5 Tips to Scaling A Digital Agency

Today I want to talk to you about five things that helped me while I was growing my agency that I think every agency should be implementing, but especially in light of recent times, like the whole COVID-19. At our agency, we’ve been fortunate enough to grow for the last nine years (est 2011). Each year we’ve doubled what we did the previous year, which is great. And I’m not naive to know that at some point that’s going to come down and we can’t always expect such growth. However, there are some things that I can certainly attribute to being able to have that sort of safety in our company and our business and to not really be as affected as I’ve seen some of my peers through this whole COVID-19 thing. And so here’s some examples of things that I believe we implemented at the beginning stages of our agency and throughout the nine years that we’ve been in business that has really helped with just having a solid business ultimately.

You Don’t Have to “Niche Down”

The first thing I want to talk about is serving different markets. I was always reading, and everybody told me to niche down, which is great. There’s certainly a lot of value in niching down because you get to know that one industry and those pain points and those profiles. However, I had some friends that had niched down and depending on where they niched down, those industries, in light of recent times were really affected by the whole COVID-19. So overnight, their business almost went from doing really well to really struggling. And so that’s one thing that I believe we did that helped us throughout this whole situation was that we didn’t focus on one specific market. We found a market that had a demand. We served that market and then we found another. And so there’s not one niche that we as an agency are specializing in and when I say this, I’m speaking about DesignLoud. There wasn’t one industry or one niche that we specialized in. And I think that helped us when some of those industries were affected, we didn’t really feel that on the back end.

Regularly Document and Update Your Processes

Second to that, and I stress this a lot, it took me a few years to really grasp this, but the earlier you can do this, the better. Write down your systems and processes. This could be anything like Google docs. We used some free tools that we did some wire mapping that provided us a visual flow chart of our systems and our processes. And we even made that interactive. I later converted that to InDesign. if you’re interested, I’ll definitely drop the link in the comments or something, but that allowed our employees to see what to do and how we do them. So that it’s scalable. It’s repeatable. It’s almost as if I’m doing the work by myself, but I’ve got a team behind me that’s actually doing that work. That’s what’s allowed me to kind of step back a little bit more from the agency and focus on the software side, which is SWELLEnterprise.

Here is a great video on how to knock out your processes in as little as 30 minutes: https://youtu.be/KF2D9VjryVc

So definitely start implementing your systems and processes as early as possible. If you’re a solo entrepreneur right now, just go ahead and take a day and write down everything or visually map out these things. If you’ve already got a team behind you and you feel like your systems or your processes are kind of weak, have them create them and then submit them to you to review and improve on. That way you don’t have to take on so much pressure of doing all these things at once and are they going to follow it or are they not? If they’re already doing the work, have them create it and then you review it and ultimately approve it.

Subcontract Work Until It Makes Sense to Hire In House

The next thing I want to talk about is subcontracting. I know that raises some flags with some people, but at the beginning stages of the agency, we actually were the subcontractor, we subcontracted for other agencies. That kind of got a little dicey as we grew because their clients started looking for us and trying to work with us directly. So we ended up cutting that cord, but we started utilizing subcontractors as we were growing our brand. And here’s my philosophy on it: utilize a subcontractor up until the point where it makes sense to eliminate the subcontractor and hire somebody on specifically for that.

So for example, let’s say we are subcontracting, we’re providing an agency service where we are creating blog posts. We’re subcontracting those blog posts out to some third-party provider. At a certain point, that’s going to make more sense for me financially as the business owner to bring that position in-house than it is to subcontract it. But up until I reach that point, I’m going to subcontract it. And I’m going to mark it up by 2x or 3X, whatever the case is. That’s going to allow me to grow and that’s going to allow me to not have to worry so much on some of the taxes and some of the other things that come with hiring an employee if I’m not able to afford them at that time. Obviously, if I was able to afford them, I’m going the employee route before I go the subcontract route. But as you’re growing and scaling your agency, subcontract as much as you can.

It’s All About Your Profit Margin

The next thing I want to talk about is focusing on your profit margins. So you can have a $5 million agency, but if you’ve got a 10% or 8% profit margin, it really doesn’t matter how much you bring in with revenue. If you were to go and sell that agency, ultimately one of the things they’re going to look at the most is what is the profit margin of this company? And so I’m grateful to be able to say that our profit margin in the agency was around 30% consistently year over year. And so some of the things that I think we did that played into that profit margin was when we were calculating pricing, we knew, for example, what our expenses were, what we wanted to bring in for a profit, and then any kind of other overhead or savings.

So we factored all of that into our pricing. For an agency, I believe it’s ideal for you to have a 30% or more profit margin. And it doesn’t matter so much what the total revenue is year over year from the agency, as long as you’re growing, it matters what the profit margin is. So even if you’re making $100,000 a year, but you’ve got a 30% profit margin, it’s going to look a lot better to a potential buyer if that’s your exit strategy, then something that’s $500,000 or a million dollars a year, but it’s only got like a 3% profit margin. Me as the owner or the potential buyer, I would want the business that yields the most profit for me.

Always Keep Learning

Finally, I want to leave you with, make sure you’re consistently growing. Look at what you did the previous year, are you on track to add double that? Are you growing? Are you keeping up with trends? In other words, don’t be stagnant. Don’t be complacent with anything. Look at, for example, what Amazon did to the whole online retail industry, blew it away by storm. So things you can be doing to constantly be growing, keeping up with new trends, testing new services, speaking to your customers, even do a SWOT analysis. It’s not a bad idea to do this maybe once every two years or once a year, whatever the case is, but really sit down and find out what your company’s strengths, opportunities, weaknesses, and threats are. And if you do that, you will try to stay ahead of the curve a little bit more, or you’ll be a little bit more prepared in, for example, the most recent situation with the whole COVID-19 thing and how you can ride that out. It’s better to be proactive than to be reactive.

So make sure you’re consistently growing. If you’re not growing, then there’s a problem in your business and you need to really dig deep to find what that problem is.

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