The Agency Business: Growth requires evaluation of both agency and client needs

When looking to expand, many firms must determine whether they should grow their staffs as clients emerge or add new employees and hope that clients will follow.

When looking to expand, many firms must determine whether they should grow their staffs as clients emerge or add new employees and hope that clients will follow.

In 1984, APCO began with one employee, Margery Kraus. Twenty years later, APCO, having completed a management buyout in which 40 employees have a stake in the firm, reported 355 employees and $56 million in revenue. During that score, growth followed - slow in some parts and explosive in others. Growing out a business follows the chicken-versus-egg cliche. Does a company grow out its business in hopes that it will entice new clients and, by proxy, risk profitability when leads don't materialize? Or does the company grow its team as clients emerge, risking the juicy contracts by being unable to provide resources necessary for a new client. Kraus believes growth is a balancing act, sometimes requiring a firm to rely on a gut feeling when it comes across potential employees, and other times hiring out because of a client expansion. "No firm can sustain over-investment [of personnel], so you have to pick your risks carefully," Kraus says, but adds, "You can also be too risk-averse, where the world passes you by." "It's easier and more financially secure to grow with your clients," says Waggener Edstrom EVP Katie Kemp. "But if you just do that, you limit opportunities for yourself and your people." APCO launched six global offices in 2000, then realized it did not have the corporate or technical infrastructure to sustain continued growth at that level. When APCO decided to expand rapidly abroad, it made sure the clients would be there. "We had some clients who'd already said [that] as soon as we set up, they [would be] ready to use [us]," Kraus says. "And with potential clients we got a sense if we did [go abroad], there would be significant opportunities." In any case, Kraus says, one truism remains: "Clients don't care if you have two or 100 people. You have to get it done if you say it's going to be done." If an agency gets the opportunity to take on multiple clients, but can't serve them all, it must accept that it needs to decline some offers, says Margit Wennmachers, cofounder of OutCast. "We only have [to offer] the quality of work we do every hour," Wennmachers says. "If someone calls you and you can't take them, you're better off saying no. They'll call you [down the road]." But at the same time Wennmachers advocates knowing when to take a risk. "We didn't want to pass on Mercury Interactive," Wennmachers says, adding that by doing so the company's personnel became temporarily stretched until the firm could grow again. But having a slightly larger staff than necessary isn't guaranteed to be a detriment. Declan Kelly, CEO of Financial Dynamics, says he likes to hire "slightly ahead of the curve." "If there is a promising pipeline, you should make sure you have enough resources," Kelly says, calling it "a little gas in the tank in case something comes out of the blue." But he adds, "I'd never run a business based on what client wins I think I might have in two months. It's bad business [to have] people sitting in your office waiting for business to arrive." Kelly was part of the group of employees that, via a management buyout, became owners of FD in 2003. He says the firm is less likely to be overzealous or lazy in growth because the principals make decisions with their own capital. Mike Burns, president of MBA, a 20-person firm with billings of $2.5 million, says that he views expansion carefully because of the need to use operating capital for that purpose. "I have to decide out of my profits when I can afford to invest for future growth," Burns says. Wag Ed makes sure it doesn't pursue superfluous growth, says Kemp. "Some people ask us, 'Why don't you open a Chicago office?'" Kemp says. "It doesn't make sense for us right now. You can't grow just for growth's sake." Kemp adds that any growth must be handled with the proper senior personnel. "We can't expect [CEO] Melissa Waggener [Zorkin] to supply the day-to-day leadership in that new office," she says. But for a young, small firm that is in the throes of expansion, such things are unavoidable. "I recall being in the office on New Year's Eve, standing by the fax machine to make sure the right thing got delivered," Kraus says. "If you're going to be involved in building these businesses and you're under-resourced, you must be willing to make up the difference." -------- Tips for growth
  • Growing for growth's sake will not serve the needs of you or your client
  • Stress the quality of your work, not the size of your staff, to clients
  • Reel in plans to expand if your internal infrastructure can't handle it
  • No acquisition or new office rollout is the same as another. Plan for this
  • Make sure you can deliver on what you've promised, regardless of your staff size
  • It is unwise to staff according to what business you might get in the future

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