42 Degrees - Business from a different angle

"Toot-de-toot, toot-toot, toot-toot, toot." Who doesn't remember the red telephone on wheels in the Direct Line ads? It was one of the best-known advertising icons of the 1990s. And do you recall Connie, the pretty girl with the weird blue moving dress in the AOL commercials? She, too, is almost certainly lodged permanently in your brain.

Neither has been on air for a couple of years now. But both campaigns were the work of Tim Mortimer, whose advertising agency MWO was one of the surprise successes of the past decade. While not quite in the Saatchi and Saatchi league, MWO excels in the old-fashioned art of creating simple, popular and effective campaigns through the use of an end line, jingle or brand icon that you just can't forget – no matter how much you may try.

Mortimer set up the business in 1994. He felt that advertising had become over complicated and just a little bit 'up itself'. He wanted to try a less pretentious approach. "People try to mystify advertising with marketing science and creative mumbo jumbo," he says. "In fact, it is a very simple business that needs a lot of common sense and a measure of creative inspiration."

It was the beginning of remarkable 11-year rollercoaster ride that would see his agency unexpectedly go from zero to £10m turnover in eight years, back to near zero again and then rise from the dead as a thriving concern. "Building MWO was exciting, nearly losing it was heartbreaking, but coming back is what I am really most proud of," says Mortimer.

At first he had no idea how successful he would be. But, within two years, Mortimer amazed rivals by beating some of the most famous names in his industry to the £12m advertising account for Direct Line insurance. Two years later MWO was rewarded for its unfashionable but unabashed populism with the £3m account of a little-known internet service provider called America Online.

Aided by Connie, the account grew on the back of the internet boom and, come the millennium, Mortimer's two key clients were spending £76m a year on advertising. Life was sweet. His agency was now in the premier league making profits of nearly three quarters of a million pounds a year.

Mortimer worked hard and enjoyed the fruits of his labours with all the accessories of the successful lifestyle. Then disaster struck. Within the space of 18 months he lost his contracts with both AOL and Direct Line. "AOL went first," he says. "I remember feeling winded at the news. But Direct Line was the killer. We had done very well for them, so it was a complete surprise. I felt physically sick when I was told."

Losing AOL and Direct Line didn't just take MWO back to where it had started. By now the company had 32 employees and a lease on 3,500 square feet of smart offices at central London rates. "Obviously there were no profits and I had to sacrifice my own salary," Mortimer says. "I went from living high to being careful about even small items of personal spending. It was very, very painful."

Direct Line gave MWO six months' notice, but Mortimer knew he was staring at going under: "They asked me to repitch for the business but that alone would have cost me a hundred thousand pounds. For months I kept on running different scenarios in my head about how I could save the account."

Ironically, the turning point only came when he gave up any thought of winning the business back. "Trying to retain it would have sunk us. It was only when I let it go that I could start addressing the very difficult realities of my situation," says Mortimer.

He put in place a battery of cost-cutting measures. "During our growth phase, my time was more profitably spent making money than saving it. So I soon realised there was a lot to cut." Flowers, cabs, free food for the staff, first-class travel, computers, stationery, were all pruned. He also renegotiated the lease on his offices. "It's amazing how you save tens of thousands of pounds on bits and pieces you hadn't even noticed, " he says.

But by far the most difficult decision was having to make redundant 15 people who he regarded as friends, who had worked tirelessly for years and who had to go through no fault of their own.

The decks were now clear and it was all hands to the pump rebuilding the business. At the time you wouldn't have bet on a recovery. But, much against the odds, MWO has been remarkably successful. It has regained half the turnover with less than half the expenses and now has a much wider portfolio of clients.

Mortimer is still angry at the way some clients seem to change advertising for change's sake. "These companies had invested hundreds of millions of pounds in their icons and then they just chucked them away," he says. "It's like burning down the factory because you're bored of it."

But he's older and wiser and claims he's learned a hard business lesson about the dangers of building a business dependant on too few customers.

"No matter how good business is, never rely on the business you've got. In a service industry you've always got to be looking for the next customer because you never know when you'll need them."