If you are an avid follower of the startup news, you might have noticed that most of the startup funding is landing in the tech startup space, that too largely in the mobile apps & e-commerce category. Have you ever wondered why the startup advertising agencies are not in the investment radar.
Why is it that the most innovative or profitable ones (agencies) get acquired, while the rest struggle to make their mark for a very long time?
If you are an owner of a digital agency startup, here are few things you must build in your business plan in order to secure startup funding for your business:
1. Productize your offering
There is a general assumption that agencies are service based companies (which is not incorrect) and their revenue model is fragile. The competition is so intense that you have keep searching for leads all the time. Payment cycles are long and ‘client loyalty’ is limited due to which advertising agency is considered (or perceived) as low cashflow business.
In order to change this perception, you need create a unique product of your service which has a tangible aspect to it. One way you can do it through technology i.e. by building custom proprietary solutions targeting a specific need (like lead generation, customer engagement, user behavior, customer satisfaction) in a particular industry.
Once you do the above, it would lend measurability to your business model. You can actually predict a certain revenue based on the target audience you have made that solution for.
2. How to showcase your solution to an investor?
Every investor wants to see a practical and profitable business application of your service/product. Do your research on different brands across industries, make an attempt to understand their brands and business challenges. In the agency world, this is called working back to the creative brief. Figure out why your solution or service best-suited to help a particular client.
Show examples & case studies to your investor as to how you transformed it for a particular client.
3. Demonstrate Measurement and Support Capabilities
Make sure you have a sophisticated measurement and accountability system embedded into your technology. Analytics are essential components of the agency business, so be sure to address the topic in your presentation. Also mention your team, however small, in your pitch. Even though you may be a small startup, you have to reassure that you and your team will be able to see any project through to the end.
4. Scalability is critical
One of the key criteria of evaluating any business model is to see how quickly it can scale in time. Every agency is currently dealing with this issue of scalability, especially because they have not embraced the technology to the fullest. Most of the processes (especially around Project management, client relationship, resource management), can be automated through various digital tools available on the cloud. These technologies allow you to get more done with limited number of resources at 1/10th of the operating cost.
Once you have a strong business case, the investor would be interested in knowing how you would scale up the revenue & systems to handle hundreds & thousands of clients? That’s why your investor pitch needs to have scalability in its DNA.
5. Demonstrate multiple business opportunities and revenue models
The investor is also interested to see the vision behind your business. Are you thinking ahead of your time and your competitors? Do you have the team who can produce cutting edge solutions based on past, present & upcoming platforms?
A single business model can never succeed and is too risky to put investor’s money. Having said that you must showcase your plan of action around every revenue model that your company would touch in the next 5 years.
What are places where you are trying to generate first mover advantage for yourself? How will you accelerate existing revenue models? What are the new audience segments you would try to penetrate where existing market hasn’t ventured out?
6. Brand your startup agency
There is no doubt that digital is the hottest proposition at the moment. Every company is re-looking at their business models to match the growing requirements of the digital world. In this case, it is absolutely vital for a digital startup agency to build their startup philosophy in order to create a differential.
A smart investor would definitely like to see how good is the social media of the company who claims to bring the next big disruption in the space. Is your website behaving like a notice board (bored) or your achievements or if it is designed to share valuable insights & trigger conversations?
Also read: 25 ways to Brand your startup
Beware! Do not consider creating a fancy parallax website as thought leadership. Disruptive strategy does not require show off. Sometimes, it is doing all the right things in a clinical manner that makes a huge impact.
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