“Not small for long!”
That was the greeting we received from some, along with congratulations, for winning an Advertising Age Small Agency of the Year award last year, Zambezi’s second. It was meant as a compliment, obviously, but it triggered some serious introspection at our agency. Was there something wrong with being small? Compared to big, does small necessarily imply less-than or second class?
We realized pretty quickly the answer was no. Small is not a negative. It’s a positive. Especially in the advertising industry. With the right combination of talent and clients, a small agency can be as effective (definitely more efficient) than a five-hundred person colossus. Thankfully, clients get it.
The landscape is changing, big brands are breaking longstanding AOR alliances and are partnering with smaller players, sharing project assignments, diversifying and multiplying the perspectives and voices that make up their marketing initiatives. Advertising is splintering and diversifying after years of massive consolidation and bundling, and simply put, there is more work out there and more small agencies to handle it all.
For years, this industry has been obsessed with growth, big, all encompassing services and output. The pendulum of business naturally swings back and forth, and thankfully entrepreneurs in the ad industry are pushing our business forward, creating independent shops to meet the demand. It’s pretty clear, advertising is in the midst of a renaissance, a flowering of many points of view. We’re healthy, and productive, and it shows.
According to Hoovers, the top 50 advertising agencies in the world account for less than 50% of revenue. Correct me if I’m wrong but that appears to suggest that mid-size and small agencies are taking up the slack, making more than 50% in revenue. The Harvard Business Review has reported that smaller or midcap companies in general, with $10 million to $1 billion in revenue, make up the fourth largest global economy in the world, employing 34% of the U.S. workforce.
How does a small agency that’s growing into a mid-size agency avoid bulking-up, short of downsizing? Here are three suggestions that have worked for us:
Avoid Culture Killers. Work only for clients that have a product worth getting behind. Does it add a dimension to people’s lives? Would you be proud to tell your Mom that your agency is working on the brand? (No e-cigarettes or defense contractors please!)
Embrace Saying No. Efficiency requires restraint. Don’t chase bad revenue. The agency that has 100 people making a 15% margin is more profitable that an agency with 200 headcount and a 5% margin. Do the math.
Get Paid – Don’t pitch on spec and don’t pitch for projects. End the insane practice of giving away the only thing your agency has of value in the world – your intellectual property and creativity. Clients who pay for pitches are serious about the pitch. Clients who don’t pay are only window shopping. Demand skin in the game, both ways.
I’ve talked with a lot of agency founders and leaders who are riding this new crazy wave. One thing is consistent: 150 employees is the tipping point. Beyond that, an agency’s culture changes. Founders are not as involved in all aspects of the business; six degrees of separation from management emerges in order to move work out the door. Bureaucracy starts to set in.
Bottom line, stay true to your small-time roots, and consistently keep on top of what keeps your agency on top: speed, flexibility, independence and company culture. In other words, work hard, be original and really get to know and appreciate all the people you work with.