Agency owners (and anyone who has spent time with them over the past 12 months) know that things have been rough for many firms.
But this quarter’s SAGA Small Agency Business Review & Outlook Survey suggests that many small agency owners are optimistic that the worst is behind us and there is growth on the horizon.
A strong 68% of agency owners expect to see revenue growth for their businesses in the next 12 months, with 59% expecting profits to follow suit.
It is important to note, however, that just 35% expect to increase their headcounts. This suggests that agencies are either overstaffed today or they plan to ask more from their existing teams to keep profits rising.
Owners averaged a 6.88 (out of 10) satisfaction score with the overall state of their businesses, suggesting that they largely feel there is a lot of room for improvement but haven’t lost hope.
This is the first of an ongoing series of quarterly assessments that will seek to measure the confidence level of the agency industry, while also taking deeper dives into specific topics of interest to agency owners.
Agency business development
This quarter, we take a close look at agency business development, including what’s working and what owners expect to implement in the months ahead.
We heard a lot of frustration from owners, and the vast majority aren’t very satisfied with the state of business development in their firms (with an average satisfaction score of 4.81 out of 10. More than half (56%) say that sales cycles have gotten longer for them during the past 12 months).
But they do seem prepared to invest more time and energy (and resources) into growth in order to make their revenue predictions a reality.
One in four spend at least 50% of their time on business development, and 56% spend at least one-quarter of their week on the function. These represent increasing amounts for the vast majority of owners.
Looking ahead, 63% of agency owners expect to increase their investment in business development.
When asked which business development tactics have proven most effective for their agencies, typical answers like word of mouth and attending events topped the list. But less widespread ones like podcast hosting and video marketing also ranked well.
This survey indicates that agencies have generally been seeing growth from a mix of both recurring and project revenue, with organic growth from existing clients playing an important role.
More than half of the respondents (52%) use hourly billing as one of their models, indicating that despite all the hoopla that approach isn’t dead. At the same time, monthly retainers (not hours-based) and fixed-fee projects represented significantly more prevalent pricing models for most agencies.
In addition to slower sales cycles, some respondents noted that many prospects go through the process of vetting agencies – only to decide against hiring any at all. For many owners, that reflects a greater frustration than losing to a competitor.
Conclusion
Agency owners have optimism for the next 12 months, despite continued uncertainty over the economy and other global issues.
They believe that an increased investment in business development coupled with an improvement in the overall economy will likely lead to revenue and profit growth for their businesses.
Although most remain unsatisfied with the state of their own business development efforts, the owners surveyed have plans to address that, including spending more of their own time and money to drive growth.
SAGA’s Q3 2024 Small Agency Business Review & Outlook Survey was conducted online from July 15 to August 2, 2024. A total of 80 small agency owners participated.
