In 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!
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Thoughts? Questions? Let us know in the comment section below.
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.
Listen to the episode to learn more!