In any field of activity should be growth. A person either get ahead on the career ladder or independently creates opportunities for the development of itself and people, around it.
Many designers, programmers, internet marketers, and those, who work in the field of digital, think about creating their own agencies. When a professional becomes quite experienced, it goes into freelancing. When a person develops management skills, it creates a startup or company.
But why the majority of those who start in the digital business still remains at the level of remote teams or freelancers, why they cannot create their own full-fledged, serious big agencies?
First. Rent an office
You should have heard a very popular belief that digital agencies and web studios can be built remotely. But in fact, it is very difficult (or even impossible) to remotely assemble a strong team and use it to provide professional services in the market.
There is no such successful example in the world. And this does not mean that it can be a reason to change the world. Maybe there are some small teams, but there is no single large agency that could work in this format.
Why not? Because, first of all, the main work of the agency is a creative process. Most often, in the process of interaction with the creative group, some interesting solution arises, which is subsequently implemented simultaneously.
You have to work side by side and “boil” together in the designing and development processes:
- Offline teams are growing and capitalizing much faster.
- Online teams are involved in themselves, and they don’t care about clients.
There are of course some examples of small online companies, but actually in the lead, in the top 1000, there is no one that would work remotely.
In this business, it’s easy enough to start with remote works. Those who cannot afford to immediately hire a team and set up an office can easily start working remotely. But here can appear a number of problems that you may encounter.
Let’s imagine that a freelancer begins to receive the first orders, the first money. It seems to be all right, the money is growing. He took the first client, took the second client, everything is fine. Here appeared the first income, and freelancer spent it on a loved one — itself. He bought himself a cute hat, an iPhone XS, a new iPad and moved to the place, where it’s always warm, where the sun, sea, surfing, etc. Seems great.
When a person begins to work on freelancing, all the money that appears it usually spent on itself, and there is always a moment when it begins to want more. — Tweet it!
New clients are coming, and our freelancer is no longer working with one client per month, but with two, three and more. There is such a management clinch, when due to the fact that it works with several customers at the same time — the focus shifts, and for sure more problems arise:
- the freelancer needs to transfer the project to his client, but people working remotely, involved in the process at the initiative of the freelancer, have not completed their part of the work on time. Consequently, a freelancer cannot submit a project and receive payment on time, which leads to late payments to participants of other projects. Then, due to this, on another project, there are also missed deadlines and discontent.
- the client does not accept the work of a freelancer and therefore does not pay, and the freelancer refuses to make changes or redo the project because he does not have the money to pay for the services of other specialists involved remotely on this project, or on others.
- the customer needs to submit the project to his client, and our freelancer has delayed the execution. The customer cannot transfer the project to its client, therefore cannot receive payment and pay for the services of a freelancer. Moreover, because of this, the customer may not be able to pay for other projects on time as well.
Such a chain of situations can be an incredibly huge set.
Thus, it turned out some chain of people who are far from each other, and these people maybe have never even seen each other in real.
Without an operating capital, the whole story becomes sad. And as a result, a person, getting into such a situation, intuitively begins to search for more clients in order to pay off his debts. As a result, the phone and Skype are constantly ringing, hundreds of emails are coming and our freelancer is already forced to think not about how making money, but how to pay off his debts.
There are experts who understood their mistakes and went the other way. There are people who have remained forever freelancers, loners. There are those who went to work in the agency realizing that they are no longer willing to endure such stress, doing this business alone because this is a serious responsibility.
You need to understand that if you want to develop an agency, at a certain point you will have to go in offline and you need to save money for it. — Tweet it!
Undoubtedly, you need to pay yourself a salary, you shouldn’t, in any case, offend yourself and starve. But it’s important to think about a small plan, consider how much money you need, and when you can make it. Based on this, plan your activities and try to go to certain financial indicators. And when you get to the point where you have already attracted some amount of customers, but you find it hard to cope — you need to rent the office and recruit a team of employees for working in offline. Then you’ll be ready to continue working.
Naturally, your personal income may fall a little, because you will have to invest in all this. You will be earning less for some time, but you’ll manage to put together a team that can be able to solve more interesting problems. A team, that can be able to work together with you on more complex products, makes them more interesting, professional and better than others. And in the end, you will be able to sell 10 times more expensive than you sell one.
Second. Hire an HR manager
If you have earned capital, created a plan, gained an understanding of how and where you want to go, who is to hire first?
Of course, HR-manager. This should be the first person in your company to start working with. Many designers, developers, and startuppers who create their own digital agencies make the mistake by thinking that HR in this business is not important. Usually, they are trying to talk with everyone they hire by themselves.
Do not take on too much at once, your tasks are completely different. The peculiarity of digital business is the importance of selling the projects, ideas, concepts, and already developed products. — Tweet it!
The executive should be at the forefront of all technologies. Permanent communication with entrepreneurs, businesses, potential clients and the formation of certain concepts for them, forms the leader very strongly. And it takes a lot of time, for sure. Simultaneously, as a boss, you need to constantly maintain your level of knowledge about the products and services in order to be able, at the level of a great specialist, to discuss the projects with your clients and partners.
And HR just has to form a team that will make the products. In fact, the manager is responsible for what kind of people will bring you money.
This often underestimates by the specialists, launch their agencies.
HR Manager Functions:
• Search, hire and register staff
• Internship, registration, and control of trainees
• Control of remote employees
• Preparation for a trial period
• Adaptation, certification, training, and motivation of staff
• Personal Assistant
• Office Manager
HR in place is better than a remote one:
- It is always with you, and it is easier to manage and motivate it for best quality work. It is enough to put its salary in direct dependence on the company’s revenues.
- Constant contact and instant feedback. The human resources manager is constantly in the office, and a huge flow of information flows to it, even without additional surveys, interviews, and other researches.
- This increases business awareness of manager and its involvement in workflows.
- It gives a possibility for HR to continuously monitor the results of its work and the behavior of employees, forms deeper knowledge of the staff. It is always somewhere nearby, feels and sees all the changes in the qualifications of employees and their motivation.
- Well, the last important argument — everyone should do its own job. A key part of the executive’s work, especially at the start, is to provide the company with sales.
When a new person comes to the company, it is quite difficult for him to adapt, get used to the current conditions. In order to
the employee reaches the greatest capacity quickly, it’s important to adapt it correctly: to introduce it to everyone, to make a training plan, a development plan, to create motivation for it. All these needed that a person start to work effectively as soon as possible. You also need to assess the competence of the employees during the execution of their work. All this can make HR.
At the start, you can combine the HR and several other positions. For example, this person can be as well your personal assistant, who can optimize information, help you with the schedule and work with freelancers. The variability is big and, of course, life is simpler with the HR manager. Its functions also can include staff registration (employment contract, employment records, law questions and so on).
Carrying out internships for young graduates or future graduates can help your company with rapid development. During the internship, they adapt to the company, atmosphere, style and mode of operation. Then already prepared and motivated people, who know your company, can come to work for you.
Third. Pricing. How much does your work cost?
Most often, the head of business forms the price tag based on these two options:
- “Not very scary amount” — is such a format, when the CEO has already burned itself once, called a very small or very high price for the project.
- “For how much I can sell” — a format when CEO evaluates the client, for how much it can pay for the product or service.
In the end, it all comes down to the fact, that you sell your services either very cheap (and incur losses), or very expensive (and the clients don’t agree to work with you).
How to calculate the cost of the project?
You can take the number of hours, that a manager, a programmer, a designer spends on a project and multiply by the cost of that employee’s hour.
How to calculate the cost per hour? You can take a monthly salary and divide by, for example, 160 hours (with 40-hour working week).
But here comes a nuance. Unfortunately, in this business, it is impossible to simply take and divide the salary of an employee, who is engaged in development, by 160 hours.
There are 3 main items of expense: management expenses, commercial expenses, and cost price.
Management expenses are office rent, tea and coffee procurement, Internet and telephony payments, office maintenance costs, payment for services and management personnel, including payment to you as the chief executive, to HR manager, office manager, account managers, etc.
Commercial expenses are spendings on attracting customers and working with them, like advertising, marketing, sales (all bonuses, salaries, etc.).
The cost price is the payment for the services of the creative group (each participant) and the services, used by it, for project implementation.
If you divide an employee’s salary by 160, you get the face value per hour. But this digit excludes management and selling expenses. Yet, the company, naturally, incurs these costs. Thus, this calculation is not correct.
Of course, one can take all the expenses of the company and summarize them. Then divide this amount by the number of employees and get some markup, which can be added to the face value per hour. But this markup could be wrong. The salaries of employees in the creative group are different. Designer, developer, and copywriter have diverse prices. As a result, there may be incorrect final figures.
Therefore, you can calculate the margin:
1) We should take all the expenses and take away the wages fund of the creative group.
2) The resulting value should be divided by 160 (the number of working hours per month) multiplied by the number of participants in the creative group.
It turns out the management margin per hour, which we can add to the cost of services of each employee of the creative team.
But it is best to calculate the coefficient:
1) We should take the margin from above, add the average cost per hour of an employee of the creative team and 2) divide the resulting value by the average cost per hour.
Many problems arise if there is no long-term financial planning. For example, incorrect calculation of project costs, lack of sales plans, lack of a nominal structure and budgeting. Most companies usually do the minimum number of projects, they have learned to complete with income and stop at this level. The reason is the nonunderstanding of how to further develop, with what tools.
There are many nuances, managerial and financial. At least, you need to calculate your production capacity, understand what margin to put and understand what your price is made of. First of all, you need to be able to fully argue the budget estimate to the client. You should be able to explain that the cost of the project is not a fictional figure, but the cost of services, formed on the basis of cost, margin and time your team spends on the project.
Then the client will be able to understand how you work, and you understand how much you earn. This approach simplifies life for a designer or developer, who decided to create an agency. As well as clarifying how to earn money and where to invest further profits in the future.
To put all this in the system, initially, you need a financial consultant.
When you move to an office and start growing, you definitely need a person who will help you create a financial model. He may first work remotely or part-time (you need not this person in the office all the time). Any collaboration model is suitable. The main thing — you need a consultant. You need to constantly know your annual income, turnover, to have a financial development plan for the company. Based on this, it is much more efficient and easier to evaluate the perspective of a particular type of activity.
It is difficult and inefficient to start a business without financial planning. Without this, you are like without a goal. No plan — no conscious and fast progress. This greatly hinders the development.
Fourth. Regulations of your work
Here we are talking about the level of service. The key mistake of many entrepreneurs in this business — think they sold the project when they got the money. It’s a wrong way.
Often, clients are quite strict in their requirements. The implementation of the project depends on two sides: from the client, and from you (your team as an executor). It depends on your correct interaction.
The quality of your work execution is really important. But it is equally important, how fully your client able to describe its wants. There should be mutual respect. Your internal regulations are really important. How communication with the client and the departments of your company is built (including with sales managers, project managers, creative team, after-sales support) from beginning to end? How gives the client the information on the basis of which you are doing the project (meetings, documentation, a compilation of high-quality technical tasks, feedback)?
There are many types of business processes, and you need to choose the most optimal for yourself.
But it is only the first step, in the future, you need to teach the process to your whole team and train it. You should ensure that your team develops relevant skills to implement the process.
Now your own digital agency (web-studio, design studio, etc.) can be opened with almost zero capital. Sometimes it can be enough to find an order to create and optimize a website to get started.
But don’t forget, that over time, it will be harder to start because of the ever-increasing competition. — Tweet it!
The digital services market is also growing, and business does not always manage to keep up with them. The specificity of measures, for the promotion of goods and services on the Internet, has certain features: information environment, an efficiency of the offer, service capabilities. And all these conditions are constantly changing, forcing the business to learn tirelessly, track changes, and new Internet tools. The web development, design sphere, and software development are growing as well.
For many companies, the time has come, when they need to either transfer part of their business online or close. Therefore, now digital specialists, such as designers, programmers, and internet marketers, have an ideal time to grow. — Tweet it!
The undeniable advantage of the digital business is that there is almost no financial threshold for starting. In fact, to start this business, you do not need to rent an office and hire employees. You can work remotely and also remotely control your creative team, conduct production activities with them. That is, they create — you sell and negotiate. This is a very common format. But do not stay at the level of distant work with employees, move on. For sure, at a certain stage, you will need to take your business offline.