021 Agency (The Book) – Rick Webb, Author and Agency Founder

Contracts, Favorites, Growth, Interactive, Project Management, Proposals, Sales, Selling Your Agency, Specialization, Web

Rick Webb standing in poolIn 2001, Rick Webb co-founded The Barbarian Group, an award-winning digital ad agency. He grew his agency to a 150-person-team that works with big brands like Apple, Google, GE, and more. Rick served as The Barbarian Group’s COO for the first ten years of the company’s existence.

Rick’s book, Agency: Starting a Creative Firm in the Age of Digital Marketing (Advertising Age), is the best tell-all guide to growing a digital agency that you’ll find.

In this interview Rick talks about how he grew his agency despite the inevitable bumps along the way. We cover bootstrapping, developing a culture and vision, Rick’s distaste for hourly billing and time tracking, procurement, and more.

Be sure to stick around for Rick’s takeaways at the end of the show. This is an episode you won’t want to miss!

Follow Rick Webb on Twitter @RickWebb

Thoughts? Questions? Let us know in the comment section below.

Transcription

Chris: [00:01:09] All right well today I’m very excited to have Rick Webb author of “Agency: Starting A Creative Firm In The Age Of Digital Marketing” and founder of the Barbarian Group. Welcome to the show.

Rick: [00:01:20] Hey thanks. Good to have you with me. Good to be here.

Chris: [00:01:25] I’m glad to have you. And this is actually the second time because the first time we tried to do this interview I accidentally forgot to hit record and my and my fellow employees have decided to remind me by putting a sign in the window of the conference room that says “press record.” So we’re definitely going to record it this time.

Rick: [00:01:45] It’s like the Joseph Gordon-Levitt start-up, Hit Record.

Chris: [00:01:51] [Laughs] Yeah! So I love your book and I recommend everyone reading it. I’ll put a link in the show notes. It’s fantastic and I actually bought it twice because I lost my first copy. At the beginning of your book you talk about how you wished there had been a guidebook available when you started your agency. You said you sort of had to wing it. And I’ve actually felt that pain myself because in starting our agency, Murmur Creative, I had trouble finding other resources out there. And that’s why I started this podcast and I’ve scoured Amazon looking for other books on, you know, running a digital agency and it really isn’t that much out there and I think we’re really fortunate that you wrote your book which is so high quality.

Rick: [00:02:31] Thank you. Yeah, there really seem to be like two kinds of books, there’s a lot of small business starting a graphic design shop books. And then there’s like a lot of, you know, stories from the battles at big agencies, that kind of book. Yeah, definitely. There seemed to be something missing in the middle.

Chris: [00:02:49] That’s awesome. Well I’d like to start out by talking a little bit about your agency the Barbarian Group that you founded and then after that we’ll talk a little bit about bootstrapping and culture and your approach to timekeeping and some other good stuff. So the Barbarian Group was a pretty significantly sized agency. On the Barbarian website it says you work with Pepsi and Google and Intel and GE. How many employees did the Barbarian Group have while you were working there?

Rick: [00:03:18] Yeah, so, I mean I worked there–we started the company in late 2001 and, just to give you a little overview, we sold it to a holding company in 2009, and I left at the end of 2011. So I was just about a decade. And in that time we went from the four founders to about 150 people when I left.

Chris: [00:03:38] Wow. Would you say that there are many agencies that size?

Rick: [00:03:41] I think we broke through at that point, there are still a lot. I mean there’s–one thing I’ve learned after writing this book is, there’s far more agencies in general than anybody is aware of. But you know I think in my travels in talking to people I see a lot in the 30 to 60-75 range. And there’s definitely fewer when you break 100. You know, there’s probably a sort of a smaller number.

Chris: [00:04:05] Yeah I don’t know if they’re any of that size here in Portland, Oregon there maybe .. oh, well probably Wieden+Kennedy.

Rick: [00:04:10] Yeah right, perfect example: you got Wieden, you get the big ones. I think there might be one or two in the middle within that you know even I know of several smaller shops and that 10 to 50 people range.

Chris: [00:04:22] So what was your annual revenue before you sold your company?

Rick: [00:04:27] Hmm, well, I think by the end it would have been in the 10 to 20 million range. It had to be more, significantly more, than 10 because I remember payroll being about a million dollars a month at the end.

Chris: [00:04:39] Wow.

Rick: [00:04:39] So I have you know 15-20, maybe.

Chris: [00:04:41] And how much do you sell it for?

Rick: [00:04:43] Well, you know, all these agencies … one of the things I really talk about in the book is there isn’t … it’s all pretty much a multiple on revenue, right? When you talk to bankers and things like that they always go on about EBITDA (Earnings before interest, tax, depreciation, and amortization) and profit, but we all kind of do the same work; and we all kind of hire the same people; and pay them about the same amount; and price their jobs about the same, so it tends to be everybody’s got kind of the same margins. So companies typically go for, you know, one to twice revenue is the rule of thumb I sort of advocate in the book. And that was what we did, you know.

Chris: [00:05:14] One to twice? So either how much you make in a year, or how much you make over … two years?

Rick: [00:05:19] Yeah, you know, then you get all these questions about is it the last 12 months? Is it forward looking? Is it the last quarter multiply by four? There are different ways to do it, especially if you’re growing fast. But you know it’s in that range.

Chris: [00:05:31] So, how much did, like, an average project cost? At the height of your business?

Rick: [00:05:37] Well you know, I would say after the first two or three years we settled really nicely into an area where, you know, this was in the early 2000s and things are predominately Flash, mini sites, or little games. Things like that. There wasn’t any mobile development yet, there wasn’t any software development yet or video production and we hadn’t really broken through to be someone’s agency of record, right? So projects kind of ranged from like $50,000 to $300,000 for a lot of years. And then the last few years we did kind of break through that and we started becoming like the agency of record for people, or doing like full annualize web development jobs and things like that. And then you started getting into jobs that were over one million, two million a year. You know, once you own a website, a big corporate website, for a brand and they’ve got like a team that’s dedicated, that’s always working on it, in some iterative or agile way, you know, it starts being not so much a project as like an ongoing relationship.

Chris: [00:06:35] Gotcha. An agency of record just basically means you’re the main agency?

Rick: [00:06:39] Yeah, I mean you know that term is a little fuzzy and kind of losing meaning as the years go by, but if you’ve got some sort of official ongoing relationship or for some aspect of their business–be it the social ill or the website or something like that, you know what I mean?

Chris: [00:06:56] And so for a project how many people would usually end up working on an average project? I guess that’s kind of a broad question, but …

Rick: [00:07:04] Yeah, you know, I mean it gets harder to answer that as the years went by, right? So, there’s sort of these different stages of growth to these companies. I think everybody sort of starts out these days because they were good at what they did, right? I talked a lot about that in the book. In the old days, agencies kind of started like Mad Men-style and you were already working at an ad agency and you had an account person and a creative person and a copywriter and if you all left you took an account with you. It’s not really like that anymore. A lot of these companies are started by freelancers. They might be designers or engineers or UX people or writers or something, and then they get more and more work that they want to do, so they start hiring people and growing and then they hit … you know that’s kind of the first inflection point is when you get beyond yourself. And then I think there’s often another inflection point in the 20 to 40 people range where you start to take on different types of work, right? But you might have a client that you’ve been doing graphic design for years but they just would love to give you all the back end too and they don’t want the hassle of dealing with two different shops. And the works just sitting there. So you start hiring a developer or two or vice versa. And so then you’re sort of offering like different types of work. And then after that goes on for a while you might start taking peer development work or peer design work or a job to do both. So the longer you’ve been in business and the more you grow the notion of like an average job sort of falls away, you know?

Chris: [00:08:32] Yeah, I mean I definitely realize that at least here at our agency  … projects have been accumulating people as we separate out the different roles. It’s like, “oh now we have a strategist, and now we have the UI/UX person, and now we have a designer.” In the beginning, we had a designer and developer and that was the project [laughs].

Rick: [00:08:52] At the beginning we specialized in database driven Flash sites, so like a lot of games, a lot of like, you know, Nike sites, e-commerce things like that. So I would say our core skills of the early years were creative-driven design … and backend. And then, you know, we expanded into strategy and user experience and then Facebook came along and we started doing more, you know, “social.” And then we had a whole planning department and we expanded with YouTube and video production. So by the end, we were many different services and every client had a different combination of them.

We did pretty much everything for Kashi, the cereal company, and maybe 70 percent of GE’s digital stuff. At that point you’ve got these very large teams, right, one or two designers, a UX person, a strategist, one to four developers– maybe you’re doing some video production and you’ve got some sort of base contract, you’ve got your producer, maybe a writer. And then you’ve got a base contract for the year that pays for that team each month and maybe that’s in the $100,000 or $200,000 range. And then throughout the year, there are add-ons, like you need to do a photo shoot or a video. Then there’s these little projects that add-on that could range anywhere from $50,000 to $150,000.

Chris: [00:10:32] In your book you say … “in my agency, when we finally got around to asking each other what we wanted out of this whole enterprise and why we did it, it was an incredibly awkward conversation.

Rick: [00:10:47] [Laughs] More than one.

Chris: [00:10:50] [Laughs] Why do you think that was?

Rick: [00:10:51] Well, so I have this whole theory about agencies in general. You know, one of the reasons I love them so much is I view it is a very egalitarian industry, right? It’s not dominated by MBAs. It’s not something you need to be really rich to get into. You don’t need to raise venture money, in fact, it’s probably not a great idea. I say in the book, these days you could probably start an agency with an iPad and a desk in a co-working space right? [Laughs] So, it naturally lends itself to a lot of people that are younger and hungry and eager and trying to get their feet off the ground and are just looking for a start in their career. And everybody’s really excited because you’re turning nothing into something, right?  And that’s very different for everybody, right, so some people might just want to do this for their whole life. Some people might have viewed this as a stepping stone to do something bigger or get into a startup. I have one friend that’s pumped all his money from his agency into real estate. And yet when you’ve got partners, your sort of mutual go at the beginning is very in-line. You’re all starting to do this to get something going, to grow something and make it cool. And then as you grow everybody revisits their life goals and, you know, the odds are pretty slim that you’re all going to want exactly the same thing in life.

Chris: [00:12:24] Yeah. [Laughs]

Rick: [00:12:26] So [Laughs] if you haven’t really talked about that along the way you now have this thing that’s worth something and you’re all very passionately invested in it and you all kind of might view it very differently and where you want to take it. So that communication is so vital. I start the book talking about “what do you want to do with this?” What are your goals? Where are you going in life? And it’s doubly important when you have many people.

Chris: [00:12:51] Yeah, I love that part in the book and it actually inspired me to work with our agency on sort of establishing our values and our vision and stuff like that, because we hadn’t given much thought to that either, and it’s been really valuable.

Rick: [00:13:05] Yeah, exactly. And you know it’s a lot like a marriage except you got multiple people and you need to revisit what you want out of it pretty frequently, right?

Chris: [00:13:15] [Laughs] Yeah.

Rick: [00:13:15] People grow up; people change.

Chris: [00:13:16] So, you and your partners did eventually decide to sell the Barbarian Group, was that always the plan?

Rick: [00:13:23] Well it turned out it was for some of us and not others. [Laughs]. So that was a heavy part of the conversations. And then you know when you realize some people really love what they do and they don’t want to do anything else. And some people’s perception is it has turned into an asset. You know, they’re not diversified and they’re looking at their life through the lens of financial planning over the course of their life. Those become different things and the questions start to become how can you fulfill the goals of as many partners as possible, right? So if one person just wants cash for this asset, another person wants to do it forever, you start to think about a place where you can you know sell to someone that will let the other person keep doing it forever. So what we did was very much a circumstance of trying to find the way to best fit as many partners’ goals as possible.

Chris: [00:14:13] And so did some of the partners stay on?

Rick: [00:14:15] Yes. Some had left before. I think we started at 6, we rapidly down to five. Then we added one, and then we’re back to 6, and then we’re down to 5, and they were down to 4. I think we were at 4 when we sold. But, you know, each one of them had different agreements with us about what would happen if it did sell down the road.

Chris: [00:14:50] Gotcha. What was your role at the Barbarian Group?

Rick: [00:14:53] So, you know, it’s funny that’s kind of another example of this, right? When we started, we all did similar things. We were all designers and developers. I was a decent designer and an okay coder, but very good at the production. We started to specialize. I rapidly took on anything project management related, financial related, and things like that.

You know my title the whole time was the same. I was always the CEO. But by the end we had maybe 10 or 12 producers reporting to me and 10 or 12 account people, the entire strategy department, finance … All that was sort of under me at the end. The other interesting thing is, I picked this up in my early years when I worked at Ernst and Young, but there was always a partner that was the engagement partner.

So. You know there’s a lot to sort of start out. Also, everybody is always stepping on eachother’s toes in a partnership. It’s like employees will go ask Mom or they’ll go ask Dad and try and get a different answer. So it’s really incumbent on the partners to figure out who’s responsible for what and agreed between themselves who’s the ultimate answer. Right. So with each client, we had an engagement partner that was ultimately responsible for everything on that client. And so I had several accounts I would oversee you know the cace account the Apple account. Ben my partner had G.E. and Keith had Bloomberg in Cubin had CNN and you know so there was also that kept so that I could always still sort of participate in the design and the creator as well.

Chris [00:17:13] What do you think the Barbarian Group owes its success to.

Rick [00:17:18] I talk to a lot of agencies now and people are bad at PR. People are bad at getting the word out about their shop and they are bad about bragging about themselves.

One of our first in-house hires was a PR person and it really made a difference. You know I don’t know that you need to do it in-house. It’s funny, I would do it again. I would I would hire a PR person pretty early on if I were ever to do it again. But I don’t know if anyone else has ever done that.

It’s funny, I would do it again. I would hire a PR person pretty early on if I were ever to do it again. But I don’t know if anyone else has ever done that. The shops I work with today nobody does that. But you know you can get lazy about it if you have a good roster of clients and they keep coming back and you’re doing pretty well and you think it’s all fine. But nobody in the company is relentlessly thinking about getting the word out all the time.

Chris [00:18:42] Yeah that makes sense. I mean we’re an 11-person agency and there’s no one here who’s solely responsible for marketing our agency.

What was the major sort of pivot for the Barbarian Group where you turned a corner as a business in order to grow?

Rick [00:19:10] I say this in the book: you have to decide you want to grow the company. And I always tell people now that once you’ve hired one person you’ve made that commitment. So there is that first moment where you decide, yes I want this to be beyond myself. So my wife is a freelance designer. She gets sometimes more work that she wants. It probably crosses her mind “I can hire some people” but she knows the minute she does that it’s a very different thing. You’re responsible for someone’s livelihood. They’re going to expect raises and they’re going to expect career growth. So there’s that first moment where you decide you’re going to grow and be a company and then you know after that. For a very long

So my wife is a freelance designer. She gets sometimes more work that she wants. It probably crosses her mind “I can hire some people,” but she knows the minute she does that it’s a very different thing. You’re responsible for someone’s livelihood. They’re going to expect raises and they’re going to expect career growth. So there’s that first moment where you decide you’re going to grow and be a company and then you know after that. For a very long time, every penny pretty much goes to growth in some way. Right?

So you’ve got some finite amount of money and you need computers and you might need to move the office, raises, and you know you really need to do your website which means maybe taking a little less paying work.

You have all these things you spend the money on and you’ve got to kind of give some of it to all of them. And that phase just stays for years. Yeah. And you just keep your head down and you just keep doing it. So there does come a point, to answer your question, this pivotal point: the first time you think for a moment “oh hey we have enough money now that we can do more than one of these things and I know where payrolls coming from and we were a little bit ahead of the game now.” And I think that’s always like a pretty pivotal moment. You’ll look up and you’ll be like “oh my God what just happened. I lost five years of my life and there are 50 people here and I don’t even know them all very well.” You know. So at that point you can stop and take stock and maybe open an office in another city or maybe you just like the way it is and now you can relax a little bit.

It really does sort of lend itself to a re-evaluation of that point you know at what point sort of in your growth do you sort of find yourself feeling that.

[00:21:43] Yeah it was very fast. I mean one point I’m like I’m paying a million dollars a month. This is too late just salaries. That’s insane. And then like you know maybe another six months went by and like OK I don’t really stress them up paying a million dollars a month at salaries anymore I know where it’s coming from and that’s kind of amazing right. Yeah that’s a that’s a big moment you know. And you know the other thing I always this industry changes so much that. I used to say there’s like a groundbreaking change in the industry every 18 months. So you know and then our period everything started out as Flash mini states and that YouTube came along and viral videos came along and Facebook came along. Google and the iPhone you know each one of these laig radically change what clients wanted from us and then we had to sort of decide if that was something we wanted to pursue and expand our capabilities or change what we did and you know they’re always happening those are kind of the other ones every 18 months something you know right now it’s like to you people care about drones that people care about Wii already. You know all the stuff that you know like stuff like alexa and the stuff that Google announced today like you have to deal with each one of these new things and decide is it something we want to pursue or is it something we want to go whole hog into is this something we’re just going to pretend doesn’t exist because we don’t like it.

[00:22:57] You know this is a pretty reason every year a year and a half you get to have one of those moments too.

[00:23:02] Yeah. We just had someone in our meeting in a meeting yesterday asking us about drone videos.

[00:23:08] Yeah. You know and then at one point for us I would say all the way back in late 2003 or 4 it was podcasting right. Yes. And it just didn’t really become a thing for 10 years now it’s a huge thing but it still really doesn’t impact the advertising digital advertising world that much. Yeah. You know anything if we had gone more all in on it that would have been a waste of time. Right. So you got to kind of make some gut calls here or there.

[00:23:32] Totally. Do you think that the more people usually means more profits that that’s the way to go for an agency is that the easiest way to sort of grow your profits?

[00:23:43] There’s two ways and you kind of you know if you’re going for maximisation you’ve got to sort of pursue both. One is growth rate. Of growth one increase your profit margins. And in fact in the short term it might dampen them. Because you all need to hire ahead of the growth rate. You know you’re doing a million hours of work right now with seven people you want to get the two million dollars work. You can’t just sell the work and have the same seven people do it. You’ve got to hire seven more people and some of those you might have to hire before you get paid. Right. Yes. So in the short term it can dampen profits. But if you say or really get two or three year stretch your profit margins were you know 30 percent. On a million dollars and three years later they’re 30 percent and $2000000 Well you’ve doubled your profit. Dollar amount from 300 to 600000 right. And so that number as it grows becomes more meaningful rate. OK. You got three partners and your profits are 20 percent you’re doing a million dollars a year that’s $200000 that’s you know a salary for those three partners. But it’s not great but you are doing for a million dollars a year and you still have 20 percent margins and you’ve got $800000 that can either go to the partners or growth and that’s you know that’s a much more significant number. Right. But you increase your profit margins in that whole period.

[00:25:01] Which leads to the second way you can kind of grow it just by expanding your business capabilities into more profitable areas. Right.

[00:25:09] So you might be a Deben shop in your home how much you can charge is really hampered by outsourcing to Eastern Europe or the Dominican Republic or something and you’re never going to able to charge more per hour. But if you got into the U.S. situation and you started to be offering really good you know interaction design or user experience and you can build those at a higher hourly rate and that sort of insulates yourself from competition from outsourcing and now you can charge like $200 an hour for that new opportunity instead of $100 or engineering the Nido at a profit margin can go up on the set as you expand your work that makes sense.

[00:25:45] So for us you know things like U.S. strategy planning. Media strategy that sort of stuff. You know we can charge a lot of money per hour. Have to pay the person more but not so much more that it didn’t make the profit margins higher than our base design flash and engineering work.

[00:26:01] You know did you ever end up hiring to zealously Do you ever end up happening to like lay people off or sort of go and get yourself in hot water by hiring too many people. Oh yeah.

[00:26:13] You know so yeah I’m an economics major Originally I started as a computer scientist and learn to code when I was young and went to college where I realized I knew enough that I didn’t need to go to college for it and it changed my major to something I could get some money out of it and I mean get some value out of paying them all that money. So as you know we started in 2001 which is a pretty dark time right.

[00:26:37] We started at the dotcom bust. So people were really happy to get a job. And so our salaries were really low. And the agencies that we lived off of in the early years we did a lot of work for agencies at the beginning. They had laid off a lot of people but they found that the work the. Clients wanted didn’t really go down as much as everybody thought it was going to. So like the excitement over the Internet and the eyeballs moving to the Internet was enough to offset the crash and startup valuations. And so the economic forces that were 2001 to 2008 people whatever you want to say about Internet businesses and people still use the Internet more and more. Right. Right. So we were growing even in a down economy because people needed to be on the Internet more and people knew it was a good advertising opportunity. So I kind of ended up fooling myself into thinking that would be infinite and it very much wasn’t.

[00:27:39] With the 2008 recession. So I had just always been hiring for growth for seven years and then when the 2008 recession happened you know growth stopped and people stopped paying their bills.

[00:27:51] And the bank called in its line of credit.

[00:27:54] And we ended up having to lay a bunch of people off and we made it worse for ourselves because we were in denial for a while. And I held out for like six months paying everybody making the company go broke without laying people off until it was so dire we had to let a lot of people go and that was really bad. And in hindsight I would have done it much sooner and I would have you know tried to mitigate it by cutting and containing costs much earlier on. But I didn’t realize that the environment my company was running and had changed completely.

[00:28:20] Yeah I guess that’s something that you know for younger agencies that haven’t actually gone through that have to sort of be aware that another economic downturn those marketing budgets a lot of time to the first thing to go down.

[00:28:32] You know it could be something else like you could be doing big web site builds and the Web site could go away right now and you just don’t have maybe you don’t have a big mobile capability you just never double down on Android and iOS and you know people don’t spend as much on their Web site as it used to. You know there are these larger trends that can hit a shop if they’re too specialized in not looking at everything too.

[00:28:50] Yeah. In your book you write I really believe one of the great things about advertising agencies and consulting companies is that anyone can make a go of it. You don’t honestly have to need anything more than the clothes on your back. A bit of hustle and a beat up old laptop.

[00:29:06] How would you sort of describe that bootstrapping time in an agency’s growth with a universal and constant and all your time.

[00:29:17] I read it as it is. It is pretty much what you’re going to be doing really eight years.

[00:29:24] It’s not like it’s just a few years at the beginning of the agency you’re always sort of trying to pull things together by your bootstraps.

[00:29:32] You going back to that sort of profit and revenue total revenue scale right if you’re just one person and you get your thing at your age of a million dollars and you have 20 percent profit margins and that’s $200000 your salary rate yeah you can go on for quite some time where you’re quite comfortable.

[00:29:49] Now these other larger issues you’re talking about could pull that the rug out from under you without any notice. But if you’re not going for a big goal or you don’t have a lot of partners you could you could get out of it in a few years. But I do think you know I have a lot of issues with growth in capitalism it’s funny I’ve written two books now and I’m working on my third and every one of them starts out with a big caveat about capitalism and growth. Because we’re getting to a point where we have to wonder if it’s perpetual But at the scale these companies are operating I think a lot of it is perpetual. You know you’ve got to save for retirement if nothing else. You know you say you did this for 50 years and nothing changes and you keep 10 people what do you do when you retire are you going to be just going to let them close it down you know or you know over the last few years bring on partners and then you’ve got other people and then they’re younger and they care about growth and you’re taking all the profits and they don’t own as much. They’re going to want growth. I think there’s a lot of reasons of that it’s pretty necessary to continue growing.

[00:30:48] That growth gets easier as you get bigger and you get more resources. But I don’t see a lot of companies that don’t see it going away. And if you really don’t want to go away I’d question you why you are not staying Freeland’s.

[00:30:58] Great. Yeah that makes sense. I mean we’re we’re sort of in that bootstrapping stage. You know next year it’s going to be a first year we offer health and everybody. We’re still probably not as like competitive with salaries as other agencies. But yeah I mean I feel like there’s you know there is sort of a light at the end of the tunnel we do feel a bit more secure every year we don’t have we don’t have three months of payroll in the bank yet but we don’t know what it was.

[00:31:24] But that’s what I was writing the book My editor was like you’re really stressing this three months. I did. Did you ever have three months I was like oh god no. She’s like so why are you telling them that is something you never did. And I got. That’s a fair point. Yeah. You know and that’s the other thing right you might be comfortable making this $200000 of your problem. But everybody that works there is going to want some growth. They’re going to want to see like their salaries be competitive.

[00:31:49] They’ll give you the benefit of the doubt for a few years but they’re not going to want they’re going to work for you forever at below market rate with no benefits. That means growth you have turned over so that means growth. You’ve got to like pay the new people more market rates and. You know I just think it does get easier. But it doesn’t go away.

[00:32:07] I mentioned before I loved the beginning of the book where you’re talking about vision and culture. And you write before you get started running your business out in the cold world you need to know what your company stands for. I imagine a lot of agencies might have a hard time saying that in any succinct kind of way. Why do you think that’s important.

[00:32:26] So yeah I mean the reason why I think it’s hard is what we had said before. Right a lot of these people see an opportunity in the world and they are hustlers and they go for it and they’re just trying to make something out of nothing and they’re going to you know I think I have another place here and there that these things are like little infants you know struggling to stay alive. And you know and when survival is so high in your list of priorities it’s hard to think beyond that rape. Like a baby doesn’t think. Why am I in here baby food.

[00:32:58] So what happens is we have these shops like we struggled to get going that we didn’t really ever figure out what it was about them that. What we’re doing or what makes it special. Right.

[00:33:08] And you know I think that’s true for some freelancers even in their chosen craft whether you’re an engineer or a designer or a writer like what is it that you write or your designer develop and what’s different about you are you faster cheaper or are you very good. You know my best friend is an engineer and his greatest thing is he can code in anything and he can have real world human conversation with somebody like you and I are having and turn it into code without a million layers in-between of a functional specs and this and that right. He’s very intuitive He’s like an intuitive coder and that’s his thing and then some people really appreciate that. But if you don’t know what it is it’s a it’s very hard to market yourself and be start taking jobs don’t fit with that. And I think but more to the point see every decision is harder. Like who to hire next is hired or where the office should be is heard or what kind of clients you want it is hard or whether this honesty is worth pursuing is harder because you don’t have a decision making paradigm yet.

[00:34:07] I mean since we started sort of defining our vision. We’ve had a lot easier time making business decisions. It’s kind of remarkable because when we first did it was like OK now we did it down on paper. What does that mean. And then immediately we start realizing that we can apply it to decision making. That

[00:34:24] is a moment where you think this is like an academic exercise and that’s fine just put it in a drawer at that point because it will be less than three days before some question comes up and you’re like oh yeah I should point to that document. You know what I mean. And

[00:34:37] we didn’t Renner’s down so there’s another anecdote in the book where I woke up one day I think we’re like 70 people and I came out of the office and I was like why are you working on this guy’s like I’m writing fake reviews for this book for him and I’m like oh that’s terrible. And

[00:34:53] how he’s posted or the like the account person was new and he was new and they didn’t need to talk to the tech team in the league. So nobody knew that that was just against our principles. Right. And so then I instituted this process where I just literally when somebody got hired I sat down with every one of them and I said we don’t do bad stuff and we feel like you’re doing something that makes you feel immoral. Come to me and look at me I’m telling you. So if you do it later and you didn’t come to me it’s on you now you know I’ve helped a lot. I just stated our visions of these people right when we hired them so that everybody was making decisions against the same sort of principles.

[00:35:31] That’s awesome. Yeah that’s that’s another thing we’ve got to work on some way to prepare employees when they come here to understand what our vision is.

[00:35:39] Yeah.

[00:35:39] And for me it’s just a conversation and that was your seven figure that one out.

[00:35:49] Another thing you say in your book is that time sheets are a joke. They are an outright lie. What is it or how do you get by without timekeeping. What’s wrong with time people.

[00:35:59] OK so there are two things I think there are two ways to look at what’s wrong with timekeeping right. And the push get these days that technology can fix it. So I think that technology can help with one of the two but not the other and I’ll sort of walk you through. Number one is that almost all time. Is billed an hour early increments and you are not paying your employees hours early. So that’s kind of I would say 90 percent of the time that’s the situation. So at the core of the whole process is a lie. Right now that’s not the case. If you’re in an agile development team based job they’re hiring Weekly. You could theoretically then be paying and tracking and billing in the same increments as the time sheet but typically at the core of the time the time sheet issue is just a fundamental lie. Like you don’t pay your clients or your employees hourly. So why is the time sheet hourly and so by necessity there will always be some point in the process where that line needs to be reconciled and there will be some degree of lack of accuracy because of it. Right. So that’s important to remember that like most of the time and time cheaters is born in sin. And then secondly people hate doing that. I mean people lie on them and they don’t pay that much attention to their time and they don’t track it very closely and people especially when you get into the creative world it’s very hard to capture the time when you’re walking down the street thinking about your projects right.

[00:37:20] Right. So whatever they put on the sheet is almost guaranteed to not be accurate. Now obviously to some extent there are tools now that can mitigate that part of it a little bit. In the sense that there is these tools that look at what apps you’re in and what documents you have open and in certain situations.

[00:37:38] This second bucket can be mitigated with technology but by and large you cannot mitigate it completely. Right.

[00:37:44] So at the times these are just inaccurate and basically lies for two reasons that are almost always going to be there. One it’s impossible to track creative time when you’re thinking about stuff. To people. So there’s that just sort of reporting it actually. And then there’s the inaccuracy around the fact that you’re translating hours to weeks when you don’t pay people that. And so somebody works all weekend to catch up and you’re still paying on the same right amount. Why does the number of the time. So it does bother me. And there are easier ways to do it.

[00:38:12] We’ve had trouble tracking time. We sort of do it in a way now we actually have a clock running but we’ll have people account for what they worked on at the end of the day and we sort of use that as a measuring stick.

[00:38:23] But what is a better way to where I’m definitely a little obsessive and logical about this stuff. So even what you just said to me is like glossing over lies right. So we sort of track it. We use it as a measuring stick like you’ve just accommodated inaccuracy in your process and accepted it which is fine if you never forget that. But what people tend to do is they just pretend they forget that that inaccuracy was they were there and they treated this some sort of gospel it is just not right. So that is an important point. But I think that like the other big thing you know companies do a lot of different work and there are different solutions for this that are more applicable to different types of companies. But. If you’re a software development company we have the agile methodologies now that are very team based and it’s very easy to just to make sure your team is build for in the same increments that you pay them i.e. weekly or monthly versus hourly rate. That is a very simple way if you’ve got a team of five people and they’re working on the same project and you get paid monthly and that’s all they work on. There’s no need for timesheets at all you know.

[00:39:31] And then there are other ways and the other stuff. So what we would do is we would have a person that kept an eye on what everybody worked on and we would estimate of the job we build you know a lot of people do this. They estimate the job is for people at two weeks and so the job equals $60000 and then they just bid flat at $60000 rate. So I had to do was make sure that only four people worked in that job for two weeks and it didn’t sneak in to get a fifth person on it. One of the people wasn’t just doing nothing. And then I don’t care how much they worked on because I got paid for their time. Right. And if I had a person on two jobs then the resource manager would keep an eye on both jobs. And it’s very hard for that to be faked because one job will suffer if the other job gets too bad. So the resource manager will notice that. So all we had was a form at the end of the project it was like why did you say this is going to be well I said it was two full time people and to have time people for five weeks what it turned out to be truthful you know three full time people and to have time people for three weeks. That’s off right. Yes. The research manager says yes it was the producer really. They both say it’s like minutes as why was it off. You look at the Wise was.

[00:40:38] Maybe it was billed in which case it’s fine if it wasn’t billed you fix that problem. But you can catch it on a one page sort of actualization sheet at the end of the job. You mentioned in the book dealing with gestures I believe sort of like you can’t charge this much for a developer this much for Sinar procurement or procurement syrinx what I call it if I use Jester’s but I think you said adjuster’s Yeah I think is that adjuster’s Yes.

[00:41:05] Procurers you procure a disservice.

[00:41:08] I mean does that even get down to with to senior employee or a junior employee and yet you actually track that stuff yet for couple of weeks as you get bigger you will eventually run into her care.

[00:41:19] And if you Google the word you’ll see there are whole conferences on it and the trend in this stuff is that it is increasing increasingly used by companies for services. Right. So historically procurement departments are around buying 10000 office chairs and 50000 pens or whatever then they’ve always had a hard time with service based industries like ad agencies or their lawyers or their accountants. Right. But. The corporate trends over the last decade have increasingly brought procurement into what we do. So there’s two forces that make it more likely that eventually you’re going to get a procurement department you’re growing so your clients are getting bigger. And then to procurement just becoming more of a thing everywhere. So you know every company it’s worth researching and I give an overview in the book but like the sort of school of thought in companies around procurement for service based company for services and how they handle it there’s a couple of ways these companies handle it right. Some of them make specialized procurement departments within the marketing department or the tech department that deal with procurement for services that understand it’s a little bit different right. In those situations it’s pretty cool and it’s not much of a problem.

[00:42:34] They understand that like your flash guys might be them I shouldn’t use flash as an example anymore you know your designers are better than the graphic designer they can get off of the Internet and so they understand that and procurements generally not that bad. Other companies believe in centralized for care and so if you were here with this big company and you’ve got a deal going on with the marketing department to design a brochure or a Web site or something and then they’re like great we love all this. Now you just have to go through procurement and then you go to procurement they might not even know each other. They might not know anything about the job they might not know anything about the field of graphic design.

[00:43:07] You know it’s a very different process. And then I sort of outlined a lot of that there is things you can do to get through that process better. Right. A lot of times we would have a conversation with our client up front. OK we’re going to go for it. What do we need to know is this procurement. Do they report to you or they’re in your department or are they not in your department. What should we say. You know your client is having this problem all the time and they’ll give you some guidance on how to get through procurement. And that can influence how you handle it right. If your client the CMO and procurement is not in the marketing department they know that CMO is not their boss and they will be as scared of it. Right. Whereas if procurement is key in the marketing department and the person you’re talking to use Boss reports to your client then laig they’re not they’re going to be more scared to say they messed up the job and you’re not going to work with them because they have to tell their boss to just tell their boss that the person they want they can’t have. Nobody wants to do that right. So you got to like get into the psychology of it a little bit.

[00:44:05] So like someone so you do kind of work backwards do it like OK this is going to be a $300000 project and they say OK we need to go to the procurement and then he’d try to figure out exactly how that $300000 is distributed amongst your employees in terms of work or do you or you just set up a system so you know exactly.

[00:44:24] So you know that begs the larger question about how you run your agency and basically you can get away with making up a dollar figure for a while but several forces amongst them procurement will over time make your company get more accurate estimating rate. So eventually we had a situation where we had a pricing worksheet that you could put in how many hours or weeks for each person that was on the job and it would give an estimate and it would also output a sort of nice little table that we would use if we had to for procurement and it would say Account Manager for weeks or three weeks senior design or two weeks you know we still have tried to avoid getting into our early but we would have a team breakdown in about how many resources. A lot of times we do it in full-time equivalents. So half of a full-time equivalent for two weeks you know and then we would use that as a defense in procurement. Gotcha. But yeah once you get to a formalized procurement department it’s pretty hard to just say it’s three hundred thousand dollars and we’re not going to tell you why.

[00:45:27] And the other thing is the bigger the number is right. You can probably say it’s $20000 that we’re not going to tell you. You can’t say a million dollars and I’ve got to tell you re the more expensive your jobs get the more lay people at the client are going to like tear it apart and look at it. Yeah. But the other thing you ever hear me is you’re the only person who never forget this you’re the only person in that conversation that has any personal investment in this right. Like a per cubic prisons job is there you know their job review is based on the percentage they saved over a portfolio of procurement projects right. So they were they’re talking to you they’re talking to a hundred other people and when there were job review comes along they’re going to look at how much the original estimates came in and how much they saved.

[00:46:07] And you know that’s going to be what they judge on there is going to be judged on any one job they’re going to be judged if they lose the job and they don’t really care that much because of the more difficult you are they’ll make it up on somebody that’s left right and you’re the only person with a personal stake in the matter. So I never outsource I never gave procurement to my CFO or anybody else. I would do it and I would just say on the phone like the money we’re talking about here it goes into my my belly and my children’s education and this and that.

[00:46:34] And you can’t say the same and you had the moral high ground and you can be a little bit more bring something like than they could you know. So that’s sort of like got to get into the psychology of the procurement office and create a. Topic but you know once you have the basics out and you can you can do it in a way that you can get there quicker you can get through with higher numbers it’s worthless. You know thinking a little bit about no no.

[00:46:57] I mean I found it really interesting.

[00:46:58] We haven’t had to do it yet but now I know it exists.

[00:47:04] Oh another thing you say in your book is that you try to when you do when you bid you try to give one number rather than breaking it up into sort of an itemized list.

[00:47:16] Yeah. Is that is that sort of in your opinion the best way to go in sort of bidding on a project.

[00:47:21] Yeah I mean so I make a distinction here between how you present and how you calculate it right. Long before that we stopped just throwing out a number and making it up. Great but even once we had a very accurate method of making the number we still always tried to just sell it on the number and that would only work like five 10 percent of the time. You’re always better in that situation because if you ended up needing fewer people you could just make the team smaller and they’re never going to notice things like that it gives you a lot more flexibility. Right. But then if they want. It they want additional detail and you can write it very quickly. They can tell that you’re just making it up. Right. So they want them or additional detail right away. I would just we had a like a client facing a version that didn’t show all the information it showed like a you know at least the team size and about how much they worked on it each month that we could pass that along. And then if they needed even more we would consider whether we would give them more and so it was sort of got progressively revealing more information only to those that insisted upon it.

[00:48:23] That’s kind of what we’re thinking about doing right now because we list out we usually get sort of a laundry list of all of our services and their costs to our clients and we’re thinking about sort of giving them a list of all the services but sort of a single number that represents everything or perhaps even giving them like a couple different package options rather than giving them the individual price of everything.

[00:48:43] Yeah exactly. Yeah I guess it would do it in terms of. I did do it. I’m not giving advice. But what we did was in terms of. Our sense of full time employees. Right. So a hundred percent full time 50 percent full time because it gave I was a stickler for not doing ours because I don’t think they’re real. And it’s still you know it tacitly says essentially if it’s 75 or anything on less than a hundred that person is working on something else so they can’t catch you later finding out that gene is working on another project you’re like well I told you you are only getting 75 percent. And so it’s important.

[00:49:15] This is all very distinct from specs and capability like the project what you’re building for them. You know if you’re an agile development job and you’re designing each Sprint Well you’re all working on fine. But if it’s a normal project with a scope we were very accurate about scope because the other thing you want to make sure is if the if scope is increased You can go back and point to the document and say you need to pay more.

[00:49:36] Right. Right. Yes scope creep is the enemy of all agents.

[00:49:39] So we’re talking purely here on how you present the numbers not the functionality.

[00:49:44] Well great. Thanks so much for joining me once again.

[00:49:47] Even though our listeners only get to hear the second interview they said making the question is a little different say I get bored get. No of course.

[00:49:58] So I always ask our interviewees to provide three takeaways for you would be advice to other people who are running grilling starting an agency.

[00:50:09] Yeah well I mean number one is no way you’re doing it right. Have a vision have that vision sort of way influence everything. Number two is make sure that you or your partners are in line with that and you all know where you want to get out of it over time and repeatedly check in on that. And then number three don’t sell short your own PR and marketing people are really bad about that. The larger more incoming leads you have the more flexibility you have the more opportunities you know.

[00:50:37] Great. That’s great advice. Thanks so much for joining me. And I encourage everyone to check out your book which is called agency by Rick Webb and the subtitle is starting a creative firm in the age of digital marketing call.

[00:50:53] Thanks so much. You’ve been listening to the creative agency podcast with your host Chris Bolton when he’s not podcasting or being a dad. Is a digital strategy director at murmur creative in Portland Oregon. Be sure to visit us online at creative agency podcast

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