Working as a freelancer isn’t always the easiest path to follow, but it can certainly be the most rewarding and offers the biggest perk of all…
You have the freedom to pick and choose what you want to work on, who you want to work with, and how much to charge. Vacation days are all up to you. Hours are all up to you. You answer to no one.
It sounds great, right? Unfortunately working as a freelancer also lacks a lot of the benefits of being a full-blown digital agency. You miss out on things like company healthcare options and taxation benefits. You also can have a harder time landing the BIG project contracts though. The mid to large-size companies are going to prefer the safety of an agency over a freelancer. An agency implies that a whole team will be working on the project. An agency implies long-term stability and a history of success.
Despite coming with a higher price tag, larger companies are going to go with an agency over a freelancer the majority of the time. They have the money so they are happy to pay extra for the added security of using an agency. They’ll pay for all the extra overhead that an agency has to charge for in order to thrive because they are buying into the image and all the weight behind it.
As a freelancer, you likely want to keep your freedom and be your own boss, but you also want to land some of the big fish. It may be time to not only be your own boss. It may be time to be THE boss of your own agency. Oftentimes the same traits that make you a great freelancer are the ones that will enable you to successfully transition from freelancer to digital agency owner.
Let’s take a look at how you can prepare and pivot to make this goal a reality.
#1 Master the Art of Selling
Every successful agency is launched on the back of a stellar salesperson. A salesperson is a master of influence, psychology, verbiage, and closing the deal. If you are a freelancer who has reached the point where you have enough work coming in to be thinking about making the move to start an agency, then you likely have had some decent success in networking and selling yourself already.
To begin the journey as an agency owner, you will need to take your sales skills up to the next level and own the fact that you will be the face of the agency at this stage. Steady incoming work and retainers become more and more important to sustain enough cash flow to cover employees. You’ll need to turn simple projects into retainer contracts, upsell other services, and convince bigger and bigger clients that your services will be a value to them with the higher price tags than you used to charge as a sole freelancer.
Compiling case studies and a stellar portfolio will provide invaluable tools to help sell your agency and it’s always useful to get some recognizable brands on your client list at the beginning even if they get cut some slack in price. The evidence of one major brand putting their trust in your agency gives major trust signals to other brands that you are a safe and reliable agency to work with. It is basically the equivalent of social proof for companies.
These skills can all be learned, practiced, and honed over time until you are a selling machine. A good starting point to up your game is to read some books relating to the psychology of sales and influence. Learning what to say, how to say it, and how it gets interpreted by the potential client are key concepts that will be opening the doors to your next big contract. It will take practice, but it can all be learned.
Here are some good resources to get you started:
#2 Build Up Your Network
As a freelancer, networking as a way to generate more work and networking to build up a bench of fellow quality freelancers should be something that you are already familiar with. This principle is no different and is even more important than before considering the difference in scale that an agency should be compared to a single freelancer.
Local Freelancer Bench
A local bench of reliable resources is important because these people can provide visibility and direct communication with clients if needed in the early stages of a startup agency. No client wants to hear that you’ll be outsourcing all of their work and it can come across poorly if, as an agency, you are the only person they ever actually get to speak to.
Using local contractors when you are still a freelancer and after you’ve made the switch to be an agency owner gives you a chance to test out their skills and how well you get along with them. This is important because these people are ones who could potentially be employees in the not so distant future or potentially even partial owners of the agency with you. You’ll be able to find other freelancers at coworking spaces, local groups, and through word of mouth.
Not all freelancers will want to give up their freelancing career to work at a normal company again, but many will still be interested in the stability and benefits that it provides. Giving a really valued freelancer that you believe in a stake of ownership in the company when it’s a new startup makes it all the more appealing to join in the agency venture.
A good way to convince a contractor to make this move is to keep them busy so that they are practically working for you full-time already. Then, making the switch to be a full-time employee who can get various benefits becomes almost a natural transition. Just don’t make the mistake of hiring before you need to or you’ll just end up wasting money over time.
We have hired this way many times at our agency where we may have used a freelancer for a project in an area of expertise that we didn’t have a full-time staff member for and really found them to be amazing at what they do. Then when we expanded services in the future, these local freelancers were happy to come aboard and play a crucial role in this new business area.
Reliable Remote Bench
Remote workers are a regular part of digital agencies these days for a multitude of reasons, which also depend on the work being done.
- They can do more menial process-oriented tasks for a cheaper rate than your full-time employees, which also frees up your full-time employees to work on other more specialized tasks
- They can take care of temporary overflow work that did not justify bringing on another full-time hire.
- Remote agencies can take on full-size projects entirely without requiring to use many of your in-house resources at all beyond someone to check in and deal with being the communication middleman.
- They can work with technologies that your full-time staff isn’t familiar with and likely won’t have to work with again in the future.
No matter what the reason, remote contractors are an incredibly useful resource, but with the rewards there are risks. Remote workers have a much higher rate of problems arising than when using someone local. This can be due to language barriers, overinflated claims of skill, no real repercussions for poor performance, easy ability to disappear, constantly missed deadlines, and more.
These reasons are why doing small test projects for any remote contractors or outsourced agencies is very important. If they fail on something small, then it’s not a big deal, but if they fail on a major project that you threw them into you could end up eating a giant loss to get it done right or possibly even end up in a legal battle.
For development outsourcing, I generally try to use single page template builds or internal projects for testing the contractors. Creating a standard “test” page for them to build where you put in known stumbling blocks is a great way to test their attention to detail and their ability to develop using proper coding standards. These tests aren’t free to do though and you don’t know how many tests you’ll have to run until you find a quality applicant, so it oftentimes makes sense to just go straight to some pre-vetted sources with quality guarantees that can be trusted. I have my own bench of these services.
Codeable is my go-to resource for anything WordPress-related. It has WordPress development experts that made it through the vetting process that accepts only 2% of applicants. No-obligation project quotes are free to get and money is kept in escrow until you mark the project as completed. There’s also a 28-day bug fix guarantee after the project was marked complete if any later issues do arise.Try Codeable
TopTal is a place I’ve turned a few times for any top-to-bottom projects outside of WordPress. TopTal accepts 3% of its applicants and is like a mini-staffing agency of its own since you get your own personal recruiter. Once you are hooked up with a new contractor you work through a trial period and if unsatisfied during that trial period, you can back out of the arrangement and keep any work done so far for free.Try TopTal
Freelancer.com is what our agency uses if we’re looking for some cheaper labor for menial tasks, whether that be data entry, excel work, virtual assistant work, or something else. Getting the right outcome for these tasks is never really an issue as long as you provide detailed instructions on what to do. This is also where I’d run developers through test page builds to try and do my own vetting to find some great help if not using a pre-vetted development service.Try Freelancer
Always Be Networking
Networking to generate more work is something that is especially important as you plan to step in to become the owner and face of a digital agency. You have to treat everyone you meet as if they are a potential client because they just might be. Even if they aren’t, they might still happen to know someone else who needs help in your area of expertise.
You have to remember that as an agency owner, you are not only representing yourself, you are representing your agency brand and everything that you want it to be. In time, if all goes well, your brand will grow to become more than you. Your agency will become self-sufficient. You will be able to get back that freedom we all desire. Though in the beginning, your hustle is more important than ever.
There are many ways that you can build more relationships and spread the word about your agency and its expertise. You need to pursue these opportunities as much as possible.
- Participate in Speaking Engagements – Speaking at conferences and events is a great way to establish yourself as a thought leader in the community and it brings people to you with their own questions to help spark conversation. There’s a lot of other time at these types of events for mingling and networking with the other attendees.
- Attend Networking and Alumni Events – This one goes without saying, but everyone at these events is looking to make connections, so there’s no reason to be left out.
- Host Your Own Events – Host some small meetups on interesting topics. Anything that can draw interest that you will be good at talking about can again help establish you as a thought leader and an authority figure in the subject matter. The time before and after the event can provide a great opportunity for individual connections.
- Be Active in Relevant Social Media Communities and Discussions – You have the expertise and you should share it. The more you interact with people online and the more your name becomes synonymous with a topic, the more likely it is that people will seek you out for help in that area. Just make sure that you use your profile to promote the fact that you are part of an awesome digital agency.
#3 Set Up the Infrastructure
If you want to manage an agency, then you will need to be equipped to handle everything before you hit the ground running. This includes project management, time tracking, finances, marketing, branding, and deliverable templates.
Starting out you should be able to use a simpler and more affordable project management tool like Trello or even work out of a custom-made google sheet. As you scale up though you may want to move to something more robust. At my agency, we have hopped between many tools. We ended up using Asana in the end, but I was a big fan of Team Gantt as well because I am a big fan of using Gantt charts in development projects. Having any PM tool is key to keeping all of your team occupied and on track with what they should be working on and when tasks are due.
Hands-down the best tool to use here at an unbelievable value is Clockify. This tool is free to use, but you can upgrade a few cool features for $10 per month in total. It has browser, website, and app-based time-tracking options like all of the major players. I highly recommend it for any startup looking to track their team’s time. Tracking time can’t be ignored as it provides insights into crafting better proposal estimates, highlights problem areas, and provides needed data if you are billing by the hour.
Managing finances is a required evil, but I’ve found Freshbooks to be a useful tool in keeping track of business financials. I had to learn a bit about accounting first to make sure I was doing the books properly. If you aren’t looking to deal with bookkeeping at all you can always use an outside accountant to take care of your books for you. If you want to take advantage of the tax advantages of a business and want to avoid getting audited, then you will need to keep track of everything in the correct way.
Managing payroll and benefits for your staff doesn’t have to be hard or confusing. Gusto is a great service that takes care of a lot of the heavy lifting for you and provides an access portal for your employees so that they can access their information for themselves. It really makes running that side of the business a bit easier and the Gusto support staff is available to every employee if they have any payroll or benefits questions as well.
Website and Branding
You need to craft your agency’s branding before you start promoting anything too heavily. Create your logo and style guide, decide on your messaging, define your services list, and build a website as a marketing tool. This is all essential to being able to build a public image for your agency.
A lot of work being done will need to be delivered to the client as a nice structured document that is on-brand. SEO especially has a lot of projects that require deliverables. It is best practice to have a standard deliverable template for every type fo task so that your agency is putting out consistent work for every client. These can evolve over time, but your local and remote employees should all be able to use these templates to present virtually the same deliverable no matter who made it.
The tools you start with are not set in stone, but you should have something set up to handle these items before you dive into managing an agency. As the agency grows and evolves, your toolset and deliverables can grow and evolve too. My agency has switched every tool at least once over time and I’m sure we will continue to make changes in the future as new tools come out and our needs change.
#4 Decide When to Make the Switch
The best way to make the switch from freelancer to agency owner is in a slow and deliberate way that leaves the least amount of room for failure.
As a starting point, we are going to assume that you, as a freelancer, have a steady incoming flow of work to the point that you have plenty of overflow or a backlog and would be able to benefit from expanding your efforts to accommodate all of this work and land larger clients. Got it? Great! Now we’ll take this step by step.
If you had not already formed a Limited Liability Company (LLC) for your freelancing career, then it is time to formally file paperwork. An LLC offers legal protections and tax benefits without all of the extra paperwork and requirements of a corporation. Once this is set up you’ll need to treat the business finances separate from your own, so a business bank account is required.
You’ll need to be ready with your chosen agency name and the rest of the filing process is fairly straightforward thanks to the services of places like LegalZoom.com. If you already had an LLC set up for freelancing, then you can also use one of the online legal services to set up a “Doing Business As” name, also known as a DBA. This will allow you to legally operate under the new agency name of your choosing.
This is also a good time to decide if you want to offer any of your local connections a stake in the company as it can be beneficial to not lead all of this on your own. It’s not a decision to be taken lightly and this partner’s skills should be essential to the business while also being something that you yourself are not as skilled in.
Build Up Your Client List
Now that you have officially formed your LLC, you should transition your current clients into agency clients. They will need to be writing checks out to the agency now, so they will just need to be informed of the change. Potential clients can also now be pitched under the agency name as well. At this stage, you will be starting with all contract-based staff, but you may also potentially have a partner.
You should now be selling, selling, selling and relying on the infrastructure you had set up to manage all of the contract staff and projects. Every successful project should be turned into a fresh case study or portfolio piece to help generate more future sales. The good part about being this small is that your overhead costs are low, but it will still be hard to land the big contracts. You are still a fresh startup and you will still be seen as new and unstable to large companies.
Before moving to the next step you will want to be sure that you are not hedging your success on a few large clients. If you have one large contract that makes up 50% of your company revenue and they disappear one day, then you are suddenly in dire straights if you have built up your overhead costs too much. Aim to have a healthy mix of clients and try to not have any single client control over 10% of your revenue. That’s not to say that you should turn down any giant contracts, but you should try to counter that by signing more overall contracts or additional large clients, or just refrain from making financial decisions that hinge on that client remaining long-term.
Invest in the Agency
You are generating enough revenue now, but in order to continue to scale you need to legitimize your operations a bit more with some investments into the agency. The first thing to do is to consider renting an office space. There are plenty of rental office space companies like WeWork out on the market now to make this easier than ever. This gives you an address for clients to see. It gives you a place for your local contractors to work together at and they can bond with each other as a “team”. It provides a location to have in-person meetings with clients. It gives your agency a physical presence.
The physical space helps bring you to the next investment you need to make, which is your first full-time hire. You should now have had time to work with and interact with a lot of your local freelancers, so you should know who you want to hire and who you need to hire. You also might decide that it would be better to start hunting for someone else entirely. The financials will dictate when it is time for this and any other future hires.
One of the major pitfalls of new startups that drives them to failure is purely scaling up too quickly. Bringing on too many full-time employees too fast is a recipe for disaster. You are purely guaranteeing a lot of overhead expenses with full-time staff so there is no need to rush it unless you are looking to join the ranks of the 90% of startups that fail.
You are running a real digital agency at this point, but that doesn’t mean that you are out of the woods. There are lots of critical decisions and business moves that will decide the future fate and success of your agency along with lots of growing pains as you reach new milestones in company size. It is quite a ride with ups and downs, but if you continue to deliver quality work, sell well, and budget wisely, then you’ll end up making a lot more money than you would have made as a lone freelancer and can still maintain your freedom.
Best of luck on your own personal journey!