Across the creative agency industry, we’re hearing the same pain-point: pipelines are quieter, longer, and leaner. Now that pandemic relief money has been spent and the economy is in search of a new equilibrium, it looks like all eyes will be on pipeline for the near future.
With a strong concentration in the creative agency space, we have our ear to the ground on pipeline issues. Every month our CFOs lead a pipeline meeting with clients, and every week we gather as a group to identify trends and brainstorm solutions. Jamie Nau, Director of VCFO Services and co-host of our Creative Agency Success Show, sat down with CFO Hannah Hood to discuss the pipeline challenges our clients are facing today – and how we recommend they confront those challenges. Here’s what they shared.
Quieter Pipelines
For some agencies, leads are down compared with a few years ago. Even if conversion rates stay stable, that’s enough to drag down revenue.
When we see leads drop, we want to zoom in and really examine the data under a microscope: What are the sources of your leads? Is the drop in a certain area or across the board? Do we need to spend more on marketing, change our strategy, or develop cross-selling and upselling strategies with current clients?
By looking at granular data about lead sources, we might also determine that one service line is out-performing the others. That could be a clue that it’s time to niche – a practice that we find improves conversion rates and allows you to charge a premium.
Longer Pipelines
One of the most common struggles we are hearing with agencies is that the pipeline is extending. Agency prospects and current agency clients looking for additional services are requesting more meetings and involving more decision-makers before committing to services.
But sometimes the lag comes from within the agency itself: maybe there’s no product catalog to streamline the proposal process; maybe the sales team needs to tighten up their approach.
When you hold a pipeline meeting that brings together sales, operations and finance, it’s easier to evaluate each step of the process and make sure everyone is on the same page. Hearing a CFO say, “every additional day of pipeline costs your team X dollars,” can be a strong motivation for everyone to row in the same direction.
Leaner Pipelines
Another trend we’re seeing is that clients want more from creative agencies and they want to pay less – while at the same time, costs are going up across the board. With news of generative AI reaching the mainstream, clients may also expect that jobs can be done faster and cheaper.
All this amounts to a communications issue: We need to explain to clients the value of what we do. It’s not the hundreds of hours we put into building a product; it’s the expertise. Sure AI can do some legwork, but they can’t bring our understanding of a website or a marketing strategy. It’s a conversation we need to have early and often with clients and with prospects.
It all comes back to data.
One of the best parts of the pipeline meeting is when we look at the win percentage – and high or low we’re almost always going to have some changes to make. On the one hand, if it’s too high, it probably means your product is underpriced. And if it’s too low, we need to see if the price is out of whack compared to industry standards – or if maybe we need to work on a marketing strategy that better communicates your unique value proposition. We recommend that our clients aim for a 30-40% sales close rate (based on actual sales qualified leads). This number will fluctuate a bit based on the niche you serve, the size of the engagement, strategies used by your sales team, etc. 30-40% is just a great target to aim for.
The real value comes in analyzing your numbers month after month, so you can keep your finger on the pulse of these metrics and then take concrete steps to improve them over time.
Do you need more help with your pipeline strategy? We’ve helped our agency clients work on improving their pipelines and change the course of their agencies. Request a virtual CFO consultation below to learn how we can help.
