It’s a big risk to turn independent after working with a multi-national organisation for years. It’s all about leaving all the comfort and going solo -- from taking care of electricity bills to finding a good brand to work with as a start-up. Not all survive and the ones that do either get acquired or are in the race to get acquired. We speak to some agencies to know how it is to run independent and their ultimate goals
Akansha Mihir Mota | Mumbai | March 21, 2017
“Our agency was doing okay and growing well enough. After a point, any business needs to respond to the laws of business. All businesses have to grow and they cannot be dormant. We grew organically for 10 years now. To take it to the next level, to be able to participate in all kind of pitches and convince clients, we needed this. Today ‘Happy’ is called to the biggest pitches by the biggest clients. All this is difficult to do as an independent,” said, Kartik Iyer, CEO, Happy mcgarrybowen, which was recently acquired by Dentsu Aegis Network.
Starting off solo and sailing in his own boat in a sea full of giant ships, a sailor has to fight the current and find treasures in the ocean. Then after getting more people on board and finding a lot of treasures, the sailor decides to get onto a giant ship. Metaphorically, this is the journey of an independent agency till it is acquired by conglomerates.
It can often be intimidating to be the little guy. The larger players have the big wallets, impressive offices, big clients, and, of course, the advantages that come solely with their name and recognition. How can independent agencies compete?
Why people set sail on an independent boat in the vast ocean
People in the industry turn independent for varied reasons. Some find pride in their own work, some get good clients, some are bored of the hierarchy, while a few get that entrepreneurial kick from within.[caption id="attachment_82611" align="alignleft" width="150"] Priti Nair[/caption]
Priti Nair, Director, Curry Nation, was fed up of the hierarchy and started Curry Nation. She said, “After working for about 20-22 years, there are too many layers of approval points and opinions and you get tired of it. At the end of the day you are not getting to do what you want to do. You will have to continuously be answerable to so many people even when you know what you are doing is right. Secondly, I also missed being in the thick of the action, dealing with the clients on a one-on-one basis. There is too much bureaucracy when the agency is large. When you grow senior in the business, you are more caught up in the admin, meetings and management things.”
Another reason for which people turn independent is they want ownership of work they are doing and clients offer support to them whenever they want to start on their own.
Scarecrow’s Manish Bhatt and Raghu Bhat turned independent when Religare offered them its account to start off on their own. So, with their first client as Religare, they opened their creative boutique in 2010. Jagdish Acharya also thought of turning independent when he became quite aware about creative and planning and got Republic of Chicken on board, and then he launched Cut The Crap.[caption id="attachment_54216" align="alignleft" width="150"] KV Sridhar[/caption]
More recently, KV Sridhar (Pops) after investing all his retirement money, launched his own agency Hyper Collective with a unique concept. But Sridhar’s reason of turning independent was very different. He explained, “I went independent because market need pushed me to do that. Otherwise, I would not have delivered what I wanted to deliver to my clients.”
Resonating what Nair said, Naresh Gupta, CSO and Managing Partner, Bang In The Middle, turned independent primarily because he was sick of answering small questions and not answering ‘big ones’. “The kind of system I was running, I was allowed to do something large, but smaller things which I had to do for that large thing is something I no more wanted to do. At a point in life, you don’t want to answer that question.”
Sailing against the current
Starting from zero again is not an easy task. You have to take care of daily operations from strategic to creative decisions all by yourself. Not all who start independent have clients from day one. One also has to find enough capital investment to run the business, look for good talent, set a brand image, pay salaries on time and, most importantly, negotiate with clients on timely payments and fee.[caption id="attachment_60563" align="alignleft" width="150"] Naresh Gupta[/caption] Recently, Gupta took to Facebook to speak out against a client who did not give them the fee. They just not delayed, but also refused to pay.
Sharing his grief, Gupta said, “As an independent, I didn’t have money to pay to the alphabet suits. We are not a member of any organised body of advertising. The kind of money you have to pay to be the part of that group is very large. AAAI and people like them. It’s the membership you sell. If a client doesn’t pay, then in a group of agencies, you can at least tell the world that this is the client who hasn’t paid me and another agency should not sign them up. Agencies do sign up even after knowing how the client is. But at least there is some small fall-back. When you are an independent agency, there is a zero fall-back. If the amount is very large, it can kill you.”[caption id="attachment_82309" align="alignleft" width="150"] Mahesh Chauhan[/caption]
Mahesh Chauhan, former Rediffusion chief, formed his own agency in 2011 when he thought that he no more fits in multinational networks and could not match himself with the routine work of global organisations. He faced a situation sometime back. He said, “There was a client that went under and with a lot of our revenue. That was a wake-up call. This can happen to anybody. It’s just a question of luck irrespective of global or independent. Pitching is definitely tougher in the beginning and that’s how you bank on your previous relationships.”
He said, “We are 45 people and every month we have to worry where the rent will come from, where the salary will come from, the service tax, TDS we have to deposit. It’s a big issue and a fight every month.”
Mentioning one important point, Gupta said, “We may be independent as an agency. People who come and work for us look at us like any other agency. They look at you for future growth, professional excellence and those drivers don’t change. It’s romantic for a couple of people to own an agency and say I am independent, but for every person who works with you, it doesn’t matter if you are independent or not. They work for the brands you have in the agency, growth, visibility and fame that you will give them.”[caption id="attachment_61914" align="alignleft" width="150"] Praveen Das[/caption]
For Praveen Das (Managing Director, Happy mcgarrybowen) and Iyer, their first office base was Praveen’s house and the first equipment they had was a Mac. After changing offices for five times in 10 years and from one Mac to 100 now, the agency has grown big.
Santosh Padhi, Co-Founder and Chief Creative Officer, Taproot Dentsu, once regretted of going alone when he lost his office in fire only after nine to 10 months of his existence as an independent. Padhi explained, “I questioned myself if it was a right decision to start independently. If this could have happened to any big network, I wouldn’t be so depressed the same way because at a network agency there would be 500 offices and if one office caught fire, it wouldn’t be that of an issue like us. That was the only thing that was with us.”[caption id="attachment_61214" align="alignleft" width="150"] Kartik Iyer[/caption]
Just like any other start-up, Iyer and Das had to face similar problems related to talent acquisition and retention. “Nobody wanted to join us. Even people who knew us didn’t want to join us. Because when two guys start an agency and say it is going to be an agency, what is the difference between you and a freelancer? It is only when you get people and clients, people start looking at you as an agency. If it is people’s business, then why do you need a whole set-up to start an agency?”
Having a very different point of view, Sridhar thinks there is not much difference in the risks of independent and network agencies. He junked the perception that people think that network agencies are always available to help out in bad days. He elaborated, “That is just a myth. When network agencies say I will invest, they are not saying they will bring the money from somewhere. They are saying you earn that money and we will invest back that money. The pressure is the same when you earn the money for someone else or you earn the money for yourself.”[caption id="attachment_65788" align="alignleft" width="150"] Jagdish Acharya[/caption]
In a very smart move, Acharya, to save on the cost, for two years, he didn’t have an office and was connected through emails and phone calls. Acharya said, “To open the office, there were two kinds of expenses. Firstly, you have some expenses in running the office. Secondly, you need a few people full-time, otherwise, the office looks empty.”
Advantages of owning a boat over a ship
Smaller the size of the agency, more importance the agency pays for the client’s work. When some work comes to a smaller agency, the whole agency is on toes 24x7 for the clients. Whereas in bigger groups, a team is appointed for the work and the higher leadership comes into action at the final stage only. Because the independent agencies are new, they are mostly ready to work on clients’ terms and conditions.[caption id="attachment_13915" align="alignleft" width="150"] Vipin Dhyani[/caption]
Vipin Dhyani worked with some top ad agencies such as Rediffusion DY&R, Lowe, Grey Worldwide, Mudra and Everest Brand Solutions before he set up his company ‘Thoughtshop Advertising in 2009. The agency formed its shape when it was recession time, but steadily the agency started getting work and now the boat is sailing well.
Instead of talking about the challenges that independent agencies face, Dhyani commented, “Even clients know that if they are hiring us, we will be on our toes 24x7, 365 days. Bigger groups take their own sweet time to turn. It is a kind of decorum which I also felt when I was with big agencies. If a brief was given to us, we would take our own sweet time and tell them that it will take minimum 20-25 days. They generally take longer time as they are not the only client the agency has to serve. In independent agencies, it becomes easier to take care of their needs.”[caption id="attachment_79843" align="alignleft" width="150"] Santosh Padhi[/caption]
Adding to Dhyani’s point of view, Padhi said, “Clients are more willing to work with a compact team that wants to work on that brand, but in big agencies, this doesn’t happen. Founders at independent agencies are working very closely with the heads of brands. There is no lack of information and you save a lot of time if there is no hierarchy.”
Chauhan believes it doesn’t matter if you are global or an independent agency. He said, “There are takers of both kinds of offerings. There are clients who don’t care if it is a global or an independent agency and then there are clients who say I need global support as I have so much global support in so many countries. Essentially it boils down to the individual until it is business compulsion.”
|Agency||Year of formation||Network||Year of acquisition|
|Happy mcgarrybowen||2007||Dentsu Aegis Network||2016|
|Taproot Dentsu||2009||Dentsu Aegis Network||2012|
|Communicate2||1997||Dentsu Aegis Network/iProspect||2012|
|Webchutney||1999||Dentsu Aegis Network||2013|
|Milestone Brandcomm||2009||Dentsu Aegis Network||2014|
|WATConsult||2007||Dentsu Aegis Network||2015|
|L&K Saatchi & Saatchi||2005||Publicis Groupe||2014|
|22 Feet||2009||DDB Mudra||2014|
|Indigo Consulting||2000||Leo Burnett Group||2012|
|Ulka Advertising||1961||Foote Cone & Belding||1997|
|Lintas India||1939||Lowe & Partners||1999|
|Chaitra Advertising||1972||Leo Burnett Group||1998|
|Enterprise Nexus||1977||Bates Asia||2005|
While there are the ones who turn independent, there are also ones who are happy working with the multinationals until their retirement. They don’t get that kick of entrepreneurship.[caption id="attachment_70118" align="alignleft" width="150"] Subhash Kamath[/caption]
Explaining why he didn’t open up his own shop, Subhash Kamath, CEO and Managing Partner, BBH India, said, “It’s a question of risk and appetite. Starting your own company is always an entrepreneurial risk. There are some who may take that risk and there are some who may not take that risk. Also, if you are really happy in what you are doing and your company is looking after you well and you are enjoying the work, then you don’t feel like giving it all up and starting fresh on your own.”
After working for Bates for almost four years as Group CEO, Kamath left the company and brought BBH to India. So, indirectly Kamath was an entrepreneur as he had to set up BBH in India. He said, “BBH gave me an opportunity to be an entrepreneur despite being in a job. I started BBH from zero. It was a very entrepreneurial start-up. I got the experience of being an entrepreneur without necessarily taking full risk.”[caption id="attachment_72463" align="alignleft" width="150"] Dhunji S Wadia[/caption]
Dhunji S Wadia, President, Rediffusion Y&R and Everest Brand Solutions never thought of going independent as he is comfortable with what he is doing. Wadia said, “It all depends on the individuals. There are multiple scenarios. People who work with large agencies are probably there because they like the job -- the scale, the process, the best practice and the large clients. All of these combined to add to the charm of the job. People who feel shackled by systems and may feel they have reached the ceiling and want to do things their own way will be more likely to opt for being independent.”
The wish to find more treasure leads to hopping on to larger ships
India has come a long way since the establishment of the country's first ad agency B Dattaram and Co. back in 1905. The global conglomerates were always present in India since pre-independence. Agencies like Clarion, Lintas, HTA were always there and worked in affiliation with Indian agencies. In the 1970s after Indira Gandhi’s foreign policy, all multi-nationals were asked to leave and all the branding exercises remained in the hands of Indian agencies. When Lintas International left, it donated 51 per cent of shares to Mother Teresa’s charity.[caption id="attachment_58273" align="alignleft" width="150"] Ramesh Narayan[/caption]
Ramesh Narayan, Canco Advertising, explained, “By then the era of profligacy in advertising had ended and agencies became a lot more professional. The days of parties, martinis, lunches was slowly going out. In the early 80s we had professionals from top B-Schools in India choosing to join the advertising industry. For example, Arun Nanda, Ravi Gupta, Arvind Sharma, Ambi Parameswaran and Rajiv Agarwal came out of IIM Ahmedabad and Calcutta. They opted to enter the advertising industry. All of them first came as professional employees. But most of them set up very good advertising agencies of their own.”
Arun Nanda went on to start Rediffusion. Ravi Gupta went on to start Trikaya. Rajiv Agarwal started Nexus Advertising. From one agency, three to four agencies came out. Narayan added, “It was a glorious era where we had highly qualified knowledgeable professionals. Then we had a lot of home-grown agencies. There I will rank Canco also, who opened shop in 84.”
Acquisition of independent agencies is not a new thing. This is happening for long. In 1991, Dr Manmohan Singh became the Finance Minister and liberalisation, privatisation and globalisation happened and global agencies were again allowed to do trade in India.
Why did Indian independent agencies sell off earlier?
Narayan said, “Only because of money and scale. I don’t think Indian agencies were lacking in creative resources or strategic planning. Sheer scale of the operations and also the fact that when they came, they came along with their advertisers. Unilever, P&G and anybody else would have one agency across the world and their affiliates. That is how the whole thing came back into foreign hands again.”
Communication revolution exposed Indians to all the things that were available outside and were not available in India and therefore created a lot of aspirations. “Slowly, we entered an era of liberalisation, globalisation and privatisation. In that phase, you had the real spurt in the Indian advertising business,” Narayan added.
In fact, RK Swamy and Madison BMB are the only Indian creative agencies that hold major stake in foreign companies.
With international brands also entered their international network creative agencies. It was then a slew of takeovers happened. Trikaya became Grey, Clarion became Bates, Lintas became IPG, Ambience became Publicis and Zen became Publicis. More recently, the Omnicom-Mudra, Dentsu-Aegis, Sistas became Saatchi & Saatchi. The Publicis-BBH deal also happened. Dentsu-Taproot and Happy Creative and Dentsu deals were no less than a marriage.
People start independent agencies to own something of their own, to take pride and also to work on their own conditions. The bigger question here is that why do independent agencies sell off or are available to be acquired by the bigger networks and conglomerates. By getting acquired, one also gets to work on brands that they would not get if they are independent.
Iyer said that bigger networks buy independent agencies for two reasons -- to add numbers and to further the culture.
Some people call Vivek Suchanti, Chairman and Managing Director of Concept PR, as ‘Mini Martin Sorrell’. He has invested in a lot of start-up agencies, including five creative agencies like Enormous Brands and Scarecrow Communications.
Elaborating on checkpoints he keeps in mind before investing, he said, “Firstly we see if the talent will be able to pull the agency on its own. We don’t invest in agencies and promoters who don’t have the vision to take it beyond a single man show because then it is a one person office. It doesn’t become an agency. Secondly, there is a time frame for which we are invested. We don’t keep putting money on an on-going basis.”
After proving their metal and being wooed by several giants for acquisitions, it was only in 2012 that Padhi and his partner Agnello Dias agreed to be acquired by Dentsu Aegis Network, but only on Taproot’s terms and conditions. He said, “When you get acquired, it is up to you to put across things that you want to continue with your partner. If they agree fine and if they don’t agree, move on. When we decided to get acquired, we made this point across that we will take 100 per cent rights and the system won’t take the call. Fortunately and unfortunately they have given everything we have asked for. So we have zero complaints. In fact, we have become better in the partnership with Dentsu in things like finance, legal issues and billing, which we were very weak at. When they came in, a lot of things got fixed. We retained what we were known for. Till you keep performing, I don’t think any coach will come and tell how he should be batting.”[caption id="attachment_61665" align="alignleft" width="150"] Subhrangshu Neogi[/caption]
Subhrangshu Neogi, Director, Head, Group Marketing and Brand, Religare, believes that there is nothing wrong in getting acquired. He said, “Advertising entrepreneurs should not be seen in isolation, they are like any other entrepreneurs. They want to create value for themselves. If you look at the start-ups, fundamentally all want to create value creation. Value creation can only come through multiple routes. Fundamentally it is the marriage of strength and strategic alignment. There is nothing wrong. It is a win-win for both the parties.”
Another reason for which agencies get acquired is that there is no successor after they reach their retirement age. Chauhan elaborates further, “I have an expiry date. With every passing day that expiry date comes near. For acquisition, we had a few conversations but we have gracefully closed them as I think it is not the time yet. I don’t mind when Salt reaches that bridge.”
Although he points out, “Being acquired by an agency is no different from two agencies merging. Your independence is not hampered even if somebody buys you out. In fact, you are a free bird to start something fresh. Independence is actually enhanced because liquidity is what gives you independence.”