7 reasons why many agency founders fail

For many people, setting up their own agency is an attractive option. Many young agency founders try to start their own business in order to pursue their own ideas, but also because an own agency does not require much more than a laptop and a seat.

Nevertheless, many fail. The reasons for this are manifold.

1. Not the necessary expertise

If an agency wants to survive in the market, good expertise is essential. This is the only way to provide excellent services that will lead to success for the client and generate the important recommendations.

2. No clear positioning

The “we do everything and serve everyone” approach is no longer credible in a complex world of communication, as no agency has the expertise to offer excellent services in all communication areas and sectors.  A clear positioning on the agency market is therefore indispensable. A positioning sets you apart from the competition and also helps you to perform well through concentration. When starting a new agency, you should therefore be clear about what you want to offer and which target groups you are serving.

3. Price too low or too high

If the price for the services offered does not fit on the market, you will get into trouble as an agency founder. If your agency services are too expensive, you will have difficulty selling them. If the services are too cheap, you will not be able to survive as an agency in the long term. In order to successfully set up your own agency, a good cost calculation is therefore an important basis.

When calculating prices, always put yourself in the role of the customer and ask yourself what economic added value you bring to the customer and how much your service is worth accordingly. The aim should be that you can provide the highest possible service with the least possible effort. Ultimately this means that you must put efficiency before perfectionism.

4. Free services

Anyone who runs an agency will be confronted with the fact that existing customers or potential new customers want to use their agency services free of charge. To a certain extent this is also okay. But if the number of hours suddenly skyrockets and a mentality creeps in that every service is available free of charge, this becomes a problem. With your agency you should therefore make free services the exception rather than the rule.

5. Growth forecast too optimistic

Building a new agency takes time. Very few agency owners can make a full living from their own agency after the first year. In most cases this is only possible in the third or even fourth year. The reasons for this are diverse. On the one hand, you are operating in a highly competitive environment with an agency. On the other hand, referrals play an important role in building strong, continuous business. However, these referrals usually only come about after you have successfully accomplished a few customer projects. When setting up an agency, patience is therefore required above all else, as well as a solid financial buffer that allows you to cover your living expenses for the first few years.

6. Lack of results

An agency’s role is usually to help the client achieve their business objectives. For companies, marketing budgets are not play money, but an investment. As an agency, it is therefore important to keep the customer’s goals in mind from the very beginning and to achieve them through excellent work. If you succeed, you can be sure of continuous business and recommendations.

7. Getting the right customers

In order to survive successfully as an agency in the market, it is also a matter of addressing the right customers and ultimately building up continuous business from them. If you as an agency concentrate on the penny-pinchers and discount hunters who switch directly to the competition for a few cents, you will find it difficult to develop long-term business and work profitably. Building a successful agency is all about building a sustainable and good customer base with whom you work together on a partnership level.

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Christian Wagner
Christian Wagner
Founder RiskPlayWin | Owner & Founder of the digital marketing agencies morethandigital.com & PEAKFOCUS.agency