Why Indie Boutique Toy's Story Came to a Surprise End

Small-Agency Executives Share Advice on How They Survive Their Day-to-Day Challenges

Posted by Rupal Parekh and Jeremy Mullman on 02.08.10

NEW YORK (AdAge.com) -- Last week's shuttering of the highly regarded, 4-year-old boutique agency Toy caught many in adland by surprise. To the outside, the New York-based indie shop had all the hallmarks of a success story. It created the wildly successful "Elf Yourself" viral for Office Max and had a stout client roster that included Virgin Mobile and Activision. Alex Bogusky sang its praises in the pages of Ad Age.

While the agency never borrowed a cent and remained profitable, an abundance of project work rather than anchor agency-of-record clients prevented Toy from scaling as fast as it wanted to. Certain unbending principles of the founders -- a trio of former Fallon executives, Anne Bologna, Ari Merkin and David Dabill -- such as over-servicing the client, didn't help. Nor did outside forces like the tough economy. So, Toy opted to close.

That decision left many similarly creative small agencies wondering how they can avoid the same fate amid a downturn that has slashed client budgets, leaving vulnerable smaller firms with less room for error. Ad Age queried small-agency leaders across the industry to see how they're tackling the times.

MAINTAIN A HEALTHY FEAR

"I play a lot of sports and have borrowed a strategy/philosophy from my experience on the ice and hardwood: Try and always have the mind-set 'We are losing,'" said Michael Ferdman, CEO at Firstborn. "If you can keep that grit and fight as part of your DNA, it will serve your clients and agency well." Added Mark DiMassimo, of DiMassimo Goldstein: "There's no margin for error. In order to maintain our independence, we've seen successive generations of clients get phenomenally rich while we've become moderately prosperous. This is OK with us."

REALIZE RESOURCES AREN'T EVERYTHING

"The big holding-company agencies certainly have more resources to draw upon: access to research, analytics, people," said David Murphy, co-founder of Barrie D'Rozario Murphy in Minneapolis. "But the advantage smaller agencies have, many of them independent, is the ability to be more nimble and efficient and enable clients to work hand-in-hand with accomplished leaders."

MANAGE CASH FLOW VIGILANTLY

"You have to be careful about getting paid," said Firstborn's Mr. Ferdman. "I will pass on a project if there is even a hint that getting paid will be an issue. Cash flow is of paramount concern to everyone, but it takes on a different meaning to firms of our size."

BEWARE MISSION CREEP

"Smaller shops a lot of times are put in a position where they may forego who they want to work with for who the need to work with," said Michael Ventura, CEO- chief creative officer, Sub Rosa, New York. "In a small shop, you take a project and it can take your eye off of what you really want to be working on -- and it consumes the entire agency, not just a division of the agency."

Said John Coleman, founder-CEO of Via in Portland, Maine: "Being independent gives us the freedom to do the right thing -- from sacrificing margin to support a client in difficult times, to being able to quickly invest capital in emerging ideas."

LOVE WHAT YOU DO

Being an entrepreneur means being a human long-shot," said Harry Woods, partner at Woods Witt Dealy & Sons in New York. "Beating the odds is about love. We love the people who work for us. We love our clients. We love learning new ways to do the job for them every day. We love our life's work. When I was a cynical kid at TBWA, Chief Operating Officer Dick Costello used to tell me that I was a member of his family. I probably smirked. But now I see that much of what that wise man used to say was true. Together with his brother Bill Tragos, they willed their agency to greatness and without doubt, the hall of fame. I'm pretty sure love is how they did it."