I attended a meeting of the BzzAgent board of directors last week (senior staff members also joined for part of the meeting) and it made me realize even more clearly that BzzAgent is a mini-company at a major crunch point.

Just because Balter & Co. has $13.8 million “in the bank” does not mean that everything is all set. In fact, the availability of that kind of capital puts more pressure on the company to grow — and to do it fast and profitably. These are some of the major challenges that the company faces right now or will face in the near future:

1. Expanding staff. Just since I began writing this blog on Feb. 7, there is a noticeable number of new faces ranging around the Hive. (I offered to take one of them on a tour.) Many more will join in the next few weeks. There is a slightly different sense around the place. No one knows yet how the new people will settle in and how existing relationships will change. Some long-time employees, like Jono O’Toole, who have known no other boss than Dave now report to newcomers. To make matters more interesting, the person most responsible for managing the staff expansion, Suzan Doucette, Director of Human Resources, is herself new to the company.

2. Developing sales. The volume of incoming inquiries has exploded over the past year, from some 30 a month to as many as 200 a month. Rich Sullivan, a newly enHived temp, spends most of his time qualifying the inquiries. Is the inquiry real? Does the potential project fit with BzzAgent’s capabilities? Does the inquirer have sufficient budget? Devin Golden will join next week as VP of Sales, and another six people will come on board in the next few months, at least doubling the department’s ability to handle inquiries, qualify leads, develop and close business. A lot is riding on their ability to build a team and sales at the same time.

3. Finding office space. Suzan sits facing the wall in a space that looks like it once was a hallway. The guys in the Cave touch knees. Some say the Library — which currently serves as casual get-together spot, lunchroom, and snackitorium — is being eyed for desk space. I will soon be sitting on the floor or standing outside with the smokers. Many things that need to be decided won’t be decided until new office space has been found and leased. The search is on, and the new digs will be “somewhere near South Station or Back Bay station.” In the meantime, temporary solutions must suffice.

4. Defining internal processes. A small company can operate with organic and loosely-defined processes, a larger company has to bring more form and consistency to them. Last month, BzzAgent instituted a standardized performance review for the first time and everybody has now finished filling out the two-page input form evaluating immediate co-workers and reports. Suzan Doucette will now begin analyzing the input, quantifying the results, and determining compensation. We’ll see how people respond to their “number” pretty soon.

5. Scaling the system. About a year ago, BzzAgent moved from smaller digs to 273 Summer Street, and inherited some system constraints. The T-1 connections, phone system, several small servers, and a mass of wires all reside in a small closet, a cooling fan bzzing at them. (The main server resides elsewhere.) To expand the company to 100+ employees and the Agent community to an unknown number requires system scalability. Which is why the engineers in the Cave are working on system design and product direction for 2008.

6. Strengthening client relationships. Currently, BzzAgent is not landing as much repeat business as they intended to. Part of the reason is that the company has been almost completely focused on handling inbound inquiries and producing campaigns, and has not been able to put enough resource into client service. But there may be other reasons, as well. Word-of-mouth marketing is new enough that clients do not automatically build it into every campaign. They’re not always sure when to do a campaign or how to measure their return on the investment. They may be trying out other WOM companies before they decide on which one to make their main supplier. BzzAgent needs to build stronger, closer relationships with clients — so that they really understand the client’s market, customers, product cycles, internal selling process, and more. It will take time and results for WOM to prove itself as a medium, and time for BzzAgent to build the trust that leads to long-term relationships.

7. Utilizing the community. The BzzAgent community is arguably the company’s major competitive advantage. Not only is it the largest such product-related community, it is unusual in how strong the relationship between the company and agents is. This comes from a deliberate focus on regular, rich communication. However, because the agent population is growing fast, BzzAgent will be doubly challenged to bring in more campaigns to keep a large percentage of them engaged, so they don’t lose interest. That’s where Michele Pearl, Network General Manager, and Sam Clemens, Director of Network Optimization, come in. One of their main tasks is to develop ways to keep as many Agents as meaningfully involved as possible.

8. Establishing the channel model. Two weeks ago, BzzAgent announced that it would be moving to a “channel model.” This essentially means that clients will have the option to conduct campaigns through the BzzAgent community of agents, but develop the communications strategy and materials themselves. BzzAgent will handle agent recruitment, fulfillment and shipping, report and trend analysis, and measurement. The success of this channel model will depend largely on the optimization of the community. Everything connects.

9. Managing the founder factor. Dave is spending 25-30% of his time on new hires. He still communicates personally (emailing, IMing, phoning, chatting) with all the staff members. He gets overwhelmed sometimes. His Board, populated by members with much experience in start-ups, is urging Dave to prioritize more rigorously, let some things go, spend more time developing major client relationships. In short, to lead more and manage less. This is very hard for a founder to do, and Dave knows it.

10. Setting strategy. Currently, BzzAgent doesn’t have much in the way of direct competition, but companies offering similar services are popping up with greater frequency, some of them copying elements of the BzzAgent approach. One of them could come up with an innovation that will steal away agents and clients. BzzAgent is also competing with many other “alternative” communications methods, including viral, mobile, buzz, and others. Competition could even come from current friends, particularly agencies who are clients now but decide to develop their own word-of-mouth channels. It may also be that WOM marketing, as a whole, will prove to be a brief-lived phenomenon or one with limited potential, and that BzzAgent simply won’t be able to grow to Yahoo-like size and influence.

Then, of course, there is the prospect of competition from some new method of company-consumer communications that is, as yet, unknown or in its infancy. In addition to everything else BzzAgent has to handle in the next year, they also need to be alert to the emergence of The New New Thing that will turn the marketer’s eye and make WOM marketing look old-hat.

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