An agency that is a practice is a whole lot different from one that is a business. Understanding the differences, and how they impact psychic and financial success, is vital in aligning the interests of the agency and its leaders. This whitepaper can be of help in creating that alignment.

1. Is Your Agency a Practice or a Business?
by Mike Carlton
Vernon C. Kenny, MD
When I was a kid, Doc Kenny was our family physician.
His office was over the hardware store in our village. When I had an ear-ache or
it was time for a vaccination, Mom would send me off to see the doctor. I’d
trudge up the stairs to his office, with the five dollar bill my mother had given me
to pay him for the visit.
Although he was a lone practitioner, Dr. Kenny took good care of me and my
family. As well as many of the other members of the community.
More Than a Professional Relationship
Dr. Kenny was deeply involved in our small town. He was highly respected. And
very approachable. Not just as a physician, but as a friend and neighbor, too.
For a while during their high school years my older sister dated Dr. Kenny’s son.
I remember how cool it was when he showed up for her in his dad’s big yellow
Buick convertible. Boy, would I have loved to have a car like that some day!
The day my father had a fatal heart attack, Dr. Kenny was at our house almost as
fast as the rescue squad. When it was apparent that Dad was gone, Dr. Kenny
sat in the living room for hours consoling Mom while they reminisced with each
other about Dad.
That wasn’t unusual. It was just the way he treated all his patients and their
families.
Stepping Down
Dr. Kenny lived a good life. When it came time to retire, he personally called
each of his patients and told them of his plans. He offered to not only turn over
their records to whatever new physician they chose, but to individually brief that
physician on his opinion and previous treatment.
That done, he quietly closed his office and moved to Florida.
A Different Paradigm
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2. Today, my health care is in the hands of The Cleveland Clinic. Probably one of
the most highly acclaimed medical systems in the world.
The Cleveland Clinic was founded by George W. Crile MD, a contemporary of Dr.
Kenny. But his vision was quite different.
Dr. Crile set out to create a world class medical facility. His mission was to
provide patients (lots of them) with a scope and quality of health care services
unheard of in his time. His focus was on building the enterprise. His dream was
realized. And it has succeeded him brilliantly.
Each year I go in for my routine check-up. Everything is coolly clinical. Most of
the people involved, with the exception of my primary care physician, I have
never met before. And it seems like there is a different doctor and a couple of
technicians for each part of my body. Most comprehensive. Highly organized.
And very, very professional.
From a technical standpoint these folks clearly know what they are doing.
But, there is little bond with the team of physicians, nurses, technicians, etc. who
are providing that care. I am just another of a myriad of faceless patients they
deal with each day. And while each of them is undoubtedly extremely proficient
that their particular specialty, there is scarce human connection.
It appears that physicians at The Cleveland Clinic are like interchangeable parts
in a huge and very complex machine. Each is quite good. And each is quickly
and easily replaceable.
Unquestionably, the technical quality of care they provide is superb. But at the
same time, the human quality of their care is open to question.
Which is Better?
Neither is better. Neither is worse. Each approach has its distinct advantages.
And it has just as distinct disadvantages. Each provides its patients with
generally satisfactory results.
The differences are simple. Dr. Kenny had a practice. The Cleveland Clinic has
a business. Dr. Kenny’s practice ended when he retired. The Cleveland Clinic
will thrive long after any of its current physicians.
Each approach exists because patients have different wants and needs. And
because physicians have different wants and needs.
In this world of choices, it is as simple as that.
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3. What Does this have to do With Advertising Agencies?
Agencies, like all professional service providers, are either a practice of a
business. Or somewhere on the continuum between. Knowing where you are,
and where you want to be can make things a whole lot easier. A whole lot more
fun. And a whole lot more rewarding.
Some Definitions
First, let’s look at what we mean:
1. A practice is an enterprise in which the revenue stream is closely
connected with the activities of its leader(s). That revenue stream will
quickly dry up without those individuals.
2. A business is an enterprise that can continue to thrive without its current
leader(s). Its revenue stream is, or quickly can be, independent of those
individuals.
That Leads to the Question
Is your advertising agency a practice? Or is it a business?
On the surface this may sound like a silly question. An initial response might be,
“Of course we’re a business. We’re incorporated as such.”
Yet the legal trappings and outward appearances have little to do with providing
an accurate answer to this question. Being crystal clear on the correct answer is
far more important than it may initially seem.
Because your life satisfaction, both now and in the future, hinges on it. And it
truly is your choice.
Why is This Important?
It is an unfortunate truth that many agency owners think that their agency is a
business, when in fact it is a practice. This can lead to all kinds of problems. Not
the least of which is the almost unconscious confusion it causes for agency
staffers.
And for the owners, it can create serious disillusionment. Particularly when that
leader is seeking to merge, sell or retire.
For the fundamental fact is that a business has enduring value in the
marketplace. Most practices do not.
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4. The Acid Test
Ask yourself what would happen to your agency’s revenue stream if you (and
your contemporary partners) were suddenly no longer involved? Leadership
would immediately pass to others. Others that may not have the knowledge,
experience, relationships, skill and drive that you do.
An honest answer to this will quickly tell you if yours is a practice or a business.
Or where it might be on the continuum.
Vive la Difference
Now wait. Don’t misunderstand. There is nothing wrong with being a practice.
Nor is there anything wrong with being a business. They are just different. And
require vastly different qualities and contributions from their leaders.
Typically, all agencies start as practices. They are usually driven by one (or no
more than a few) passionate entrepreneur(s). In time, all come to a fork in the
road. Some evolve into businesses. Many do not. There are reasons for this.
Understanding these reasons, and embracing a self-selected proactive plan
makes success much easier, and life a lot less frustrating.
It starts by understanding which you are today. Which you would like to be. And
what will be necessary from you as leader to achieve your desired outcomes.
This insight should come from conscious, thoughtful introspection and decisions.
The Plusses and Minuses
Let’s look at both models more closely.
A Practice is a great way to live. Carlton Associates is a practice. It is exactly
what I want. There is enormous freedom and independence in a practice. The
leader can set the tone, the style and the pace of the organization. The
passions, the vision, the values, the goals are all easily controlled. A practice
can do what the leader wants it to do. And not do what he doesn’t want to do.
In a practice, the leader answers only to his own conscience.
In addition to all the psychic rewards, a practice can be as financially rewarding
as a business. Or even more so. Thus, the quality of life can be exceptional.
Think of Dr. Kenny. His focus was entirely on his patients. He contributed to his
profession and to society. Enjoyed professional and personal respect. Had a
strong family. He lived well.
In many respects he had it all. Not a bad way to live a life.
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5. But from a financial standpoint, his ability to generate wealth was directly
connected to his work. When he retired, his practice had no residual value.
There was nothing to sell that could fund his retirement.
Nor a booming enterprise that he could bask in the glory of. Or leave an ongoing
legacy that history can attribute to him.
Enduring Value
A business too can be a great way to live. There is enormous satisfaction in
guiding an enterprise from birth through all of its growing pains to a point where it
no longer needs its founder. There is a certain selflessness in this.
Dr. Crile’s entire professional life was focused on creating an outstanding health
care system. His biography describes it as “medical practice on an industrial
scale.”
But grooming an organization for this kind of growth and self-sufficiency requires
a different leadership mindset than a practice. There must be a continuing focus
on the enterprise that surpasses focus on the craft.
The benefits of building a business are clear. Not only does it provide the
psychic rewards of creating an enduring enterprise, it also can have significant
residual financial rewards. The enterprise has value that will outlast its founder.
This combination of psychic and economic rewards can nourish and support a
very good life.
The Role of Indispensability
Within the agency industry key differentiator between someone leading a practice
and someone building a business is their indispensability.
A practitioner usually feels a sense of indispensability in the day-to-day craft
activities of the firm. He is usually very highly skilled in the craft, and personally
touches much of the work. He is good. And the benefit of his involvement is
known to clients and staff alike.
But the flip side of this benefit is that others in the firm can tend to defer to his
thoughts and personal leadership. They may hang back. And as a result often
do not develop their own craft skills. They allow themselves become subordinate
to their indispensable leader. This usually isn’t a happy situation for anyone.
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6. That sense of indispensability can make the leader a prisoner of his own
practice. Making it difficult to grow past his personal span of control. And
leading to higher than desirable staff turnover.
It is not uncommon for a strong practitioner to say, “I can’t find good people so I
have to do it myself.”
Planned Dispensability
The builder of a business, on the other hand, usually follows a course of planned
dispensability. First, she will set a clear and stable vision and values for the firm.
As well as fostering the key elements of the culture.
With those components embedded, she consciously and continuously seeks to
work herself out of a job. Constantly pushing and prodding others to step up to
higher levels of self actualization, so that their craft, leadership and management
skills can more fully blossom.
Her objective is clear. She wants to build the scope and scale of the enterprise.
And knows that accomplishing that requires a strong, entrepreneurial tier of
second level leadership. In fact, leadership development frequently becomes a
mantra throughout the entire firm. And talent is attracted and remains largely
because of the opportunity each individual has to grow professionally.
In her mindset, the work is not the end in itself. It is rather the means to the end.
And that end is in the reputation, growth and strength of the enterprise.
She is the orchestrator that makes that happen. But not necessarily the star
performer.
What to Do If You’re Not Where You Want to be
If your answer to the question tells you your agency is where you want it to be,
great. Consider yourself very fortunate. Your likelihood of psychic and financial
reward is great. Life should be good.
However, if you are not where you want to be perhaps it’s time for some serious
introspection.
For example, if in your heart you get greater satisfaction from practicing the craft
than you do from building the enterprise, maybe its time to rethink the size and
scope of your agency. Has it become a business, or is headed there, and yet
you really yearn for the days when it was clearly a practice? If so, it is within your
power to change directions.
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7. Conversely, if yours is a practice and you would like it to become a business the
actions you should be focusing on are clear. Building the enterprise so that you
can eventually become redundant must take high priority. Sometimes at the
expense of craft ego.
It is Up to You
One of the wonderful things about advertising agencies is the freedom their
leaders have to shape the vision, values, scope, size and direction of their firm. It
always troubles me to hear an agency leader say, “My work is not fun anymore.”
This is a terrible waste. Life should be enjoyable. And so should work. And if it
isn’t, it should be changed. And in the agency world that is fairly easy to do.
The business model of your agency should be in full alignment your life interests.
Remember
There is nothing wrong with an agency that is a practice. And there is nothing
wrong with an agency that is a business.
What is wrong is being one when you would really be a lot happier being the
other.
Copyright 2009 Carlton Associates Incorporated
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