Many people in our industry contemplate setting up their own agency. The rewards both financially and emotionally are high if you succeed and even the journey can be fun even if you don’t arrive at your destination. What is the worst that can happen? You lose some money and you go back to working for someone else.
First the health warning: 8 out of 10 start-ups fail. But that should not stop you trying – after all, life is not a dress rehearsal and you don’t want to look back when you are older and wish ‘if only…'
The key thing is to mitigate the risks and maximise your opportunity of success. Over the next weeks I will be sharing tips I have learnt over the last seven years that I wish someone had told me when I was contemplating leaving the comfort zone of working for the Saatchi’s after 15 years
Tip number three: Invest in good advisors from day one
So you have your partner on board and worked out a killer positioning and are getting ready to launch. You have emptied your piggy bank to fund your new start-up and plan to boot-strap your launch so why would you want to fork out on expensive fees for lawyers, advisors and accountants?
Well firstly, we are in a professional service industry and we would not look very kindly at clients who to save money wrote their own ads and bought their own media – so if we don’t value the expense of professional advisors why should we expect others to value us?
And secondly, in the long-term it will save you money (unless you are an expert in contract law and tax).
The first port of call I recommend is to find yourself an advisor that specialises in start-up agencies and be prepared to pay handsomely for their advice.
We were fortunate to be introduced to Charles Fallon at SI Partners.
Having come from an entrepreneurial background – we had set up some new agencies for M&C Saatchi – we assumed we needed a corporate backer at the outset and were considering going into partnership from day one and giving up 50% of our equity for the comfort and safety of having a large organisation behind us, providing a new business pipeline.
However, the reason to start-up on your own is to be master of your own fate – giving up equity (a subject of a future tip – how not to do it) is something you want to avoid as it dilutes the value of your own shares but also gives up control.
SI Partners pointed this all out and helped us put together a business plan that showed we needed less funding than we anticipated and held our hands over the different challenges and priorities we needed to tackle.
The next advisor to have is a good lawyer. Firstly, to ensure you exit your previous employer in a way that avoids you getting sued (bear in mind they are likely to have much bigger pockets than you and can tie you up in knots and force you to fund a defense even if over something small – the key thing is to not give them a pretext for doing so if case they are that way minded). Secondly to ensure you have a shareholder agreement between you and your partner/s so that everyone is clear what might happen in the future if things go well, or if in the unfortunate situation they don’t.
We work with Paul Rajput at Lewis Silkin who specialises in our sector and has helped us navigate pretty much every legal eventuality you can imagine and many which you can’t.
Then you need an accountant, not only to prepare and file your annual accounts but to help you navigate the multitude of taxes and allowances (which are harder to find but can be hugely beneficial). I have always had a good head for numbers and the tax system but have really valued the input from Esther Carder and the team at Kingston Smith - I think between us we could write a book on the subject.
We have had the same advisors since we set up seven years ago. They are with us on a journey to build value in LONDON Advertising and if at some point in the future we wish to sell, the buyer will want to see that all the accounts, contracts and processes have been robustly and legally set up. I am convinced that without them we would have been significantly worse off financially and the company would not be worth as much as it is today. So in summary I would like to take this opportunity to thank each and every one.
Next week’s tip will be the importance of having a well-thought out business plan.
If you want to hear about the high and lows of our launch you can read it here
Tip no 1: treat yourself as you would a client
Tip no 2: set up with a partner you know and trust