Wed, 22 May 2019
Do you have one mega client that would cripple your agency if you lost them? If you have a client that represents more than 40% or 50% of your total revenue, don't let them hold you hostage. Check out how one agency knew it was time to say goodbye and took a leap that helped build the agency he always wanted.
In this episode, we’ll cover:
I’m talking to an agency owner who lost a mega-client and lived to tell about it. Jeff Conlon is the CEO of Ideas, Money, Art (IMA) the video marketing agency he started in 2004. He shares his story of actually walking away from a client that was over 50% of the agency’s revenue, and how that decision has helped him grow the business into what he’s always wanted.
Why Walk Away from a $750,000 Agency Client?
Do you have a big but difficult client you’re afraid to get rid?
It happens to the best of us, right? We work hard to land and keep amazing clients, but sometimes we get backed into a corner where we need them more than they need us. That’s what *almost* happened with Jeff’s agency.
Early on, IMA did a small project for a huge home services business worth over $100 million. That small project turned into a little SEO retainer and opened the door for them to work with 30+ franchises…. Well eventually, IMA was grossing $750K per year from this client. The agency always had other work, but this one remained more than 50% of their revenue stream.
So, why would Jeff walk away from that kind of revenue? Over the years, there had been too much turnaround on the client side. After many years with one VP of Marketing, he retired and the position has been a revolving door ever since. The synergy was gone and could not be recaptured. Working with that client was more stressful than it was worth.
When their contract came up for renewal, Jeff decided to walk away. The move was big, bold, and scary. But the agency has come out the other side and Jeff says it has been a huge relief.
Of course, the downside was letting go of the account team dedicated to that client. But on the flip side, it forced IMA to work on their own business. They created their own lead generation system and developed a way to productize their agency services.
And the new rule is… no one client can represent more than 20% of the agency’s revenue.
What Does Productization Look Like for Agencies?
With their newfound clarity and not wanting to be lumped together with all the other “full-service video agencies” (AKA “me too agencies”), Jeff and his team took a long look at their differentiating factor. That’s how they developed the Digital Marketing Quadrant.
Instead of selling multiple services, IMA offers their Digital Marketing Quadrant as a strategy which paves the pathway for clients to achieve their revenue goals. Instead of offering tactics (SEO, PPC, etc.) the Digital Marketing Quadrant starts with a small engagement and then advances toward larger projects that lead the client toward their goals.
Remember, your clients don’t care what you do, just as long as you get the results they want.
The Biggest Mistake an Agency Can Mistake
With over fifteen years in the business, Jeff says he’s made every mistake in the book. The biggest, though, was not understanding the value his agency provides and not going after clients who understand it.
This caused major strife… despite the fact that the agency had been growing rapidly for 3 years, profitability was in the single-digits. (This gives me nightmares, btw!)
At the time IMA was at nearly $2 million in gross revenue, yet Jeff’s income had flatlined and the agency’s margins were dipping. Why? The agency was in a growth phase, so of course, they were adding staff and paying out benefit but otherwise spending unwisely...
That experience, of single-digit margins, totally cured him! Jeff’s sights are set on 20% profit -- which is still way too low, but at least he’s aiming for double-digits :)
Direct download: How_One_Agency_Lost_a_Mega_Client_and_Came_Back_Stronger.mp3
Category:general -- posted at: 5:00am EDT