After going to grad school for “stuff that was completely unrelated to what I do now,” David C. Baker started his own agency, which he describes as “unremarkable.”
It was only when he looked outside his own agency and branched into consulting in 1994 at the urging of Cam Foote of Creative Business Magazine that he finally found his niche. Years later, in what Baker calls an “accident of history,” he met HubSpot VP Pete Caputa at a conference, and the rest, as they say, is history. Since then, Baker has done consulting work for 39 HubSpot partner agencies.
In this episode, Baker explains why inbound agencies are not immune to the same business concerns that every other type of agency has to address and offers tips for building a profitable agency. For more information, Baker recommends visiting his website, ReCourses, which offers plenty of free information through his blog posts, webinars, and “position papers.”
Your Inbound Marketing Agency is Not Special
Agencies that never deviate from the cookie-cutter HubSpot approach are doomed to failure. Every agency needs to find a way to differentiate themselves with their branding, by focusing on specific niches or on services. Agencies who only follow steps outlined by HubSpot will be quickly overtaken in this competitive industry.
It’s important for agencies to make themselves unique and stand out. There are now more HubSpot Partners than ever before, so being a partner now means less than before. It’s important for agencies to find a way to stand out.
Baker takes issue with the tendency of inbound agencies (especially HubSpot partners) to think of themselves as somehow above business concerns.”The agency owners that are all in on inbound are different kinds of entrepreneurs, and they’re lost a little bit… They are eager, they’re smart, but they don’t really know what to do… They’re looking for a specific track laid out in front of them.” – Baker.
Inbound agencies had the head start on the explosion of content marketing and seeing the opportunity outside of traditional outbound methods. Inbound is the new thing and agency owners are smart, but this is difficult. It requires more than being smart to make it in the agency space and since inbound is new, it’s even harder when there’s not a roadmap. Agency owners need to take smart risks, position themselves, and make their own uniqueness in the inbound space.
One of Baker’s key metrics for determining an agency’s success is fee billings per full-time equivalent employee. Inbound agencies tend to do very badly in this metric. $120,000 per employee would be high for a typical HubSpot partner, but is significantly below average for any other kind of agency. This is a problem. Agency owners need to become more savvy on their revenue, profitbalilty, and overhead.
In Baker’s experience, the agencies that are most successful in the long term aren’t the most creative ones; they’re the ones with the most business sense. Agency owners often join the industry due to their creative instincts, but what makes for a happy and fulfilling agency is having an agency that is run like a business and having the sense to understand numbers and make decisions based on data.
Tips for Agency Owners from Baker
Make positioning your first step.
Positioning is crucial to identify and communicate with clients and for the agency’s own internal marketing. An example of good positioning, according to Baker, is TREW Marketing, an Austin-based agency that focuses on engineering firms.
As you narrow your positioning, your agency’s self-promotional content will become more focused, which will make it, as Baker says, “less relevant to more and more people… but your true prospects are going to be even more interested in you”. This is an important concept to remember. That you aren’t trying to sell to everyone. Your ideal client isn’t anyone. You will have to create marketing content that does appeal to your ideal customer and this will mean losing out on business, but long term, it positions your business to be more profitable and enjoyable.
Avoid getting outside money. If you’re raising money from outside, then you have your hand tied when making decisions and are worried about paying off debt or investors rather than on building your agency that you want. You may think it will make you more creative, but it ties you down in decision making since you have to consider other individuals as well in any decision you make,.
Don’t let project managers manage accounts.Project managers tend to focus on keeping clients without upselling or growing them. The project manager needs to focus on making all the pieces in the puzzle fit, run together, and deliver results for the client. By getting sidetracked on tasks an account manager will do, quality of work will suffer.
“There’s two pieces of bread for this sandwich: one of them is the account person, one is the project person.” – Baker
Avoid a retainer-based billing system. A consistent retainer might look nice on your agency’s balance sheet, but it can quickly become a source of tension with clients. It is likely to cause friction when clients are looking to justify the costs or feel resentful when they see themselves locked into a contract.
Instead, Baker recommends charging clients a low monthly fee with additional charges added on.
Podcast recap notes by Grayson Quay.
