For over three decades, the West End office of accountants Kingston Smith has been the go-to specialist firm for independent players in the advertising, marketing, and entertainment sectors. Ever since Bob Willott, founded Willott Kingston Smiths, the firm has left an indelible mark on the industry with the annual financial survey which has become the sector benchmark in which firms are measured. Now, in his third retirement, Bob has published a new book titled "Between the Balance Sheets," a compendium of articles reflecting his profound insights. In an exclusive interview with Paprika Software MD Nick Tomlinson, Bob delves into his accidental yet illustrious career, shedding light on the evolution of the industry and the genesis of his latest publication.
Bob's Unplanned Journey:
Bob's journey into the world of accounting was anything but planned. Starting as an article clerk at 16, the decision to become an accountant came about during a casual lunch with a cousin. From being the first-ever editor of Accountancy Age to becoming the technical director of The Institute of Chartered Accountants, Bob's career unfolded in unexpected ways. He encourages young accountants to embrace opportunities rather than stick to rigid career plans.
Specialisation in Advertising and Marketing:
The evolution of Kingston Smith into a specialist for advertising and marketing services wasn't part of a grand plan. Bob's entry into the industry was catalysed by a call from John Bartle, John Hegarty, and Nigel Bogle, founders of BBH, seeking assistance in a management buyout. BBH became Willott Kingston Smith's first client in the advertising industry, marking the beginning of a niche operation that flourished in the West End.
From Fintelect to "Between the Balance Sheets":
The journey from Fintelect to the recently published book "Between the Balance Sheets" took shape over the years. Fintelect, a newsletter focused on financial intelligence in marketing services, was born out of the need to address gaps in information, such as the sale of an agency without disclosed funding. Bob's dedication to providing valuable insights led to the creation of special reports, which eventually culminated in the book. "Between the Balance Sheets" compiles reports and examples, offering readers a comprehensive understanding of financial challenges and successes in the industry.
Challenges in Valuation and Private Equity Dominance:
The book predominantly highlights challenges and lessons from the industry, acknowledging that not everything goes smoothly. Bob addresses the issue of valuation, emphasizing that the frequent write-offs of goodwill and misjudgements indicate a recurring problem in the industry. Private equity, once dominated by major networks, has shifted to private equity investors in recent years. Bob questions whether private equity, driven by short-term profit motives, is the ideal source of finance for people-centric businesses.
Bob expresses a desire for entrepreneurs to continue building businesses for the long term, fostering a culture beyond immediate financial gains. The industry veteran encourages the younger generation to find a balance between financial success and the intrinsic value of a people-oriented business.
Further Insights from "Between the Balance Sheets"
Sir Martin Sorrell, in the foreword, describes marketing services as having transitioned from a cottage industry to a fully-fledged business sector. Bob shares his perspective, acknowledging the industry's polarisation with large conglomerates at one end and startups at the other. He believes there will always be a place for small agencies as some individuals prefer the freedom of doing their own thing.
The conversation delves into the challenges faced by young, talented, and entrepreneurial individuals working in large corporate conglomerates. Bob reflects on the changing dynamics of starting a new agency, emphasizing the increased need for capital and the challenges of securing funding.
The discussion also touches on the topic of earnouts in acquisitions, citing Jeremy Middleton's perspective and the potential downsides associated with this approach. Bob Willott shares his views on M&C Saatchi, highlighting the initial plan where individuals retained equity after selling their businesses to the agency.
However, recent changes in the accounting treatment have impacted profitability and nearly jeopardised the agency's independence. The conversation extends to the variability of profits in the industry, particularly related to goodwill amortisation and its potential effects on company valuations.
The interview explores the internationalisation of agencies, cautioning against pursuing it solely for the sake of expansion. Bob emphasises the need for careful handling when servicing international clients and the importance of maintaining a diversified client base.
The discussion concludes with thoughts on the role of big consultancies in the marketing industry, with Bob expressing scepticism about a massive wave of consultancy acquisitions.
Throughout the interview, Bob Willott shares valuable insights into the challenges and dynamics of the marketing and advertising industries, drawing on his extensive experience and knowledge. "Between the Balance Sheets" stands as a testament to his commitment to providing valuable insights and guidance for all industry professionals.
Watch part 1 and part 2 of the Bob Willott interview sharing his insights about his book “Between the Balance sheets”, video below.
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