media update’s Kristy Hesom sat in on Raizcorp’s MasterClass at day one of the Loeries®Festival of Creativity, held in Durban on Thursday, 17 August.

Raizcorp founder, Allon Raiz, highlighted seven reasons why small agencies fail, in the form of myths, and offered the realities to these fables. Raiz also tapped into his experience at Raizcorp, a company that provides support for enthusiastic, growth-hungry entrepreneurs.

1. You think that because you’re a creative, you should start an agency

This is where it starts, says Raiz. You think that because you have the creative skills, you also have the business skills, but this is not true. There is no correlation between ‘I am a creative’ and ‘I should be in the creative agency business’, and Raiz warns that it’s important to pause and remove that from your mind if you find yourself thinking this.

“What you need to be, as a person who builds an agency, is an entrepreneur. That’s first and foremost. And if you happen to be creative, that’s just wonderful.”

2. Your USP is that you “give personal service”

This is the worst possible USP a business can have, says Raiz, because it’s what everyone has. Another red flag that this belief raises, is that as a business, you are dooming yourself to remain small. Big agencies cannot give personal service to everyone and it cannot be your USP.

“So are you providing personal service? Perhaps. But that cannot be what defines you,” he says.

3. You claim to be cheaper than the big guys

Raiz pointed out that when you compare yourself to ‘the big guys’, you must always remember that there’s a reason they’re big and you’re still small.

“You cannot build a business on being cheap, you cannot build a business on price. You have to build it on value.”

4. You can’t count properly, which means you can’t cost properly

Raiz used the example of the first creative agency he worked with. Its team was unable to determine how much it would cost them to sell their hours. The team was charging R500 an hour (this was ages ago, he notes) and quoted the job for 10 hours.

However, when Raiz looked at the job card, he realised they’d spent 18 hours on it. He asked them why they billed them for 10 hours when they’d actually spent 18 hours on it, and they simply answered, “Because that’s what we quoted them.”

Raiz then asked various questions, from travel time to how many times the team went to see the client and how long they spent there. These were all hours that weren’t accounted for. Taking all these hours into account, Raiz worked out that it actually costs R87 an hour.

“It’s essential for small agencies to understand their costing and their efficiencies,” Raiz says. “The moment you go in, pull a job card and be honest about how long it really took.”
However, if it’s the opposite, he says, that you billed for 10 hours and it took seven, then “fantastic – willing buyer, willing seller.”

5. You aren’t the main salesperson for your business

While he says ad agency founders are less likely to make this mistake compared to other entrepreneurs, he warns that thinking somebody else is better at selling your product or service can result in the agency failing.

Founders assign the sales role to someone else, claiming that they’re “not really good at sales, because I’m just passionate about the creative…” However, Raiz says research has shown businesses that succeed have the founder as the primary salesperson.

Raiz used the example of Steve Jobs and how, up until the end, he was the primary sales person of Apple products.

6. You are too dependent on one client

Raiz warns that being too committed to one client, or relying on one client for the majority of your business, is a big mistake that small agencies make. That client, he says, proverbially has you “by the nuts”.

In order for you to keep that client, however, you have to serve that client. The more you serve them, the more entrenched you become in the work and before you know it, they are 90% of your income.

Raiz warns that this is only beneficial until that client moves on and your business goes from “hero to zero in one month”, and you don’t come back from it. If a business has a dependency issue with one client, it’s a red flag. Raiz suggests that small agencies be no more than 20% reliant on one client.

7. You are too focused on your business’ image

The idea that your image is the most important part of your creative agency, is a common downfall for many small agencies.

“We’re about image, we’re in the creative space, and we have to have these phallic symbols of our power to show how wonderful we are,” Raiz joked.

However, the problem with this is that they cost money, usually money that small agencies don’t have.

“As long as you can deliver, as long as you can get your client from A to B, that’s what counts.” He says that at the end of the day, real value is what clients care about.

For more information, visit www.raizcorp.com.

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Brands need creativity now more than ever. Gareth Leck, CEO of Joe Public United, emphasises how the Loeries®is used as a benchmark of creative excellence in order to inspire other creative industries. Read more in our article, Loeries® 2017: Creativity is needed now more than ever.