as a consequence, were often unprofitable.
Faced with this information, Cityzen committed 100% to niching their agency to focus on commercial clients only. This meant
The whole of 2018-19: Offering professional services to B2B and B2C, delivering construction-focused design
2019-20: delivering the same package but niched to B2B only (developers, concept architects, contractors)
Charlotte Smith, Director, concluded “It took, what felt like, some bravery at the time to turn our backs on domestic work but the strategy we worked through with Rob has put us in the strongest position we have ever been in. Not only that, but the work we are being invited to do is more aligned with our values, and fulfilling for our team.”
This is a great story of focusing on a niche and using the intersection of where you get the best results, where you are most profitable and where your passion lies, to work out what your niche should be. It also shows the power having a clear niche will have on your bottom line (from £163k to £1.1m).
I’ve seen it time and time again...
Agencies that have a clearly defined niche massively outperform those that don’t in almost every way: revenue, customer retention, employee satisfaction, and in the quality of their client relationships (because prospects see you as the expert, not just as a supplier).
A big statement to make? Sure - but I know it’s accurate because I’ve lived it. Niching my agency allowed me to triple my profits inside 6 months (you’ll read more about that in the next section).
And in my coaching practice, helping clients to niche their business is one of my most common interventions.
I recently worked with a PR firm that served three main niches. They were doing well, but were struggling to grow their agency and win new business. They felt stuck - like they were perpetually taking one step forward and one step back, never truly making progress towards their goals.
We worked together to answer three core questions (covered later in this article) about their business, the answers to which revealed a clear target niche for them. And by honing in on this area of their business and committing to it in their sales & marketing, they were able to land three new (highly profitable!) clients in just 90 days.
The world values specialists. When you have a cold or a flu, you head over to the GP and take their advice as gospel. But when you need urgent surgery on your elbow, you don’t settle for a GP - you go for the best surgeon you can find.
It’s the same with your agency. People with burning problems want to have them solved by experts. When you serve a specific group of customers, you can:
How much less stressful would running your business be if you knew you could serve a highly targeted group of customers that saw you as an expert (and paid you the fees you deserve, without question)?
In this article, we’re focusing on how niching your agency can help you to supercharge your profitability, attract a constant stream of great prospects, and effortlessly build stronger relationships with clients (which is SO much less stressful than running a generalist agency).
Here’s what we’re going to cover in this article:
The information you’ll learn here is the kind of advice my coaching clients routinely implement with tremendous results. So if you want to start getting paid like a specialist (and have more fun with your business than ever before), then read on!
We cover a ton of information here, and I know how hard it can be to actually apply everything you read when you have so much else on your plate already. That’s why I’ve summarised everything you need to know in this One-Page Action Plan. Click the image below for instant access.
No matter what industry you’re in, niching works. I saw it when I was running my own agency. I’ve seen in my clients businesses’ - and I’ve even seen it in my coaching business.
Back in 2007, when I first started my practice, I was a generalist coach. Whether the client was a large corporation or a small startup, I was happy to help them all the same. I thought that I needed to be a generalist from the get-go so I could get my coaching business off the ground, and set up my website and marketing to reflect this.
The issue with this approach was that in trying to appeal to everyone, I ended up appealing to no one.
I didn’t have a compelling story to tell larger clients because I didn’t have loads of “large corporate experience”. As a result, those types of companies were hard to win.
On the other hand, I had plenty of relevant expertise to offer startups and smaller businesses - but when they heard that I also worked with bigger firms, they would assume that I couldn’t understand the particulars of their situation. Consequently, I struggled to land clients from either category.
I was in a lose-lose position. It turned out that my beliefs about niching and winning new business were completely backwards. Rather than making me more attractive to prospects, positioning myself as a generalist was actually hurting my chances.
But if I took the opposite approach, and instead chose to niche my offering and serve a small group of potential customers above all others?
I would be in a much stronger position to succeed.
Sometimes the simplest truths are the most difficult ones to accept… but after much soul searching, I made what I felt was a very brave decision to niche my business.
For me, choosing my niche was not difficult. I had been a part of the marketing agency world for the previous 15 years as head of my own agency, so I was certain of two things:
But despite being passionate about the niche, and being confident I could deliver results to my clients… I still hesitated.
Looking back now, I can see that it felt like a big decision to make because I still believed that I’d miss out on tons of business opportunities by picking one niche to serve.
I thought about it for hours, days, weeks on end. I’d ask myself “But if I focus just on the marketing agency sector, won’t I miss out on lots of other potential clients?”
As I’ve seen many times in my life, honest reflection is key to finding an answer to the difficult questions. In this case, I had to face up to the reality that I wasn’t winning many clients anyway. Most of them were put off by my generalist positioning, choosing instead to go with more focused alternatives. So really, I didn’t have much to lose. Worst-case scenario, I could pick a different niche, or go back to being generalist if niching didn’t work out.
Fortunately, that wasn’t an issue, as niching my business turned out to be the best decision I ever made.
Within six months, I had tripled my profits and was winning new business left and right. And not any old clients either - ones that I understood deeply (so I knew I could do a fantastic job for them)... ones I truly enjoyed working with.
It’s been almost 13 years since I first started serving this niche above all others. And with the benefit of this experience, I have two key learnings to share with you. Using this advice, you’ll be able to better establish your niche, serve your target audience and build a sustainable agency that profits for the months and years to come.
Defining a niche for your business doesn’t mean that you can never take on an opportunity outside of that niche. While you don’t market and sell yourself to other niches, it’s still possible that clients outside your chosen target audience will seek you out - or that a chance will come across your path that’s too good to ignore.
In these cases, you can make a decision based on the facts at hand. If you feel your agency is a good fit for the work based on your culture, you can deliver good results to the client and would also enjoy working with them, then go for it!
Few agencies will serve just their niche and no one else. You’re free to pitch for and serve business outside of your chosen market. As long as you don’t forget what your core focus is (and why you picked it), there’s nothing to worry about.
And remember: choosing a niche doesn’t mean you’re committed to it forevermore. In fact, I frequently tell my clients that it’s far better to start niche and then broaden out, rather than starting broad and trying to narrow down. As you establish a strong position in your target market, you’ll be able to expand the scope of services you offer to people outside that niche. Over time, you can transition completely if you like.
I’ve seen this in my coaching business. While I started out working with marketing agencies only, I’ve since gained enough experience in the marketplace to help other types of businesses too. My client base is still mostly marketing agencies, but has expanded to include clients outside this niche too. It’s a roughly 80/20 split between niche and non-niche clients.
You’ll probably experience a similar development in your business over time. If you choose your niche well at the beginning, you’ll continue to serve that market above all others - but there’s nothing wrong with dipping your toes in other waters too, if you feel the prospect is a good fit and you will be able to do a good job for them.
Niche businesses nearly always charge more than generalist ones, simply because they are seen as subject matter experts. The more narrowly defined your niche, the more likely it is prospects will assume you are an expert in the field.
As a niche agency, you are seen as an expert. You’re not a mere supplier for some commodity: you’re a trusted partner, someone to be consulted. This, in turn, allows you to build better relationships with your clients - and earn higher fees.
That’s why surgeons get paid far more than GP’s. It’s why World War II historians are seen as more knowledgeable than history teachers when it comes to discussions of World War II. And it’s why some web development agencies can charge £50,000 for a website (while others struggle get paid even £500).
To be honest… it was easy for me to select the niche I’d serve with my coaching business.
As we discussed in the previous section, it just made sense to serve marketing agencies. However, through working with over 250 agencies in a coaching capacity, I’ve seen that it’s not always so easy to pick your niche. In fact, it can be downright confusing if you don’t know what segment of your business to focus on.
I find that there’s a few key questions businesses need to answer before they can choose their best niche. Consider these questions when researching what niche you’d like to target:
You can visualise these questions with the following graphic:
You want your chosen niche to be at the intersection of the Money, Passion, and Results circles. This will allow you to build a sustainable business where you can deliver great results for clients, earn fees you deserve and enjoy the work you do.
Operating a business that fits in just one of these circles (or even in an overlap between two) will be unsustainable in the long run.
Take the time to figure out what niche lies in the overlap between these three circles. This market will become your core focus, allowing you to build a stable agency dedicated to serving those customers.
If you’ve run through the three questions above and are still having some trouble wrapping your head around niching… consider the following framework.
There are four easy ways you can think about niching your agency.
Let’s examine these in more detail below.
This one is self-explanatory: you can choose to serve a market based on geographic location.
This can be a good strategy when knowing the area is a competitive advantage. Understanding the lay of the land and being able to “speak the language” of your target audience is often an invaluable asset in winning their business.
Examples of industries/verticals include pharmaceutical, telecoms, tech, and education.
These sector definitions are quite broad, so it can be a good idea to niche down even further by identifying a sub-sector in the niche e.g. rather than serving tech companies, you could drill down and focus on helping consumer tech start-ups or B2B SaaS companies.
Examples of deliverables/services you may provide could include PR, web development, SEO etc. Once again, it’s important to ask yourself if the specific service you’ve identified is niche enough… or if it’s too broad.
If it is too broad, you need to establish a niche position that makes you look like a specialist, not a generalist. For example, you don’t just offer PR services - you’re an expert in Crisis Communications. You’re not just a web developer - you’re a web developer that specialises in integrating CRM systems.
Sometimes, you’ll find that a lot of your clients are facing broadly similar problems. E.g. you help startups win funding from competitive grant programs, or you help financial practitioners generate more leads for their services.
If you habitually help your clients with the same problems, you could consider basing your business around solving this problem. And if you can explain how and why you are uniquely qualified to serve this sector, you’ll do just fine!
Once you’ve picked your niche, you need to commit.
All of your outward communications should be crafted with this niche in mind. If you’re advertising, you should endeavour to speak to your target audience directly. Forget about being all things to all people - serve the few so that you may build a profitable, stable business that will eventually serve the many (if you want it to).
Your goal is to be seen as an expert in your chosen sector. In practical terms, your website should be geared towards achieving this outcome. First impressions matter. You don’t have very long to convince people you can help them. As soon as prospects land on your site, they should be able to tell:
Let’s look at some quick examples to really drive this point home.
Look at this web design agency. Here’s the first thing you see when you click in…
This is the site of a web design agency located in East London - but you wouldn’t know that from looking at their home page.
Their offer of “bespoke design and web development” is stuck in the top left corner in small white font. The most prominent thing on the page is the fact that they’re looking to hire developers.
Suffice to say that prospective clients who come across their website are unlikely to stick around for very long.
To apply the criteria listed above to this site:
Now, let’s look at a better example. This is another web design agency. Here’s the first thing you see when you click onto their site:
Instantly eye-catching visual imagery, a clear contact button, an uncluttered screen and an obvious next action to take. In addition to this, they instantly speak to their audience (ambitious businesses who want their brand to “thrive online”).
Their niche is even clearer when we scroll down to the next section…
Great use of white space, and a beautiful design in general. Important for a design agency, sure - but let’s apply our criteria from above to see how well they fare.
Of course, there’s more to marketing than just your website. You also need to think about how people will find you.
If you’re running ads, they need to be congruent with the niche you’re targeting. Speak their language, and tell a consistent story across all mediums you use to reach them.
Beyond ads and digital outreach, you also have to be mindful of the networking events you attend.
Packaging design business owners shouldn’t be attending events where they meet accountants, bankers, personal trainers & hairdressers. Sure, they might have some great conversations - but they won’t be talking to their target customers.
If you’re not sure who your target customers are, you need to spend some time developing crystal-clear customer personas (or customer avatars). For more info on how to do that, check out my Customer Personas Workbook (discussed in the Resources section below).
Having a clearly defined niche and understand who you’re targeting is a massive part of running a successful business in any industry, not just in the agency space. To prove this point, let’s look at another example… coffee.
I don’t know about you, but I can’t start my day without a good cup of coffee. And to be honest, I’m pretty spoilt for choice. Living in the seaside town of Brighton in the UK, I can’t go more than 100 yards without coming across a coffee shop.
In my eight years of living here, I’ve seen many coffee shops come and go. In fact, I’ve actually worked with one or two over the years (a good example of how you can take on clients slightly outside of your niche when you can add value to their business).
Trust me: it’s extremely difficult for a coffee shop to stand out from the crowd here. They all sell the same basic product (coffee), have roughly the same atmosphere and decor, and operate their businesses the same.
Most struggle to define a clear niche to target. And so they try to cover all bases (e.g. offering breakfasts, takeaway lunches, teas etc.) - this is a mistake. As we’ve already discussed, trying to appeal to more and more people usually has the opposite effect you’d like it to have.
Singing the same tune as everyone else is not a good way to get heard over the noise. This is why the majority of coffee shops are just getting by. The owners don’t get rich - at best, most just build a high-stress job for themselves.
Of course, some coffee shops are doing very well. Take Small Batch Coffee Company, for instance.
When they first started in 2007, Small Batch was a small-scale business. Their only goal was to roast small batches of high-quality coffee. After a couple of years of this, they opened their first few coffee shops. Gradually, they expanded the company’s wholesale and retail business to include multiple coffee shops.
Today, Small Batch Coffee is a hugely successful coffee wholesaler, supplying high-quality, ethically sourced coffee to cafes and restaurants all over the south of England. They also sell coffee online direct to retail customers and serve their own customers in seven different locations.
I believe that Small Batch have succeeded because, right from the start, they were clear about their niche. They didn’t open up another generic coffee shop and starting competing with the 15 other stores within walking distance of theirs. They focused on providing home-roasted, high-quality coffee to the exclusion of all else. At least at first. They were singing a different tune… and pretty soon, people started to pay attention to them.
You’ll also notice that they didn’t confine themselves to this niche. Once they had established a position in this space, they expanded outwards into complementary markets (known as ‘shoulder niches’). This contrasts with the standard generalist approach taken by most coffee shops.
In addition to this, Small Batch established a reputation for quality in the micro-roasting business, then carried it over into their retail operations. People know that if you’re looking for a good cup of coffee, you go to Small Batch. They prove that niching works.
In this section, I’m going to share with you some of the powerful tools you can use to help niche your agency.
Previously, we discussed some of the big issues that stop you from building a highly profitable niche agency. False beliefs, not taking the time to truly examine your business, and the fear of “missing out” on all the niches you don’t choose… all of these factors can hold back your business from growing like it should. Growing your agency is challenging enough - you don’t need all this extra baggage complicating matters too!
Luckily, I’ve developed some useful tools in my time as a coach to 250+ agencies. And in this section, I’d like to share these resources with you.
Firstly, you can get a free copy of my “Defining Your Niche” eBook. Inside, I break down the difference between niche and generalist agencies, the realities of running each type of business, and a super-simple (but powerful) framework for figuring out where your business is right now - and more importantly, how to get to where you want to be.
Secondly, If you’re completely new to the subject of niching, then I highly recommend you check out the book “Blue Ocean Strategy”. First published in 2005, it revolutionised the way I (and thousands of others) think about business. I’ve often applied its learnings with my coaching clients, many of whom have benefited tremendously from the ideas contained within.
The book likens competitive marketplaces to “red oceans”: waters where fish fight for scraps and tear strips from each other in an effort to survive. Companies operating in red oceans typically have smaller profit margins, experience more competitive pressure and have a harder, more stressful time in general.
The book then goes on to explain that you don’t have to dive into these overcrowded markets. You can instead head for open water and seek out your own “blue ocean” (an untapped or underserved niche). These spaces are less competitive, allowing you to more easily establish a position in the niche (and even become the dominant force in it).
Thirdly, you can also get a free copy of my Customer Personas Workbook. Rock-solid customer personas are the foundation your niching efforts are built on. In this PDF, you’ll get my step-by-step system for getting in the heads of your target market, deeply understanding their needs, and effortlessly tailoring your business to their desires. This is the exact stuff I do with clients every week as part of my coaching practice, and some of the highest-ROI work you can do as an agency owner.
Finally, we have to face up to reality - not all niches are created equal. Some seem great on paper, but don’t pan out like they should when it comes to overall market demand. And one of the best ways to gauge how viable a niche is? Keyword research.
One of my favourite keyword research tools is Keywords Everywhere. This free browser extension gives you access to tons of keyword-related info that you’d otherwise have to pay for via expensive Adwords campaigns and the like.
You can also consider Neil Patel’s namesake app: another great resource at your disposal.
And if you don’t mind spending a little money, you should check out Ahrefs, which has tons of useful content for researching a niche, and positioning yourself within one.
Using tools like these, you’ll be able to research your chosen niche & associated keywords in detail, assessing its viability without committing lots of money and time to the cause.
We’ve covered a lot of ground in this article. To help keep this actionable, I’ve outlined the very next steps you should take to start the process of niching your agency.
If you’re interested in getting your hands on this free One-Page Action Plan, click the picture below for instant access.
The value of having a clearly defined niche cannot be understated. In my experience, niche agencies outperform generalist ones in almost every way. They:
Running a niched agency doesn’t entrap you - it frees you to build a business that delivers great results to clients, earns you the fees you deserve, and allows you to work on projects you’re excited about.
Your ideal niche is at the intersection of profitability, your ability to deliver results to clients, and what you’re excited about (Money, Passion and Results). Making anything else your focus is unsustainable in the long run.
You can also think of niching in terms of geography, industry, service and the problem you’re solving. Remember, these are just four different ways of considering how you might differentiate your business from your generalist competitors.
Once you’ve picked a niche, you have to commit to it. All of your outbound communication (including your website) should demonstrate your understanding of that niche and your ability to solve their problems. Websites or ads that miss the mark with this will hold your agency back and cause you to lose out on lots of business, so it’s worth paying attention to.
Having a clearly defined niche to serve is important in any industry. Web design, marketing, 3D architectural rendering, and even for coffee shops - businesses need to pick a niche to serve above all others if they hope to succeed in these spaces.
My aim with this article was to teach you everything you need to know to start niching your business today. With the tools, processes, templates and frameworks we’ve discussed here, I’m confident that you can:
I’d love to hear about your experiences with niching, so please reply in the comments below with your thoughts to these 2 questions:
I look forward to reading your answers below!
P.S. Don’t forget to download your One-Page Action Plan by clicking the image below.
As we all know, the pressure to run faster can come from different sources. It might be clients who want everything yesterday or staff who always seem to want us to deliver more in less time. But for many of us, the biggest source of pressure is ourselves – because we like to busy but aren’t always clear what we need to be busy doing!
The busy fool works long hours and can’t turn their phone off. They are a hive of activity but ask yourself this – are they moving their business or project forward? If not, then they are being busy for the sake of being busy – the busy fool.
Understanding what is VITAL v what is IMPORTANT
Many people start their day/week with a “to-do list” which they diligently work their way through from top to bottom. Forget it. Instead, identify the top three vital actions on the list (which are often the hardest things) that can only be done by you. What are the real priorities? Focus on those first and then tackle the next three priorities and so on.
Doing nothing (procrastination) is rarely a safe option. Yet sometimes doing nothing and giving yourself some breathing space to think, stand back and prioritise, is exactly what you need to do!
What is the impact on the business? The danger is we become purely focused on the short term rather than the bigger picture and you get a sense of ‘1 step forward and 1 step backwards’.
Some organisations seem to work harder and longer but productivity goes down. A business full of busy fools!
So here are 7 useful tips to help you be busy doing the right things:
Focusing on the right things to do to move your business forward might seem like an obvious statement but you won’t be surprised to learn that this is a common topic of conversation with clients (hence this blog post!). Have a read of my eBook on ‘winning back time’ (complete the box below to get instant access).
Please leave a comment if you have any additional favourite tools and tips to share.
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I want to share something that may help my fellow agency owners. I ran my own agency for 11 years (before selling up), and even though I’m grateful for the experience… man, there were some hard times.
Lately, I’ve been reflecting on the experience I had towards the end of running my marketing agency. I was thinking about all the hard times, and how when I was so deep in the valley, it was tough to see the light. So I decided to write a letter to myself 15 years ago. I wish I had this letter at the time because it would have been so encouraging, given what I was going through. I wasn’t going to share this, but it may help some of you, so here you go. Here’s the letter I wrote to Rob, the burned out agency owner, 15 years ago.
I know you aren’t that motivated to be at work today and you are almost certainly distracted. No doubt your day will be filled with handling difficult clients. I know how hard it’s been recently dealing with the loss of XYZ client. They were 40% of your revenue, and you lost them virtually overnight. You’re panicking, and wondering how you’re going to make payroll with such a big loss.
You’re walking into work every day expecting to deal with yet another ‘wheelbarrow of crap’. Problem after problem. Frustration after frustration. You’re wondering how the hell the ACTUAL business has strayed so far away from the VISION you originally had for it.
You’re wondering how long you’re going to feel so damn… lonely.
But before you throw away a great business because you think the other man’s grass is greener, let me tell you one important thing: It gets better,
Rob, my friend, here is what you need to do to turn it around:
Trust me, if you do these things, you will quickly realise there are more options than just selling the business. And done right, you could have the freedom to pursue other things. Like travel more. Start that business in Spain. Become a coach and so on.
Do you know the best part, Rob? The part you can’t see right now, but I wish you could? It’s that you can do all this while keeping a business running that earns you a good income and provides a great life.
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