In this episode of the podcast we are exploring the differences between rural and city based agencies as well as regional differences across the UK. We dig into the WOW Company’s new regional reports with Rory Spence.
[01:06] The advantages and disadvantages of city v rural agency and differences regionally
[02:01] The value of 3rd party market research data (i.e. The Bench Press Reports)
[03:09] Interesting findings from the regional research especially the pricing league table
[03:53] The UK average hourly rate for agencies is £91 but how does it differ in different regions? Some surprising results!
[05:15] Gross Profit Margin analysis by region - again more surprising results
[07:44] Do you think the regional differences are caused because of mindset?
[09:02] Everyone can now compete with London Agencies!
[10:22] What are agencies planning to do with their offices in 2022?
[12:02] Lead with value to be able to charge higher fees (and compete with London agency pricing)
[14:11] Are agencies planning to recruit remotely?
[16:08] 83% want to keep their office yet 78% will recruit remotely!
[18:04] How do you embed culture with remote workforces?
[22:36] Rory shares his views on using freelance staff v in-house employees
[23:43] The impact of IR35
[25:15] External support to hiring people on your team
[27:49] What advice would you give yourself, just starting out in the agency world?
“The average GP Margin for a UK agency is 44%” - Rory Spence, The WOW Company
“It doesn't matter where you are based any more. Everyone is working remotely serving clients all over the world.” - Rob Da Costa
“73% of agencies are planning to keep an office” - Rory Spence, The WOW Company
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I'm Rob Da Costa and this is The Agency Accelerator Podcast. As someone who has stood in your shoes, having started, grown and sold my own agency. I know just how it feels during the ups and the downs of agency life. This podcast aims to ease your journey just a little by sharing my own and my guest experiences and advice as you navigate your way to growing a profitable, sustainable and enjoyable business.
In today's episode of the podcast, we're carrying on the conversation that we started a couple of weeks ago with Rory Spence, benchmarking expert from the Wow Company. Now, in the last episode, we talked about all things pricing. So, go back and listen to that episode. If you missed it, there will be a link in the show notes.
Then, today we are talking about regional differences in agencies. Because there will be many listeners who listen to this from London or another big city. There's also been many who listen to this, far more regional locations. Big cities or regions have their advantages or disadvantages. Present opportunities and challenges around recruitment, pricing and winning works. Then, that's what we're talking about today.
Welcome again, Rory. Let's kick things off by just talking about the advantages and disadvantages of each.
Yeah, perfect. Thank you so much, Rob. Thanks for having me on again. It was really interesting to get this regional analysis for the first time of BenchPress because we've run it for nine years now and we've always released things like pricing stats. People have said, “Well, that's really interesting, but I'd love to know what it means for me. Also, compared to where I am, I'm up in Scotland. I'm not in London or I'm down on the South Coast. You know, how does it differ?”
Then, to be able to provide these insights for the first time, it's been really exciting. All of these reports are available for you to download, so everyone can have a look. Though, I wanted to pick up some key stats today to share with you. Where did you want to start, Rob? Because we've got a fair bit to look after that.
Yeah, well, let me just first do a bit of cheerleading for the BenchPress reports, because I have been receiving them for probably all nine years of the fact that you've been running them. They are very useful because sometimes you can say something to a client and have that third-party data to back up that thinking. It's a great way of kind of removing blockages for clients.
I think a couple of smart things that you guys have done, one is having the report for that million pounds plus agency. Then the agencies that are less than a million because a lot of my clients are hovering around that point. Then, it means that they stop saying this is really interesting but it doesn't apply to me. I think now that you've gone into this, regional, you've broken that down even more and you're breaking even more of those barriers. I just want to say to the listeners, If you haven't heard of the BenchPress reports or you haven't read them, then go get them. The links will be in the show notes. They are free to get and they are very useful.
Then, let's start with that but just share with me I guess, some of the interesting stats you found when you did this research. Was there anything surprising? Were there any disconnects that you thought was interesting? That's a big question. Then, I'll just let you talk about the stats that you found.
Yes, I think the thing I was most excited to see was going to be the pricing league table. It didn't disappoint. It didn't disappoint. It was really curious to see just how much London was going to be ahead in terms of an average hourly rate versus some of the other regions because I don't think anyone would be surprised to know that as a region that was going to be higher. Though, it was really curious as well.
I've got it here. I'm gonna just read it directly on my phone. The UK average hourly rate for agencies of all sizes is £91 an hour. That's the UK average just to give you some context. Now, you've got London up to £105 an hour. Quite a jump above all have probably guessed about £10 an hour, obviously, that's £14 an hour higher than the average, quite interesting, actually. Also, Bristol and Cardiff are above the average. Then again, the average is £91, Bristol and Cardiff for at £93. Also, you've got the South, North, Central and Eastern England. All within a couple of pounds an hour of each other; £88, £87 and £86 an hour. Then finally, you've got Scotland, whose average is £83 an hour.
I was really surprised about that because we've got some brilliant clients up in Scotland. They are really successful clients that are competing for not just region, not just across the UK but like across the globe. Then, I know for a fact that they will be higher, but perhaps that suggests there are a few smaller agencies in Scotland that are charging lower rates.
That was really interesting. I was always curious to see that. As Robert said, he's kind of going to share the link of the report so that you can download that in full and go into a bit more detail. To follow on from that, what I then found even more interesting was we did gross profit analysis by region. Me, perhaps naively thinking, well, the gross profit margin is going to be directly impacted by the fees that they're charging.
Then, the league table for prices and the league table for gross profit will be exactly the same. Well, how wrong was I? Actually, completely different. I guess again and I won't give you all of the stuff because there's a lot to soak in, but I'll pick up some highlights that kind of help to tell the story. The average gross profit margin for a UK agency is 44% now. London, which is obviously charging significantly more than the UK average in terms of pricing, their gross profit is actually 43%, lower than the average across the UK. Bristol and Cardiff, who were charging only £2 an hour more than the average, actually are up at 48% gross profit margin.
A really strong performance there. Then, just shows that there's a 5% gap in the kind of gross profit margin between Bristol and Cardiff agencies and London agencies. Even though they're charging so much more now. Of course, some of you will say that well, you would expect that salaries are going to be higher in London, costs are going to be higher, but actually, I still think it's really fascinating.
It shows that you might be a London agency can get, “Oh yeah, well, you know, we are charging more were charging more than the average.” But are you charging enough? You could argue that actually, these Bristol and Cardiff agencies, maybe better at pricing because their gross profit is higher.
I think another thing to pick out there is Scotland. Although, charging the lowest amount by a fair chunk in terms of their pricing. Well, actually, they bang on the UK average of 44% gross profit. Although they might not be charging the same amount, they're obviously really good at delivering these projects profitably. They're not doing over delivery. They're better at avoiding things like scope creep or in having that conversation. I think there are a lot of kind of additional takeaways that you can look at just beyond the headline stacks.
Yeah, it is so interesting. Of course, the GP margin is the thing everyone needs to pay the most attention to because that's the thing. That means whether you're profitable or not. Though, it is really interesting. Do you think a lot of the regional differences are mindset based? Like, I’m in Scotland, so I couldn't possibly charge the London rate.
Interesting enough, the reason I say that is because we're just fresh off recording Episode 100 wherever it was 104, where we talked about value pricing. Actually, at the end of the day, there is absolutely no reason why a Scottish agency or a Southern agency wouldn't produce amazing work as a London agency. Yet their rates are a lot lower. Then, that's sort of an interesting one, isn't it?
I completely agree with you, Rob. I think it is a mindset. I think we've seen, particularly in the last 18 months, everybody's working remotely. It doesn't matter where you are. It does not matter if you're in the big London office, right? Because actually, everybody is in their bedroom, they're all working from the sofa, and we're all in the same place, so I think that created.
I'm sorry. Can I actually, I hate to do that, but I just want to add to that. Not only that but also we're serving clients all over the place. Yeah, I mean if you were a Bristol agency and you only serve Bristol clients then, you're a London agency, only London clients it might make sense. However, we're actually serving clients all over the world from all over the place, right?
A hundred per cent. Never before have agencies down in Cornwall, for example, had such a great opportunity to suddenly compete for clients anywhere across the UK, anywhere across the world. Because we're all doing things on Zoom, we're all doing things remotely, so you're absolutely right.
If you are competing against the London agency, why shouldn't you treat that as an opportunity to increase your prices? Since you're still going to come in lower than actually where those London agencies are. Also, the justification of costs will chronically go out the window. As I said, when we're all working from home, when we're all doing things remotely in servicing that client remotely, potentially not getting face to face with any clients at the moment. Then yeah, a massive opportunity at 100%.
Yeah. Also, you know that old age of like, well, if I'm hiring a London agency, I expect the fees to be high because of their costs are higher, is kind of going out the window again. If you overlay the whole value conversation, then it's not about your costs. It's about the outcome that you deliver for your clients, right?
What other interesting stats did you have to share?
Interestingly, you mentioned. Around London, agencies have higher costs because things like offices are going to cost more. Well, that was one of the questions that we asked. What are people planning to do with their offices in 2022? That's basically how we positioned it. Because it's something that's on a lot of people's minds. I don't know about you, Rob. I regularly have people coming to me saying, what are you guys doing? Are you going back part-time or full time? Would you keep your office?
Then, we thought that, well, let's ask it in BenchPress. There were some really interesting results. Overall again to give you the UK average 73% of agencies are planning to keep their office. Okay, so certainly, you know that the large majority are keeping their office. I should add some context when I say keeping their office, I mean keeping an office. They may be downsizing, might be upsizing, might be keeping the same one, but they will have physical premises.
Just said for context, the other 27% are either going to be fully remote or they're going to be using, like, a co-working space. Then, that's the other. They were the other options. That 73% of agencies that keep in their office.
Well to kind of get a bit regional with you now, the highest percentages were in Scotland and central and eastern England, where they were 83% and 84%. Actually, those agencies value the face to face time and want to get people in. London is considerably lower than the rest. Only 58% of agencies in London are planning to keep their office or keep an office. Which I guess again, probably people sitting there going again, not too surprising, considering the costs in London versus everywhere else. It's still really interesting because it goes back to what you're mentioning there, Rob.
Well, these London agencies, I'd be very surprised if they're going to reduce their fees because they don't have an office anymore. I do not think that's going to be the case. I think the saving on that rent is going to be invested in other places, and they're still going to be charging a fee that's higher than if you're an agency outside of London. Again, I think just that mindset doesn’t accept it. Don't allow clients to say, “Oh, well, we're expecting that London agencies price more because they've got larger costs.” Challenge them on it. Again, a really interesting opportunity here.
Yeah. Again, without sounding like a scratch record. If you lead with value, you're focused on the outcomes the client wants to get and you believe you can help them get there, then why wouldn't you charge the same fee or a higher fee? I think it will be really interesting when you do this again next year because we are sort of, we're here at the beginning of 2022. We’re still knee-deep, sadly, in a pandemic world with a lot of uncertainty. God, let's just hope that a year's time that's changed.
It will be interesting to see what changes in this particular report because I think my take on this is that at first, people had to very quickly get remote working work right. They had very little time to do that. It was sort of novelty staff, liked it at first. Then, they stopped liking it quite so much because they are in their house 24 hours a day. They got kids running around so on. I got a sense that some people really wanted to go back to having an office, having that routine and the separation between home and work. Then, I think it'll be really interesting to see what these stats are in a year's time. Do you get a sense that they will be similar or they might change at all? Who knows?
Yeah, it's really hard to call. I think the office decision may not change too much, but what's fascinating is another question that we asked was around recruitment. We asked agencies whether they plan to already recruit people remotely. People that are not within a commutable distance of the office.
67% of agencies said yes, they would recruit remotely. To be honest, I thought that figure would be higher than that. Because in BenchPress, what we asked every single year is what is your number one challenge within the agency. Every single year without fail, new business is number one. Then, no surprise there, new business is always number one.
Then number two quite often is around talent and recruitment. Really fascinating that again we talked about we kept using the words opportunity in the last 10 minutes, Rob. Although, again, I think there was a huge opportunity when we did all start working remotely, and everyone was on Zoom anyway. I live a mile from my office. I live a mile from about five members of the team. Yet I didn't see them for 18 months until the Christmas party.
With that ability to work remotely, you could work with anyone wherever they were. It was a huge opportunity that we certainly grasped. Actually, there was someone that was kind of a friend of someone that worked at Wow, who we always thought could be a good fit for the team but she lived up in Aberdeen. Therefore, we never really considered it. Then suddenly, when actually, there's a great opportunity and she has been absolutely brilliant. She's been brilliant for the team.
I think this is a huge opportunity for a lot of agencies when there is that scarcity of talent and this huge increase in wage demands at the moment as well. Well, actually, can you treat this as an opportunity to go and find people that you know outside of London, for example, like lower living costs, lower salary demands? I think there's a big opportunity.
But I guess, just the final note, I'd add on this recruitment challenge Rob, which I found really fascinating to go back. 83% of agencies in Scotland said they would keep their office. However, 78% of agencies in Scotland have said they recruit remotely. Then, they have the highest region in terms of agencies that said they recruit remotely. You compare that to Bristol and Cardiff, where only 47% said they would recruit remotely. It's obviously really important for them that they're having people coming in face to face.
Then, it does feel like there's this slight disconnect. I think these agencies say, “Well, we want to keep an office, but we want to hire people remotely. I wonder if one of those two things will take over and they'll either go.”, “Hey, we suddenly got a really remote workforce, so we will change our mind about the office”. Or, “Actually, if we're sticking with an office, we want people in there. We're going to stop hiring remotely,” I'll be interested to see.
I guess in a way, I'm not surprised at that, because in the last year or so, the talent conversation is definitely a top of the agenda. If I had to ask all my clients what their number one challenge is, it's finding good people. When I talk a lot about building a self-running agency and work typically with sort of sub-million-pound agencies, the biggest issue is that they need to get a really strong leadership team beneath them and they can't do that. I think finding people is such a challenge at the moment. If you find someone in Scotland when you're based in London, then you need to snap them up.
I've got a client in a similar position. They're in Guilford, and they have one of their account managers based in Glasgow. He never met the team, and he works really well from there. But that does raise another question, which I don't know whether it was in your report. I don't even know how you phrase this question but there's a big cultural implication with remote workers. How do you make people feel part of a team and how do you get people embedded in your agency's culture? Have you got any thoughts on that or did you ask any questions around that?
Yeah. Interestingly, you mentioned that because at the point that this podcast goes live in January. Our 2022 to BenchPress survey will be live at that point, which you can get to by going to wowco.uk/benchpress. That survey is live to take part in, and I'm sure you'll be able to share the link.
Yeah. I encourage everybody to take part in it because you want to put yours to penny thing, but you also want to find out how you compared to everybody else.
Exactly. Right. By taking part, you will get an invite to the launch event, but you will also be the first to receive those reports. There are plenty of reasons to take part. But Rob, to go back to your point, you were asking about the culture. What are we're gonna do next year for our 2022 to BenchPress? We're actually gonna have three reports that are going to be released over the year.
The first of those is sort of financials and KPIs. Then, we will go back to things like this; growth, gross profit, target directors earnings and some elements around that. One of the reports is going to be around new business and client work. Where do you win your new business? What's the most successful lead tool? How much time are you spending on it? And so on. But one of those reports is going to be on people and culture because it is on people's minds.
Exactly what you said, Rob. A lot of people are thinking about this now. Actually, not only on the recruitment side of things, where do you get talent? Actually like, how are you doing? How are you managing the recruitment side of things? But also like the culture, how are you building a culture whilst working remotely? How are you ensuring people are staying in touch and staying motivated? How can you check in on the team? It's much harder.
When you are face to face with people in an office, actually, you can tell pretty quickly whether someone is having a bit of a down day or some things up and you all step behind the screen. It's much difficult, much harder to pick up on. Now it's going to be fascinating. I'm really excited to see the results of that. It's difficult right now to comment too much. Although maybe, Rob, off the back of those reports going live we can do it in sessions.
Yeah, for sure, because it's such an important topic. Also, probably the answer to it is multiple. Things like this technology can help, but it can't do everything. It can help in terms of communication. There's some clever tech around there to aid that and create a sense of community.
But it's other things as well. I have no idea. I don't know the answer. I've actually really enjoyed the remote working because it's made me very efficient. Whereas, I used to spend two hours on a train going into London for a two-hour client meeting. Now, I don't spend any time doing it. I do. I'm off to Maidenhead on Friday. Actually, I do some face to face meetings but I want to keep it this way.
It worked for me but it doesn't work for everybody. I've had a few clients where I've been working with their team. They're sitting on their bed or in their bedroom because there's nowhere else to go in their house. That isn't a sort of a sustainable long term thing.
What I've seen, which I think kind of agrees with your findings is that a lot of my clients have got rid of their old office or downsized their old office. They've got an office space that their team can book into when they want to. They also have set times or days of the month where everyone comes together for their team meetings. Then, that sort of blended approach seems to be working well.
It will be interesting to see the report because we don't have a crystal ball or even the next few weeks. Let alone the next year of what's going to happen. When we come out of the crazy world we're. Where will the pendulum stop? Where or what? What we learned has been good for us and I think recruitment.
It's funny. I started this business in 2007 at the height of the financial crash, and recruitment is tough then. It seems to me that it's never gone away but in the last year, it's been tougher than ever. It's just I don't know whether because people have kept their heads down and not changed jobs or what.
This is a bit of a sidetrack conversation. I hope you don't let me go in there with this, but that's resulted in people being creative about how they staff up. I've got a particular view about building an agency using freelance staff. Have you got a view on how that works and what your thoughts are in terms of this freelance?
Yeah, I think there's no right or wrong answer here. It really depends on what you're trying to build and where you're at. Since I think for a lot of people you have no choice but to initially use freelancers because you can't guarantee them five days worth of work. Also, you do not want them sat there.
If there is a team member, number two or three, you just can't afford to have them sit there twiddling their thumbs for a day a week. Then, the freelance route can be really good for that reason, but equally like having ambassadors for your brand. People that are really aligned with what your beliefs are as a business and really passionate about what you do. You can't replicate that, and I think you will struggle. I'm not saying it's impossible, but you're going to struggle to get freelancers that are on board in that sense.
I think going down the recruitment route for that reason can be brilliant. You can build over the years absolute ambassadors for your brand. Of course, go down a slightly geekier route, IR35 is going to be coming into play soon enough, which if you're not familiar with this, if you've got full-time freelancers, please go and chat with your accountant about IR35. I was going to say, give it a Google, but there are all sorts of terrible advice on Google, so please chat to an expert about IR35. It's going to limit the amount agencies that can have those full-time freelancers. I think we might see a little increase in the kind of recruitment of staff from that sense.
Yes. Basically, IR35, sort of in the government's view, says you're employing someone if they work for you full time. Even if they are freelancers if you are they’re any client or whatever. That's definitely something to be mindful of. Listen, I sprung that question on you, and I'm super glad you answered it the way you did, because I have a really strong view on this, and sometimes my clients don't agree with me on it.
I believe building an agency using freelancers is a bit like building a business or building a house on quicksand because they have a different agenda from you. They will never be your brand ambassador. They'll have their own plans for their own freelance business. Of course, ultimately they cost you more money than hiring an equivalent in-house person.
Then, I believe absolutely, as you start, if you go from being a freelance yourself to growing an agency, you're going to use freelance to start with. You just need to keep a really strong eye on your costs. When your cost of outsourcing becomes higher than employing someone that should be your trigger to bring them in.
I think the other time for having freelancers are when you've got capacity issues. Also, when you need specialist skills that you don't have in-house or you don't want to have in-house. Those are for me the only times that you can do that.
What I would add as well. We're talking about the scarcity of talent. It's clearly a problem in the industry. I believe that we all have a part to play in that, right? We all have a role to play in adding that talent into the sector, right? Actually bringing the next generation of creatives, developers and technicals like through.
I think, to give BIMA a shout out. They do digital day every year, which is brilliant. It's encouraging. It's going into schools and encouraging kids to take part in. With like pitch processes and getting them engaged in digital. If you are being a member, then hopefully already know about that. You can get involved and if you're not, though, there's definitely a role you can play in that.
I'd also add the government introduced, Kickstarter campaign, which obviously means you're getting funding for taking on apprentices. Don't get me wrong. I'm not suggesting everybody. Some people can't afford to go away and take someone on who they then need to train up. You need someone that can get the ground running. But if you're in a position to do that, I'm certainly not complaining.
I'm claiming that I'm a success story here. I started Wow as an apprentice eight years ago, still at well today and absolutely love it. That was because they were dedicated to looking after me, training me up, and all of the trust that they've given me. If you cut me open, I would be well through and through now. I would definitely encourage you to consider the Kickstarter campaign. It’s brilliant.
Yeah, I'll put links to both of them around that in the show notes. One of the advantages of hiring someone like you as a grad and then training them up is that you get them into your way of thinking. You can't build your agency entirely on that. But that's certainly a strategy that a lot of people have found more successful because they retain their staff longer and their staff live and breathe their brand. Also, the way they deliver, whereas you hire someone else in and they've got their own agenda.
That is really great. It made me smile when you said that because it leads me to my final question, which isn't gonna be too hard for you. But with someone who’s old and grey like me is a bit harder. I ask all my guests this which is, if you could go back in time and give your younger self, which is only eight years ago, just starting in the agency world one piece of advice. What would it be?
Yeah, it's an interesting question. I always enjoy listening to people's answers to this when I'm listening to the podcast in the gym. I had thought about this. I think, honestly, my advice would be to look after yourself. Alright? Look after yourself personally, because I have certainly seen, particularly during the roller coaster of sales. Some downtimes are really tough. Some up times are really great. However, you need to just throw out all of it.
Make sure you're looking after yourself, right? From a mental health perspective, make sure you're able to switch off. You're listening to your body. You're listening to your heads. You're looking after yourself. Make sure you're taking proper breaks. I know so many people will be listening to this. Well, of course, we're all in a position where, when was the last holiday? God, because we've not been able to go away for two years. But personally, I want to make sure that every quarter, I'm taking some time out where I can switch off properly.
I'm not suggesting that I go jetting off on holiday every quarter. I wish, however, to make sure every quarter I got that time where I know it's in the diary. I work towards that. I'm really strict to that I take that time out; getting away from emails messages and switching off. I'm better for it. I think mentally if you're in a great place, you're gonna do great work. You're gonna be more confident you're going to have more energy. I know I'm speaking about this because I hear it all the time.
There are so many agency owners out there, particularly that are burning the candle at both ends, that is doing a crazy amount of hours a day or a week. Sometimes you need to do that, right? Of course, you do. But please make sure you are just taking time to yourself, and you know that you're not a machine, right? You can't just keep going and going. You take some break up to yourself.
Got a great piece of wise advice. I love asking this question because I am so ready to get the same answer twice, and I don't think you've ever had that answer. But if you guys, if listeners want to go back to Episode 100, then that was an extra that took us forever to put together. Because basically, we've taken all of the pieces of advice and put them into one episode. We've also created a download which I find really inspirational. With all of the quotes that people have said into that, you can download them.
This is something you can read or have a listen to. What 40 plus guests have said as their piece of advice. Because if we could digest that and live that, we would be so much better. I think the mental health thing is so important right now because so many of us have struggled with that in this strange, isolated world. Thank you for sharing that with us.
Listen, Rory, it's been brilliant having you as a guest across these last couple of episodes. I will make sure I include all of the links to the BenchPress report as well as links for people to connect with you and obviously the way our agency as well. So I just want to say a huge thank you for joining us today on this episode of the podcast.
Thank you, Rob. It's been a lot of fun this morning. Thanks for having me on and take care.