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Agency predictions for 2023

Agency Predictions for 2023 – Are you ready?

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Can you believe that we are already at the end of 2022?

This year has blown by in the blink of an eye and it only seems like yesterday that we made our predictions for the ad industry for 2022. Looking back at that article, it’s incredible to see how much the world has changed in less than a year.

The war in Ukraine has obviously had a profound effect on the world economy. Inflation has spiked globally and most central banks are predicting recessions and interest rate increases although we probably are in one already.

Overall, though, most of our predictions were pretty good if not 100% accurate.

  • The pandemic is in the rearview mirror but COVID is here to stay.
  • While some organizations have told employees to go back to the office, most have let staff keep working from home or adopted a hybrid model.
  • Clients have been as demanding as ever and we fully expect 2022 to be another record year for breakups and honeymoons.

And so on

Agency Predictions for 2023

Unfortunately, it looks like 2023 is going to be a challenging year for the marketing and advertising industry. This is because of many of the things that we already touched on above.

The war in Ukraine

It appears that there is no end in sight for the Ukraine war so energy prices will remain stubbornly high. The winter months will be hard despite the price caps that some governments have implemented. Consumers will be paying significantly larger energy bills and have much less disposable income.

The Recession

High energy costs (including gas prices will keep inflation up and force the banks to either increase or maintain high interest rates. That means that the cost of borrowing (and mortgages in particular) will be higher. The poor consumer will have even less disposable income.

The Markets

The recession also impacts the markets and most (if not all) markets are significantly down. Billions of dollars have been wiped off company valuations. In many ways, it should not matter but it does. Companies tighten their belts and cut discretionary spending.

Discretionary Spending

You can see where we are going with this. Advertising is one of the 1st lines of discretionary spending that businesses shrink or cut altogether. There are also no major sporting or political events (eg the soccer world cup and the US midterms were in 2022) to bolster ad spending.

How can agencies prepare for 2023?

Businesses in 2023

It may seem that our agency predictions 2023 are all doom and gloom but take heart. There are always agencies that thrive in any economic climate and yours can be one of them as long as you plan accordingly. Here are some tips:

Plan accordingly

Many of you will have worked in one of the large holding companies if you still don’t. You can be sure that they are well into their 2023 budgeting. I am certain that they will be very cautious about 2023 and you should do the same.

  • Speak to all your clients now and talk to them about their budgets for 2023
  • Make sure that you are very clear on the difference between confirmed revenue vs predictions.
  • Be very conservative on New Biz and by all DO NOT estimate revenue based on your team capacity or staff costs. Far too many agencies inflate the top line to justify staff costs and that is a recipe for disaster.
  • Look after your staff. Be realistic and acknowledge that high inflation does mean that your staff salaries should be adjusted to compensate. One benefit that independents have is that you don’t have to make a certain margin so accept that margins will be tighter.
  • Hold on new hires. Many agencies overuse freelancers but, in these circumstances, using freelancers is a great idea. Its flexible and low risk.

Adequate systems/ reporting

If you don’t have a proper project management and reporting tool, then it’s probably nearly too late. If not, this is where you have a great advantage over your competition. A proper fully integrated, CRM, project/resource management system will give you 360 data as to how your agency is navigating the headwinds.

  • Your CRM/pipeline reporting will give you advanced warning of drops in revenue so you can prepare accordingly. If this also gives predicted revenue of ongoing jobs then even better.
  • Your cashflow forecast will give you advanced warning of cash shortages so that you can either arrange an overdraft or manage AP and AR to compensate
  • Your capacity forecast will give you great insight as to when you need to bring in freelancers or not. In the medium, to long term, it also will tell you whether your agency needs to hire staff or not
  • Inbuild collaboration means that, you can review rents (if you did not already do that in the pandemic) and reduce office costs

We wish and hope that all that is not necessary but, our agency predictions 2023 suggest that it will be a challenging year so be prepared.

By the way, if you want to see how technologically prepared your agency is for a recession then take our quiz.

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