Agency Food Barometer - 2016
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Transcript of Agency Food Barometer - 2016
QUARTER 1 2016
WELCOME TO AGENCY FOOD
This, the most recent Agency Food report compiled by The Agency Works with the highest level of response to the industry survey we’ve had to date, gives a detailed insight into Agencies in the Creative sector, looking at the outlook and current perception of their trading landscape in Q1 2016, versus Q1 2015.
The feedback and engagement of the industry has been hugely welcomed and we hope that Agency Food continues to spark debate, provoke thought, and place a spotlight on the growth of the UK’s talented and creative businesses.
As part of this Agency Food Barometer, we have split respondents by whether the majority of revenue is obtained from B2B or Consumer clients. We have then been able to profile the landscape for each of these, looking at how the land lies for each Agency focus. This has highlighted key differences between B2B and Consumer, particularly in the operational and financial challenges faced.
Looking at the overall picture and comparing our year-on-year Agency Food reports, we can see that Agency life is stabilising. The results for 2016 show there is an increase in those who see their organisation’s performance remaining the same and although there is a consistent perception of improving conditions, a decrease in those predicting an incremental improvement is observed.
Increasing new business leads remains the key challenge for Agencies, also of note is the year-on-year dramatic increase in those citing talent recruitment as an issue, as well as an increase in the number of Agencies feeling challenged by client budgets and competition compared to this time last year.
Is this a picture of Agencies that are stagnant and not finding the right talent to move forward, or Agencies that are settled but preparing for growth by wanting to expand their head count?
Your participation in this survey is hugely valuable and we thank all those who again gave their opinions and thoughts so readily for us to use for this report. All questions asked are listed at the back of this document.
At The Agency Works, we support more than 450 Agencies in all creative sector disciplines – from digital and social to design, PR and integrated marketing. Thank you again for helping us relay this insight back to an industry about which we are so passionate.
Jay Neale, co-founder The Agency Works Team Ltd
SCOTLAND 9%
WALES 0%
LONDON 15%
EAST MIDLANDS 9%
NORTH EAST 0% 0-5 5-15 15-30 30-50 50+
NORTH WEST 13%
EASTERN 7%
SOUTH EAST 18%
SOUTH WEST 10%
THAMES VALLEY 4%
WEST MIDLANDS 5%
YORKSHIRE 9%
ANNUAL TURNOVEREMPLOYEES
DIGITAL AGENCY 29%
MARKETING/COMMS AGENCY
18%
ADVERTISING/FULL SERVICE
AGENCY 18%
DESIGN/CREATIVE AGENCY
29%
PR 5%
£250k-£749k 25%
£2m-£4m 18%
£4m-£5m 2%
£5m+ 15%
£750k-£1m 16%
£1m-£2m 24%
WE SPOKE TO… B2B
55
AGENCY LEADERS
RES
PO
NSE
RAT
E
10%
20%
30%
40%
SCOTLAND 0%
WALES 0%
LONDON 39%
EAST MIDLANDS 0%
NORTH EAST 0% 0-5 5-15 15-30 30-50 50+
NORTH WEST 6%
EASTERN 6%
SOUTH EAST 11%
SOUTH WEST 28%
THAMES VALLEY 0%
WEST MIDLANDS 6%
YORKSHIRE 6%
ANNUAL TURNOVEREMPLOYEES
DIGITAL AGENCY 28%
MARKETING/COMMS AGENCY
17%
ADVERTISING/FULL SERVICE
AGENCY 22%
DESIGN/CREATIVE AGENCY
33%
PR 0%
£250k-£749k 11%
£2m-£4m 22%
£4m-£5m 6%
£5m+ 22%
£750k-£1m 16%
£1m-£2m 22%
WE SPOKE TO… CONSUMER
18
AGENCY LEADERS
RES
PO
NSE
RAT
E
10%
20%
30%
40%
OUTLOOK?
WHAT IS THE GENERAL OUTLOOK OF YOUR AGENCY’S PERFORMANCE OVER THE NEXT QUARTER?
IMPROVING SLIGHTLY IMPROVING
REMAINING THE SAME
DECREASING DRAMATICALLY DECREASING
Q1 2016
Q1 2015
RES
PO
NSE
RAT
E
10%
20%
30%
50%
40%
CHALLENGES?
WHICH OF THESE IS A KEY CHALLENGE FOR YOUR AGENCY AT PRESENT?
INCREASING NEW
BUSINESS LEADS
GROWING EXISTING CLIENTS
RETAINING EXISTING CLIENTS
RECRUITING TALENT
RETAINING TALENT
DECREASING CLIENT
BUDGETS
INCREASED COMPETITION
RES
PO
NSE
RAT
E
10%
20%
30%
40%
50%
60%
80%
70%
Q1 2016
Q1 2015
THE FINANCES
LATE PAYMENT
ACCURATE FORECASTING
OVER- SERVICING
MANAGING CASHFLOW
INCREASING PROFITABILITY
PAYING TAXES/ BUSINESS
RATES
RES
PO
NSE
RAT
E
10%
20%
40%
50%
30%
70%
60%
Q1 2016
Q1 2015
WHAT ARE THE BIGGEST FINANCIAL CHALLENGES YOU FACE IN RUNNING YOUR BUSINESS?
When presented with these year-on-year comparisons, you might have cause to think about the landscape of your own Agency this time last year compared to the beginning of 2016.
Are you, as with the majority of Agencies, feeling that performance is improving over the next quarter and that increasing new business leads is your biggest challenge? Or is your story different?
Looking further at the results of the report, there are other changes which might be a more familiar story.
In terms of financial challenges, it will undoubtedly resonate with everyone regardless of the maturity of your Agency, that over- servicing continues to dominate as the top financial consideration for Agency leaders.
No surprise there you many think, however, in the context of the full results from Q1 2015 v 2016, the outlook of an improving performance remains relatively unchanged but concerns have risen in relation to increasing profitability. Over-servicing therefore, has never been a more pressing issue.
With two thirds of respondents consistently citing over-service as their biggest challenge; a year-on-year increase in Agencies reporting decreasing client budgets together with increasing competition presenting a hurdle for them, control over billable resource seems like an incredibly important issue.
As we also noted as part of this survey for Q1 2016:
79% OF AGENCIES ARE GENERATING THEIR REVENUE THROUGH PROJECT WORK
21% THROUGH RETAINERS
86% OF AGENCIES STATED THEIR PROFIT IS FROM FEES AS OPPOSED TO
14% FOR WHOM IT IS COST MARGINS
With this in mind, perhaps a review of project costing versus work delivered would be timely for your business. It may be that over-service at your Agency is seen as investment to ensure competitiveness, and longevity of client relationships. Whatever the reason, over-service can always be explained away, but is this a sustainable model for your business?
FOCUS ON WHERE ARE YOU NOW?
JAY SAYS:“ At the beginning of 2015 we were seeing a similar mix of challenges compared to now, but with the year-on-year rise in the number of Agencies seeing increasing profitability as a financial challenge, Agencies cannot ignore the barriers to growth that constantly plague them. Without increasing profitability there is no growth so now is the time to take stock at the beginning of this new financial year, and take charge of driving your Agency forward on a path of growth.”
FOCUS ON B2B V CONSUMER FOCUSED AGENCIES
In a special review of B2B and Consumer Agencies, we look at the variances in the make up and outlook of the two differently focused businesses.
From those participating in Agency Food, 75% mainly see revenue from B2B clients, and 25% from Consumer.
Reviewing in which sectors each Agency type is operating, we see that currently their focus is completely different:
Top two sectors for the majority of clients:
B2B:1. Professional and
Business services
2. Healthcare and Communications & Technology (joint 2nd)
Consumer:1. Food & Drink/Catering
2. Communications and Technology
Is the majority of your revenue from:
How is the majority of your profit created?
B2B: CONSUMER:
77% PROJECT
WORK23%
RETAINER WORK
83% PROJECT
WORK17%
RETAINER WORK
B2B:
89% FEES
11% COST
MARGINS
CONSUMER:
22% COST
MARGINS
78% FEES
JAY SAYS:“It is hugely informative to see from the information on this page and the following data charts just what the nuances and characteristics are that make up the B2B and Consumer Agency landscape at the beginning of 2016. With more reliance on project work and profit from cost margins in the Consumer Agency, but as you will see on the charts following, a greater talent recruitment challenge for B2B Agencies, there is food for thought in all of this data.”
FOCUS ON B2B V CONSUMER FOCUSED AGENCIES
FRAN SAYS:“It’s interesting to see that consumer agencies are also predominantly project based, reflecting the fundamental shift that the industry has gone through over the last decade.”
Fran Brosan, Chairman of Omobono
DANNY SAYS:“It’s interesting to see the post recessionary behaviour from clients and agencies reflected in a worryingly low level of fee based income, however I am pleased that one of these has been a move away from margin based charging which is archaic and not transparent. It’s also heartening as a B2B practitioner to see our sector with higher levels of retained business and less reliance on mark ups. I would expect this to be a reflection of our client relations which are more closely aligned to other professional services providers”
Danny Turnbull, Managing Director of Gyro
ALEX SAYS:“Data and reporting is getting better which is highlighting where the pressure points are, hopefully most knew that already! Now we have the clear evidence and we see B2B and B2C struggling in the same areas. We have to get tighter on scoping, better on briefing and delivering first time. We have to take action.”
Alex Brayshaw, Business Partner, OgilvyOne Business
OUTLOOK?
WHAT IS THE GENERAL OUTLOOK OF YOUR AGENCY’S PERFORMANCE OVER THE NEXT QUARTER?
IMPROVING SLIGHTLY IMPROVING
REMAINING THE SAME
DECREASING DRAMATICALLY DECREASING
RES
PO
NSE
RAT
E
10%
20%
30%
50%
40%
B2B
CONSUMER
CHALLENGES?
WHICH OF THESE IS A KEY CHALLENGE FOR YOUR AGENCY AT PRESENT?
B2B
CONSUMER
INCREASING NEW
BUSINESS LEADS
RECRUITING TALENT
GROWING EXISTING CLIENTS
DECREASING CLIENT
BUDGETS
INCREASED COMPETITION
RETAINING TALENT
RETAINING EXISTING CLIENTS
RES
PO
NSE
RAT
E
10%
20%
30%
40%
50%
60%
80%
70%
CHALLENGES?
WHAT ARE THE BIGGEST FINANCIAL CHALLENGES YOU FACE IN RUNNING YOUR BUSINESS?
OVER-SERVICING
INCREASING PROFITABILITY
ACCURATE FORECASTING
MANAGING CASHFLOW
LATE PAYMENT
PAYING TAXES/BUSINESS RATES
RES
PO
NSE
RAT
E
10%
20%
30%
40%
50%
60%
80%
70% B2B
CONSUMER
JAY SAYS:
“The comparisons we have been able to draw as part of this report in to the first quarter of this year compared to 2015, and between B2B and Consumer focused Agencies have made for fascinating reading. The greatest cause for concern I can see for both types of Agency lies however in the last chart on the previous page – the financial challenges. There is a marked difference between how B2B and Consumer Agencies feel about the challenge of managing cashflow, with B2B Agencies feeling the pressure almost four times more than their Consumer counterparts. When paired with their heightened concerns over
increasing profitability and over-servicing, it highlights further support needed in helping B2B Agencies operationally. Our report has shown that Consumer Agencies too feel particularly challenged to increase new business leads, more so than B2B Agencies, and feel most financially troubled by over-servicing and increasing profitability. It may be that businesses are settling in to the year still, and whether that translates to a performance plateau or indeed gearing up for growth, getting your financial confidence back could be the most important acquisition of 2016.”
WHAT WE ASKED…
IS THE MAJORITY OF YOUR REVENUE
FROM B2B OR CONSUMER
CLIENTS B2B OR CONSUMER
CLIENT?
HOW MANY EMPLOYEES
WORK AT YOUR
COMPANY?
WHAT ARE THE BIGGEST FINANCIAL
CHALLENGES YOU FACE IN RUNNING YOUR BUSINESS?
WHAT IS YOUR
AGENCY’S DISCIPLINE?
IN WHICH SECTOR DO THE
MAJORITY OF YOUR CLIENTS
SIT WITHIN?
IS THE MAJORITY OF
YOUR REVENUE FROM RETAINER
OR PROJECT WORK?
HOW IS THE MAJORITY OF YOUR PROFIT
CREATED?
HOW DIFFICULT DO YOU FIND
FORECASTING FOR THE
BUSINESS?
IN WHICH REGION OF THE
UK IS YOUR COMPANY BASED?
WHAT IS YOUR BUSINESS’
ANNUAL TURNOVER?
WHICH OF THESE IS A KEY
CHALLENGE FOR YOUR AGENCY AT
PRESENT?
WHAT IS THE GENERAL OUTLOOK OF YOUR AGENCY’S
PERFORMANCE OVER THE NEXT QUARTER? (COMPARED TO LAST
QUARTER)
The Agency Works helps agency owners, MDs and senior teams with the financial and operational aspects of running their businesses offering both strategic counsel and workable solutions, depending on their needs. The insight that we have gained over the past 10 years means that we’re ideally placed to understand the challenges agencies face when looking to launch, build and grow a sustainable, profitable business.
We hope you’ve found our Agency Food Barometer an effective way to share collective experiences, trends and feedback. If you are interested in taking part next time we would welcome your input.
IF YOU’D LIKE TO SPEAK TO US:For further information on how The Agency Works can make an impact on your business please call Jay Neale on 01455 553 246.
www.theagencyworks.co.uk
ABOUT THE AGENCY WORKS
CONTACT DETAILS/LINKS
Twitter.com/ theagencyworks
Linkedin.com/company/the-agency-works
Search ‘Agency Food’ on LinkedIn to join the discussion
Facebook.com/ TheAgencyWorks
The Agency Works, The Cottage, 37a Station Road, Lutterworth, Leicestershire LE17 4AP
01455 553 246