As we come to the end of 2022 it offers a chance to reflect on the last 12 months. One of the things we are most proud of is having spent so much time talking to, and in the company of, so many truly remarkable agency founders and entrepreneurs. It doesn’t matter how many times you’ve chatted about general agency challenges and opportunities it never ceases to be motivating to be surrounded by motivated, focused and smart people.

It’s precisely why we are so motivated to help.

The exposure helps sharpen your senses around how you spot a great agency business/team/idea quickly and I am constantly asked what I look out for when analysing and evaluating agency teams that we feel we can help. As we are focused on helping only a select number of agency businesses it makes choosing the right ones a very important process.

To do it we’ve combined our years of agency experience with our time in venture, being pitched to by 1,000s of entrepreneurs, to come up with a simple system for evaluating the opportunity.

The Selection Framework we use is based on six simple questions/challenges we ask ourselves about the people in front of us and the agency itself….

The Selection Framework

1. People

Agency businesses live and die by the quality of their founding team. It’s rare that a single founder can do it alone and so I like to look for multiple founder businesses and, most of all, a tenacity and voracious appetite for learning oozing out of their pores. Business is hard. You must be built a certain way to pursue it for long enough to be successful.

2. Distribution

Having a trendy service offering is OK but it’s less than half the war now. With so much competition I always want to see an awareness that sales and marketing will be the difference between winning and losing and that the plan to deliver it has as much effort put into it than the product/service.

3. Engineering , tech and IP

Most good agencies have built, or are building, some kind of proprietary tech to help them win and deliver genuinely brilliant work. But not all agency tech is equal. If you have it I always ask myself ‘does this solution offer a truly technological breakthrough’? Does it make the customer journey 10x better/easier or the client lean in at pitch? If not it will be very difficult to scale and defend.

4. Timing

We like to pretend that our agency businesses are successful because we are smarter than everyone else. But the reality is that timing has, more often than not, played a massive part in that breakthrough moment. A big question in my mind then is ‘is the timing right for this agency brand and service offering’?

5. Durability and Defensibility

What does this idea/business look like in 10 years? How easy will it be to defend? Can we build a moat? All are important considerations for building long term value.

6. Unique insight

Often the best ideas come from the founders’ unique view on the world. Often they have spent time in an in house position or a paralell industry and can see a way of doing something better. Or, they’re aware before others of structural shifts coming down the road that create opportunity. Always look for that in the people speaking. Why do they see that and others don’t? Is this the case? It needs to be….

7. The numbers

You often won’t know a lot about the numbers of first visit as founders are understandably protective of this info at the beginning. Instead it can pay to understand the percentages. A healthy agency P&L should show a gross profit of circa 80% (dependent upon what sits above that line and how the agency operates from a staffing perspective). Staff costs should be little more than 50% of revenue and operating profit should be at around 30%+ unless there has been significant investment in growth or IP development.

And so this is the basic structure we use when speaking to new agency partners for the first time. Each question is assigned a score of 10 and we look for 60+ outcomes…