Ad Agencies · Digital agency

Starting a company without external funding: slow ramp up pros and cons?

Betsy Campbell Seasoned Biz Dev, Sales & Management Professional

March 31st, 2015

The marketing industry has a low cost of entry. I don't want to owe anyone money, ever. But I want to build my Advertising Agency into a viable, employing business with hip offices (not luxurious, just functional and urban hip) within 12-18 month of getting my first client. What are the drawbacks of this kind of low cost ramp up?

Tim Kilroy Analytics - LTV - Boosting Profits - Digital Marketing

March 31st, 2015

There is absolutely NOTHING wrong with this approach. As a matter of fact, most business do not start with "funding". And, I wouldn't worry about your offices - do awesome work for your clients and the revenue will come...and then you can get the offices you want.
Building out of revenue is a great way to build a business.

Anthony Miller

March 31st, 2015

I totally agree with Tim here. I started my agency the same way! We're a digital creative agency and the toughest part was finding great talent. Once you've mastered that and your process things take off! 

Good luck to you Betsy!! I'd be happy to help any way we can. 

Rob Mitchell Senior Java Software Engineer at Direct Commerce

March 31st, 2015

Starting an advertising company is not terribly different than starting a software consulting company - the majority of the work product is service-based. Yes, you have deliverables of various products, documents, media, etc in advertising but this is somewhat analogous to software products being developed and delivered. I started my software company from scratch with $0 startup investment and it ran successfully for 10 years. You can do it too. 

Rob G

March 31st, 2015

Nothing. .. it's the way most services businesses start.  

Peter Harvey CEO Intelli-Global

April 1st, 2015

You can do this without debt.  it's been done countless times.  BUT you need to put in some of your own money, versus borrowing.  Don't create your own personal debt.  I doubled up-work two jobs at once.   Focus on very high margin revenues. You can find these.  
Consider having a partner.  You've got to have a differentiate yourself at least to get in the door, otherwise it will be VERY difficult to unseat current service providers.  Get assignments from your network first.  All outside your network will ask "Who are your current clients".  Beyond your network target smaller, early stage companies. 
Don't compete on price, you'll go out of business fast.  Compete on unique services.  Sniff out prospects who just want your proposals for your expertise with no intention of retaining you.
Create a well thought out business plan and bounce it off as many experts as you can.  This input is critical in sharpening your plan before expending your time and effort.
Once have this GO! be relentless. The difference between  entrepreneurs is passion, creativity, being able to think from a blank sheet of paper, and picking yourself up when you get knocked down.
Take risks.  I always remind myself of Tim Cruise in Risky Business when he brings the prostitutes into his parents home while they are away to make money.  The person from Princeton comes into the party for his interview and says to tom "Your just not Princeton material"  Tom feels the bulge of cash in hos pockets, puts his shades on and replies "You know, everyone and while you just have to say, What the F^&*ck" He goes on to make a lot of money and also get into Princeton. (He creatively took care of his interviewer)
Good Luck

John Seiffer Business Advisor to growing companies

April 2nd, 2015

Not only do I think this is a smart way to go - for an ad agency, I think it's the only way to go. What people tend to forget when they read about companies selling equity to investors, is that investors want to get a huge return on that investment. The only way they can do that is by selling the company - either through an acquisition or through IPO. 

By definition, that excludes a number of types of companies that will never go IPO or get acquired fast enough for enough money for the investors to get the kind of return they need. As a result, they won't even consider companies that don't have that potential.

Most service companies fit that mode that won't be considered. Not that they won't be successful, profitable companies but that they won't give a good return on investment. 

Bootstrapping and selling to customers is the way the vast majority of companies of any stripe get going. 

Tim Kilroy Analytics - LTV - Boosting Profits - Digital Marketing

March 31st, 2015

BTW, we are 2 years old, doing really good revenue with $0 investment. (It can work out OK ;-))

Becky CounselingWise.com Private Practice Marketing Consultant, Smart Web Marketing for Therapists

April 3rd, 2015

Betsy, I started my agency from my kitchen table. In fact, my first couple of account managers worked there with me. Then we got co-sharing space at a hip tech place in December 2013. We finally moved into our place in Dec 2014. I've bootstrapped the whole way and it's going well (even though I chose a niche that is low profit).

I'm going to expand to different niches now, and I feel very optimistic. We have our processes down.

If you ever want to chat, reach out!

Julien Fruchier Founder at Republic of Change

April 3rd, 2015

The only thing I can add to the conversation here is that, since you're working, I would keep my job until you have enough business to cover your basic living expenses, then make your exit. And please, don't commit to fixed expenses like office space until you absolutely have to. Impress people with your creativity and hustle, not your environment. 

I am interested in some sort of contra. Check out my LinkedIn profile and let me know if you'd like to explore some ideas. 

Betsy Campbell Seasoned Biz Dev, Sales & Management Professional

April 1st, 2015

Thank you all for the feedback! So much of the focus here is on raising seed money, I was concerned that I was thinking too small.  My reasons for doing this are deep and personal and founded in the fact that I KNOW I can do this successfully.  There is so much commerce here in Houston, not just oil and gas, and there are very few great agencies here.  It's the 4th largest city in the US and extremely underserved in the ad agency business.

I am still working at my "day job" for now, ensuring I am able to fund my business start up needs as they arise so I am right in line with your feedback Peter.  Thank you for that input.  

If you all run across any budding advertising entrepreneurs, please send them my way.  I am laser focused on finding a partner (or 2) who fill in the gaps in my skill set.  I am looking for a strong creative director and a web developer / business systems analyst.  I am anxious to get off the ground!  

And I am wide open to assistance from anyone willing to advise.  Please let me know if any of you are interested in advising.

Thanks again for the feedback!
Betsy