In the past 9 months, I've gone from being a full-time freelancer with a few clients to running a niche agency with 50 contractors and three full-time staff. Draft.dev still has a long way to go, but I wanted to share the steps I took here to move the business from freelancing to building a team and extracting myself from (almost) all of the day-to-day operations.
When I first started freelancing, I took just about any client that came my way. I knew what my skills were, but I hadn't figured out where the profitable, scalable niche was yet.
After a couple months of trying various things and having countless conversations with prospects, competitors, and clients, I started to really narrow down what I did and for whom. My niche is now so narrow that there are only 5-6 real companies out there doing it.
You might think that choosing a narrow niche would hurt my chances of finding a sale, but the opposite happened. As I got more narrow, clients and friends referred me more and better new clients. Additionally, it was easier to do cold outreach when I had such a narrow scope. I earned trust faster because all my existing clients looked so similar to the new clients I was pitching.
Admittedly, not just any niche will work. There has to be existing demand and an ability to pay, but finding economies of scale and training other people got infinitely easier as I narrowed my scope.
The more similar each of your clients is, the more scalable your service becomes.
As new clients started knocking on my door, I started to define each step in my marketing, sales, and operational process. Initially, I came up with 5 categories:
Then, I started tracking my time spent on each of these categories. Yes, even when the business was just me, I was tracking how much time I spent doing sales calls vs. producing work.
I also tracked (more qualitatively) my mood while doing each of these tasks. For example, I quickly realized that sales calls were fun, but I couldn’t do them all day. I also realized that I liked the production process, but it took by far the most time.
I try to minimize the number of energy-sapping tasks I have to do each week, so as I gathered data on how I spent my time and which tasks were hard to do, I started to get an idea of which areas I could outsource first.
At this point, I decided not to document all of these tasks in detail. I figured that the processes would change as I hired other people, so I decided to ignore the people who tell you that you need an SOP (standard operating procedure) for everything on day one.
Instead, I picked one task that took me the most time and outlined how I did it. I generated some basic documentation and a job description and started looking for freelancers who could do that one very specific task.
Outsourcing a task to another person - especially one critical to the business - is scary at first, so I decided to start with a “trailblazer.” I picked a person I knew based on prior work and a strong personal recommendation so I was confident they could figure the task out even if my first pass at documentation was not good.
The trailblazer did a great job, so by August, 2020, I had officially gone from freelancer to employer.
Next, I wanted to make sure that almost anyone could do this task. The book, The E-Myth Revisited talks about this idea a lot - that entrepreneurs need to make a "franchise prototype" that anyone can execute on.
I also realized that it would be too expensive to only hire trailblazers and that they were really hard to find. Starting with the trailblazer helped me figure out how to communicate my expectations effectively, but I wanted to build a process that was nearly foolproof.
The next couple of contractors I hired were not so great.
One completely misunderstood the project even after I gave him instructions to fix it. I had to re-do the whole thing overnight to fix it. But, this failure taught me that I needed to make some adjustments to our instruction and freelancer vetting processes before it would be ready to scale. After a few more tries, I started to figure out how much detail I needed to give people (hint: it’s a lot) and how to pick better freelancers. After a few weeks, I automated some parts of this process (using Zapier and Airtable) to reduce the chance that I would miss a critical piece of communication.
As I iterated on this process, demand for my service continued to grow. In the past, clients expected direct access to me, but now, I set the expectation that I would do quality control, but not execute every project personally.
While bringing on more freelancers meant I was doing less production work, it also meant I was paying more money to other people while the baseline costs of running the business had only grown. I started tracking my margins and realized that I’d need to raise prices to continue growing.
A lot of freelancers are confused by the fact that agencies can charge double or triple the rate they can as a soloist, but here’s the secret:
Companies aren’t just paying for your time in hours; they’re paying based on the value you bring in.
A single freelancer (ie: me in the early days) could realistically only service 2-4 clients per month. If one wanted to increase the size of a project, it would come at the expense of another client because I only had so many hours in my day.
But an agency doesn’t have the same limitation. Once I started bringing on more people, our output was not limited by my pace of work. So, my company is now much more valuable to my clients than it was when I was doing it solo. I can spin some dials to ramp up and down as our clients need it.
Agencies can increase their prices as their capacity increases because having more capacity means working with larger, more mature, less price-sensitive clients. This is why my larger competitors can charge 2-3x what I do while individual freelancers can only charge about half.
As I raised prices and increased our maximum output, new bottlenecks started to arise. So, I continued to monitor my time and the tasks that took the most personal energy. As a task started to reach 10 hours of work per week, I started documenting it and looking to hire my first trailblazer. I've done this four times now so that my only remaining tasks are sales and administrative work now.
Once I got the basic process down, I realized that scaling a service business is not only do-able, it’s actually really fun. I enjoy helping more clients and giving good, consistent work to the other freelancers as well.
Note: I wrote a longer version of this post with even more detail on my personal blog in case you're interested.
I'd love to hear what you think. Are you scaling a service business? Is there anything else I should keep in mind as we grow? Anything that stood out to you?