Business services: spotlight on marketing agencies
Investor interest in marketing agencies is ramping up; a fragmented landscape, growing demand and ample headroom mean appetite is strong.
Specialisation is key
Agencies increasingly need to build expertise in their chosen sectors to ensure they have a ‘right-to-win’. Specialisation enables them to offer deep insights and tailored strategies that generalist firms often cannot match. As a result, strong credentials are typically seen as a baseline requirement for being invited to pitch.
However, credentials alone are insufficient for success. Thorough preparation is essential; getting to know the prospect, in-depth research of their market and articulating their brand ambition is key to converting pipeline opportunities.
Buy-and-build
Organic growth in existing sectors, where a track record can be demonstrated, is achievable through strong pitch execution and clearly demonstrating ROI. However, breaking into new or adjacent verticals presents greater challenges.
To overcome this, investors and management teams often adopt a buy-and-build strategy – increasing headcount, building presence and scaling at pace. The landscape is highly fragmented, making it ripe for M&A.
Market growth
While marketing budgets can be vulnerable to cuts during challenging times, certain services are experiencing significant growth.
Data-driven marketing, for example, is becoming increasingly crucial as businesses rely on analytics to shape their strategies and justify their budgets. Similarly, ESG-related services are gaining traction and present lucrative upsell opportunities for agencies with these add-on capabilities.
Maximising value
Given that marketing budgets are sometimes vulnerable, agencies should focus on clearly demonstrating ROI to decision-makers. This should a) ensure repeat selection and b) maximise lifetime values. When targeting new sectors, focusing on those with greater budget resilience should help to minimise this risk further.
Revenue can also often be project based and lumpy in nature. Client concentration therefore poses a risk. To mitigate this, building scale and diversifying revenue is crucial.
Whilst risks do exist, a well-executed plan focusing on building ‘strategic partner’ like relationships and targeting culturally aligned acquisitions, help to ensure quality of earnings, and that growth is maximised.
Speak to a member of the team about opportunities in business services.
Jack Hibbs
[email protected]
+44 7883 296 346