Building any business past 250 people is not easy. I can tell you that through real-life experience. The journey there is littered with trip hazards at every turn, as I’ve written about before, you simply CANNOT get there alone.
But, having now spent the last 12 months or so working with other agency and saas business owners, and the last four with fast-growth funded start-ups, I can also say that the path is not entirely unique either.
The same basic challenges come up time and time again, and at very similar junctures and this post is designed to share a broad overview of those observations so they don’t come out of the dark to bite you, in the same way they did for me.
Before we dive into specifics though let’s look at the bigger picture and the simplified challenges agency businesses face when growing at pace.
The overview
Having had the time to reflect on the growth journeys I’ve experienced and also those I’ve helped others through, it’s clear that the following things are broadly true on the path to growth.
First off, every time you double revenue you must proactively reinvent 50% of your processes.
It’s a fairly obvious thing to say that if you grow fast, or a lot, the way in which you do things has to change. Knowing when, and how, is of course the greatest challenge for those facing it for the first time.
The good news for that is you can plan ahead of those challenges with the help of foresight, experience, and good operational business intelligence. Building that into your processes from day one is one of the smarter things you can do.
Time tracking and the process around it to surface such measures as capacity, utilisation, profitability by team and client etc. are MUCH easier to integrate early than they are to bring in when the culture is already set!
What is less obvious, however, and it caught us out in growing Zazzle/Stickyeyes Group is that culture must also evolve and change in a similar way.
Sure, the cadence is different. But it is true that without (often painful) cultural shifts it is nigh on impossible to grow past certain sticking points.
This is one of the great challenges for the founder in particular. Having led the team through the first few phases of growth as a mission-led leader the time must come when that responsibility is handed down to management and the business instead focuses more on measurable KPIs, OKRs and more accepted and structured approaches to people management.
And then there is the challenge of keeping all of the plates spinning at once. Often glass ceilings are reached when one or more of the four key areas of agency business, which I define as:
- Sales
- Delivery and Product
- Communication (internal and external)
- People
Are neglected and scaling challenges mean that they are not worked on simultaneously.
Without keeping the plates spinning you plateau at best, and the culture is usually slightly chaotic, and the senior team is usually found ‘firefighting’.
Other areas to watch?
Organisational design, delegation and accountability, internal and external communication…the list goes on
This then gives us some context and insight into why these glass ceilings to growth exist. But where should you expect them to crop up – and why?
The glass ceilings
There are several ways we can cut the view on these plateaus, moments of struggle or glass ceilings as I term them. We can talk about revenue, number of customers/clients or any other of the ways in which you measure the complexity of a business.
But where the complexity – and therefore the challenges come from is always related back to, ultimately, a growing number of people operating within your organisation.
So, let’s look at what we see regularly as the points of most resistance, starting with the solo freelancer to first employee journey…
Ceiling one – It’s not just you
When it’s just you, life is relatively easy. You do the work you have relations with all customers/clients and everything that comes in is yours.
But what happens when you can’t do it all alone? How do you choose when the right time is to hire employee number one and delegate?
Our take is this should happen as soon as revenues allow as growth becomes a self-fulfilling prophecy. With another ‘mouth to feed’ you generally see the founder work harder, and longer and begin to externalise process and knowledge as well as mission.
But it’s a big step. Deciding to employ someone when you’ve never done it feels like a much harder problem to solve than it actually is – the key is not to worry, find a good accountant that can manage PAYE for you, and you are away.
Ceiling two – 8-12 people
Once you’re over the ‘employing people’ mental hurdle then it’s plain sailing for a while. This is one of the very best sweet spots in the growth journey – and you feel invincible.
If you’ve hired well and have established a good product then things should accelerate whilst, at the same time the team grows a real sense of the ‘us against the world’ mission.
The first 10 employees really are your evangelists and should form an important part of your cultural compass too and with less than 8 or so people everything seems easy.
But the cracks in internal comms do start to appear and before you realise it you are losing clients, missing delivery tasks and everything can start to unravel.
The problem, as with all of these ceiling stages is that the issues creep up on you slowly. Insidiously. And you don’t often realise until it’s simply too late.
To get ahead of this issue the key is to establish plans for the following key areas of the business:
- Operational client planning. Formalise this into a central process involving all the right people. Get each task into a PM system and ensure one person owns the process.
- Create a good meeting structure and cadence. Include operational meetings, client-specific meets and sales meetings.
- Agree on a ‘tiering’ system for clients based on how important they are to the business. Ensure they get a minimum amount of comms and reporting above the task delivery piece.
- Start to track sales leads and values and get a good accountant on board who can supply a monthly P&L – this way you start to grow a finance function and understand your numbers.
Ceiling three – 25+ people
The most difficult ceiling so far (there’s a theme here!). With 25+ people you will really start to test the quality of your systems, processes, and, most of all, ability to delegate properly and create visibility via data, not gut feel.
Teams will, by this point, have formed around channel specialisms and team leaders will have begun to lead. The key here is NOT to fall into the trap of hiring the best ‘doer’ to lead the team, but instead, to establish the fact that people management is just a different path and does not sit higher up in the hierarchy.
You’ll also need to be working on a wider meeting structure to keep everything joined up, really delegating around accountability frameworks to keep everything in check.
Any cracks will be exposed across any and all areas, but most of all across your processes. By this point, it is wise to have a specialised senior role set specifically over operational delivery and task management. This will minimise the impacts of the above as you race to iterate the approach and the realities of delivering in a more specialised way and at scale. They should also be tasked with creating good operational BI (business intelligence) data, so you have your fingers on the pulse.
At this stage, too cost base will become more than simply something you ‘can cover as long as you sell enough’. You need to know your numbers and hiring an office manager role who can perhaps help with bookkeeping and bits of HR admin etc. is a wise decision, alongside some good external or fractional senior finance support to produce good monthly P&L reports etc.
Ceiling four – 40+ people
It’s at this stage where I feel real ‘companies’ begin forming. Where the founder/s decide to build something of significant scale as opposed to a lifestyle business.
The choice is not an easy one, significantly because this step is hard. It often means waving goodbye (for a while) to your impressive margins to allow you to invest in a higher calibre of senior leadership.
To run well it’s key to have ‘generals’ in each of the following key areas of an agency business:
- Sales
- Delivery
- Clients
This list will be added to as you grow but for now, you need real experience here to make it to the next phase.
You’ll also need to hire your first real finance person, if you haven’t already, in the form of a good Financial Controller. Their job will be to build out the finance function and mature the processes that feed into it to ensure numbers are accurate, bad debt is in hand and reporting is delivered well and on time.
Ceiling 5 – 75+
Weirdly this next jump is perhaps not as difficult to break through as the previous couple. This is because you have done the hard work around org design, bringing in experienced leaders and maturing operational and finance functions.
This is about ensuring you continue to invest in finance and operational support and then further grow our sales and marketing functions.
At this stage, you need a sophisticated approach to pipeline development and monitoring as the demand for winning new business becomes much more significant.
This is where further proposition development starts to come into its own too – the launching of new channel teams and service offerings to allow cross and upsell to accelerate.
At this stage, more business opportunities can be found in the ‘farming’ of existing clients than the winning of new ones.
Ceiling 6 – 150+
By this point the organisation is complex and culture is being pushed and pulled apart.
If you haven’t already then during this phase you simply have to move on from an era of ‘founder-led leadership’ to a more structured, accountability-led culture.
Ensuring that client relationships deepen and widen is absolutely central to the success of the agency at this stage as you win bigger brands with more complex needs and more opportunities.
And as a founder, you may well want to start thinking about replacing yourself as CEO if you have indeed lasted this long.
Running a complex organisation requires a different skill set and set of experiences. Emotion-led leadership creates more problems than solutions here and a more ‘corporate’ approach is needed to ensure the new culture embeds and decisions are made out of logic as opposed to ‘gut feel’ or belief systems.
It is at this stage that your CFO plays a key part too. Running a tight ship on the numbers side and ensuring that BI is correct and delivered in real time is imperative.
Good governance also plays its part of course too, with accountability also true of the CEO. A good non-exec or two will help with this to protect and enhance shareholder value.
The senior team by this point should include an experienced CEO, chief commercial officer, chief finance officer, chief operating officer and also great people heading up clients, marketing, client strategy and HR.
If you are still independent at this stage, then expect EBITDA to have reached £3-5m and the pull of sale or exit becomes greater and greater.
Few can resist the pull of liquidity at this stage, but the occasional agency does. The question is, how far is far enough for you?
Do these ‘ceilings’ resonate with you as an agency leader? Do you feel like you’re wrestling with any of these stages right now? If so, we’d love to hear your story. Please do share your experiences with us by reaching out as we love nothing more than trading agency war stories!
