State of Agencies 2021: What challenges are agencies facing?

This goes without saying, but nearly every business faced uncharted territory in 2020. In many cases, this meant closures or downsizing.

A Yelp report shows that nearly 100,000 U.S. businesses closed in 2020, 60% of those permanently.

Over 60 million Americans filed for unemployment in the first six months of the pandemic. Between shutting down and laying off staff, it’s safe to assume marketing budgets (if they still existed) were slashed.


All of this is to say: Agencies have faced some tough challenges. Through the loss of clients and reduced revenue, agencies have a daunting challenge in the next year and beyond.

On top of that, a lot of agencies have been forced to adapt to working remotely.

However, it wasn’t all dire.

When we set out to better understand the state of the agency, we discovered a high level of trust between agencies, their teams, and their freelancers. We saw positive sentiment despite productivity challenges and new ways of working.

The goal of this report was to uncover the biggest challenges agencies faced in 2020, how they’re managing their work in 2021 and beyond, what tools they’re using, and more.

Let’s dive in.

Methodology

We surveyed 139 agencies that provide the following services:

  • Digital marketing (33%)
  • Web development (18%)
  • Advertising (13%)
  • SEO (7%)
  • Creative / branding (6%)

state of agencies report methodology

We created an online survey that was distributed through email and social media. While we asked questions about remote work and outsourced projects, this survey was not limited to remote teams only.

That said, the survey was conducted in the summer of 2020, when many companies did embrace remote work in response to the coronavirus pandemic. This might have played a role in responses, and is important to note when reviewing findings.


Key findings

  1. Agencies struggle with prioritizing tasks and getting work done on time
  2. Only 43% of agencies consider their team productive
  3. When agencies outsource work, it’s mostly to freelancers
  4. Most agencies trust their outsourced staff
  1. Agencies are spending up to 20 hours per month on payroll and invoicing
  2. Agencies prefer using PayPal when paying for outsourced work
  3. Salesforce is the most popular project management software among agencies
  4. Timesheets are still a struggle, but the sentiment is mostly positive

Let’s take a closer look at each one, and see what agencies can learn from these results.


1. Agencies struggle with prioritizing tasks and getting work done on time

Agency work ebbs and flows. Client objectives shift after a challenging quarter, businesses downsize, budgets get cut, and new work comes in all at once.

This happened at breakneck speed last year. With businesses shifting to remote work overnight, while those in the hospitality and service industries shut down, agencies had to adjust along with their clients.

Other businesses ramped up marketing efforts, leading to an influx of client work. (Think of what Slack’s marketing department must have looked like during the first week of the shutdown.)

It shouldn’t be surprising then that the top challenge agencies identified in this survey were prioritizing work.

This would be a challenge in a normal year, but it was most likely made worse by the pandemic’s unpredictability.

agency stats- 27% of them struggle with prioritizing work

Staying on top of projects as the target moves and deadlines change takes an enormous amount of time and attention.

You’ve probably heard of project management being described as herding cats.

If anything, the fact that only 27% of agencies face this issue might be an indication that project planning is better than before. (Of course, we’ll need years of data in order to identify a trend.)

What else is bogging down agencies?

  • Getting work done on time - 27%
  • Getting team members to submit updates and status reports - 26%
  • Estimating hours and budgets for projects - 25%
  • Going over budget - 23%

agency challenges in percentages


How to tackle project planning and better prioritize work

If your agency is struggling to get work done on time, it might be time to try different prioritization techniques or project management software.

Here’s a good starting point.

1. Utilize prioritization techniques
MoSCoW

MoSCoW is a prioritization technique created by Dai Clegg, a software development expert. It involves sorting tasks into the following categories:

  • Must Have: Non-negotiable project tasks. These need to be completed to finalize the project.
  • Should Have: Important tasks that, while not vital, add significant value to the project.
  • Could Have: Nice-to-have initiatives that won’t have a big impact if they’re left out.
  • Won’t Have: Tasks that aren’t a priority for completing the project. Including tasks in this section is crucial for preventing scope creep.

Using MoSCoW is a great way to ensure your team is focusing on the most vital tasks at any time.

Want to read this later?

Download the full report to reference whenever you’d like.

Eisenhower Matrix

The Eisenhower Matrix got its name from Dwight D. Eisenhower. According to the Eisenhower Matrix, you should categorize tasks into four categories:

  • Urgent and important: These are tasks that are crucial for completing a project. You need to tend to these as soon as possible.
  • Not urgent, but important: Tasks in this category don’t require your immediate attention. However, they’re still important for moving a project forward. You need to make sure to schedule time to complete these tasks.
  • Urgent, but not important: This category includes tasks that you need to complete quickly. However, they’re not very important for the project itself. You can safely outsource these tasks if you don’t have the capacity to handle them in-house.
  • Neither urgent nor important: Is there a task on your to-do list that's neither urgent nor important? You should probably remove it from your team’s to-do list altogether.

Note that tasks can move from one category to another depending on circumstances. That’s why it’s important to revisit the matrix from time to time to make sure it’s up-to-date.

Check out these other tips for managing multiple projects along with productivity techniques to dive deeper into productive work.

2. Manage projects with a powerful project management tool

Project management software can solve many of the big challenges agencies deal with, including:

  • Prioritizing work: Ensure employees are assigned to and working on the right tasks.
  • Meeting deadlines: You can assign due dates for both projects and tasks to let team members know when their work is due. Some tools offer a project timeline feature, which allows you to get a quick overview of project status.
  • Getting team members to submit updates: Embrace daily stand-up meetings or recaps to completely automate status reports.
  • Making accurate project estimates: A good project management software also lets you integrate with time tracking, so that you can see hours spent on a project and assign a budget. This, in turn, can help you make accurate project estimates.

2. Only 43% of agencies consider their team productive

As expected during a global pandemic, the agencies surveyed were also dealing with productivity issues. Only 43% of respondents considered their team to be productive.

Another 38% felt that their team was sometimes productive, while 15% claimed that their team isn’t productive at all.

productive agency teams percentages

This might be a result of agencies still trying to adapt to remote work.

There’s also the impact of the pandemic itself on productivity to take into account.

Companies that managed their time, talent, and energy well, before 2020, have fared much better than those that did not, according to HBR.

“For companies that struggled to collaborate productively before the pandemic, work-from-home orders only made matters worse. To begin with, the time consumed in virtual meetings exploded,” the article explained.

In other words, if your team didn’t focus on collaboration and efficiency before, the pandemic made both much worse.

To return to previous levels of productivity, both managers and team members need to adapt.

It’s easy to gauge if employees are working when you’re in the office with them. With remote work, it can be hard to understand what team members are doing throughout the day.

This leaves managers in an awkward position trying to understand if work is getting done remotely.

Further, team members might find it difficult to manage their time now that they’re working from home.

These two things combined lead to decreased productivity for agencies.

How to address this?

While we can’t impact global health, there are some small adjustments you can make to set your teams up for success.

Create clear process documentation

One of the best ways to boost productivity is to ensure employees know their priorities and the expectations around completing work. You can do this by creating step-by-step processes with input from your team.

Apart from saving time, this will also help to reduce the number of errors team members make.

Here’s how to create clear process documentation:

  • Define process scope. The first step is to write a brief description of the scope of the process. The brief should mention everything the process includes, as well as what it doesn’t.Define process scope. The first step is to write a brief description of the scope of the process. The brief should mention everything the process includes, as well as what it doesn’t.
  • Explain boundaries. Every process in your agency needs to have a clear start and end point. Explain where your process starts and where it ends, and what might bring you into scope creep territory.
  • Identify inputs and outputs. What resources are needed to complete the process? What’s the end result or deliverable? Make sure to include this information in your process documentation.
  • Outline all the steps. This is the most important part of any process document. Describe all the steps needed to complete the process.
  • Name stakeholders and assign teams. Finally, name all the people involved in completing the process. Make sure to assign every step in the process to someone.
Help employees get better at managing their time

Another approach is to be more proactive and help employees better manage their time. You can share the following tips with them and start a discussion about how people prefer to work.

It’s entirely possible that everyone in your agency has their own productivity hacks to share.

  • Use a time management system. Using a time management system can help your employees almost instantly improve their time management skills. Some systems you can recommend include Getting Things Done (GTD), the Pomodoro technique, batching, and time blocking.
  • Take regular breaks. Taking breaks is important for staying concentrated and avoiding burnout. Encourage employees to take breaks regularly throughout the day to reset and come back to a task with fresh eyes.
  • Reduce distractions. Remote employees face a lot of distractions when working from home. Recommend that team members find a room or corner in their home that they can dedicate as a “workspace.” Consider buying noise-cancelling headphones for the entire team to help them focus when working from home.
  • Making accurate project estimates: A good project management software also lets you integrate with time tracking, so that you can see hours spent on a project and assign a budget. This, in turn, can help you make accurate project estimates.
All of my teams are productive because we function based on goals, rather than time spent at work. Meet your weekly goals and you’re good to go for the week, even if you’re done two days early.

Dmytro Okunyev, Founder at Chanty

Use proof of work software

Tools that provide productivity benchmarks can help you keep an eye on your team’s productivity, and celebrate wins or improvements. Productivity software can help:

  • Set a baseline so you can check-in when rates dip
  • Find out when team members are struggling with their workload
  • Discover bottlenecks in your team’s workflow
  • Send virtual high fives for accomplishing a task that’s due or improving productivity

Every team member likely requires different feedback and motivation, so make sure to adjust your methods accordingly.


3. When agencies outsource work, it's mostly to freelancers

Agency projects often have a lot of moving parts and require expertise in different areas. A lot of agencies don’t have in-house specialists for every project they get. The overhead would be out of control.

An agency might bring on a developer for one client project, a brand strategist for another, and an illustrator for a pitch. Smaller agencies likely can’t support these professionals on a full-time basis, so outsourcing is ideal.

That’s true in a typical year. During a pandemic, you may need to scale in different ways. Agencies might bring in more specialists but on a project basis since future projects are hard to predict.

Taking all of this into account helps provide context as to why 46% of agencies said they outsource work.

agencies outsource work percentages

When it comes time to bring in a pro, most agencies go with a freelancer over another agency or specialist.

Our report found that:

75% of agencies outsource work to freelancers

agencies outsource work to freelancers percentages

This makes sense. Freelancers are often skilled in certain areas and can take on ad-hoc projects without requiring a retainer. That’s why they’re the ideal outsourcing solution for agencies, especially in uncertain times.

However, not all agencies outsource to freelancers. Another 34% outsource work to virtual assistants, while 20% outsource to other agencies.

Those who outsource work to a virtual assistant are most likely delegating administrative work and light marketing tasks.

Agencies that outsource to other agencies presumably don’t have in-house talent to handle certain projects. This is common when working with larger clients who may require a digital agency, a media company, and even social media strategists.

In this case, these agencies work together or one oversees the relationship and pulls in others as needed.


Where do agencies outsource to?

Most agencies don’t limit the geographic area for outsourcing.

We found that:

54% of agencies outsource globally

Only 17% outsource to freelancers or companies within their country, while 22% stick to their city or state.

where do agencies outsource wotk to

When it comes to outsourcing locally, respondents provided the following explanations:

  • “Because we know someone personally.”
  • “Streamlined communication that comes with being in the same timezone as well as the opportunity for face-to-face time (pre-covid).”
  • “Most of our clients are in the US, but also because we don't want the headache of payroll, benefits, and other regulatory issues from other countries.”
  • “Convenience.”

Where to find reliable freelancers

Freelance talent platforms make it easy to find local or international professionals for your next client project. Here are a few places you can check when it’s time to hire again.

Hubstaff Talent

Hubstaff Talent is our very own free-for-all freelancer directory. We list thousands of freelancers who specialize in services such as:

  • Development
  • Marketing
  • Sales
  • Design
  • Writing
  • Customer support

It’s free to sign up, free to post a job, and you can browse profiles and reach out all within the site.

Upwork

Upwork is one of the biggest freelance marketplaces in the world. It’s used by millions of freelancers and companies worldwide.

Whichever task you need help with, you’re bound to find a freelancer on Upwork who can do it.

Toptal

Toptal focuses on the top freelance talent. The company vets all the freelancers it accepts into its network extensively.

If you’re looking for quality talent, you’ll find it on Toptal. Make sure to have the budget for it, though.

hubstaff time tracker for agencies

4. Most agencies trust their outsourced staff

In a challenging year, it was reassuring to discover that a few things that agencies can control, including trust and positivity, weren’t in short supply.

Our survey revealed that:

72% of agencies trust their outsourced staff

Another 16% of respondents said they sometimes trust their staff, which means that a large majority of agencies are happy with who they’re working with.

However, trust doesn’t just happen overnight.

41% of respondents said they have tools and processes in place to ensure their outsourced staff is working when they say they are.

Since so many agencies rely on freelancers to complete projects, it’s common to develop systems that foster a trusting, symbiotic relationship.

how much agencies trust outsourced staff percentages

Here’s what one agency pro had to say about trust.

As I’m part of an agency specialized in IT outsourcing, I am all too familiar with having nothing but trust in our outsourced staff to deliver for our clients. I believe that agencies like ours can achieve this confidence in their staff by devoting time and resources to continue developing their skills and knowledge, as well as their collaborative processes. When you have a blend of timely, responsive, and easy to work with industry experts, you have a strong foundation to deliver the best results for your clients.

Shaun Kennedy, Copywriter & Social Media Strategist at Rootstrap

This sentiment echoed a trend in 2020 where people leaned on each other more. Coming together and working toward shared goals is something we hope continues for years to come — within agencies and elsewhere.

How agencies manage outsourced staff

Creating the ideal collaborative relationship takes a fair bit of planning. We wanted to find out which processes and tools agencies use with outsourced staff. For many, project management and time tracking topped the list.

51% of all respondents use project management software to manage outsourced staff. 45% use time tracking solutions.

how agencies keep track of work done percentages

However, not everyone defaults to software.

Over 14% of agencies said they don’t track projects or hours. Even more surprisingly, nearly 13% still use paper timesheets.

Those who don’t track hours at all might include smaller agencies that are dedicated to one or a few clients. It’s easier to keep track of work with fewer people on staff. Or, you might have retainers in place that are related to work output instead of hours.

This group might also include another sub-set of agencies that have used timesheets in the past and found them challenging, or those that operate with a different billing structure such as monthly flat fees.

In general, most agencies use project or time management tools to help meet deadlines and stay profitable.


5. Agencies are spending up to 20 hours per month on payroll and invoicing

You might already know that payroll and invoicing are some of the most time-consuming administrative tasks.

While 76% of agencies spend less than 7 hours per month on these tasks, some are spending up to 20 hours. A small group of 2.2% spends over 20 hours per month.

how much time do agencies spend on client invoicing percentages

That means that 37% of agencies spend nearly one day each month on payroll and invoicing.

That’s a lot of time, especially when you could be spending those hours getting new clients and completing projects.

How can you save hours on payroll and invoicing?

It might come down to the process you have in place. For the 9% who manually calculate payroll and invoices from spreadsheets or templates, the answer might be billing or accounting software.


how do agencies invoice clients percentages

One positive trend to see is that:

32% of agencies use payroll or invoicing software

That’s a good way to keep the hours you spend on admin work low.

Look for more automation

To speed things up even further, you can see if the tool you’re using integrates with your project management software, time tracking tool, CRM platform, and more. There’s plenty of automation to seek out that can save you time and money in the long run.

This includes setting a separate bill and pay rate for each person, so when it’s time to invoice, you have the amounts calculated.

The same goes for sending payments. The amounts are ready to go based on hours worked and each person’s hourly rate.


6. Agencies prefer using PayPal when paying for outsourced work

Perhaps not surprising is the fact that PayPal is the most popular payment solution among agencies.

48% use PayPal to pay for outsourced work

how do agencies pay outsourced people percentages


PayPal has been a highly popular online payment solution for years now. A lot of people use it for personal transactions and online shopping, so it makes sense that freelancers also use it to accept payments for their work.

Agencies also use the following payment methods:

  • Wire transfer (42%)
  • TransferWise (17%)
  • Payoneer (11%)
  • Western Union (6%)

7. Salesforce is the most popular project management software among agencies


which project management software do agencies use percentages

This was a surprising finding.

25% of agencies in our survey stated that they use Salesforce to manage their projects

Salesforce offers a suite of solutions that agencies can you use to manage their day-to-day tasks. It makes sense that agencies who are already invested in the Salesforce ecosystem (e.g., by using Salesforce CRM) would also opt to use Salesforce in other ways.

However, when we polled agencies about the results, some were surprised.

“Salesforce doesn’t even come close to our favorite. We use Jira and Asana primarily.”

Others noted they used Salesforce in addition to other PM tools, including Asana or Jira.

Next on the list for PM choices were:

  • Trello (17%)
  • Asana (15%)
  • Basecamp (12%)
  • FunctionFox (12%)
  • Hubstaff Tasks (12%)
We've adopted the Kanban-based project management system for all internal and freelanced workflows.

Colin Rose, Managing Director at Rose Agency Inc

Some tools mentioned in the "Other" category include:

  • ClickUp
  • Zoho
  • Teamwork
  • Advantage
  • Notion
  • Microsoft Project
  • AirTable
  • ActiveCollab
  • Wrike
  • Podio

The great thing about agency project management tools is that you do have options, so you can find the one that’s best for your team.

You can delegate a small team to test drive a few first (hello, free trials) so you’re not constantly changing directions across the agency.


8. Timesheets are still a struggle, but sentiment toward them is mostly positive

Ah, the dreaded timesheet reminder email. It’s better to be the sender than the recipient, but they’re still a time-wasting practice for all involved.

Ideally, time is tracked and timesheets are created without needing a nudge or firmly worded email. But for many, that’s not the case.

29.2% stated that they sometimes send timesheet reminders, while 25.8% said they’re sent weekly.

16.9% of agencies do it right before billing, which is a somewhat dangerous practice that can result in your agency not accounting for all the time your team has spent on a project.

how often are timesheet reminders sent

Getting team members to fill out timesheets is something agencies have always struggled with. We’ve seen agencies resort to providing incentives to team members for filling out timesheets.

One agency even rewards team members with free beer for filling out their timesheets.

Surprisingly, negativity toward timesheets was not what we saw in this survey.

According to our report, most teams are either neutral or positive about tracking time and using timesheets. They just seem to need a little push to actually fill out and submit their timesheets on time.

 how agency teams about timesheets percentages

Maybe the beer works after all.

Wrap-up

According to our survey, the most common agency challenges include prioritizing tasks and getting work done on time.

Some agencies also deal with productivity and budgeting. Most spend too much time on payroll and invoicing.

The plus side: Trust is high, and agency folks don’t mind timesheets.

While 2021 looks about as uncertain as it can be, it’s reassuring to see similarities across agencies and know that you’re not alone in those missed deadlines.

Hopefully, this helps with your goal-setting and gives you some ideas for paths to pursue.

And don’t forget to try some of the ideas mentioned here:

  • Utilize prioritization techniques
  • Test out different project management software
  • Create clear process documentation
  • Help employees improve their skills
  • Automate payroll and invoicing
  • Continue building trust and focusing on your people

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