Best of the Best: Underwood’s In-House Ad Agency

Craig Underwood shares insights on the benefits of your own ad agency.

HOW MANY OF YOUR ad dollars are going into your agency’s pockets each year? If the number is significant, you may want to create your own in-house agency. 

Whenever you hire an ad agency, a big part of its fee structure is the 15 percent commission that it is paid by your media partners when the ad is placed. The commission is a built-in fee, typically paid by radio, TV?and sometimes magazines. (Newspapers generally don’t.) How much money would you save if that 15 percent stayed in your pockets? 

MAKE IT REAL

More than 20 years ago, before I came to work for Underwood’s, my father created the William Gravely Agency. It allowed us to do everything advertising-related ourselves, and earn the 15 percent commission back from the media we were buying from.  

We’ve found that by setting the agency up as a separate C-corporation, we have fewer problems in convincing media to give us the commission. Obviously, they’re not going to give up 15 percent of their income lightly. Besides the money it costs them to give us the discount, they also have to worry about losing the business of other local agencies as a result — each one of which may represent 10 or 20 clients. So they have to be able to justify any decision to give us that 15 percent to their other customers. As a separate corporation, we make it easy for them. 

We do all the creative ourselves, along with media placement. We write the scripts, we handle the photography, recording, mixing — everything. We pay corporate taxes as a separate entity. We even invoice Underwood’s for our time and costs!  

INVEST IN AUDIO

It’s much easier to do radio than TV — and cheaper. First, you need to have an acoustically designed recording area set up. Purchase the proper microphones, recording system, and editing system. One of the most popular pieces of audio editing software is ProTools, which provides editing and sound enhancement. (Depending on the version you purchase, you could spend $250 or $8,000).  

You’ll also spend several hundred dollars on a microphone. And you can purchase royalty-free music that you can put underneath your voiceover. Ultimately, you can set up an entire radio production system of good quality for less than $5,000.  

INVEST IN VIDEO

With TV, you’re going to spend a lot more. To get a high-quality studio-grade camera, you’ll need to spend $10,000 to $15,000. Recording technology is moving more and more into recording directly to a “tapeless deck” (also known as a hard drive), But if you want a nice Beta deck, you will need to spend $5,000-$8,000. For video-editing systems, your main choices are Avid, Adobe Premiere Pro or Final Cut ($2,000-$5,000). We are in the process of converting over to Adobe now. We use other Adobe products, like Photoshop, and they all integrate nicely with Premiere Pro. 
And then you’ll likely need a new computer because of the processing time required for video, which means another $10,000-$15,000 on hardware. All told, we’ve put well over six figures into our system. 

INVEST THE TIME

Be prepared to spend time on your advertising, or to hire someone who can. Each month you’ll need to handle billing, check affidavits, and when you’re negotiating your schedule, there’s a lot more time spent on research. And then there’s the creative — writing the ads, shooting product, recording and editing. I would guess maybe a couple of hours a day over the course of the year, on average. 

But to tell you the truth, even if you have an agency handling your advertising, you’re still going to put a lot of time into working with them, communicating your vision, overseeing the negotiations, etc. So the net difference in time invested may not be that significant.  

THE BOTTOM LINE

If you primarily use co-op ads, an in-house agency isn’t for you. If your campaign is primarily print-based, it’s probably not worth the time and effort, because you won’t earn the 15 percent commission. But if your campaign heavily involves television or radio, it’s something I recommend investigating. Take a look at what you’re paying your agency. What is your total yearly expense? You may find that the money you save by doing your media placement and creative yourself is well worth the effort. I certainly know what 20 years of savings have done for our bottom line! 

URL: www.underwoods.com