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How Do You Go From Freelancing to Building an Agency?

How Do You Go From Freelancing to Building an Agency?

Whether you’re fresh out of college or fresh out of the corporate world, freelancers typically start out solo. Freelancing solo is a reasonable way to start, because you have to master two different learning curves:

  1. The learning curve of your craft, if you aren’t already a master.
  2. The learning curve of sales, if you aren’t already a professional salesperson.

I have both personally been a freelancer and I hire freelancers all of the time, so I’m on both sides of this equation.

I’m someone who took a solo freelancing career and grew it into an agency.

Here’s how I did it.

Why Go From Solo Freelancing to Having a Team?

First, why do this?

Um. Money.

Unless you get into some very specific world and are extraordinarily well-connected, there's a limit on how much you can charge as a freelancer. Even if you’re consulting, your per-hour or per-project rate may not be as much as you want to make. 

If you get the bug, and see the potential, your only choice is really to gather a team, transition into an actual business, and make a percentage of their earnings.

But this is FAR easier said than done, and most people cannot do it.

Listen to me, seriously, guys: most people cannot do this.

Because what you are good at as a freelancer is probably not being a CEO. This means you do not yet possess some of the fundamental skills it will take to survive as a business owner. It’s called the peter principle.

More importantly, you may not like it. It may not be what you want to do.

As a freelancer, you are free:

  • Free to set your own hours
  • Free to turn down work
  • Free to work when you want, adjust timelines, take a day off

When you are a business owner, ALL of that goes away. The leader of a small business has virtually no freedom. NONE. You are it. You are the backup. And, the risk just got a lot higher, because you have to make payroll and keep more clients happy. So. Really count the cost. 

What makes you successful as a craftsperson and a freelancer is not what will make you successful as an agency owner or business owner. It’s an entirely different skill set and you need to be ready for the challenge of your life.

If you’re still hanging onto the idea that you should do this, okay. This is how it works.

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First Steps to Starting a Business as a Freelancer

First thing you do is get too many clients. 

Second thing you do is find people to help you.

Ideally, those would be reversed… but how? No one’s going to work for you and have no work to do. Plus you don’t have money to pay them with. So this is where you start to experience the first real pressure of scaling: the balance of client work and people to do it.

Note: Unless you’ve got cash reserves, you need to pay the people who work for you with client money. 

Third, find a way to find more people.

You need a way to source people. The best way is a network. I asked everyone if they knew writers. I ended up hiring someone who had a history degree and was a great writer… and was my babysitter. It’s always better to find someone you know and it’s NOT better to go for the lowest cost option so you get a high margin. Prioritize talent over what they can make you, or you’ll pay for it.

Then, spend time with them. You cannot outsource and walk away. You cannot outsource and hope for the best. Your entire business depends on your clients’ happiness. You are VERY FAR away from being hands-off. 

Fourth thing you do is create systems.

Once you get two, three, four people working for you, you need a system. The more people you get, the more of your job will be eaten up overseeing and coordinating their work. In my opinion, the NUMBER ONE priority is training them. Number two is project management, number three is bookkeeping and logistics. 

Most freelancers who want to become an agency fail here: they hire low-quality, low-cost talent and the work suffers. Then the clients go away and you’re alone again. Your reputation is EVERYTHING in these early days, and every single client you have is a referral opportunity.

Fifth thing you do is work your butt off.

Serve clients. Help your people. Don’t complain. It will be the hardest work you’ve ever done in your life. Do it. Do it well. Do it better than anyone else in the entire universe.

Do. Not. Take. A. Vacation. 

Do. Not. Take. A. Break.

That will come later. I budgeted five years of no time off. I’d recommend at least two. People who dip out earlier either grow slower or don’t grow at all. You cannot skip the foundation building.

Sixth thing you do is change your mentality: you are a business owner.

As you get the basic nuts and bolts of an agency together (systems, project management, communication, sales, payroll), you need to change the way you think. You can’t do this too early, but it does have to come.

You need to think like a business owner. 

You need to have the right kind of relationship with your team (close, but not too close). You probably haven’t had anything awful happen yet, but you will. People will make poor choices and they will fail you. You need to be professional, and you need to be prepared.

You need a lawyer. You need a CPA. You need experts in your life. And you need to project the maturity model of your business. What will it look like in 5, 10 years? What are your EXACT revenue margins for every single client and every single employee? How much money are you actually making? How will you sell more?

Be relentlessly specific and relentlessly disciplined. Read every book you can find on leadership and business. Make it your complete obsession and life’s work. At least for this season of your life. You can blow through seasons of growth if you learn more about how to lead.

Sorry to tell you, there’s no easy button or magic potion for this. In addition to the climb, there are two major costs you need to be ready to pay.

What’s the Cost of Starting an Agency?

There are two cost considerations to making this move:

  1. Financial
  2. Emotional

Financial Cost: Freelancing to Starting an Agency

Running a business isn’t free. The internet wants you to think it is. Drag and drop website editors want you to have rosy colored dreams of DIY. But you cannot do this yourself. And it’s going to cost you some capital up front.

I wouldn’t recommend even thinking about starting a small agency if you don’t have at least $10,000-$25,000 in the bank. 

That’s just the professional money.

I also wouldn’t recommend starting an agency if you don’t have three months of personal finances tucked away. This means salary, incidentals, rent/mortgage, your kids’ tuition, you name it.

This shift is a huge risk, and it will take time for you to find the secret sauce of how many clients you need versus how many team members at what rates… not to mention the overhead. You need a cushion or you will live in panic mode.

Emotional Cost to Starting a Business

I know it sounds like a drumbeat, but if you think you are burned out as a freelancer, launching an agency is not the solution. That’s the most hilariously macabre thought imaginable, from where I sit. 

I look at my freelancers, so innocent and productive, and think: You haven’t even touched busy. You haven’t even touched burnout. 

But, you also haven’t even touched the possible impact and fulfillment of replicating your skills and investing in your people. You do gain. But it will cost you. Count the cost before you pay a price you weren’t ready for.

How to Start an Agency as a Freelancer

I’m going to sound a little like Simon Sinek in this wrap up, but you need more than just a plan: you need a purpose.

What’s your why?

Start there.

Because that’s what’s going to get you through the nights where a team member gets sick and you’re covering until 3am… only to have to wake up at 5am for a call with China. It’s going to get you through when people flake, when your staff steal from you, when you have to fire someone you liked, when you lose clients because your team phoned it in. Stuff that would’ve never happened to you as a freelancer. 

It’s going to get you through when you have to miss out on a lot of life for two to three years until your agency hits its stride.

You need to see the bigger picture.

For me, I want to be the best writer I can possibly be. I want to extend the absolute limits of my ability to express myself. I need the challenge of leadership to clarify my ideas. I need the pressure of training apprentice writers to formalize my approach. This is just as much for me as it is for them.

And, for me, Hire a Writer is worth it. 

Make sure that whatever your plan is, you have a purpose that will get you through.

Want to connect? I don’t have any coaching spots open but you can find me on LinkedIn.

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