by Herman Manson (@marklives) As many of the better-known independent agency brands continue to join global agency networks, a new generation of challenger agencies are aiming to take their places — agencies you have probably never heard of. But will.
Built over decades, these owner-managed business are generating revenues of between R40 and R70 million, and have strong below-the-line and digital abilities.
Hero is one such agency.
James Burton and a business and creative partner, Doug Lockhart, took over a small agency called Hero in 1996. The two had previously worked together at D’Arcy Masius Benton & Bowles (later Sonnenberg Murphy Leo Burnett in Cape Town).
Promised to work together again
Their paths had split but they promised one another that one day they would work together at their own agency – Hero would be it.
They got into the digital space quite early, launching Hyperactive (later Fuse Net Solutions) in 1997; the digital agency was later folded back into Hero about three years ago. The agency pitched and won BTL business from Eskom, which put it on the radar.
The agency later won business from satellite communications firm, Iridium. The Iridium client later left for Old Mutual — and took the agency along with it
Burton met Andrew Hall through friends and they soon started cycling together. Hall had started his career as the marketing and events executive for Western Province Rugby Union before joining Protea Hotels as marketing co-ordinator.
Catalyst for growth
After finding that its relationship with Old Mutual was going through a rough patch, Burton asked Hall to come on board and stabilise the relationship. Hall stepped up and the renewed relationship proved a catalyst for growth at Hero.
Hero has been built on project fees — R40 million of them per annum, in fact. Hall, who was recently promoted to the position of co-MD, is changing that and recently signed the agency’s first retainer. He is also chasing new business.
Burton, now CEO but ever the entrepreneur, is incubating new businesses inside the agency environment, such as Hero Plugins and MediaLoop (which offers screen space inside media-buying agencies). Burton says the agency believes in its people and is — providing it makes business sense, of course — willing to back them up with resources.
Generally the agency takes a 60% stake, with the remaining 40% held by the entrepreneur/s it supports.
It was their first job
Burton says the agency enjoys a low staff- and client churn. Nearly all the directors started as juniors at the agency; for many, it was their first job.
Hero achieved 38% growth in turnover last year and employs 58 people in Cape Town and Johannesburg. It has rarely pitched over the past few years because of quick organic growth, but is now of a size where it wants to start competing with established agency brands, says Burton.
For Hall, Joburg is a key growth area. The agency struggled there for its first three years of operation but has since been turned around after Hero acquired a successful two-man agency and brought the partners (Duncan Palmer and Brett Toerien) on board to run the office.
Hall and Burton both want to see the Jozi office sizing up to numbers similar to the Cape Town agency. Its core BTL and digital skills are in significant demand and Hall says Johannesburg will soon have its own traffic and production teams in place, on top of the current nine-person team.
Hall says the agency is on on track to see 20% growth in revenue from last year. “Our projections are to achieve a constant growth rate of 20%+ in the next 5 year period,” says Hall.
Independence a key advantage
According to Burton, its independence remains a key advantage: “It presents a great opportunity to position ourselves as wholly South African and therefore proudly 100% part of and supportive of our country’s economy — in retaining and/or gaining business versus those who are internationally owned, it makes a compelling proposition to certain potential clients/markets.
“It also allows us to be far more nimble in our tactical approach, decision-making process and pricing than, say, a company that is constrained by group oversight, protocols and pricing models,” he adds.