Stability versus volatility: What our growth data might mean for agency strategy

In our recently published Growth Report, a striking pattern emerged from our analysis: the subsectors and regions showing the highest growth rates also consistently show the highest proportion of rapidly shrinking agencies. This relationship between growth and volatility raises fundamental questions about agency strategy and market dynamics. What drives this pattern? Are agencies in high-growth markets operating in inherently riskier environments, or do the strategies required for rapid expansion naturally increase operational volatility?

Northern Ireland, for example, has the fourth-highest overall growth rate of UK regions at 10.8%, but the highest proportion of agencies that are either growing (27.7%) or shrinking (12.3%). A similar correlation appears across high-growth subsectors, such as Conversion, where 42.4% of agencies are defined as growing with 12.3% shrinking, compared to other subsectors where the majority of agencies are defined as stable (for example, Copywriting at 79.7%).

Across the sector as a whole, more than two thirds (68%) of all agencies operate in what we classify as the stable growth category. This raises its own questions around whether agencies are missing opportunities or whether they are positioned in sectors where explosive growth is less feasible. And what if growth isn’t the aim? Are they working towards different measures of success?

For agencies considering their strategic positioning and investors evaluating opportunities, this stability-volatility trade-off presents some key considerations around risk, reward and what sustainable success looks like within the agency sector.

The quiet majority

Meanwhile, the data reveals something equally fascinating about the agencies that are not experiencing high growth. Wales, for example, has the highest growth rate of all the regions at 11.6%, alongside the second-highest proportion of stable agencies at 71.6%. These aren’t agencies that are stagnating. They are growing, but they are doing it steadily.

The same pattern appears in established subsectors. Design and branding agencies show 75.9% stability, while Creative and advertising shows 73.1%. Whether this represents strategic positioning, market maturity or other factors, these sectors demonstrate that stability and growth are not mutually exclusive.

The strategic implications

All of this raises some compelling questions about what drives these patterns and what they might mean for agency strategy. Are specific markets more challenging when it comes to a high-growth strategy? Are certain categories of agency structured differently? Do they serve different client needs?

There’s also the question of what stable agencies might be working towards, and be optimised for, beyond pure growth. Client satisfaction? Profit margins? Creative freedom? Work-life balance? The data suggests that for the majority of agencies, stability might offer advantages that rapid growth doesn’t.

The findings also show that simply being in a growing category, e.g. influencer agencies, isn’t sufficient. Proposition, clarity on direction, client relationships, alignment, financial controls, people and talent, alongside a host of other factors all influence whether agencies grow, are stable or shrink.

The risk-reward reality

For agencies considering their growth ambitions, this pattern presents an interesting risk-reward reality. Pursuing high growth can come with increased operational volatility. This might explain why two thirds of all agencies operate within the stable category. Whether by design or circumstance, most agencies find themselves in a growth pattern that avoids the extremes of both rapid expansion and rapid contraction.

It also raises questions about whether some agencies might be missing opportunities by operating within stable markets, or whether others are more exposed to unnecessary risks in pursuit of growth that might not be sustainable.

The investment lens

From an investment standpoint, this volatility-growth correlation presents its own considerations. Are high-growth subsectors attractive because of their potential or concerning because of their instability? Should investors be looking at stable, profitable agencies in mature markets instead? What should they consider during due diligence within these more volatile parts of the industry?

The data suggests that both approaches might be valid, depending on risk tolerance and investment strategy. But it also highlights the importance of understanding what drives these patterns in the first place. 

Questions worth exploring

This stability-volatility pattern got us thinking about the type of questions agencies might want to explore with their teams:

What does success actually look like for this agency? Is growth the primary objective or are other priorities that matter more? How much operational risk is acceptable in pursuit of expansion? And perhaps most importantly, are current strategic choices aligned with stated ambitions?

The data doesn’t provide answers to these questions, but it does suggest they are worth asking. After all, understanding the trade-offs is the first step to making intentional decisions about them.

FAQs

For an overview of our methodology, the work with our partners at The Data City, and a glossary of definitions for all our data points, please take a look at our FAQs page.
 
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