The four key challenges facing b2b marketing agencies in 2015

Some research we recently carried out in partnership with the Business Marketing Collective (BMC), has highlighted that while b2b marketing agencies must battle hard in a tough market to achieve growth, they face various internal issues in realising it.

Our study, which examined BMC b2b marketing agency members from across the UK – marketing and advertising agencies working in industries spanning manufacturing and engineering to financial and professional services – has identified four key internal challenges that agencies are experiencing, which are likely to have negative effects on their ability to grow.

1.     Poor spread of risk

Our findings highlighted that on average, 28% of revenue comes from an agency’s single largest client - 35% for smaller agencies, which constitute between 10 and 30 employees, and 20% for large agencies, defined by having over 60 employees. This represents a high risk backdrop, particularly for smaller agencies, which is compounded by the findings that show the average client relationship to be only four years. Although this is not quite a case of putting all eggs in one basket, it does create uncertainty in terms of planning and budgeting – if a major client were to leave, the agency would be left with a big gap to fill.

2.     Late client payments

The report revealed that although the average payment term (i.e. number of days to pay from date of invoice) is 30 days, only 56% of clients are paying in accordance with their contract, which is having a negative effect on cash flow needed for planned investment and paying employees. The average number of debtor days is 37, but the research unearthed figures ranging from 10 to a staggering 60. Only 9% of clients were found to make payments upfront, with 54% preferring staged payments and 36% not paying the full amount until contract completion.

3.     High proportion of ad hoc project work

Only a third of b2b marketing agency clients are on retainers (16%) or under contract (20%) – the remaining proportion are ad hoc. This means that 64% of work is unplanned and not under contract, which is leaving businesses constantly scrambling to secure work. Adding to this sense of uncertainty, salaries were found to account for 62% of b2b business expenditure – a large burden when it is difficult to budget more than 12 months in advance.

4.     Maintaining skilled staff

The inability to hire the best staff and a high employee turnover have negative effects on company productivity, and 60% of agencies stated that hiring and retaining staff was a long-standing problem. Finding new staff that are the right fit for the job and have the correct experience was noted as key issue for all of the company owners that took part in our survey.