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Change in business model rewards agency 'handsomely' Add to ...

THE CHALLENGE

John Yorke is the co-founder and president of Rain43, a Toronto-based strategy and digital marketing agency. Within months of starting, the company had big-name clients like the Canadian Breast Cancer Foundation, but all of the work was project-based.

The challenge became how to move away from a project-based model that created cash flow challenges and prevented the company from investing in the people needed to grow the business.

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THE BACKGROUND

Mr.Yorke started his career in the digital marketing world in 1994 and over the next 12 years worked with brands like Microsoft, IBM, Bell, Royal Bank of Canada and MTV Canada.

In 2006, Mr. Yorke became a partner at an independent Canadian advertising agency where he began to notice how traditional advertising was merging with digital advertising.

Three years later, Mr. Yorke was watching an episode of The West Wing, when Martin Sheen’s character said: “Just once I want to go to bed feeling as good as I did when I woke up.”

That really resonated with Mr. Yorke, who realized that it was time for a change and decided that now was the best time to build the type of agency that he always wanted to build.

“I believe that marketing agencies should be sherpas to their clients, and I wanted to help clients grow faster by better understanding their revenue streams and customer acquisition models and then showing them how they could improve both by applying technology to their marketing efforts,” he said.

He analyzed the market to understand where the market for digital agencies would be in five years and his analysis led him to believe that the most successful agencies would service their clients better by leveraging marketing automation to build customer delivery platforms.

That’s when Mr. Yorke reached out to John Farquhar, whom he had previously met through a mutual friend in 1999. The two became instant friends and always thought that one day they would go in to business together.

“People say that one of the secrets to running a successful business is working with the people you like. It’s one of the easiest things to say but one of the hardest things to make happen. I decided to seize the opportunity and asked Mr. Farquhar to be a co-founder in the firm,” said Mr. Yorke.

In June of 2010, Mr. Yorke and Mr. Farquhar merged three small agencies to form Rain43: Partners and Edell, a full-service advertising agency; Wildmouse, a boutique creative shop that John Farquhar led; and Combustion Studios, a digital and design house.

The name Rain43 came from the idea that brands needed drops of rain to reach consumers in the digital and mobile worlds on top of the thunderstorms of mass media and traditional advertising they were doing. The number 43 came from Toronto’s position at latitude 43.

Combining the three companies brought in enough business and employees to have a small and profitable company.

Early clients of the newly formed Rain43 were Blue Mountain Resorts, Wakefield Canada, which manufactures and distributes Castrol Motor Oil in Canada, and the Canadian Breast Cancer Foundation.

Winning recognizable clients was great, but the challenge was that all the work was project-based. This meant there were peaks and valleys in Rain43’s revenue, putting pressure on cash flow and made it hard to invest in the future growth of the company.

THE SOLUTION

Mr. Yorke and Mr. Farquhar felt the best way to create steady revenue and agency growth was to transition into retainer-based work. But it also meant that they had to convince new customers to buy into the changes they were proposing.

Potential clients believed in the vision, but were hesitant to hire Rain43 because back then it wasn’t a proven method. It was the classic catch 22 scenario: Rain43 couldn’t get the business because they didn’t have the experience, and they couldn’t get the experience because they couldn’t get the work.

To solve this connundrum, Mr. Yorke and Mr. Farquhar reached out to a former colleague, Kevin Pfuhl who, at the time, Mr. Pfuhl was an experienced senior vice president and managing director at BBDO, the largest agency in Canada.

Mr. Pfuhl believed in Rain43’s strategic direction and joined in the summer of 2011. The three partners then worked together to create a compelling way to bring the creative and strategic components of marketing together with automation to build highly effective customer delivery systems.

THE RESULT

“People heard what we had come up with and decided that having customer delivery experts create their marketing strategy was exactly what they needed,” says Mr. Yorke.

With customers like the Ontario Toyota Dealers Advertising Association (OTDAA), Work Place Safety and Insurance Board of Ontario, Ontario Ministry of Health, Rain43’s revenue has more than doubled, going from $3-million to $6.5-million, and the number of employees has grown from 18 to 50.

While the Canadian market has been good to them, Rain43 is currently considering a U.S. office because more companies are harnessing the power of marketing automation, lead generation and customer delivery systems south of the border.

“Success is for the bold. Companies that have been brave enough to rethink their customer acquisition strategy and implement marketing automation have been handsomely rewarded for their efforts,” said Mr. Yorke.

Craig Elias is the founder of Shift Selling Inc. and an entrepreneurship instructor at the Haskayne School of Business at the University of Calgary. This is the latest in a regular series of case studies by a rotating group of business professors from across the country. They appear every Friday on the Small Business website.

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