At the other end of the scale from a railroad company is an enterprise, such as an advertising agency, which renders a service that is largely of a personal nature analogous to the service rendered by a lawyer, physician, or consulting engineer. It is true, of course, that many of the functions of an advertising agency are of a more or less clerical nature; but the more important functions are advisory and cannot be performed properly except by well-qualified, high-priced men. For this reason the growth of an advertising agency, if it is a healthy, permanent growth, is necessarily a rather slow process. The time and energy of the principals are limited, and, if an attempt is made to spread their efforts over too many undertakings, the result is apt to be unsatisfactory both to their clients and to themselves.

It would seem, therefore, in considering the financial problems of an established agency, that a reasonably rapid growth ought to be financed directly out of the profits of the agency. It is not necessary to maintain a great working capital in proportion to the volume of business handled, for an advertising agency usually pays its bills on the same terms that its own bills to clients are paid by them. For example, if an advertising agency gets a discount of 2% for cash in 10 days, it should give the same discount to its clients and thus secure the cash from them with which to meet the bill.

In one instance, however, an advertising agency was assisting some of its clients to carry on large advertising campaigns by granting them extra time for the payment of their accounts while the advertising agency was paying its own bills on the minute. The result was that it suddenly became necessary to add $75,000 to $100,000 to the working capital of the agency. The agency had been in existence for many years, was highly regarded, and was making satisfactory profits, so that its record favored the suggestion that preferred stock be sold to some of the personal friends and acquaintances of the president of the agency. In order to make the stock attractive, however, it was found desirable to give it a participating feature, which would make the possible net earnings run as high as 25%. Under these conditions the stock was sold. It is, however, rather an unusual instance of raising cash by sales of securities, for an enterprise in which personality plays so prominent a part.