Digital Freelancing vs. Agency: Pros and Cons

At some point you have to stop being a freelancer and build an agency.

It’s not an easy task to be a successful freelancer. It takes years of focus on a specific skill to become good at what you do. It takes consistent effort, not just to sharpen your skills as a freelancer but also to keep selling yourself in the marketplace. It can become quite exhausting at some point.

Going from a freelancer to an agency will allow you to expand your offerings, take on larger projects, and work with a team. In this article, we’ll explore how to transition from a freelance business to an agency business and the pros and cons of making this leap. The content here is from my personal experience of establishing my agency DeepMarketing.com.

The Difference Between Freelancing and an Agency

Freelancing typically involves offering services on a one-to-one basis, where you’re both the manager and the worker. Freelancers often work solo, handling everything from client acquisition to project execution.

On the other hand, running an agency means managing a team of specialists who handle different aspects of a project. In an agency model, you shift from doing the work yourself to overseeing a team and ensuring that projects are delivered to clients at a larger scale.

Why Transition to an Agency Model?

There are several reasons why freelancers might consider transitioning to an agency business:

1. Increased demand: You might have more client inquiries than you can handle alone.

2. Growth potential: Expanding into an agency allows you to offer more comprehensive services and take on bigger projects.

3. Financial security: With a team, your agency can work on multiple projects simultaneously, increasing revenue potential.

4. Opportunity to specialize: Building an agency lets you focus on strategy and management while your team handles execution.

How to Transition from Freelancer to Agency?

Here are the different steps you can take to slowly move away from freelancing and get into building an agency.

1. Are you ready to build your agency?

The first step in transitioning to an agency model is assessing whether you're truly ready.

Ask yourself:

• Are you consistently overbooked as a freelancer?

• Do you have a strong personal brand and account-based marketing strategy?

• Do you have enough leads and demand to sustain a team?

• Are you prepared to handle the responsibilities of managing people?

If your freelance business has reached its capacity, and you want to grow beyond your current offerings, an agency may be the logical next step.

2. What’s the vision for your agency?

Before making the leap, defining what you want your agency to look like is crucial.

• What services will you offer?

• Will they differ from your current freelance offerings, or will you expand?

• What is your target audience?

• What is your agency’s unique selling proposition (USP)?

Having a clear vision will help you create a strong brand and communicate your agency’s mission to potential clients and employees.

3. Start Small by Outsourcing

You don’t need to hire a full team overnight. Begin by outsourcing tasks that take up too much of your time, such as administrative work, marketing, or smaller parts of a project (e.g., graphic design, copywriting). This allows you to dip your toes into managing others without fully committing to a team.

4. Hire Strategically

Once you're comfortable with outsourcing, it's time to hire key team members. Focus on hiring talent in areas that complement your skills or fill in gaps. If you’re a web developer, you might want to hire a designer or content writer to offer full-service web solutions. Remember, building the right team is essential to your agency's success.

5. Set Clear Systems and Processes

As a freelancer, you likely have your own workflow, but transitioning to an agency requires setting up systems that work for a team. Document your processes for everything from client onboarding to project management. Use tools like Asana, Trello, or ClickUp to track progress and assign tasks. Clear workflows will ensure efficiency and consistency across projects.

6. Establish Your Agency’s Brand

Freelancers often rely on personal branding, but agencies need a separate identity. This means creating a professional website, designing a logo, and developing a clear value proposition for your clients. You’ll also need to adjust your marketing strategy to position yourself as a company rather than an individual.

7. Focus on Client Acquisition and Retention

Scaling a business requires a steady stream of clients. Invest in marketing strategies like content marketing, SEO, and social media outreach to attract new clients. At the same time, focus on retaining your existing clients by delivering exceptional service and offering additional value through your expanded team.

8. Learn to Delegate

One of the most challenging aspects of running an agency is letting go of control. As a freelancer, you’re used to doing everything yourself, but in an agency model, you’ll need to delegate tasks to your team.

Trusting your team to handle day-to-day operations will allow you to focus on growing the business, managing client relationships, and steering the company’s strategic direction.

9. Invest in Continued Learning and Leadership Skills

Running an agency requires a different skill set than freelancing. To ensure your success, invest in learning how to manage a team, handle finances, and grow your business strategically. Leadership and communication skills are essential for managing both your team and clients.

10. Monitor Your Financials Closely

Freelancers usually have lower overhead costs, but running an agency comes with additional expenses like employee salaries, tools, and office space (if applicable).

Ensure you have a solid financial plan in place. Track your expenses, set clear profit margins, and regularly monitor cash flow.

Pros of Transitioning to an Agency Model

These are the advantages of running an agency:

• Increased Revenue Potential: With a team in place, you can take on more clients and larger projects, ultimately increasing your earning potential. Instead of relying solely on your own hours, you can scale by leveraging the skills of others.

• More Comprehensive Services: Agencies often provide a full suite of services that a freelancer can’t manage alone. This allows you to attract clients looking for one-stop solutions, making your agency more competitive.

• Ability to Specialize: As your agency grows, you can choose to specialize in a niche market or service, which can help you stand out from competitors and attract high-paying clients.

• More Free Time: When you’re not responsible for executing every project, you’ll have more time to focus on running your business and personal life. Delegating tasks to your team can lead to more flexibility and less burnout.

• Building a Team Culture: Running an agency allows you to build a team and foster a company culture. This can be incredibly rewarding, as you’ll see your employees grow alongside your business.

Cons of Transitioning to an Agency Model

Where there are advantages, there will be disadvantages as well.

• As an agency owner, you’ll be responsible not just for your clients but also for your employees. Managing people comes with its own set of challenges, from hiring the right talent to ensuring team productivity.

• Running an agency means additional costs, including salaries, office space, and software tools. You’ll need to consistently generate enough revenue to cover these expenses.

• As your team takes over project execution, you may have less direct involvement in the creative process. For some former freelancers, this can be frustrating, as they’re used to being hands-on.

• Scaling a business always comes with risk. There’s the possibility that demand for your services fluctuates, making it difficult to maintain steady work for your team.

• Instead of focusing solely on creative work, you’ll need to dedicate significant time to managing your team, handling administrative tasks, and overseeing business operations.

Transitioning from freelancing to running an agency can be a rewarding journey, but it’s not without its challenges. With careful planning, strategic hiring, and strong leadership, you can grow your business and expand your services.

While the increased responsibilities and risks may be daunting, the potential for financial growth, work-life balance, and building a thriving team make it a compelling choice for many freelancers looking to take the next step in their careers.

Cheers,
Deepak Kanakaraju