Armanino Blog

Starting Your Creative Agency in the Age of COVID-19

by Jenn McCabe
September 15, 2020

If you’ve been wondering when to start your creative agency, it’s time to giddy-up. In spite of, or due to, COVID-19 troubles, small agencies have an advantage today. (Conversely, if you’re an established agency, beware of the little guys in the rearview mirror.)

Economic downturns are the perfect time for those who are gutsy and scrappy.

Big brands and big clients are under pricing pressure themselves or are keen to exert pricing pressure in order to preserve cash. No one knows when this will end exactly, and that’s forcing more conservative decision-making. As a result, clients today do not expect an agency to be working out of a cool office space. Draw a line through “build or find super cool creative space” and just go win some work.

Smaller creative shops can compete on price, without sacrificing creativity, and lock down their market share. What’s fantastic is that a small agency can price slightly (not a lot!) lower and have bigger margins. Bigger margins mean small agency owners quite often make more money than shareholders in larger shops. When agency overhead is low and the staff talent is lean and mean, even when the rate card is two or three times your cost, it is still less than a larger shop can afford to charge.

Where to Start

Now that we’ve talked you into it, make sure your startup is done correctly. When scale happens, your agency needs strong bones.

  1. Set up a proper company. Even if it’s just you in the shed, get a proper legal entity created. Yes, it’s worth paying a lawyer.
  2. While you’re at it, jealously guard equity. Don’t give it away! That’s a common mistake. If you have a partner, get a prenup (i.e., formation documents, including buy-sell agreements along with other more boilerplate corporate resolutions). This is mostly likely not a “‘til death do you part” relationship.
  3. It’s all about content, right? If you are going to create content, protect your intellectual property by hiring talent so you own the output, or by contracting with your vendors using airtight onboarding documents. If you’re creating for clients, protect their property by investing in cybersecurity.
  4. Lay the groundwork for your culture. Think about how you’ll retain and recruit talent. This is your “equipment,” so take care of it. Get an HR advisor who’s educated in these matters.
  5. Have your lawyer talk to your finance/tax person, so that the legal structure lends itself to growth and reflects your hopes and dreams.
  6. Don’t confuse a tax person with a managerial accountant or a finance person. These are different skillsets and you need them all, no matter how tiny you are. Don’t settle for less.
    • A tax CPA will help you file mandatory forms and stay out of hot water. A good tax CPA will also help you strategically plan for taxes before they’re due.
    • A managerial accountant helps with the day-to-day and regularly presents you and your fellow leaders with accurate financial results. A good accountant understands a balance sheet and equity and doesn’t just do “bookkeeping.” Know now that bookkeeping isn’t enough.
    • A finance person takes the accounting (the science) and turns it into forecasts and projections (the art). Last, assemble a good team — creative, leadership and back office. Have enough new talent to keep it fresh and exciting, but make sure you have some solid citizens aboard, too. You need industry experience and a strong back office to balance your creativity with reality.

September 15, 2020

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Jenn McCabe - Partner, Outsource HR - El Segundo CA | Armanino
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