2018 was a challenging year for Workshop Digital.
We lost $1,243,344 in existing client revenue—most, but not all, of which happened in Q1 and Q2. In our 10-year history (including the two companies that merged to create Workshop Digital), we’ve never experienced attrition like this before. It seemed like every time we’d ring the gong to celebrate landing a new client, we’d get a phone call or an email from an existing client giving notice.
More than 90 percent of our business is retainer revenue (clients that have recurring billing rather than fixed scope project revenue). We grow by keeping our existing clients while also bringing in new business. We were not prepared for this level of attrition.
Why did the attrition happen?
At Workshop, whenever we lose a client, we do all we can to understand why they left and what we could have done differently. Most clients are willing to share feedback, which we analyze and use to make improvements to our services, our sales process, and our relationship-building.
In 2018, there were a variety of reasons we lost clients. But after analyzing the departures (our post-mortem process), we found the following reasons.
1. We didn’t own the relationship, an agency partner did.
Agency partners are other businesses that partner with Workshop Digital for some or all of our digital marketing services. In these partnerships, we have varying degrees of access to the client, based on agency-partnership agreements. Some agency partnerships are amazing, long-lasting, and a great way for us to grow. Other agency partners have been challenging.
The biggest reason for lost revenue in 2018 was not having a strong relationship with a client due to involvement by an agency partner. We found that when we couldn’t build direct relationships with our clients—or had a limited role in their success—we were more vulnerable to the chopping block. Our results could be great, but if an agency partner had poor results, difficulty articulating our results, or didn’t provide Workshop an equal seat at the table with the client so we could build a relationship, we were in trouble.
2. The client had unrealistic or shifting expectations.
We found that a few of our clients had targets that were either unrealistic or seemed to change with the wind. These two clients typically fell into one of two buckets: clients that hadn’t invested in digital advertising before, or startups who had not validated their business model yet. While these reasons don’t automatically disqualify a business as a good fit for Workshop, there is certainly some extra validation we need to do before we partner.
3. We didn’t do our best work.
While the smallest percentage of our attrition was related to our actual work product, it always hurts the most to lose a client because we could have done better. It happens to us only very rarely, but it always stings when it does.
So what did we do about it? We learned a ton, and we learned fast. But we didn’t look for excuses. We looked at our systems and processes and decided to do what we do best—make them better.
To fix the issues, we had to change the way we work.
When we started looking for the holes that we needed to plug to keep the ship afloat, we found we were missing some critical components. Here’s what we did.
We built strategy meetings into our Client Service processes.
We’ve long had kickoff meetings and regular monthly (and sometimes weekly) meetings with our clients. But we’d been missing a yearly meeting where we could zoom out of day-to-day tactics to understand our clients’ goals for the coming year—including their budgets and other concerns—and how we could align our digital strategy with these expectations.
A big part of these strategy meetings is setting clear expectations with the client on what success looks like, defining what KPIs we will measure and report on, and setting expectations around communication. It’s important to reset and redefine these elements every year and it’s been paying big dividends already. It’s early still, but the initial impact of this one change has been HUGE. We were, admittedly, a little slow to figure this out.
We put even more emphasis on client communication.
We have long known that relationships are critical to success. I often tell our team that relationships trump results. Results are critical, but we lost clients in 2018 when numbers were through the roof and we didn’t have a strong relationship. Our goal is to build long, successful relationships with our clients while also generating great results. The formula, as I see it, is simple: Relationships + Results = Retention.
Our team is largely comprised of expert analysts. When I have the pleasure of sitting in on client meetings (admittedly I don’t get to do this as much these days), I’m always amazed at how professional, courteous, and well-informed our team members are. Our clients love talking to them. Clients often tell us that they are genuinely learning from our analysts, and are more informed decision-makers as a result of our team’s knowledge sharing. How awesome is that?
Because we know relationship building is critical, and we have a team of experts who love to nerd out about digital marketing, we’ve dialed up our communication and are empowering team members to take even more time to communicate (via email, phone calls, video chat, and in-person meetings) to build trust and help educate our clients. The feedback has been overwhelmingly positive.
We’ve also worked hard to ensure we have an equal seat at the table when partners bring us in to manage digital. It’s amazing the difference this can make.
We created a client flag system.
When we assessed how we identified potential attrition, we realized we didn’t have a system in place. There were gaps in the timing of when the management and leadership team were made aware of potential client issues. This made us slow to respond. And once or twice, we were completely blindsided when a client gave notice.
We had some basic signals to indicate when things weren’t going well, but we were missing an early warning client issue detection system; or, a way for us to identify issues before they bubbled up. Our Client Services teams identified a number of behaviors and items that could indicate potential issues. These include clients who are slow to respond to meeting requests, a change in our primary point of contact, and negative results. We then categorized issues by level of severity, and defined a set of actions for each level, as well as who would be involved. The more severe the issue, the faster it gets elevated to senior leadership.
We got the business development team involved.
Presenting additional services to clients can feel sales-y. However, we realized that if we weren’t actively trying to look for ways to provide more value—even if it meant more cost to the client—then our clients were mistaking that lack of outreach as complacency. We knew other agencies were pitching our clients, so we realized we better ensure our clients know about the services we provide when we know they’re a good fit.
We built a system that enables our business development teams to work more closely with the client services teams to track everything currently leveraged by all clients, so we can prioritize which services and which clients we should be presenting to.
We built our 2019 budget with some attrition based on our flag system.
In past years, we’ve had some amount of attrition baked into our annual budget and our five-year forecast model, but it’s typically been a random percentage. Once we were hit with the losses of 2018, we took a fresh look at how we calculate attrition. While we still use a percentage method, we also reviewed our client flag system and baked in a certain amount of “known” attrition based on a couple of clients that were sending up the biggest warning flags. If these “warning flag” clients leave in 2019 (and one has), we already have the loss baked into our model. If they stay (and one has thus far), then that extra revenue can help us achieve our targeted growth goals.
The benefits of all of these changes are having a positive financial impact.
Despite a challenging year, our team rallied around these issues. I’ve been using “we” a lot in the post, because it took our entire team to diagnose issues and opportunities, build and test the new systems and processes, and implement them.
Although we experienced a large amount of attrition relative to the size and income of our business, we never stopped focusing on the bigger picture—and our 2018 revenue actually surpassed our 2017 numbers, which means we not only made up the $1,243,344 but generated additional revenue on top of that. While we missed our revenue targets for the year, we still finished the year strong and in a much better place heading into 2019. Because it took a team effort to get through the year, build and launch the new systems, and finish the year strong, the leadership team decided to fully fund our annual bonuses and 401k profit sharing despite not hitting our sales targets for the year. It was the right thing to do.
How are things going now? To date, the first three months of 2019 have been the best we’ve ever seen—and I attribute much of that success to the hard work put in by our teams as we continue to build a better agency.