There are three primary sources for new business and healthy agencies generally grow in three ways equally. The first is prospecting which accounts for about a third of new revenue. The second is organic growth among existing clients which contributes another third and referrals bring in the rest. Agencies who are aggressive prospectors but leave the second two opportunities to chance are leaving money on the table. In fact, data shows that organic growth and referrals are far more likely to lead to a new client and far less expensive than prospecting.
Prospecting is hard and has the lowest rate of return. Response rates from marketers are declining. Win rates are generally low. The investment in people and pitches is high. And the disruption to the agency is extreme. Contrary to prospecting, the data tells us that personal recommendations, a friendly introduction, a trusted source, a credible referral are the top factors that lead to new business. Cold calling, lack of differentiation, no awareness, too much competition are the top reasons that prospecting for new business fails. Putting all your effort behind a hunter and sending them out into the wild may just be ignoring as much as two-thirds of your opportunity to grow.
Why then are these areas neglected? From conversations I’ve had with agency owners, I believe it is a couple of factors which can be resolved easily. It starts with leadership acknowledging the importance of all three channels and developing individual plans to attack each. It may require some training and coaching of staff and incentives for those involved. Most importantly, it is a cultural change. As Philip Kotler said, the sales department isn’t the whole company, but the whole company better be the sales department. Personal connections, networking, and referrals are the richest sources of new business. Developing a strategy and implementing a process to leverage these sources is time well spent.
Another challenge is the lack of time available for leadership to focus on organic growth. They are typically over-scheduled with client work and have little time to think about or plan for new opportunities. Management needs to insure they have time set aside for client growth. And then there are the seemingly endless issues within the client relationship that diminish the account team’s ability or confidence to ask that client for more work or help to introduce the agency to their peers. Having someone other than the primary account person do the hunting helps get the favor out of the fray. It may be the president or head of strategy; whoever can engage the client outside of the day-to-day struggles.
One thing I have observed among agency leaders is an overly humble attitude toward the value of their work. They are reluctant to ask a friend or associate to make an introduction because they think they are merely selling something. The right perspective is to suggest an introduction because the agency can solve real business problems. They forget why their clients hire them and why they keep paying them for their service. Agencies generate revenue, increase profit, grow the value of their client’s business and provide a very favorable return on their investment. Why wouldn’t they want their friends and colleagues to benefit as well? I’ll share more about referral strategies in a future post.
Agencies that have strategies to maximize all three channels will see consistent, predictable growth year over year. That doesn’t mean you should be any less aggressive finding new business. After all, it should be contributing about a third of your new revenue. But think about the way you look at your business overall with three distinct areas where new revenue will come in. Diversifying your sources will help smooth out the peaks and valleys in any one channel and provide stronger revenue growth overall.
If you want help, email me or spend some time on my website www.jheenan.com to get more tips on ad agency growth. If you liked this post and want more new business advice delivered to your inbox sign up for my monthly newsletter. #LetsGrow!