Running a profitable agency business has only gotten harder in recent years. Most large agencies routinely downsize every 4th quarter, just to balance for the lost margins. The business model has been under attack for some time now with loss of AOR business, the move away from long term Retainers to shorter fixed bid or T&M projects, fragmenting client relationships, and the worst of all - the decline in productions fees. Per a recent 4As survey, the average length of a client/agency relationship in the 1990s was 8 years -- but now, it's 3-years (if that). Coping with this new business model is making agency execs heads spin. The top three concerns I routinely hear from agency execs are:
- How much work are we going to do that we won't get paid for?
- Which of my relationships will disappear next year?
- When can we expect to get paid back?