You might be wondering if love really adds value to a business.” Warren Buffett sure thinks it does. You’ve probably heard of him. He’s done pretty well financially by making a few wise investments in companies. Indeed, he’s generally regarded the best ever at making savvy investments. One day I came across a video interview with him on The Motley Fool website. They asked him a question I’m sure he’s heard a million times about how he determines whether a company is worth buying. And he gave the answer you’d expect. He talked about analyzing the numbers (for which he has a legendary, uncanny ability) and reviewing the competitive landscape and doing his due diligence on the management team. But if all of that comes up good, he still has one more step. He sits down with the CEO and looks for the love. “I look into their eyes, and I try to figure out whether they love the money or they love the business,” Buffett said. “Everybody likes money. If they don’t love the business, I can’t put that into them.” If they do love it, he said, then he buys the company and it becomes his job “to make sure that I don’t do anything that in effect kills that love of the business.” It’s not hard science, I know, but if you analyze Buffett’s 15-second answer, he uses the word love four times. Buffett knows love matters, because we, as human beings, do all we can to nurture and grow the things we love. If he sees dollar signs in the CEO’s eyes instead of love, then Buffett knows that the only thing this person is interested in is his exit strategy. [...]

The world was supposed to end in 1954. It didn't, obviously. But that didn't seem to matter much to the people who believed it would. Remember that. It's important, especially if you want to change people's opinions or behavior. Looking back at 1954, though, you might not be surprised that some folks thought we were facing our end here on Planet Earth. While the year began with the happy news of Marilyn Monroe marrying Joe DiMaggio, there were plenty of not-so-happy things that followed. The Hydrogen bomb test in the Bikini Atoll. The McCarthy hearings, which inflamed the Communist "Red Scare." The introduction of the "domino theory" that suggested that any Communism we let pass would lead to Communists taking over (and the end of the Capitalist world as we knew it). The seeds of the Vietnam War. There were even appearances from outer space, in the form of a meteor crashing through a house. But Dorothy Martin of Oak Park, Illinois, got something else from outer space. Her outer space-based sources told her in no uncertain terms that the world was going to end on December 21, 1954. Before the world flooded that night, a flying saucer was going to come and pick them up from Martin's home altar (also known as her sun porch). She believed. So did her followers. They sold their homes and gave away their possessions. That night, the minutes ticked by. The saucer didn't come. The world didn't end. What did Martin and her believers do? The rational answer would be that they realized they were wrong, and in varying levels of sheepishness, admitted it and went on to rebuild their lives. Right? I mean, that's what rational people [...]

When digital was a novel offering, we saw agencies with that narrow focus receive extravagant valuations.  Today, digital expertise has become a given rather than a point of differentiation. I heard the comment at an AMI event that basic online digital services are part of the “table stakes” that every agency must put up in order to be seriously considered by a prospective new client, or by a current client for some types of projects.  That is consistent with my experience. Most agencies have it in-house and the others outsource it. But it’s a very rare agency today that just doesn’t offer digital services. So, how do advertising agencies charge for services? Agency values continue to be simply defined as a semi-subjective combination of profitability, size, the client list and the services the agency routinely provides. There are plenty of other factors that influence the final number but we always start with these. So, what about the seller’s goals?  Many agency owners begin down the path of selling their agency only to quickly retreat once they are shown the valuation and what they can hope to get as a purchase price/package A very important aspect of the transaction is the actual structure of the deal. How, how much, and when are you going to get paid?  In many cases, the sales price doesn’t matter as much as when are you going to get paid. First of all, how much cash are you going to receive at closing?  What can you expect? And, how negotiable is it? Managing Your Margin Let’s assume that your agency is profitable, with a respectable margin.  Say that the net margin is 15%. (Note: net margin is the percentage of revenue [...]

Your marketing agency just got a great new piece of business. Terrific news! The creative team is full of energy and ideas, the account service folks are ready to roll, and billings will start climbing soon. After there’s a contract signed, of course. Soon enough, there’s an email with your client’s standard (and very lengthy) “Professional Services Agreement” in your inbox with a request to sign before the work is approved. What now? First, avoid assuming that the client’s document represents a done deal. It can feel overwhelming to be on the receiving end of a legal document that neither the agency nor its legal advisor drafted. What kind of language should you expect, and what does an unreasonable provision look like? Where the client is an enterprise-sized company with a large in-house legal team or, even worse, a procurement department, managing the contract process, the contract review and negotiation seem more time consuming than completing the actual marketing work. It helps to know which issues to look for in a presented contract, especially those that could be legal or financial minefields for the agency. Here are 5 things every marketing agency principal should look for in the client’s contract form: Intellectual Property Provisions – Clients will expect to own the intellectual property in the work the agency creates for them, and their contract form will likely include language that provides for this, with the default provision that the client own rights to the work as soon as it is created. It’s certainly fair for the client to expect to own the IP (unless the parties have agreed to some sort of licensing arrangement), but only once the agency is paid for its work. Negotiate language that conditions [...]

Agencies can no longer expect to hold onto fantastic writers, designers, or account managers for the next 20 years. In fact, they’re lucky if they can get three years. After surveying almost 1,000 marketing and advertising agencies, I learned that just about every agency is facing similar turnover problems. Agencies are struggling to find and keep good employees, especially because workers are being poached by clients, other agencies, and even corporations.  As a result, agencies are worried about taking on new business opportunities that would require recruiting more talent. To resolve the problem, they’re adding more significant benefits (and more money) to their new employee packages. It won’t be long, however, before there’s another economic shift. Throwing more money into the mix may not be an option: Likely, agencies will have to ratchet it down as soon as next year, especially when clients are asking for prices to remain the same or sometimes even shrink.  So how can you become a stickier employer without emptying your wallet?  Beef up your company culture. You must know how to celebrate your agency’s unique core values. What’s the ultimate vision for your agency? Consider the intangible reasons someone chooses agency life over corporate life (and why someone would choose your agency over another). You work there, too, so don’t forget to make the agency unique in ways that matter to you. As you determine what makes the business unique, emphasize it. Money alone won’t win the day. Create a work environment where someone chooses to stay for fit instead of funds. For example, do you offer flexibility that allows an employee to attend her child’s midday soccer game or opportunities to take longer vacations?  Invest in what matters [...]