When the waters get choppy, navigate with trust and value.
There is no such thing as a recession-proof business, and there is—certainly—no such thing as a recession-proof creative agency. We acknowledge that at Butchershop and talk about the future with the full, honest understanding there’s a recession, perhaps a large one, looming.
How do we navigate it?
Two principles will always steer our ship: trust and value.
Where do clients trust us to create the most value?
It’s important to look at the trends in agencies and companies, and their relationship in the past decade. The sheer number of creative service companies in the Bay Area (over 150 at last count) makes standing out hard. If this recession does land with the promised force, there’s going to be some very real attrition. According to AdAge, less than 5% of the creative agencies will make it to year ten and reach revenues that surpass a $10m revenue mark.
“You can’t read the label when you’re inside the bottle.”
Over the last decade, we’ve seen the rise of fancy homegrown in-house design teams, innovation hubs, and self-serving marketing tools at companies. Think Google, Autodesk, Evernote, Airbnb, Uber, WeWork, Okta, Zenefits, Workday—they created internal teams to lead the creative processes and strategies. The work, production, creative, strategy, and execution have moved internally, drastically altering how an agency relates to a business. In turn, we’ve seen agencies look more like consultancies, focusing more on business design than ever before.
And yet these businesses still need support from outside agencies. Why?
Outside support can take impartial views. Agencies don’t drink the Kool-Aid. They don’t have legacy systems and processes. They aren’t bogged down with internal bureaucracy and decision-making. As they say: you can’t read the label when you’re inside the bottle. That’s where clients gain the trust. Agencies can stand back, be honest, and deliver a new species of value. Mike Shields from Business Insider, “Agencies are good at moving on to the next big thing.”
We call it the “necessary passionate detachment.”
I’ve experienced this first-hand. In 2005, I was part of an action sports venture that landed large sponsorship before the crash in 2008. Our event, a ski jump competition in the middle of San Francisco, was valuable in good times, but very unnecessary in bad. We could feel how sponsors and partners ran fine-tooth combs through their budgets. Sponsorships got killed. Every dollar got stretched to the limit. But that also meant we saw a lot of partners struggling. Companies still needed to do business. They still needed to get their brands out there. But with the economic downturn, they’d had to lay off staff. We watched a lot of smart agencies step up and fill the gaps while internal teams disappeared.
Butchershop constantly talks about “doing more with less.” We started during a recession, also in 2008, and worked nimbly on a per project basis. We were new (and small), so our pricing was attractive. But something we also figured out was how to become “a part of” the San Francisco startup journey. We built trust and created value with companies on unsure economic footing. We treated every small project like life-changing work. Treating every project as proving ground, no matter how small, became part of our culture and values. Butchershop stayed away from Agency of Record (AOR) and retainer models in the early days. We didn’t have a bunch of partners or industry veterans with rolodexes jumping ship from other agencies to start Butchershop. We simply kept proving to companies during tough economic times that an outside partner can be trusted to create value.
So if I look at the different models for creative agencies, I still believe a project-based agency is best positioned to navigate a recession. Here’s why:
Agency of Record
“Once you win a client, it’s the day you start to lose them.” That’s the bane of the AOR model. Not to mention being on that kind of leash puts a terrible strain on quality of culture, work-life balance, and mental health. When you lose a big client it usually means big layoffs, hurting people and your agency’s reputation. It’s old school and most clients only ask about it because it’s all they’ve ever known. You can’t build a good culture on pitching and pitching and pitching to win. The cycle of RFPs act like a pair of boots stomping over a company’s imagination and cohesion. If our past work doesn’t start a relationship, then we’re not a fit to begin with. We want to make it personal. One way to do that is to stay open for projects, not pitches.
The consistency with retainers is great, but the potential for mistreatment is also very high. A lot of retainer work becomes less strategic and more production based, pumping out commodity-like work. This usually isn’t the client, but rather the agency’s fault. We try to remember: the work we do with our clients is our first job and our client’s second.
Retainers are also often the first line cut from the budget in a downturn. Fees tend to catch a CFO’s eye.
Imagine having a great reputation as a creative agency who comes in, listens, creates a solution, executes, gets the job done, and gets out. It’s a refreshing relationship dynamic. And one that usually keeps Butchershop top of mind for several more projects thereafter. We have some clients who we have turned out dozens of specialized projects for over the years. And on a long enough timeline, with a good reputation and network, projections get a little easier. A project-based company doesn’t have a massive client to lose. We don’t have retainers that will be pulled. And we are incredibly comfortable with reacting to trends and the optics from within our industry. We make decisions quicker, and we don’t have bloated teams tied to accounts we could lose. There will always be projects, even when the goals and budgets change due to a recession.
It’s almost like saying project-based agencies are battle ready, because they know how to battle.
So if a recession is indeed looming, we will continue our course as a project-based shop. But that isn’t perfect on its own. As battle ready as they may be, agencies must also push hard to innovate and create new ways of doing business. Forward-looking agencies are already starting to look a little more like consultancies, focusing on discovery, business strategy, data, having their own IP, and spending time on ventures that bring additional revenue and value.
This is just my opinion on the topic, and I’m sure some of my peers will have some great insights. Please send me your responses, comments or questions here.
- Trevor Hubbard, CEO and Executive Creative Director