a lot of agencies stall at $1m-$2m in annual revenue. here's why. first, many many agencies start as just 1 person who is really good at the thing that they do. that could be building product, design, marketing, etc. they're so good that demand starts to outstrip their supply, aka their time. when that happens, they have two paths: 1. double / triple their prices or 2. build a team and teach them to do the thing that they do well. there are a few dynamics to consider here. - the person choosing path 1 will make a lot more money take home than the person choosing path 2 for years. probably until the person achieves 4x-5x in revenue scale. that's because path 2 is lower margin. you have to build out the team that does the thing. then you have to build out the ops and overhead that stitches it all together. this can be very discouraging, and it's often much easier to stop building the team and just go back to doing the thing yourself and raising prices on your time. - doing the thing is a vastly different skillset and job than building the team that does the thing. people who are really good at doing the thing, often really like doing the thing. what they don't like is incorporating a biz, building a back office, chasing down invoices, doing 1:1s, hiring, etc etc etc. a lot of people find that building an agency isn't fun and what they learn is that they'd rather do the thing that they like to do. some of these folks take the contractor-subcontractor approach where they then actively do the work and subcontract out some of the boring bits. this can work out very well and ultimately results in a setup akin to the solo contractor approach where you have high margins but your topline is capped by your time. - scaling the biz means developing a repeatable sales & marketing motion. this is where, particularly, e.g., product, design or eng agencies, get stuck because the whole basis for starting an agency came from a surplus of word of mouth biz. ie they got the biz by doing the thing well, and they don't have the skillset for scaling demand beyond that. the way i think about it is that this agency exists because it does great work. word of mouth is a proprietary channel for this agency. how do you scale complimentary proprietary, owned channels based on this agency's 'secret'. i believe that the 'mistake' that folks take when they try to scale is by going after nonproprietary channels, which turns their agency into a commodity biz. sales cycles are longer and more competitive for customers that you have to introduce yourself to. you become a hubspot agency partner and you compete just as 1 of N agencies. ultimately, what's important isn't scaling an agency beyond $X milestone, it's about building the biz you want, doing the work you want, supporting your family and all that good stuff. however, breaking out of this range makes cracking $10M+ in annual revenue a real possibility if that's what you want.
Just need to work with one of those outbound agencies that guarantee 30-50 leads per month and boom, agency biz easily scaled. Stop being so negative. 😜
Love this write-up! I usually call path 1 "consultancies" (they come for the founder / work is primarily their responsibility) and path 2 "agencies". Walter Chen Can you clarify what you mean by non-proprietary channels? Not sure if this means anything outside word-of-mouth, or if you're talking more about the verticalization journey (marketing agency -> HubSpot partner agency).
Hello Walter Chen Can you plz check your inbox? Thanks
Greg Hickman is the GOAT at developing repeatable sales & marketing processes 👌
Incredibly insightful post. What's the "secret" to developing a repeatable marketing motion without becoming like the Hubspot Partner agencies? Or is the commoditization inevitable and you just have to differentiate as much as possible with proof of results, perspective, etc? I resonate with having the skill at delivering my service but not being as skilled at selling it.
This is an incredibly insightful post on how agencies start and achieve success! It’s clear that creating the business and work environment you desire is what truly matters.
I should tell you about my new Agency! $10M is just the first step.
Strong POV!
Product-Led Storytelling (PLS)
7moVery relatable. Doing the thing is so different from the beast of growing an agency-like business. Clients have literally ended their contracts because I wasn't the one handling their account and writing their content. Even when you nail your QA process and the delivery seems great, some leaders only choose to work with an agency because of the expert (often the owner) behind the agency. In my opinion, this is the biggest problem. You must hire great talent (which is hard) and train them to execute at the same quality clients expect (which is hard). As those talent get better, you must raise their pay to retain them, which sometimes, affect your margins. Before you know it, you start needing more accounts to multiply the shrinking margins (despite working more). Then you'll need more employees. All this is why I prefer the path of staying lean, doing the work, raising rates, and managing a small team with no outlandish growth goals. Else, you work yourself out.