I’ve just finished my 4th full year as a non-PAYE employee, as an NXD (Non-Exec Director) working with agencies. It’s the best career decision I never made (pushed into it by the pandemic after years of procrastination). It’s been 4 years that I’ve thoroughly enjoyed, to paraphrase Alex Ferguson, working with young people (agencies) helps to keep me young, I’ve been able to draw on a 32-year agency career to help people learn from the many mistakes that I made in mine.

Over that period I’ve worked with well over 100 agencies in engagements that span board-level positions to mastermind courses, and agencies across a wide geography, range of sizes and specialisms. Whilst their commercial models differ, they tend to encounter similar issues – we see common themes.

Here are the top 5 .. no, 6 … questions we get asked as Non-Execs …

1) It’s the economy stupid

Will the operating environment get better for agencies? Has everyone found it so difficult in recent years?

As a seasoned campaigner, I’m struggling to remember any ‘easy years’. I’m not an ‘agency soothsayer’ (there are lots of them about), but I do agree with the prevailing narrative that last year was particularly challenging, with incredibly slow decision-making across existing client work and new business commissions (the Year of Treacle) and that this year so far has seen continued stasis, fuelled by an unstable political environment with a dash of our usual seasonality layered on top. Whatever your political leaning, it’s encouraging to see this resolved and anecdotally my clients and networks are already reporting an uptick in business.

2) New Business is everyone’s business

What works? What’s the silver bullet for lead generation?

There is no silver bullet – it’s hard work. However, what definitely doesn’t work is doing nothing. We lament our clients for cutting marketing expenditure in a downturn but it’s a trap we can too easily fall into ourselves. Different things work for different agencies. There isn’t a magic number for activities to do, but I’d suggest between 5 and 10. Combine activities which you are comfortable with alongside others you may be less so with (perhaps speaking engagements, or working with intermediaries), move outside your comfort zone. Make sure it’s allocated the proper budget (3-5% of your revenue target), ideally run by a dedicated and trained resource, and be patient – new activity takes time to yield returns.

3) What gets measured gets done

What are the key metrics I should watch within my agency business?

Well the 66 that I had at gyro is too much, I’d suggest 10 to 15 for a good agency dashboard and covering all areas of the business not just financial. There isn’t one metric to rule them all, but at a push I’d say the bellwether is staff costs to revenue ratio which shouldn’t exceed 65%, closely followed by a NP % (no less than 15%) and proportion of revenue in one client (no more than 25%).

4) To niche or not to niche

Do we need to have a very defined area of operation to succeed?

Those agency soothsayers will tell you that you need to niche but this is a nuanced debate. I’ve worked with businesses focused on sectors like building services and care homes hit very hard in downturns and pandemics. Niches are better suited to small businesses and harder to scale. It’s of course common sense your agency should have clear, demonstrable and valuable specialisms whether that’s a vertical sector, marketing (sub)discipline, geography or a target audience.

5) A fair day’s pay

What should I pay myself?

A colleague of mine says make sure you don’t eat pot noodles every day – don’t forgo paying yourself a decent wage while you build an agency. It’s a false economy and will be adjusted in any M&A valuation. I similarly raise an eyebrow at anything above 6 figures, although it’s relative to size, 10% of revenue is a reasonable heuristic. Of course limited companies offer advantages to owners in terms of alternative forms of remuneration including dividend payments, pension allowances, EV purchases etc but make sure these are reflected in that staff/revenue ratio,

6) Should I employ a Non-Exec Diector?

Yes