Prepare Your Agency for 2024. It May Be the Most Challenging Year in Decades.
Is there a big storm on the horizon? The warning signs are flashing.
Generally speaking, most agencies saw consistent growth and profits from 2013 through 2022. However, for many, 2023 was a year of flat-to-negative revenue growth as rising interest rates slowed the U.S. economy. Profitability was down. New business became harder to win. And now, as we’re entering 2024, it’s at best an uncertain forecast… and some scary red flags are appearing.
The rapid decline in earned media continues (particularly local news coverage). PR/communications firms which continue to strongly rely upon “media relations” must evolve and expand into “paid” while somehow still differentiating themselves. With 2024 being an election year, public affairs and political campaign companies may experience substantially less paid spending later in the year as the Presidential candidates already seem preordained.
The United States now has $1 trillion in consumer debt. The national debt has reached $34 trillion. State debt also continues to escalate. States with large budget deficits will be forced to spend significantly less on their communications programs. These financial pressures will only intensify as the true, mounting and unrelenting cost of uncontrolled immigration into the U.S. hits state and city budgets.
While inflation is decreasing, it’s still above the old “normal” of 2% annually. We’ve had three consecutive years of above-normal inflation with a cumulative 17% increase in prices generally…and much higher increases for many household staples. Combined with the high interest rates on credit cards, this will likely reduce disposable income for most Americans.
While interest rates are expected to decline in 2024 (although not all prognosticators agree), it may take longer than anticipated. This will continue to negatively impact early-stage companies, especially those in biotech and fintech.
Politically, we will undoubtedly experience highly contentious elections for the House, Senate and Presidency. At the same time, geopolitical tensions keep growing throughout Europe, Asia and the Middle East. As a result, there will be continuing unease among most Americans about the future.
The 2024 environment that agencies will be operating in is not a pretty picture. So…what can agency owners do about it?
A few of our thoughts for better protecting your agency.
As a starting point, here are five recommendations for agency owners and leaders to implement right now (if you haven’t already) in order to tighten up financially:
Reduce debt. Cash may be king in a tough economy.
Run leaner on overhead.
Let staff attrition happen. Move more slowly to fill open positions.
Slow down or postpone investment spending on anything other than building new revenue streams or enhancing the firm’s reputation.
Increase pricing in line with increased labor costs. Clients will either move forward with budgets or they won’t. A 5% difference in price will not alter their decision.
Proactive agencies will also get more disciplined on organic growth and move even closer to their clients at all levels. They will frequently demonstrate the firm’s value and commitment by bringing clients fresh ideas for building their businesses and brands. Organic growth is the cheapest and fastest way to increase revenue.
Finally, develop and aggressively pursue a short list of dream clients that you are built to serve. Relentlessly communicate how you can help these prospects. Build relationships so that over time they will turn into clients. During difficult times, extraordinarily good things can happen to those agencies with vision and daring. You just never know.
There are many ways that Prosper Group can help. Here’s proof.
These are just four of the exceptional results which we have helped agency owners achieve in recent years:
Public relations firm: Redesign of financial model leading to 50% greater profitability.
Healthcare agency: Reorganization of staff and development of a dedicated marketing function led to 300% revenue growth (yes, that’s a real number) and the blockbuster sale of the firm to a management consultancy.
Digital marketing company: Bringing PR, creative and digital production in-house drove 500% growth in three years.
Advertising agency: Revitalized the brand proposition, energized senior leadership, increased profitability by dropping low-margin clients and re-worked the new business process. The result? “Agency of the Year” recognition by a national publication.
To access our detailed thoughts on how you can protect and keep growing your agency during turbulent times, click here.
For additional ideas on this important subject, click here.
For our in-depth thinking and specific recommendations on many other topics of interest to agency owners, click here.
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