When I joined the agency last year, my mandate was to sort out the finances of the company in a way that would empower the directors to take action based on current information.
Outsourced financial management and accounting was good enough for Switch as it grew. However there comes a stage when a company needs access to in-depth financial data at much more regular intervals than at quarterly management accounts meetings.
That was where I came in.
How did I do it?
In the first few months, I aimed to sort out all the accounting functions of the agency to bring everything up to scratch. This allowed for better drilling down and give the directors a finger on the pulse of how the agency is running at the click of a button.
If we need to know how profitable an account is, if we need to understand which areas of the agency are doing well or if we want to have forecasts for the rest of the year we can usually simply fish the data out in a matter of minutes.
This is incredibly empowering. Once everything was up and running smoothly I wanted to see how we can use these numbers to improve the way Switch works. Both for the agency itself and for its clients.
One of the biggest challenges we’re facing here is that the way agencies have worked traditionally is incongruent with the way we see ourselves going forward.
In my first few months here I learnt that traditionally agencies would rely heavily on commissions for income. Book an advert here, book an advert there and skim a percentage off that when billing the client. This needed a structure that could take silly amounts of cash-flow in and out to allow for enough revenue at the end of the year to scrape by.
In addition, we had a major issue with this model because it is not collaborative, and was therefore against our company values. It did not encourage us, as an agency, to think in the best interests of our clients.
It promoted spend for the sake of it. If we’re being paid our fees on spend, then our best interests are at odds with the best interests of our clients. Why fight for a discount on an ad if it means we’re earning less on it?
What comes next?
So now, armed with a much clearer picture of all that goes on in the business, the next step is allowing our clients to enjoy the benefits of working in a much fairer practice.
We’re moving away from a commission model. We’re working on a way of doing business that helps us build better relationships with clients. We are doing this by showing them that we’re on their side, not trying to make them spend more to earn more.
We bill our clients for the time we spend working on their projects. Whether it’s negotiating rates on their behalf, coming up with creative ideas, planning strategy for their campaigns or making their lives easier in any other way.
How is it affecting us?
Has it had an impact on our turnover? Yep – we’ll probably be billing much less than we did in previous years. However, we’ll also be in a much healthier position than we were in previous years because we’re building a level of trust and transparency that clients aren’t used to seeing.
It also works in our favour because a client is usually much happier to pay for our fees if we’re bringing their overall marketing spend down. It makes it much easier for us to justify spending money on us if we’re giving much better ROI.
Personally, as the person who’s handling cash-flow and who leads the administration team, this makes my life much easier. I am now dealing with less paperwork and less cash-flow that leaves very little margins at the end of the day.
The workload on the rest of the team hasn’t really changed. We’ll still research the best places to book advertising and we’ll negotiate on behalf of a client – but we’ll pass any discounts we get straight on to them.
The only areas in which we charge a rate that’s based on spend is on online advertising – and there’s complete transparency there too. The amount of paperwork that’s involved in dealing with small regular payments has to be covered somehow, but we make this transparent to our clients.
Going forward we’d like to see this financial transparency across the board in the industry. It would make agencies a better place to work at and give clients a much better impression of our industry in the long term.
Till then I’m going to continue working to create an agency that runs as smoothly as it possibly can. Both for our happiness and for the benefit of our clients.