Article - Agency Owner Outlook for 2022

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AUTHOR: Robert Craven

I am constantly asked about how the digital agency space is. How is it growing? Where? Why? How? Who?

Perception is not reality

Of course, my view, like any commentator, is one of perception.

Why is this?

Well, I can only comment on the agencies we see and what they say and what their accounts say. All of these are prone to error or some form of misrepresentation (intentional or otherwise).

So that is my huge caveat. Even though we are dealing very closely with 3-400 agencies at any one time, it is still a skewed sample. We only see the agencies that want to work with us or share their information.

Do not read too much into the averages. As the joke goes, Bill Gates walks into a room of 100 business owners; everyone is instantly a billionaire… on average!

On the plus side there is a wonderful depth and breadth to the sample (22 countries, from 1 to 280 staff). This could be perceived as a negative.

Finally, beware that the map is not the territory!

That being said, I can still make some general conclusions from what we are seeing.

What we are seeing

As at the height of COVID, there is little change in the distribution of thriving/not thriving agencies. It is roughly a 50/50 split.

Using an unscientific approach, there are still about 50% of agencies ‘above the line’ (high growth or thriving) and about 50% ‘beneath the line’ (struggling or dying). I am delighted to say that our paying clients are almost exclusively in the ‘above the line’ category. But this is an example of the vagaries of drawing conclusions from averages.

Looking at interactions (both general and specific) during conversations with just under 490 agencies in the last six months, via self-reporting, the digital agency world splits itself as follows:

10% High Growth

40% Thriving

40% Struggling

5% Dying (Closing disgracefully)

5% Closing gracefully

The reason I mention this split is because the individual agency’s outlook is determined by the category that the agency believes it is in. So High Growth agencies see the future as really exciting based on their recent experience. The Thrivers see it as positive and exciting. The Strugglers are finding it really tough etc.

So, unsurprisingly, where we are determines our view.

There is a feedback loop.

We are doing well… we feel confident… we have the funds and the enthusiasm to go for more work which we get… so we are doing well etc.

Or

We are doing badly… we feel nervous and twitchy… we are running out of funds and the enthusiasm to go for more work which we might not get… so we are doing badly etc.

This is particularly significant for the Strugglers for a number of reasons.

Firstly, most believe they are in the dark smelly stuff.

Second, they find it difficult to see their way out.

For many in the struggling category, I believe that they have talked their way into the depression. Things aren’t as bad as they seem. Several basic changes need to be applied to their business and then things will turn around: stronger pricing, a better business development and marketing machine, a clearer customer proposition etc. These are the building blocks of success. It is a lack of these building blocks, the good systems and processes, that has got them where they are. And by putting them in place, many of their issues will vanish.

While it is easy to make such claims, we have seen formerly lacklustre agencies literally get their act together. And this is as much about attitude and mindset as it is about getting the right things in place.

We see a direct correlation (beware of the averages and sweeping generalisations!) between business performance and having the basics in place. It is as simple as that. It is unlikely to see an agency with sustainable high growth that doesn’t have the building blocks in place. And those that struggle do not have those building blocks in place.

So how should you view 2022?

Right now, I want to emphasise that the success or failure of your 2022 is more about you than it is about the outside world. There are plenty of agencies doing way better than you and they are facing the same business environment as you.

Your recent experience determines your viewpoint (glass half-full or glass half-empty?).

The High Growth agencies will continue to do well. Why? They have the muscle memory of doing well and it feels good, it is addictive. They see and relish opportunities more than the threats and they are willing to ‘go for it’. They have all the building blocks in place, most notably around marketing and the business development machine.

For the Thrivers and the Strugglers there are some choices to be made. Are you prepared to invest in the systems and processes (the dull boring stuff)? As I suggested before, there are some struggling agencies that don’t need to be in such a bad state, but they can’t see the wood for the trees (they are playing the right notes but in the wrong order).

The real Strugglers and the Dying agencies need to take a long hard look at what they are doing and to make some tough decisions. I am afraid that nature is brutally honest and sometimes it is best to call it a day (but on your own terms). And there is no shame in that.

In summary, this is a mindset and systems thing. Please, take action. Hope is not a method.