TL;DR

• Share the Agency Web Dev / Design Survey with your team's devs and designers and get access to the full report when it's live!
• An agency’s ability to reliably generate new leads has a waterfall effect on just about every other aspect of running a shop.
• The more effective your leadgen is, the faster you’ll be able to grow.
• Knowing your level of leadgen today unlocks your ability to accurately forecast tomorrow.
• Any misstep in leadgen flows right to forecasting, which translates to poor utilization rates and margins.
• Agency leaders can improve leadgen by investing more in marketing, narrowing their focus, and becoming comfortable with sales.

Share the Agency Web Dev/Design Survey With Your Team

We’re exploring the trends shaping how developers and designers at digital agencies approach web dev and design work today.

Including:

• What devs and designers are actually using AI tools for.
• The average number and types of sites everyone’s working on.
• The tools devs and designers are using to create for the web.
• CMS preferences and trends (including headless).
• Hosting preferences.
• Emerging tech and trends.

Share the Agency Web Dev / Design Survey with your team's devs and designers and get access to the full report when it's live!

Agency Leadgen

Want better growth rates? Leadgen.

Want to forecast farther and more accurately? Leadgen.

Want better margins? Leadgen.

An agency’s ability to reliably generate new leads has a waterfall effect on just about every other aspect of running a shop. Let’s explore a few.

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Growth Rate Impacts

This one’s self-explanatory.

The more effective your leadgen is, the faster you’ll be able to grow.

“But Nick, which tactics are actually effective?!”

Here’s the tactic efficacy chart from How Digital Agencies Grow. We asked agency leaders to rank their revgen tactics from Low (1) to Medium (3) to high (5) based on how much of their revenue comes from each. Note that we only include rankings for those agencies that employed these tactics.

As the chart illustrates, most shops only see Low-to-Medium success from their revgen tactics. There's also a major disconnect between things that take a lot of resources (Podcasting, Blogging, and Newsletters) and their relative effectiveness.

Your most effective leadgen strategies are going to come from developing deeper relationships with current clients and partners to generate referrals. I've written extensively on how hoping for referrals isn't a growth strategy, but being intentional about referrals most definitely is.

Beyond referrals, RFPs and speaking at events can effectively drive net new business.

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Forecasting Impacts

Knowing your level of leadgen today unlocks your ability to accurately forecast tomorrow.

I used to be an equity analyst.

Skip to “THE POINT” if you’d rather not reminisce with me.

Beyond being a fun fact about me, it’s pertinent to this discussion since a major part of the job was building models to forecast future revenue, margins, and earnings per share.

I did this for enterprise software companies (Salesforce, Teradata, etc.) and the major semiconductor players (Nvidia, AMD, Intel, etc.).

Early on, I spent a massive amount of time learning how to forecast. I came in with just a few years in corporate finance and a degree in Finance. Neither of which really taught me how to forecast accurately. Sure, I could build pretty Excel models, but they weren’t accurate.

Forecast accuracy was something I had to work for.

It clicked when my boss told me to look at the decision chain. What was the foundation that most managers based their decisions on, even if they didn’t do it consciously?

It was growth expectations.

Did they expect to grow more quickly in the future, maintain, or decline?

If they thought their company was going to grow quickly, they’d be more comfortable investing in various projects. If they expected a decline, they’d be more likely to pullback spend or cut various expenses. Their growth expectations influenced their decisions whether they knew it or not.

To predict future growth expectations, we would model various end markets for their products. When I looked at Nvidia and AMD in 2012, I developed trackers to detect changes in consumer sentiment toward or away from them to predict market share shifts. This would then become an input into our revenue model.

That revenue model, which took up multiple Excel files and hundreds of hours of work each week, fed into a single top-line number in our income statement model. Getting revenue growth right was that critical.

THE POINT

If growth expectations are the foundation of accurate forecasting, and the precursor to growth expectations is leadgen, then getting reliable leadgen dialed in allows an agency leader to forecast more accurately.

Most shops need fewer than one new client a month to grow at industry-average rates.

Anecdotally, I’d put the average close rate between 25-45%. So you need to send four proposals a month.

Maybe a third of the conversations you have lead to a proposal. So, your prospect number grows to 12.

How many contacts actually have meaningful conversations? Half? Now that prospect number is 24.

What percent of site visits end in a contact form conversion? Not even going to guess this, but it’s low.

From our survey work, we know that it takes an average of 4.4 months to close a deal. So for January 2025, you need to drive a few thousand site visits today. Or you need 12-24 referrals this month.

If you know your conversion rates at each step, it’s trivial to work back to figure out what level of leadgen you need to grow, maintain, or contract.

Again, knowing your level of leadgen today unlocks your ability to accurately forecast tomorrow.

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Margin Impacts

By now, we all know that Agencies Don’t Scale, but if we look at scaling operations in the context of how quickly they can react to demand shifts,… we find they still don’t scale :D

Agencies produce value with their employees' ability to do work. In a 100% FTE environment, there’s a massive lag between an agency’s ability to generate work (4.4 months, as seen above) and its ability to hire additional qualified talent to do that work. Because of this, they either need to hire ahead of securing work or they need to keep capacity open.

Both of those harm utilization rates and margins.

It hurts even more when leadership is wrong about the amount of new work or talent needed. This is a downstream effect of poor forecasting. So any misstep in leadgen flows right to forecasting, which translates to poor utilization rates and margins.

Side note: I’ve noticed a shift in the industry where agencies are using more contractor and freelance talent. This is mainly at the large shops, but I’ve seen multiple 100+ FTE agencies supplementing with a bench of another 100-200 contractors or freelancers. This arrangement allows the agency to increase its capacity quickly to meet higher demand levels, but it also drains margins.

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Leadgen, The Answer to it All!

If it’s so important, then why tf hasn’t this been solved?

Well, it kind of has.

It’s just uncomfortable for a lot of agency leaders to embrace.

Invest more in marketing.

Most shops aren’t run by rockstar salespeople who can magically produce an endless supply of work. Most shops ARE run by reasonably capable leaders who are somewhat above-average at sales.

Doing sales without marketing is infinitely more challenging.

If the average shop invests 7% of revenue on sales and marketing, there isn’t a big budget for the marketing side. Simply adding a coordinator or director typically eats most of this budget, which then makes their jobs nearly impossible.

Want to grow faster than average?

Double it.

If you want your agency to grow sustainably, you must provide the necessary resources.

Focus.

Even doubling that budget won’t work if it’s spread across too many activities. It’s ok to experiment, in fact I encourage it, but you need 75% of that budget going toward things that work.

I’ve conducted several Revgen Reviews for all kinds of digital agencies, and not a single one has had Ideal Customer Profiles that did not require work. This is the first area where focusing can make or break an agency’s growth plans.

It’s impossible to effectively deliver a bunch of different messages to a random assortment of buyers and have them reliably work. Successful agencies will focus on 2-3 ICPs and dial them in perfectly.

Within those ICPs, identify the buying committee. Find out their pain points, where they get new information, and who they trust, and design poignant messaging pillars that resonate with them.

Find comfort in sales.

There isn’t a point in an agency’s life where leaders can slack off on sales. Even after outfitting a full sales org., leaders will always be called in to close significant deals.

Becoming comfortable in this role will make everything easier.

You aren’t just selling your agency’s services either. You’re selling key hires on why your agency is the place to join. You’re selling employees on your vision for what you’re all building toward. Some of you will eventually be selling an acquirer on why they should pay an expanded multiple for your business.

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Invest, focus, and find comfort.

Do those three well, and many leadgen issues begin to evaporate.

LMK if there's something specific you'd like me to cover in a future newsletter. I'm always eager to hear more about what you'd like help with.

Until next time!

-Nick

Upcoming Events

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