QUARTER 1 2016

exsystems

agencyfoodbarometer

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 yearon-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


WE SPOKE TO… B2B

EMPLOYEES

ANNUAL TURNOVER

SCOTLAND

9%

RESPONSE RATE

10% 20% 30% 40%

£250k-£749k

25%

£750k-£1m

16%

£1m-£2m

24%

NORTH WEST

13%

WALES

0%

WEST MIDLANDS

5%

SOUTH WEST

10%

SOUTH EAST

18%

NORTH EAST

0% 0-5 5-15 15-30 30-50 50+

YORKSHIRE

9%

EAST MIDLANDS

9%

EASTERN

7%

LONDON

15%

THAMES VALLEY

4%

MARKETING/

COMMS

AGENCY

18%

PR

5%

DIGITAL AGENCY

29%

ADVERTISING/

FULL SERVICE

AGENCY

18%

DESIGN/

CREATIVE

AGENCY

29%

£2m-£4m

18%

£4m-£5m

2%

55

£5m+

15%

AGENCY LEADERS


WE SPOKE TO… CONSUMER

EMPLOYEES

ANNUAL TURNOVER

SCOTLAND

0%

RESPONSE RATE

10% 20% 30% 40%

£250k-£749k

11%

£750k-£1m

16%

£1m-£2m

22%

NORTH WEST

6%

WALES

0%

WEST MIDLANDS

6%

SOUTH WEST

28%

SOUTH EAST

11%

NORTH EAST

0% 0-5 5-15 15-30 30-50 50+

YORKSHIRE

6%

EAST MIDLANDS

0%

EASTERN

6%

LONDON

39%

THAMES VALLEY

0%

MARKETING/

COMMS

AGENCY

17%

DIGITAL AGENCY

28%

PR

0%

ADVERTISING/

FULL SERVICE

AGENCY

22%

DESIGN/

CREATIVE

AGENCY

33%

£2m-£4m

22%

£4m-£5m

6%

18

£5m+

22%

AGENCY LEADERS


OUTLOOK?

WHAT IS THE GENERAL OUTLOOK OF YOUR AGENCY’S PERFORMANCE OVER THE NEXT QUARTER?

RESPONSE RATE

10% 20% 30% 40% 50%

Q1 2016

Q1 2015

IMPROVING

SLIGHTLY

IMPROVING

REMAINING

THE SAME

DECREASING

DRAMATICALLY

DECREASING


CHALLENGES?

WHICH OF THESE IS A KEY CHALLENGE FOR YOUR AGENCY AT PRESENT?

RESPONSE RATE

10% 20% 30% 40% 50% 60% 70% 80%

Q1 2016

Q1 2015

INCREASING

NEW

BUSINESS

LEADS

GROWING

EXISTING

CLIENTS

RETAINING

EXISTING

CLIENTS

RECRUITING

TALENT

RETAINING

TALENT

DECREASING

CLIENT

BUDGETS

INCREASED

COMPETITION


THE FINANCES

WHAT ARE THE BIGGEST FINANCIAL CHALLENGES YOU FACE IN RUNNING YOUR BUSINESS?

RESPONSE RATE

10% 20% 30% 40% 50% 60% 70%

Q1 2016

Q1 2015

LATE

PAYMENT

ACCURATE

FORECASTING

OVER-

SERVICING

MANAGING

CASHFLOW

INCREASING

PROFITABILITY

PAYING TAXES/

BUSINESS

RATES


FOCUS ON WHERE ARE YOU NOW?

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 overservicing

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?

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

Is the majority of your revenue from:

B2B:

How is the majority of your profit created?

B2B:

77%

PROJECT

WORK

89%

FEES

23%

RETAINER

WORK

11%

COST

MARGINS

CONSUMER:

CONSUMER:

83%

PROJECT

WORK

78%

FEES

17%

RETAINER

WORK

22%

COST

MARGINS

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.”

2. Communications

and Technology


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

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

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


OUTLOOK?

WHAT IS THE GENERAL OUTLOOK OF YOUR AGENCY’S PERFORMANCE OVER THE NEXT QUARTER?

RESPONSE RATE

10% 20% 30% 40% 50%

B2B

CONSUMER

IMPROVING

SLIGHTLY

IMPROVING

REMAINING

THE SAME

DECREASING

DRAMATICALLY

DECREASING


CHALLENGES?

WHICH OF THESE IS A KEY CHALLENGE FOR YOUR AGENCY AT PRESENT?

RESPONSE RATE

10% 20% 30% 40% 50% 60% 70% 80%

B2B

CONSUMER

INCREASING

NEW

BUSINESS

LEADS

RECRUITING

TALENT

GROWING

EXISTING

CLIENTS

DECREASING

CLIENT

BUDGETS

INCREASED

COMPETITION

RETAINING

TALENT

RETAINING

EXISTING CLIENTS


CHALLENGES?

WHAT ARE THE BIGGEST FINANCIAL CHALLENGES YOU FACE IN RUNNING YOUR BUSINESS?

RESPONSE RATE

10% 20% 30% 40% 50% 60% 70% 80%

B2B

CONSUMER

OVER-

SERVICING

INCREASING

PROFITABILITY

ACCURATE

FORECASTING

MANAGING

CASHFLOW

LATE

PAYMENT

PAYING TAXES/

BUSINESS RATES


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 overservicing

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?

WHAT IS YOUR

BUSINESS’

ANNUAL

TURNOVER?

WHICH OF

THESE IS A KEY

CHALLENGE FOR

YOUR AGENCY AT

PRESENT?

IN WHICH

REGION OF THE

UK IS YOUR

COMPANY

BASED?

HOW MANY

EMPLOYEES

WORK

AT YOUR

COMPANY?

WHAT

IS YOUR

AGENCY’S

DISCIPLINE?

WHAT IS THE

GENERAL OUTLOOK

OF YOUR AGENCY’S

PERFORMANCE OVER

THE NEXT QUARTER?

(COMPARED TO LAST

QUARTER)

IN WHICH

SECTOR DO THE

MAJORITY OF

YOUR CLIENTS

SIT WITHIN?

WHAT ARE THE

BIGGEST FINANCIAL

CHALLENGES YOU

FACE IN RUNNING

YOUR BUSINESS?

IS THE

MAJORITY OF

YOUR REVENUE

FROM RETAINER

OR PROJECT

WORK?

HOW DIFFICULT

DO YOU FIND

FORECASTING

FOR THE

BUSINESS?

HOW IS THE

MAJORITY OF

YOUR PROFIT

CREATED?


ABOUT THE AGENCY WORKS

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.

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

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.


CONTACT DETAILS/LINKS

Linkedin.com/company/

the-agency-works

Search ‘Agency Food’

on LinkedIn to join

the discussion

Facebook.com/

TheAgencyWorks

hello@theagencyworks.co.uk

The Agency Works, The Cottage,

37a Station Road, Lutterworth,

Leicestershire LE17 4AP

01455 553 246

Twitter.com/

theagencyworks

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