What happens when an agency bites off more than it can chew?

Beware what you wish for, because you just may get your wish. It is an interesting warning. Not just because of the threat that all your dreams coming true may turn into your nightmare, but because for many agencies it is often realised. As part of the DNA of any new agency, there is a desire to grow. One of the fastest ways to grow is to win the business of a major advertiser. But winning big accounts has consequences for the agency, the staff and ultimately the clients.

While we all love to read about the growth of an indie agency startup, the truth is that managing the growth of an agency is a delicate process. And having your dream of massive revenue growth come true with the appointment as an agency of record for a major advertiser is definitely the fast track to growth, but it also poses the most risk.

Let’s look at a few of the major implications and considerations for an agency that is biting off the big account.

The change in agency personnel

The first big challenge is having the resources to service the account. It amazes me how often marketers will ask to meet the agency team who will be managing their account, if the agency is successful. At its most obvious it assumes that the agency has these people on staff and ready to go for when a large client walks through the door.

But as we have seen, when a medium-size agency lands a massively big client it can mean they need to recruit 50-100% or more of the current staff at the agency. Managing a big insurance company tender, I had agencies with as few as ten people contacting me when the tender leaked to the trade media, begging to be included.

When I asked their size, they told me, and I would respond that winning this account could increase their size tenfold. This got the agency excited and got me nervous. The risks associated with this are enormous – recruiting new staff, potentially new offices, equipment, furniture and everything else.

Now, all of this can be achieved with enough money, but I am yet to find too many clients willing to fund agency growth. And without this funding, the chances of managing this massive growth in employee size increases exponentially the risk of something going wrong.

The change in agency culture

Managing growth also poses a risk to agency culture. The people and the leadership in the agency largely define the culture of the organisation. This culture is often what attracts like-minded staff and clients. But what happens when in response to a huge client win you find yourself with an influx of people into the agency?

Great talent is hard to find at the best of times, but with the urgency of simply getting people on board to handle the client business, the selection process can break down. Often there is a group of people let go from the agency that did have the account, and they follow it across to the new agency. Or the agency resorts to filling positions with a rotating roster of freelancers as a stopgap that somehow becomes permanent.

But it is not just the employees who set the cultural tone of the agency. Clients and their organisations have cultures too. Often highly successful growing agencies have attracted clients who appreciate the agency culture and find alignment. But suddenly, there is a massive client on the agency wall, and they demand the attention and the service, and their corporate culture begins to influence the agency.

The change in client service

It is not uncommon for existing smaller clients of the agency to feel conflicted during these times. On one hand, they are happy for the agency and the success they are enjoying, yet at the same time feel threatened that they will no longer enjoy the same status with the agency in the shadow of this new, behemoth of a client.

This feeling can be exacerbated by the fact that it is common for the agency leadership to take a very hands-on approach with their new client. Their time and attention is directed elsewhere during the honeymoon period and incumbent clients feel that they are now lower on the agency’s list of priorities.

It can even impact day-to-day account management, as often the agency will take their best and brightest account management people off existing accounts to work on the new, big client. Part of this is because the agency created the expectation of who would be working on the account during the pitch, and there is a desire to minimise the risk of mistakes by an account service team new to the agency.

The change in market desirability

While winning a large account is great publicity for the agency and will attract attention, a problem arises if this becomes the only large account the agency wins. There are a significant number of agencies that have become known for their largest account. The advertiser and their profile have the ability to position the agency in such a way that the other clients have become secondary and irrelevant.

An agency known for its largest client becomes known as that client’s agency. It is as if they become an extension of the advertiser’s marketing department. The best way to counter this is to continue to win further large pieces of business and prove it was not a one-trick wonder.

The problem with this single client positioning is it becomes perceived that the agency somehow specialises in that category of advertising alone – for instance automotive, financial services, or alcoholic beverages. This means that advertisers in that category will not come near you because of conflict, and advertisers outside that category think you are a specialist in a category with skill sets they do not need.

The exposure to the fatal blow

There is a saying that any agency is just two phone calls away from disaster. Two clients walk and suddenly the agency is no longer financially viable. Perhaps, today it should be two emails away because I have noticed more clients are informing their agencies of their departure by sending a contract termination letter first.

But things are even more precarious for an agency with one oversized client on the roster. If that one client decides to leave it is very hard to downsize and stay in business. Often the loss of this major client creates a smell of failure around the agency and a sense of desperation within the management team. But more often it is the fact that having scaled up, because all it takes is money, the same is true for scaling down – it costs money.

Then what to do?

As the saying goes, when you bite off more than you can chew, chew like hell and try not to choke. And then keep biting and chewing. Because as you see, the first skill you will refine is recruiting staff – good staff. Never easy, but an essential skill. Plus, you need to onboard people really well.

And you need an outstanding account management team to ensure when you are winning big clients you are keeping the current clients happy. And finally, once you have won your first really big client, do not stop there. Once you have them settled in, go and win your next big one and then another and another. One major client does not make the agency.

For advertisers, the lesson is, when you are choosing an agency to grow with your business, you need to also make sure they know how to grow.

TrinityP3’s comprehensive Search & Selection process provides extensive market knowledge, tightly defined process and detailed evaluation and assessment. Learn more