There’s a lot of great reasons to start an agency: It gives you control of the type of clients and projects you take on, you get to handpick your team, and it can also bring financial wealth if you play your cards right.
But owning an agency can also be miserable at times (though no one admits it). I was a freelancer who started an agency in 2008, and while my experience may not be consistent with everyone's, I can talk about things I did right and other things I wish I did better. Here are some mistakes to avoid when starting out:
1. Not planning a unique value proposition
When you are starting your own agency, chances are you probably worked in one before, so you have a general idea of how they are run, who does what, how clients get pitched, how work gets invoiced, and so on, so it’s really tempting to just plow ahead with your new business without really taking time to think about it.
If you want to build your own agency, take time to go through a branding process and really figure out what kind of agency you want to build. More shops are opening up every year, so how is yours going to stand out?
Too many design and marketing agencies have no clear value proposition beyond “we do good work” and they don’t target any particular industry or serve a vertical market, believing they should work for any business that wants to hire them. Don’t make that mistake. The way to get good clients who pay top rates is to target a specific niche so that you don't have to compete as a generalist.
2. Choosing the wrong partner (or none at all)
I know people will disagree with me on this, saying “I run a great agency and I don’t have a business partner, plus I get to keep 100% of the profit.” But for most people, having a business partner will reduce the loneliness that comes with being a sole cofounder.
Have you noticed something among some of the most famous advertising agencies?
- Ogilvy & Mather
- Saatchi & Saatchi
- Wieden + Kennedy
- Goodby Silverstein & Partners
They are all named after the partners who founded them. Running a business is hard, especially at the beginning, and it’s twice as hard doing it alone. Finding a good partner will bring its own set of challenges, but the pros will outweigh the cons.
When I started Headspace, I partnered with Kevin who was a friend and former colleague I worked with at a previous agency. The fact that he was a sales/account guy with experience running his own businesses and I was a designer/developer meant that our skills complimented each other.
There’s not much of a point having two founding creative directors, neither of whom are experienced with sales, client management or operations. While you may share some of the same knowledge and skill, there should be a broader spectrum of your skillsets that defines you separately from each other and makes it easier to clearly define your roles.
The key is to find a partner who you know and trust, and preferably one who has a skill set complementary to your own.
3. Not making sales and marketing a priority
Clients are the lifeblood of any agency.
But you don't get them if you can't sell, and unfortunately most designers, developers and marketers hate to sell. But get used to the idea that your main job is going to be selling, even if you have a partner who is better at it.
You're going to be tempted to do one of the following:
- Hire a salesperson
- Partner with someone who's only skill is selling
- Being a subcontractor for a bigger firm that feeds you work
These are all short-sighted mistakes, because they are all just ways to try and get out of having to sell to clients yourself.
- A hired salesperson will never be able to represent the agency like the founder would.
- A partner who only brings sales contacts to the table but doesn't have knowledge and passion about what the agency actually does will never be able to bring in clients long term.
- Working for a bigger agency just means you get the scraps of their projects and don't get to build relationships with clients or take credit for your work.
The most successful agencies are built off of the blood, sweat and tears of people who could sell. They took a chance by picking up the phone or booking a plane ticket to pitch a client, and they were told no a lot more than they were told yes. Once you land a big client it gives your agency the cash-flow and breathing room you need to develop more business.
It's easy to focus on selling when you don't have any work. The hard part is sticking with sales after you land a couple clients. You should be able to let your team lead projects, and only stay involved at a high level to ensure quality control and offer your own insights.
Selling is your job now, so you better get used to it.
4. Hiring contractors or junior staff
It's hard for most freelancers to let go of the need to control every project that comes through your door. You may be tempted to manage the clients and hire a junior person to take care of the monkey work, but stop and think long term about what kind of agency you decided to build.
Do you want to have an agency where you are tied down by every project and in every meeting because you don’t trust your employees to lead? Not only will that earn your agency a poor reputation, it will also hold you back from getting out and selling.
On the other hand, you may be tempted to outsource production work to freelancers on a per-project basis so you don’t have to commit to paying someone a regular salary, but this is a terrible long term strategy.
For starters, freelancers are generally more expensive per-hour than employees, which will eat into your profit margins, but more importantly, you can't build a great team culture with contractors, especially when you're new and fragile. You need a team of full time, experienced professionals who will stick with you and earn your agency a great reputation.
5. Working remotely as a “virtual” agency
Working remotely is becoming more popular than ever before as thousands of office workers give the proverbial middle finger to grey cubicles in favor of working from home. But does that work in an agency environment?
When you’re starting out it’s tempting to forgo bricks and mortar to save money, but if you want to be taken seriously by those big paying clients you’re hoping to persuade, they want to know you are a legitimate firm and not a fly-by-night operation running out of your basement.
For better or worse, inviting a prospective client into your studio impresses them, and even though they should be hiring you for your capabilities, a slick workspace can help you stand out in their mind as an established firm.
To work well, agency teams need to be in close communication every day with lots of time for brainstorming together, and this becomes cumbersome and impractical over Skype, email or another online collaboration tools.
Whether you’re working on a visual identity, a video concept, or a social media strategy, creativity flourishes when people get together with beer over a game of ping pong (or whatever toy your swanky office includes). This bonding together is what creates culture (not the ping pong table itself) and the work improves as a result.
When people work from home on a regular basis it hurts the culture because they worked in silos and don't collaborate.
The reason I include this point in a post about starting an agency is because a culture is hard to change once it’s established. It’s hard to tell people they need to come into an office by 9:00 am every morning if you've already let them work from home in the past, so start out on the right foot and invest in a decent workspace to start building your agency culture.
Owning an agency is not for the faint of heart, but if you want to evolve past a one-person business and really compete for great clients on the world stage, avoid these common pitfalls and get it right from the start. Take the time to plan out what kind of company you want to build, make sales your focus and invest in a team and culture who will make your job of selling an easy one.
Going forward this blog is going to be all about helping entrepreneurs in design, development and marketing firms build better agencies, become more profitable, employ happier staff and deliver more value to their clients. We're also going to interview agency owners for their unique perspective and how they overcome challenges. Please get in touch if you'd like to write a guest post or get interviewed.