How to scale from a freelancer to agency

As a freelancer with several years of experience, I got to the point that the next logical step is to start a agency to help companies with my skills.

There are are multiple questions I had at the beginning of my agency journey:

1) How easy/hard is to find clients?

2) How much initial capital/budget is needed for starting a shop like this?

3) How much do a development shop/agency charge in order to stay in business?

4) Do checks really take 3-6 months to be received from clients?

5) Any recommendations/suggestions/hints/tips ?

I run a small agency of 10 employees and 5 contractors, and there are a lot of things I wish I knew back in 2014 when I started.

1. How easy is it to find clients?

Finding clients is hard. Think hard about what an awesome customer looks like and then figure out how to reach them. This is the most important thing IMO. I’m reading Standout of Die, it has good advice on this.

2. How much cash / what budget do you need?

First attempt, I started with about $40,000 and blew it all quickly as I didn’t have enough sales. Better to get the sales first then grow the rest. You can be transparent about this with potential clients.

3. How much should you charge?

If your costs are £400,000 a year, and you’ll sell 44 weeks of the year allowing for holidays, sickness and wiggle room, then you need to sell £9,000 a week to stay in business.

If you want to make 25% profit then you’ll need to sell closer to £500,000 a year and £11.3k a week.

4. How long does it take to get paid by clients?

I’m in the UK, we pay someone to politely chase clients for payment. This was a game changer.

Most agreed to pay monthly but never do without a good bit of nudging.

5. Any other tips or recommendations for starting an agency?

Most people vastly underestimate how difficult it is to start, run, and scale a profitable agency (dev shop, design studio, or similar).

New business is the hardest part, and unless you’re extremely well-networked, you’ll soon run into problems.

The best advice I could give would be:

– Make sure you really want to do this. It’s way harder than you think for reasons that have nothing to do with doing the actual billable work. (Legal, HR, payroll, management, new business, processes, etc.)

– Keep your costs as low as possible. Average agencies are in the 12-18% profit margin range. Agencies doing very well might be able to hit 25-35% or sometimes more.

– Become a recognized expert in one area.

– Use that expertise to promote and market your company to potential clients in that problem space.

– If you want a leg up on your competition, go hire someone like Blair Enns or David Baker to get you started on the right foot. (nobody does this, but it would save a lot of work in the long run if you can)

There are so many good books and courses on building and running a service business, I wish they’d been there when I started. To name a few.

– Jonathan Stark.com – Hourly Billing is Nuts

– Gareth Healey – Standout or Die

– Jason Swenk – Agency Playbook

– Blair Enns – The Win Without Pitching Manifesto

– Blair Enns – Pricing Creativity

– Traction – Gino Wickman

Running a dev shop can be incredibly rewarding and fun, especially if you love the work you’re doing.

Building a business will be like learning a whole new career, so don’t underestimate the learning curve the number of mistakes you can make (if you’re like me haha).

It’s great that you’re asking for advice, it will save you some headaches 🙂

was in a similar position and found the following quite useful:

– Leaverage your existing professional network to find your first client. Go above and beyond to ensure they see the value of what you offer.

– Build your portfolio and testimonial base from day one.

– A referal client is going to be alot easier to land than an organic lead.

– Develop your processes, standard operation procedures etc as soon as possible.

– Stick with your current job until it’s just not possible to manage both / it’s clear you have enough income to sustain yourself / you’re confident in your business to the extent where you are comfortable living off some savings for a bit.

– Keep your costs low, don’t subscribe to every saas. In saying that, don’t try to save a few bucks by forgoing something you actually need. Rule of thumb is to sit on something for a week before committing to a new subscription. Audit your subscriptions on a monthly basis.

– Get something like Xero to make accounting easier, keep on top of your invoices, outgoings etc to make the accountants life easier / cheaper at the EOFY.

– Finding clients is a mixed bag. Depending on your target audience, happy clients might refer more clients your way.

– Bad clients are most likely going to refer more bad clients.

– Once you are taking off, a proposal software tool like Better Proposals is going to be very useful.

– Poor scoping / agreements will bite you in the ass in the long run.

– Allowing scope creep will set a precedent for all future conversations with a said client. Alot harder to walk it back once it’s been said.

– If you agree to something out of scope, it’s now your problem. Ie if it’s not up to scratch, you can’t come back and say well it was out of scope, we did our best.

– Having a “gap” in your quotes will help you with scope change conversations. Ie. Sure we can help you with that, but that will eat into your gap. A gap is an extra % charged upfront, that is deducted from the final invoice if unused.

– Go for something like Office 365 for Business for your emails etc. Explore all of its features. Most people don’t even know the half of what a ~$8 subscription can get you. Emails. Cloud storage. Client booking systems (Like calendly but better). Teams. Automated forms.

– Setup your Google My Business to collect reviews.

– SEO for your website. Very important. Not too hard to get right if you are not in a competitive space. Write relevant blogs with long tail keywords your clients might be searching, especially if there isn’t much competition on Google.

– Find clients who will have multiple projects for you. Whether it be an agency, or large client.

– Try locate avenues for monthly reoccurring revenue as soon as possible.

– Working 7 days a week for extended periods of time isn’t going to do you any good.

– Don’t buy your domain name until you have registered your legal business name. Make sure you you can try get the dot com + your local tld.

– Most client emails can wait until Monday. Don’t set the expectation you’re there 24/7.

– Don’t get bogged down in a persuit for perfection. We are a web development agency and our website sucks, the rebuild keeps being pushed back because we get bogged down in client work. Our new rebuild is alot simpler and will be done way sooner.

– If this is your first time in business, try find a business mentor. Doesn’t need to be in the same field as you, although that might help. Just someone who knows how to run a business