Digital Agency vs Freelancer Business Models

freelance business model

What’s the best way to sell your services online? Should you build a freelancing business or go all out and build a digital agency? What are the pros and cons of each model today, in 2018? Let’s dig in and take a closer look at this topic.

I’m going to start with a true story. About ten years ago I was competing for the contract against one of the largest web agencies in the country, based out of Los Angeles. This agency did everything from digital marketing and website development to PPC (Pay Per Click) campaigns and graphic design.

I found myself in a big agency versus small agency type of scenario. On paper, small doesn’t match up with big very well, does it? My strategy for getting around this was to approach the client as an individual “hired gun” type of consultant. A Freelancer.

I basically said in so many words, “Don’t hire an army when all you need is a sharpshooter.”

I then gave them a point by point roadmap for their digital marketing strategy and explained exactly how their website should be developed.

They took the information I provided, considered it, and then shared it with the big agency in LA.

The LA-based group responded with this, “I’m sure he means well with his recommendations, but he doesn’t know what he’s talking about and has provided you with a very inadequate plan. Our experts will give you a complete blueprint for your business and guide you through the process.”

The Best that Money Can Buy?

The cost was around $10,000 to get the ball rolling with the big agency.

My client cut them a check and basically said, “Sorry, Jim. Thanks for your time.”

A few months later the client returned to me and said, “We got screwed. They took our check and then gave us YOUR plan a month later – almost word for word after saying your advice was wrong! We should have listened to you.”

Now, here are a few things to consider. First, the client already knew me. We already had a relationship. So, why would they trust doing business with a company out in LA? Well, like many things in life, it all came down to perception. Maybe it was the fact that they had teams of specialists and I was just one person?

Maybe they were better at name dropping than I was? Possibly they thought bigger would be better?

If you have a corporate background, doing business with “big, bigger, and biggest” is almost akin to doing business with “good, better, and best.”

Guess what? The last two decades have, for the most part, knocked that belief down and out.

A Decade Later, What Has Changed?

My client’s experience with a big agency wasn’t an isolated one. In fact, it’s become commonplace over the years.

The sad truth is, here in America, agencies are sinking beneath the waves of change. They have been for the past several years. Before someone hollers their objections, let me qualify that statement. Big agencies whose lower-end services start at around $10,000… they’re really struggling.

Think about some of the underlying reasons for this. From a poor ROI (return on investment) to larger companies now having easy access to freelancers and remote workers from around the world, the hits just keep on coming.

Instead of going through the “agency gate” for whatever they need, they’re opting to go around them and go directly to the source. It’s not like the talent is that difficult to find anymore. All you really need is a project manager to pull them all together.

The game has changed. People in the industry aren’t shouting it from the rooftops, of course. The whispers, however, have increased.

Just because many of the bigger agencies are failing doesn’t mean all is lost.

It just means the times have changed and that we need to change with them.

Smaller Agencies Have Become the Norm

Now, let’s talk about smaller agencies. I’m talking about the type of agency business that has a handful of people working together under the same banner or business name. A smaller agency, for example, may have one designer instead of six.

The first agency I worked for didn’t have one photographer, they had four.

Okay, so within the smaller agency category, I’d like to quickly highlight –

  1. Local Agencies
  2. Remote Agencies

A local agency simply means you can gather your whole team together and physically show up for a meeting with a local client.

This type of setup has obvious advantages that you don’t have with a remote agency – especially when it comes to sales. Most of the time, being local can give you a significant advantage.

That said, people who are a better fit for your business will often be found outside of your local marketplace or area. That was the case with my business.

In the past, I believe people were more impressed with the size of an agency than they are today. A lot depends on the market but let me explain what I mean. Meeting in coffee shops with a prospective client has become commonplace today. Back in the early 2000s, that wasn’t yet the norm. Usually, you’d meet in an office.

If you didn’t have an office (outside of a home office), you weren’t seen as being on the same level as companies that did. Does that make sense?

The journey to business legitimacy was much steeper in the past than it is today.

An Inside Look at Agency “Life”

There’s nothing “less successful” about owning and running a smaller agency.

An associate of mine runs a small branding agency. They only work with people selling online services. They don’t work with product creators or offline businesses. Their focus makes day-to-day life less stressful for them. They also enjoy higher profit margins.

The right support can minimize the amount of stress you’ll have to deal with. You can’t minimize the importance of support in the world of business. Just knowing that you’re not alone or carrying the weight of an entire project on your shoulders can help you sleep better at night!

The first few people I hired were brought onboard at the perfect time. A few months afterward, I found myself managing the most stressful project of my career. I found myself facing one challenge after another. Even my vacation time fell victim to the stress associated with project deadlines.

Without the support of my team, I would have really struggled.

Over time, if the individual personalities are a good fit, you can really build a strong, experienced team.

What Happens When the Work Dries Up?

Now, the flip-side. All businesses, regardless of size, must face and deal with the ups and downs of the economy. Even with a smaller agency, it’s not a given that you’ll always be able to keep your team together. If the work just isn’t there, people will be forced to move on. As an agency owner, you’re faced with the pressure of knowing your team is counting on you to secure new clients.

They’re relying on you to bring new projects to the table in perpetuity. The well-being of their households depends on it.

Losing a good team member is the worst part of the agency life. Maybe they need more than you can afford to pay them? Or, maybe they’re just moving on to a different place in life? Nothing lasts forever, but that’s especially true when it comes to this kind of business.

Fortunately, there are plenty of digital mercenaries out there who can get the job done if you ever find yourself stranded.

Taking all the above into consideration, can you keep enough work moving through your pipeline to keep everyone happy? And, if so, can you pay the team enough money to keep them from moving on?

Some of these questions aren’t easy to answer. There are alternatives, however, like the freelancing business model.

Business Owner or Worker/Implementor?

Have you ever heard the question, “Are you working in your business or on it?” The question implies that you’ve inadvertently created more of a job for yourself than you have a business.

You can consider this question as you plan your approach to the freelancer business model.

In our society, at least here in the USA, perception plays a major role in the business world. This is one of the reasons why I believe many freelancers find it difficult to find higher quality clients. They often present themselves as though they’re applying for a job instead of presenting themselves as fellow business owners.

As a result, they’re viewed as being little more than temporary employees by the people hiring them.

Question – would you rather work for someone or do business with them? Which has the higher perceived value?

There are many ways to change perception. As a freelancer, why not simply market yourself as a business owner? In other words, instead of being a designer, you’re the owner of a design business. A business isn’t any less of a business if it’s just one person, is it? If you work for yourself, it’s still your business.

Plus, once you’ve become comfortable with outsourcing and sub-contracting, you’ll still do it on an as-needed basis, right?

How you present yourself, the words you say – all these things combine to project an image to the marketplace. Keep in mind, people make snap judgments. That’s why it’s so important to understand this dynamic exists and is either working for or against you – right now.

You Are a Business Owner from This Point Forward

So, let me encourage you to be a business owner from this point forward. At the very least, realize that you have teams of people available to you whenever you need them thanks to sites like upwork.com, peopleperhour.com, etc.

All that to say – you can present yourself to the market from an authoritative position or a supplicant one. In the business world, wherever you place yourself, people will respond in kind.

Higher status or lower status is assigned to you by others all the time. We do the same with others. You can be a high-status freelancer (regardless of the actual work you perform) or a low-status one.

The way I see it, God doesn’t create low-status people. Those are just labels others assign or force on people. It’s hard to fit a label, though, if you don’t act the part. Refuse to act or present yourself as a lower-level business owner – whether you’re a team of one or a team of 20.

The world of business (and the world in general) is really quite ruthless when you get right down to it. People get taken advantage of all the time. The goal here is to not fall into that category. You want to build connections and alliances where everyone benefits. It can be done.

To do it as a freelancer requires a bit of a different approach. You are the face of the business. You are the brand. You’re a personal brand.

Consider presenting the image of a personal brand with a team behind you (whenever you need one).

The Personal Branding Approach for Freelancers

So, the lowly freelance mindset is out and the personal brand, business-owner mindset is in.

I’m sharing this because this is what I’ve experienced over the last twenty years in the online business world. At the end of the day, we’re all just people, right? That doesn’t change the fact that people have expectations. Right or wrong, they have them. If you meet them, you’re in. At the very least, your foot is in the door.

If you don’t, you won’t even get your foot in the door to prove what you can do.

Snap judgments are made all the time. Plan and build with that in mind

Conclusion

So, let’s tie a few of the loose ends together. If I were starting over again today, I’d most certainly borrow elements from both business models and combine them together. I’m not a big fan of labels, but for the sake of the discussion, I reference them.

I would concentrate on identifying a team of go-to specialists that I could work with as needed.

I wouldn’t focus on building online agency brand. Instead, I’d focus on building a personal brand with a team of specialists who could work along with me. You may be wondering, how is that any different than an agency? It’s different insofar as – I’m not cutting everyone a check every two weeks or every month.

Technology has advanced to the point where applications are now doing what employees used to do. While it may not be the exact equivalent of robots replacing factory workers on an assembly line – it sure is getting there!

Couple that with the fact that you can easily outsource any aspect of the business you don’t feel like dealing with… and what do you have? You have lean, low-overhead business you can grow and manage.

Please understand, you’re not wrong for taking a different approach. My approach is based upon my personal experiences in the business. In theory, there are a lot of approaches you can take. Experience, however, has a way or narrowing those options down for each of us.

Feel free to share your own thoughts, insights, and ideas about this topic in the comment area below. I hope this article gave you a few things to think about?

*Other articles you may enjoy reading

Designing Your Ideal Online Business

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