Why Growing a Marketing Agency is So Tough (And One Thing You Can Do About It)

Updated: August 27, 2024

If you run a small or medium-sized agency, you’ve likely encountered a common roadblock to fast revenue growth: Getting in front of a new audience outside your core referrers and fans.

Why? Because agency demand isn’t driven by the same factors that drive purchasing processes with a long consideration and sales cycles, like those of B2B SaaS companies. When your clients need help, they need it now, and likely due to an inciting event like a key staff member quitting or a recent acquisition of another company or another event where had major changes to resources, timeline or strategic direction. They can’t spend a ton of time researching the very best fit agency (which may very well be your agency!) when they have fires that need to be put out immediately. Instead, they are going to who they know or asking people they trust what agencies they use.

This type of reputation purchasing that your agency has benefitted from means that you’ve likely been able to grow and scale within a particular subset of your client niche, and it also means that growing outside that small subset of your client niche into your wider ICP can be very difficult.

A note here to say that finding a good niche for your agency and leaning into it is really important for positioning and new client acquisition. However, there's having a niche, and there's the situation that many owners find themselves in, which is that they are only able to capture a small subset of the potential clients in that niche because of their inability to reach beyond client referrals. That's the situation in which strategic partners can help.

A Strong Client Referral Pipeline is a Double-Edge Sword

What’s wrong with having demand fueled by client referrals? Absolutely nothing. But if you’re an agency founder/CEO who is looking to grow more quickly, having a loyal, referring client base - and having that be the only way you can capture new business - can work against you in a couple of ways:

• Revenue can be more volatile. Market factors that affect the subset of the niche that you’re in will affect all of your clients at the same time.
• Predicting demand so you can staff for it is tougher. Having a strong base of referrers means that the typical “signals” that your clients use to determine demand - like website hits or search engine stats - don’t work as well since your long-term or former clients don’t need to research you. They can just show up on your website or in your LinkedIn DMs.
• A few missteps can really sink your reputation across a large swath of your clients. 

All of these things can cause headaches and slow your growth, and if you are an agency founder looking to grow quickly, you must have a plan to break out of the growth-by-referral cycle if you want to see faster topline growth.

Roller-Coaster Revenue

When things are good, they are really, really good. And when they are bad, they are horrid.

This is the cycle many agencies get into since they lack the ability - due to the nature of a services business - to see and predict how referral revenue will come in. A large project closes after a short 2-week sales cycle and suddenly a 15-person agency has gone from 80% billable time utilization to 110%. What now? Staff up? Find contractors/freelancers that can take overflow work? Start putting your CEO to work on client projects? All of the above? 

Many agencies use some amount of “elastic resourcing” (contractors or non-FTEs) to help service during the boom times, but most agencies are also wary of bringing in resources like this and introducing them to clients; there’s an inherent risk in having a contractor represent your brand. Yet hiring a bunch of FTEs during a temporary boom spells disaster when the staff utilization rate tanks if a large client is loss or client budgets constrict (remember 2023? Good times).

So what should you do?

Leverage Partnerships To Break Out of the Cycle

To overcome the limitations inherent in being active in a specific niche and accelerate your agency's growth, consider the power of strategic partnerships.

Agencies - even ones that compete with each other - should be working together more to help smooth out the revenue rollercoaster. 

If you’re a small agency with highly specialized services, there are limits to the type of work you can service well, but if a long-term client comes to you and asks you to complete something that is outside your wheelhouse, it’s going to be extraordinarily tempting to say yes to the work and figure out how to staff it later. Similarly, if it's work that fits into your ideal profile of work but you just can't staff it at the moment, then you'll be telling a long term client "no" and set them out looking for another agency for work that you do.

But if you had a strong partner agency that was well-versed in the type of work the client needed and was willing to either white-label or work under your team’s project management lead, you get to keep the client, delight them because they don’t have to conduct another agency search, and you haven’t opened yourself up to losing that client to a full-service agency that can do lead management and the web/MAP/CRM development that you are currently doing for the client. Is there a risk that the new agency will “steal” the client for themselves? Sure. Is it a greater risk than trying to service work that you don’t really know how to do? Good question.

Partnering up is the antithesis of how many agencies approach the competitive landscape, but “playing nice” with another provider can lead to more introductions to good projects that your agency does well from your partner agencies.

Partnering with other service providers can also help you reach new audiences and find fans and advocates outside of the core niche you have likely found yourself in, and allow you to test out new offerings and lines of business. A partner agency can also be validating of trends you are seeing take place within your sales and marketing motions and help navigate poor market conditions.

Dedicating time and energy to nurturing those kinds of intra-agency relationships takes time and effort that may not be within reach for a smaller agency, but can absolutely help smooth out the peaks and valleys of demand that are commonly seen.

How to Find the Right Partner

Finding other service partners to work with that you feel you can trust is a challenge, but there are some resources available that can help.

At the top of the list? Community. There are a few for agency owners. We happen to belong to Bureau of Digital, which is a fantastic resource for digital agency owners and operators to share knowledge (and leads!), but there are multiple places for agency owners as well as communities that are specialization or vertical focused and could be worth looking into.

Growing your own following on your social channels can also be a good way to find like-minded people, but of course takes time, effort and dedication (you should do this anyway! but it won't be the fastest route to meaningful partnerships).

Cold outreach? Well, it also works in this situation. If there's an agency you admire, or have encountered at events that you think would be a good fit as a partner, shoot them a note, connect on LinkedIn or hit up their contact form. The most productive agency-agency partnership I've ever been a part of started when my counterpart hit my agency's contact form. What did that person do right? She had a clear ask of me, which was to help her scope out and co-pitch a type of work that her agency did, but wasn't great at. She knew we were great at it, and even though we were competitors, it just so happened that it was a practice we were looking to build and grow.

Finally, events are always a great place to connect with other service providers. Are you exhibiting at a tradeshow? Take a look around at your fellow vendors. Approaching their booth for a chat could be the start of a beautiful friendship.

Quality Over Quantity - Always

Remember, partnerships are give and take propositions. You have to go into these conversations with a good idea of what you can do for them as well as what they can do for you and dedicate time and effort to each of the partner relationships. You should plan to spend about 4 hours per month nurturing each partner relationship, so choose wisely. This may include pipeline comparisons and discussions, co-pitching, co-marketing (if you choose to be open and vocal about your partnership), offering development, and just general knowledge-sharing that could be beneficial to each of you.

So, yes, growing a marketing agency is tough, especially when most of your business is coming from client referrals, but if you forge solid partnerships as early as possible, even if you work with direct competitors, you can often break yourself out of a client referral rut and into new areas of your specific niche (which in turn will create more clients who give you more referrals and broaden your base of fans and advocates).

If you're still unsure how to profitably navigate the ebb and flow of agency revenue, let's chat! We can help you identify your key operational financial targets to better set you up for sustainability as you grow.