Freelance VS Starting an Agency

Summary

In 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

• 😀 The speaker is considering starting an agency to scale their freelance business and increase impact, despite initial reluctance.
• 🤔 The speaker is concerned about the potential drop in margins once they start hiring and taking on office space.
• 💡 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.
• 📈 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.
• 💼 John explains that despite being a smaller agency, they have had to develop teams for sales, social media, and community to ensure business continuity.
• 💰 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.
• 🚀 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.
• 📚 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.
• 🔑 John emphasizes the importance of trust and gut feeling when hiring, as it can prevent future issues and the need for firing.
• 🛠️ The speaker acknowledges the need to master team management and growth as crucial skills for long-term success, which an agency can provide.
• 🤝 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

00:00

🤔 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.

05:02

📈 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.

10:04

🛠 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.

15:06

🚀 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.

Keywords

💡Agency

An 'agency' in this context refers to a business organization that provides services, such as design or marketing, on behalf of its clients. The video discusses the transition from being a freelancer to running an agency, emphasizing the challenges and benefits of scaling a business. The term is central to the theme as it represents a potential new direction for the speaker's career.

💡Freelancer

A 'freelancer' is an individual who is self-employed and is often hired to do a particular job on a short-term basis. The video script explores the speaker's current status as a successful freelancer and the considerations involved in potentially moving away from this model to start an agency.

💡Scaling

In a business context, 'scaling' refers to the process of increasing the size or volume of a business operation. The speaker mentions that their freelance business is doing well but feels it can't scale anymore, indicating a desire to expand beyond the limitations of a one-person operation.

💡Impact

'Impact' in this script refers to the effect or influence one has, particularly in terms of making a difference in their field or industry. The speaker is considering starting an agency to increase their impact, suggesting a move from personal success to broader influence.

💡Margins

In business, 'margins' refer to the difference between the cost of a product or service and its selling price, indicating profitability. The speaker expresses concern that starting an agency will reduce their profit margins due to increased overhead costs.

💡Product Business

A 'product business' involves creating and selling goods or services that are not dependent on providing ongoing services for clients. The speaker mentions a product business called 'Prosper' and discusses the dilemma of whether to continue freelancing or to focus on growing this product-oriented venture.

💡Hiring

'Hiring' in the script refers to the process of recruiting and employing new staff. The interviewee shares his experience with hiring, which was initially slow and cautious, and later became a strategic move to rapidly expand the agency.

💡Profitability

The term 'profitability' pertains to the ability of a business to generate profit. The speaker is concerned about whether starting an agency would be financially viable and seeks advice on this matter from the interviewee.

💡Strategic Decision

A 'strategic decision' is a significant choice made by a business that is intended to achieve long-term goals. The interviewee mentions that strategic decisions have the potential to significantly increase the business's profitability and growth.

💡Pilot

In the context of the script, a 'pilot' refers to a trial project or a small-scale version of a larger plan. The speaker mentions having done 'tiny pilots' in the past, which could be seen as preliminary tests for the idea of starting an agency.

💡Vacation

The term 'vacation' is used to discuss the ability of the business to operate smoothly in the absence of the business owner. The interviewee admits that even after six years, taking a vacation can still be challenging due to the business's reliance on his presence.

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]