Forget the days of whiskey-swilling Mad Men. Agencies these days have demands Don Draper would never have dreamed of. The current climate sees the old world of marketing - television and print - overlapping with the breakneck speed of digital, and advertising agencies are scrambling to keep up.
It’s no wonder then, that an agency, wanting to diversify their service offering and offload operations and finances, will often sell their business to a holding company. It’s the way it’s always been done; that’s how the WPPs and Omnicoms of this world got so big.
But, despite the common practice of growing and then selling ad agencies, many commentators don’t think this model is sustainable. Margins are tight and the pinch is worse in a ‘one house, all service’ agency.
“Declining fees, downsizing that goes with it, the uncontrolled workloads, the failure to negotiate workloads – [it’s] not healthy." - Michael Farmer, award winning author of the “Madison Avenue Manslaughter”
What’s becoming clear is that staying independent and offering a specialised service will stop you becoming the next Droga5 of Australia. Farmer sees the future of agencies being consultancies with creative and capital capabilities. The numbers also stack up with consultancies generating fees at five times head costs and agencies generating fees at around 2.2 times.
Think about it: freedom gives us control. But when you’re owned by a holding company, unpredictable shareholder interests mean there’s a Big Brother aspect to the way you make financial, cultural, creative and client decisions.
So before you consider selling, ask yourself: do you want to excel at some things or be mediocre at many?
Read on to see why and how independent media and marketing agencies should stay that way.
Attract the right clients - and the right employees
The talent you hire and clients you have are what make an agency, and it’s essential to build harmonious relationships between the two. If the mix isn’t right, you can end up with sluggish campaigns that don’t perform...and there goes your reputation.
Being able to pick the clients who are a good fit means you can stay away from those who may not pay you on time. And you can also choose clients who are right for your culture and make each project enjoyable. This is important if you want clients who are an extension of your agency, not simply adversaries that you need to pander to.The same goes for the people you hire. Independent agencies attract those who value empowerment, autonomy and ownership. These candidates aren’t afraid of accountability. They don’t want to be a cog in the wheel of a huge conglomerate, and the work they produce often reflects this ethos.
Be agile and adapt quickly
No agency can survive long-term without adapting to their environment. When you don’t have to deal with corporate structure and hierarchy, you can quickly make changes to your business. There are new tools, new processes, and new technologies that crop up constantly. If you’re owned by a holding company, you often don’t have the ability to implement them. Instead, you have to make do with technology that spans every corner of the globe and is slow and unwieldy.
In terms of ideas, if anything has ever gone ‘viral,’ it’s because an agency had an original thought that they were able to act on without going through lines of command. Independent agencies can be fast-paced, passionate and innovative and are able to challenge their clients. Some ideas are risky, sure. But some will pay off, and going it alone means you can take leaps of faith instead of asking permission and missing opportunities.
Be more than just an agency
Consulting and end-to-end execution gives independent agencies pipeline stability and stronger margins. A way to supercharge this model is to create a venture vehicle to that gives teams an outlet to experiment with creative ideas. One example of this is B.B.E, a venture marketing agency providing brand, marketing and creative services. But they also invest in, and partner with, innovative startups. This allows them to do things fast and to always be at the forefront of technology.
“We approach every client as a catalyst of change and challenge their expectations. Leveraging our hunger for technology, we build solutions that cement strong strategic partnerships with clients”. Adam Beaupeurt - B.B.E
B.B.E’s approach allows a diversification of revenue streams and it also gives them an edge in securing large clients because they’re able to apply business principles in conjunction with their brand, marketing or creative perspective.
Agency management made easy
Alright, so perhaps you’re convinced by all the reasons above. But you’re still worried about the administrative side of your business. After all, managing costs and cash flow isn’t much fun. But (of course), there’s a way to overcome this tedious problem.
The first thing to remember is to clean out all the excess. You don’t need to say goodbye to Friday drinks, but be honest with yourself about what’s costing more than it should. Look at all the key functions of your business: sales, account management, operations, finance, creative. Some areas must be managed internally, but others could be outsourced or subcontracted.
After you’ve banished those things that sucking up cash, your next problem is cash flow. Yes, it’s the bane of most independent agencies, but a bedrock that can’t be ignored. Even if you have the best clients and excellent margins, when wages are due and you don’t have cash...it’s not pleasant. You can hire technology and business management consultants like Ratio who will streamline your processes and free up cash, but there’s also a great toolbox of apps that will help you to simplify and automate back end processes on your own.
So there you have it. All the potential reasons to sell to a holding company mixed in one article. When you’re stretched to capacity, and wondering what it’s all for, you might feel like being acquired is the easy option. But don’t forget that freedom gives you choices. Choices to become an expert, or diversify where it’s beneficial. Choices to adapt and take risk. And choices to use technology to streamline administration and focus on what you really want to do. Don Draper would surely agree that the ability to implement off-the-wall thinking, is why being independent matters so much - so don’t give that up too easily.