May 15, 2009 
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From freelance to agency
Agency work is often outsourced to freelancers. There are some high end production houses that produce everything in-house to ensure supreme quality of work. These houses often face the problem of overworking their staff as their staff is growing very slowly - staff is limited by space and equipment and they don't just hire anybody. Space and equipment is controlled by upper management. As a result there is a tense battle between the need to grow and the cost of growth. As a result most agencies eventually outsource their work.
This leaves freelancers exactly where they want to be. Take on the work you want and get billed by the hour no matter where you work. Now the freelancer, within a few years knows much better what to do than the agency. I am not talking about the high end agencies that pay top dollars for the best creative talent. I am talking about the other agencies - what I call the accidental agencies. They became agencies because someone gave them some agency work while they were doing something else for them. Word of mouth is still the biggest B2B seller and too often it makes the most convenient sale, not the best. These agencies rely heavily on the creative juice of the freelancer, his ability to estimate time requirements and overcome technology challenges. In these instances the freelancer would be doing close to 90% of the work. But will the freelancer ever get 90% of the money? Freelancer know that they often get less than 50% of the total profit resulting from a project. Often it is under 25%. Some who did the math console themselves that their profits are not eaten up by real estate and communication costs. A freelancer often works and lives on the same computer and uses a single cellphone for all communications. Truth is if agency work was not more profitable than freelance work, there would be no agencies. And the disadvantage of never having contact with a client, is even if the client loves the work, you may not get the follow up work, because some other freelancer was willing to work longer hours for a little less.
For a freelancer going from freelance to agency may mean a 10 fold increase in annual income
But an agency needs work. You need someone to answer the phone, you need a place to present to clients and everything must be as impressive as your portfolio or you will not get the job. As a freelancer you were envied for your home office. As an agency you will not sign a single client without a boardroom. The cost and risk of obtaining office space is often tremendous. 5 year leases, build out, etc. A small conventional office in downtown will easily cost upwards of $90k the first year and around $60k (cost incl. lease, maintenance and reception) for the remaining years. This puts a $350k overhead to a freelancer wanting to start an agency.
This is often more than enough to deter any sane minded person from making the leap.
But what if there was another way?
A virtual office will often give you access to a boardroom, have a receptionist that will answer calls in your name and a way of streamlining and funneling communications so that you can look as big as you want. An Officeexec virtual office is only $149/month and includes usage of the boardroom, with all its presentation and conferencing equipment. At that price your 5 year overhead is only $8940 (you can probably write that off it that's the only money you made giving you a free office for a few years or one that pays for itself, depending on your success). Essentially, if you can land one client you will be able to pay for the office for 5 years. Now, it's no longer a great leap. Especially, because nobody at Officeexec expects you to sign a long term lease - most virtual clients sign up for a month-to-month contract that they can terminate at any time.
Get a virtual office and start working like an agency
When you get too busy hire a freelancer, or a full-time person and connect them into your communications channel. The big advantage of Officeexec is that they are a telecom company and can do wonders for your communications. You will still be meeting at a posh boardroom, your clients will be greeting by a professional receptionist and more.
Once you have a virtual office you will be able to impress your clients with the quality of your work and no one will worry about that fact that your work is still done "freelance" style. You will be able to establish yourself as a name brand that clients will pass on to their clients, and you will finally get the lion's share of the profit!
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