One of the biggest challenges agency owners face is scaling their business. Increasing client work intake should mean higher profits, but that's not always the case. More clients require more resources, either time-based or in-house employees, and that doesn't even account for the hills and valleys your business experience on a monthly/quarterly basis.
That's where leveraging outsourced developers comes into play. Many agency owners integrate freelance developers into their workflows on a variety of occasions and they do that with an interesting goal in mind: improve their outcomes and their business margins.
Scaling an agency business is a hard topic to discuss for it's strictly connected to your current scenario, your market position, your available resources, and your approach to business. Yet, there are core principles that apply to the vast majority of agencies and that can be really helpful for you, no matter how big or young your business is today.
So, how can you increase your agency margins without changing your prices?
Scaling a business means being productive and efficient on three fronts
You should pursue better productivity and improved efficiency.
These might seem quite basic recommendations about nothing special. However, most of the time it is the basics that are neglected by agency owners caused extensive damage in the long term. WordPress developer and Codeable expert Paul Cohen elaborates:
It's common sense but you'd be surprised how often we're not following these core principles and get distracted. Nowadays it is happening more than ever with distracting activities like social media acting as a time waster.
To do that you need to take action on three main areas of your business: Project and Product Management processes, communication tools, and automation.
1. Project and Product Management
It all starts with better procedures and processes.
Project Management encompasses every single detail of the project from the client's knowledge to their objectives and techniques, while Product Management is focused on designing the right product for the customer. As Paul explains:
Roughly speaking, Project Management is the process of development. Product Management, on the other hand, is the process of developing the right product, the right website. They're interrelated but separate processes, like two cogs in a gear assembly.
Being productive and efficient with respect to these two areas requires an agency owner to deal with different and connected matters in a sensitive and timely manner. Opting for the most efficient and effective development workflows, asking the right questions, and determining appropriate deliverables and milestones enable you to keep hold of the process and the costs involved. Paul comments:
In terms of project management methodologies, if your clients are very clear and they have an existing business, then you can almost do a waterfall project management methodology, which is still valid in certain contexts, because you're able to do all the requirements up front with a little bit of iteration. That will allow you to estimate much more efficiently. If your client's request is more open-ended or they don't really know what they want that's the value of using a more agile or rapid prototyping iterative method of development.
There are many Project Management methodologies to choose from and your choice should be driven by the type of clients and projects you usually work with. Some of the questions that might help you here are:
- What's the type of product/website your client is asking? Is your client's website a marketing website or is it an eCommerce website? Maybe a rental site?
- What's your client's awareness level? Do they know what they want/need? What's their background?
- To what degree do your clients have experience in that business area? Is it a new idea that they're trying?
- What's their in-house resources availability?
- What’s the budget?
- What's the timeline?
An important part of improved workflows is played by highly-skilled outsourced developers who know what they're doing. They might cost more but they can deliver a better product faster with higher quality so that there should be fewer downstream issues.
2. Communication tools and processes
Efficiency in communications comes from streamlining processes and tools adoption. Having clear lines of command and communication channels and then utilizing them in the most productive ways possible should be the precise way forward. As Paul also brings to our attention:
You increase agency margins by being productive and efficient. And that has also to do with tools you have and how you use them. I'm talking about everything: from the right GitHub client instead of a command line, what development processes you're running, how far you've standardized tools among all your developers, etc. If you focus on making these flows of communications more efficient, theoretically it means you have a better process.
The lesson to draw here is that, at a higher level, you should be looking at minimizing friction among all parties involved.
Another area that might be worth investing is automating repetitive tasks. Think of how much time you could gain back if you were able to automate these tasks:
- Backups for your client's websites
- Plugin and theme updates
- Performance monitoring
- Application performance monitoring
- Server monitoring
- Analytics reporting
- SEO reporting
The list could be endless.
If you really want to take it to the next level, automating your repetitive tasks goes hand in hand with leveraging what's usually called "retainers", which are fixed-scope tasks you outsource to freelance developers and pay for a fixed price. This way, you free time on your end and still are in control of the process and the final outcome.
You won't believe how such basic truths aren't embraced by many agency owners who say they'd like to grow their business.
The fundamentals are important more than anything else. If you want to increase your margins, without touching your pricing strategy, you need to be "brilliant at the basics", as one of the longest winning NFL coach Vince Lombardi used to say.
Being brilliant at the basics means trying to do everything you can to improve these three fronts of your business so that you'll be able to juice out higher margins.
At the end of the day, it's all about focusing on and increasing efficiency in all your processes. An important aspect that stands out is that increasing margins doesn’t necessarily mean cutting costs at every possible step. Sometimes, spending more means investing in greater returns because this allows long-term gains and minimizes your chance of having issues in the near future.
This blog post features Paul Cohen, a hands-on technology strategy consultant with 20+ years international experience on a variety of projects including WordPress, Enterprise IT, web/mobile applications, eLearning simulations, educational apps/games in teams of all sizes. He’s also a creative technologist who understands the business, product, project, design, and development aspects involved in taking ideas from concept to realization.