EP 35: Alternative Agency Partnership Models, with Patrick Smith

On this episode of THRIVE—now sponsored by Workamajig—Kelly explores unique and alternative partnership models for agencies with Patrick Smith of C2 Creative Studio in Chicago. Patrick shares his story and experience in creating partnerships that add value without adding overhead in order to produce the best work and results for clients.

Episode 35 Links

C2 Creative Studio: c2-cc.co
iTunes / Apple Podcasts: itunes.apple.com/us/podcast/thrive-the-agency-scaler-podcast/id1370205729
YouTube Channel: youtube.com/channel/UCboltXvff1KfeCHpQbY_8PA/
Vimeo Channel: vimeo.com/agencyscaler

TRANSCRIPT

EP 35: Alternative Agency Partnership Models, with Patrick Smith

Duration: 00:22:25

Kelly: Welcome back to Thrive. Today, we’re talking about unique and alternative partnership models, and my guest and creative agency owner is Patrick Smith, founder and creative director of C2 Creative Studio in Chicago. Patrick, it’s really great for you to be here and I’m excited to dive into this conversation today.

Patrick: Yeah. Thanks for having me Kelly. It’s great to be here.

Kelly: So you actually wrote into me a little while ago probably going back a couple of months, right? And we had a chance to talk a little bit about your creative agency and what I would imagine that most agency owners grapple with on a pretty consistent basis, “Do I enter into a partnership, do I acquire another company? What’s my growth model? how does that all work? What is the sort of the impact of joining different cultures if I did partner or merge with another company?” So all this stuff kind of comes up.

Patrick: Sure.

Kelly: And I’m sure your story is really unique, and I thought it would be kind of a great story to impart on other agency owners who are listening and watching. So do you want to just give us a little bit of foundation and talk about C2 Creative consulting and just a little bit back story on that?

Patrick: Sure. The background for me professionally is I started probably the first 15, 13 years or so of my career, at a traditional agency side, so bigger agencies in Chicago or in the Midwest, and if you think of a classic brand marketing team, whether it be copywriters and designers and developers and account people and strategists planners and on and on, that was kind of the environment. And it was great. At one point, I decided I wanted to do my own thing and without knowing really what I was getting into.

Kelly: Oh, you’re just like all the rest of us?

Patrick: Exactly. I thought that should be really fun to do for myself. But in reality, I think at some agencies or just a place in life, you get to a point where you want to do it on your own, and so I was kind of hitting that spot. And in or around 2009, I had a business partner and a creative partner ,and we decided to start our own little shop, and he was a writer and I was a designer, and we had this kind of a 50-50 arrangement. But it was very organic. There wasn’t a lot of grand planning around it. Just kind of went out, and started taking up some clients, picking up projects, now start to get a little bit of momentum. We definitely wanted to be, the vision was to be a boutique agency at that time because it was just the two of us. And we didn’t know what we were doing necessarily.

And we love the idea of “small teams, big ideas,” and I thought we’re senior level talent without all the big idea, kind of come from that small teams was, it was really just the two of us. We’d pull in freelancers when we needed them or kind of development partners or things along those lines. So that was kind of the big thought. And what we specialized in, and still do is basically creative strategy, things like branded audits, positioning, customer journeys, brand narratives, brand design, like naming identity, your message platforms or brand materials. And then campaign development which would be brand ads, brand campaigns, websites, video, trade show experience, social, things along those lines.

So that’s in a nutshell what we do and how we started. And then after a couple years, my business partner and creative partner at the time had some life changes, and he ended up leaving and moving out of state and got married, all that kind of stuff, so life took over for him, and we did over the course of the first two or three years, we started to build up some other partnerships along the way, and I didn’t want to work by myself, and I still had this dream of growing this into a fifteen or so person shop. The idea there would they have a couple of different groups that could service clients, so we didn’t have just like one team working on the same thing all the time and we had some different perspectives. So my goal is always going to get to somewhere between us 13 to 19, 20 person group just so we have different perspectives and are able to service clients with different groups and whatnot.

And so, along the way somewhere probably three or four years in, we started to work with some other groups so we were the creative side of things, and there was a development team that we started to work with, and we still work with today. And in the beginning of that, we started to just really kind of strategically align, and what I mean by that is we started the pitch together, we would start to integrate some of our systems and our operations a little bit; meaning things like Dropbox and Slack and things like that. And then move forward to another year or two, and there was a third a group that we started to integrate and we were starting to lay the foundation to have kind of a merger if you will at some point. We had three different organizations.

We each had 4, 5 employees each and I was getting really close to this kind of vision that I had when I originally set this out or set out for this and we started, we get to MSAs, signed, we were about to do business evaluations and things along those lines, brought in the consultants, brought in the accountants, brought in the lawyers, that kind of stuff, and we did do it for about two and half years or so. Ultimately it didn’t play out but that was a really good learning. Some of things that I didn’t want to continue doing but I still continue to work with that development group and we’re pretty about as fully integrated as you can get but remaining two separate companies, but we’re truly partners in that sense. So that’s kind of the cliff notes if you will of the last nine years.

Kelly: Right. So just to go back to something, a couple things that you said there. So the merger actually did take place and basically went through with that and worked on in that capacity for two and a half years and then did that disband, did you break that off and then continue working together?

Patrick: We didn’t go to the full merger. We all moved- if you think of it like any kind of relationship, we moved in together, so we got to the same office, we just didn’t get married. So we had we had an umbrella company basically that served kind of our marketing space or the customer side face, but at the time we’re still three independently independent groups which was interesting and created some interesting dynamics along the way. And the plan was ultimately to do a merger. But we just never got to that point. So I think we learned a lot as we were going through this kind of engagement phase if you will, to use that metaphor a little bit more. It wasn’t gonna work.

Kelly: Yeah. So you guys all kind of gave each other rings and then just kept pushing the marriage date off?

Patrick: Yeah.

Kelly: Realizing, we can still live together but it’s not going to actually happen.

Patrick: Yeah. I like your version of it so we’ll stick with that.

Kelly: And again some of the agency owners who are listening or watching and maybe thinking about that, because maybe they have a strategic partner similar to the one that you’re describing or multiple ones like the ones you’re describing, and they have that idea in their head that maybe down the road maybe a merger or an acquisition or something might occur, what are some of the things that you would say you learned, like what are some of the takeaways or some of things that you would say, if I was giving advice to someone else who had this path in mind like what are the things to look out for?

Patrick: Yeah that’s a great question. So I’ve got a couple of different like visions that I had all the different types of partnerships that I’ve encountered, this might just become a broad stroke but there’s kind of that 50-50 set up that happens organically that you might have in the beginning when you have an idea with somebody just like I had with my first partner. And what I could take away from that was we were friends, we were former coworkers and continue to work together and so we never did anything formal in a deeper way and I think that the lesson that I got out of that was we never really, we tried to expand on or build off of our previous working relationship where we were within a larger organization that had rules and management and suddenly we didn’t have that. And so, I think having some kind of framework for how you’re going to work together when you’re on your own would be tremendously helpful. We just didn’t, we were very naive when we were doing this, so that’s one.

And then there’s this kind of this next kind of group of partnerships that usually don’t happen but they can happen and it’s the person who comes along sees that you’ve got your own business and says, hey why don’t you give me 20% of your business or 30% of your business and I’ll come work for you, I’ll be your salesperson and that kind of person usually likes what you have going on.

They might be miserable in their job and they’re just looking for a way out and they want you to give up something that you’ve been working very hard on, putting a lot of equity into, sweat equity and otherwise, and I just want you to sign over a big piece of the business to them without anything being proven yet in terms of what they can bring. And I’ve seen a couple people go through that and it usually doesn’t end well. Usually it starts really well for about a month, and then it kind of falls apart just because everybody’s got a very different set of expectations around what this person is gonna bring at the company. Even if they spell it out, it just very rarely works so that’s kind of like a landmine that I think most people should avoid and most do.

Kelly: Just to add for to that for one second. For all of the agencies that I’ve worked with and spoken with over the years, I haven’t seen a lot of external salespeople, hired either part time or full time really work out, and I think it’s just because there’s so many moving parts to understanding what an agency does, the value that they bring, how to really get new clients onboard. You just have to know so much, and it’s really hard for salespeople especially if they have like a pretty aggressive sales style, it’s hard for them to kind of know everything and really cater to the nuances of developing new business. And so what you’re talking about is kind of like forget even the first date, you’re saying like let’s get married right away and give me a stake in this company that you’ve worked for 10, 15, 20 years to build. I could never see that working. That seems like a huge red flag to me.

Patrick: Yeah, well you’d be surprised at how many people actually approach us with that kind offer.

Kelly: Yeah that’s crazy.

Patrick: Yeah. And the next one is probably pretty common, kind of the white label word; you’re using a vendor, kind of has your own capability and in the very beginning we worked with a lot of business consultants that didn’t have a creative capability necessarily and we were white labels for them. And the takeaway from that was, it was great for the first year or two. I think we learned a lot and I think we also learned that we’re really spending a lot of time building other companies up and we’re not building up our own. And the other piece to this is we weren’t doing best work for clients or for their clients because there’s always this in between this goal between that just didn’t seem to click.

Some white label arrangements work better than others, and something can be successful for short period of time and on occasion we’ve got some people that we worked with in the past that will do this very selectively every once in a while, but I think it’s gone from a significant part of our business down to almost zero.

And then the last one is really that when I was mentioning before with the three companies kind of almost merging is that strategic partnership, a coop, and I think even though we were only 15 people or so or 14 people. It was amazing how much culture influenced how everything kind of eroded.

You think it would be something that would be really easy to pull people together but it was really complicated and quick as story was. Even something as simple as one of my employees talking to somebody else’s employees in the heat of a moment next and something that sounded like accusatory and the person receiving it wasn’t used to having those kinds of conversations in the course of the day and all of a sudden something that would seem relatively benign in most environments becomes a huge issue. And so I think the one thing that I look back that we didn’t do a good enough job on was we spent enough time like on the social side of things, getting everybody in the same room and going to lunches together and things along those lines.

Kelly: The fun stuff.

Patrick: The fun stuff. But I don’t think we ever really, none of us were big enough to have like HR departments. That piece was missing and I don’t think we were able to see forward enough to say, “Hey here’s a potential issues that might come up between teams or between different personalities, and how do we just get everybody on the same page of how to work together if there are those, we are in advertising, right? Marketing. There’s going to be deadlines. There’s going to be a lot of pressure. There’s gonna be angry clients. And sometimes that spills over onto what we’re doing for better or for worse. It can become a test of environment at times.” So looking back if I was gonna do that again, that would be in like probably one of the first things I’d want to address versus something that we thought we just take care of itself, those type of things don’t take care of themselves.

Kelly: Yeah. It’s a great point and especially I mean you guys had been working together for a pretty significant amount of time up until that point. Then you think about well there are strategic partners or potential co-op type of relationships that haven’t really been working together for a decent amount of time and if you were struggling with that could you imagine what that would be like from a culture clash standpoint if you didn’t have that back story and just that longevity of working together. So yeah that’s really interesting, and it is something, I think you’re totally right. I think it’s something that people don’t, they just kind of think, “Oh well we’re all in marketing, we’re all in advertising, we’re all in branding or whatever. We all are of ‘the same mindset’ and it’ll just work out we’re people, we’ll just get on the same page.”

But I think if more agencies that were moving into a partnership arrangement of any kind spend more time on the people aspect, I’m a big fan of saying, “Your people are your products.” Clients come to you basically for your team’s ability to solve their problems. So why not invest more in the people and make sure that the vernacular is the same, that your goals and values and all of those core things are really aligned across the board because otherwise it can fall apart. So I think that’s really probably one of the most important takeaways from this conversation for me.

Patrick: Yeah, it really is. It’s not the what so much, it’s not what are you making. It’s really about but who you’re working with and how do you work with them. Truly, you hear that in a meeting or on a movie or whatever in a book, you kind of think you understand it but until you really live it and co-author it the way companies do, it just takes on different meanings. So that was a big one for me.

Kelly: Yeah for sure and I also just wanted to touch back on something that you mentioned about white labeling. I’m also seeing that as a trend in terms of some type of strategic partnership. I’m seeing that as a trend in terms of the commoditized services maybe just like a straight up website build, something that can more feasibly be in the background. Those are the types of white label relationships that I see working pretty well especially if it’s a web development team, I’m just using that as an example, if they don’t really- they’re just looking to produce the work and get it out the door, they’re not really looking to build up their brand, that works really well but almost anything outside of that, it really is a little detrimental to the growth of the agency.

So I am definitely seeing that more and more. The agencies themselves who are a little bit more strategic thinking or are bringing in those creative services. You have to have access to the client. You have to be sort of who you are and not- I think the clients also realize that there is no such thing as a full service agency so you’re going to bring in partners, and if you’re more transparent with those relationships, the client appreciates that as well. How you bill or how you invoice, I mean I think that’s an easy part, but it’s again going back to the people who am I going to be working with and where are they from.

So yeah and just to touch on the way that you had the arrangement. Some people might be wondering, if you were sort of this umbrella company, but you had three separate entities, how did you work things like invoicing, did the client get three different invoices or one or how did that work?

Patrick: Yeah, we had a great finance person and a bookkeeper, and basically the way it would work is they got an invoice from the master in the umbrella company and if I have to do the financial gymnastics on my head ,and I went to school for art not finance. But basically what would happen is we would send an invoice, we would get paid and that would go into the umbrella company’s account. And then we would all individually invoice the umbrella company, and the umbrella company would pay us. So that’s how it works. So it was two-step process, a little bit more paperwork on our end, but at that time we were like this is just what we need to get through to get to the next point so that’s how it works.

Kelly: That seems like a really great solution though, one that most people might not have thought of because it keeps it clean, and it also keeps it really convenient for the end-clients. So yeah.

Patrick: Going back to your point about the white label and even the arrangements. Some clients don’t want to, I’ve seen it both ways. To your point I think a lot of agencies are moving towards this and some clients really want to have this at a level of accountability better just dealing with one group and are not dealing with multiple moving parts and then there’s other groups that I think it just depends on the client that really don’t have as much. They don’t put as much stock in and out.

So it can go both ways but I think the accountability part for some clients is a big deal, and it helps us with that umbrella company only having one name if you will, because what was happening, the reason we actually did this, it’s for a little bit more backstory, is we were pitching together and what was happening as we would do really well on the pitch and then I’d ask for a business card, it just created all these questions about, “Who’s doing what? Who do I call?” and at that point I think we realized that we need to elevate this to another point and have this umbrella and because if we’re going to move up the food chain, if you will in terms of the client opportunities, this coop if you will, just wasn’t working. And in the eyes of our clients, it created a lot of questions for certain groups.

Kelly: I mean, but on the flip side of that, just to kind of play the devil’s advocate for a second, if you had presented it like we are as C2 we are specialists in this and this is our partner that we’re bringing in specifically to serve this portion of the project or the retainer and then here’s our other partner. If that was sort of part of the conversation at the very beginning maybe by the time you got to handing out business cards there would have been an expectation set. I just wanna play both sides of that because I think it could work either way.

Patrick: You’re definitely right, and we would do that. We would have those initial conversations but in the actual meeting once I got beyond maybe on our initial point of contact and two or three more people were involved or five more people involved, it started to unwind a little bit. So for some clients it wasn’t a problem, but I think for other clients that are usually a little bit larger, if you are working with a healthcare company or something along those lines where their process everything and if they think that somebody’s gonna disappear, because they’ve been burned before in the past by some of those arrangements so they’re trying to avoid those kinds of scenarios.

Kelly: Right well like I said, I thought that this was going to be a really interesting conversation, and you definitely didn’t disappoint. Lots of really great takeaways for agency leaders that are thinking about partnering in some way shape or form, and I’m sure I’m gonna get a ton of feedback on this particular episode. So thank you so much for joining me today. I really enjoyed it.

Patrick: Yeah, thanks for having me Kelly.