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As a CFO in the advertising industry, the one constant that I’ve come across is change. Maybe it’s a recency bias, but the past few years have been seemingly more volatile than at any point I can remember. The challenges have been harder and more ill-defined, the answers weren’t straightforward and the outcomes have been equal parts scary and exciting.
There is a truly exciting crop of new agencies that are opening up and making a mark in the industry. But despite doing great work, one pain point is how to pivot from being an employee to being a business owner, and all of the nuance that goes into that change.
At Flower Shop, some of the conversations we find ourselves having revolve around some of these core issues. Can I afford to hire someone? How well is my business running? Important questions that, when accounted for, can put a company in a position to make smart decisions and grow.
Running a business is hard. In the same vein that I find a new crop of creative agencies to be exciting, it’s also incredibly scary as well. Small agencies typically come from bigger agencies and sometimes lack the knowledge of what goes into running a creative agency.
In that spirit, I offer up a few thoughts for new agencies as they navigate the waters of being business owners and entrepreneurs.
Create and focus on scalable behaviors
For so many agencies, finance can be a bit of a black box with success loosely defined by topline revenue and margin. I recall an insight from earlier in my career that sometimes the only thing that changes for a growing business is where the comma and the decimal point go on the P&L.
If processes, ways of working and finance are prioritized from day one, they become a fixture in the culture of the business. A strong financial foundation and investment upfront will make growth and scaling incrementally easier.
Focus on the right financial metrics
Three really clear areas of finance should be the focus of any owner: Cash flow, budget forecasting and pricing.
A forward-looking cash flow model is essential to businesses of all sizes. In creative services, having a 90-day rolling forward-looking model is a foundational tool. It forces a business owner to understand their current cash position, grasp the inflows and outflows of the business, and what sort of capital requirements could be needed to make an investment or hiring decisions.
