Karl Sakas — July 30, 2019 — July 30, 2019
Why do you really want new clients? Be intentional about your three options!
If you’re like most agency leaders, you want to land new clients. But have you thought about why you want that new business?
The answer is simple, yet powerful. New revenue helps your agency 1) grow revenue, 2) replace current clients, or 3) both.
Which of those is most important to you today? Your answer impacts your short-term decisions and your long-term results.
When you’re intentional about new revenue in the short-term, you can ensure your agency serves your ideal future. Here’s why… and what you can do today to create more long-term value.
Key Assumptions on Getting New Clients at Your Agency
Unless you’re a Maximizer who needs constant adrenaline rushes from daily firefighting, consider this logical flow for Optimizers like you:
- Your agency is more likely to succeed when you’re strategically intentional rather than reactive.
- Today’s short-term decisions cumulatively impact your long-term results.
- Your long-term goals should drive your short-term decisions, not the other way around.
- Agency structure drives how many active clients your agency can profitably handle.
- Regardless of what future structure changes you might make, your agency today can profitably handle only a certain number of clients.
- Organic or “casual” upsells of current clients can add 10-15% revenue growth, but higher growth targets typically require new clients and/or a strategic approach to upselling your legacy clients.
- As you add new clients, you (eventually) need to replace current clients and/or change your structure to handle the growth.
- Smart agency leaders are intentional about what each new client means to the agency—the new client is an opportunity to grow, to replace a current client, or a combination of the two.
What does this mean for you? Before you close each new client, decide whether you’re adding them to grow your revenue, replace existing clients, or both.
Today, I’ll look at how to pick the right choice for you today, and then what to do if new clients are about growth vs. replacement vs. both.
How to Pick: Grow Revenue vs. Replace Revenue vs. Both
Are you getting new business to grow your agency, replace (“upgrade”) current revenue, or a combination of both? Each is OK—and indeed, you’ll alternate between the three reasons during your agency’s lifetime. You might even switch within a single month, as you close or lose big clients.
Helping You Decide: Which Scenario(s) Sound Like Your Agency?
Which of these scenarios sound like you and your agency? In bold, I’ve listed the ideal outcome for each: Grow total revenue, Replace current existing clients by “upgrading” to new ones, or a combo of Grow+Replace.
- You have aggressive growth goals (i.e., 30%+ this year): Grow Revenue
- You have a pod-based team structure that’s working effectively: Grow Revenue
- You need cash flow to afford a major new initiative: Grow Revenue
- You don’t mind the stress of rapid growth, if it’ll pay off later: Grow Revenue
- You’re good at finding affordable, high-quality new hires, and your current structure can handle the additions: Grow Revenue
- You have moderate growth goals (i.e., under 30% this year): Replace, or potentially Grow+Replace
- More than 20% of your current client base doesn’t fit your new positioning: Replace, or potentially Grow+Replace
- You’re concerned current clients are taking work in-house: Grow+Replace
- You want to sell your agency: Grow+Replace
- More than 10% of your current client base is terrible: Replace Revenue
- You don’t plan to sell your agency: Replace Revenue
- You’re struggling to profitably fulfill work for current clients: Replace Revenue
- You have trouble attracting affordable job candidates: Replace Revenue
- Your team is regularly working 50+ hours a week: Replace Revenue
- You’re tired of client drama and/or employee drama: Replace Revenue
Picking Which of the Three Options Applies to You Today
From my list, you’ll likely see several matching scenarios:
- If my recommended outcome (in bold) is the same for each one, the in-bold recommendation is probably the right choice for you today (whether Grow Revenue or Replace Revenue or Grow+Replace).
- See a diverse mix of recommendations in bold? You probably need the “both” Grow+Replace combination.
What next? Let’s look at your decision-making implications.
Your Agency’s Implications: Grow vs. Replace vs. Both
The idea of “grow vs. replace vs. both” might seem obvious—but this is a “simple, yet powerful” framework. Here’s how each choice might impact your day-to-day decisions today.
Implications if “New Clients = Help You Grow Revenue”
You probably lean toward the Equity side of my Agency Growth Style continuum, or you’re a high-growth Lifestyle agency. Equity-oriented agency owners tend to accept short-term pain (like what you see during hypergrowth) as an investment toward long-term gain (via a high-multiple exit event).
This includes taking risks—like hiring the high-potential job candidate before you’re 100% sure you have the business to fulfill it. In that context, you need to keep bringing in new revenue to cover those high-risk choices.
Be sure to carve a slice of revenue from new clients to build your cash reserves. When the goal is grow-grow-grow, bad things tend to be bigger and faster than when you’re growing more slowly.
As I’ll share in a future article, this also includes creating ramp-up plans for new hires. You’ll describe what you expect from them at monthly milestones… and then hold them accountable to your expectations. If someone isn’t going to work out, you need to know at three or six months, instead of six or 12 or 18 months.
If you have several mediocre current employees, you may need to delay terminating them ’til you can hire replacements. When the focus is growth, sometimes “mediocre help” is better than “no help” (but don’t get complacent).
Implications if “New Clients = Replace Current Clients”
You probably lean toward the Lifestyle side of my Agency Growth Style continuum—where you’re prioritizing ongoing quality of life (and above-market compensation) over a future exit.
In that context, life is too short to put up with poor-fit clients (whether they’re terrible to work with, or just no longer fit your future plans).
Think ahead about your thresholds. For instance, closing one $ 10K/month client might be the trigger to replace three $ 3K/month clients. This is easier when you keep a running list that ranks your clients to grow vs. fire.
What are the client assignment implications? Sometimes you need to explain to employees that you’re thinking 2-3 steps ahead; for instance, you may need someone to work extra hours temporarily, so you can give them a great new client while you finish terminating their poor-fit clients. In contrast, you don’t want employees to think workload surges are permanent.
Now’s the time to make plans to terminate your poor-fit employees, especially since the overall workload isn’t growing rapidly.
Implications if “New Clients = Grow and Replace”
This approach combines aspects of Grow and Replace. You’ll need a solid employee recruiting process to fulfill new commitments, albeit slower than the Grow option.
You’ll still terminate poor-fit existing clients, but slower than the “Replace” option. For instance, you might choose to use a new $ 10K/month retainer to replace just $ 5K/month in existing business.
Don’t stop growing your cash reserves, but you may not need to grow them as fast as in the “Grow” option.
Recognize that in future months, you may shift toward either Grow or Replace, depending on how things unfold.
Applying “Intentional New Client Growth” at Your Agency
Remember, new clients help your agency:
- Grow revenue
- Replace a current client, or
- Both.
Whichever you choose, be intentional about it. The right choices help you meet your long-term goals… and too many of the wrong choices might eventually might put you out of business.
Question: Why do you want new clients at your agency today?
Business & Finance Articles on Business 2 Community
(22)
