At some point in your agency journey you thought about niching your offering. That is by either specialising in a particular skill e.g. WordPress development, video production, PPC. Or in a particular sector e.g. financial services, healthcare, leisure & tourism.
Every time you start thinking about it, the daunting feeling of getting it wrong starts nagging.
- What if we lose our clients?
- What if we lose team members?
- What if we don’t get enough new clients?
That feeling is called: Risk.
“All profit derives from risk” – Peter Drucker.
A recent study of over 700 independent agencies (mainly sub £5M turnover) revelead that:
9% of niche specialist agencies were more likely to have a net profit of 25%+ in the past year compared generalist agencies.
9% of those niche agencies were also more likely to say they grew their turnover by 25%+ in the past year compared to generalist agencies.
Tip: Consider this process carefully, as there are many success stories – but also lots of failed ones.
Here are some tips to get you started if you are looking to niche your agency…
1. Why are you niching?
- Is there something wrong with the business as it stands?
- What is wrong with the business?
- Is it an ego thing?
- Is there an opportunity in a market?
- … these are just some of the question to ask yourself.
A lot of the time agency owners get frustrated with the lack of progress of their agency. The obvious solution is to fix the problem that is causing the lack of progress. Instead we try to come up with a new great creative way of running an agency – “the new agency model” – that is different to everyone else. Forgetting that maybe the issue may be a lot simpler e.g. not doing enough marketing, lack of leadership skills, deliver problems, etc.
Agency case study: MadeBrave agency is not considered to be a deep niche specialist by the definition of The Agency Collective. Yet, relentless pursuit of making their agency famous through their marketing, has turned MadeBrave into a well known brand in Scotland.
2. Is the niche something you are passionate about?
In the search for happiness, the Japanese developed a philosophical concept called: Ikigai – “a reason for being”. Looking at this diagram, if you are not passionate about your niche you might end up feeling empty or uncertain about whether you truly love what you do. Without being too philosophical about this: Just going into the finTech sector because there is a need and it pays well is probably not a sustainable life choice.
Case study: dxw are deep sector specialists (public sector) – and have always been. They are a growing team of 80 and love what they do every day. Following a strong mission to change people’s lives through the use of technology. There is not one day where Harry Metcalfe the founder gets up and thinks what is the point of all this. He found purpose.
3. Is there enough demand at the right price?
The best way to answer this question is through two failed agency stories.
Agency case study #1: An unnamed agency I worked with a while ago focussed on the dental health industry. Mainly working with small private clinics. Offering marketing services. Countless stories of potential clients unwilling / not having the budget to invest in marketing. Let alone make this agency a viable business.
Agency case study #2: Another unnamed agency specialised in facebook ads to help people find funders for crowdfunding campaigns. Purely based on a performance based pay model. The pricing model works well if you are sure of the result and the turnover are high. Not so good if even your clients are struggling to make ends meet, hence looking to raise £15,000 on a crowdfunding platform.
4. Demand is high, but enough for the amount of agencies in the market to command a high price?
Do your research. Nothing better than finding a new wave. But in an established market there will already be a lot of major suppliers. WordPress is a good example of market saturation. There are 1,000s of small agencies who focus on the WP skill set. How many of them are able to command a high price vs. being easily replaced by the next agency. Use competitor analysis frameworks such as Porter’s 5 Forces and Blue Ocean Strategy.
The transition into the niche
5. Is your team behind your plans?
Fundamentally changing the vision of a business has a massive impact on the job satisfaction of the team. Today the vision is to help humanise technology for ‘the good of the world’. Tomorrow the vision is to help traders make more money. There is a high likelihood that most of your existing team members who bought into your old vision, are not going to be on board with the new one.
This is the point where you need to make a decision: Is changing the vision more important with largely a new team? Or is keeping the existing team on board and behind you more important? I learnt this the hard way in my business last year and will share my experience in my upcoming talks in Bristol, Manchester, London and Edinburgh.
6. When to transition?
There are different ways of transitioning into a niche:
a) Go all in. Complete rebrand. (High risk)
b) Find an agency in the niche that is ‘not doing well’ and negotiate a deal to buy them out (High – Medium risk)
d) Hire someone to set up a completely separate business (Medium risk)
c) Work with a partner agency who is already a niche specialist. Eventually merge or buy them out (Medium risk – low risk)
e) Start with testing your services on clients and new leads in the niche sector (Low risk)
7. Getting the clients
There are plenty of ways to get clients if you are already established. If you are short of ideas, here are some new business tips. No prior experience in the niche? One highly effective way to attract clients is by showing you really understand their customers. A research report outlining the state of the industry is often a favour marketing tactic used by niche agencies.
Piggy back off the credibility of other agencies in the new niche. Partner up with them by offering your complimentary services to their clients. You can find such agencies in peer support communities like The Agency Collective.
Final words of wisdom – choose to dismiss or take on board.
A great way to think about this all is that we only have one life to live (in the purist form). How exciting is it that you get to choose what you do with your time and why. Essentially we need water, food and shelter. The level of risk you take after that is arbitrary…
Come and see me speak at one of upcoming events in January and February
I’m on a road trip doing a talk on specialising in a niche.
I’ll go into a lot more detail, share more real life examples, give you an opportunity to discuss the topic further with me and give you practical tips to “say no”.