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The agency growth lifecycle

Although every agency is different, there are certain universal truths. One of those is around the stages of growth the business passes through and what is needed at each stage.

The Convivio model for agency growth features 5.5 phases. Each is defined very roughly by the number of employees in the business.

Roughly is the key word. Some agencies accelerate ahead and hit the challenges in each phase at a lower headcount, others take their time and go cautiously and can grow larger before they hit them.

So use these size bands only as a rough guide.

1: Start-up: 0-10ish souls
2: Step-up: 10-30ish souls
3: Smarten-up: 30-75ish souls
4: Scale-up: 75+ souls
5: Sell-up: can happen anytime
5.5: Screw-up: can really happen anytime!

1: Start-up

It's just you and a small team, all as one. Hanging out, working ad-hoc, figuring things out as you go.

You have an idea and enthusiasm, and you're willing to put in the hours and sweat to make it happen.

As the founder you're able to keep on top of all the projects, all the client relationships and have close working relationships with all your fellow team members.

You may already have the job title of CEO/MD/etc, but won't really fulfil that role yet beyond having responsibility for the accounts and legal compliance. You're a startup agency founder.

You're learning as you go. Things go wrong, but you then work even harder to fix them. You're winging it, and that's okay.

Like starting a fire, all that matters is not letting the wind blow out that first beginnings of a flame.

Characteristics of the start-up stage

  • 0 to 10ish people (depending on the culture and growth rate)

  • Feels like one team 'all in it together'

  • A bit ad-hoc and chaotic, but small enough that you are able to be across everything that is going on and act like a sheepdog, spotting anything that is straying off course and shepherding the whole team, the clients/prospects, and the projects in the right direction

Common mistakes at the start-up stage

  • Focusing on the wrong things.
    It's too easy to be dazzled by shiny things like logo, website, office space when all your time should be going into finding and serving clients, and managing your cashflow.

  • Thinking you need to present a false image of being a big company.
    Times have changed and clients think it's cool to work with startup agencies, as long as you have something unique and impressive to offer. Focus most on your services.

  • Spending too much time organising rather than cracking on.
    If you're the kind of person that spent ages doing a colour-coded meticulously scheduled revision timetable rather than doing revision, watch out for this one. Lean into the chaos and just get things done.

Tips for the start-up stage

  • Keep things simple, until absolutely necessary
    Don’t rush into solidifying your business. Keep things loose and simple. Build processes as you find you need them. Have the simplest possible 1-page website until there is a clear reason you must upgrade.

  • Focus
    Sales is your top priority, focus on it above all else. But focus on the sales that are right for your agency, don’t spread yourselves too thinly.

  • Start out with a shareholders' agreement
    If you have more than one founder, ensure you put in place a proper shareholders' agreement. It may feel unnecessary (‘We're all mates!’) but you'll be glad of the clarity later on.

  • Don't recruit until you must
    Only recruit staff when the pain of the workload gets too much and you can see every likelihood of enough work ahead.

  • Fill in the gaps
    Use contractors and freelancers to fill short term gaps.

  • Always know exactly where the money is
    Do weekly cashflow forecasts. Know what you have in the bank, what payments you are due, what you need to invoice for now, and when you will next be able to invoice.

  • Negotiate good payment terms with clients
    Explain that you're a startup and you'd appreciate their support. Ask for payments in advance. Insist on maximum 30 days terms, preferably 14. Be strict about making sure clients stick to payment terms. Don't worry about upsetting people by chasing money, it's just business and that money is now yours.

  • Build your networks and relationships
    You're less likely to win work through formal procurements at this stage, so spend your time instead on building up a network and relationships. Go to events in your sector or industry.

  • Make the most of your contacts
    Work your contacts book to get early work, or introductions.

Signs you might be outgrowing this stage

  • You reach 10ish people
    For some agencies this happens earlier, at say 7ish, if they are on a fast growth trajectory, or depending on their culture. For others it can happen later at around 15 people. 10 is just a rough rule of thumb.

  • The ad-hoc stuff is becoming stressful
    The stress of the ad-hoc chaotic nature of being a start-up starts to feel overwhelming. Things start to fall between the cracks, there are irritations about whose job is what.

  • You're growing confident in your financial strength
    Your cashflow is good, and you feel financially confident

  • You're starting to build a good reputation

If a few of these things are true, you may be ready to move on to the Step-up stage.

But, if you have any of these signs of problems:

  • More than two staff leaving in a quarter

  • Clients getting frustrated, showing signs of mistrust and micromanagement, or firing you

  • Poor cashflow and you're stressed about money

  • Founders arguing

…then it may be wise to check the Screw-up stage to see if you need to switch into rescue mode for a bit.

2: Step-up

There's a subtle change in this phase that many leaders don't expect, some don't spot, and a few resist. You become the boss. You move from being just a member of the team, to being the leader of the team.

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