by Herman Manson (@marklives) Ten years ago four friends decided to launch a brand and design agency. Their focus would rest on emerging markets, especially on Africa and the Middle East, although their work would take them onto design adventures in parts of Asia and Eastern Europe as well. They decided to call it HKLM – using the surnames of the four founding partners in alphabetical order – Harwood, Kirsten, Leigh, McCoy.
The four partners had all been directors at Enterprise IG Africa Middle East (now The Brand Union, a WPP Group company) and launched the business less than a week after resigning. “HKLM promises to challenge what it terms the ‘stagnating status quo’ by introducing a more imaginative and strategic approach to brand consulting and design solutions,” the new agency promised in its launch media release.
Today the business generates more than R90 million in annual revenue and has offices in Johannesburg, Cape Town, Nairobi, Accra, Lagos and Dubai. It employs 65 people. Not too shabby for a business that started from a tiny office with plastic garden furniture.
The agency itself has continued evolving since its launch in 2003, says co-founder Graham Leigh. Today as much as 80% of revenue is generated through professional services rather than media. They are evolving beyond an agency into a consultancy, he adds.
The South African business gained traction quickly following the initial launch and was winning significant business within a couple of months of opening its doors. HKLM was named ‘Brand Agency of the Year’ at the Financial Mail AdFocus awards in 2004.
They had opened their first representative office outside South Africa, in Berlin, in 2005. Dubai followed in 2006. Through a series of joint ventures and strategic partnerships it also opened in Lagos and later in Ghana as well as in Nairobi. At its peak revenue outside SA represented around 40% of business, but this varies, and can drop as low as 20%.
The agency has also expanded its offering to include design across a wide spectrum including information and environmental design, brand management, advertising and events.
It’s not all been smooth sailing either – three years ago the business had to finally face up to the reality of the global recession and its impact on their business. “Hope is not a strategy,” says Sean McCoy. The business had to quickly find a balance between its people centric culture and financial performance – today the staff headcount is down form its peak at 80 to 65.
Cape Town also remains a headache – the office is finding it difficult to gain traction in a regional economy where creativity, in the words of Leigh, has become commoditised. With so many creatives in the city people are competing on price. On the other hand – plentiful talent at reasonable prices also allows the Cape Town office to feed work into other group offices.
Then there was the Berlin office which was supposed to take the group into Eastern Europe but turned out to be a very expensive if educational lesson instead (it’s been closed down).
Initially the four partners traded on their own names – people (clients) buy into a group of people – says Leigh. With this in mind they tend to hire entrepreneurially minded talent themselves. It offers the group certain strengths and also vulnerabilities. Nevertheless, considering that the four partners have managed to stay in business together for a good 10 years, it seems like strength is winning out.
Now HKLM gearing up for growth again. Partnerships in other markets on the continent, which includes shareholdings by local partners, extends its own owner managed ethos to offices outside SA. (An agency only has three sets of assets, says Sean McCoy, people, IT and some office furniture. It’s also a lot like a restaurant, Leigh jumps in, the owners run the kitchen and the front of house. But as soon as they shove a manager in there…)
New accounts in HKLM’s African operations includes Nexus Alliance, FCMB Plc, Heritage Bank, Aquila Leasing, Recare and Kenna partners in Nigeria and Ubora Hospital and Tatu Coffee in Kenya.
Locally the market is starting to pick up its head, says Leigh, with the agency taking more cold calls over the past six months than in the previous two years put together. HKLM is also increasing its efforts to move from a project based to a retainer model – although some project contracts can stretch over anything from a year to three.
The agency saw a 31% growth in revenue and new billings topping R10m in 2012. It expects to be a R100 million business at the end of the business year ending Feb 2014.
– Manson is the editor of MarkLives.
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