December 11, 2017

The Myth of Scale

One thing I’ve heard many times when talking to prospective clients is the idea of their outsourced marketing team being able to scale.
Posted in: news-opinion
President & Lemonhead Evangelist

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One thing I’ve heard many times when talking to prospective clients is the idea of their outsourced marketing team being able to scale. I get it, you have lofty goals, you expect your company to grow, you want a team that can grow with you. And this can be a valid argument when comparing a typical agency to an individual consultant, but anywhere in-between (say a large vs small agency) it gets murky. How so? Glad I’m pretending you asked!

In my experience, this is rarely about range of capability and entirely about the allure/confidence of a large team. This is why agencies put lots of headshots on their websites and send 5+ people to a sales pitch. You think, maybe you’re going to really expand your efforts and the large staff at the agency will be ready to dive in and help. In theory, they are, but in practice, rarely.

A brief detour into how you make money in this business. In case it wasn’t obvious, you’re selling time. Time spent working on billable client projects = revenue. And obviously you need to spend enough time on such projects to turn that into profit. From a numbers standpoint, this means the typical agency employee is spending 85% or more of their time on billable client work (agency people reading this are laughing at the idea of such an easy workload – it’s not uncommon to have 110% or more of your 40 hour week dedicated to client work). That other time is supposed to go to company meetings, learning stuff, blogging, being part of the sales pitch army, etc. So in the ideal scenario where 15% of your time is not actually free, but not yet being billed… that’s 6 hours a week at most. Since that non-client stuff can’t all be thrown aside, it’s probably more like 1-2 hours. And those hours are probably unpaid overtime because exempt salary status FTW.

Agencies can, and certainly do play the shell game of taking a client away from one person to overburden another just so that original person can be overburdened with the new/growing client. Sometimes it’s people behind the scenes and it doesn’t matter. Other times it’s more noticeable and you have the uncomfortable situations of faces changing on your agency team. That doesn’t result in any net new hours for your account and it’s not sustainable from a burnout standpoint, but in theory it helps you scale a little.

In rare cases, client demand will grow enough that a new hire is in order. Let’s skip over the idea that this could be someone with zero experience and just look at the numbers. That person is going to be making at least $20/hr and you’re getting charged at least 5-10x that rate (or more). If you’re thinking this person was hired because you grew so much, let’s run the numbers… they need to be 85% billable to profitably exist, which is 34 hours/week. If you’re paying $100-200/hr that means you need to come up with an additional $175-400k/year worth of work to justify this individual being hired.

I know, it’s rare that a single client demands that much and it’s generally a collection of new/growing business (combined with the high turnover rates in agencies) that leads to this – but you get the idea.

Really, the most important thing is contingency plans, not scale. Regardless of team size (but especially with very small ones), one person can be critical to success. If that person gets too busy, quits, falls in a well, etc., there needs to be a plan. For small agencies or consultants, there has to be some distribution of talent and a clear path to bring on capable people to help. Often those extra people are sub-contractors, which can be way easier to get up and running, but that presents optics that are tough for clients to trust. But it’s optics, as long as there’s a solid plan.

The fact is, a company can have 5 employees or 5,000 and it rarely makes a difference in terms of the service you get. If they have a good team of smart/talented people who are happy with what they do – you’ll likely have a great relationship. As long as they are big enough to handle your work without it seeming like a strain, you’ll be fine. Additional head count has almost nothing to do with the ability to serve your account. Go with a small agency because they do things different and you get more personalize service. Go with a big agency because they have capabilities and buying power that are tough to match. But don’t make your choice based on how many funny photos appear on the “our team” webpage.

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