Thinking of starting an agency during the recession? Read this first

Four bosses who set up shop during the 2008 financial crash tell their stories and explain why the current economic crisis shouldn’t put would-be founders off taking the plunge. In 2008, as the banking sector and housing market were crumbling, you’d have been forgiven for thinking it wasn’t a great time to launch a new business. But lots of agency founders weren’t put off.So, with a new recession in play in the UK (and potentially soon in the US and Eurozone), we ask four agency leaders who launched their businesses in the middle of the Great Recession if they had any advice for would-be founders today. ‘It doesn’t intimidate us’: the founders launching ad agencies in a recession Attracting clients“It was a terrible time to start a business – but at the same time, it was an amazing time to start a business,” says Todd Wiseman Jr, a co-founder of Hayden5. The production agency was founded back in 2009, after Wiseman and business partner Milos Silber graduated from film school at New York University (NYU).Gaining clients as a young business can be difficult – you’ve no reputation or track record to trade upon. It’s even harder when clients are reluctant to spend. But for Hayden5, the recession arrived as a gap was opening up in the film and video production world.Clients needed video content, but established production companies (“with rosters of hoity-toity directors,” in Wiseman’s words) charged a premium rate. Unburdened by family commitments or mortgages, Wiseman and Silber found an opportunity. “At the time, there was work out there nobody wanted. It was low budget and clients expected they would still get a premium-looking result. No one wanted to do it, so we put our hands up. We would do this, we would do a really good job, we would stretch the dollar.“Value was our reputation from the beginning and it’s still our reputation,” he says. “Now, we do multi-million-dollar jobs, but we also still know how to do a job for $7,500 and make it great.”Web development and digital agency Splitpixel was founded in Huddersfield on similar principles – and initially charged just £500 per website project. “I was in my first agency job, fresh out of uni, but things weren’t going necessarily very well there,” co-founder Greg Smuk tells The Drum. “We’d pick up on things and think we could a little better, so we had a chat and said ‘Shall we set up a company? Why not?’“Charlie Herke, who co-founded Splitpixel with Smuk, says it took a lot of networking – and perseverance – to establish the business: “I literally spent the first couple of weeks sending out hundreds of emails. We had the passion and drive to make it work, no matter what it took, and we didn’t give up.”The agency has since scaled up considerably and now employs 17 people. It principally works with brands in the region’s arts and culture sector, such as Leeds Playhouse, though it has retained a handful of small B2B enterprise clients from the early days. Herke says a willingness to chop and change away from its original model helped the company survive. “I put a lot of work into our business plan, but at the end of the day until you actually get in there and do it, it’s kind of worthless,” she says.In the case of Manchester’s Driven, the pressures brought on by the recession were baked into its offer to clients. “Given the financial climate in 2008, marketeers were crying out for agency talent that had a proven ability in using creativity as a commercial tool to deliver results,” recalls partner Graham Drury.“We started Driven to help give clients a better return on their marketing investment by providing access to senior talent on a day-to-day basis, not just the odd meeting.”By addressing recession-era concerns in the doldrums of 2008 and 2009, the agency built itself a reputation for cost-effectiveness, he says. “From experience, we were aware of the benefits of spending through a recession and could prove this to clients. Then, once they could see it working for them in their business, they were usually happy to step things up.”Early recruitmentFor Zak Mroueh, founder and chief creative officer at Toronto-based Zulu Alpha Kilo, the recession provided the impetus to put his ambitions to the test.“Although I was already a partner in a successful agency [Taxi], it had always been an unfulfilled dream of mine to start my own shop from scratch. I wanted to experience that startup, entrepreneurial feeling of building a company that completely reflected the values that I believed in,” he remembers.“All I needed was that little push to finally go through it and, strangely enough, it came to me in the form of an article. I was inspired by a piece in our national paper about ‘When it’s time to move on.’ I got goosebumps as I read the article and thought, ‘that’s it, I’m finally going to do this.’ I went to the bank the next day and remortgaged my home and then handed in my resignation.”Not everyone is willing or able to bet the house on a business ambition, however, so how can founders persuade early recruits to join their (potentially doomed) enterprises? For Splitpixel, the offer of a better quality of life in Huddersfield provided a steady stream of experienced recruits, while for Hayden5, Wiseman recalls that the employment market in 2008 meant “star players were sitting on the bench without a job”. He predicts a similar situation emerging in 2023.At Zulu Alpha Kilo, Mroueh says he had “no shortage of people applying,” but that he specifically looked for a “strong entrepreneurial appetite”.“They bought into the creative vision. They had more of an appetite for risk, which – as it turns out – is exactly what you need if you are committed to greatness versus chasing growth. The big creative stars with cushy jobs in big multinationals were not going to leave for a small startup with only one client.”He says that, over the long term, hiring carefully has been key for Zulu Alpha Kilo’s subsequent success. “While obvious now, one thing I’ve learned is that your success hinges on the quality of the talent you bring on. Over the past 14 years, every time we’ve hired someone amazing, our business has grown and our creative product has flourished. It’s a simple recipe for success that we’ve replicated in other markets.”Building runwaysEvery business needs a little cash to get it going – to invest in premises, equipment and people. With interest rates going up, business loans are likely harder to get hold of, while venture capital and private equity firms have cut investment in 2022. Back in 2008, a similar situation was developing as banks stopped up the lending spigot.Mroueh tells The Drum he refused offers of early-stage funding from interested backers, saying: “I decided to go out on my own. For me, it gave me the freedom to build the company on my terms and make quick decisions without committee consensus. I self-financed the business by remortgaging my house. That gave me enough income to last a year and I figured that, if things didn’t work out, I could always get a job.”The co-founders of Hayden5 took a more DIY approach, Wiseman says. “I don’t know that we could have got institutional money, so I swiped the credit card. It had a crazy high interest rate.“We each put in $1,500, which while not a lot of money was a lot to us at the time; it took me a long time to pay that off. Then, a year later, we put together a friends and family round of $40,000. Luckily, we were able to pay all that stuff back.”4 tips for starting an agency during a recession1. ‘Find your purpose’Zak Mroueh, founder and chief creative officer, Zulu Alpha Kilo: “Take the time (but not too much time) to define your purpose. Pick something you’d be willing to fight for every day. And then, when you make the leap, know that you are only going to be as successful as the people you hire. So invest in the best talent right out of the gate. Hiring the best people will make you become the best agency. “2. ‘Improvise’Todd Wiseman Jr, co-founder, Hayden5: “I’m not a veteran, but the Marine Corps has a saying that I love, which is: ’adapt, improvise and overcome.’ I think if you have that seared into your mindset, you’ll be OK.”3. ‘Balance your client portfolio’Greg Smuk, co-founder, Splitpixel: “As we started to grow, we were a bit naive in taking on some clients that accounted for at least half of our turnover. That was evident in the pandemic when everything hit the fan, because when things start to go wrong, marketing is generally one of the things that goes first. So now we keep a nice balance.”4. ‘Stay in your lane’Graham Drury, co-founder, Driven: “One decision we made was not to diversify into other disciplines. We felt it was better to focus on what we do well and develop a strong reputation for that.”

Thinking of starting an agency during the recession? Read this first

By Sam Bradley | Senior Reporter

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