TL;DR

• Growing your agency can improve its stability.
• A stable agency should be able to shrug off most shocks to the system (delayed projects, new tech, bad hires, etc.).
• Growing the agency correctly with a repeatable revgen strategy and in the right direction improves stability.
• I'm booking new revgen review clients for April. Check out the details and LMK if you'd like to set up an intro call. Just reply to this email, and we can get started.
• Optimized margins through operational efficiency and pricing also improve agency stability.
• Wanna hang out and try some bourbon? I'll be joining the Bureau of Digital on their Owner Excursion: Kentucky Bourbon Trail event at the end of March.
• The 2024 Digital Services Salary Guide is live! Use code --- to take $95 off the final price.

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Why do you want to grow?

When an agency leader reaches out about a growth strategy, one of the first questions I ask is: “Why?”

Why do you want to grow?

There are some very real challenges down that path, and it’s good for me to understand what’s driving the change. Most of the time, it’s because they’re sick of the challenges faced by an agency of their size. The grass is always greener, right?

But recently, someone framed it in an interesting way.

When I asked why they wanted to grow their agency, they said:

(:wave: Can’t wait to get started next week!)

This was music to my ears. I’ve always presented my work as being first and foremost risk reduction. Hell, the hero text on my home page reads “Reliable Growth for Digital Agencies.” That reliability piece is huge. It’s core to what I deliver.

So, with that framing, let’s look at building a stable agency.

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What is stability?

When I talk about agency stability, I’m referring to it in the sense that shocks to the system won’t cause a major change to the strategy or operations of the agency. Little adjustments are fine and encouraged, but large ones aren’t.

Some shocks are so great that it’s impossible to build an agency that’s impervious to them. Things like major recessions or pandemics. Any agency is going to notice those.

But what about the more common shocks?

• A few clients pushing out projects shouldn’t cause panic.
• A new tech hitting the mainstream (see AI) shouldn’t make you rethink your entire strategy.
• A bad hire shouldn’t derail entire projects.

Unfortunately, last year, we saw examples of each of those play out across a number of different agencies. Some experienced major impacts from small shocks like these, and they shouldn’t have. In the finance world, we call this unsystematic or diversifiable risk.

When I design a growth strategy, the end result should be a less fragile agency.

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Stability through less fragility.

Don’t worry, this isn’t some thinly veiled retelling of Antifragile. We aren’t making agencies stronger through adversity. We’re designing them so they don’t notice adversity as much. Two key ways to do this are through growth and by using margin as a buffer. As a bonus, they’re even intertwined!

Growth

The first way to reduce fragility is through growing the agency. Larger firms are simply more able to shrug off shocks to the system. As an agency grows, it can be designed to incorporate a sort of built-in operational redundancy. This comes with a host of benefits that smaller shops don’t have access to.

Want to offer a better PTO or paternity leave policy? That’s easier to do if other employees can fill in when needed.

Did a new tech come out that could impact your firm? A larger shop can devote more resources to exploring that tech than a small shop. The larger shop can also afford to be wrong more often with these experiments if they size their bets appropriately.

If you grow the agency correctly, you’ll have a repeatable revgen strategy and system to drive sales even in adverse economic environments. Doing it incorrectly, like growing significantly off of a single client that makes up a major portion of your revenue, will add risk and reduce the stability of your agency.

So, while growth can add stability, all growth isn’t equal.

Side note – I just launched an Agency Revgen Review Service to help with this. Take a look, and if it sounds like a fit, let’s get a call scheduled. I’m booking new projects for April now.

Margins as a buffer

There are two main components to the margin conversation.

The first is general operational efficiency, and the second is proper pricing. These set your base margins, and they’re quickly becoming table stakes.

We can measure operational efficiency with metrics like utilization rates, project margin, rev/production-employee. There are entire consultancies built around this, so I’m not going to dive too deep here.

For the pricing conversation, it’s more experimental than anything else. Both in terms of framing your value and testing different price points. Putting in work here is almost always valuable. The impact on margins is massive.

The more margin you start with, the more you’ll be able to divert to absorb shocks.

It gives you space to maneuver.

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Intentional growth and healthy margins improve stability.

A stable agency is a byproduct of designing a growth strategy that optimizes growth and margins. Conveniently, I discussed this in a recent newsletter.

Hopefully, this alternative framing was helpful. The idea of a stable 7-person lifestyle shop is nice, but it doesn’t appear to be the norm. That doesn’t mean you need to grow-at-all-costs, but it does probably mean that a lot of agency leaders and owners need to reconsider their growth plans.

I’d love to know what you thought of this newsletter. I read and reply to all the feedback I get.

What’d you think?

-Nick

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P.S. - Wanna hang out and try some bourbon?

I'll be joining the Bureau of Digital on their Owner Excursion: Kentucky Bourbon Trail event at the end of March. If it's anything like other Bureau events, it'll be a great time!