How big should you go? Part 2
Continuing the discussion in Part 1, on ways to grow a digital agency. One way is strategic investment; another is pure grit and hard work to grow organically.
A largish digital agency with IP around a platform and some hefty media contracts is quietly in the process of securing strategic investment to help it scale up and meet growth targets (including overseas) sooner. This deal will probably stay under the radar so I can’t tell you who it is.
And news in the last week or so that independent creative & media agency Razor has sold a ‘significant equity stake to ex media agency boss Graeme Wills. This investment will reinvent the agency beginning with a name change to The Joy Agency, according to AdNews.
But if you don’t have access to large investors, then how do agencies manage to grow? As one agency CEO mentioned to me recently, it’s about getting that first multinational client which puts money in the bank, and builds the agency profile. Another is the MassMedia approach, developing an additional revenue stream, Traction, which is now a separate company.
“To be honest, it’s hard. To break through the 12-15 barrier requires, great work aside:
- a plan which addresses how does the business grow, what is the tipping point for new hires, what exactly is it we offer our clients and how do we expand this capacity efficiently
- great people (the team have to care, they have to want to grow, ultimately they are the ones that have to pick up the slack as you have more work than time, because really you’re laying the track as the train rolls over it – unless you’re minted of course, but then it’s a hobby, not a business!)
- and thirdly some good fortune.
Yes, funnily enough, I believe that fortune plays a big role. You are at the whim of client decisions, you are at the whim of great people choosing to stay with you and you’re at the whim of the economy at large. You can influence all of these things to a degree, maybe not the economy so much, but you need the planets to align a few times per year in order to take enough quick steps forward so that when the next crisis or challenge hits, you only lose a little ground, not all of it.
One of the other keys things that makes growing easier and less risky is sticking to your knitting. Know what you are good at, do it brilliantly and just do more of it. If you take this approach you’re hiring people you understand, doing roles you understand, so it’s easier to manage and you can hire more cost effectively rather than needing to hire Seniors for IP, that you then don’t know how to lead.
At TheFARM, we did it the hard way. We changed and expanded our knitting by moving from being a design and development shop (largely working for bigger creative agencies) to being a strategy/creative lead, direct to client digital agency. We made this change whilst going from 10-20 people. We also, inadvertently of course, were half way through this plan as the GFC hit and overnight all our client stopped spending money (ah the memories!).
We did, however, have a plan and we did work with some great business advisers (namely The Leach Partnership & Mike Satterthwaite, ex Saatchi’s CFO) who helped us define and stick to the plan. We didn’t always listen to them of course, but their input was invaluable. We also grew a little top heavy due to our shift in business capability and focus, but we’ve now got a fantastic leadership team in place that we believe will double the size of the business of the next couple of years.
As a small, still relatively young independent, we’re now at about 30 people across Sydney and Singapore and haven’t taken any strategic investment to date. Chris and I have both a great leadership team and fantastic wider team who are on top of their game and we’re very excited about 2013 and beyond. The next challenge being how to get from 30-50 across two continents – but why keep it simple!”
So the key take-aways from John’s comments are:
1. It’s hard; you need a plan, great people and good fortune
2. Once you’ve got this it’s easier to grow efficiently by sticking to your knitting
3. But sometimes you have to flow with the challenges, and like TheFarm change and grow all at once!