How to Scale Your Creative Agency for Sustainable Growth
So, you want to scale your creative agency. Companies scale to add revenue to their business operations, right? I mean, you’ve heard others talking about business growth and how scaling is the path to successful customer acquisition and increasing revenues and profit. The thing is, it’s still a mystery to you. What does scale mean in business, and what do you need to do in order to scale?
In this article, I introduce you to scale, and answer three questions that our clients commonly ask when we discuss scaling a small business:
What is scale in business?
What does scaling a business mean?
What are my options for scaling my business?
What does it mean for a business to scale?
While growth and scaling are often discussed simultaneously (and for reasons that will become clear in this article), there is a big difference in the business model that you must understand. Essentially, the aim of increasing revenue is achieved differently.
What is growing a business?
When you grow a business, you are adding resourcing to increase revenues. For example, you may add a new customer to bring in an extra $100k in revenue, but to do so you need to beef up your sales and marketing team, which costs $100k. Your business has grown, and so have your business operations. The net effect is little (or, in this example, zero) growth on your bottom line.
What is scaling in business?
Scaling a business – whether in professional services, services companies, or in a product market – is a more effective way of growing a business. When you scale a business, you add revenue for a much lower outlay. For example, instead of an expensive sales and marketing team, your marketing strategies are executed by automated marketing tools. You achieve the $100k revenue boost for a cost of, say, $10k.
Let’s dive deeper – what does scaling a business really mean?
Scaling a business does not just mean doing more. It means finding your service market fit and becoming more efficient with your resources.
One way to think about scaling is getting the most out of the resources that are available. I’ll give two examples:
You have a service business, and you want to start expanding. You need to find an efficient way of making sure that your customers are still being served and satisfied with quality work, even as you hire more people on staff.
You have a service business, and you want to start selling products online. You may only be able to produce one product at a time because it’s a laborious process, but if you find ways of automating some of the processes or outsourcing it, then you can produce more products with fewer resources.
Scaling a business is not always an easy thing to do. It requires us to think of what we are doing in different ways. We want to look at our product or service as something that can be made for other clients as well. It takes time to figure out how your company’s product or service can be made in this way and find new customers.
The process of scaling should be continuous. Scaling is not something that you do once and then stop. It is more a mindset than an event. If you want to grow sustainably, then you must focus on having the right package, finding new opportunities, and being flexible enough to seize them as they arise.
You want to continue to hone your offering, improving it to raise prices without losing clients, while at the same time reducing costs, and delivering a repetitive process that achieves all the above.
Options for scaling your business
Scaling is no easy feat, and it’s not for the faint of heart. However, it is a journey that creative agencies must go through to deliver sustainable growth. Perhaps the best way to think about scaling is in terms of the business U-curve:
- Stage 1: Profit growth – when you are a small business and every new sale is profitable.
- Stage 2: Maintaining profitability through revenue growth.
- Stage 3: Growth and profit – where the effects of scaling have the greatest impact.
The execution of scaling is key. If you plan it well and invest upfront, then scaling will be easier and more effective.
There are two ways to scale your business: by scaling for depth or scaling for breadth, also known as vertical and horizontal scaling.
Scaling for depth
Scaling for depth is not a new concept. It’s been around for a few decades, and it’s based on the idea that companies should focus on just one segment of the market to penetrate deep. This means that you should focus on getting people in one segment of the market super excited about your service, and then make sure you keep up with them by giving them what they want over time.
How do you do this?
Use your domain expertise to do more within your market niche, and provide more value for clients and potential clients. If you are working with a specific sort of client in a specific industry, specialize further within that niche, delivering more and better services that your clients need.
It’s important to identify your product-market fit and specialize your agency around this. By understanding your existing clients – their industry, business, challenges, and opportunities, for example – you can innovate existing services and develop new services and products that will be attractive to existing and new clients within your area of specialization.
The goal of scaling for depth? To cement your product-market fit and drive growth rates by marketing your experience and specialization within a single market sector or industry.
Scaling for breadth
Scaling for breadth is the process of finding adjacent markets that have the same type of clients and problems. You can then sell your existing products and services to those clients, as ‘ready-made solutions’. For example, if you develop websites for large construction firms, you can do the same for large engineering firms. Your service is still relevant to them.
How do you do this?
You might seek to find the commonalities between different markets where they share a problem, customer group, or pain point. When you find these connections, you can identify new markets that might want to pay for a solution to those shared problems.
On the other hand, you can discover an adjacent market that has a similar customer base by looking at their demographics, psychographics, and product offerings, and then assessing how they differ from your current market.
To scale your agency successfully, avoid this mistake
Some firms try to scale in-depth and breadth. This is a big mistake. You will end up pouring money into adding the resources needed to service your client base. You will lose focus on what you are exceptionally good at, and spread your resources way too thinly.
Successful agencies focus on what they do best, and they use their expertise to scale either vertically or horizontally.
Is your creative agency ready to scale and grow? Take our growth phase assessment to discover where your firm is positioned. It only takes a couple of minutes, and you will gain valuable insight to help your firm grow faster and more sustainably.