The Online Agency Business Model Explained
Hey guys! Greg here. For anyone who follows our blog, you know that we are committed to putting out exceptional content. What you may not realize is that we’ve had a secret weapon behind-the-scenes for years. Elisa Doucette and her team at Craft Your Content have helped us to improve every piece that graces the site. Her agency operates 100% virtually, and works with writers, entrepreneurs, and brands all over the world to make their content the absolute best it can be, through extensive editing and writing coaching with trained editors and proofreaders. It was a no-brainer to ask her to offer up her experience to help you decide if an online agency might be the right business model for you!
The greatest problem that many freelancers and consultants face is their ability to scale.
When it is just you doing the work, you will quickly realize that there are only so many hours in your day that you can work — and that number is at least 2-3 hours more than any human probably should work for six to seven days in a row.
Plus, you might just want to have one of those personal lives that others seem to live, seemingly without having to forgo things like indoor heating and eating daily.
Enter the Online Agency Business Model.
This business model shockingly follows much of the same setup and processes as a regular, brick-and-mortar agency. The most important difference between an individual freelancer and an online agency is that with an agency, you are bringing on a whole team to service your clients’ needs. This is usually done by using the online and cloud services that make collaboration and virtual teams an easy solution.
At Craft Your Content, we have a team of about a half-dozen skilled editors and proofreaders that work daily on various pieces of writing and content. We spend our days using programs like Trello, Slack, Google Docs, and other online cloud collaboration services that allow us to communicate and update in real-time, both internally and with our clients and writers.
The most obvious types of online agencies tend to focus in areas and industries that are already operating on the internet, or that do a majority of business there, and thus can understand the ability of a team to service them without ever meeting in person. This means folks in SEO, blog writing and content creation, virtual assistant services, marketing and social media, animation and video production, graphic design, website development — if you are doing this job yourself you may be ready to scale your business by expanding your offerings and client roster.
Difference Between SaaS vs Productized Services vs Online Agency Business Model
At first glance, an Online Agency Business Model may seem to be another manifestation of SaaS or a Productized Service.
The truth is, the best online agencies often offer at least one of these models, in addition to their own retainers. More simply:
- Software-as-a-Service (SaaS) — Solves a problem by offering a software/technology solution on a recurring basis
- Productized Services — Solves a problem by offering pre-determined packages and bundles of various service solutions
- Online Agency — Solves a problem by offering customized solutions for the client’s individual needs
The most common combination of these is the Online Agency and Productized Services. This allows customers the ability to work with you in two ways: a more cost-effective product that would be good for someone testing out your services or with a smaller budget, and a more robust and bespoke proposal that will serve a client with specific needs that might fall outside the scope of your regular productized services packages.
Though we are starting to see more SaaS businesses offering these individual proposals on their own software solutions with “Enterprise” level packages, which often include the technology they created, along with one-on-one support and consultations. This is essentially exactly what an online agency offers.
Of course, by combining all three you find the magical triad that many online companies in the business services space strive for.
Examples of an Online Agency Business Model
Many folks think only of marketing and content agencies when they consider an online agency, but there are actually a number of niches that support the business model.
Remember, the biggest differentiator in an online agency is that they offer individual and personalized services to their clients, rather than just packages or product solutions. Some great examples include:
Content Marketing and Marketing Agencies
TOCmedia – TOCmedia is a content marketing and website development agency, founded by Tracy O’Clair. They tend to work with small businesses and brands that want to dive into the world of online marketing, but aren’t sure exactly where to begin. The epitome of “full-service”, TOCmedia offers customized solutions, productized services, pre-built retainers, and one-off projects to their clients.
Bobsled Marketing – Bobsled Marketing is a marketing agency that specializes in Ecommerce businesses looking to improve their rankings and sales. Part of their expertise comes in their own experience, as they have never advertised for leads, and instead rely 100% on content marketing and word-of-mouth reputation. Additionally, their team (comprised mostly of women) focuses on an extremely flexible remote work opportunities, a major bonus for new parents like founder Kiri Masters. Their work is mostly bespoke proposals and one-time contracts with clients, though they occasionally do pre-built retainers as well.
Search Scientists – Search Scientists is a virtual SEO and paid advertising agency, founded by Michael Erickson. With over 200 individual procedures and performance standards to keep their client accounts in top shape, they’ve been very scientific about what good PPC means. They best serve clients by not offering a one-size fits all solution.
Ranking Press – Ranking Press is an SEO and Facebook Advertising agency, founded by Jesse Hanley, that has been profitable since Day 1, offering individual and customized work for clients, as well as larger one-off projects. They’ve also been able to insulate their core agency offerings by using their expertise to build affiliate sites and software products that are unrelated, but bring in additional revenue.
Connex Digital Marketing – Connex Digital Marketing, founded by Paul Kortman, started with a productized services business model, but always wanted to expand into individual services for their clients. They finally found the perfect opportunity when they started to really focus on pivoting their productized services clients who were not being best-served with a packaged solution, and needed something more customized.
Website Design & Development Agencies
Aeolida – Aeolida is a website design and development agency that specializes in Shopify sites and helping stores establish their own brand identity. Founder Arianne Foulks found her client sweet spot by only working with creative/crafty/design-oriented product-based businesses that need an intermediate solution — not beginner, not enterprise. In addition to their client solutions, they also round out their regular revenue through courses and info products, helping people to do this on their own if the agency is not a good fit for them.
No More Chores – No More Chores is a unique cleaning and “chore” service, founded by Mike Ziarko. While at first glance they may appear to be a productized service business, with pre-built retainers and packages that people can sign on for, the agency expanded in less than a year to start offering larger enterprise solutions for commercial spaces that needed a more customized cleaning price. Additionally, though the work is done in person (it’s really hard to clean somewhere virtually!), all the management and booking is handled virtually.
SummitCPA – Summit CPA is a virtual accounting agency that set out to totally disrupt the finance industry, which they have absolutely managed to do, landing accolades and awards across the niche and securing a spot at #2845 on the Inc 5000 list. Based on the traditional Certified Public Accountant agency model, they offer full-agency services, as well as virtual CFO and 401K audit services.
Craft Your Content – Of course I’d be remiss to not tell you a bit about our agency, Craft Your Content. We fill a particularly interesting, but underserved, gap in the content marketing space by offering editing and coaching solutions to entrepreneurs and writers who want to build their authority and admiration by committing to publishing-industry levels of quality content. While we started with a productized services model, we quickly shifted to a more bespoke solution, customizing retainers for each individual client’s needs. Recently, we have reintroduced proofreading and content editing packages and have a few courses available.
The Pros of an Online Agency Business Model
As with any business model you look at, there’s always going to be some good, some bad, and some downright ugly things that may or may not make it a good fit for you.
Ability to Scale
Many online agencies find their inception in the simple problem that freelancers and consultants will never be able to scale on their own. They will always be limited by the fact that they can only do so much. Beyond hours in the day, levels of energy and focus, and ability to balance maker and manager tasks, there’s also this funny thing called a personal life and self-care that some people like to partake in every now and again.
By expanding your business to work with a competent and trained team that will be able to replicate your systems and deliverables, you immediately create the ability to take on more clients and thus bring in more revenue.
Work Yourself Out of Day-to-Day Operations
When you work for yourself, you fulfill the responsibilities of owner, customer service, marketing, accountant, assistant, janitor, and so much more.
By expanding into an online business model, you are giving yourself permission to start doling out some of those tasks to other members of your team. While also sending the message to your clients that they are in good hands working with anyone who is a part of “the agency.”
Eventually, you might even be able to hire on an operations manager or similar, who can oversee the majority of your tasks, so you can focus on building even more — or maybe taking some more of that personal time we mentioned before.
A More Intimate Experience for Your Customer
No surprise, the secret to running great online agencies lie in your abilities to document every damn one of your processes, from opening an email to what to say in the email to where to send it and when.
And much more.
That said, when people come to you as an online agency, they are generally paying a bit more because they expect a more personal experience. Perhaps they’ve already tried to solve their problems with a software or productized service — but have discovered that their needs are too specific and/or too large for a cookie-cutter solution.
As an online agency, you can pull all the different offerings and services you have to create specific proposals (often referred to as “retainers” in the agency and freelancing space.)
The Cons of an Online Agency Business Model
It isn’t all scaling yourself out of freelancing and chasing contracts to make millions. There are some very real downsides to the online agency set-up that you should consider.
More Team Costs and Management
With the joy of having a team to work with so you aren’t so damn alone, you also have the logistics of a team to consider.
Just because you are making more money it doesn’t necessarily mean you are keeping all that money for yourself. You need to pay your team, buy software and systems to coordinate everyone, oversee the assignments and delegate the work; and if you hire your team as employees rather than contractors, there’s a whole slew of taxes and benefits you may be required to pay.
Additionally, if you have never managed a team (or another person) before, it cannot be said enough that it will possibly be the hardest thing you will ever do in business. Understanding how to motivate and provide support for people who depend on you for (at least a portion) of their income and livelihood, is a challenge most don’t fully understand until they’ve done it.
It Isn’t a “Set It and Forget It” Business
There are a number of online business models that you can build or buy that will eventually run without you ever having to touch them again. The mystical “1-hour work week” approach that actually does work for some businesses.
An online agency is not one of those businesses. Especially if you’ve built the agency off of your own name and personal brand.
While you may eventually be able to work yourself out of the operations, and maybe even the sales & marketing, part of the appeal of an online agency over a productized service is that your clients have a more intimate and personalized experience. That means they expect to be able to find a person inside the agency to be held accountable. As the name on the shingle, or the brand the agency was built on, that will probably be you.
Can Scale Too Quickly
One of the greatest death knolls for an online agency happens when they scale too quickly, and aren’t able to sustain.
This happens in one of two ways, and likely a combination of both.
In the first, an online agency will take on a team to distribute the work across, but the margins for maintaining and managing a team are too small with the current client retainers. Just because the work you’ve managed to build as a freelancer or contractor may warrant some outside help, staffing up to “prepare” for the new clients you’ll be bringing on might not manifest as quickly as you imagined.
In the second, your systems may not be refined enough to be stable on an enterprise level. Meaning that what worked for you as a solo shop, when you knew everything inside your brain, might not work with multiple people who aren’t inside your brain and don’t know how to interpret the things you want them to do. If you haven’t taken time to write out every detail of your process, it will be near impossible to expect others to replicate it.
What Buyers Need to Know Before Buying an Online Agency Business
Buying an online agency is definitely one of the riskier moves in a business purchase. Because it involves way more than just a website and some documents, it will take some serious consideration before jumping in.
First, you’ll want to check to see if there is already a trained team in place. Since the agency is successful enough that you are interested in purchasing it, chances are the answer here is yes. But also ask, is the team willing to move to the new leadership after the sale? The team is only good if everyone is moving, or if the systems are so well documented that anyone who doesn’t can be replaced after acquisition.
Second, as the new agency owner, how much knowledge and involvement do you need in the niche. While there are agencies out there that manage to exist as totally faceless brands, for which the owner never has to be involved, they are few and far between. And likely skew to a more productized service model. Will you be expected to contribute to client accounts? Review the team’s work? Speak on the expertise of the agency? If so, you probably want to make sure you are familiar with the industry, or that you can familiarize yourself quickly.
Finally, the biggest consideration happens during your due diligence, and it involves the monthly recurring revenue. The bread-and-butter of online agency models is either consistent large contracts that come in (e.g. marketing launches, website redesigns, manuscript writing, etc) or consistent monthly retainers that clients sign on to. Notice the repeating word there is consistent. You want to make sure that any dips in regular income are easily and justifiably explained, as the revenue stream for an agency can be volatile — which is usually a sign the agency is not actually as stable as the sell themselves to be.
What Sellers Need to Know Before Buying an Online Agency Business
So, let’s say you are an online agency that is as stable as you sell yourself to be, but you are ready to move onto your next project. Or perhaps you’ve spent years working at this, and need to take a bit of a mini (or full) retirement somewhere with sand in your toes and fruity drinks in your hand.
While it may seem like selling an online agency is a challenge, if you take the right steps to set up the sales pitch, it could be quite a lucrative windfall for you.
The biggest concern for any new buyer is going to be “How easily can this online agency transfer hands?” While they may be willing to put a lot of heart and soul into your business after the purchase, chances are they want to buy something that absolutely works from Day 1. If you don’t have your processes and systems carefully documented, so that any skilled worker could slip into any position with minimal training, you might want to do that. Or look into acquisition opportunities — are there any competitors or big fish in your industry that might be happy to snap up your client list and parts of your team (systems, team, etc) with a big check?
Regarding those assets a competitor or big fish might like to snap up, consider if you will be releasing everything in the sale? Do you want to send all your clients with the new agency, or keep a couple that you have a long-standing relationship with (or that pay you enough monthly to comfortably sustain a freelance income)? Will you be releasing the team as well? Or do you plan on opening up shop doing something else with one or two members of your staff? Will the team sign non-competes before the sale, should they decide not to remain through the transition?
Next, you’ll want to look at how consistent your revenue is. Can you explain any bigs peaks or valleys in the last 12 months? Be honest here, can you explain them in a way that is authentic and believable?
Finally, you’ll want to measure your personal dedication to this sale or acquisition. Many buyers in a situation like this may propose having you stay on for a determined amount of time, to help them transition into the leadership position you currently fill. How long are you willing to stay on to help the new owner get up to speed? Are you even willing to stay on? And will you be able to separate your attachment to the agency from the “new way” they are going to want to do things?
What Buyer Persona Best Fits the Online Agency Business Model?
Online agencies often struggle as freelancers scale up to expand the business, but don’t know how to effectively manage such a large entity, so they end up with a failing business they can’t improve on (but you can, see below!)
If you are someone who is willing to jump in and get your hands a bit dirty, an agency that hasn’t realized its full potential could easily be made successful with a few tweaks that someone who is a bit more experienced (or has the time and energy to put into it) could implement and see great returns from.
If you see a competitor cropping up again and again in your space, especially as a freelancer or consultant who is looking to make a jump or an already established business in the space (e.g. a productized services company looking to offer more bespoke proposals), acquiring a company that does what you want to expand into saves you time and energy figuring out those processes and solutions.
Or maybe you already are a successful online agency owner?
It’s not a bad idea to put out feelers to smaller agencies that you are constantly putting in bids with, to see if they might be over the whole online agency entrepreneurial rat race, and would be willing to walk away for a good payday.
Though it might not seem this way, there are actually a number of ways that you can grow this type of business model.
If you are someone who is highly adept at SEO, you could possibly implement a site redesign or copy overhaul to get the site to rank better and bring in more traffic. It is often said that the cobbler’s kids have the worst looking shoes in town, and the same lesson can be applied to many online businesses. They are often so busy doing all this work for their clients, they forget (or don’t have the time) to do it for themselves.
Now that you have all this traffic coming in you’ll want to look at what the agency is selling. If they are following a traditional agency model, they likely have retainers and one-time contracts that pay the majority of the bills. Perhaps adding productized services or a SaaS solution, like we talked about earlier, could boost the revenue by attracting new clients and customers.
Additionally, courses or resources, that further package the experience and information you have to offer your clients might be available. If you have expertise in the industry, you can put your knowledge to work, and put something together that can be sold as a one-time DIY purchase. Or if there is already content and knowledge existing in the agency (check out old blog posts, podcast episodes, and ask the team what they’re great at), see if you might be able to repurpose some of that into a valuable solution that you can stick a price tag on.
Official affiliate programs are a newer addition to the online agency business model, though asking for referrals is a mainstay of the brick-and-mortar agency practice. Setting up affiliate programs, that your clients and partners in aligned industries can sign on for, might provide that extra smidge of incentive that gets your agency buzz and inbound leads.
Resources to Learn More
The agency model isn’t new in the world of business, but the online agency business model certainly seems to be.
As the owner of one, I find myself explaining to online entrepreneurs and traditional business people alike how we manage to run a full-service agency 100% virtually.
It can be done, there are many more examples beyond our success that can be looked to — such as the examples above.
If you are a freelancer or consultant, looking to make the leap, or a small agency looking to grow and set yourself up for a potential sale down the road, you might want to check out a program like Scale My Agency, to get guidance and step-by-step plans that worked for some of the biggest names in online agency businesses.
Just want to dip your toes in and learn more about online agencies? Shopify put together this piece with lots of insights from others who have done the same, to give you a more personal perspective of the ups and downs.
Already sold on the idea of buying an online agency and want to see what’s out there? Check out the marketplace.
Or maybe you want to start the process of selling your own online agency, and need to know how? Empire Flippers can help with that too.
(Just Want to Learn About Other Popular Online Business Models? Click Here.)