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Advertising agency owners take money out of their own pocket to stay overstaffed

I have found that most agency owners are very generous people. They love the people they work with and want to create an amazing working environment. They are also very slow when it comes to firing an employee – whether it’s because the person isn’t performing at the right level or because billings have dropped and they just don’t need that person any more. All of that is lovely. But, you are literally taking that money out of your own pocket when you make that decision. I can’t tell you how many times an agency owner has lamented to me, “I know I should let Carl go but he’s putting two kids through college.” Yup – and you are taking money that should be going into your kid’s college fund (or your retirement or investment account) and handing it to Carl’s kids. Even more than that – by not firing an employee, you are putting your entire agency at risk, for the sake of this one person. Your responsibility is to run the agency in a fiscally sound manner so that the agency survives the ups and downs of cash flow, clients coming and going and other economic factors. I saw way too many good agencies just close their doors in the last recession because the agency owner stubbornly held onto too many people and didn’t trim overhead expenses fast enough. One ratio that can help you stay in alignment is a rule of thumb we use at Agency Management Roundtable with our agency clients. On average, for every $100,000 - $125,000 in AGI (adjusted gross income = your gross billings minus your costs of goods sold) you should have one full time equivalent. If [...]

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Advertising agency non-compete agreements

A non-compete agreement form is like fire insurance. It's a sickening feeling to see the smoldering ruins of your just-burned house, and wish you'd bought the insurance policy. The time to create your non-compete agreement is before you get burned. There's a widespread belief among the advertising agencies that we meet in our workshops and consulting that non-compete agreements are not enforceable. We do all we can to dispel that belief. We're not attorneys so we won't attempt to give you legal advice, other than say a properly written non-compete agreement form required by the agency and signed by the employee is binding upon both parties. Doing so could even save you a fortune on legal fees. Non-compete agreements do not fall under Federal jurisdiction. The covenants are governed by State law. With fifty states there are fifty sets of rules. This means you need to talk to your legal eagles and have them put one together for you that can be upheld in your state courts. You need to have ALL current and new employees sign the non-compete agreement form you and your attorneys have fashioned. Your attorney will tell you that you will probably have to compensate each employee in some way to sign the new agreement.  In my agency, we paid them all $1 -- which we literally handed to them. You may find that it may be simple to include a "section" on non-compete in the employment agreement. But the key is getting signatures on the document -- no matter which document you choose to include your non-compete language. While it's true that you can't prevent someone from making a living, you can prevent them from making a living at your [...]

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How do you get your agency employees to do their time sheets?

What do you do about late (or non-existent) time sheets? Did I hear an echo? It seems that this question is asked again and again, year after year.  The only modification in the conversation is whether or not you should do time sheets at all.  (Watch for that discussion later this week.) The attitude of agency management (you) towards the problem is the solution, or non-solution. If you set and enforce a policy of completing time sheets on time, the question is moot. If you tolerate tardy time sheets, that's what you get. Your attitude is reflected by your employees. It boils down to rewarding the behavior you want. Remember, the greatest management principal? If your agency has the tardy-time-sheet illness, it is because you've rewarded the tardy time-keepers by not making a stink about it. I tend to run a relatively easy going shop. But many years ago, I realized I had to take a stand on time sheets if we were going to be able to accurately track our work, our profitability and our workload. I had a choice -- the carrot or the stick. Most bosses would go for the carrot like JWT Casa did.  They created a direct correlation between filling out and getting something you desperately need at the end of the workweek: a fridge full of beer. Guess what? Everyone filled out their time sheets. On time. Suddenly, time sheets weren't a problem anymore. I went the way of the stick. I told my employees that I would fine anyone who did not complete their time sheet before they left the office for the day. I'm not sure they believed me. It was an unusually strict response from me. Until about [...]

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Results from the small and medium advertising agency survey on salaries and benefits

For the past 12 years, Agency Management Roundtable has conducted an annual salary and benefits survey looking at the trends in small and medium sized agencies.  The survey results report allow agency owners to compare their salaries by position with how the rest of the country's salaries.  The results are also presented by agency size and region. For the first time in several years, salaries seem to be on the rise, albeit a modest one. We’d seen flat or declining salaries over the past several surveys.  This and several other indicators in the report seem to suggest that the recession’s toll on agencies is beginning to recede. A new trend appeared in this edition of the AMR Salary Survey as well.  More agencies (18%) do not have an in-house copywriter.  As freelancing and contract labor options become easier and more plentiful, it will be interesting to see how this trend evolves.  It seems to fly in the face of all the Content Marketing push that is being driven by social networks and the rush to digital marketing spaces. Agencies, like all small businesses, are clearly struggling to offer their employees healthcare coverage.  Over 90% of agencies surveyed offered their employees some form of health insurance and contribute to the costs at some level The 2012 AMR Salary & Benefits Survey Report is available for purchase at $99 The 2012 survey of advertising agencies’ employee compensation was conducted by the consulting firm, Agency Management Roundtable (AMR). The firm is the only consulting group that focuses on marketing communication agencies employing fewer than 50 people. Over the past twenty years, AMR has worked with several hundred advertising agencies, public relations firms, graphic design companies and new interactive [...]

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Your agency’s biggest fraud risk

Should you be concerned about possible fraud in your business?  You bet. Here are some things to pay attention to when it comes to business fraud prevention. You may think that because your agency is a small business that you aren’t susceptible to employee theft and fraud. In our work with agencies, the biggest problem is the lack of owner understanding about financial process and how reports and statements are constructed. If you don’t have a good understanding you are a prime candidate for being bilked out of tens of thousands of dollars. At the low end. For smaller businesses especially, the burden of fraud can be very costly. Statistics show that the median loss for a small business is well over $200,000. Making business fraud prevention a priority will help ensure that you do not become a victim. With a little bit of effort, you can effectively reduce the likelihood of fraud in your business. Sadly, we could tell you too many stories  of hard working owners being defrauded by very clever thieves. And those thieves are usually employees.  The worst case I was involved in finally discovered the bookkeeper had slipped more than $400,000 out of the company coffers over a five-year period. He had a wonderful home and all the trimmings, paid for by the agency. The bad news: local authorities are hardly interested in business fraud cases that are not in the millions. It is difficult to prosecute the thief, and he goes on to his next victim.  Often, the only way to collect is to report the thief to the IRS for non-payment of back taxes on the money that was stolen. The FBI tells us that the funds are often [...]

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How to Manage Payroll

An annual salary increase should be tied to profitability not the calendar. We don't recommend automatic annual salary increases. When learning how to manage payroll, we do wholeheartedly recommend is a salary plan that is fair and rewarding to all employees that inspires them to go above and beyond for the agency and its clients. You don't reward someone with an annual salary increase just for being on staff or holding down their position for another year. You reward them for their contributions and their added value.  Unfortunately, many employees feel entitled to a salary increase every year, and are very vocal when they don't get one. Somehow, salary has become an entitlement program. "The longer I stay, the more I should be paid." Sorry, I don't buy it. My concept of a good salary/compensation plan for advertising agencies  includes four basic elements: Profitability of the agency The responsibilities of the person's job and their contributions to the profitability Did they get better at their craft (are they adding new value) How long have they been a part of the team It boils down to rewarding the results you want. Rewarding the Results Profitability has to come first. You can't increase salaries if you aren't making a profit. The first responsibility of every employee should be to help the agency make a profit. I believe it is the agency's responsibility to keep employees even with the cost of living, and that employees should receive a piece of the profits the agency earns. The agency made the profit because of the combined efforts of the staff. Responsibilities vary with the position and with the person. It's obvious that a senior art director will make more than [...]

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Exit interviews – don’t miss this opportunity

I know I'm not telling you anything you haven't already figured out.  An agency's employees are so much more than the life blood.  They are the walking, talking embodiment of your company.  And when they leave -- you can learn a great deal, if you conduct exit interviews. I've been really fortunate.  In the almost 20 years of owning my agency, I've had (and have) some incredible employees.  They've gone on to do amazing things like start their own agency, work for Dow Jones, opt to stay home and raise three wonderful boys, work for Meredith Publishing, BBDO and many other fine companies. Of course, there's the other side of the coin too.  Some self-destructed, others...I mis managed or put into the wrong position and set them up to fail.  Some of them are still friends.  Others curse my name, I'm sure.  Honestly, that's one of the most painful elements of owning an agency for me.  I know I preach that we should have have thick skins, but I can't say I have that mastered. But no matter how/why someone leaves your agency, don't miss the opportunity to to conduct an exit interview.  You probably won't like everything you hear, but you will learn from it.  Every time. Exit interviews can deliver important inside information. The way departing employees view your organization might be the way things really are.  You can do this in a few different ways. If the employee is leaving on good terms, as the agency owner, you might be able to sit down and have a frank conversation.  But if there's still a final paycheck pending or they don't want to burn any bridges, you might find them less than truthful. [...]

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5 Mistakes that cost agency owners money.

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