Regional Agency Benchmarking with Rory Spence

So 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 all things pricing. So go back and listen to that episode. If you missed it, there'll be a link in the show notes. And 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, but there also been many who listen to this from more regional locations. And big city or regional have their advantages or disadvantages and present opportunities and challenges around recruitment, pricing and winning work. So that's what we're talking about today. I'm Rob DeCosta 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. So this podcast aims to ease your journey just a little bit by sharing mine and my guests experiences and advice as you navigate your way to growing a profitable, sustainable and enjoyable business. So welcome again Rory. And let's kick things off by just talking about the advantages and disadvantages of each.

Yeah, perfect. Yeah, thanks. Thanks so much Rob. Thanks for having me on again. It was really interesting to get this regional analysis for the first time of bench press because we've run bench press for nine years now and we've always released things like pricing stats and people have said, well that's really interesting but I'd love to know what it means for me and compared to where I am. You know, I'm up in Scotland, I'm not in London, you know, or I'm down on the south coast, you know, how does it differ? So to be able to provide these insights for the first time has been really, really exciting. All of these reports are available for you to download and so everyone can have a look. But I wanted to pick out some key stats today to share with you and where, yeah, where did you want to start Rob? Because yeah, we've got a fair, a fair bit to look, look at today.

Yeah, well let me just first do a bit of cheerleading for the bench press reports because I have been receiving them for probably all nine years of the fact that you've been running them. And they are super useful because sometimes you can say something to a client and having that third party data to back up that thinking, you know, is a great way of kind of removing blockages for clients. And I think a couple of smart things that you guys have done one is having the report for that million pound plus agency and then the agencies that are less than a million, because a lot of my clients are hovering around that point. And so it means that they stop saying this is really interesting, but it doesn't apply to me. And 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. So I just want to say to the listeners, if you haven't heard of the bench press 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 super useful. And so that's, that's. Let's start, let's start with that. But let's just, just share with me, I guess just some of the. What, what interesting stats did you find when you did this research? What was there anything surprising? Were there any disconne that you thought was interesting? That's a big question. So I'll just let you talk about some of the stats that you found.

Yeah, so I, I think the thing I was most excited to see was going to be the pricing league table. And it didn't disappoint. It didn't disappoint. You know, it was. I was really curious to see just how much London was gonna 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 that was going to be higher. And it was really curious as well. So I've got it here, so I'm going to just read it directly off my phone. So the UK average hourly rate for agencies of all sizes is 91 pound an hour. So that's the UK average. Just to give you some context now you've got London up at pound 105 an hour, so quite a jump above, I would have probably guessed at about 10 pound an hour. Obviously that's 14 pound an hour higher than the average. So quite interesting actually you've also got Bristol and Cardiff above the average. So again the average being 91, Bristol and Cardiff are at 93. And then really you've got the south, the north and you've got central and eastern England all within a couple of pound an hour of each other. 88, 87 and 86 pound an hour. And then finally you've got Scotland who their average is £83 an hour. And that I was really surprised about because we've got some brilliant clients up in Scotland really successful clients that are competing, not just region, not just across the uk, but across the globe. And so I know for a fact that they will be higher, but perhaps that suggests there's a few smaller agencies in Scotland that are charging lower rates. So that was really interesting. I was always curious to see that. And as Rob has said, he's kind of going to share the link to the report so that you can download that in full and go into a bit more detail. But to follow on from that, what I then found even more interesting was we did gross profit analysis by region and me perhaps naively thinking, well, the gross profit margin is going to be directly impacted by the fees that they're charging, so 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. So I guess again, and I won't give you all of the stats because there's a lot to soak in, but I'll pick out some highlights that kind of help to tell the story. So the average gross profit margin for a UK agency is 44%. Now London, who obviously are charging significantly more than that UK average in terms of pricing. Well, their gross profit is actually 43%, so lower than the average across the UK. And Bristol and Cardiff, who were charging only two pound an hour more than the average, actually are up at 48% gross profit margin. So like really, really strong performance there. So 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, 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. So it show that you might be a London agency thinking, oh yeah, well you know, we are charging more, we're charging more than the average, but are you charging enough? You could argue that actually these Bristol and Cardiff agencies are maybe better at pricing because their gross profit is higher. I think another thing to pick out there, Scotland, although charging the lowest amount by a fair chunk in terms of their pricing, well, actually they're bang on the UK average of 44% gross profit. So although they might not be charging the same amount, they're obviously really good at delivering these projects profitably. You know, they're not doing over delivery. They're better at avoiding things like scope creep or in having that conversation. And so I think there's a lot of kind of Additional takeaways that you can look at just beyond the headline stats.

Yeah, yeah. So, so interesting. And of course, the GP margin is the thing everyone needs to pay the most attention to, because that's the think that means whether you're. Whether you're profitable or not. But it is really interesting. Do you think a lot of the regional differences are mindset based? Like, you know, I'm. I'm in Scotland, so I couldn't possibly charge the London rate. And interesting enough, the reason I say that is because we're just fresh off recording episode 100 and whatever it was, 104, where we talked about value pricing. And actually, at the end of the day, there is absolutely no reason why a Scottish agency or a Southern agency wouldn't produce as amazing work as a London agency, yet their rates are a lot lower. So that's sort of an interesting one, isn't it?

I completely agree with you, Rob. I think it is 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, you know, they're all working from the sofa. We're all in the same place. And so I think that creates.

And sorry, can I. Yeah, I try. I hate to do that, but I just want to add to that, not only that, but we're serving clients all over the place. Yeah. I mean, if you were a Bristol agency and you only served Bristol clients, and you were a London agency, you only serve London clients, it might make sense, but we're actually serving clients all over the place. All over the world. From all over the place.

Right. 100%. Never before have agencies down in Cornwall, for example, had such a great opportunity to suddenly compete for clients anywhere. 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 a London agency, why shouldn't you treat that as an opportunity to increase your prices? Because you're still going to come in lower than actually where those London agencies are, you know, and the justification of costs, well, kind of goes out the window. Like I said, when we're working from home, when we're all doing things remotely, we're servicing that client remotely, potentially not getting face to face with any clients at the moment. So, yeah, a massive opportunity there. 100%.

Yeah. And you know that old adage of like, well, if I'M hiring a London agency, I expect the fees to be higher because of their costs are higher. It's kind of going out the window a bit. And then 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? Yeah, yeah, yeah, yeah, without a doubt.

So what other interesting stats did you have to share from the report?

Yeah, oh, it's interesting. You just mentioned around London agencies having 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? Was basically how we positioned it. And so 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? You going back part time, full time that you keep in your office? So we thought, well let's, let's ask it in bench press. And there was some really interesting results. So the overall, again, to give you the UK average, 73% of agencies are planning to keep their office. Okay. So certainly, you know, the large majority are keeping their office. Whether, and I should add some context, when I say keeping their office, I mean keeping an office, they may be downsizing, they might be upsizing, they might be keeping the same one, but they will have a physical premises. So just for context, the other 27% there are either going to be fully remote or they're going to be using like a co working space. So that's, that's the other, they were the other options. So that those 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 in central and eastern England where they were 83% and 84%. So actually those agencies valuing much more that face to face time and wanting to get people in London considerably lower than the rest. So 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, yeah, not too surprising considering the costs in London versus everywhere else. But it's still really interesting because it goes back to what you were 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, that's higher than if you're an agency outside of London. And so again, I think just that mindset, don't accept it, you know, don't allow clients to say, oh, well, we're expecting that London agency to price more because they've got larger costs, challenge them on it. So, again, a really interesting opportunity here.

Yeah. And, you know, if you lead, again, without sounding like a scratch record, if you lead with value and you focus 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, you know, we're, we're here in, in the beginning of 2022, we're still knee deep, sadly, in pandemic world with a lot of uncertainty. God, let's just hope, you know, in 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. Working. 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, you know, in, in their house 24 hours a day, they got kids running around, blah, blah, blah. And so some, I got a sense that some people really wanted to go back to having an office and having that routine and the separation between home and work. So I think it'll be really interesting to see what these stats are in a year's time. Do you, do you get a sense that they will be similar or they might change a. Who knows?

Yeah, it's really, really hard to call. 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. So we asked agencies whether they plan to or already recruit people remotely, people that are not within a commutable distance of the office, and 67% of agencies said yes, they would recruit remotely. And to be honest, I thought that figure would be high, higher than that. Because in Benchpress, what we ask every single year is, what is your number one challenge within the agency? And every single year, without fail, new business is number one. So no surprise there. New business is always number one, but then number two quite often is around talent and recruitment. And so really fascinating that Again, we talk. We kept using the word opportunity in the last 10 minutes, Rob. But again, I think there was a huge opportunity when we did all start working remotely and everyone was on zoom anyway. And I live a mile from my office and I live a mile from about five members of the team, yet I didn't see them for 18 months until the Christmas party. So, you know, that. That ability to work remotely, you could work with anyone, wherever they were, was a huge opportunity that we certainly grasped. You know, there was actually. There was someone that was kind of a friend of someone that worked at. Wow. Who we always thought, oh, she could be a good fit for the team, but she lived up in Aberdeen and therefore we never really considered it, and then suddenly went, hey, actually, there's a great opportunity and she's been absolutely brilliant. She's been brilliant for the team. And so I think this is a. This is a huge opportunity for a lot of agencies where there is that scarcity of talent. There is this huge, at the moment, increase in wage demands as well. Well, actually, can you treat this as an opportunity to go and find people that, you know are outside of London, for example, like, lower, lower living costs, lower salary demands? I think there's a big opportunity. But I guess, just a 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. So they're the highest region in terms of agencies that said they'd recruit remotely. You compare that to Bristol and Cardiff, where only 47% said they'd recruit remotely. It's obviously really important for them that they're having people coming in face to face. So it does feel like there's this slight disconnect. You know, I think 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've 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. So it'd be interesting to see where that goes.

I guess, in a way, I'm not surprised at that, because I can't. I mean, in the last year or so, the talent conversation is definitely at the top of the agenda. If I had to ask all my clients what their number one challenge is, it's finding good People. And you know, 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 really a strong leadership team beneath them and they can't do that. And so I think finding good people is such a challenge at the moment. And 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 there in Guildford and they have, one of their account managers is based in Glasgow and he's never met the team and he works, you know, really well from, from there. But that does raise another question, which I don't know whether it was in your report, but I don't even know how you'd phrase this question. But there is a big cultural implication with remote workers and how you make people feel part of a team and how you, you know, get people embedded in your, your agency's culture. So have you got any thoughts on that or did you ask any questions around that?

It's really interesting that you've mentioned that because. Well, at the point that this podcast goes live in, In January, our 2022 bench press survey will be live at that point, which you can go to by going to WowCo. That survey is live to take part in. I'm sure you'll be able to share the link, Rob, as well. Yeah, yeah.

And I'd encourage everybody to take part in it because you just, you want to put your two penny but you also want to find out how you compare to everybody else.

Exactly right. Yeah, exactly right. So by taking part, you will get an invite to the launch event, but you will also be the first to receive those reports. So there's, there's plenty of reasons to take part. But Rob, to go back to your point, you were asking about culture. Well, what we're going to do next year for our 2022 bench press, we're actually going to have three reports that are going to be released over the course of the year. First of those is sort of financials and KPIs. So we will go back to things like this. Gross profit target, director's 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, etc. But one of those reports is going to be on people and culture because it is so on people's minds. Exactly why you asked it Rob, a lot of people are thinking about this now. You know, actually not only on a recruitment side of things, where do you get talent? And 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, staying motivated? How can you check in on the team? It's much harder when you're face to face with people in an office actually. You can tell pretty quickly whether someone's having a bit of a, bit of a down day or something's up and you're all stuck behind a screen. It's much difficult, much harder to pick up on. So that is going to be fascinating. I'm really excited to see the results of that. It's difficult right now to comment too much but maybe Rob, off the back of those reports going live, we can, we can do another session.

Yeah, for sure. Because it's such an important topic and the 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 and there's some clever tech around there to aid that and create a sense of community, but it's other things as well. And so I have no idea, I don't know the answer to it. I've been a, you know, I've actually really enjoyed the remote working because it's made me super efficient, you know, whereas I used to spend two hours on a train going into London for a two hour client meeting. Now, you know, I don't spend any time doing it. So I'm pretty, I do, I'm off to Maidenhead on Friday actually. I do do some face to face meetings but I like, I want to keep it this way so it works for me but it doesn't work for everybody. And you know, I've had a few clients where I've been working with their team and you know, they're sitting in, on their bed in their bedroom because there's nowhere else to go in their house and 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 and they've got an office space that their team can book into when they want to and they also have set times or days of the month where everyone comes together for their team meeting. So that sort of blended approach seems to be. Yeah, seems to be Working well. And it will be interesting to see the report because we don't have a crystal ball of even the next few weeks, let alone the next year of what's going to happen. And you know what, when we come out of the crazy world that we're in, what, where will the pendulum stop? Where, what, what have we learned that's been good for us?

Yeah.

You know, 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 and it seems to me that it's never gone away, but it, 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, or what. And that's resulted, and this is a bit of a sidetrack conversation, so I hope you don't mind me going there with this, but that's resulted in people being creative about how they staff up. And I've got a particular view about building an agency using freelance stuff. But what's. What have you got a view on how that works and what, what your.

Thoughts are in terms of employees versus freelancer?

Yeah, yeah, I think there's no right.

And wrong answer here. It really depends what you're, what you're trying to build, where you're at. Because I think for a lot of people, you, you have no choice but to initially use freelancers because you can't guarantee them five days worth of work and you do not want them sat there. If they're team member number two or three, you just can't afford to have them sat there, Twitter their thumbs for a day, a week. And so 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. And so I think going down the recruitment route for that reason can be brilliant. You know, you can build over the years absolute ambassadors for your brand. And of course, to 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, please go and chat to your accountant about IR35. I was going to give it a Google, but there's all sorts of terrible advice on Google. So please chat to an expert about IR35 but it's going to limit the amount agencies can have those full time freelancers. I think we might see a little increase in, in kind of recruitment of staff from that sense.

So yeah, so basically our 35 sort of in the government's view says you're employing someone if they work for you full time, even if they're a freelancer, so, or if you're their only client or whatever. So that's definitely something to be mindful of. Listen, I'm, I, I sprung that question on you and I'm super glad you answered it the way you did because it's, I have a really strong view on this and sometimes my clients don't agree with me on it, but I, I believe building an agency using freelancers is a bit like building a business on, or building a house on quicksand because they have a different agenda to you, they will never be your brand ambassador, they'll have their own plans for their own freelance business and, and of course ultimately they cost you more money than hiring an equivalent in house person. So I believe absolutely, as you start your, if you go from being a freelancer yourself to growing an agency, you're going to use freelancers to start with. You just need to keep a really strong eye on your costs and when it, when your cost of outsourcing becomes higher than employing someone, that should be your trigger to bring them in. And I think the other time for having freelancers are when you've got capacity issues and also when you need specialist skills that you don't have in house or you don't want to have in house. So those are for me the only times that you would do that.

And what I would add as, as well, you know, we're talking about scarcity, 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, that talent into the sector. Right. And in actually bringing the next generation of creatives and 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 almost like pitch processes and getting them engaged in, you know, in digital. And if you are being a member then hopefully you already know about that and you can get involved. If you're not though, like, there's definitely a role you can play in that. And I'd also add, you know, the government introduced the Kickstarter campaign, which obviously means you're getting funding for taking on apprentices. And 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 hit the ground running. But if you're in a position to do that, I'm certainly not. Certainly not complaining. I'm a successful. Claiming. I'm a success story here. But I started wow as an apprentice eight years ago and, and still at wow today and absolutely love it. And that was because of wow. Dedicated to looking after me and training me up and, and all of the trust that they've given me. And if you cut me open, I would be wow through and through now. So I would definitely encourage you to consider that the Kickstarter campaign is brilliant.

Yeah. Well, I'll put links to both Bima and that in the show notes. Because, you know, one of the advantages of hiring someone like you as a grad and then training them up is that you get them into your. Your way of thinking and, and 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, you know, live and breathe their brand and their. The way they deliver, whereas you hire someone else in and they've got their own agenda. So that is. That is really, really great. And it leads me. It made me smile when you said that, because it leads me on to my final question, which isn't going to be too hard for you, but with someone old and gray like me is a bit harder. But I know 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 out in the agency world, one piece of advice. 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. So I had thought about this and I think, honestly, my advice would be look after yourself. Right. Look after yourself personally, because I have certainly seen, particularly during the roller coaster of sales, you know, there are some down times which are, you know, which are really tough. There's some uptimes that are really great. However, like, 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 head and you're looking after yourself. Make sure you're taking proper breaks. I know so many people will be listening to this and. Well, of course we're all in a position where. When was the last holiday? Holiday? God, because we've not been able to go away for years. But. But personally, you know, I want to make sure that every quarter I'm taking some time out where I can switch off properly. I'm not suggesting I go jetting off on holiday every quarter. I wish. However, like I make sure every quarter I've got that time where I know it's in the diary and I work towards that and I'm really strict that I take that time out and I get away from email, emails, messages and switch off and I'm better for it. I think mentally, if you're in a great place, you're going to do great work, you're going to be more confident, you're going to have more energy. So 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 are doing crazy amount of hours a day, 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 know what, you're not machine, right. You can't just keep. Keep going and going like you take some breakup for yourself.

What a great piece of wise advice. And I love asking this question because I so rarely get the same answer twice. And I don't think we've ever had that answer. But if you guys, if the listeners want to go back to episode 100, then that's a really. That was, that was an episode that took us forever because. Put together because basically we've taken all of the pieces of advice and put them into one episode and we've also created a download which I find really inspirational with all of the quotes that people have said into that. So you can download this as 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. And I think the mental health thing is so important right now because so many of them of us have struggled with that in this strange isolated world. So thank you for, 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 Bench Press report as well as links for people to connect with you and obviously the wow 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, it's been a lot of fun this morning. Morning. Thanks for having me on and take care. Of.