The Magic Numbers of Agency Growth

These Headcount Milestones Changed the Size and Shape of Our Shop

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Phil Johnson
Phil Johnson
I'm not superstitious by nature, but when it comes to building an advertising agency, I've found a couple of magic numbers: 12, 30 and 55. They represent the number of employees that both change the structure of the agency and how you manage the business. When people talk about growing pains, I suspect they're struggling with how to adapt to the demands of one of these numbers.

The actual numbers may be different for everyone, but at each of these milestones, I've discovered that the business goes through a transformation for which I had to learn a whole new set of skills. It can be unbelievably frustrating until you figure out how to make the transition. Like any puzzle, once you succeed, it looks simple and obvious.

Part of the challenge is that agency growth usually takes you by surprise. It's seldom a straight upward curve with a steady rate of growth every year. It's more like sharp spikes followed by plateaus. Success breeds success. One win leads to another. When you're six people, a new account may double the size of the agency. Now you need more space. Before you know it, you've got a hungry beast to feed. Each successive jump gets harder to make as the number of employees increase, and the revenue gets bigger.

At twelve people, you hardly need any management systems. You can thrive on raw talent. You're small enough so that everybody can work across multiple disciplines. The communication is simple. You can come together as a SWAT team for big projects and break into smaller units to manage multiple accounts. Almost everybody has direct client contact and supports the account process. Clients get optimal value with little bureaucracy. I loved running an agency of this size.

It's hard to hold your size to an optimal number. With some happy clients and an occasional new business win, twelve people can quickly grow to 20-plus. The old systems work but become harder to manage. Without some changes, you hit a wall at 30. People trip over each other. Projects can fall between the cracks. Clients wonder if you're over-extended. The answer is to define roles, create structure and introduce processes so that people have a consistent way to work. To some people this can feel restrictive after working spontaneously with a small, close group. When you get it right and everyone finds their groove, these new systems become liberating, and individuals can excel at what they do best. You've got more muscle, and you can manage bigger and more complex engagements.

You would think that you can keep growing under a structure that supports 30 people, and you can, for a time. You've got managers, a work process, and you can keep adding to the mix. That is, up to a point. As we passed 50 people, I noticed a new set of challenges. We needed more senior staff that could take responsibility for entire functions, or major pieces of business, and it seemed to get harder to integrate them into the organization. Some schisms began to emerge between departments. In our case, we had the added challenge of maintaining a culture and a mission across two offices, one in Cambridge and another in San Francisco. As the company founder, I also found my role changing. I knew just enough to be dangerous when I stepped into an account meeting.

I was lucky to have some good advisors, people who had built organizations and agencies a lot larger than mine. Two changes made the transition to a 55-person agency manageable. I began to understand that my value to the agency was much more about building and supporting a management team that was empowered to run the company, and less about being immersed in day-to-day operations. Part of that meant promoting long-time partner Mike O'Toole to president. The second change was to introduce a business planning process that gave the management team a blueprint for major goals and initiatives for the year. Interestingly, as we exceed 60 people, with these new structures in place, the agency feels small again. Which is exactly how I want to keep it.

Let me add that I'm not advocating growth for growth's sake. I fell into that trap during my early days, and I learned a few harsh lessons. What the market gives, the market can take away. Whether you're an aggressive risk-taker or a cautious businessperson, you've got to build an agency on a mission that sustains the business through every imaginable economic condition. Growth is not a mission.

It may seem strange to write about this topic during a recession, when new business is an endangered species and many businesses consider holding their ground to be a real victory. My attitude is that, even in the lean times, you need every advantage you can find, and the last thing you want to do is limit yourself when opportunity knocks. I'm hoping I get the chance to make the next jump, whatever that magic number might be.

Phil Johnson is CEO of PJA Advertising & Marketing, with offices in Cambridge and San Francisco. Find him on Twitter at @philjohnson.
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