Pub. Note: Bill Fritsch, a local veteran of the ad-biz wars, was a regular columnist in the late MARKETING newspaper for five years, in the latter stages of the last century. He returns with some sage advice for agency principals trying to cope with today’s challenging business environment.
By Bill Fritsch
When I was confronted with troubles as a boy, my dad would say, “Don’t sit here worrying about things. Get up and at ‘em”. Meaning—look your troubles straight in the eye and do something about it. Don’t hesitate.
This simple idea stuck with me through a long life of ups and downs. In the first year of building Christiansen & Fritsch, we were confronted with a catastrophic loss of business. We had just added six employees to handle work for Safeco Mutual Funds that we won in competitive pitching. Unfortunately, the promised budget never materialized. We were left with the payroll and no income to match. Oops!
The obvious move was to immediately downsize. But we just didn’t want to treat our team that way. It was our fault that we had acted before we had all the information in hand. Consequently, it was our duty to fill the financial hole.
Rather than painting a bleak picture of the consequences of failure, we brought every single employee into the conference room and detailed to the penny the financial hole facing us. The hour-long meeting looked at every client and every place where we might gain business, with a little extra elbow grease. We let the team vote on extending working hours. And we also detailed what rewards awaited at the end of the extended work period, if we achieved our goal. This included bonuses and closing the office between Christmas and New Year’s Day, if the goal was reached by Dec. 15.
For some unknown reason, we videotaped that particular meeting. I came across the video two weeks ago. Talk about going “up and at ‘em!” Watching this meeting, you would think we were having a celebration after winning the biggest game of the year. But there we were, facing business closure if we failed, and yet failure wasn’t even considered by the team.
The story ended well. We reached our goal. We landed new assignments from existing clients and even won a new client in the process—all in seven weeks. And everyone on the team enjoyed their week off between the holidays. More importantly, we did it together. From that point on, the company grew and grew and ultimately sold to one of the multi-national advertising groups. During the whole journey, we never lost the sense that—from top to bottom—we were in it together.
Today, owners of marketing-services firms have substantial challenges. Abusive payment terms by most big brands is putting back-breaking financial pressure on cash flow. Misguided bidding processes by some brands redirects too much senior-staff time to “filling the pipeline.” Clients now are building internal creative capabilities in order to decrease costs and improve “speed to market.” This means that there now is an overcapacity of marketing-service firms. And this puts a downward pressure on agency compensation.
These challenges can lead agency owners to feel stuck. Firms that aren’t growing have hit walls that seem too hard to penetrate. This comes in several forms: Perhaps one client is more than 50% of the agency’s revenue—which makes it hard to get a line of credit and puts the firm at risk of failure, if the client bolts. Or an agency’s major clients have abusive payment terms (two, three or four months) and there is just not enough retained earnings to fund payroll in the meantime. Or the company isn’t making a decent profit margin year in-and-year-out.
Yet, despite these challenges, there are benefits to “looking your troubles straight in the eye and doing something about it”. It’s amazing how fast things can move when you switch from neutral to second or third gear. Getting “unstuck” is mostly mustering the courage to confront the problems, getting over bias and ego and opening up to solutions that involve the broader team—which is better suited than most owners to identify and solve the most critical issues.
Bill Fritsch now runs TigerSoup, a consultancy that works with both agencies’ and brands’ in-house teams. He also is a member of the MARKETING IMMORTALS pantheon.