Another important new character, Joe Arthurson, who could be a major asset for the agency, emerges, but first Al and Bill have to talk Joe’s father Ian into a partnership deal.
JOE
The next item was Joe. Bill sounded Joe out on the idea of his becoming a silent partner in an advertising agency. Joe and Bill had managed to form a friendship, and Bill had been so struck by Joe’s work that he’d made a point of showing Al a few examples. Al had been very surprised, highly impressed, then highly enthusiastic. He missed working with David, and Joe’s work was excellent. He told Joe, in detail, the story of the new arrangements at the agency, and the need for some real cash to enter the business. This was done with a sort of ruthless honesty, culminating with: was Joe interested, either in working with them as a graphic artist, or partner, or both?
A graphic artist is always a graphic artist. That was never a problem. Joe was very much in favor of both, because it was a meeting of Joe’s two great ambitions, art and independence. Joe was effectively grounded, financially, for the English Curios fiasco. He was in a hurry to make up ground with his father. That mess had put him in an extremely difficult position, even if he’d got out of it with more or less a whole skin thanks to Bill. His judgment was now suspect. Money is an unavoidable topic in the lives of the wealthy, and stupidity, however innocent, is not an asset. Getting lucky didn’t count in Joe’s favor. His father would have to be persuaded that there was some good reason to part with a cent. That was interesting, because they’d come up with a figure of one and a half million as the amount needed, and that’s quite a few cents. Effectively they were getting back to that same three million the agency started with.
It was arranged, eventually, after some intensive spadework by Bill, to meet Joe’s father for dinner at their place, which turned out to be in a pretty well-heeled older part of town on Sydney Harbor called Darling Point. They arrived to be met by a domestic who looked and sounded as though he could give etiquette lessons to the A List anywhere on Earth. They arrived in a sort of cathedral hallway. This was Old Money territory, and Al knew he was in for some new experiences. Old Money has had the time to learn what it can do, and when it does something, it tends to be ahead of everyone else. He made a point of not valuing things. David had told him that if you really wanted to bore or offend one of these people, start talking about their money at them, or valuing their property. Then he’d introduced him to his father. A stray thought reminded Al that David in his early days had also been ferociously determined to achieve his own independence. Maybe that was why he hadn’t seriously questioned Joe’s position. At this point he needed any reassurance he could find.
A man in his fifties, probably, appeared. This was Ian. A very well turned out woman in her forties, he assumed, greeted them as they were gently swept into the living room to meet Ann, Joe’s mother. No clangers, so far. Drinks were served, and Ian began talking business when Joe, a windswept looking late-twenty-something, arrived.
“Well, Al, I hear you want Joe to become a partner in your business. Why?” asked Ian.
“We need capital. Bill says Joe has both capital and good skills as a graphic designer. From what I’ve seen of his work, I agree. We need in-house graphics design, because the visual component is so important. Production quality is vital, and an in-house guy saves time and money. I think maybe I better color in the story of the agency so you can see where all this came from…….”
That hadn’t sounded like one and a half million’s worth of anything to Al. He tried very hard not to ramble. It was a complicated enough story without help from digressions. He also knew from Bill that an introductory phone call from him to Ian explaining the idea in principle had taken two hours, just to get the invitation. That was significant, if you knew what two hours were worth to Ian. Having explained as well as he could, Ian looked at him with a raised eyebrow. Al wondered if he could shoot down planes with it.
“So you took over the remains of the business and put your own money in it. Altruism? Enthusiasm? Masochism?”
“None of the above. I did the figures for the agency before they even set it up. Tony Fazzina is a clown, and whatever he did doesn’t affect the basic tenets that the agency was based upon. I think David was onto a winner. I also think that I’ve found at least two very useful people who have better instincts for this business than a lot of professionals I’ve met in the last couple of decades. We just got a very good client, who I hope we never lose, thanks to Bill.”
“Good in what sense? Cash up front?”
“Yeah. Good industry to do business in. Pet food. Very solid market.”
Forgive me, Dorothy, he thought, noticing that his vision of her had her in a sort of Greek temple, for some reason.
“That’s true. What would Joe have to do to be a silent partner?”
The phraseology was nowhere near as glib as it sounded. Al was wondering how Saul would get along with Ian. Same twists in sentences. If you missed any of them, you really lost points. What would Joe have to do if I give you one and a half million dollars, he meant, and the sarcasm wasn’t exactly hidden.
“Do our graphics, TV production, and visual design work. Do the bottom-end stuff. Get trained by Bill in actual account management, not theoretical, including the really tedious spreadsheet stuff like balances, reports, invoices, contracts, the gritty, gruesome, work. Get trained by me in the advertising business, and get trained by Carla in the discreet art of client-handling.”
“This is rather a lot of money to be throwing at a job, you know, Al. What sort of terms are involved in the partnership agreement?”
“51-49 split, after overheads, my way. I get final say in the decisions. Not a democracy. Full equity returns, pre-tax, with an assigned amount to be determined annually to cover operating costs, shared between us on the same equity ratio. Tell you what; you draw up the agreement, on that basis, if you like. That way you know what’s being signed. Whatever you feel is appropriate to safeguard the investment.”
That was no concession. Al needed the money to stay in the game.
“That values the business at three million, without sales to cover it, even nominally.”
“We did finally get a balance sheet put together. This is David’s last return, this mess is the Fazzina era, here, and this is current.”
Al, in a sort of entranced horror, thought that if he’d ever in his life had any idea that he’d be trying to get this sort of money out of anyone on the basis of figures like that, he would never have tried to believe himself. The fortnight’s work was absorbed by Ian in about two minutes. To Al’s great relief he went straight to David’s figures.
“I see David was on track to get some decent returns going with those clients you said Fazzina lost for you. How are you going at getting them back?”
“Fifty-fifty. Some were really terribly offended, and I can’t blame them. Some I’m going to get David to call, and a few are nibbling. We have one new bite from the outboard people.”
Further interrogation, and a lot of it, got pretty technical. It seemed there wasn’t much Ian didn’t know about advertising, and Al was inevitably asked about his business plan and visions of management, in a dry voice that suggested Ian was being a great deal more sarcastic than Al would have believed. This was tougher than a job interview, which in a sense it was. Al stuck to his one guiding business principle; he didn’t promise anything he wasn’t sure he could deliver.
An excerpt from the latter part of the grilling:
“We don’t have the facilities to run a full service job for big clients. We have to operate on what we are actually able to do. We can do things at the lower end, the straightforward promos, the fairly simple stuff, like we’re doing now, basic ads, and in-house promo material. Any kid with a laptop can do that. There aren’t enough hours in the day or enough people to do the rest of it. We have to sub out a lot of stuff because we’re actually pretty busy. Against which we still have to keep our costs down. That’s why graphics are important. They’re also valuable; we can make a bit on trademarks, and things like that, but they have to be top quality.
We’re up against market rates, too, and TV stations and magazines don’t reduce their rates because you’re a nice guy. I notice that the top Australian agencies have an income which figures out at about a sixth or a seventh of their billings. (That’s what they pay for ads on behalf of their clients). That rate is prevalent for the top 12 or so, on very large revenues.
The fact that they’re all making the same ratio of income suggests that they’re all operating in very much the same way, in the same market environment. We’re like a smaller guy on a football team. We can’t muscle up with the big guys and expect to get very far, and there are some things we can’t tackle. We can’t do six month national campaigns with multi million dollar budgets. We don’t have the capital, or capacity.
What we can do is provide specific things, at rates which the larger agencies couldn’t be bothered with. (Yeah, that reduces profit, Ian, but it also gets, and far more importantly, keeps, cash customers. This is a high cash flow business. We can’t function at all without a steady cash stream). It takes time to build up a clientele, and get a rep for anything, good or bad.
This is not, ever, going to be a get rich quick scheme, because you don’t, you can’t and you won’t. The industry isn’t a charity, whatever you may hear about massive accounts, and decadent alcoholic advertising executives. (Yeah, like David. Caligula in drag). You can be very dead if you don’t get solid results. You’re expected to deliver, and you’re disposable if you don’t. I expect a few years very hard slog before we hit a smooth ride.
So, the equation is: X capital + Y customers + fees – cost of ads/promos/ overheads = income, if you’re doing it right. Sound familiar? It’s also a small market with most of the big money well socked in. The small money is just that; small. Dorothy is our biggest account at this stage, and although we’re doing pretty well for such a short period, largely thanks to Bill and Carla, it’s still hand to mouth stuff. We’ve covered the rent on the office, with a reasonable profit.
We’re making a slightly better ratio because we had the chance to do some of our stuff at no charge; really, Ian, the margins are a bit better because I did the Iota and Flingers Friends things, and Bill knew a few people. If we’d had to get too much outside help it wouldn’t have made half as much, and would have taken weeks we didn’t have. We’re still charging the rates David set up, by the way. Not quite rock bottom, but designed to get business; a bit of a discount to normal. Admittedly the income from that will grow a fair bit with return work, but you see what I mean, there aren’t too many “gimmes” knocking about .
We have to grow. X can reduce very fast indeed, (Particularly if you have to bring in third parties for production: you’re at the mercy of their rates; you have to have production costs under control.) Y is a negotiated, nitpicking, maybe, fees are movable, and costs and overheads are constant and definite. If we work on low rates, we need to be doing a lot of work. It will make money. The question is will it make enough money.
Yeah, I want to keep the Rocks office. It does have that Sydney Icon image, and it looks good. It’s expensive, though, and we really can’t afford mistakes at this point. (…Direct marketing? Yeah, it makes money, but I dislike it intensely, Ann. It’s a potentially very bumpy ride. That’s one part of the industry I’m happy to avoid, despite the fact we need every cent. DM has a poor image, particularly at the top end of the market, and in the industry. You can’t even really use DM professionally as a basis for getting anyone to believe you’re much more than a noisy spruiker, as an ad man. It’s perceived as shoddy selling, which a lot of it is, and the DM suppliers aren’t even particularly reliable clients. Some of them also don’t know the laws about the garbage they sell.) Ah, that’s about it, really, Ian.”
Al was suddenly very glad that the idea of playing poker with Ian had never occurred to him. He also noted that for the first time since arriving in Australia he was talking at his American speed, which was fast, almost machinegun, and they hadn’t got lost. That was new.
“Joe. You want to do this?”
“I don’t see many possibilities of continuing my graphics, and getting any worthwhile business experience doing much else. I want to do my work and stand on my own feet. I’ve tried every bloody thing I can think of, Al, to do my own stuff professionally, and it’s been an obstacle course. Let’s face it, Dad, I’m also not likely to wander back into business college and become Alan Greenspan. ”
A quick back and forth established that Joe had in fact qualified at a basal level business college. Theoretically he was able to be a manager of a business. It was just that he’d unreservedly detested every second of it. He’d left with an unshakeable hatred of anything to do with business management. Ian had pushed him into it, he’d done it, and that had set the scene for his refusal to follow up on it. Even Ian didn’t seem to be denying that.