When NOT to hire an agency

Jameson Pitts
Managing Director
·
July 4, 2021

Two of the most common questions I get from founders are, first, when is the optimal time in business growth to hire an agency? And second, is retaining an agency akin to creating a new position that will exist indefinitely, or a time-boxed service that they should plan ahead to offboard?

The answers are nuanced and depend on your type of business and the makeup of your internal team. Let’s review some of the reasons to hire an agency in the first place.

The Advantages of Hiring an Agency

I often remind my staff that the reason one hires an agency is simply to fire them.

Now that may sound harsh, and I don’t mean to imply that our clients are so cold-hearted, but it’s just part of the gig. The advantage of a marketing, advertising or creative agency is that you get a ready-to-order team, that can be hired all together, and let go just the same if they aren’t performing. To put it simply, we earn our work everyday.

The other truth is that it’s hard to build a team that is good at diverse marketing needs such as branding or media planning. Most businesses will instead have to hire a small number of generalists, instead of enjoying the benefits of a larger group of specialists. Think about the advantages of having a copywriter, designer and media planner over two marketing associates with none of those specialized skills.

The last advantage is more abstract. Even enormous enterprises that can acquire agency teams or hire complete marketing teams efficiently retain a roster of agencies. Besides the reasons above about being able to hire and fire easily, why are these skills so commonly vendorized?

In actuality, there is a unique advantage to being external to an organization. Hiring an agency is a shortcut to tapping into new ideas, a river of them not tainted by whatever groupthink is prevailing within your internal team. We can be a reality check and help you realize what you really have. And not only that, you can fire us if we don’t!

The Truth About Hiring an Agency

Surprise, it costs money. We pride ourselves on extremely close relationships with our clients, but at the end of the day an agency is a vendor. And before going into any procurement process you ought to be able to articulate the parameters of an engagement, including scope, time requirements, and budget. Think about the total marketing budget, and how that breaks into payroll, contractor fees, and media expenses.

The biggest truth to have your eyes open to when hiring an agency is that it requires time to manage them. Consider who will be the agency’s point of contact, and if they will have time to provide that team what they need to succeed. Working with startups in particular, we have adopted an extremely proactive orientation as a vendor, with the idea that we are a nearly self-sufficient growth engine attached to an organization, and require much less time than an in-house FTE. Just don’t forget, any agency still needs executive buy-in and feedback.

When to Hire an Agency

This core question depends on your type of business. One common way this is often broken down is between Lifestyle or Cashflow businesses and Ventures. A cashflow business is generally a more commoditized offering, like a professional service or widget store. The economics of these businesses mean they spin off cash — think of a dentist or lawyer who makes so much per hour after overhead and expenses. This same principle means that these businesses scale nearly linearly. You probably need close to 10x as many lawyers to serve 10x clients.

Compare this to a venture, which is usually powered by unique technology. The core economic advantage of a scalable business model is that some amount of investment can be scaled to a very large number of customers. Think of the cost of another user downloading an app, it’s negligible. The difference in overhead between 10 users and 100 users is nothing. Compare that to the fixed marginal cost of the lawyer selling one more billable hour.

Our core recommendation for cashflow businesses is to validate your business before hiring an agency, or you may lose money on a concept not ready to be marketed. If the fundamental economics of your firm, store, restaurant etc, are not working, it is likely too early to hire an agency and not a problem that a marketing agency can solve. You are likely to lose money trying to solve a management problem with marketing, or diverting your limited resources to marketing before the business is ready to scale.

Conversely, a venture startup ought to rely on agencies to find product-market fit as quickly as possible, else lose money by moving too slowly. The economics of a venture are fundamentally different. Profitability at early stages is irrelevant when going for venture scale and exit. In these cases, a founding team’s mandate is to grow and iterate as quickly as possible to achieve exponential growth milestones before they run out of runway, or more likely, to keep each financing round “up”.

For venture founders, we recommend you focus entirely on your core competency and product while listening to the customer to ship that product in response to their needs as frequently as you can. Bring in professionals early to handle the test marketing that makes that possible, and scale the strategies that are working. It’s irresponsible to use investor money to learn digital marketing, and will likely give your competitors the space to claim your share of the market.

How Long to Retain an Agency

Pay your bills forever and don’t ask questions!

Just kidding. This too depends on your team and the scope that you’ve engaged an agency for. Many of our clients utilize our team as their marketing team indefinitely, but others rely on our experts to implement the process, tech, and brand that allows them to make it to the next level of Product-Market Fit, where the economics of their business shift and allow them to build out more robust teams. Our leanest clients don’t have any on-shore staff at all, and use an agency partner as a flexible resource.

Agencies succeed at attracting people who live for creative challenges, who aren’t wed to your way of doing things and will challenge the norm and path forward — and that’s valuable for any stage of business.

Connect

THAT’S WHO WE ARE, NOW WHO ARE YOU?
info@sangfroidstudio.com
512-643-1092

201 E 5th Street
Suite 103
Austin, Texas
78701
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