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DigiChefs has been profitably running for the past 5 years now. Started with just two people in a shared office space in Andheri East, Mumbai.

Today a team of 36 people with a much fancier office in one of the most premium locations of Andheri East. 

The best part about a digital marketing service agency is that it has no entry barrier. Anyone with a laptop and internet can start an agency. The real game is to sustain and grow in this competitive environment. 

So, here are the top 5 challenges in starting an agency and ways to overcome them. 

1. Talent Recruitment & Retention:

In a service business, your team is your product. So recruitment is going to be a big problem because great resources always get great offers. Have a dedicated HR person as early as you can in your journey. Dedicated HRs ensure that you close your hirings faster.

One more challenge with the Digital Marketing industry is that, it is predominantly a youth-led industry.  Your resources are going to want to for better pay or better office or for a better boss, they aren’t as loyal as the Generation X. 

So you need to take care of your team like they are your family. Team-building exercises are non-skippable. This ensures the team bonds well and they will have more reasons to stay back than leave. 

2. Client Retention:

A digital agency really starts making profits three months down the agency-client relationship. Primarily because the first quarter is going to require additional resources and time to get things sorted. 

So, in turn, to really earn some profits your clients should stick around for longer. 

Client retention rate is probably the only metric where you can judge if you are doing a great job with your agency business or not. 

So you need to make sure your relationship with your client is strong, really strong. 

What worked for us is that we are honest. We own up to our mistakes, we accept our failures and we learn from them. Our honesty has paid us more often than not. 

There are a lot of “Yes” men around, and the clients’ BS radars have evolved, they want to hear the real opinion and we give them that. This helps build trust and the only reason why they stick around longer. 

Remember this rule: Under Commit & Over-Deliver. 

3. Profitability:

More often than not, you or your team are going to over-commit, or your client is going to throw work that doesn’t fall under the scope of work. 

It starts with one favor and then becomes a habit. Sooner or later you start making losses because you are putting more time in the project than it deserves. 

In this business time is literally money. 

Another point that will help you stay profitable is controlling costs. This does not mean you become a miser. You simply need to monitor your costs and allocate fixed budgets for each activity. This way you can control costs more efficiently and tweak them depending on revenues.

4. Revenue Managers:

If there is any growth hack that we’ve cracked so far then this is it. 

You will get more work, but sustaining that work is going to require some good pillars in the team. As the team grows you cannot possibly manage everyone so you are going to need service owners who effectively are the revenue managers. Revenue managers ensure the money keeps coming in and also ensures the client stays for longer. For every revenue manager we’ve added we’ve seen a growth of 30% in overall revenues.

5. Cash Flow Management:

For every business managing cash flow is the biggest challenge of all. You don’t want to be the agency that doesn’t pay their employees on time. 

You are going to have to follow up aggressively and get the payments out asap.  This ensures less stress on the cash flow pipeline. 

So to have timely payments ensure frequent follow-ups and a good relationship with the client. 

One master tip here would be to save up some runaway money.  No, not to actually run away but to use it when the cash streams go dry, say because of a virus or some god-forsaken meteoroid. You would want to have at least 3 months’ worth of salaries ready to be able to pay your biggest asset, that is your team.

Entrepreneurship is a difficult but fun game to be in. Approaching one challenge at a time and solving them with innovation is the only way to nail this game. 

Also Read: Top 15 Parameters To Evaluate a Digital Marketing Agency For Your SME in 2020