CRO:NYX DIGITAL BLOG

Stages of Agency Growth

October 17, 2020 / by Tanya Wigmore

Most agency founders start out as freelancers who are busy doing their own thing. Their initial client projects are small, scrappy and confined to a budget. But with consistent effort over time, something magical can start to happen. They win more clients, are able to hire people, and their freelancing gig transforms into an entity with different needs, painpoints and benefits.

 

Here's a look at the most common stages of agency growth for entrepreuers. Whereabouts in this journey do you see yourself?

Stage 1: The Solopreneur

First, it's all you: sales, service delivery, operations, HR, finance, and more. Most of these roles don't even really matter. You're the one getting the work, doing the work, reporting to the client and invoicing the work. After payment, you have the autonomy to decide how much money you're going to pay yourself or reinvest in the company. 

As you get busier, can afford it, or when you realize that there are certain things you can't do (ahem, accounting) you start to hire some part-time help. Whether it's a bookkeeper, EA, or a sub-contractor, you're leveraging the help of someone else on an 'as-needed' basis. 

Why this stage is awesome

You have full autonomy and get to keep what you earn! You can set your own prices, turn down work that doesn't excite you, and decide how much you're going to commit to. Most of the money that comes in goes right into your pocket. 

Downsides of this stage

Your income is directly tied to your time and availability. If you're slow or need to take a breather, your revenue is affected. If you overestimated your capacity, you might not be able to manage or deliver everything you've committed to. You're limited in the work you can take on because your expertise and experience is also limited. Being a solopreneur can also be a bit lonely as you have no one to collaborate with on a daily basis. 

Small agency challenges

  1. Not enough resources (people or money)

  2. Hard to recruit great team members

  3. Hard to retain great team members

  4. Susceptible to revenue changes

  5. Take on poor fit clients

  6. Take on poor fit resources

 

Stage 2: Mid-Sized Agency

You hit the mid-sized agency status when you're overseeing all the things that are happening in your agency but you're not doing many of them yourself anymore. At this stage you might have hired someone to take control of the finances, someone to do the lion's share of the work, an EA to take the day-to-day stuff and some additional team members with complementary skills so you can expand your service offering. Your team is mostly full-time or dedicated part-time and you have financial commitments to them and dedicated time and delivery expectations of them. 

Why this stage is awesome

You have more time and resource capacity to work on the business instead of in the business. You can attend events, do speaking engagements, build relationships and biz dev your heart out to help you bring in more work. You're also feeling better about that because when that work comes in you know that you'll be able to get it done. 

Downsides of this stage

You have overhead with payroll and maybe even an office. That overhead is likely a big chunk of your expenses and is one of your biggest risks. You are likely earning your income from the profit margins of the work you give your team; if your ratio of revenue to payroll is low it means you might not get a paycheck. 

Small-mid sized agency challenges

  1. Communication delays: everything goes through you and you are a bottleneck

  2. Poor inter/team communications because they're working through you and not with each other

  3. Clients feel alienated/abandoned when you switch points of contact from you to someone else (or if you switch their main POC regularly)

  4. Processes: it's on you to train every hire which can be time consuming in the short term

  5. It becomes more work to run your agency and often with less financial reward for you

Stage 3: Large Agency

You move into the large agency stage when you are managing the managers. You no longer have 1:1 relationships with your clients and maybe not even the service delivery team. Decisions are made without your consultation or involvement. At this stage, your job has completely shifted from being a freelancer who needs to sell and execute a service themselves to learning how to be a leader who enables other people to have the autonomy and responsibility to make business decisions in your absence.   

Why this stage is awesome

Being a larger agency opens opportunities to focus on culture, develop business strategies, and to have the team execute on bigger ideas. Your revenue and expenses are more consistent and predictable. Your income is more stable. You can take time off and know that operations will not be impacted by your absence. 

Downsides of this stage

You've become removed from the work that you enjoyed doing and you may not enjoy the work that you're doing now. You may need to hire someone to fill your "CEO/COO" roles if you have little passion or talent for business operations. You might not know where you fit in your own company anymore. You have more 'people problems', inefficiencies and bloat.  

Mid-large agency challenges

  1. Hierarchy & bureaucracy: having meetings about meetings and more talking about what should happen instead of actually making things happen 

  2. Inefficiency & bloat

  3. Lack of ownership/accountability: "pay grade" issues and deflection, often punctuated by "that's my not in my job description"

  4. Complacency: "we've always done it this way" / "I don't think they'll want to change this"

  5. Removed from the "front line" you can miss issues that are happening with your clients and within your business

  6. KPIs become more important and can sometimes hurt more than help 

  7. Middle management becomes more important

  8. Us/them feelings and favouritism for different teams and departments

 

Topics: Growing an Agency


Tanya Wigmore

Written by Tanya Wigmore

Tanya Wigmore is the founder of CRO:NYX Digital and is passionate about growing healthy teams and businesses. With an extensive background in inbound marketing, search marketing, web analytics, CRO & UX, she's always finding new ways to apply optimize and improve.