Don’t Trade Up

There is a common practice in the world of service providers – the idea of “trading up.” Basically, work with a smaller fish at a lower budget to get the skills and then trade up to a bigger fish with more money. From the looks of things, it sounds like the best possible way to grow a business but people should really give it more thought before they are blinded by the extra zeros.

 The first thing to consider is how much you love working with the starter client. Do the folks involved enjoy the work? Is the creative energy flowing? Is amazing stuff happening for both businesses involved based on the relationship? Is it profitable all around? Many PR firms (and I’m sure other service firms fall into the same trap) ignore these questions when the seemingly greener pastures of a larger account or bigger name company come along. They set parameters around “minimum budgets” that are not logical and are only based on anecdotal data or ego – not hard facts. And, worst of all, they don’t talk to the team working on the business day-in and day-out about what they should do next. Most often, they make a unilateral decision and opt to end a relationship with what could be an amazing partner for a little more dough.

This is, as they say, jumping out of the frying pan and into the fire. Beyond not knowing how this new partner will be to work with – and understanding if their expectations are in line with reality – these larger budgeted clients usually tend to be the most over-serviced and therefore the least profitable. This leads to a team of overworked employees who hate their job, hate their client and hate you for putting them in the position.

Here’s a quick list of things you should do/questions you should ask before you decide to jump ship on a long time partner and trade up for a bigger fish:

  1. Look at their profit/loss margin over the course of the relationship – how many times have you over-serviced them without being able to recoup the money at another time? Talk to your finance people – has the relationship been a profitable one, regardless of the size of the budget?
  2. Look back at the results of working together. Do you have amazing, award-winning work to show for your partnership thus far? Has the work with this partner gotten your team thinking more broadly and building relationships in your ecosystem that they would not have otherwise?
  3. Talk to the team – every single one of them individually to avoid group think – about their experience with the current partner. Have them give you both quantifiable and anecdotal feedback. Get them to give you a 1-10 rating on how much they want to keep working with the current partner. Then, at a different time so they don’t know you are comparing the ratings, get the same 1-10 on the bigger fish.
  4. Think about the way the current partner works with your company. Are they grateful when you do good work or give it extra effort? Do they understand what you do and see the value you bring? Are they committed to the process and willing to put in the time to make the overall relationship a success?
  5. Think about the actual people – not just the company and the work. Would you want to grab a beer with the folks from the current partner company on the weekend without charging them by the hour?

What am I missing, y’all? What other things should people consider before they trade up?

~ by Julie Crabill on February 16, 2011.

13 Responses to “Don’t Trade Up”

  1. I completely agree with you, Julie. The point that really jumps out at me here is involving the day-to-day team on decisions regarding clients. Let’s be honest: it is usually the junior staff that get the most emotionally invested in the client and their passion for the business can make or break an account. I am currently reading the book “Drive” by Daniel Pink, where he talks about intrinsic vs. extrinsic motivators and how important it is to foster intrinsic motivation when doing creative, right-brained work. Whenever possible, you want to make sure your team is intrinsically motivated about your clients and doesn’t just see it as a paycheck. That may mean leaving behind some of the bigger fish, but in the end you have a happier team and happier clients that keep coming back.

    I’m so glad you’re blogging again, Julie! This post is insightful and thought-provoking as always.:)

  2. Thanks for the comment, Marie, and sorry I was so absent from blogging for so long. This starting and growing a company thing is rather time consuming.:-)

  3. Funny, when I first started reading, I thought you were complaining about *clients* trading up from a smaller firm to a larger firm instead of growing with them… I guess it works both ways!

    Do you think it’s scalable to build a PR firm that is sustainable, but only takes smaller, profitable accounts?

    • You are so right, Mark – it def. works both ways. In terms of the scalability/sustainability of building a PR firm that only takes smaller, profitable accuounts – absolutely, the key word being profit. Ultimately, if you can run at a profit, you can grow/succeed/survive. This sort of business also takes a certain kind of staff – born multitaskers who are not easily overwhelmed by the needs of various startup founders, media and other partners in the ecosystem.

  4. I think the answer is,” it depends.” I’ve had low budget clients that everyone on the team enjoyed working with so in that regard it was fulfilling, but b/c everyone enjoyed the partnership the client was grossly overserviced to the detriment of other clients. Also, after awhile it became extremely difficult to say no or push back and so that then created tension at the top level. Rather than trading up, I would have loved the client to pay what they should have been paying for the amount of and quality of the work they were getting from the team – then it would have been a win for everyone.

    • I see your point, Becky, and thanks for the comment. If the team was going way over budget because they love the account, it makes me wonder about a few other things. Was there a lack of time management from the team/the leadership to make sure this stopped? Did the other clients suck so bad that the team, no matter how well managed, would rather scratch their eyes out than do good work for them?

      Not being able to “push back” or control the time spent on a client is endemic of an all you can eat model of PR – it doesn’t work – not for the firm, not for the managers/team, not for the bottom line.

      And totally agree re would rather the client “pay what they should.” Unfortunately, most PR people can never be honest with them about what the work they are getting REALLY costs and/or have a tough time explaining to them why upping their output on marketing/PR would pay dividends. That honesty is needed to end the issues you mention in your comment.

      • I agree with you about the “all you can eat” model – it makes for very difficult conversations with the client (and your teams) when you want to talk about over-servicing … which is only exacerbated when the reports you get are weeks (if not months) old. Honestly, I had a MUCH easier time making sure my teams worked to budget when I was on a time & materials model versus the flat fee. I could make the call to stop work or push my team for more output regardless of whether they loved or hated the client because I always knew where we stood against the retainer. I had hard #s to back it up. If the client wanted more work, I could have a very honest, realistic conversation with them about what that would look like and I think they respected both me and the agency for it more. It wasn’t always perfect, but it’s hard to argue with someone when you say, “it’s the 17th of the month and you’re at $8k of your $10k retainer based on your launch early in the month.”

        And yes I think I’ve gone off on a bit of a tangent with this one, but I think a lot of what happens at the outset of an account sets the tone for whether or not an agency will put itself in a position where they have to trade up to make ends meet.

      • I hear you, Becky – and you know what, I am starting to wonder why PR types are so quick to avoid charging for their time directly. That is, after all, what we have to sell, right? Not to say that we should all be hard asses who won’t help a second more than we are paid to help but even the donut guy only gives you one extra donut – not three extra boxes. (was the donut analogy a stretch? maybe I am hungry).

  5. You nail all the key points Julie. The grass is always greener (for both the client & provider) but there’s no way to know for sure. In terms of client size/budget, I think it’s good to have a mix of both to broaden the team’s experience and opportunities. Sometimes smaller clients are more demanding because PR is a major investment, but that can also be the case with a larger account too. Personality isn’t determined by the size of the budget.

    I think the key is having a client that really understands PR and appreciates that it can be a long-term investment since there will always be an ebb & flow with coverage. Clients, no matter the budget, that have unrealistic expectations and need constant reassurance will never lead to successful growth for the points you mention. A relationship that has mutual respect & understanding is priceless regardless of the budget.

    • Amen, Coco – mutual respect and understanding are so key. That’s a good follow up to this post. Profit without respect is just money. Respect without profit is not sustainable. Really need both to make it work.

    • You’ve nailed it Coco. Regardless of the company – startup or Fortune 500 – if there’s a lack of mutual respect it’s never going to be a good fit. I think that mutual respect means the team does the work they’re getting paid to do and the client not abusing the “all you can eat” model.:-)

  6. Great post. I think this list is a great collection of things to evaluate in a sevice relationship, and if you’re covering off on all of these it’s tough to go wrong. Only thing I’d add is to look ahead. Certainly the work you’ve done is important, but so is the work you have yet to do. When you think about your client’s future, is there still great work to be done? Are there still milestones ahead, or have things graduated/evolved to a place where the only metric left is consistency? Much of the time a smaller client needs a lot of upfront work to get a basic platform in place and generate some early momentum. Once you’ve gotten past that stage, it’s time to think about whether you’ve done the job and it’s time to move on, or whether the real work is just getting started.

    • Really good call re looking ahead, Carter – knowing there is great work to do still will not only keep the team motivated and happy but also ensure that the relationship continues to be successful. If you’ve played your hand entirely, it’s usually better to walk away from the table. Don’t wait for the relationship to jump the shark before you end things.

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