Finding a full-service niche
While studying at Warwick University, Donnelly set up a fledgling agency with £400 in capital. One of his first clients was a fish and chip shop in nearby Leamington Spa.
When he graduated, Donnelly chose an entrepreneurial path rather than take up a well-paid graduate job offer in financial services. Today, Verb Brands generates more than £4m thanks to servicing luxury brand clients like The Wolseley, Creed Fragrances and Grosvenor Estates.
“We always agreed that we’d pick a niche and become a full-service agency for that niche,” says Donnelly.
Growing through acquisition
The agency’s scaling strategy has focused on reinvesting cash to foster organic growth. The company is also driving growth by acquiring other agencies, like its 2017 acquisition of DBD Media, a small agency that that specialised in performance media, Donnelly says.
With a nod to the corporate mergers and acquisitions market, the deal removed crossover costs – such as office managers, office costs, and software – then integrated the acquired agency. “We took over the business, strengthened the team, and stripped out office and operational costs,” he says.
Donnelly says this strategy has reaped rewards: “From a commercial point of view, it’s been nothing short of brilliant, generating much higher turnover with higher profit.”
“After the process of consolidation we got to a point where we were making an additional £20,000 a month,” he explains. “This had a huge impact on our profit margin.”
Automating reporting tasks has allowed the different teams to focus on upskilling each employee, instead of spending time on manual reporting.
Chris Donnelly, Verb Brands
Taking out the manual effort
While on the lookout for the right target, the company is also honing its profit margin and by deploying tech to refine processes. “Automating reporting tasks has allowed the different teams to focus on upskilling each employee, instead of spending time on manual reporting,” he says.
Verb Brands has recently automated 90% of its monthly and weekly accounts reporting. “This removes about six days of work a month for the pay-per click team,” says Donnelly.
Freeing up capacity by leveraging technology has boosted the agency’s existing human capital potential. “We don’t have to hire more people for existing tasks and can focus on upskilling our team,” he says.
Selling a piece of the action
So far wary of relinquishing equity, Donnelly has “strategic” relationships with private equity houses that invest in digital agencies. He has a sense that many private equity investors “really need to be in digital to stay relevant and they would love to have a piece of us to strengthen their proposition”.
So would he let those investors in? “As for selling equity, I think we’d be open to a conversation but little else at the moment,” he says. But he’s glad the agency has held back from selling an equity stake.
“Selling equity earlier would have affected our valuation.” he adds. “It’s proven to be a sensible strategy to cashflow the business.”