How to build a successful agency: 12 questions all SME consultancy owners should be able to answer

When you’re in the thick of running a fast moving communications consultancy it’s very normal to feel that there’s never enough time to get everything done – you’re flat out working on pitches, delivering for clients, managing your team, interviewing for new staff, dealing with crises (there’s usually at least one each day) – it’s exhilarating but also exhausting!

Undoubtedly you are busy because you are very good at what you do. The clients you have attracted and the growth of your business reflect your talent and understanding of what clients want. You have had the confidence to launch your own consultancy and should be proud of being an entrepreneur and business builder.

But do you understand your business fully so that you can give it the very best opportunity to succeed?

From the conversations I have with owners of thriving small consultancies I often hear a similar story - attracting clients, growing, building reputation - but struggling to find the time and energy to get under the skin of commercial business management. Such as having a defined business plan, having targets for profit margin, having a solid rationale for pricing, having a clear route to evolving the business to feel less pressured.

How much does this matter you may say?  If the business has clients and is doing fine surely that’s good enough – and it’s not every small consultancy owner’s dream to become the next Top 20 agency is it? True, but whatever the motivation for launching and running your own firm, there’s enormous benefit from taking some time to focus on your goals, strategy and management approach, both to make the most of the hard work put in to set up a business, and to protect it as much as possible from risks (for example running out of cash due to unexpected bills or the loss of a major client).

As a basis to understanding, protecting and building your business, the following are 12 essential questions which I recommend every consultancy business owner thinks about and knows the answer to, 6 on vision and focus, and 6 on financial strategy

Know your vision and where to focus:

1. What do I want to achieve?  Even if you aren’t 100% certain where you want your business to take you, it is a good idea to consider your short, medium and longer term goals. These are very likely to evolve over time but if you have not thought about where you want to get to, it will be hard to know if you are ever on the right path and doing the best things to get there.

2. Why did I start this business? Is it to be free to manage your own work and life balance, to innovate and make your mark on the industry, or to aim for complete financial freedom in a certain timescale? Understanding your core motivation will help you focus on developing your business in ways that will help you remain true to your original ambition.

3. What do I need to do in the next 12 months to keep on track? It is so easy to be swept along by immediate needs – today’s meetings, this week’s pitch – but having a rolling 12 month list of critical actions and milestones will provide a framework to get your business to where you want it to be.

4. Am I spend my time on the right things? Working 14 hour days does not necessarily mean that you are doing the most for your business or yourself. Red flags include finding it easier to do everything yourself rather than delegate or spending so much time working on pitches that you are squeezing time from checking in with existing clients (never mind your family and friends). It’s key to work out where your time should be focused so that your efforts are doing most for your business goals, and have a strategy to help you do this.

5. Where do I need to innovate? How does your firm compare to your competition? What do you need to do to your offer to attract new clients and keep existing ones? Every business needs to avoid complacency to remain successful and know what needs to be done to remain competitive.

6. Do I have the right people around me? When you are clear about what you want to achieve it becomes easier to know that the team you’ve hired is going to help you get there. You will know what skills you need at senior and junior levels and will be better able to get the people mix right rather than recruiting and hoping for the best. Plus you will be able to present a clear vision to everyone around you and have their energies focused on supporting your goals.

Know your numbers:

1. What ‘financial cushion’ do I need to protect my business from potential risks? For many people it does not come naturally to spend time thinking about bank balances, accounting and spreadsheets – but the fact is that one of the biggest risks for businesses, even perfectly good ones, is that they will fail if funds run dry and bills cannot be paid. So it is vital to know what your outgoings are – such as salaries, rent, tax, suppliers – and then protect your business by keeping a ‘financial cushion’ at all times which can fund these for as long as possible so you can weather unforeseen issues such as losing a key client – I recommend six months as a minimum.

2. Do I know our cash position? Linked to your ‘financial cushion’ is knowing from week to week what liquidity you have for your outgoings – how much cash is in the bank? There are adjacent issues to this which also need attention such as ensuring that clients pay you promptly. Always remember that salaries can’t be paid on promises to ‘get that invoice sorted ASAP’! Why should you work for free?

3. Which is my best and worst performing service? While a sense of euphoria accompanies every new business win and it’s great to look at your client list as a VIP directory or your annual revenue as a fabulous milestone – ‘we billed £500,000 this year!’ – it’s likely that not every £1 you earn is equal in value. Understanding the difference in impact on your business of types of client and work will help you know where your strengths are, which in turn will help you maximise where you are doing really well, and be able to address aspects which aren’t doing so well.

4. Do I have a new business strategy?  Do you know how much new business you want or need to achieve this year and how you are doing at this point? Sometimes ‘doing new business’ can feel like a never ending task which hangs over you. But while there are many variables that will affect where new clients or revenue will come from, having a defined plan for marketing and client retention and growth will make your efforts more efficient, help you know how much time you should be spending on it, and how and what will deliver for you.

5. Am I pricing at the right level? The only sure way to know this is to define a pricing policy for fees and other charges which is aligned to your cost base, checked against the market, and stretch tested regularly. If you are producing proposals for work which are not priced on this basis, how do you know if you are working profitably at all, or pricing below what you could be earning?

6. Did I forecast my business performance accurately last year? Finally, a question which will give you a good idea of how tuned in you are to the dynamics of your business. Did you know what your revenue and profit was well before year end or did you have a surprise (good or bad) each time your accountant produced a set of accounts?  The only way to have a chance of forecasting accurately and therefore feeling in control, is to have a business plan to work to and track against. 

Maybe you could check off each of these questions – brilliant! But if you feel a bit queasy after running through the list don’t panic - the important thing is to know that your business could be even better than it is at present by starting to work on this Essential 12.

It was from doing the ‘hard yards’ of building a consultancy through to its successful sale and beyond, that I learned about the side of running a comms business that is ultimately as important to success as your client offer and talented people – a commitment to strong commercial management.

Interested to find out more about helping you and your business thrive?
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