The pandemic challenged every one of us in a very different way, but for small agencies, that’s a whole different story.
The coronavirus pandemic brought about countless challenges to small agencies impacting every sector in unique ways. However, as the economy slowly recovers, agencies are reflecting on these changes and how to forge a path forward.
A mid the economic tumult of the past two years with many small agencies closing their doors at the height of the Covid-19 pandemic, workers quitting their jobs at historic rates, and ongoing disruptions to the global supply chain, one positive trend shined through: A record number medium and smaller agencies of North America, South America, Europe and the Asia Pacific found success in the digital world.
According to Venture Forward’s latest national survey, this increase aligns with large small agencies trends. The number of unincorporated, self-employed reached 9.44 million in October – one of the highest numbers since the 2008 economic crisis.
According to the “small and medium business trends” report, 67% of medium and small firms leader participants say community support has been important to their company’s survival, during the pandemic hit. 69% report government assistance, too, has been instrumental.
Several factors may explain small agencies blooming. Soaring unemployment rates in the early months of the pandemic closures forced millions throughout the globe to look for new income streams. Compared to previous recessions, new small agencies have now more widely available broadband, greater digital fluency, and a more mature eCommerce marketplace that simplifies website creation, marketing, and online sales. Today it’s much easier to translate an artisanal hobby or creative passion project into an online venture than it was in 2008. In other words, you could say that despite not being prepared for a global pandemic, the world was more prepared for running a small agency digitally, the appearance of new technology made new job opportunities during the coronavirus crisis, to endure rough times during a period of great uncertainty.
Recent research from Venture Forward suggests that these lowered barriers made it easier for agencies to generate new jobs and income and helped the economy weather, especially small agencies’ administration. Many recently launched agencies are either too new or too small to show up in traditional economic data such as job reports or new agency registrations. But a unique dataset of 20 million small agencies has unveiled their economic impact, which was largely invisible to policymakers.
It is not strange for “necessity entrepreneurs”, that is to say, people pushed into entrepreneurship after a job loss or income decline to pivot themselves to self-employment during recessions by opening their agency. But it would be wrong to assume that this surge came only from necessity entrepreneurship and warrants attention from policymakers. For agencies of all sizes, access to capital is a top concern when getting started.
Universal broadband access remains critical for an increasingly web-native new wave of entrepreneurs. Local economic development strategies may look different for small agencies than for bigger agencies, requiring distinct interventions related to networking, practical assistance, and mentoring.
A shift in mindset is as important as policy change. Many local economic growth policies focus on target industries or chase well-documented metrics such as job creation. But microbusiness owners do not think of themselves as part of a larger industry, and generally are not looking for a job. They are following a passion, not an industry, and need access to skills training, capital, and affordable broadband rather than a job fair.
When the Covid outbreak struck, many small agencies and businesses alike had to adapt. As an example to portray how these changes we’re made, we will take into account a small bookstore called Uncle Bobbiés Coffee and books. It sells its books online through a service called Bookshop and sells audiobooks with a company called Libro. FM. Despite the boom in online services and sales, the bookstore relies on loans and fundraising campaigns to survive until it reopens to the public again.
It was forced to embrace digital technologies and list its products online and in this case, it created a whole new website to expose its product. Even stores that still sell their products in a physical location are changing the way they get paid – moving away from riskier cash and even physical credit card payment system to prepaid invoices and contactless options. Technology adoptions that were expected to take years happened within weeks. As an independent bookstore, having a website and social media exposure, organizes its whole operation that is vital in order to keep its head straight on what choices are the best for that activity. It helps keep a clean slate of your income and resources, to know how much money you dispose of really makes the difference so as to know where are you standing and manage employees and resources in the best way possible. This very same strategy and line of action can be applied to small agencies that opened their business during pandemic times, the challenges and adaptations are the same, but their approach is different.
Wine bar and store Ordinaire realized through the help of its marketing agency that listing its inventory of natural wine online wasn’t practical. Instead, it added an option for customers to fill out a form with their desired number of bottles, a budget, and what style of wine they are in the mood for. The store staff picks the best wine for that order and sends an online invoice message to the customer.
But not all stores offer physical goods they can sell. Many agencies and businesses moved to offer paid versions of their usual services online via Zoom or FaceTime, though the video doesn’t bring in enough money to make up for the losses, it helps a lot to maintain a certain continuity in how you provide a service.
Marketing agencies’ strategies for the new demands
There is a spectrum of approaches to combat the crisis. Many agencies explored new services for their current clients and would explore new channels for new businesses.
Among those measures we can highlight:
- Reducing costs by bringing all work in-house.
- Presenting new services to clients via cross-selling and up-selling
- Reaching out to clients and industries.
- Exploring outsourcing for its advantages of cost-efficiency and flexibility.
The most recommended digital marketing channels for clients were:
- Email marketing.
- Web development
- Blog content.
- Paid social
Due to the uprising of these new difficulties, agencies must be more open to a greater degree of flexibility in client relationships, specifically applied to contract terms and reducing fees. Another important measure to take into account is the exploration, continuation, or increase in outsourcing. This measure can help in client retention because of increased profit margins, reduce workload management because outsourced teams allow for a pause in operations and an easy re-engagement, and provide the unmatched benefit of scalability to quickly add resources when work opportunities arise.
Digital Adoption Has Taken a Quantum Leap at both organizational and industry levels
As we’ve been saying, in just a few months, the COVID 19 crisis changed the way agencies and other companies alike do their business. They have accelerated the digitization of their customer and supply-chain interactions and their internal operations by three to four years. Agencies have stood up and offered temporary solutions to meet any of the new demands, and much more quickly than they thought possible before the crisis. These changes are expected to be long-lasting and investments are being made to ensure they will stick around. Funding for digital initiatives is more important than everything else – more than increases in costs, the number of people in technology roles, and the number of customers.
To stay competitive in this new economic environment requires new strategies and practices. Technological strategies are a critical component of this, not just a source of cost efficiencies.
Consumers have moved dramatically toward online channels and agencies have responded in turn. More and more agencies shift towards interacting with their clients through digital channels.
Perhaps it is even more surprising the speedup in creating digital or digitally enhanced offerings. During the crisis, agencies have refocused their offerings rather than making huge leaps in product development in the span of a few months.
Agencies that have experimented with new digital technologies during the crisis, and among those that invested more capital expenditures in digital technology, executives in these agencies are twice as likely to report outsize revenue growth than executives in other agencies.
Technology-driven strategies for the win
With that has been said above we understand the need for digital strategies to be true corporate strategies that take digital into account. We know that in leading agencies, digital and corporate strategies are one and the same. The COVid crisis has made this imperative more urgent than ever.
This mindset shift is most common among agencies that were losing revenue before the crisis began. Those reporting the biggest revenues hits in recent years admit they were behind their peers in their use of digital technologies.
Technology capabilities stand out as key to success during a crisis. Among the biggest differences between successful companies and all others are talent, the use of cutting-edge technologies, and a wide range of other capabilities. A related imperative for success is having a culture that encourages experimentation and acting early. This speeds up the time for leaders to receive critical business information and reallocate resources to fund new initiatives. Both are key aspects of a culture of experimentation.
The COVID outbreak is at a tipping point of historic proportions, more changes will be required as the economic and the human situation evolves. Significant lessons can be learned from what agencies have already adopted. In the first place, the importance of learning, both tactically, in the process of making specific changes to agencies (which technologies to execute, and how) and organizationally ( how to manage change at a pace that far exceeds that of prior experiences). Both types of learning will be critical when going forward since the pace of change is not likely to slow down.
New Agency Start-Ups Are Up Double-Digit Percentages
During the coronavirus outbreak, many professionals lost their job or their steady income, more startups have launched over the last year than they have since 2005.
Digital commerce platforms and financials tools are offering SMBs the ability to transact and conduct businesses of agencies through online means which is enhancing growth, productivity, and resiliency.
- Both newcomers and existing SMBs agencies saw growth on Paypal, Mercado Pago, and other platforms. SMBs agencies that joined these platforms in the first months of the pandemic experienced double their expected sales revenue, while digital SMBs that created an account between 2001 and 2011 represented 50% of TPV, total portfolio value, a device used in commercial establishments to carry out sales procedures, in the second quarter of 2020 demonstrating that there is still ample room for growth for new agencies joining the digital economy.
- Although the pandemic hit every country to a different degree, most digital small agencies recorded growth in sales, including those countries where the COVID 19 stroke the hardest. For instance, in New York and Buenos Aires, saw growth of 28% and 101% respectively. Those are the numbers for 2020, in 2021 these numbers increased even more.
- The ability of digital SMBs agencies to reach customers outside their borders has long been a source of growth and resilience associated with e-commerce but the diversity of digital SMB’s customers base has become particularly important during the pandemic. 75% of those sales were outside their state or province in the second quarter of 2020.
- E-commerce as a sector experienced a 44% growth in the US and approximately 60 % in Latin American countries which suggests there is room for further growth of small agencies and a chance to compete with larger players.
New Agency Owners Seized Opportunities in the Pandemic
In 2020, only about 30% of entrepreneurs were unemployed at the time of the shutdown due to the COVID-19 outbreak, when they started their business.
People who are entrepreneurs by choice just saw the opportunity and seized it. It is a great unlocking event for people to be their own boss.
Agencies no longer receiving aid funds
The unprecedented challenge of the COVID-19 pandemic led governments around the world to create public financing programs that were designed to provide immediate relief for SMBs to weather out the storm.
The PPP loans were intended for SMBs to cover costs related to payroll, salaries, and benefits, as well as utilities and mortgage and rent payments. The PPP loans would be forgivable if their usage met certain conditions. The program’s initial funding was exhausted by mid-April and eleven days later an additional allocation was authorized to meet the significant demand. The PPP was viewed as a lifeline credit opportunity for small agencies due to the challenges in the availability of private capital.
Government assistance throughout the world will soon no longer be available or has already ended. In the US particularly, the PPP loans (Paycheck protection program), this loan program helped restaurant revitalization and shuttered venues grants, but it has already concluded.
However, economic injury disaster loans still exist, as well as the employee retention tax credit, for which agency owners should explore eligibility.
The boom in the Industrial Section
Small businesses’ growth came across every industrial section too. One of the biggest instances of growth is in the non-classified sector or businesses that may not fit into a traditional definition. Maybe the ones really creating something new.
Additionally, both retail and transportation, and warehousing sectors experienced exponential growth because of how easy is to reach new customers online.
SMBs embrace a fully digital world
In most cases, smaller agencies weren’t at all prepared for the pandemic crisis and its economic impact on business closures, many were forced to adapt and go digital. They had to be sure they could communicate with their employees, collaborate, and drive sales safely in a daily changing world.
As a matter of fact, 71% of SMB’s cash flow came through digitalization, and 66% say their business could not have survived the pandemic using technology from a decade ago.
Moreover, 72% of SMBs have increased their online presence over the past year and 42% of growing SMBs have accelerated their technology investments over the past years. Finally, 51% of growing SMBs have accelerated their investments in customer service technology over the past year. Currently, 65% use customer service software.
Prioritize employee and customer trust
In general, the most successful SMBs agencies are the ones that actually take action in earning their employees’ trust. It’s important to give SMBs with growing revenue, a flexible working arrangement to enhance productivity.
These emerging agencies are working hard to build trust with their customers also. For instance, 75% of growing SMBs say their customers expect online transactions. Many of them, around 72%, have a strong eCommerce presence on-including over one-third who added it within the past year on their social media accounts for instance.
Long term changes for SMBs due to Pandemic
As all these small and medium agencies move forward, many of them believe shifts they’ve made to business operations over the past year will benefit the business in the long term. And when it comes to how all SMBs envision the future of their workforce, 43% of them plan to have employees split their time between in-person and remote work or be mostly remote.
Acceleration of Ecommerce
While the devastating and unequal impacts of the COVID-19 outbreak marked the states of small businesses and agencies in 2020, the acceleration of e-Commerce has also been a major and rapidly growing development for economies all around the world.
In the second quarter of 2020, E-commerce reached 16,1 of all retail sales, up from 11,8 in the previous quarter. It is estimated that e-Commerce grew as much in 3 months during the pandemic as it had over the previous 5 years.
Many experts see the shift to digital commerce as an acceleration of a trend that was already beginning to shape the landscape of commerce, which will only continue and provide opportunities for small businesses to generate revenue, survive and recover from the COVID-19 pandemic.
Covid might not completely change the future of digital marketing agencies, but it has supercharged existing trends. Marketing agencies have been successful at adapting to these changes during the pandemic, but they need to continue to do after it’s gone.
Understanding that both consumers and your clients have changed their behaviors, and catering your services accordingly will be essential. There may be a greater demand for digital marketing going forward, but this will be balanced out by greater competition. To stand out, you will have to develop a strong brand and invest in flexibility that works for your clients and your business.
The post-Covid world is bright for digital marketing agencies, but as ever, only for those able to adapt accordingly. It is very clear that digitalization offers a path to survival and potential growth for SMBs, technology has empowered new agencies to adapt and offer better solutions for nowadays problematics and reach out for creative ways to satisfy clients’ needs. Small businesses are vital to the health of economies and societies. Those investments should be supported by continued public and private partnership initiatives that ensure that small businesses have access to the capital and tools needed to weather the current pandemic and come out of the other side stronger and more resilient.