Do You Want To Build An Agency Empire?

by | Oct 23, 2020

Lab founder Jonny Tooze has turned his agency into a group of agencies. He’ll talk you through his thinking.

Jonny explains that the change in Lab across the last few years has come mainly from his ambition to do something more than run an agency, and also from a place of knowing that growing an agency organically is really hard. ‘At its biggest Lab was made up of 80 people, it is rare that agencies organically grow bigger than that.’

‘Becoming a group was one of the ways that I could see us growing. Around five years ago, I started having meetings with people in the M&A world and learning about how it was possible. I noticed quite quickly that a lot of groups are motivated by the corporate finance considerations and with this comes a lot of pressure to acquire businesses; you become less of an agency business.’

‘Money or share price seemed to be the key motivator, a lot of them seemed to miss the point of why an agency group would exist in the first place. I wanted to put people back at the core.’

‘Anyone can take money from someone and scale their agency, but you’ve got to have a good plan. We had a vision to create an agency world where everyone was doing what they loved. We put a 4-day week into practice and looked at what everyone actually needed from the agency model.’

‘We thought that we could bring our visions about people and human behaviour to other agencies and offer them value. With a group we realised we could remove barriers to growth for a lot of small agencies.’

‘If you want to create a group, you need a good chairman. I connected with Adrian Webb and he loved what we were doing. He joined us as chairman and backed us. We also put in some money to effectively seed the business. We then decided to take on a small business as a pilot.’

‘I wanted the whole thing to be very organic.’

‘We spoke to Becky and Paul from Refit Digital, who I had connected with a few years prior. We knew from the outset that we didn’t want to do 100% acquisition, but instead wanted between 51-80% of the company. We didn’t want the focus to be on earn outs and money, but instead on passion and motivation.’

‘We wanted independent agencies running themselves who were motivated by growing themselves, but also by growing as a group with the other agencies involved. We did a lot more due diligence on culture than we did on finances.’

‘We haven’t acquired businesses that are competitors, instead they come in doing different things and become specialists in the group for their specific area of expertise. When Refit Digital joined us they were making around £1m in revenue, but now they are on a £1m profit rate.’

When asked about how clients have transitioned through these periods of change, Jonny suggests that ‘actually when a client works with multiple partners within the group, they are more likely to fix any problems that arise than to get rid of the whole group of agencies. They recognise the value of the group and will work harder to rectify problems.’

When discussing structure, Jonny suggests that at the top level, ‘Lab has a Growth Officer, a People Officer and a CFO who work across the entire group. I told them from the start that I back their decisions 100%. They make all business decisions unless they could be catastrophic or unrecoverable, in which case they run it past me.’

He also notes that decision-making from all parts of the business is key for successful leadership. ‘Everyone makes decisions with 3 things in mind;

  • Commerciality
  • Great Work
  • People First

With this system decisions are made efficiently across the whole group and cannot go too far wrong.’