14 Signs It’s Time to Switch from Freelance to Agency
According to a Freelancers Union study, there are over 21 million people in the U.S. who work as totally self-employed freelancers. As one of those freelancing individuals, I can tell you that there are some awesome benefits to it—as I’m sure most of you can attest to as well. Freedom to make your own schedule. Freedom to choose your own clients. Freedom to set your rates.
But with all that freedom comes a tradeoff. As Uncle Ben once told Peter Parker:
Sure, you’ve got all the power now, but it also means that you’re 100% responsible for the outcomes of your project work and, ultimately, for your business’s success. And as you improve your processes, build more client relationships, and really gain momentum in building your business, there’s going to be a lot more pressure coming down the line.
If you’re a web developer or designer who has gotten to a point where your workload is too overwhelming and your services are in high demand, then it may be time you thought about the next steps for your career. For some of you, that next logical step will be to join the ranks of the 2.8 million freelance business owners and launch your own small web development or design agency.
If that suggestion provides you with more relief than concern, then let’s talk. There’s no better time than the present to take action to lighten your load, streamline your processes, and start bringing in more moolah.
When Is It Time to Switch Your Business Model from Freelance to Agency?
Whether you’re currently on the fence about this or just not sure if this move is a smart one to make, consider the following. If seven or more of these scenarios currently sound like what’s going on with your freelancing business, then it’s time for a major change.
Your current work day lasts more than eight hours on average. And, not only that, there’s some serious spillage going on over the weekend.
If you currently have anyone working for you, they’re completely maxed out and you’re either spending way too much money on overtime or trying to take it all on yourself.
Your wife/husband/sister/best friend asked you to take a vacation and you started laughing/crying/profusely sweating. There’s no possible way you could even consider taking a vacation any time soon. Even a day off would result in lost productivity and you can’t afford that.
Your client list hasn’t changed in the last three months or so. You worry about what will happen if you lose one of those clients, but you just don’t have time to look for new ones right now.
When prospective clients have approached you about working together, you’ve had to turn them away.
Despite turning away web projects that you know would push you and your team over the edge, the quality of work you’re doing is starting to slip. Again, you’re starting to worry about what’s going to happen if your clients notice and start to depart in droves.
Or maybe you just don’t care anymore. You’re bored with creating websites day after day, and so your attention gets diverted, costing you productivity and dropping each day’s profits little by little.
You find that you’re spending more time in business management-related tasks like assessing financials, prepping contracts, fielding client calls, and so on. You barely have time to develop or design websites even though you’ve got new clients coming in all the time and your pipeline is swelling.
As of right now, you already generate a sufficient full-time income, but you want to see your business do more than just the minimum to survive.
You’ve had clients express interest in additional services that you’d love to offer, but currently are unable to due to a lack of knowledge, experience, or time. You know a friend-of-a-friend who could step in and provide that new service, but you don’t have time to approach them about it or figure out how to update your site, business plan, or process to accommodate it.
You know that your clients are willing to pay more money for your web design services, but you haven’t had time to research what an appropriate adjustment in rate is. You also don’t know what that sort of change will do to your tax classification and how it’ll affect licenses, taxes, insurance, etc.
You like the thought of building a team who creates high-quality websites and will be dedicated to staying on top of web design trends just like you do. But a team requires extra funds to pay them, time to train, and the know-how to communicate with and manage. If you suspend your own project work to take this on, you wonder if you’ll be able to ramp them up quickly enough.
You really enjoy the marketing side of your freelance business. In fact, you’re surprised at how much you like being a recognizable face and voice on social media, and you’re excited to make new contacts—both partners and clients—to take your web design services to the next level.
When someone asks you what you do for a living, you tell them that you own your own web design business. The fact that you’re an independently employed freelancer never factors into the conversation. This is your business, your baby, and you want to see it grow.
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So, if this sounds like you, then we need to take a look at what needs to be done to get you from freelance web developer to agency owner ASAP.
What You Need to Do to Switch Your Business Model from Freelance to Agency
Depending on where you live or how long you’ve been self-employed, you may have already begun to tackle these next steps. Either way, this list will provide you with a good sanity check to ensure you’ve covered your bases as you work on making this transition from freelance to agency.
#1. Check with the Government
As of right now, you may just have a simple state business license and quarterly tax payment schedule that you abide by. However, as the owner of an agency, you need to think about which category of business (e.g. limited liability company or corporation) you want to register under. You’ll also need to look up additional fees, licensing, insurance, taxes, and so on that are associated with your new business type. And don’t forget about employees! They come with a whole new set of expenses.
The SBA is a really great resource to get you started and will also tell you what is needed at the federal, state, and local levels.
#2. Assess Your P&L
Never heard of a “P&L” before? Well, it stands for a profit and loss statement and it’s something every business owner needs to keep close track of on a regular basis. This is what will tip you off to any deterioration in the health of your business, either now as a freelancer or later as an agency.
It’s incredibly useful to have on hand as it gives business owners the ability to determine base rates (and the flexibility of those rates) in order to continue to make a profit. Once you get to a point where you’re hiring and paying people to work for you, this statement will enable you to play around with your numbers to find the ideal situation in terms of incoming work, staff salaries, business costs, and so on.
#3. Create a Forecast
You already have solid statistics to work with (those being your P&L), but now you have to create a projection for your business.
To start, assume that you’ll be able to retain your current client list. Then build out goals for how many new clients you aim to reasonably acquire each month, how much revenue you expect to generate, how much capacity your team will need to complete that work on time, and so on. If this forecast doesn’t work out to a profitable income or takes you back to square one where everyone is overworked and exhausted again, then revisit #2.
#4. Hire Web Design Professionals
If you’re serious about starting an agency and focusing on its growth, then this is the first piece you need to give away. Your sole focus needs to be on running your agency: building your brand, marketing your services, generating new revenue opportunities, supervising and mentoring your team, etc.
But hiring web designers, developers, writers, and other WordPress website professionals is tricky stuff and not something you should go into lightly. In fact, you may want to start by finding freelancers that you can test out on a few projects. Build a relationship with them, get a sense for their style, and make sure they jive with the future you envision for your company. Once you’ve got a good rhythm going and know you’ve got a good team in place, then you can hire.
#5. Start Outsourcing
As a business owner, you’re going to have to learn to let go and entrust your previous responsibilities to others. This also means hiring specialists or investing in software to handle the business management tasks that previously occupied your time (especially the finance piece). And get yourself an assistant. They’re going to be helpful when it comes to hunting down leads and coordinating client communications.
6. Rent a Space
Working from home is great when you’re freelancing, but what happens when you have a team of 10 or more people working for you? Or you want to bring a local client in to talk about the progress you’ve made on their website? Sure, you can do pretty much everything virtually these days, but it’s not necessarily the ideal environment to run an agency.
#7. Talk to Current Clients
Before you get too far into launching this new business venture, get on the phone with your current client set. There are a couple reasons for this. For starters, you’re going to want to see how they feel about this change. They might not be excited about the idea of a 21-year-old newbie designer taking over the management of their website after trusting you for the last year. If you’re going to lose any business after this transition, you need to know sooner rather than later.
You can also use this as an opportunity to let your clients know that this change is all thanks to them and how grateful you are for their business. If you can, see if you can get them to help spread the word.
#8. Start Building Hype
Don’t wait until your agency is launched and in full swing to start building hype around it. Once your branding for the new agency has been created and your site updated, get moving on marketing it. Blog. Issue a press release. Share it all over social media.
For some of you, this step to convert your freelance web design business into an agency just won’t make sense. If your goal isn’t to run an agency and allow others to be the creative minds behind the websites you develop, then freelancing may just be your thing—and that’s awesome. But, if you do envision expanding your services and building a team who can be that go-to source for high-quality websites, then this might be exactly what your 2017 needs.