Two years after its sale to chief creative officer Matthew McDermott, Baltimore advertising firm Harvey Agency has filed for Chapter 11 bankruptcy protection. It follows a layoff of 15 employees in April and a move from Medfield to a co-working space in Hampden. The voluntary bankruptcy filing was made June 30 in the U.S. Bankruptcy Court in Maryland and lists assets in the amount of $162,862 and liabilities totaling $1,204,075.
“While many see a Chapter 11 filing as a death knell, it’s provided us a pathway to new life,” McDermott told the Capitol Communicator. “We can rebuild the agency while finding ways to meet our financial obligations. We were proactive and responsible, keeping our accounts payable in good standing as long as we possibly could. Now we’re working closely with our legal, accounting, and bankruptcy trustee teams to find ways to meet our obligations without crippling our resurgence.
“The Harvey legacy will always be a part of who we are, and with Kathy Harvey‘s blessing, we’ve decided to rebrand by the end of the summer under a new name and a new model,” McDermott said. “This filing won’t impact our ability to serve current and future clients. In fact, it will allow us to focus more than ever before on their success and growth. Honestly, we’ve done some of our best work in years over the last three months.”
The court filing lists office furniture in the amount of $41,362 and computers valued at $8,270. Kathleen Harvey is listed as having secured shares of the company valued at $1.2 million.
McDermott said it started in March of 2021, his second day at Harvey, when long-term client CoverGirl announced they would be moving all of their business overseas on Jan. 1, 2022, after more than 30 years of working together: “It was a massive hit not only to our finances but to the morale. They were our largest and most profitable client — 85% of gross revenue and nearly 100% of our profitable revenue,” McDermott said.
The agency started 2022 with about 500,000 in booked work and the team more than quadrupled that by the end of the year, including landing clients such as Black + Decker, SECU and Harbor East. “We took care of our people; we went over a year with 0% attrition – which says a lot in a field where attrition rates can reach 30% or more,” McDermott said.
According to an earlier announcement from the agency, recent clients also included Sally Hansen, Rimmel, the H&S Family of Bakeries, Flying Dog Brewery, Loyola University, and Glory Days Grill.
“Unfortunately, we still had the financial burdens of an agency two and a half times bigger than we were,” McDermott said. “That meant we were nearly always operating at a deficit – despite everyone’s best efforts. I believed wholeheartedly in the agency, and so I did whatever I could to buy us runway for the turnaround while impacting our staff as little as possible: taking out a line of credit with me as the signatory, taking a nearly 50% pay cut, taking on six figures of personal tax debts to keep the agency’s cashflow as high as possible.
“But it wasn’t just me who sacrificed. I’m so grateful to senior staff, including our COO Sue Baile and IT Director Ken Schumann, who voluntarily took pay cuts. Every bit helped. We also had to part ways with some talented C-Suite staff who went on to start their own consulting agency; we celebrated and supported their launch and were proud to be their first client.”
In the end, the agency had to resign accounts, knowing some would not remain through Harvey’s reorganization, and McDermott said they helped transition some of them to the creative start-up Coven Collective, founded by Jessica Brown and Sarah Quackenbush, two Harvey leadership alumnae who previously served as Harvey’s Chief Creative Officer and Chief Strategy Officer, respectively.
“The change allowed us to double down on the clients willing to stick with us, including local brand Schmidt Baking Company,” he said. “They have been incredible partners for years, and the trust they placed in us during this transition has been unprecedented.
“I’m excited to move into a new era, put what I’ve learned from my mistakes into practice, and choreograph one hell of a second act. To paraphrase Mark Twain, the news of our demise has been greatly exaggerated.”
Image of Harvey passing baton to McDermott via Harvey Agency