Marketing teams are closely scrutinizing their budgets and bringing a lot of their work in-house. As a result, the number of small and mid-sized agencies struggling to acquire new business has increased from 28% in 2021 and 43% in 2022, to 58% in 2023, according to the latest installment of the RSW/US 2023 Agency New Business Report.
RSW/US surveyed more than 3,000 agency executives nationwide to understand the unique challenges they face in the current business climate. The most prominent struggles include:
- Fewer opportunities available (61%)
- Prospect budgets are too small (55%)
- Harder to break through to prospects (47%)
- Prospects go dark (37%)
Interestingly, “breaking through to prospects” has consistently been the main reason why agencies said it was harder to obtain new business. This year, it was number three.
As more businesses pull back on their marketing spend, some agencies are also seeing the size of their deals shrink. Results reveal that 72% of new business opportunities are the same or lower in dollar amount than last year.
Small and Mid-Size Agencies Struggle with Business Development
To drive awareness and build a pipeline of opportunities, agencies need to maintain a steady marketing and business development drumbeat. However, only 44% of respondents said they were happy with their internal new business programs. A potential reason for this satisfaction could be that hiring for a new business director position is at its second-lowest level since 2010, with only 36% of agencies hiring in the past three years. Moreover, the average tenure of a new business director hire is notably short, with 29% lasting less than a year and 23% lasting 1-2 years.
More than two-thirds of respondents (69%) said they find referrals to be the most effective method for acquiring new business. (Likely because of their lacking business development and marketing initiatives.) However, respondents also reported that referrals have been a less reliable vehicle than in previous years. As a result, most agencies are relying on winning more business from existing clients (50%) and old-school networking (46%). Very few respondents are leveraging paid search (7%), email (14%) and inbound marketing programs (15%) to build their pipelines.
Couple this with the new realities of the business climate, which includes longer and more arduous sales cycles. RSW/US found that the average time from first meeting to close in 2023 is between one and six months for 75% of agencies. While this was an improvement from 2022, deeper analysis found that shorter timeframes are decreasing and longer timeframes are increasing, creating a push-pull effect for agencies.
