For many founders, success brings an unexpected turning point. The work may be going well, but suddenly the hardest problems are no longer about the work itself.
We’ve met many agency founders who told us that the point where they felt the loneliest, was when they had their first success, but had backoffice problems they didn’t know how to solve.
Their first inflection point.
Sandru from Ambilhati shared this story when we were just finished with one of our strategic thinking sessions:
"I have loved to draw since I was in diapers, with my blanket as my canvas. Growing up, I had this strange addiction of watching people purchasing stuff. Their expression of wanting it, the anticipation in their eyes and the joy when they finally have it.
So when I started at a global agency, I got good at the skills needed to sell stuff. But something was missing. The pitches, deadlines, and contracts felt heartless. I wanted to create an agency that got back to the core of what advertising is about: touching the heart of consumers.
The first years were great, we’d won awards like the Digital Agency of the year, even being featured in the New York Festival.
We finally got to this point where my creative agency started to be trusted by blue chip brands. But at the same time at this size, the issues that were bogging us down had nothing to do with stealing hearts or telling stories.
What needed mending was in backoffice areas like funding, finance, accounting, IT, legal. Stuff outside of my area of expertise. We weren’t sure who to ask, because people saw us as people who had “made it”. They expect me to have my stuff in order. So I wasn’t sure if I should expose my fears."
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Many agency founders leave a well paying job because they are confident about their craft, and they care enough to build something that reflects their beliefs. Their soul.
They have the guts to compete with established agencies. And the ones that get through that first hump have the skills and grit to turn that belief into events, campaigns, or productions that deliver for their clients.
The problem we’ve seen is that once these founders start succeeding, when they hit their first inflection points, the problems beyond their craft starts appearing.
One of the first problems that comes up is finding funding.
Most contracts have terms of payments yet they have to pay their vendors at least an upfront down payment. The usual route is to go around asking friends and family, but after a while these channels tap out and they have to go beyond their immediate circle. This is when we found cases where more sophisticated people prey on the founders' needs and take either more of the pie than they should, or lull them into saying that things are taken care of.
The second problem is usually finance, accounting, and tax stop being administrative issues.
Controlling budgets, recording that budget in a proper system, is a task that few agency owners have expertise in. Hiring someone who is good at this is hard especially when you are starting out when you don’t know what to look for and don’t have the budget.
The lucky ones have a friend who is an expert and helps either full time or part time.
Unfortunately this is another area of caution because we’ve seen both in house finance managers and outsourced consultants mess up. The pain is not immediate, but years later, they could have billions in tax liabilities. Or improper financial reporting, such as tracking of real project costs., results in hidden losses that bankrupt the company.
The third is legal. Having a robust akta from the get-go, with clear ownership, conflict resolution, and governance is key. And the need to maintain that governance with regular RUPS, documentation is no less important.
We’ve done diligence so many agencies that took this for granted. When you are starting out, of course everything is peachy, but during difficult times we have seen this go very messy. In fact, this sector is one we saw with the most legal disputes.
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So whether you’re just about to start an agency, or are already at that first inflection point, our recommendation is to ask yourself:
And perhaps more importantly: who has already been through this before?
The best answers often come from fellow agency founders.
That is one reason we started bringing agency owners together at KarmaClub. We work closely with agencies, but we have never run one ourselves, and we do not pretend to know everything about building one. What we can do is make it easier for founders to compare notes with people who have been in their shoes.
Because at this stage, the difference between a vendor and a real long-term partner can be difficult to see from the outside. Other founders can usually tell you.
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