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6 Things to Know Before Turning Your Freelance Business Into an Agency

If you're thinking about growing your online freelance business into a full-blown agency, consider this expert advice first.

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The following excerpt is from Shelby Larson's book Moonlighting on the Internet. Buy it now from Amazon | Barnes & Noble | iTunes
Shelby Larson presents the most reliable and proven ways you can create an extra paycheck for the short term and establish a continual revenue stream for the long term with your own website. In this edited excerpt, Larson offers real-world advice about the downside of running an agency.

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There are no limits to the type of branding agency you can create. You can build a full-scale agency like mine that provides most services a company needs for marketing their online. Or you can specialize in one area and have a graphic design agency or a agency, for instance.

Deciding to scale up into an agency is a huge undertaking, and you'll only know if it's right for you by experiencing the journey that leads you in that direction. But if you'd like some advice to help you decide whether you should turn your online business into a full-blown agency, the following list of six primary pain points should help.

1. Do you love business?

You need to ask yourself if you love the business of business. Many times, people start an agency because they're passionate about a specific aspect of business. For instance, it was natural for me to start a business outsourcing moms as writers because I loved being a freelance writer myself. Guess how much writing I did once my business got off the ground? Next to none. There was no time. In addition, writing, which had always been a pleasurable hobby for me, became a chore.

It's really fortunate that I love the business of business. Because owning an agency is about creating and running a business. It's high-stress, people-driven, and takes a lot of trial and error to get right. The point I'm trying to make is that if you're thinking you want to create a technical agency outsourcing web dev teams because you love programming, don't. Do it because you love business and are fortunate enough to have a topic you're passionate about that you can successfully monetize.

2. Do you love people?

When you run an agency, your most valuable assets are the people who work for you. The majority of your success and your failures ride on your ability to recruit, hire, and retain the best talent with personalities that fit your . I am the ultimate people person, and even I find the people-driven aspect of agencies challenging. You have to patiently nurture and train your staff to perform to the standards that you and your customers have for your company.

3. The buck starts and stops with you.

You'll sometimes find yourself in highly frustrating situations that make you just want to rage at your teams. But if you sit back and evaluate things from a neutral perspective, chances are, you'll discover that things didn't go the way you wanted them because you didn't have the proper processes and procedures in place. It's true, sometimes people let you down, and that's an unfortunate pain point of having a large staff. But often you let yourself and your staff down by not creating systems that allow you to scale with the demand of your client base.

At the end of the day, you don't have anyone to blame. Even when your teams screw up, you're the one who has to talk to the client, own it, fix it, and move forward. You get the credit and accolades when your team does well, but you also get the reputation hit when they fail. With agencies, SOPs, systematization, and processes aren't optional -- they're critical.

4. You get the last buck.

Speaking of bucks, when you have an agency, you have a lot of people on staff. So everyone gets paid before you do. I'm sure that's probably a universal in most businesses, but it's especially true with an agency. If you don't pay your people on time and lose them, your "product" just walked out the door. You'll always get paid last; it's just a reality of this model.

5. You're constantly playing defense.

One frustrating component of owning an agency is that it seems you're in a never-ending cycle of defending your value and your company. This would be understandable if you were putting out subpar work. But when you're an agency, especially in the marketing industry, people depend on you to make them money, and once the money starts rolling in, they mistakenly think they can continue on that successful path without you. It's very common to lose clients simply because they generate enough income and learned enough of what you do by working with you to hire someone in-house to replace you.

Also, when you're providing a service, there's so much room for error. Often clients have a vision of what they want but don't know how to accurately communicate it. So even though you did exactly what they asked you to, their perception is that they clearly explained what they wanted and you failed them. The only way to avoid this scenario is to get very, very good at the new project intake process.

6. This is not a work-less-overtime path.

If you're looking for a business where you can put a lot of hard work into the front end and then sit back and relax while the money rolls in, this is definitely not the right path for you. With an agency, you can definitely position yourself in your company to not always have to work so hard, but only if you get the right people under you, and good people -- especially driven, proactive thinkers -- are tough to come by. Depending on the type of agency, stepping back will be easier in some cases than in others. Usually when you're providing services, you need to stay on top of the hottest trends, technologies, and strategies. I have yet to meet an agency owner who's not still working more hours than they consider ideal.

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