Risky Business: Agency Tackles Economic Realities Head-On

By Laura Borgstede

As founder and CEO of Calysto Communications, a PR and social media marketing agency specializing in the broadcasting, mobile and telecommunications industries, I was experiencing difficulty with high employee turnover. Specifically, when my junior employees reached “senior” level, they tended to go to in-house corporate jobs or to larger agencies that paid more. The constant turnover was making clients unhappy. 

In addition, like just about every agency, we were beginning to feel the economic pinch. Thus, I began to consider transforming Calysto from a ‘traditional” office-based agency to a “distributed” business model, where employees and consultants work from home from locations across the country instead of one central office. Two years ago we made the switch, and I can report that we now save nearly $85,000 a year in office rent; $50,000 a year in IT costs, $20,000 annually in benefits, and more than $15,000 per year in telecom costs. 

You may be wondering what the key differences are between “distributed” and “virtual” models. A virtual agency is one where freelancers work together, often loosely, and do not necessarily rely on a centralized operational or technology architecture and standard business practices. In contrast, a “distributed” agency is one that allows its employees – both contract and full-time – to share files, a phone system and to be trained on a pre-defined way of doing business. 

Not only have we realized substantial cost savings, but there are other benefits as well:

Benefit #1: Better client service. Relying on a distributed model allows even a boutique agency to afford senior-level talent because there are fewer operational costs to absorb. 

Benefit #2: A happier and more productive team.  A 2009 study by Cisco of their own employees found that telecommuting significantly increased Employee Productivity, work-life flexibility and job satisfaction. Plus instead of dealing with the hassles of managing junior-level people, distributed team members get to learn from other senior-level people. 

Benefit #3: More flexibility. The distributed model allows agencies to enter new areas of business more quickly. For instance, Calysto launched a social media practice last year by hiring a few highly experienced social media experts. Hiring these experts would have been cost-prohibitive for the agency under the old model. 

However, there are also some big drawbacks to the “distributed” model:

Drawback #1: High upfront costs. Setting up the infrastructure for a truly cohesive “distributed” agency is no easy task. Migrating from a traditional to a distributed model can take upwards of 12 months and cost more than $500,000 to find the right people and set up the technology infrastructure. 

Drawback #2: Skepticism from potential clients. The reaction of potential clients to the new model can be mixed. I lost several clients after changing the business model and often finds myself defending its worth to skeptics. On the other hand, the distributed model also helped Calysto attract back two clients it had lost previously due to employee turnover and low level of service from junior staffers. 

Drawback #3: Fewer resources for business development. Traditional agencies can rely on extensive staff resources to uncover new client leads and answer RFPs. Under the distributed model, every minute of a team member’s time that is used to bring in new business cuts into the bottom line.

Despite the challenges, the change has been for the better. Under the new model, my clients are much happier with the level of service they receive. I understand that this model wouldn’t work for everyone, but for Calysto, we’ll never go back to the traditional model. 

Laura Borgstede is CEO of Calysto Communications. She can be reached at Lborgstede@calysto.com.

February 4, 2010