Some firms are black holes where accounts go in and seemingly never come out. They have little pressure on their new business development function and don’t think too much about it. Growth just happens organically. Other firms are new business development machines, consistently generating 40%-50% (sometimes more) of their revenue from new clients every year.
Obviously, every creative firm owner wants a business with high client retention and organic account growth, balanced with a formidable new business development machine. And while there are many firms that succeed at both over the medium to long term, I believe they represent a small percentage of the agencies out there. Most struggle with both functions to a certain extent, but every once in a while I encounter a firm that is extremely successful at either keeping and growing clients or getting new clients, but horrible at the other.
Let’s look at how these firms differ from each other then try to answer some questions about how to achieve the right balance.
The Black Hole Firm
The black hole firm is the Hotel California of agencies, the place where clients check in and never leave. The first obvious implication of such firms is that they do good work. The second is that a firm that keeps a client for ten years or more, while doing good work, is likely to outlast a few of its client counterparts. This sometimes means that the institutional marketing memory resides in the agency and not the client. I worked in one such firm in my agency career. The client personnel would turn over regularly and we were the constant. The new marketing lead could not get up to speed, let alone function, without lots of help from us. We knew the approval processes. We knew where the bodies were buried. We were indispensable and unfireable, and everyone knew it.
Another implication of these black hole firms is they are good at not just keeping clients but growing them. Their clients tend to be relationship buyers who use most of the agency’s services. When the client grows, the account grows. When the client has a need adjacent to the agency’s services, the agency adds new services to meet it.
In these black hole firms a healthy percentage of client-side personnel rehire the creative firm when they move on to either another division within the client company or to a new organization altogether.
Put all these variables together and you have a firm with little pressure on the new business function. They grow by keeping and growing existing accounts, with occasional new clients added through the career moves of the client-side personnel. Growth seems to just happen—in a slow but steady way, with no panic or drama and little expense. Many of these firms don’t even have a fully dedicated new business person, with the principal and account leads doing the selling.
I’m always impressed with these black hole firms when I encounter them, but I’m not sure I know the recipe for how to become one. The ingredients seem to include some combination of attention to quality work, relationship building, the size and nature of the market served, the personality of the owner, seasoned account leads who are all team players, and other variables that speak to the culture of the firm. But it’s not all rainbows and unicorns for black hole firms. They have their challenges.
The New Business Machine Firm
At the other end of the spectrum there is the new business machine, capable of replacing 50% or more of their revenue every year through new client acquisition. These “machine” firms tend to be exciting places with their high energy level typically originating in the competitive nature of their owner, who is usually the engine driving the new business machine.
New business permeates the entire culture of the machine firm. I’m always impressed when I encounter these firms because I appreciate anyone who excels at selling. But these firms also have their problems. These skills of keeping/growing clients on one hand and getting new clients sometimes seem to be at odds with each other.
In some ways the black holes are a little boring. It’s grown-up people doing grown-up work for grown-up clients. These firms have the same “feel” about them. I like the way they feel—measured and responsible—but I understand that they’re not exciting enough for some others in the creative fields.
The danger of course for the black holes is they never develop a proper new business muscle, so when they do lose a large client, they’re unsure of how to actively replace it. When they lose two, they’re in trouble.
Black hole firms also tend to be less focused in their positioning. They’re more full service in their offerings, often operating as departments of their clients’ businesses because of their deep integration. So when they do have to build a bit of a new business machine, they find they lack a good starting point: a differentiated and compelling value proposition. Everything a black hole firm needs to do to build some new business generation capacity—sharpen their focus, staff the position, do some actual marketing—seems at odds with their history, therefore they rarely do it. They are wonderfully successful, but can go extinct with a pulse of two coincidental client losses.
The new business machine firms, on the other hand, are so successful at client acquisition because they have to be. They live on the edge because of their inability to keep, let alone grow, clients. This too seems to be a cultural issue. I can spot the ingredients but cannot discern the recipe. Some commonalities I see are a value proposition that sounds different but isn’t, a culture that is a little too in love with the frenetic pace and stress of always having to sell, and an understaffing of the account management function at the senior level.
Striking a Balance
I’ve described two types of firms at opposite ends of the spectrum, and let me reiterate that I think the vast majority of firms out there are somewhere in the middle, with decent competency at both retaining clients and adding new ones.
If you see your firm in either of these extremes, however, then consider the following:
- Black hole firms might consider launching a specialized entity as a hedge. Take a narrow discipline or market expertise, create a new specialist brand and launch and market that. It’s an easier entree into new clients and can always lead to delivering the more generalist services of the mother ship later. If the mother ship implodes, the specialist entity will serve as the escape pod for the highest value team members.
- New business machine firms need to face the reality of the value they are not creating for their clients. Clients don’t stay because the promises made in the sale don’t get paid off. The positioning is mostly smoke and mirrors and should be revisited, and the delivery (account management) function needs to be valued as much as the sales function. Look at who leads each and what they are paid and the imbalance that needs correcting will become clear.
Both types of firms possess enviable skills, but both have systemic challenges, with black hole firms vulnerable to the rare but devastating loss of more than one client, and new business machine firms having to live under constant sales pressure. Both challenges can be ameliorated, once the pattern is spotted.
Do you see your firm in either of these descriptions?