PR Wars Podcast: Start your own agency

Have you ever dreamed of running your own PR agency? If you were the boss, how would you run your agency differently? On today’s PR Wars podcast, we talk to one of the industry’s success stories… Rick French, CEO of French|West|Vaughan. FWV is the agency of record for some of the world’s top corporate and consumer brands. Learn what you need to know to start your own public relations agency.

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A.I. generated show transcript: “We want the truth.” “We want the truth.” “We want the truth.” “I have news for everybody. Get over it.”

Announcer
It’s time. Welcome to PR Wars coming at you live from Atlanta, Georgia. Now, here is your host… Chris Shigas.

Chris Shigas
Hey, everyone, thank you for listening to PR Wars. I’m Chris Shigas. Have you ever dreamed of running your own PR agency? Everyone has those frustrating moments working on the front lines. But if you could do it your way, if you were the boss, how would you run your agency differently? Can you make an agency not only survive, but thrive.

So everyone thinks they can run an agency better, but very few actually make that leap. It takes courage. You venture out into the great unknown and start your own business. And out of those people that have the fortitude even fewer are successful.

Today we’re going to talk to one of the industry’s success stories. French West Vaughan is a nationally recognized full service agency. Its headquarters is in the capital of North Carolina, and they have offices in strategic markets across the country. They’re also a member of the IPREX network globally. French West Vaughan grew from a small upstart and is now the agency of record for some of the world’s top corporate and consumer brands. And they also keep a full trophy case of awards, including 20 National Agency of the Year honors.

Joining us today, to talk about the things you need to know if you want to start your own agency is the CEO of French West Vaughan, Rick French. And before we talk to Rick, I’d like to introduce the co host of PR wars, and fellow communications maestro Brad Grantham.

Brad Grantham
Maestro, where do you come up with this stuff, Chris? I mean, I’m not a distinguished musician, by any means. But one could assume if you have opened an agency, or you’re going to consider opening one, that would be Mo Money, Mo problems. And full disclosure, Chris and I worked for French West Vaughan and Rick French for many years. So you probably say we both have a French Connection of sorts. It’s a film. Look it up kids.

Chris Shigas
Okay. Thanks, Brad. Yes, I have seen the French Connection. Now. Let’s move on to Rick, Rick French. I’m so glad to have you on Welcome to PR wars.

Rick French
It’s great to be with, with you. And Brad. I miss you guys. And so hope you’re doing well in these unusual times.

Chris Shigas
You have created a wonderful, successful agency. When you started way back in what was it? 1997?

Rick French
uh, when I started the agency was 1997.

Chris Shigas
Yeah. So you’ve been through a lot between then and now. And you’ve seen the ups and downs of agency world. But you couldn’t have been born that way. Like you started off in corporate comms, you went to an agency and at some point, a feeling had to get in your head that you said, I can do this, I can create something really good.

Rick French
Yeah, well, first of all, thank you for having me on. And, and second, you know, it does take some courage or insanity, depending how you want to look at it, to decide that you’re going to start an agency, you know, as with another firm that was doing very well, I was leading their PR practice. And I had risen to being over both the public relations and advertising side of this agency. But I didn’t have any equity in it. And I felt like I was building the business, but I wasn’t really profiting from the business. So I went out and saw it. angel investment capital, which is a very unusual way to go out about starting an agency. And there was a gentleman Lee Trone. I knew that because a couple of my former colleagues at the firm I was at had gone to work for him. And they had been telling me I should have a conversation with him. So I approached him with the idea of, of maybe investing in a startup agency. He asked me to write a business plan. He knew I had a non compete agreement, so wasn’t like I was going to be taking clients or anything like that. So it was a big leap of faith on his part. And, you know, he put some seed capital in. And I think that that gave me some of the courage that was necessary to go out and start the firm. Because, you know, at the time I had, you know, I had a five year old daughter, and I had one on the way, and starting an agency was scary, because I was making a very good living at the firm that I was at, without the financial backing of Lee, I don’t know if I would have had the courage necessarily to just give up my job and take that leap.

Chris Shigas
So you went the capital route, right? Where you looked for the financial backing. Was that to ensure that that you would be able to pull a salary from the beginning? Or was there another reason that you just said, I don’t want to do this out of my basement. I don’t want to just kind of wing this. It’s got to be structured like a real agency.

Rick French
Yeah, it was both Chris. I knew that I didn’t want to do it virtually or out of my basement. I felt like, that’s a hard way to grow. I knew that to grow an agency, you needed other people. And I needed to have the cap the capital to hire others. And I did also need to be able to still make a living as I was waiting on receivable. So you know, Lee took a big leap of faith in investing in a startup agency that could have failed. Now, you know, what ultimately happened was when I when I left is several of our premier clients that I had brought into that agency asked for permission to, to come with my new firm, I did not solicit them. It’s just that when I left along with three of my colleagues who were kind of unhappy, because they felt like PR was the redheaded stepchild within this advertising agency, when we left, I had to have the ability to pay them and so on. So we put up the money, and Wrangler, and a couple other major clients said, we would like permission to come along. And my former firm said, well, they looked at the odds of keeping Wrangler, for example, without us being there, and said, it’s probably not going to happen. So they negotiated, we negotiated a deal. But I gave the first year and a half of fees, every dime we collected from Wrangler while we did all the work, and its other brands, Lee and your bow at the time, back to my former agency as a buyout. So I was carrying all the work and all the expenses. So without that financial backing, it would have been hard to do that. Now. Wrangler continues to be, you know, an anchor client of this agency 23 years later. So it was a good bet. But if you were an investor looking at that, I’m not sure I would have made that bet. You know, because we’re a startup agency with a very small dealing with a multinational brand. It could have been a short term experiment, and they might have decided they needed a bigger firm.

Brad Grantham
So let’s let’s talk about 1997. Yeah, you make the move to open the firm. What does your staff look like at that point? So you mentioned a couple people that you You brought on? Yeah. You know, compared to where you are now, that first week? What did things look like?

Rick French
Well, it’s funny, the very first week, a colleague and I were out in Las Vegas, supporting one of our charter clients, the formal football riders only, which was a bull riding only league that competed with what’s today the PBR they eventually merged. So in that first week, our spouses were literally helping us move into the office while we weren’t there, to get a setup. I know my colleague, jack glacier, his wife at the time was, was helping decorated do things like that. So we were off working from day one. In the office, we had four of us. And then I used the investment to hire a front office person or, you know, to handle administrative things. And then we started to grow as we started to publicize the doors were open, and added staff from there.

Brad Grantham
So from 1997 to Now, obviously, there were some few stops in between where you step back and realized, all right, we’ve got to hire, you know, an enormous amount of people this year to accomplish these client’s goals. What was that first bump? So it was it, you know, two or three years in, we realize all right, we’ve got 46 people now we need to get to 22 service, what’s about to come? And then my second question to do to that is, back then did you have a dedicated new business person to help you with those goals?

Rick French
So in our first year, PR week ranked assist the fastest growing agency in the world at a year over year basis. And that’s kind of easy. To achieve when you’re a startup agency, because if you if you grow by 100%, you know, you’re, you’re outpacing the industry. But I, I think the the answer to that question is, is really rooted more in a philosophy brand, it’s I looked at the agency and got some very good advice from some people early on who had started agencies. And their advice to me, which I will still tell people when I do lectures or discussions like this is that you do not start an agency to create a job for yourself, do not start an agency to, to do it to even benefit yourself financially, you have to stand in line last, not first, in terms of the distribution of client fees that you receive. So if you if you put it in that perspective, I always looked at it as when we were growing in those early days, and funds were coming back in it wasn’t so that I could create a larger salary for myself, I looked at as the opportunity to hire another person. And each time we we did this, I looked at that person as Yes, I’m paying them a salary, but they’re going to generate revenue for us on a multiple of that salary. And I had the belief that we could attract clients that there were plenty of them out there, what I needed to do was fill help fill their plates with work. And that would generate critical mass and, and more and more profitability that would lead to us being able to invest in the acquisition of other firms and, and always hiring one position ahead of what we needed. In the first 10 years of this agency’s existence, we always had one position that we identified a strategic that we had hired ahead of what we actually thought the need was, because we believed that that next client was always around the corner, and there’d be somebody who would come in and want to buy the capacity of our team. And we needed to have the capacity available to sell to them.

Chris Shigas
Well, at some point, you know, and you’re very successful working for an agency as an account person, and there’s a lot of big shot account people out there. And that doesn’t necessarily make them a great CEO. Right. So what do you think it was about your skill set going into this that made this agency successful? And did you learn it on the fly? Or was this something that was that you just had in you,

Rick French
I’m still trying to figure out if I’m a great CEO, I’m hoping to figure that out before I retire. But in terms of skill sets or aptitude, I, my mom was an accountant. So I grew up around numbers, and I knew the value of cash flow, I knew that you had to accurately account for your financials. And I think the the problem with a lot of people who start agencies is they may be inherently very creative. But they’re not very good on the business side. Or you have people are very good on the business side, but they don’t have a creative bone in their body. And so I think what I was able to bridge both sides of this, I had a good business sense. And I also had a good creative sense. And, and so that helped. I think that, you know, it’s like I learned very early for the phrase that cash is king. And that meant that you needed to stay up on your receivables, you needed to make sure that the agency got paid so that you could pay your employees, you could continue to invest in them and the agency. I know so many agencies that have collapsed because they’re lacks on receivables, they could have collected and they’re always told the checks in the mail. And people there were clients who will take advantage of you until you push back. You guys dealt with that with a we were always talking about receivables and being on top of it. And that’s because every two weeks your paycheck was always coming right. And there was always and every expense report was covered. And we were never hurting for money. But that’s because of a couple things. One, I left the distributed profits of the company in the business year after year to create a cash cushion but also we just didn’t allow ourselves to get behind. And I you know, there’s a there’s a 95% failure rate in the agency business in terms of agencies that open fail 95% of the time within five years, I believe it and you’ve often failed not because you can’t win clients. It’s because you don’t operate it like a business and you don’t have the cash flow to sustain yourself during certain periods. And that’s what distinguishes I think a successful agency for ones that have all the potential to be but never get there.

Brad Grantham
So to that point, you know, we’re in a very interesting time right now. And you’ve faced something like this. Similarly, back in 2008 2009, with a great recession. You know, can you walk us through? Oh, eight and oh nine, what you did as an agency at that time to ensure that you guys would sustain a path going forward? And then, you know, how that relates to now? Or did you learn anything from Oh, 809 that you’re putting into place now during COVID?

Rick French
Yeah, back in? Oh, 08/09. I think it was actually worse than it is. Now, the bottom fell out overnight in the same way it did here. I think the difference, though, is that it took a little bit, it’s taken longer for the cuts in the budgets this time to catch up, I think a lot of companies because of when COVID hit had budgeted for a very successful 2020. So they had the money earmarked. And they didn’t necessarily pull back and they’ve continued to spend it now whether they can allocate it again in 2021, depends on the degree of optimism of the company, and so on. Back in, oh, 08/09, you start to see the bottom drop out. And there was some some financial warning signs in the late third quarter and beginning of fourth quarter of 2007. So, so companies were starting in the budgeting cycle to retrench earlier, and then it really caught up. The way we dealt with it is in Oh, 08/09, we had a handful of layoffs where there were very few and they were generally more underperforming people, you’re keeping your best people. This time, we didn’t lay anybody off. We did put temporary and they’ve been rescinded short term salary reductions for people in place in order to keep all staff because we just weren’t sure what we were looking at. But what I promised employees was that anything that they gave back on a temporary basis, we were going to accrue in escrow those actual dollars. And that if as long as we at least, had a profitable year, this year, we weren’t in the red, that we would pay those back dollar for dollar. And that’s what we’re actually going to be doing, we’re actually having a very good year as a result of cost controls, and so on. So all of those dollars and give backs they’ll receive in right before the holidays, this time.

Brad Grantham
From a time management standpoint. I mean, you’re pulled in 1000 directions as a CEO. I mean, you’ve got the agency, you’ve got the film projects and movies that you’re doing on the side, you have all these different things going on. How do you manage your time, number one, because you’ve got everything going on? But secondly, how do you manage the needs of the agency? And what does that structure look like to ensure that the ship keeps going no matter what,

Rick French
yeah, well, the, you know, an agency is a byproduct of all of us. And so there’s I have a lot of great people around me who I can, I can lean on to keep the ship moving in the right direction and get things done. So I look at it, it’s trying to provide more of a guiding hand and be involved where I really need to be with certain clients strategically or very senior level counsel. The film stuff is interesting, because I usually have my mornings that I can focus on the agency at the time. It’s lunchtime, here, it’s 9am. And Hollywood is starting to work. So in the afternoon, I tend to get more things coming across my desk related to film projects, that tends to carry me into the evenings where I’m often working very late because of the way Hollywood likes to work and I’m responding to things and I kind of fit, you know, running my baseball team down in Daytona Beach in that in between there. But again, I think it’s good people allow you to have the time to do all the things that I have my hand in. If I didn’t have people I could trust and lean on, then I would not have the capacity to do it. But I guess the other thing I would add and you guys know this well is nothing sits on my desk, it hits my desk, I look at it and I make a decision. I don’t let things pile up ever and I don’t let them pile up an email. And my when I go to bed every night, my email, I can see my outstanding emails on one screen, and everything is categorized in a file where I know where it is. It helps me stay sane and stay on top of things and also know exactly what I have to respond to and what’s evergreen there that there will be Subsequent response coming in on that. So it comes down to organization, probably a type A personality, in terms of dealing with those kind of things, and just making decisions and going with them. I mean, I know so many people that struggle to make a decision, and things pile up on them, and then the weight of the decision piles up on them. And if you just make it and move on, knowing that there’s always going to be another one to make tomorrow, I subscribed to that being a better philosophy than looking at things from 1000 different angles, and then still never being able to come to a clear, concise decision, like so many people who tie themselves up that way.

Chris Shigas
Let me give you a scenario and see how you could give me advice. So let’s say I wanted to start my own agency, and I came to you as a mentor, I’m thinking I can pull together maybe 15,000 a month in billings sounds like a lot of money to me, you know, it might be a little bit more than I’m making per month. And so in my head, I’m thinking, Okay, 15k a month, I could live off of that, I need to go get a website, I need to make a logo, and I have an agency, what would you say to them?

Rick French
Well, you’ve already framed it, because you framed it, that you can live off that, which means you’re not creating an agency, you’re creating a freelance business in which you’re looking at it from the standpoint of whether you can exist off that you’re not, you’re not necessarily looking at what the long term projections are going to be, I would tell you 15,000 a month, that you should be taking no more than probably 30 to 40% of that total, and living off and then reinvesting it in infrastructure and people and processes and software, and all the things that are necessary to actually grow.

Brad Grantham
So one of the things that that you mentioned, when Chris and I were both there was the again, I could be wrong. Something about the 40 4020? Yep. Can you explain what that is for everybody?

Rick French
Yeah, sure. I mean, there was an old model, and I, you know, the numbers are a little moldable. That said, 40% of your revenue that you take in should be allocated toward hard personnel costs, the people assigned to it 40% should be towards operating costs of the agency, including the CEO salary and other administrative people who are not directly involved in client support. Because your administrator, your finance, people, things like that. And, and then within that, second 40% is often benefit costs and so on, some people will look at it as 5030 and include benefit costs in the in that part, and 20% minimum should be your gross margin pre tax. So the 40 4020 rule had been around forever in the agency business is kind of a gold standard for what you would like to see how you’d like to spend your resources against those. It’s hard to do, it’s increasingly hard to do in a talent driven business in which to hold on to your best people, you have to continue to up their salary every year, even though sometimes their job isn’t significantly changing. And or it may not be tied to the actual revenues that they’re working on every day. Because that can be very fluid and out of their control. So maintaining a 40 4020 is very, very difficult. I think the industry consultants would tell you 50% today is probably the right number to spend on personnel. But they’re still telling you that in that scenario, you shouldn’t spend more than 30% of your revenue and rent and other operating expenses, new business expenses, computers, filings, everything else. And that 20% is still golden. If you don’t make 20% you don’t have enough you’re not generating enough pre tax cash to to build a cash cushion and insulate yourself against client losses. Because there’s no such you know, we’re not in the indentured servitude business either with with people or clients and, and the truth is, at the end of every year, there could be budget cuts that affect the agency and you get very little notice and you need a cash cushion there to be able to ride that out. So while you ramp up the new business process to replace that loss revenue,

Brad Grantham
person, I probably have about two more questions here, each, but going off of that, you know, in the business 23 years, you’re you’re pushing through these times, you know things are good at the moment. The COVID has changed a lot of thinking in the world. And you know, one of those is working from home. You know, Microsoft has told their employees and definitely if you want to work from home even after COVID is gone. That’s an option. How hard is that? Do you think for an agency? And you know, what are your thoughts on potentially, you know, working from home either full time or maybe like a day or two a week? You know, has that cause you to think anything about that?

Rick French
It has. It’s a weekly assessment. You know, the majority of our staff have been working from home throughout COVID. We’ve had a very small team of people in here every single day that are essential to keeping the business going, you know, finance people, and then accounts payable and receivable in my assistant, Sharon, as you guys know, and a few other people have come in because they want to be out of the house. But the majority have worked from home. Will that continue? It’s a really good question. I think it’ll continue in the near term until there is a vaccine in terms of in perpetuity. I’m not a huge fan of it personally. And I’ll tell you why I believe that often great ideas come from the interaction that you have on a daily basis and being able to walk down the hall, if you’ve got a challenge or a problem and talk to somebody else. And I think when you’re just segmented in at home, what you lose is you may still have regular ongoing communication with your team members that you’re working with in an account group once you’re not having any interaction or very little interaction with everybody else in the agency. And I think that it’s stymies creativity. Now, can you get work done? Yes. Can you do good work? Yes. But are you getting the very best of what an agency offers in an at home environment? I don’t believe that that’s, I don’t think anybody’s figured out how to achieve that yet. And I think that last dynamic just means that you’re losing the spark of some of these great ideas. So I hope it doesn’t continue in perpetuity. But I could see a scenario where people get so accustomed to it. And they decide that’s what they want. But there’s a difference between an agency deciding that it’s okay for that, and an employee deciding that’s just something they want, you have to find a happy medium there.

Chris Shigas
I think that’s one of the advantages of agency life. When you’re in house in a corporation, you’re not surrounded by communicators all the time, right? So maybe you’re somewhere wedged between HR and legal, right. Whereas in an agency, you can bounce ideas, you can talk about press releases, or this or that, and maybe they work on a different vertical, but at the same time, messaging is messaging and, and those types of things. So I think that’s an interesting point about how agency people feed off of each other to produce more creative work. A question for you, Rick. Now more than 20 years with with French West Vaughn, and you look at the ebbs and flows of the agency, and, and trends come and go. And we had the rise of social media, and you have to reinvent yourself. As you look back some of the what are some of the things you’ve learned from, and then some of the things that you really feel like you nailed it, and that really gave your agency an advantage?

Rick French
Again, I think this would this goes to philosophy, I have always been of the mindset that Once you’re comfortable with your business and where you are, it’s time to disrupt it. And it’s time to think ahead. So we were a public relations agency that acquired an ad agency during a period where that was very uncommon. It was always ad agencies acquiring below the line public relations firms. And then we moved into digital media very early on, because we could see what was happening with social and the influence of that. And we could see that ad buying was shifting. So and now even within film production, you know, the reason I got into the film business was not not to make motion pictures, it’s, there’s some sexiness to that, that that creates, I guess, a halo for the agency. But the truth is, is that we’re in the short form storytelling business, when you’re an agency, you’re creating press releases, 32nd, ads, print ads, you know, tick tock videos, those are short form content. And I felt like as an agency, we needed the ability to have a longer form content available to us. And we needed to know how to do that where we could weave clients and stories into into longer narratives. So the reason for creating and investing in the film business was to create something. We already had the short form stuff, you know, well in hand, but I saw the future being long form content because brands themselves are becoming publishers and have for a long time now. They’re not relying on third party media outlets to distribute their content. They’re building their Our own audiences and distributing content to them every single day. And so doing that through film, and that kind of storytelling was something that I thought was another kind of evolutionary trend that we would want to get ahead of.

Chris Shigas
Right. And you probably started that, before a lot of these streaming services came online, right? As Netflix was coming up, and they needed content, and HBO Go, and all these other things that now there’s a need for content?

Rick French
Very much so.

Brad Grantham
So you hired Shigas 1.0 that Shigas 2.0. Yeah, Shigas 3.0

Rick French
I was I was still looking for a report. But but but but you know, all kidding aside, you two are two of the favorite people I’ve ever worked with in my agency career just because smart, congenial, willing to roll up your sleeves and, you know, do whatever the client really needed you to do and and just great partners, to the company, and so on. So I was sad to see both of you move on in your careers. But I was also really happy to see you both move on, because you’ve both done incredible with your, your careers and what you’re doing. And I’m really proud of you both.

Brad Grantham
Appreciate that. And I didn’t mean that to go on the podcast. But no, no, but the one question I do have, and I think we can kind of wrap it up. Maybe Chris has one more question. No, you’re good, is looking back 23 years after the fact. If you could go back in time, and tell Rick French in 1997, one or two pieces of advice, what would that be?

Rick French
You know, I think I would, I would tell myself that it’s a really competitive business that you’re going into, you’re always competing against other agencies and other ideas. And I’m an inherently competitive person, as a former, you know, elite tennis player and baseball player, I play all these sports, right? I’m used to winning, you can’t win all the time in the agency business. And winning is very subjective, whether it’s in a new business pitch or your ideas, and they’re in the eyes of the beholder. And so in the early days, I was so competitive, I think in terms of wanting to win every account, and every award and everything else, because I felt like that all contributed to the agency story. But at the end of the day, I think as you get older, you realize that you’re not going to win. It’s like playing baseball, if you bet 300, you’re an All Star. We spend a lot of time and energy and money pursuing new business opportunities. Some of them are legit. Some are just clients fishing for ideas, without any real intent of hire an agency, it’s easy to get frustrated or get get tied up in the failure rate. But you’re going to fail more than you’re going to succeed. And if you’re a 300 hitter, and you’re winning three out of every 10 of those, you’re actually not doing bad at all. And I think it took me a long time to kind of come off the idea that my people are really good, or our D, our ideas are really good. And we should be winning every one of these. And why aren’t we it’s just not possible. It’s not going to happen. And a lot of this business is based on not so much the ideas, but relationships. And whether you click early on when you’re in a new business pitch or whether you’re talking to people, and sometimes you’ll just your hire people that you like to work with, or you think you’re going to like to work with. And if you find that there’s one person that’s off putting in the room, it can change the whole dynamic, and then it isn’t so much about the ideas or experience or anything else. It’s about the people. So at the end of the day, I think what I’ve learned over time is this business is about the people, which is pretty endemic for public relations as a terminology, it’s people’s business. You know, that’s, that’s what I’ve, I’ve learned and I would tell you that if you can step back and have patience and understanding and realize that you can’t win them all that you’re going to get your fair share of opportunities if you stick with it. And if you manage the right way, you can have a really successful agency.

Chris Shigas
Okay, Rick French, thank you so much CEO of French West Vaughan, thank you so much for joining us on PR Wars.

Rick French
Thank you, Chris. Thank you, Brad.

Chris Shigas
You can listen to a new episode of PR Wars every Sunday night at 8pm. On behalf of my co-host Brad Grantham and the entire PR Wars nation. Thank you to Rick French CEO of French West Vaughan and do me a favor. If you’re ready to venture out on your own. Ask yourself are you a freelancer? Are you starting a new agency? If it’s the latter, invest in your business, invest in your clients, invest in your people, then you are on the road to success. Now go get ’em.

PR Wars was selected as a Top PR Podcast You Must Follow in 2020 by Feedspot.

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