Question: I’m new to all this so sorry if this is so obvious. How often do mid to large size agencies contract work out to smaller ones? And what’s the best way to go about starting that relationship?

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Depends on what your company's offerings are. Mid to large size agencies are typically part of holding companies and those holding companies usually have some sort of resource they use within themselves. If you can identify the gap your company can address then lead your pitch to them with that, reach out to the decision makers in those agencies directly.
Other times, it's the client's decision to hire another third party if the agency doesn't serve a need within the fee structure. Again, depending on your services, you should approach them directly and lead with that. Hope that helps!

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No problem, feel free to chat me directly if you'd like to learn more about agencies. I'm pretty familiar with the inner workings

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Often for production. Interactive used to be like that too back on the day, less so now with the likes of huge...Big agencies like 72andSunny had to spin off their internal production shops because clients believed there was price fixing going on. Editing and post shops, design firms & director reps are forms of outsourcing as well.

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