2. 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 year-
on-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
3. SCOTLAND
9%
WALES
0%
LONDON
15%
EAST MIDLANDS
9%
NORTH EAST
0% 0-5 5-15 15-30 30-50 50+
NORTH WEST
13%
EASTERN
7%
SOUTH EAST
18%
SOUTH WEST
10%
THAMES VALLEY
4%
WEST MIDLANDS
5%
YORKSHIRE
9%
ANNUAL TURNOVEREMPLOYEES
DIGITAL AGENCY
29%
MARKETING/
COMMS
AGENCY
18%
ADVERTISING/
FULL SERVICE
AGENCY
18%
DESIGN/
CREATIVE
AGENCY
29%
PR
5%
£250k-£749k
25%
£2m-£4m
18%
£4m-£5m
2%
£5m+
15%
£750k-£1m
16%
£1m-£2m
24%
WE SPOKE TO… B2B
55
AGENCY LEADERS
RESPONSERATE
10%20%30%40%
4. SCOTLAND
0%
WALES
0%
LONDON
39%
EAST MIDLANDS
0%
NORTH EAST
0% 0-5 5-15 15-30 30-50 50+
NORTH WEST
6%
EASTERN
6%
SOUTH EAST
11%
SOUTH WEST
28%
THAMES VALLEY
0%
WEST MIDLANDS
6%
YORKSHIRE
6%
ANNUAL TURNOVEREMPLOYEES
DIGITAL AGENCY
28%
MARKETING/
COMMS
AGENCY
17%
ADVERTISING/
FULL SERVICE
AGENCY
22%
DESIGN/
CREATIVE
AGENCY
33%
PR
0%
£250k-£749k
11%
£2m-£4m
22%
£4m-£5m
6%
£5m+
22%
£750k-£1m
16%
£1m-£2m
22%
WE SPOKE TO… CONSUMER
18
AGENCY LEADERS
RESPONSERATE
10%20%30%40%
5. OUTLOOK?
WHAT IS THE GENERAL OUTLOOK OF YOUR AGENCY’S PERFORMANCE OVER THE NEXT QUARTER?
IMPROVING SLIGHTLY
IMPROVING
REMAINING
THE SAME
DECREASING DRAMATICALLY
DECREASING
Q1 2016
Q1 2015
RESPONSERATE
10%20%30%50%40%
6. CHALLENGES?
WHICH OF THESE IS A KEY CHALLENGE FOR YOUR AGENCY AT PRESENT?
INCREASING
NEW
BUSINESS
LEADS
GROWING
EXISTING
CLIENTS
RETAINING
EXISTING
CLIENTS
RECRUITING
TALENT
RETAINING
TALENT
DECREASING
CLIENT
BUDGETS
INCREASED
COMPETITION
RESPONSERATE
10%20%30%40%50%60%80%70%
Q1 2016
Q1 2015
8. 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 over-
servicing 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?
FOCUS ON WHERE ARE YOU NOW?
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.”
9. 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
2. Communications
and Technology
Is the majority of your revenue from:
How is the majority of your profit created?
B2B: CONSUMER:
77%
PROJECT
WORK
23%
RETAINER
WORK
83%
PROJECT
WORK
17%
RETAINER
WORK
B2B:
89%
FEES
11%
COST
MARGINS
CONSUMER:
22%
COST
MARGINS
78%
FEES
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.”
10. 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
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
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
11. OUTLOOK?
WHAT IS THE GENERAL OUTLOOK OF YOUR AGENCY’S PERFORMANCE OVER THE NEXT QUARTER?
IMPROVING SLIGHTLY
IMPROVING
REMAINING
THE SAME
DECREASING DRAMATICALLY
DECREASING
RESPONSERATE
10%20%30%50%40%
B2B
CONSUMER
12. CHALLENGES?
WHICH OF THESE IS A KEY CHALLENGE FOR YOUR AGENCY AT PRESENT?
B2B
CONSUMER
INCREASING
NEW
BUSINESS
LEADS
RECRUITING
TALENT
GROWING
EXISTING
CLIENTS
DECREASING
CLIENT
BUDGETS
INCREASED
COMPETITION
RETAINING
TALENT
RETAINING
EXISTING CLIENTS
RESPONSERATE
10%20%30%40%50%60%80%70%
13. CHALLENGES?
WHAT ARE THE BIGGEST FINANCIAL CHALLENGES YOU FACE IN RUNNING YOUR BUSINESS?
OVER-
SERVICING
INCREASING
PROFITABILITY
ACCURATE
FORECASTING
MANAGING
CASHFLOW
LATE
PAYMENT
PAYING TAXES/
BUSINESS RATES
RESPONSERATE
10%20%30%40%50%60%80%70%
B2B
CONSUMER
14. 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 over-
servicing 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.”
15. WHAT WE ASKED…
IS THE MAJORITY
OF YOUR REVENUE
FROM B2B OR
CONSUMER
CLIENTS B2B
OR CONSUMER
CLIENT?
HOW MANY
EMPLOYEES
WORK
AT YOUR
COMPANY?
WHAT ARE THE
BIGGEST FINANCIAL
CHALLENGES YOU
FACE IN RUNNING
YOUR BUSINESS?
WHAT
IS YOUR
AGENCY’S
DISCIPLINE?
IN WHICH
SECTOR DO THE
MAJORITY OF
YOUR CLIENTS
SIT WITHIN?
IS THE
MAJORITY OF
YOUR REVENUE
FROM RETAINER
OR PROJECT
WORK?
HOW IS THE
MAJORITY OF
YOUR PROFIT
CREATED?
HOW DIFFICULT
DO YOU FIND
FORECASTING
FOR THE
BUSINESS?
IN WHICH
REGION OF THE
UK IS YOUR
COMPANY
BASED?
WHAT IS YOUR
BUSINESS’
ANNUAL
TURNOVER?
WHICH OF
THESE IS A KEY
CHALLENGE FOR
YOUR AGENCY AT
PRESENT?
WHAT IS THE
GENERAL OUTLOOK
OF YOUR AGENCY’S
PERFORMANCE OVER
THE NEXT QUARTER?
(COMPARED TO LAST
QUARTER)
16. 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.
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.
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
ABOUT THE AGENCY WORKS