Agency: the new four letter word

Nobody seems to want to run an agency anymore. Many see it simply as a means to an end: running a software company.

"Do what you can to do what you love."

Many point to 37signals as a successful example of a company who has managed to transcend the traditional agency model of client work and been able to sustain themselves off the revenue generated from the services they offer.

I, too, have often looked at the agency model as being an ineffective way of running a business. "It doesn't scale." It's a constant cycle of getting projects, working on projects, finishing projects and starting all over again. Want more money? Work on more projects! But to work on more projects, you need more staff. With more staff, you have the overhead of having to add in a management layer to the process.

Working on a web application seems like utopia. Build once, and have the revenue stream in continually without ever having to lift a finger. While it's not quite that easy, many have managed to build million dollar companies out of building a web application and only left with some weekly maintenance.

But is there something inherently wrong in the agency model? Is it worth it and can it sustain itself?

Agencies actually make a lot of sense, especially when they specialize within a specific niche. Few organizations have enough know-how on staff to solve all their problems. As a result, they rely on agencies to fill a specific need, often a particular project that has a definitive start and end date.

And agencies have the opportunity to scale somewhat, mostly through reputation. The better you get and more well known you get, the more you can charge for the same amount of work using the same number of staff. Certainly there's a limit to how much one can charge but look no further than companies like Happy Cog who have the clout to charge top dollar for what they do.

In the end, the commitment to running a succesful agency relies on establishing a small and effective team. It's not about getting 100 people on staff. It's about providing a quality service to clients you want to work with. Running an agency and wanting to do it for years to come doesn't have to be a bad thing.

Published February 28, 2007
Categorized as Business
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Kyle said on February 28, 2007

The people who don't want to run an agency clearly haven't been at a good one. I can tell you after working for 3 years at an agency, it is by far the best possible working situation when you're still dealing with clients.

I think people forget that just as there are good projects, and bad projects, there are good agencies, and bad agencies.

If working on the biggest sites on the web, for a paycheck that comes every 2 weeks, in a town I love, with people that I love can be synonomous with a four-letter word, we better redefine the term... because I love it :)

Jeroen Mulder said on March 01, 2007

Yet that constant cycle is exactly the reason why I have grown to hate it. I love building great things, so at first that seemed like a logical choice for me. However, I absolutely hate building things and then let go of them.

So, I see myself building web applications for the simple reason that it allows me to build great things, release them, receive feedback and improve them. I am a perfectionist, so I constantly want to make things better. By building web applications I feel I have more room to satisfy that.

Am I the only one who feels about client work this way?

Keith said on March 01, 2007

Interesting post. As some one who started an "agency" (we don't tend to like that word much) and who actually enjoys most of my client work, I think I've done more than the usual thinking on agency models, client work, etc.

Brian has written a bit about our thinking on the issue.

I think you're right about keeping it small, working with a good team. I'd add to that being careful about the clients you work with and caring about them. Client work doesn't have be suck. A good process, good communication and working to set your self up for success helps quite a bit.

Having said that, we try and do a bit of our own projects along side the client work.

This is done to keep us busy is slow periods (the client/service world can be up and down), to provide us a bit of a diversified income and to have fun working on our own stuff.

Anyway, it's not that the agency model needs to go away, it just needs to be changed.

Mike Papageorge said on March 01, 2007

"Running an agency and wanting to do it for years to come doesn't have to be a bad thing."

Funny, that line above and more from your post hits similar points, for me, as my post about "your web business plan".

The scaling of reputation is one way to go; you can get more challenging and different projects, demand more compensation etc. But I wonder how many of us, enthralled by the current wep-apps and money making on the web, may eventually feel underwhelmed doing what can be very similar things from project to project.

I guess the beauty of the web is the skys the limit possibilities and the ability that we have, as designers/developers/marketers etc, to make a real difference to the bottom line of a business or to their client relationships. The challenge will always be there, one way or another.

Mark said on March 01, 2007

I think there's two agency sub-models, in addition to size being a factor in efficiency and success.

One model is: We want to start a client services firm. We need to line up work and hire people to do the work. In this scenario, you're going to get a mixed bag of people, with some carrying the weight of others, some just punching a clock, and you're going to be focused on the bottom line too much to be really providing value to your clients.

The other model, which is what I see you doing with Sidebar, is a collective of people who are established experts, love their jobs, and come together to provide additional value for clients. They don't have a sales team; the work comes to them. They probably grow not only through an increase in the client roster but also through encountering new people they'd love to collaborate with.

I've had a lot of experience with the former, which is why I'm on the verge of going solo. But I won't be alone. I'll be counting on smart, smaller agencies who don't try to staff for every possibility, but are willing to outsource technology efforts to people they trust and like to collaborate with. At the same time, I'll be partnering with other freelancers who are experts in what they do (design) and maybe some day some of us will pool our resources and start our own collective.

Do I have web app aspirations? Sure. But one of the reasons I've stuck with the agency model is that I like variety and new projects and new people. So while I might launch something that's standalone for some added revenue and reputation, I wouldn't want to be bound to something that would require a lot of support, and I'd like to establish an expertise at providing solutions to client's challenges, not just expertise in one niche app.

Just my take!

Nate K said on March 01, 2007

I would have to agree with Jeroen Mulder. I like to continually work on an application and refine it. Not that I don't like building client sites, but even then I want to do everything I can to help them be successful, there just isn't enough time in a day to get it done.

The agencies around here are definitely sub-par, it is poor work with a high price tag. I know this because I have done consulting with some who previously used a local agency. I guess it made me somewhat bitter, because I feel like the agency is just taking the client for a ride - at the client's expense!

I understand there are good and bad agencies, unfortunately all I have seen are the bad.

David Martin said on March 01, 2007

The basic problem with the "Agency" mindset is continued sales growth. The inability to say no, it just ruins you. You are pushing so hard to sell, sell, sell eventually you find yourself mired in mediocrity and inner turmoil. You can sustain long-term growth and success, but I strongly believe it's at the risk of personal happiness and stress levels. I work for an agency that other agencies hire.

soxiam said on March 01, 2007

And here I was thinking that the real reason why the agency model fail is because they have designers and developers all each reporting to 50 directors who spend all day checking their stock quotes on blackberries.

Natobasso said on March 01, 2007

Any wealth is built by commoditizing a service. Henry Ford put this into action with his assembly lines. The industrial revolution put wealth building (for the elite, company owners anyway) on the fast track.

I don't imagine you'd start what is a service-oriented agency merely for these kinds of IR profits and as you said they aren't set up to do that. More and more, though, clients see design work as a commodity; we just have to figure out how to give that to them.

There is some creative ego that must bend for this to happen, however.

Mike Papageorge said on March 01, 2007

Sox, don't let that bitterness from Operacion Puerto and the UCI cloud your judgement. I mean really, what else can the directors do? ;-)

Mason said on March 01, 2007

Overall I think of interactive agencies in a different way and on a different scale. A small talented team is necessary to start and grow a successful agency, but after that it becomes more about your reputation and your big name clients. Large agencies don’t have to deal with the churn of pitching new work (don’t get me wrong, they still pitch all the time), but they have retainers and long term SOWs that guaranty their revenue stream and at that point it’s just about maintaining the relationship and selling the next phase.

This may just be semantics (and a bit off topic), but in my experience firms that do mainly interactive work don’t really identify themselves as “Agencies.” I usually associate that term with ad agencies (Ogilvy, Y&R, etc.), which, generally are a different beast.

Nathan Garza said on March 02, 2007

Something I've learned is that it is absolutely necessary to outsource on occasion. That let's you keep the core organization lean. That way when you hit the inevitable low points, no one has starts stressing about layoffs (or at least not as much!)

I've also found that if you take good care of your clients, you don't necessarily have to let the project go. We are constantly doing new work for on of our clients, add ons to his original site, etc.

That said, I would also like to develop some apps of my own, in the future. We'll have to see.

Steve Oliveira said on March 05, 2007

Hey, great article once again. Every time you write business articles you change my prospective on things. Keep up the good work

Ron Rosenhead said on March 13, 2007

Just a brief addition from the UK. I run a company called PROJECT AGENCY.....we specialise in helping companies deliver projects on time and to budget.

I am merely pointing out that the words project and agency are being used a lot in these blogs and there is a company with the name Project Agency.

Good blog

Mark said on March 13, 2007

We've got to change the agency model so that it's not about execution but about ideas. Everyone talks about ideas, but we're living in a world dominated by execution. —Scott Goodson, founder, CEO, StrawberryFrog, New York


Artem said on August 07, 2007

yeah, Agencies seems to be one of the most profitable engage for many people of the Web. Examples like b5media of Aaron Brazel and TTZ Media of John Chow prove it again and again

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