A New-Business Pitfall to Avoid

The longer you've been with an agency, the more intuitive the new-business process becomes with respect to identifying the good leads and the bad ones. My company, Underscore, has been around for about three and a half years, and in that time, we've gotten much better at spotting the inquiries that will result in profitable new business--and the ones that will likely become huge black holes that suck up time, effort and passion.

There's one such abyss that seems to be coming up a lot more frequently--one I like to call the NECOC (pronounced "NEE-cock"), if you'll allow me to coin a term. The letters stands for Non-Exclusive, Commission-Only Client.

This client is coming from a different frame of mind than the other clients that might engage your agency. As the name might suggest, the NECOC is looking for someone to identify and source performance-based advertising arrangements for it, and its principals don't care how many agencies they need to engage in order to satisfy a monthly volume of new orders or leads.



These types of arrangements understandably make an agency skittish. The first contact between agency and client goes rather smoothly, with the client promising a big budget and more work if an initial pilot program goes well. In subsequent phone calls and e-mails, however, you'll find that there are a number of drawbacks to the deal, usually:

  • This isn't an exclusive arrangement. The client will have two, three or even dozens of other agencies working on the same effort at the same time. Can you say "channel conflict?" Good. I knew you could.
  • The client can't tell the difference between "agency" and "CPA vendor." Your media strategy chops are meaningless in this discussion. The client wants success at volume, and will de-emphasize the need for smart strategic planning, wanting the agency to spend time on sourcing deals.
  • The compensation is performance-based. Usually, you'll only win if the client wins. Don't expect to be paid for your time. The client wants to pay you only for your ability to find deals.

Most such arrangements make agencies flee, screaming, in the other direction. I wouldn't blame you if you did. Certainly, we've turned down our share in favor of businesses that value our strategic advice as much as our buying chops. But let me make a suggestion: Take one such client. Just one.

What this will allow you to do is have an account that can allow you to get paid during those times when you're not so busy. In other words, it can help smooth out some of the billable hour peaks and valleys that we all know and love. Another client cancel a project? No biggie. Take the hours you would have spent on that project and put them toward the NECOC. At least you'll get something for your efforts while you find other business to fill the void. Think of NECOCs as the clients that will buy up your "remnant inventory." Got a couple hours to kill between the end of the business day and your flight to St. Louis? Throw 'em at the NECOC. Maybe you'll nail a deal that adds a few tens of thousands to the bottom line at the end of the month.

Of course, the usual rules apply concerning new business. Make sure the NECOC's expectations are aligned with your own. Promise no minimum volume. Promise no strategic help unless the client is willing to pay for it. Most of all, don't front any media dollars--and sign contracts only when you have funds in house from the client.

If you do this right, having one NECOC on board will help iron out some of the wrinkles in your day-to-day operations and will add to your profitability.

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