How To Run A Profitable Advertising Agency (1 of 2)

How To Run A Profitable Advertising Agency?

Don’t Take My Word For It, Yet…

monopoly-manI’ve been working as a senior executive and owner in the advertising, digital and Internet startup worlds since the golden 1980’s. My global and regional clients and new business wins include General Mills, Harrah’s, J&J, Intel, Microsoft, Nabisco, Northwest Airlines and Nike. And, many smaller regional clients you might never have heard of unless you are on the west coast.

Over the years, I’ve made hundreds of business decisions. Some were brilliant and some were ‘learning experiences’. I’ve decided to share my top 25 business-building lessons with you. No, I am not so crazy to think that these will instantly make your agency the next 72andSunny. But, I do know that most of these lessons represent best practices that, if followed, can help make you be more successful.

The path that got me here included sixteen years at Saatchi & Saatchi Advertising Worldwide as Business Development Director North America, General Manager Minneapolis, European Director in London and Management Director in New York. After I discovered the Internet browser in 1994, I left advertising for seven years to be CEO and founder of two Internet publishing and technology startups. One was one of the first major online newspapers. The other company created technology that allowed people to have meaningful conversations with a computer – Microsoft bought the technology in 2005. If you were online in the early 2000’s you might have talked with our SmarterChild bot on instant messaging platforms. Over 20 million people did.

After my digital sojourn, I moved from New York to Oregon in 2002 to buy the advertising agency RalstonGroup. In the ten years that I ran the agency, we bought the sports marketing agency Citrus, took their name and added clients like Dr. Martens, Legalzoom, Montana Lottery, Nike’s AOR college and Major League Baseball accounts and the U.N.

I understand the advertising industry from the perspective of huge to small agencies and have sat on the client side of the table.

By the way, I now run an agency consultation business that specializes in business development. I help agencies find their positioning sweet spot and build action-oriented business development plans. I just published my second book, The Levitan Pitch. Buy This Book. Win More Pitches. This book is a very detailed how-to about how to manage and create business-winning new business pitches.

My experience as a consultant and the opportunity to look under the hood of many agencies has confirmed that the following ideas can help add value to most, if not all, agencies.

I hope that by now you think that I must know what I am talking about. If so, here you go…

Here are the first 12 of my 25 key lessons I’ve learned over the years. Part two is up tomorrow.

1. Have a three-year agency business plan. You’d be surprised how many agencies do not have even a basic business plan. My agency’s plan helped us grow the agency’s valuation through an acquisition, open a second office, pitch and add Nike AOR business (which helped us gain even more desirable clients) and develop a focused; high-energy; 24/7 new business program based on direct, as in outbound, marketing and inbound social media.

Note to the 45+ crowd. The plan also acted as a framework to begin to position the agency for an eventual sale.

2. Create an agency brand positioning that differentiates your agency from the other 4,000+ agencies out there. I know, I know, you’ve heard this one before. But, having a viable agency brand positioning is critical. More importantly, have a very powerful brand positioning — in reality it’s really a sales proposition — that actively attracts and stimulates interest from the right new clients. Here is the most critical thing I learned in my own agency’s positioning development process:

Just trying to find yet another new way to say “digital” or “full-     service” agency isn’t good enough. It’s really difficult for any agency to find a brand new way to enunciate a same old, and       generally non-competitive pitch like “full-service.” Some clients might want full-service but find a way to say it with style.

3. May be you should go even further. Given the rapid pace of change in our industry, it might be time to think through some agency of the future scenarios and business models that will more effectively get you to a truly distinctive and compelling sales proposition that lasts more than six months. Double-digit growth areas like mobile or video marketing might be smart places to start. One of my agency clients is building a completely separate company based on their own IP.

4. You are a business first. Control all costs. This sounds obvious, but it is critical in an increasingly low-margin service business like advertising. My metric was that every dollar I paid to someone else was a dollar I couldn’t hand to my kids.

5. Stare at your numbers – often. We advertising people are visual types so Citrus used dashboards as a graphical agency management tool. We had detailed monthly financial dashboards tied to our P&L, balance sheet, accounts receivables and owner compensation (this one tended to focus our business decisions.) We also used a real-time agency SWOT assessment for all major agency decisions like mergers and acquisitions, go-no on RFP’s and to help manage existing accounts and staff.

6. This is a big one. Be concerned if any single client accounts for more than 25% of your revenues. When we added two Nike AOR assignments, I got nervous in addition to elated and accelerated our new business outreach to add other accounts. Not having too many eggs in one client basket will also increase the value of your agency for a future buyer.

7. Learn how to say no to clients and prospects that want too much free or low-cost brainpower. Your brains, ideas and pixels are all you have to sell. Charge like a lawyer or even SEO specialists that charge like lawyers. It is time for our industry to exhibit some self-control. If you have to give too much away for free, it might be time to examine the value of what you are selling and the mindset of your client or prospect.

8. Think about an alternative to the notion that brainpower and creativity are all you have to sell. Take some of that brainpower to find out how to create a product or service of your own that can easily be replicated and sold over and over.

Think like a “start up” and hey, let’s build some IP can sound like an obvious panacea. However, there is gold in them thar hills. There are agencies teaming up with brewers to create new craft beer brands; agencies moving into research and agencies like Wieden+Kennedy becoming start-up incubators. I asked W+K why they are doing this. The answer… they are investing their brains and experience to make more    money in a world that Mad Men couldn’t have conceived. If you need seed money for a new venture try crowd funding.

Think big like the kid down the street. I bet your team could build one of the more effective Kickstarter sites.

9. Hire only exceptional people – that’s what Google does so why not you? Do not rush to fill an open position with a B or C-person when waiting for the A-person is what you really need to do. You will pay in the long run.

10. Once on the team, make sure to keep all employees are firmly in the loop via scheduled agency meetings and email agency updates. It takes more than a foosball table to build a business building culture. CEO’s need to talk it up. I have always subscribed to Tom Peter’s management concept of MBWA. Look it up.

11. Reward only your best employees. You don’t owe anyone anything. There is no question that an exceptional employee is as valuable as two marginal people. Does this sound harsh? This approach beats not having investment capital for growth or having to go out of business because you were a bit too magnanimous.

12. Miscast or problem employees should be dealt with earlier than later.

Here is how you get to the next 13 insights on how to run a profitable advertising agency –> Part Two

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