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Keys to ad agency success, growth and survival

by | Mar 4, 2023

This article is dedicated to those who seek to establish, maintain and manage a successful advertising agency.

Capitol Communicator ad agencies neglect their peopleBy Ron Owens

There are over 18,000 advertising agencies in the United States today employing over 250,000 people working in agencies throughout the country. Unfortunately, very few of those agencies achieve real success in terms of client service, agency growth, and consistent profitability. If there were a guaranteed formula for success in the agency business, there would be many more happy people in the industry today. There does appear, however, a few fundamentals which I refer to as “basics” that seem to work, based upon my observation, experience, and evaluation of a few successful ad agencies in the mid-Atlantic region. These day-to-day basics prove essential for success, growth and survival that appear to be common to most of them. Here are just a few of them:

  • Have a financial expert on board.

No successful ad agency has grown and prospered without a good financial expert on the executive team. One of the weaknesses in many small-to-medium-size agencies is in their accounting and financial operations. Most agencies are started and run by creative or marketing people, not financial experts. My experience tells me that you fall short literally, without financial expertise, supplemented with a good outside CPA firm and / or even, consider adding to your executive team or board of directors an outside member with financial experience. And yes, one can obtain / learn agency financial expertise over time or by “trial & error”, “deep pockets” and / or good credit with a local bank or financial institution.

  • Be a business.

Most successful advertising agencies, including those with great creative reputations, are run in a business-like manner. Ad agencies, like their clients, need cash flow policies, purchasing, fiscal jurisprudence, subcontracting and billing practice systems, standard operating systems, employee policies, compensation systems, standard industry practices, a code of behavior, business ethics, etc. Profit-sharing is a nice added plus. There is simply no evidence that the sheer gratification of turning out, so-called “creative advertising,” by your creative team succeeds in the long run. Even creative people must have or possess some financial stability.

  • Be best at something.

Small agencies. Big agencies. New agencies. Old agencies. All try to be best at something. Trying to be everything to everybody is one of the quickest ways to failure. What are your agency’s strengths, weaknesses, capabilities, and limitations. Get to know them and come to realize your potential. Building a specific brand…a personality, image, and character, is one of the basics that appears to be part of the success of the top agencies in the country.

  •  Exert strong leadership at the top.

All successful agencies have strong leadership at the top. Those agencies reflect a point-of-view and a lifestyle of a relatively small group of key executives. This core group of one or two or three or four people set forth the pattern, the philosophy, the policies, and management style which gives an agency momentum and sets the pace for everybody else. As agencies grow naturally, assumption of responsibility and delegation of authority takes place.

  • Plan for permanency today

Industry studies bear out the fact that many agencies fail because there was no plan for succession. Top managers should plan for the permanency of their agency today. Those plans must include how the principals are going to get their money out of the business, who’s going to take their places, and when it will happen.

  • Develop a growth plan

Agencies grow through increased client budgets, new business, and / or through mergers and acquisitions. Responsible agency managers should develop the growth plan they believe will accomplish the objectives of the management and principal shareholders. More and more agencies are also going the merger and acquisition route. This is terribly time-consuming, but my experience indicates that there is much to be gained / learned from occasional merger discussions with other agencies.

  • Restrict new business efforts

Pursue only those accounts you feel you can handle well. Seek the type of clients you are most qualified to handle. Constantly ask yourself the question: “If I were the client, would I hire us?” Having the courage to say “NO” to new business opportunities is a lesson most agencies never learn. “Know thyself.” Avoid soliciting firms whose decisions have historically been made or governed by politics. It pays and time is money. Follow-up by reading my earlier Capitol Communicator article entitled, “Selecting an Ad Agency or PR Client Is Not Easy”, for further details / factors to consider.

  • Use your own product.

I find that very few agencies invest in their own product when promoting themselves. Sure, most agencies send out an occasional email, occasional letter or direct mail piece, but that’s about all. At my old agency, LMO Advertising, we ran an ad the day we opened for business and had advertised consistently for a number of years since then. According to the 4A’s, investing a percentage of agency income annually in self-promotion is a smart thing to do. Our new business experience, our own agency recognition and image research indicates that investment paid off well for us. Agencies should use their own product. Who knows…they may learn something about advertising. And they will surely turn up some new business leads, too.

  • Plan the work – work the plan.

Our observation of successful agencies suggests that another “basic” that seems to work is to “plan the work and work the plan.” We used management-by-objective(s) and we’ve had a long-range planning committee since early 2000. We thought planning worked for us as well as for our clients. Most agencies tend to have frantic work environments where seemingly, “the business runs the people – the people don’t run the business.” Proper planning is the only answer.

  • Avoid “management incest.”

In a personal service business, such as ours, most successful ad agencies tend to be run by “nice guys” who like each other, who like to do the same things, and who think pretty much alike. Perhaps, the smartest thing to do is to have an outside member (or two) on our board of directors or executive team. An outside director or team member can bring to the agency objectivity and a perspective that prove to be invaluable as the agency analyzes its performance and charts its future growth plans. It’s worth your trouble to avoid “management incest.”

  • Recruit and retain good people.

Recruiting and retaining good people is not an easy proposition and takes scrutiny and good management. For entry level types, we have recruited excellent people through job work sites, or better yet, we have “grown our own” through our wonderful internship program. Let’s also recognize and embrace diversity, equity and inclusion and the fact that talent and skills come in all forms no matter gender, race, creed, color, ethnicity, age, or the physically challenged. When it comes to the more experienced agency personnel, we find some online job work sites to be very effective in generating good prospect leads for follow-up. When and if all else fails, we use “headhunters,” to a limited extent. Employee referrals are also used for positions, who are hired after passing our “litmus test,” carry an incentive for the employee. Per the industry standard, newly hired employees are subject to a drug test and background investigation. An all-exclusive benefits program serves as a solid retention addition for each employee inclusive of medical, dental, 401K, liberal vacation, holiday and incentive bonuses, maternal and sick leave policies, and of course, profit-sharing.  Let’s not forget… our employees are our assets. Give them the tools and resources necessary to do their jobs, allow them to attend all-expenses paid, selected agency professional growth seminars, conferences, and by no means least, pay them very well.

While I am not recommending strict adherence to the basics, I know they work well for any agency and serve in the elimination of many business problems, while enhancing and increasing agency growth, staff retention and profitability. These basics, with close application, are a good way to enhance the agency’s brand image and increase its public awareness.

Photo by crazy motions: https://www.pexels.com/photo/illustartion-of-stacks-of-coins-and-an-arrow-12920750/

Ron Owens is President, Ron Owens & Associates, a consultancy which specializes in market development, branding, diversity, equity and inclusion. Ron is a co-founder & former Principal of LMO Advertising. He also has served as Director, Worldwide Advertising & PR, Pitney Bowes, Inc., a Fortune 500 Company; VP, Bozell Worldwide; VP, TMP Worldwide; Past President, Ad Club of Metro Washington DC; Governor, 4A’s, Region II; Committee Chair, ANA; Lt Gov, AAF, Region III; and Vice Chair, Better Business Bureau. A guest lecturer at many of the region’s colleges and universities, Ron can be reached via Ronowens221@yahoo.com     




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