TL;DR

• I’ve been able to have even more chats with agency leaders since I started offering private review calls with our reports and guides.
• During those calls, similar topics emerged over the last few months. I ran through my notes and collected them here with some thoughts.
• Digital agency leaders seem most concerned about choppy sales, but they’re seeing pipelines begin to fill up.
• Other concerns included clients demanding more for less (what else is new?), salary pressure, and burnout, leading to an increase in owners asking about exit plans.
• Strategy season is in full swing, with many leadership teams prepping for leadership retreats / planning sessions.
• Finally, some leaders have expressed frustration as they try to integrate AI tools into their workflows (and get something useful out of them).

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I’ve been experimenting with adding the option for agency leaders to book private report review calls when they download or purchase one of my reports. I’ve had a fair bit of interest in these, and they’ve allowed me to have some deeper conversations with leadership teams. They usually start with some questions on one of the topics in a report, but most evolve into a broader discussion about the industry and their place in it.

I’m genuinely a curious person and thus live for these meandering conversations. I learn about new takes on specific trends, novel ways to approach the market, or new developments in the agency space.

I’ve kept notes on these conversations and have noticed some patterns emerging. I thought they’d be interesting to share...

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Here’s what’s top-of-mind for digital agency leaders:

Getting something out of AI. One of the main reports driving these calls is our Digital Agencies & AI Report, so it makes sense that many of the questions are around this topic. Leaders seem to have a mix of optimism and frustration around the tech. They read the report and saw the massive margin shift AI can unlock, but they’re frustrated by the implementation side. It requires a non-trivial amount of work to pull it off, and when your team’s already near burnout, that’s a big ask. This is why it’s critical to nail your fundamentals before trying to do anything fancy with AI. If something’s fundamentally broken in your strategy or business model, AI won’t cover that up. I help agency leaders make sure these fundamentals are in place, and I do it in 6-8 weeks on average. LMK if you’d like to explore that for your agency (reply to this email). I am available now to knock out a project or two by the end of the year. You can find more details on our Agency Assessment page.

Sales have been choppy all year. So many shops are having issues with delayed or canceled projects, and it’s wreaking havoc on their ability to manage to a desired utilization rate. No one cares about utilization when pipelines are dry, and this’ll show up in margins at the end of the year. A bunch of leaders mentioned they’re jumping back into outbound, revisiting their referral network, and investing more in PPC and content. I’d love to say those focusing on specific niches are finding more success, but it seems like the first part of the year was spotty, and summer was somewhat dry across the board.

Fuller pipelines lately. While this year’s been rough from a sales standpoint, recent pipeline activity (as in the last month) seems to be trending in the right direction. This may be a bit of seasonality creeping in, but it’s a welcome sight. If growth rates are going to be anywhere near trend, shops have some work to do in the fourth quarter.

Client service demands. It seems that the client C-suite is passing along a lot of the pressure they’re feeling to agencies. I’m hearing about clients asking for more work or better results while remaining firm or reducing budgets. One of their arguments has centered around “you’ve gotten more efficient from AI; pass that along,” regardless of how far along the agency is in integrating AI into their workflows.

Continued salary pressure. Even though the job market has seen some tightening, and there’s been a general ease to the break-neck salary race of 2021/22, agency leaders are still grappling with salary pressure. The whole thing feels counter-intuitive to me. I’m expecting this to ease as more leaders tell me they’ve slowed hiring (due to poor sales pipeline outlooks). I’ve already seen the lack of work lead to layoffs at several shops. It must just be taking a while to filter through the market.

Burnout at all levels. This was something we’ve heard about for a while now. Everyone seems just a bit over it. One of the main reasons cited is that many of the challenges people face at work aren’t valuable. People aren’t burned out because they’re hyper-focused on crafting the best brand ever, the perfect website, or even the best business process automation system. They’re burned out because Kevin didn’t read the last four emails and hasn’t signed off on the new copy, and the project’s delayed, and now his boss is emailing you, the CEO, because they’re mad you’ll miss the launch deadline. If you’re like a lot of agency leaders I chat with, you’re sick of it. Your employees are also sick of it. There’s no joy in managing that kind of nonsense. Solid AM/PM processes can help, but there’ll always be a portion that gets through. I don’t have an answer for that portion, so if you know, please share.

Becoming more serious about an exit. I think the burnout’s getting to some people. The grind of the daily fires, depressed margins, and the additional stress of a challenging sales environment make selling the agency and moving on pretty attractive. Owners have always asked about exit potential. It’s always been an option to build towards, but I’m having more and more conversations about it. There’s more of a sense of urgency now. Owners are interested in timelines and the activities needed to get their shops to a place where the EBITDA multiple sets them up for a while. The conversations seem more serious.

It’s strategy season. A lot of leadership teams are scheduling their annual planning retreats. I’ve had a few questions about these, and there are some things I’ve seen that tend to make these run smoothly.

• Do preliminary research and send it out a few weeks before the retreat. Do this for both external industry research (client end markets, agency industry, etc.) and internal data (metrics, strategy docs, surveys, etc.). You want to give your team enough time to digest it but not so much that they forget what was included.
• Keep the groups small. Most shops are small. Most leadership teams are <10 people. While rolling into a spot with 25 “leaders” might boost some egos, it’s counterproductive.
• Set some goals for the retreat and stick to them. The goals need to clearly define what you must have done at the end. Is this a complete rethink of the agency’s strategy? Is it a refresh of the positioning? Are you making decisions on expanding into other end markets or services?
• Have an agenda that includes unstructured non-work time. Weave deep-work strategy sessions with something physical that allows everyone time to process them. Things become clearer once we give our subconscious time to work.
• Install some accountability for any proposed changes. Who’s leading what? How and when are you measuring success? That kind of stuff.

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Tired but Optimistic

2023 has been launching curveballs at just about every shop. If it has felt weird this year, that’s because it has been. There’s an entire other quarter left though. Plenty of time to shore things up before the new year. If I had to sum up the general tone of the industry, I’d say leaders are a bit tired but optimistic.

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