Why Do Digital Marketing Companies fail?

Table of Contents

Suppose you search for digital marketing agencies on Clutch. You will find reviews for 3,669 digital marketing companies in India. If you start looking at the leader’s matrix, you will find that half the names are unheard-of this is despite the fact that several digital marketing companies fail and never make it to the list

The agency reckoners published by leading publications never mention them. That’s because most agency reckoners published only cover the top 25-50 agencies in India, which mostly remains unchanged.

The Long Tail of Agency Business

The actual number of digital marketing agencies in India could be anywhere between 5,000 – 10,000. Most marketing agencies don’t even bother creating a website. If you consider mainline and public relations firms offering digital marketing services, the list keeps getting bigger.

Scaling of Agency Business Model

Suppose you were to plot all the agencies on the graph, you would see the long tail of the marketing agency business. If we were to deep dive into how agencies can scale their business, you would find that at the head of the curve, the nature of services offered is broad, and it gets micro as we move further down the curve. The competition gets higher as we move from the tail to the head of the curve.

A large number of marketing agencies today cater to mid-market and small businesses. Some of them will mature to address the enterprise market, while other digital marketing companies fail.

Why Timing is Right to Setup your Digital Marketing Company?

Everybody you talk to will tell you that starting a business sounds like a crazy idea, especially in the middle of a pandemic. But if you were to place your bet on the table, where will you start?

We have seen a massive surge in demand for ‘digital marketing agencies’ in India in the last five years. The pandemic has also resulted in a spike in search volume over the previous few months.

Interestingly the data will tell you that in India, people search for a digital marketing agency even when they are looking for SEO or PPC services. But this data is inconclusive to suggest that you should start a digital marketing agency today. 

Digital Marketing vs. Advertising Agency Google Trends

As consumers turn to online shopping, legacy brands are shifting marketing spends to digital to reach them. The brands which invested in SEO are reaping huge benefits during this pandemic. In fact, an Ahrefs study found that only 1% of pages that ranked in the first position on Google were less than a year old.

As search becomes more crucial, brands will have to invest in both SEO and PPC. While brands continue to invest in creating content, very few brands in India are focused on performance-driven content marketing. Companies that publish 16 or more blog posts per month generate 4.5X more leads than those that publish four posts (or less).

7 Reasons Why Digital Marketing Companies Fail?

If you decide to start your own digital marketing company, we have listed down some of the common mistakes that you should avoid.

1. Cash Flow & Poor Financial Management

It takes money to make money. While most of us believe that bringing in more clients will improve the cash flow, the challenge is to make sure you have enough employees to handle the incoming work.

If the client decides to end the contract, you will have no choice but to layoff employees. While your business might not have positive cash flow all the time, it is important to ensure you take the right steps to stay in the business.

Negative cash flow could result from lax credit management, loss of clients, or inefficient management of receivables. Keep a tab on the outgoing cash whether it is new campaigns, paying salaries, or purchasing essential supplies.

Develop and document your credit policy. This exercise will help you to determine the various risks and creditworthiness of your clients. Keep track of your contract payment terms, invoicing, and when the payments are received. 

Taking the above steps will help you tide over difficult situations, whether it is the loss of a client or the current pandemic.

2. Sales vs. Delivery

Don’t bite more than what you can chew. It is easy to get lost early on when you have inquiries pouring in for your services. Every prospect lost feels like a lost opportunity to scale your agency further.

It is essential that you under-promise and over-deliver to your clients, especially in the early years. Adding to your clients’ roster only means you have to hire more employees, train them, and scale your operations quickly. But you also have to ensure that employees adapt to your work culture and lay the right foundation for your business to grow.

It is also essential to set-up processes in place to make sure that the delivery of services is consistent for all clients.

3. Getting the business model right

Without a transparent business model that differentiates your business from the competition, your offering becomes a commodity. The marketing agency model has evolved to deliver experiences and even helping companies to transform their business. 

Progress of Agency Value

Without clearing outlining how your work impacts the bottom line, it becomes difficult to prove your value to the clients. If what you ultimately deliver is a commodity, then you should consider how you can do it at scale without any friction.

4. Management Skills & Sales Experience

You could be a subject matter expert and great individual contributor, but building a digital marketing company requires different sets of skills. Growing the business can be really difficult in the initial stage, especially when you have no credibility in the market.

You will have to wear different hats and even double up as a janitor if needed. Roping in co-founders can make up for the lack of experience in certain aspects of your business. But knowing the challenges is half the battle won. If you don’t consider yourself a salesperson, it will be beneficial to have someone who has the skills to help you with the process.

5. Building the right team

One of the most significant responsibilities you have as a founder is to hire the right people. The initial set of people you hire would go on to set the expectations for the rest of your team. You have to be extremely cautious about who you bring on board.

Besides the skills, you also have to ensure cultural fitment. Every wrong hire can act as a roadblock in achieving your next milestone.

Conclusion

Agency business is ultimately about people. Clients move their accounts when key people depart from your agency. Very few agencies manage to create a culture where people thrive in terms of work.

A well-run digital marketing company maintains a perfect equilibrium between management, clients, and the work delivered. When that equilibrium gets disturbed, digital marketing companies fail. 

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