AgencySparks
Joe Kaufman spent eight years at KnowledgeStorm, a B2B lead generation company that was later acquired by TechTarget, and then six years leading business development and marketing at Engage, a digital agency that was acquired by Publicis Groupe. When he left Engage, he turned down a salary of $400K plus a $1.5 million earn-out to start his own company. He saw the opportunity in helping independent, smaller marketing agencies grow instead of the large holding companies.
Kaufman launched AgencySparks at the beginning of 2014, describing it as a dating service for brands and marketing agencies. The model was to vet agencies carefully up front and then charge them for business development: a monthly retainer, which averaged about $5,000 per agency on a 12-month commitment, plus a percentage of deals. The company initially limited itself to one agency per discipline, such as one web design agency or one social media agency, to avoid conflicts of interest.
Revenue grew steadily. Year one, which covered February through December 2014, brought in $270K. Year two, in 2015, reached $370K, and 2016 reached $430K. Kaufman then changed the model in 2017 so that clients could choose from several vetted agencies in each category, with each agency paying a retainer rather than a commission.
Kaufman's first customers came through his existing network of agency and brand relationships from his career, which he described as a Rolodex. He said he had introduced at least three married couples and many business contacts through his work. The company's early growth was built on those relationships and on referrals, not on paid acquisition.
Kaufman managed the business with a very small team. He reported four employees, two full-time and two part-time, all in Atlanta, and he tracked a labor efficiency ratio to decide when to hire. He also planned a web training course on business development, to be sold through ecommerce in April 2017, as a second revenue stream. He added that he saw the business as something that could be automated in part, but that it was very relationship-focused.
In March 2017, Kaufman reported $60K in revenue for the prior month and a run rate of roughly $600K per year. He had 11 clients and set a goal of $1 million in revenue for 2017. He said he would reinvest most profits into growth and hoped to build the business over about five years before selling it, preferring to join something larger rather than sell to a recruiter-led buyer.
- •Kaufman's prior career gave him a deep, pre-existing network of agency and brand contacts, which made early business development far less costly than it would be for a cold-start company.
- •Charging agencies a recurring monthly retainer, rather than depending only on deal commissions, gave the business predictable revenue that grew with each client.
- •Moving from one vetted agency per category to several options per category matched what clients actually wanted and raised the revenue each client could generate.
- •A very small team with a tracked labor efficiency ratio kept margins high, which allowed the company to grow revenue without a large payroll.
- 1.Start by mapping the relationships you already hold in an industry, and identify the people who face the problem you want to solve.
- 2.Charge the businesses you serve a monthly retainer with an annual commitment, so revenue is recurring and predictable.
- 3.Vet and curate a small set of providers in each category, and give clients several strong options rather than one.
- 4.Track a labor efficiency ratio (revenue per dollar of payroll) so you know when a new hire makes sense and when your team is stretched too thin.
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