Welcome back to the second article in this series. Last time, we covered some of the most common problems you encounter when scaling your agency from “solo to small” (less than 5 employees), and how you can avoid them. If you missed that instalment, check it out here.
This week, we’re going to look at the next stage in the process – moving from “small” to “boutique” (5 or fewer employees to 5-15 employees). Just like the last stage, there are certain challenges that routinely crop up as you start to add more employees into the mix. Let’s examine those issues in more detail.
Stage 2: Small to Boutique
If you’re ambitious, and things work out well for you, you’ll eventually reach a point where you’re ready to scale your budding agency into a slightly bigger organisation. Breaking the 5-15 employee barrier is a big milestone in any agency’s story, and with good reason: it indicates you’re moving up in the world yet it’s one of the most difficult growth phases.
The main challenge you face when you’re just starting out is making smart hiring decisions. An agency of five (with two members who don’t quite fit with the culture) is going to be hurt more by a poor hire than a bigger organisation – generally speaking. Recruiting and retaining the best talent for your agency is always an important consideration, but as you scale up your agency, another obstacle emerges: infrastructure.
Having a solid infrastructure in place is what keeps the wheels turning when you’re not standing in the room overseeing every little action. Great systems separate the winners from the also-rans… and sadly, the kind of systems that worked perfectly with a handful of employees don’t always function so well when you add more people into the mix.
I like to use the term infrastructure as a catch-all label for the processes and systems (IT, productivity, documented etc.) your business is built on. They’re foundational – without solid ground to build on, anything you construct on it will be unstable. Throw some external pressure on top, and you have a recipe for disaster.
As I often tell my coaching clients… “what got you here won’t get you there”. Manual (or no) systems work fine when your business is small, but quickly expose you when you scale up, and ultimately stop you growing. For instance:
- If your preferred method of communication is shouting across the desks at each other, what happens when you’re in a different room?
- If you don’t measure time internally (because you have a handle on what’s going on), how does that work when you have 10 staff?
The point here is that building sound systems into your business from the start is never a waste and indeed, sets you up to become the bigger agency you aspire to be. That said, there are a few specific areas you should focus on as you grow. Let’s take a look at two of those in more detail.
Area #1: Filing & Documentation Systems
- Ever misplaced a crucial piece of paperwork, then almost torn your hair out looking for it?
- Ever had to reverse-engineer a particular working process from scratch because you neglected to write it down in the first place?
- Ever failed to produce consistent results for clients because you did the job a slightly different way each time?
If any of the above situations sound familiar, then it’s likely your documentation systems need work. Whether that means improving your organisational skills, or getting more diligent with tracking your working processes, you need to take note – your business depends on it.
The need for meticulous filing and documentation is less noticeable when your agency is small; you probably feel you don’t need them. You have fewer clients on the books. Fewer employees, which means there’s less chance of losing things! And you have an easier time directly teaching people what they need to know vs just having them to follow a documented process which means you can ensure consistency.
But as you scale up, cracks start to appear if the foundation is weak. Maybe valuable files go missing, or new hires don’t quite understand how to do some crucial task. The net result? The client doesn’t get a consistent experience, and this quickly damages your brand and loses you that client.
Issues like these can only be avoided by taking the time to set up your systems right from the start. Ensure you’ve got the basics down, such as:
- Using consistent client codes/references across paper and digital files (e.g. invoices, project work, miscellaneous documents, etc.)
- Standard processes for completing routine tasks, such as client onboarding or monthly reports.
- Think about what online systems you can use (e.g. project management such as Asana or file sharing such as DropBox).
- Have a documented hiring process in place. We covered one potential process in detail last week, but ensure you have a standardised way of selecting between candidates. At least when the system is in place, you’ll be able to make changes. Without concrete steps to follow, you could flounder for months on end.
The takeaway point here is to get your filing and documentation systems in place before you need them. Take it from someone who’s seen businesses who didn’t do this – you’ll regret it if you don’t.
Area #2: Managing finance
Much like the carton of expired milk you discover on your return to the office after a long weekend off, your finances get worse the longer you leave them unattended, and most entrepreneurs do not love doing their finances (hand up here, I really don’t like it!)
It’s easy to let the matter go, reasoning that you’ll take care of them once things settle down/take off/after your busy season/before the year-end etc.
But honestly – you’d be surprised how much work it takes to catch up when you fall behind. Piles of receipts, bills you’re not sure were paid, or even invoices that might be overdue: that’s just a taste of the trouble you can find yourself in without a good handle on your finances.
And if you think it’s bad when your agency is still small, you won’t believe how tricky it gets when your business scales up. More employees, more clients, and more money make things much worse if they’re placed on a weak foundation of poor finances.
There isn’t much to say here, apart from this… get a professional in to help! Whether that means hiring a part-time bookkeeper or an accountant, ensure you are on top of your finances.
Remember, one of the critical reasons agencies fail in their first 2 years is because of cash flow issues. So you need to be on top of your invoicing and credit control, not to mention your expenses!
And a few additional points:
- Get a reliable software solution in place for managing your accounts. Lots of agencies like to use something cloud-based such as Xero (my preferred solution) or QuickBooks. Ask your accounting professional for advice if needed.
- Building on our earlier point about having sound filing systems – hold onto all your receipts and invoices. I use ReceiptBank for managing my expenses (which has revolutionised my handle on expenses).
The areas mentioned above (project management, documentation and finances) are essential if you hope to scale your agency beyond five employees. Of course, other areas matter too (e.g. communication, IT, and more), but these are the two stumbling blocks I’ve seen numerous businesses struggle with over the years.
Weak foundations are critically exposed when weight and pressure are placed upon them. If you want to avoid serious problems further down the line, take the time to build sound systems into your business now, before you need them. You’ll be glad you did.
In the next article in this series, we’ll discuss what it takes to go from “not-so-small” (10-15 employees) to medium (25-30 employees approx). Stay tuned!