Earlier this week I was being interviewed by a blogger for a piece about entrepreneurship. When I explained my long-term vision for Anvil Media[http://www.anvilmediainc.com/search-social-media-marketing-integration-article.h tm], as a 16 person company, he replied, “you need to write your vision down sometime.” The timing was perfect, as I was recently invited to blog for OEN, and wasn’t sure what I was going to write about.
For those of you not familiar with the agency model, it’s very different from software, and even some service-based businesses. In agencies, you typically generate revenue based on the billable hour, similar to accountants and lawyers, but without as much schooling. Profitability is derived from your ability to keep the team fully-billable and your costs down. Sounds easy, right?
I’ve worked at 8 agencies since 1994, two of which I co-founded and one, Anvil, which I founded. On the plus side, I had 4 agency positions under my belt when I co-founded Wave Rock in 1999. Unfortunately, the experience did not end as I would have liked, on many levels. For starters, it was a young, inexperienced team growing through the Internet boom. Differences in values and priorities in executive management further challenged the team and company’s future.
One of my greatest lessons was fully realized the day I returned from vacation a year or so into the Wave Rock experience. A woman walked into our staff meeting holding a cake for my birthday, and I hadn’t seen her before. While I was disappointed they hadn’t hired a dancer for my birthday and that she was in fact a new hire, I realized at 17 employees, that I was starting to lose touch with the company I helped create. I also learned that as you grow beyond 16 or so, what was a creative agency became an HR company.
When I parted ways with Wave Rock in September of 2000, there were 34 employees. Soon after, marketing budgets impacted by April’s stock market crash started to hit Wave Rock hard. By June, the company was down to 14 people, and was soon subsumed by another agency. I believe a slower growth model may have helped save the company.
Since that experience, and a handful of others, I’ve been able to formulate what I think is the ideal size and shape of an agency at which I can work for the rest of my life. My vision for Anvil as a 16 employee strategic consultancy specializing in search engine marketing (SEM) was solidified in 2005. Since then, I’ve made business and personal decisions based on that vision, and it’s worked out well.
To explain a little, Anvil is in a somewhat unique industry: SEM. There is no degree or formal schooling available for aspiring search engine marketers, so we’ve had to develop our own training program. Furthermore, exceptional agency talent is exceptionally difficult to find. I’ve spent 12 years looking for ‘A talent,’ and I finally believe we’re nearly there. At 13 employees, Anvil is only 3 away from our ideal size. Then it gets interesting.
If you think about it, the challenges commonly faced by agencies relate to recruiting and retaining clients and employees. If you artificially limit the size of the company, you can increase the quality of the employees, as well as the clients. Any time we find an employee or client that is a better strategic fit for Anvil, we can ‘upgrade’ accordingly.
However, down the road, we may reach the point where we have all ‘A’ talent and clients, and someone even better I comes across our transom. In that case, we’ll have to make difficult decisions on whether to replace talent or clients, or break our own rule and grow. That is a good problem to have. If we think we can add 1 or 2 employees and clients and still have fun coming to work, then we may have to revise our ‘sweet 16 rule.’
The bottom line, however, is that we’ll be busy focusing on developing the existing teams and servicing existing clients, improving retention and profitability, instead of spending cash and resources on sales and HR. I further hypothesize that Anvil’s valuation will not suffer from being a smaller high end boutique with unheard of retention and profitability. We’ve got months or years to get to this point, but at least I know where we’re going and have a decent idea of how to get there.
