According to HubSpot’s 2018 Marketing Agency Growth Report, 57% of marketing agencies (out of one thousand surveyed agencies) have less than three months of cash flow available.
You read that right.
Six out of ten agencies don’t even have enough money in the bank to pay 3 months of employee salaries and overhead. Put simply, the majority of marketing agencies are holding on by a thread.
This should sound the alarm for marketing managers on client-side. You expect your marketing team to be there for you in the long run. How reliable can they be when they’re surviving paycheque to paycheque? What does that say about their staying power?
If the marketing agency you work with is on the ‘57% side’ of this cashflow statistic, here are some difficulties you may encounter while working them:
They may not be able to execute on big ideas because they can’t retain their employees
To save on salary expenses, some agencies give employees the workload of two or three people without the earnings to match. This leads to burnout, frustration, and employee turnover. From a numbers standpoint, it can work for the agency, considering they’ll just bring in someone new and repeat the cycle. But what does that mean for the continuity and quality of work for the client?
Apart from salary, agencies don’t have the cash reserves to support the raises and bonuses employees deserve. This contributes to turnover, too, with employees looking to other companies for this compensation.
At Stryve, we’ve always found this approach to be counterintuitive. After all, we’re in the business of selling expertise and fingers-to-the-keyboard execution. It’d be impossible for us to maintain a high level of intellectual capital and execution ability if our lineup was constantly changing. Not only that, but we spend time and resources developing our employees. Seeing them leave would be a lost investment. When we lose our intellectual capital and execution ability, our clients lose a part of the accumulated experience across our team.
Our system for retaining talent seems to be working, as no one has left or quit in our 10-year history. We do a number of things, like Stryve IO sessions, new technology investments, career conversations as opposed to ‘performance reviews’, and more, to ensure our team stays empowered and engaged.
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With some of our employees working with the same clients for years, they’ve built trust and familiarity that’s invaluable. It’s in our best interest — and our client’s — for employees to stick around. It’s our responsibility to make it in the best interest of our employees, too.
Their team’s attention might not be on your business
If an agency doesn’t manage their cash flow correctly, they’ll always be chasing other accounts in order to cover their mismanaged business costs.
Have you been in a situation where your marketing agency suddenly becomes unresponsive to your emails or calls? It’s probably because they’re taking on more work than they can handle in order to manage their finances.
Here at Stryve, we focus on specializing in high-value services that produce healthy margins for our business. We say ‘no’ to about ten potential projects to every one project that we take. By design, we’ve strategically chosen to filter out low-level and low-margin market segments to focus solely on high-value B2B digital marketing. This has enabled financial health and cash reserves for our business.
They might not be able to grow with you
If your company is looking to grow revenue in the millions, you’ll need to partner with a well-capitalized marketing agency to retain the right people to grow with your business. You’ll need a marketing agency that has the cash to finance larger advertising and campaign efforts when necessary.
This year, two of our largest clients have set ambitious growth-oriented revenue targets that require more resources on our end. Because of our capital management, we were able to turn around and make a new hire without question. Because of our cash reserves, we can bring on new salaries, do larger media buys, and make the necessary moves to answer the call. How would a paycheque-to-paycheque agency meet this demand? Longer hours? Work on the weekend?
A marketing agency will sell you on what they’ve done and what they “can” do. That’s great, but it means nothing when they can’t be sure of where they’ll be in three months. Seriously, how can you count on an agency whose employees can’t even count on a biweekly paycheque?
So, the next time you’re choosing which marketing agency to go with, ask them about cash flow. Ask if they have the cash reserves to stay afloat for 3 months with no revenue. Seriously, just ask them. Their answer could mean the difference between opportunities captured and opportunities lost in the future of your business.