January 25, 2018
Managing a digital agency is never a simple task. You have many balls in the air at once and plenty of competing deadlines and priorities. Micro agencies in particular often end up operating more like individual freelancers with fewer formal procedures in place.
However, whether you are a large or small agency, there are certain areas you need to take care of to ensure survival. Here we’re looking at what you need to cover to help future-proof your agency.
Create Robust Systems
Client Acquisition and Onboarding
“System” is really the key word here; you want to provide clients with a consistently great experience without scrambling around or “winging it” to bring in new business. This is not a sustainable practice – you’ll create more work for yourself and won’t have time for breaks.
The ideal system is where your business can run itself without you. This means leads are able to come in automatically (such as via your website) and you have team members who know exactly what to do with them. Document your system so that it is easy to pass on. There are free tools available such as Process.St which make documenting processes easy.
Being able to take yourself out of the business means it won’t fall over the second you’re not there. This is important because you can’t predict whether you may face an emergency situation, or you might just want a vacation! Look to take yourself out early, because this forces you to implement a good system.
Processes for Staff
Managing any kind of team in person is a challenge, but with remote workers that challenge grows even larger. This is why it is important to have documented processes which are easy for anyone to pick up and follow. You ensure your staff is on the same page and that your customers receive a consistent experience.
Create a library of processes in a place that is easy to access (Google Drive for example). You could use documents or even create screen share videos of “how to’s.” If you do this for any kind of process that you are often asked questions about, you create efficiencies for yourself too. Instead of repeating yourself multiple times, you can direct people to your process.
While you’re probably planning for business growth, you also have to allow for the fact that people leave from time to time. Your documented processes will help, but you should also be thinking about succession planning and developing the skill base of your team.
If your project manager came down with the flu tomorrow, do you have someone who could easily jump into their place? You don’t want disruptions for your clients, so planning ahead is essential.
Sustainable Business Practices
In this satirical infographic, Ben Horsley alludes to some of the things that creative agencies have been known to do that are not conducive with sustainable business practices.
Yes, image is important when it comes to attracting new clients, but sustainable business practices keep you around to serve them.
If you’ve been in business for a while you may have the capacity for nice office space and cool furniture (especially if face-to-face meetings are important), but if not, as lean as possible is the way to go until you are pulling in sufficient revenue to maintain the office style.
If you have a good acquisition strategy and documented procedures in place, most digital agencies can operate just fine in an online/remote environment. Keep unnecessary overhead to a minimum – the real world is different from the hard-drinking, lavish office styles shown on Mad Men!
Build a financial process your accountant will love – get our free checklist here.
Take Care Of Staff
There are a number of reasons to be taking good care of your staff. Many agency staffers have reported feeling that they are overworked, treated as expendable, are overly micro-managed, or are not paid adequately for the amount of work they are expected to put in.
Remember, if you’re hiring freelancers then it is easy for them to leave. Unless they are on a specific contract, they can legally leave without notice, which could have a big impact on how well you operate and the experience of your clients. Freelancers also tend to network with other freelancers. It doesn’t take long for an agency to develop a negative reputation among them, making it difficult for you to attract new hires.
Conversely, if you create an engaged, collaborative team environment, trust your staff and adequately compensate them for their time, not only are they more likely to stay, but they will often tell others how much they enjoy working with you. This will rub off on your client experience too; engaged staff tend to produce a higher quality of work that goes above and beyond the minimum.
Take Care Of Legalities
Failing to properly take care of legalities will put your agency on the rapid route to going out of business. No matter how small you are or how quickly you’ve hung your “open” sign, there are certain obligations which must be dealt with.
Business Entities and Licenses
Your agency doesn’t always need a license to operate, but if one is required and you fail to obtain it, penalties can be heavy enough to put your business at risk. You can usually find out if one is required by checking with your local licensing authority (your city, for example), or check online using something like this guide from the U.S. Small Business Administration.
Be aware that ignorance is not accepted as an excuse; there are stories of agencies who have faced large fines because their city found out they were in business without a license through the tax department. (This is the case even if you work from home).
Another important part of future-proofing your business is choosing the appropriate business entity. Partnerships, LLCs, Corporations etc. all have different tax and insurance implications. You can usually change your entity type down the line, but make sure you have professional advice in the beginning and are set up correctly for your size and income. While you’re at it, make sure you are operating with a Federal Tax Identification Number (EIN) where needed.
Accounting and Taxes
This often falls on everyone’s “least favorite” list, but without robust systems in place for accounting and taxes, you are setting yourself up to fail. Back-taxes and penalties have taken down many small businesses, so get advice early from a qualified accountant.
Consider this from a University of Tennessee study on causes of business failure:
“The leading cause of business failure was determined to be “Incompetence”. Fully, 46% of failures could be explained by this broad-brush term. The specific behaviors that underlie this headline, however, are fairly specific and revealing. These include:
- Taking an emotional approach to pricing
- Non-payment of taxes
- No knowledge of industry pricing conventions
- No knowledge of financing requirements and conventions
- No experience in record-keeping
- Living beyond the means of the business
- Lack of planning ”
Notice how many of these reasons come back to proper accounting and systems.
One of the areas that often trips up digital agencies is the laws which distinguish an independent contractor from an employee. Agencies often employ independent contractors since they don’t have to withhold income taxes, Social Security, Medicare or Unemployment taxes like they do with employees. Some businesses use contractors to avoid going over the employee number threshold where they need to pay employee medical insurance.
In the U.S., federal and state governments have increasingly been cracking down to ensure that workers are correctly classified. If it is found that yours are not, hefty penalties can apply.
In a piece on Mashable, Nellie Akelp gives some tips for staying out of trouble with your worker classification. Generally speaking, if you are dictating when, where and how work gets done, then the IRS may look at your worker as an employee. Independent contractors own their own business and exert control over their own time. It’s worth following the guidelines set out by the IRS (such as issuing 1099s to contractors), so that you stay out of trouble.
Image source: Brandongaille.com
Build a financial process your accountant will love – get our free checklist here.
Even if you’re not occupying a physical place of business, your company needs the protection of insurance. Digital agencies in particular need to look at liability insurance, data breach coverage and insurance for errors or omissions. One lawsuit could push the uninsured out of business, so it’s worth protecting yourself with coverage.
Operating a digital agency is not as simple as hanging up your sign and waiting for business. While it can be tempting to jump right in (especially if you operate online), if you want to protect the longevity of your agency you need to take care of legalities, processes and staffing that will keep it running, even if you’re not there.
Set up systems well from the beginning and you will have less stress and more time to grow your business.
Agency Audit Guide
The framework that helps you sustainably build your agency.
- Profiling your agency's strengths and weaknesses
- Operational processes that automate and scale
- Establishing a client pipeline
- Executing on-time and on-budget for clients
- Building an excellent client experience