By Pamela Phillips
Feast or Famine
You know what it’s like when you win a new client in your agency. There’s a buzz of excitement (and relief) to have a new project in the pipeline. All hands hit the deck as you and your team throw yourselves into the busy work of delivering the work.
Meanwhile, all the non-client work gets pushed back. Those things that you were doing a great job of keeping on top of until now - like reaching out to prospective clients, blog writing, or hosting webinars - start to slip. And before you know it, you’ve not written a blog for a month and nobody’s checked the pipeline report to see what’s coming up next after this project ends.
From ski trips to redundancies
And that’s the problem when this project inevitably does come to an end, you’ve got nothing lined up to work on next and you hit a dry spell. That buzz of excitement changes to become a worry about what costs you’ll need to cut just so you can afford to pay the wages next month.
This was exactly the situation one of our agency clients was in. One year they would have so much work that they could afford to take their whole team of 20 on a ski trip to France. And the next year they were sitting with HR working through a list of their team members working out who they would need to let go.
And here’s the other thing. The impact of the volatile swings in income isn’t only felt by the agency owners, but also by the whole team. When you see your colleagues being made redundant around you it affects your morale and makes you worry that you’ll be next.
Weary of the uncertainty and stress, the owners knew they needed to do something to get out of the feast or famine cycle in their agency.
And the changes they made are ones that you can make too so that you can create a more sustainable, and less volatile, income stream in your business too.
Here’s our 5 step list.
5 steps to breaking feast or famine in your agency
1. Manage your Pipeline
When you constantly invest in marketing and business development, even when you’re super busy, you take control of your new business pipeline.
It’s easy to keep on top of your marketing when you’re starting out and have less client work to focus on, but it becomes harder when you’re tied up working on projects and your team are all telling you they have no time to take on new work.
But marketing needs a steady momentum. Writing blogs and being active on social media is a slow burn but, as everyone says, consistency pays off in the long term.
When you’ve got a good pipeline of work coming in you’ll be less tempted to take on that purely transactional work that pays bills but that does nothing to help you build your brand or your business. Instead, you can choose who you work with and can focus solely on that profitable work that fits your target niche.
Tracking your pipeline income is a good place to start. Your pipeline tracker should look 6 months ahead and should include:
- Client Name
- Project Type
- Project £
- Likely start date
- Likely billing date
- % Likelihood of winning the project
You’ll easily be able to spot where the pipeline is weak and you need to increase your focus on business development work.
2. Key client dependency
This leads onto reducing your dependency on particular clients. It’s all well and good having lots of work in the pipeline, but when that all comes from one or two key clients then you’ve got an issue.
If one (or heavens forbid both) of those clients were to turn off the tap now then your business would be in trouble.
It’s also stressful as you know you have this vulnerability so it’s always at the back of your mind that this could happen.
As a rule of thumb, no more than 20% of your income should come from any single client. If 40% or more of your business comes from one client then you are particularly vulnerable.
This isn’t to say that you should necessarily turn away work from these clients, but you certainly shouldn’t be chasing after it at the expense of other opportunities, and you should be making sure that there is space in your resource planner for work with other businesses.
3. Retainer Income
Having a good base of retainer income is the dream for many agency owners.
Retainer income is where you have a regular commitment from your client to spend a certain amount every month for an extended period of time. This gives you far more certainty over your future income than project work does.
It’s also more profitable. Because it’s regular, you can set up a way of working that can be systemised to a degree. You also have less of that work that happens at the start and end of a project, like preparing the pitch, scoping, wrapping up.
But here’s the thing. There needs to be a compelling reason for your client to choose to take you on as a retained supplier.
It may be through your expertise in a particular field, or because you’ve developed a reputation for doing something that they need, or maybe you’ve developed a service that is unique and highly valued by your clients.
How can you package up a service in a way that means it can become a monthly offering?
If you run a video production agency, for example, a retained client may get an annual content plan plus 1 video per month in their retained package. A web designer can offer maintenance packages. Content marketers could offer to publish a certain number of blogs per month.
If you have repeat business from particular clients, consider approaching them with the idea of a retainer package for the services you regularly provide them.
4. Build a Cash buffer
When you hit a famine period and your pipeline of new work dries up, it’s your agency's cashflow that takes the first hit.
Having a cash buffer in your business relieves some of the pressure to take on those bad clients which ultimately set your agency on a downward spiral of less profitable work.
By setting aside cash in the feast times to ride out the famines you are building the resilience of your agency to the highs and lows of project work.
One way to build the cash buffer in your business is to make sure that you are charging appropriately for the work that you do.
Taking on the right work at the right margin is key to ensuring you are not running just to stand still. The margin that you make is what will pay for your marketing and business development work, which in turn will feedback into your pipeline.
If you’re not charging enough to be able to afford to take time out of the week to write those blogs or call those prospects, or to even outsource your marketing, then you’ll never break free of the feast or famine cycle.
Most agencies either have too much work or not enough at some stage in their journey. But if you are still riding those highs and lows when you’ve been in business for a few years then it’s time to look to see what you can do about that to bring some stability to your business (and life).
These are exactly the types of conversations we have with our agency coaching clients.
So if you think you need some support with tackling feast or famine in your business, let’s jump on a call to see if we’re a good fit.