Agency Equity Partner Success and Setbacks at Arcane Marketing

From bootstrapping his own agency, to fluctuating equity partnerships, to a 40% drop in revenue, Nathan Hawkes of Arcane Marketing has seen it all during his nearly two decades in the digital marketing space.

Despite the challenges, Nathan has proudly grown Arcane Marketing to serve over 150 loyal clients (and counting) across the United States. 

The journey has required courage, resilience, humility, and a willingness to pivot and employ innovative strategies to maintain an upward growth trajectory. Today, Nathan shares with us the key lessons he’s learned about communication, client retention, and committing to relentless growth–even when the chips are down.

The Agency Before the Agency

Nathan Hawkes was managing a jewelry store circa 2006 when he had an opportunity to change career paths.

“Two close friends of mine wanted to get into the digital marketing world and they invited me along because of my business development experience,” Nathan shares. The plan was for Nathan to join in a sales capacity, with a clear path to becoming a full equity partner once he achieved a set benchmark for the agency.

The early days were exciting as the agency grew and an increasing number of clients signed on. But differences in opinions about strategy and vision for the business between Nathan and the other owners soon became apparent, starting with which services to offer.  

“We were kind of a jack of all trades,” says Nathan. “Anything to do with online services, they wanted to be a part of it. Whether it was application development, website hosting, or SEO.” Nathan, conversely, saw the benefit in niching down. He noticed how the agency’s willingness to cover too much ground was coming at the cost of developing subject matter expertise in specific areas.

Nathan’s approach to business development was similarly at odds with the agency’s vision. 

“Two separate high-dollar clients were about to sign up with us, but they wanted me to travel from Idaho to meet them in Texas to make the deal in person and shake their hand first,” Nathan explains. “My business partners disagreed and wanted the contract in writing before we discussed travel plans.” Ultimately, the decision led to the clients declining the deal.

The last straw came when, shortly after, Nathan reached the intended benchmark that would clear the path for his equity partnership and the other partners reneged on their verbal agreement.

“Had I gotten it in writing, things may have been completely different,” Nathan shares.

With so many differences in vision for how the agency was being run, and the potential partnership no longer an option, Nathan made the hard decision to break out on his own in 2015. 

“I had been thinking of starting my own agency for some time,” Nathan says, “and I had about five or six clients that personally called me and said ‘Working with you has been fantastic, if you decide to do something on your own, give us a call.’ So I took that as a sign.” 

From Bootstrapping to Booming Business

Excited about a fresh new start, Nathan launched Arcane Marketing in hopes of running things differently. He was a “one-man-show” working from his basement for a few weeks and then decided to call one of his friends to help him bootstrap the agency together. 

“He said yes and we grew like crazy with no financial backing,” Nathan says. “We were working out of my house for a few years until we got it to a place where we could hire a few team members who initially started as contractors.” 

As their primary business development strategy, Nathan and his business partner, Myles Arbon, focused on attending networking events and ramping up their own PPC and SEO marketing campaigns. By 2019, the agency had grown to 90 clients and 10 full-time employees, at which point Nathan could justify leasing an office space. 

“Everybody came into the office except a few remote employees who were in Washington and California,” he says. “But the majority of the team worked locally in Idaho Falls. We wanted every employee to come into the office and work together in person.”  

Image: Nathan Hawkes, Myles Arbon, and the Arcane team attending the 2022 Funnel Hacking Live event

Exponential Growth From Like-Minded Equity Partnerships

Because Idaho Falls is a small city (with a population under 70k), the local digital marketing scene is a tight-knit community. As Arcane grew and Nathan extended his vision for the agency’s reach, it was becoming hard to expand without stepping on other agency leaders’ toes.

Nathan decided to speak with a group of other local agency owners to see if they were dealing with the same challenges. 

“We met up because we were working with similar clients, and we were all focused on growing our agencies with the same morals,” Nathan explains. “We all wanted to win, so we put our heads together and thought about how we could make this work.”

The result? In 2019, Arcane Marketing opened its doors to four additional equity partners, each one a local agency owner serving a different niche, including videography and social media. Arcane Marketing kept its name and brought the other agency partners under its umbrella since, at the time, it had the greatest market share and brand recognition.

The plan was for all six equity partners to “give it their all” for a three year term, at which point the group would consider selling the business.

Joining forces reduced competition in a competitive community, brought in subject matter experts to offer new services under one roof, and ultimately scaled Arcane Marketing quicker than Nathan and his previous existing partner could have on their own. 

“The new equity partners all brought different skills and unique perspectives, and we started seeing some wins in the first eight months, which was really exciting,” Nathan smiles. “We grew our agency by massive leaps and bounds–around 140%.” 

Macro and Micro Issues Strain on Equity Partner Relations

The equity partnership brought in roughly 40 new clients instantly, and another 40 or so signed on shortly thereafter, stirred by the buzz of the merger. Things were looking up… and then Covid-19 happened.

“We lost almost 40% of our revenue during the pandemic,” Nathan shares. 

To add to the pandemic stress, the new equity partnerships began to crumble. “Different personalities, a potential divorce, having a child, and other business opportunities pulled us apart. It changed the dynamic of the business internally that was difficult for us to navigate.” 

Following some tough discussions, Arcane Marketing was back to two equity partners, two years shy of the three-year end goal.

“I really do feel that if we had enforced our 3-year agreement in writing, maybe things would be different or even better, and maybe our agency would be larger,” he says. “Having it documented would show that we were all serious about growing our business.” 

This marked the second major occasion in which a verbal agreement had dissolved. It became clear to Nathan that, no matter how firm the handshake, moving forward, all business agreements would need to be formalized in writing.  

Given that many of Arcane’s new clients came as a direct result of the burgeoning equity partnerships, the agency faced the prospect of clients leaving alongside the partners. But Nathan and the remaining partner, Myles, chose to keep focusing on providing world class customer service and keep moving forward. 

While Arcane did lose some potential new leads that would have been accessed through the equity partners’ professional networks, they didn’t lose a single existing client when the partnerships dissolved. 

“We’ve had multiple growth challenges and I’ve learned that it’s important to navigate those challenges ahead of time with clear communication,” Nathan expresses. And getting things in writing! 

Thankfully, all of Arcane’s exiting equity partners parted on good terms. The group remains close friends to this day. 

Authentic Communication for Executive Alignment

Today, Nathan chooses to focus on the positive side of lean leadership. 

“When you have more opinions in the room during meetings, it can get complex, and some people get passionate about doing one thing or another, and it can cause tension,” he explains. "That doesn't mean you can't have many equity owners but the fewer people who are doing the actual day-to-day management in a company, the better.” 

He reflects on meetings held with the six partners that would feel somewhat unproductive, and conflicting issues would be left unresolved. 

“Having too many cooks in the kitchen adds complexity,” he states. 

Now, Nathan and Myles have grown into an even stronger partnership. With just the two of them, they’re able to meet one-on-one during a weekly check-in and have gotten to know each other better. 

“We didn’t start out as the closest of friends, but we've become closer on a personal level over the past four years to the point where we look out for each other from an emotional standpoint,” he says. 

Getting to know Myles better has helped Arcane Marketing get back on track because they’ve learned to foster clear communication. They’ve implemented the Entrepreneurial Operating System (EOS) to add structure to this process and now lean into each other’s strengths and delegate weaknesses to grow the business.

“Implementing the EOS framework has helped us foster authentic meetings and talk through any feelings and emotions,” Nathan explains. “Myles is on the operational and financial side of things and I tend to focus on business development and relationships.” The EOS system helps them come to the table with a common structure and language. 

Nurturing Deeper Client Relationships Leads to Long-Term Success

Nathan carries his belief in good communication right down to the clients Arcane Marketing works with. In fact, he cites strong communication as one of the factors that’s helped them continue delivering results and retaining clients.

“We're really good business consultants,” he says. “There have been many times where we've offered non-marketing business advice to our clients that has really helped them and it’s another way that we can add value.” 

By providing this extra value to their current clients, they have received more referrals and achieved a high success rate in closing deals.

“We’ve done the measurements and documented a 90% close rate with our referrals,” says Nathan. “That comes from building a relationship, communicating about what we’re going to do, and then actually performing and delivering results.”  

Nathan shares the importance of relationship building with clients during their company meetings so that the team understands why they should go above and beyond to make personal connections. 

“People don't do business with businesses. They do business with people,” he shares. “relationships are far more valuable than people think.”

Image: In 2021, Nathan Hawkes was recognized as one of the top 100 digital marketers in the United States by MARSUM/Marketing 2.0.

This focus on client relationships has also shaped Arcane Marketing’s future growth strategy.

“It's okay for us to have fewer clients with better relationships that go deep, as opposed to going wide and broad in our lead acquisition and churning through clients. That gets old and monotonous quickly,” says Nathan.  

The Gift of Tough Lessons

With nearly two decades spent in a growth marketing environment, Nathan has honed his business acumen while learning about his own personality and interpersonal relationships as a whole. 

In particular, he views the latest changes in Arcane’s equity partnerships as a valuable lesson in humility that he might not have experienced otherwise. 

“I can only imagine that if my success had continued on, I might not have had those opportunities to learn these hard lessons,” he expresses. “So I'm happy with how things have turned out.” 

Arcane Marketing is focused on a future with strong client relationships and custom-tailored service packages. By avoiding a generic “one-size-fits-all” approach, they’re excited to deliver the level of results that their clients need to succeed. 

“We believe in offering people genuine value first and proving that what we're offering is going to help them,” says Nathan. “Once we show that we’re good at what we do, they learn to trust us and see where we add value to their business.”