Board briefing: Productising services
An agency that only makes money by selling time will find it tough to grow margins and build a stable foundation.
The answer is to use your expertise to package common types of work into productised services.
In this session the board will explore the potential for productising some of the agency's services, and assess any current productised services the agency has.
At its most basic, the agency business model is to provide services to clients, based on staff time worked, billed by the hour or day.
To win each project they get a brief from a client about what the client thinks they want to get done, and they estimate how long that'll take to do.
Estimates are rarely on the nose, and so later the agency either has to absorb the gap as 'over servicing' reducing the project margins, negotiate to get paid more by the client — or, rarely, the project finishes faster and the agency simply gets to bill less than they estimated.
This approach designs inefficiencies into the business model, and generally puts the risk and pain of this firmly on the agency.
That's why it's hard to forecast, hard to keep margins up, hard to manage cash flow.
At the root of the problem is that most agencies tend to start out by treating every client engagement as unique — starting from a blank sheet every single time to figure out what to pitch and do.
They're led by what the client thinks they want, as written in their brief.
That's okay when your agency is a scrappy startup. But, as you grow, you want to build more solid foundations, and you want to protect (and grow) your margins.
At the same time, clients begin to trust you more once you're established — because of your reputation or their own contact with you — and they then want you to lead them more, rather than just waiting for their project briefs and RFPs.
So they want you to tell them what to buy from you, rather than the other way round. That's hard to sell if your offer is entirely bespoke, and they aren't clearly telling you what they want. You end up pretty much putting a finger in the air and guessing.
Instead, you need to offer them a menu of things that are ready to buy.
Therefore any agency that has grown past the initial startup phase should begin looking at how to wrap their services into products that are ready for prospects simply to buy 'off the shelf' with minimal tweaks.
That's also immensely helpful in times of uncertainty when clients aren't sure what they need, and so freeze in the headlights a little, stretching out the sales cycle painfully with indecision. Being able to buy well defined, smaller packages of clearly defined services takes a lot of their uncertainty and risk away.
Some common ideas for productised services in creative and digital agencies: