The Advertising Agency Survival Guide. 2022 “Recession” Version.

I am republishing and updating my pandemic Advertising Agency Survival Guide blog post. It was originally written in 2020 when we all realized that we were heading into some Covidland hell. At that time, The Association of National Advertisers, the ANA, passed the article along to its membership. Why am I modifying the article for 2022? Because I think (not alone here) that we are heading to some form of recession. Recessions are not great for advertising agencies as marketing is one of the first line items that clients cut from their budgets.

Note: While we are not sure if a recession is heading our way, we do know that company valuations are down and that is not a good thing for marketing budgets. The odds on their being that full-blown recession … This from Bloomberg.

The probability of a recession over the next 12 months is now 30%, the highest since 2020, according to the latest Bloomberg monthly survey of economists. That’s up slightly from 27.5% in April and double the odds economists predicted just three months ago.

This from ADWEEK on Sir Martin Sorrell:

S4 Capital issued its 2021 Annual Report this week and company executive chairman Martin Sorrell in his letter to shareholders strenuously sought to manage growth expectations given recent huge reversals on the macroeconomic front.

Sorrell said that events and circumstances have developed to create a “perfect storm” that will dampen the “strong bounce-back previously expected this year and over the horizon in 2023 the clouds look even darker.”

Sorrell noted that GDP forecasts have recently been cut by the IMF and others to 3.6% from 5% just six months ago. “Less robust economic growth is important as it’s one of the drivers of S4 Capital’s growth,” Sorrell cautioned.

At S4 Capital, Sorrell added, “we’ll trim our sails accordingly and won’t be blown off course. But navigation will as ever, be challenging.”

Tough Question. Will Your Advertising Agency Survive This New Recession?

Here is my educated take on how advertising agencies will survive the big dip and how they will make lifeforce happen. It is my take on an Advertising Agency Survival Guide.

Having gone through the 2007 – 2008 recession as an agency owner, I saw approximately one-third of advertising agencies shrivel. My current survival advice is based on my having navigated financial storms as well as recent deep conversations with small and medium-sized agencies. I did not choose to rush out these thoughts. I actually thought about my thoughts. LOL.

Plus, this article is not short and sweet. You will actually have to read all of it. OK, it is sweet.

Two Quick & Very Important Points.

How long will the shit-storm last? I am talking about the inevitable/impending reduction in client spending.

Like you, I have no clue when any semblance of normality will return. I have to assume it will. Plan accordingly.

Chamath Palihapitiya is one of my most respected “advisors”. He has said that companies should be able to adjust and make new plans to survive 36 months. 36! Yes.

He says, think like this is a form of depression. Whoa. Yikes. Are you ready?

This is what I do know… If you want to be in the top 1/3, you can’t lose all or even some marketing energy or brand awareness. Why make your voyage back to the land of happy clients too uphill?

You will get my marketing recommendations below. But first, the big question.

Will Your Advertising Agency Fail?

Here is what an advertising agency principle should be doing right now. I admit that this is generalized given the diversity of the types of advertising agencies. But generalized does not mean its not an effective how-to for virtually any agency.

First – Two Definitions

1. “Advertising Agency”: This is my universal term for most types of communications marketing firms.
2. “The Good Client”: A client is a company that has consistently used any form of advertising or digital marketing. In your case, it is a client that meets your target criteria (you have that, right) and you think would want to hire you.

OK, Advertising Agency… What Are You Going To Do About it?

I am going to be tough here. At least 30% of advertising agencies will fail or falter in the next twelve to eighteen months.

This post provides my take on how to survive. For the winners, how to set yourself up for growth.

6 Advertising Agency Pain Points – I Know You Know This. But, It Is Worth Restating.

1. Your current and future clients are starting to freak out. This goes from their business perspective (increases in consumer debt, lower spending by their B2C or B2B customers, that supply chain pain) and their own worries about their life savings.
2. Some current clients have already reduced or canceled advertising and project spend.
3. Growing agency profitability has been getting more difficult.
4. You could be too slow in managing your costs.
5. Agencies, too many, are already poorly positioned, do not stand out, and worse, are unbelievably ignorable.
6. Many prospective clients “probably” do not want to hear from you. Well, they might if you have the right messaging.

Advertising Agency Survival Guide Strategies

I know what I am talking about. I’ve won and lost. My advertising agency survived the 2007-2008 recession. My $30 million VC funded ActiveBuddy digital business did not survive the 2001 dot-com bust. Don’t feel bad for me, Microsoft eventually bought our technology.

Existing Client Opportunities

An always… think like a client. I’d imagine that you get really stupid supplier messages that look like the marketer has no clue about your needs. Don’t do stupid, ignorable marketing for your agency.

• Thinking of current clients… Now is the time to become close friends. Get past just being a project-based “supplier” to become a sensitive business advisor. In many cases, this is the job of an agency principal or CEO.
• Dial-up your position as a business and marketing strategy advisor. Talk to your clients about their issues – and help find market-building ideas and opportunities. Be a compassionate, valuable marketing guide. Be perceived as a friend and not a supplier that is focused on its revenues. A smart, knowledgeable “friend” will get listened to. 1/3 of you can do this.
• Consider doing client triage. Create an existing client hierarchy. Determine what current clients should get the most attention. You do not have the time to uber-manage every client. If it makes sense, fire clients or just let them mosey along. Again this is a time-management and resource issue. This isn’t the time to burn out your staff.
• Who will be the client or client category winners? With respect to your agency marketing, slow down and understand what client categories will survive and grow in the short to medium term. For example, as we all go outside again, many will head to Las Vegas or book that Delta Airlines ticket. However, given inflation, what would you be telling your airline client?
• Think like a CFO. If a beloved client is having cash flow problems, work with them on payment terms. I know, easier said than done and potentially painful for you, but this is one way to maintain the relationship. To balance client needs with yours, consider providing advantages, like a discount for advance payments.

Agency Management Action – “Only The Paranoid Survive”

Be paranoid. Internalize Intel founder Andy Grove’s mantra…

“Only the paranoid survive.”

• Understand the cash runway. We will start to see many well-funded yet low-revenue Silicon Valley startups run out of cash. Your agency is not immune. If you really think you are doomed just close your doors – or merge/sell. See below.
• Reinvent your business plan (maybe your business)… Never let a good crisis go to waste. Look at your early 2022 pre-downturn business plan. Consider tossing it. What plan, and advertising agency structure, makes sense today and for the future? Think about what a client would buy from you not what you want to sell.
• Back to paranoia… “If you don’t like change, you’re going to like irrelevance even less.” A bit of guidance from General Eric Shinseki.
• Dial-up scenario planning. Think through three or four business scenarios. What would you do if a quarter or one-half of your clients reduce their marketing? What categories should you begin to specialize in? What if this pain lasts for 12 or more months? Get into future-think, offer scenario planning to your clients.
• Now! Reduce the cost of doing business. I always tell agencies that the only thing they truly control are their business costs. Look very hard at your P&L and make adjustments fast. Today. WFH should be of help here.
• Obvious: Management should take a pay cut – well, y’all might have had to do this already but this is a start. Tell your staff that you did it. Show that you give a shit. Don’t do online meetings from your private home gym.
• Obvious: Fire low utilized employees. Harsh, you bet. I have unfortunately fired too many employees due to loss of large clients; pain from the aforementioned dot com bust and the advertising world killer 2007-2009 recession. If you know that you have to let staff go, do it quickly. You want to reduce internal stress if you can. Don’t leave employees guessing.
• Merge or Buy. There is nothing as sweet as buying cheap assets. Consider buying an agency. I bought a design firm just to get Nike as an agency of record client. Or, consider merging with a compatible, additive agency or even tech firm. or see my posts about how to sell an advertising agency.
• Never let a good crisis go to waste… It might be time to buy the smart local PPC or TikTok agency. It is certainly the time to keep your brilliant sales pressure on high heat.

Agency Business Development Planning

Should I Market the agency when even Warren Buffet is losing money? Will anyone listen?

You have a big decision. Go quiet or go smart. Quiet is bad. Think through how you will market your agency. I mean think really hard with the future client’s ear in mind.

Note: I am putting a list of essential business development blog posts at the bottom of this “essential” bog post.

Scenario planning. Build and review two alternative one-page agency marketing plans. No, you do not have to spend three weeks doing this. But, just start the process. Today. Tactical ideas follow.

• This is so critical. Be everywhere a client will look for an agency. Some will sooner or later want to find you. Try searching for your agency using the keywords a client would use. Do you know how clients find an advertising agency? Go here to find that out.
• Then go here: Ask if you are your agency is a go-to expert? If not, you better start to figure out what you can really offer clients that will make them want to and have to listen to you.
• Own a client category. Be perceived as a ‘must-read’ expert. Think insights.
• Really hammer the universe of outbound marketing. Know what clients you should be targeting. But, don’t be stupid – target the right clients. Own Linkedin agency marketing. Test PPC advertising. Leverage your email list. Think direct marketing – ABM – to your best prospects. Need a smart PPC/SEO agency? I have one for you.
• Make short but sweet agency videos. Sweet. Short. Smart. Compelling. You have the time. if you need it, I have an animation agency for you.
• Become a noted strategic thinker. Be Unignorable. Be top of mind. Deliver smart, valuable insights. Unignorable insights. Think of being perceived as a consultancy vs. agency. Send interesting ideas out.
• Do some fast online market research. Think about creating an industry-specific research panel. Impactful, effective research will get attention.
• Show your creativity. Do some crazy stuff like Canada’s John St. (look at their videos on YouTube).
• Spend, but, spend wisely. You are probably telling your favorite clients that they should not reduce their spending – a standard agency pitch. Are you spending wisely? Figure out what works.
• Be efficient! Plan and manage business development programs and costs. Be rational about what clients will need your services. Have a tight process. No plan + poor process = failure. In a recession, it is imperative that you maintain marketing consistency.
• Have a sound referral strategy. WOM, always critical, is even more s today.

Once Again – Here Are My Main Points To Help Your Advertising Agency Survive & Prosper.

Your world is now heading upside down. Many agencies will fail. If you think you will fail, cut bait and split.

Winners will:

• Love & hug their best clients.
• Adjust their business plans. Note: many ad agencies do not even have an old business plan. It is time to get on it. Here is the main question: how do you make money?
• Cut costs now.
• Practice the art of scenario planning.
• Build a business development plan based on how to market into these headwinds. Do you have a compelling expertise? If not, get it.
• Be insight-driven. People will want to hear relevant, sensitive insights. I bet I can have three for your agency in 15 minutes.
• Real winners will make being unignorable (and valuable) a primary objective. Especially in these times.
• Think about buying or merging. Hmmm, maybe selling.

Go faster than the next-door agency:

“If everything seems under control, you’re not going fast enough.” A bit of advice from F1 and Indy champion Mario Andretti.

Some, Just Some, Unignorable Links:

The Big Advertising Agency Resource List.

Business Development Secrets. Actually, this whole 800 post blog is about advertising agency business development. 

How Small Advertising Agencies Can Win Big Clients. My bet is that a smart, compelling agency can sneak into a big boy right now. But, it takes unignorable big ideas. Not sell, but insights.

The World’s Largest Advertising Agency Blog List.  Everything in one place.

That’s It For Now.

Contact me if you want to talk about your growth strategy and any detail in my Advertising Agency Survival Guide. I am offering my best of class advice for free. A give back. One of my agency consultation firms charges $750 just to have that first talk.

Go here to book some time.

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