Freelance VS Starting an Agency
Summary
TLDRIn this insightful discussion, Ronnie explores the transition from freelancing to agency ownership with John, CEO of AJ and Smart. Ronnie, considering scaling his successful freelance business, seeks advice on the financial viability and initial steps of starting an agency. John shares his experience, highlighting the challenges of reduced margins, the importance of building a strong team, and the long-term vision of creating a sustainable and impactful business. He also emphasizes the personal fulfillment of building something significant and the potential for future growth, despite the inevitable hurdles and stress of running a company.
Takeaways
- đ The speaker is considering starting an agency to scale their freelance business and increase impact, despite initial reluctance.
- đ€ The speaker is concerned about the potential drop in margins once they start hiring and taking on office space.
- đĄ John, CEO of AJ and Smart, shares his experience of transitioning from a freelancer to an agency, emphasizing the importance of building a sustainable business.
- đ John advises that it may take at least six years to reach a significant income level while running an agency, due to the time required to build structures and systems.
- đŒ John explains that despite being a smaller agency, they have had to develop teams for sales, social media, and community to ensure business continuity.
- đ° He admits that as a freelancer, he would likely be making more money, but the satisfaction of building something bigger and offering value to large companies is more fulfilling.
- đ John believes in the long-term potential of the agency, even if it means lower earnings initially, with the expectation of significant growth in the future.
- đ He suggests reading 'Radical Candor' by Kim Scott for effective feedback mechanisms and 'Built to Sell' for creating an agency that can be sold for millions.
- đ John emphasizes the importance of trust and gut feeling when hiring, as it can prevent future issues and the need for firing.
- đ ïž The speaker acknowledges the need to master team management and growth as crucial skills for long-term success, which an agency can provide.
- đ€ John offers to share his mistakes and learnings to help the speaker avoid similar pitfalls in their journey of building an agency.
Q & A
What is the main concern of the person considering starting their own agency?
-The main concern is that they feel their current freelance business cannot scale further and they are looking to make more money and impact, but they are unsure if starting an agency is financially viable or the right next step.
What is the current annual revenue target of the person's freelance business?
-The person is aiming to hit $300,000 in revenue for the year.
What is the hourly rate range the person charges for freelance work?
-The hourly rate ranges between $250 to $300, and sometimes up to $1,000 per hour for value pricing on a project.
What is the name of the agency CEO that the person is seeking advice from?
-The CEO's name is John, from AJ and Smart.
What is the person's fear regarding the transition from freelance to an agency?
-The person is afraid that their margins will drop significantly once they start hiring people and taking an office, and they are unsure if it will be profitable.
What is the name of John's podcast?
-John's podcast is called 'Product Breakfast'.
How long did it take for John's agency to start making a profit?
-John mentions it took at least six years to reach a point where the agency was making a sustainable income, similar to what he could make as a freelancer.
What is the approximate revenue of John's agency?
-The agency's revenue is just under five million dollars.
What is the main reason John believes he will become a millionaire in the next four years?
-John believes that the strategic decisions they are making and the move into digital products, such as selling courses, will significantly increase their income.
What advice does John give about hiring for the agency?
-John advises to hire slowly, trust your gut when it comes to hiring, and to do pilot projects with freelancers before officially hiring them.
What are the two books John recommends for someone considering starting an agency?
-John recommends 'Radical Candor' by Kim Scott and 'Built to Sell' as essential reads for building an agency.
What is the current state of John's ability to take a vacation and have the business run smoothly in his absence?
-John admits that while he takes a one to two-month vacation every year, the business still feels a bit shaky during his absence, and he attributes this to not having built proper structures in the early years.
What is the person's additional business venture called, and how does it relate to their freelance work?
-The additional business venture is called 'Prosper'. It is a product business that the person considered would take off, at which point they would stop freelancing. However, they are now considering integrating it with their potential agency.
Outlines
đ€ Contemplating the Transition from Freelancing to Agency Ownership
The speaker is considering starting their own agency after being a successful freelancer. They have reached a point where their freelance business is doing well but feels it has reached its growth potential. They seek advice from John, CEO of AJ and Smart, a design agency they admire. The conversation focuses on the financial viability of starting an agency, the potential for growth, and the first steps to take. The speaker is concerned about the scalability and profitability of an agency and is weighing the benefits of maintaining their current freelance business against the potential of building a larger, more impactful business.
đ Scaling Challenges and the Agency Model
John shares his experience transitioning from a freelancer to an agency owner. He discusses the challenges of scaling a freelance business and the decision to form a company after winning a project that required a corporate entity. He admits that the agency model involves a significant reduction in personal income initially, as the business requires investment in team and infrastructure. Despite the financial sacrifices, John finds satisfaction in building something larger and the potential for significant future gains. He also touches on the importance of strategic decisions and the potential for the agency to undertake high-profile projects, such as working with the government.
đ Building a Sustainable and Profitable Business
The conversation continues with John detailing the slow and organic growth of his agency, emphasizing the importance of hiring the right people and trusting one's instincts. He admits that running an agency is not without its challenges, including the stress of managing a team and the risk of hiring unsuitable candidates. Despite these difficulties, John is optimistic about the future, believing that the agency will provide a platform for significant achievements and financial rewards. He also discusses the importance of building structures within the business to ensure its sustainability, even in his absence.
đ Embracing the Entrepreneurial Journey and Learning from Mistakes
In the final paragraph, John encourages the speaker to take the leap into entrepreneurship, suggesting starting with freelancers to test the waters. He offers to share his experiences and mistakes to help the speaker avoid similar pitfalls. The speaker acknowledges the value of learning from others and the importance of taking action despite the fear and uncertainty. John's story serves as a testament to the potential rewards of building a business, even if it requires a long-term investment and a willingness to face challenges head-on.
Mindmap
Keywords
đĄAgency
đĄFreelancer
đĄScaling
đĄImpact
đĄMargins
đĄProduct Business
đĄHiring
đĄProfitability
đĄStrategic Decision
đĄPilot
đĄVacation
Highlights
Considering starting an agency to scale business beyond freelance limitations.
Freelance business is doing well but has reached a scalability plateau.
Interview with John, CEO of AJ and Smart, a successful design agency, for insights on agency creation.
Freelancing income is substantial but lacks growth and impact potential.
Product business 'Prosper' is growing, questioning the need to continue freelancing.
Desire to build a business that can operate independently of the founder.
John shares his experience transitioning from freelancer to agency owner.
Initial reluctance to start an agency due to negative perceptions of the industry.
John's agency started by accident to fulfill a client's requirement for a company entity.
The challenge of maintaining personal income while building the agency's growth.
The importance of building a team for business sustainability and growth.
John's honest perspective on the financial sacrifices made during the early years of the agency.
The potential for significant financial growth through strategic business decisions.
The transition from a lifestyle business to a more structured and profitable company.
Struggles with hiring and managing a growing team in the agency.
John's advice on starting with freelancers to test the waters before full commitment.
The organic growth of the agency from project needs rather than a pre-planned expansion.
The importance of trusting one's instincts when making hiring decisions.
John's personal enjoyment of building the agency and the freedom it provides for future projects.
The challenge of creating a self-sufficient agency that can operate without the founder's constant involvement.
John's recommendation of books to read for guidance on building and managing an agency.
Encouragement to take the leap and start the agency despite the associated risks and challenges.
Transcripts
one of the things I'm considering at the
moment is starting my own agency for a
lot of time I told myself I don't want
to do this and I only want to be a
freelancer and work with myself but
right now I'm at the point where my
feelings is doing really well but I feel
like it can't scale anymore it can't
grow and make more money and make more
impact and so starting an agency is one
of the things that I consider most I've
asked John the CEO of AJ and smart which
is one of design agencies that I really
really like to come talk to me and share
his story is how he started his agency
and should I do it is it financially
viable and what are the first step so
here's the interview I hope you'll enjoy
it
one two three clap they'll line up right
what's up John thanks for doing another
video with me hey Ronnie what's up so I
want to talk to you about moving from
freelance into an agency oh because it's
something that I'm really considering
right now let me give you kind of a
perspective my freelance is doing good
I'm actually looking to hit 300,000
dollars this year raising just doing it
on my own so it's like there's no like
real margins right this is my home
office I don't have a lot of expenses so
it's pretty awesome but I'm already
thinking like what's the next step I'm
like I'm charging relatively high like
hourly rate I don't I try not to charge
per hour but when I have to so it's it's
ranging between two hundred and fifty
dollars to three hundred and sometimes
when I'm doing like value pricing for a
project it might even get to I don't
know like a thousand dollars per hour
does that work really quick but I'm like
I I ran out of hours to sell so I'm I'm
thinking how to scale right now and and
actually even you know more important
than scale I'm not sure you know but I
also have kind of a product business
that's called prosper and I always told
myself like I'm going to freelance until
my product business takes off then I'm
gonna stop freelancing but now I'm at
this point where wait why would I stop
my freelance
I've got a good business going yeah like
I got a you know a flow of clients I
know how to sell to them I know how to
execute
why don't I build a real business out of
it like an agency that can potentially
work without me at some point yeah and
then I have to business yes so now I'm
considering this and I'm talking to you
because I've been at your office I think
that you know you know one of the
reasons that I didn't want to start an
agency all this time is because like I I
hate the agency monitor all the agencies
that I that I saw were like they sucked
and I said I don't want to go there but
your agency is amazing I think like
except for you know the cool people
office vibe I think that you know you're
selling the right product and that would
be interesting to me to think about it
this way yeah but so here's what I'm
talking to you um what I'm super super
scared about is once I start hiring
people and taking an office I'm gonna
like my margins are gonna drop super
quick yes and I'm now I'm wondering will
this even be profitable for me like
besides like a super long term strategy
to build a business that can run without
me which is probably I don't think I can
do this in less than five years maybe
yeah okay what do you how would for you
like your first time hiring you you
started as like three partners right so
I just heard your podcast on if you
don't know John's podcast by the way
product breakfast but you should
definitely check this out I will link
this but anyway so yeah please please
yeah so I mean I was a freelancer
exactly like you I mean I was only like
21 so I wasn't getting such a nice day
rate but it was pretty alright and I met
another I met Michael smart my
co-founder at the same place we decided
to do a project together that a company
was like you know tendering they were
looking for agencies to pitch for it we
weren't an agency but myself might a
bass player in my band and my friend
from work decided to pitch for it we
actually got it still three freelancers
not an agency but when we handed in our
freelance
invoices they said no you have to be a
company so that's why we started the
company the idea was to close it pretty
quickly and then get back to freelancing
but we didn't
the bass player left immediately because
he was like well this doesn't sound like
a good idea but myself and Michael ran
it and now it's six years later we are
20 people we're starting to get
relatively well known we were pretty
much silent for the last five years but
in the last year we've started to get a
bit more well known for a couple of the
bigger projects that we've been working
on and I'll just be a hundred percent
honest with you because I have
freelancer friends who are also making a
similar amount of money to you it will
take you at least six years to get to
the point where you're able to make two
hundred and fifty thousand dollars while
running something like this while making
something sustainable because you're you
need to so if it's a weird like paradox
everyone says oh I want to keep the
company really small and you know I just
want to keep it really yeah really tight
and have low overheads but the problem
is then as soon as you step out and go
on vacation everything goes to and
you come back and everything's broken so
you need to you need to have a sales
team you need to have a team running
your social media and community like
these are the types of things I mean
we're we are a pretty small agency
compared to most where our revenue is
like just under five million but we
still I have to say I would be making a
lot more money as a freelancer right now
especially after the amount of years
that I've been building this up in the
amount of contacts I've made however it
does I mean for me I think it just
wasn't satisfying enough to be a
freelancer and this feeling of growth
this feeling of building something that
we can like offer like super valuable
things to really large companies I mean
we're gonna be working with the
government pretty soon and it's gonna be
a huge huge project where we're changing
everything they're doing inside out and
this is something I would never have
been able to do on my own bringing
together a few freelancers it wouldn't
have been reliable enough and now we are
kind of able to do you know you're able
to do a lot more as a team but man I
promise you like don't do it if you're
not willing to hurt your margins because
I paid I paid myself money
for the first five years and to be
honest even right now I should be making
five times my salary but my feeling is
and here's the I'm not just being like a
you know altruistic idiot I genuinely
feel like I'll be a millionaire in the
next four years because of the way it's
going and I don't think that would
happen if I was a freelancer so I think
there's like you know the freelancer
thing always builds up and always builds
up and it's like slow and steady but you
can you can pretty much tell like if you
open up an excel sheet you could pretty
much guess how much money will be in
your bank account by the time you're
like 50 whereas for me it's kind of low
low low low low low low and then it just
jumps really aggressively when we make a
good strategic decision and we're
starting to get into digital products
now so for example we built this agency
for six years we're starting to sell
courses things like this where we're
able to constantly increase our prices
because of the brand so yeah for me I'm
not just doing it because I'm a nice guy
and I want everyone to have a great job
of course I want that too
but I also do genuinely believe that
this will be a platform for me to do
really interesting things later but yeah
man it sucks as well it sucks running a
company it sucks having 20 people
it sucks firing people it's all of this
stuff really sucks and and you'll be
pissed off you'll hire people who you
think you know are gonna do the job and
they don't and you'll be pissed and it
makes life more stressful so if I was
you I would do it because you already
have an amazing starting point and you
have a great brand because of the
YouTube channel as well I think you'll
have an a very much smoother start and
also I think what could be interesting
for your YouTube channel I would be
happy to give you like weekly advice on
all the shitty mistakes I made for the
first six years that you should avoid
maybe you can get it to three million
way faster than I did just by not being
yeah I think you're probably you're
probably right
it's like it's it's a long-term
investment
so you have to understand like what
you're paying right now and what's is
gonna pay back and I'm the the thing is
that I'm already making this kind of a
long like long term investment in my
product writing this which is like for
two years already I'm not even taking a
salary at all because I'm hoping that
it's gonna grow and like my freelance
business was the way to actually you
know sponsor that investment yeah but
now I'm trying to think bigger and I'm
saying should I make this this one an
investment as well it's tricky how did
you how did you like decide to hire the
first person and then like how did you
do it was pretty like organic basically
we got a was just my far along wasn't it
like I think we it took us probably 8 to
10 months to hire the first person ok
and it was because a project came
through from eBay it was a little bit
bigger than we where we obviously you
know we pitched for it and we got it it
was a similar situation and then we
panicked a little bit and I was asking
around and basically a friend of a
friend ended up freelancing on that
project and he was just amazing and so
we hired him his name is Tim and he's
been here for the last five years now so
that was the first hire the second no
but that's yeah actually you said it was
the first hire but actually you've pile
up did the relationship with the
freelance we I would do that every time
yeah I would never I would never it's
also something important yeah yeah man
don't like either to be honest even if
you do the pilot it still could be that
five months in you're like ah there
may be an or that you know
there's so many problems with with you
know hiring and that's something that
I'm we've learned a lot of lessons over
the years also trust your gut like if
you have the feeling that this person is
going to give bad vibes to the customers
or anything like that just don't don't
do it
because you're gonna end up having to
fire them later anyway yeah so we we
hired super slowly the first five years
we only grew to six people and then
suddenly we jumped from six to twenty
people in six months and that was a
strategic
decision that was like let's go
for it let's stop sitting around on the
sidelines and like being like because
actually you know what it doesn't make
sense to have a six person agency you're
not making enough money for it to make
sense you might as well be a freelancer
so it's like you might as well go to the
let's be a let's make a company that is
capable of bringing in you know five
million euro five million dollars
whatever and let's work on how we can
make that profitable later what do you
feel okay so let me now ask you kind of
like as as your role as the CEO you're
the CEO right so do you feel that you're
now six in six years in do you feel like
the that you can take a vacation now and
come back and things will be a-okay or
better so I always took a one to two
months vacation every year of growing
this business and honestly I think
that's also probably one of the reasons
that didn't grow we started it as a
lifestyle business so it was you know
the general idea there was that we would
always take time off um I think today I
would say still no I still I can take a
one-month vacation but it's still a bit
shaky and to be honest all of that is my
fault for not building proper structures
over the years I took it too easy at the
start and now I'm paying for it so a lot
of the cornerstones of the business are
still a little bit shaky but it's
getting very close and here's the thing
right I should also say straight up I
really really love working here so much
that I don't even want to go on vacation
my wife forces me to go on vacation like
when I was freelancing and when I was
working for other people I don't feel
like I have client work I don't feel
like I really have to do client work
because I'm building this business and I
I don't know why I really really love it
and I only do the client work that I
really then feel like I can give value
to you know when I'm like traveling to
another company and able to really give
the value but I don't then I'm not there
for the entire project so I really do
enjoy what I'm doing but it's still AJ
and smart is still shaky as
I totally understand I'm really like one
of the the things that you mentioned is
actually another one of the reasons why
I think I should go in that direction
it's just because I know that you know
being able to grow a team and manage a
team it's kind of one of those skills
that if you ever want to be like a
successful person you're gonna have to
master it I think so and so if you if
you're only going to stay alone like is
a one two person company you're gonna be
limited in what you can accomplish
totally totally and look I have the
freedom now to build this business and
like make side products using the
profits that we're creating with the
business but also have a team to do that
that it's not just a side project that
actually a team can be dedicated to
building something for like three months
and do nothing else and that takes time
too right and that's that's the kind of
investment what you're you're making
basically like you're trying to make it
build a platform for ideas to be
produced but like that client work is
coming in to pay for it and eventually
what you want to do and what obviously
every agency wants to do is not rely on
client work anymore but produce the
revenue without that right a more
predictable revenue stream we still
haven't figured that out but we're
working on it for sure yeah well you
know I have it's like I'm still not sure
about this like my gut feeling tells me
I gotta go in that direction but I'm
like honestly I'm just super scared yeah
I I don't know why you're I don't know
why you're overthinking it why don't you
just don't like just don't think about
having like your you are the one owner
you are the one founder just start with
freelancers start finding really really
great freelancers and just know because
just because even making that first step
has a cost you know it is time looking
for and starting to work with these
people and you know and paying them
which is already kind of reducing my
margins and I've I like did tiny pilots
in the past and they failed and so now
I'm like kind of worried about this but
just maybe I was wrong I didn't know how
to do this properly I have a few books
that you should read before yeah I
should probably give it a try yeah yeah
that's one we should read
full candor that's like a really from
Kim Scott so she wrote a book on
basically how to build room how to give
feedback all of that kind of stuff is
really really amazing Reid built to sell
this is basically how to create me so
radical candor Attica can be built to
sell and build like to build to sell is
basically how do you create an agency
that is so self-sufficient that other
companies will want to buy it for
multiples of millions and this is a
really a fantastic book store me read
those two they look at you in there in
the vibe to start something right so
that's a good starting point I'll read
those nice I still feel like you're
procrastinating a little bit too much
but that's just me probably probably
alright John thanks so much not a good
one I get you in the next one
all right always great talking to Joe
and I hope you find this useful John's a
great guy who probably let me know if
you like this in the comments below cuz
I think I'm gonna ask him to be on the
vlog here lots more time super valuable
and I've got a lot to learn from him
anyway hope to see you guys tomorrow
subscribe like and I'll get you next
time
[Music]
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