Confessions of a Midsize Agency CEO

This article is part of our Confessions series, in which we trade anonymity for candor to get an unvarnished look at the people, processes and problems inside the industry. More from the series →

Running an agency, no matter the size, isn’t easy. The smallest are by definition without resources and in danger of collapse if a client or project goes away. The largest often let their girth get in the way of creativity, innovation and risk-taking. But what about the agencies in between?

For this week’s Confession, Digiday spoke with the chief of an independent digital shop that qualifies in that middle range, from 35-60 people. In this executive’s eyes, this size has several challenges that are shared by all agencies and unique to its situation. The exec discusses the hard part of competing with large agencies, especially those owned by holding companies.

What’s the hardest thing about being a midsize agency?
We’re bootstrapped. We’ve never had funding. Cash flow can be the most difficult thing. When you’re trying to get talented creative and strategic thinkers, it’s that issue of cash flow. Larger agencies have the backing of the conglomerates. You can’t charge the rates to get to a certain level of talent. The larger agencies have more of a dollar pool to play with. They can do things like WPP backing tech cos. They can create trading desks. It takes millions to do those things. We don’t have those dollars.

Is it different from being small?
Small agencies have less overhead, and there are different expectations. We deal with big brands. There’s a higher expectation not only on the quality level but on the thoroughness and process. There’s also a higher level of administration and management. If you’re less than 10 people, you maybe have one admin and everyone else is billable. We’ve got space for hosting clients and shooting video. A third of our office space is without employees. That all has to be paid for. Being small is more flexible. You don’t have that problem of having hundreds of thousands of dollars of salaries to cover.

Do you want to get big?
One hundred people is about the size we want to cap at. As a digital agency, there’s so much cross-functional brainstorming and strategy that once you get beyond that people get so much more siloed and you lose that cross-functional talking where so much innovation happens.

How do the big guys throw their weight around?
We’ve seen it a few different ways. We’ve seen agencies come in where a client will get a new lead strategic agency and that agency will mandate they take over the work. We had a major client we did two years of work on, and they were happy and our metrics were incredible. They still had to fire us because the other agency mandated it. That was fun. There seems a different mentality in the holding-company agencies. People aren’t willing to give collaboration a try. It’s a fight from the start. A lot of those agencies, traditional agencies, will bring us to help with digital, but they’re not bringing us in as a partner. There’s a lot of carrots being dangled, and then they say they’ll do it themselves.

What about on the client side?
Being a midsize agency, our main contacts are the vp of marketing, director-level people. The bigger agencies often have garnered the relationship with the C level if nothing else because they have bigger budgets. You can be doing great work but the relationship is so important. You can be stuck at that director tier and can’t get up to that C level. And you can be blocked out of work.

Do traditional agencies fake it with digital?
Yeah, definitely. We find that there’s a major name, and they’ve got an outpost in a major city. They say, meet the head of our digital team. It’s one person scared shitless that if they get a lot of digital work he’s got no team. He’s got to pretend he’s got a team, and if he wins it he’s got to use a vendor behind the scenes to get it done and build a transition plan to migrate the work to his team if he builds it.

Why still?
It’s hard. When it comes to digital work, you’ve got some serious competition when it comes to hiring those people. It can be tough to find the right people, the people who can do the strategic thinking, deal with clients and constantly shift their focus among different brands — that’s not an easy mindset. Digital is far more complicated. We have to deal with the messaging, creativity, interaction, platforms. A big part of the job is just keeping up with technology.

What’s your impression of the pitch process?
It’s usually wildly unfair and a bit of sham. There’s an agency the company wants to go with, but due to procurement or company policies, they have to do multiple vendors bidding. Clients feel like they have to give you a massive amount of information. They give volume instead of quality like here’s the challenge, the time frame, the budget and how much risk we’ll take. Clients often forget to say what their true risk tolerance is. They don’t give us that and rarely give us budget. Whoever already has an in will know a lot of those things and will have the advantage in the pitch. It’s a tricky game.

Do you ever lie about your size?
Everyone does. I’ve had a few dinners with other agency CEOs. Everyone has the same kind of equation. It’s always adding 20 percent on top, then round up to nearest five or zero. We don’t want to lie about it. It’s just so prevalent that it just happens. I don’t even know how to explain it. It’s just a thing that happens. It’s like breathing. A client asks how many people do you have, you’re doing the math in your head.

What are your biggest client frustrations?
Not treating us as a true partner and not trusting us. A lot of our clients have a level of trust, but there’s a difference with really telling us what goes on. At the end of the day, we’re obligated to hold information confidential. They have the ability to share anything, but they don’t. If they did, we’d understand better what they’re going through. They’re dealing with a lot of projects, a lot of bureaucracy. If they let us in a little more on that, we could be so much more effective for them.

How hard is attracting and keeping talent?
The margins are so slim you have to work people to the bone to be profitable. And there’s not the upside you have with startups. You might work yourself to the bone there, but if you get sold you’re going to get the financial incentive. At an agency, there’s two big things: the creativity you get to do day in and day out and the lack work atmosphere. Clients are amazed we let dogs in our office. That’s why we can pay our staff 20 percent less.

If you could change one thing about the ad industry, what would it be?
I’d have people be more collaborative — honestly collaborative. We do cool stuff as much as we bitch and moan and deal with a lot of client BS. We get to come up with crazy ideas and put them in front of people. We’re pretty lucky. We have to remember we’re doing cool stuff. Also, fix client expectations. It’s amazing how unrealistic expectations clients have, like increase sales by 400 percent and do it with $250,000 in budget. Or they’ll say they’ll pay you $150,000 for four videos but won’t spend any money on media. It baffles me. Some of the decisions made on how to spend budgets are what people know won’t get them fired versus what’s right.

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