If somebody wants to pay you to build a wooden cottage for them, what do you do? Do you:
- Name a price for building a wooden cottage.
- Offer to build them a mansion with a swimming pool, solar panels, garage, alarm system, and an exotic garden, then try to bill them for that.
Common sense says that everyone should choose the former option. Yet, web development agencies routinely choose the latter. The fact that a mansion is objectively better than a cottage doesn’t negate the fact that some people want a cottage.
The $8000 script
An ex-client of mine once wanted a little app built. The app, as he envisioned it, was a one-page front-end application that did a few simple calculations and showed some results in a fancy format. When he approached a development agency with this project, they did an interview with him, then they had a second interview with the coding team 3 days later, and 2 days after that they quoted him $8000. In their detailed proposal, they had a full back-end framework, database to keep stats in, test-driven development, and custom design.
What the client wanted was…well, none of the above. After we laughed about the offer, I did exactly what he wanted in 8 hours and billed him the appropriate $400.
Why do agencies often take this route? And how can you, as a freelancer, profit from this?
The agency problem
The problem for agencies is that they have to follow a process. This process involves business development personnel, project managers, and teams of programmers. They have to plan their human resources to remain profitable. This inevitably creates a problem that I call redundant complexity.
After an agency representative speaks to a client, he can’t say “yes” or “no”. He has to consult at least a few people before even starting to build a proposal for the project.
He also doesn’t know who he can put on the project until he speaks to managers and team leaders, who then have to estimate their team members’ schedules. Only then, the decision can be made as to who might eventually do the project.
Whoever is supposed to do the coding for the project will need supervision, thus the client will be required to pay for a manager’s work hours as well, and this manager needs to be involved in the initial proposal.
Meanwhile, company owners want to get as much as possible from each client. To this end, they often suggest “improvements” in the form of adding more personnel to the job and upselling the client before the work even starts.
By the time everything is put together, the offer that the agency produces is often several orders of magnitude removed from the client’s reality.
The freelance solution
It is no wonder, then, that clients have increasingly swung towards freelance talent in recent years. Compare the process above to the following:
- The client presents their idea to a freelancer.
- The freelancer makes an offer.
- The freelancer starts working ASAP (and bills a lot less than an agency would due to having virtually no overhead).
The agency solution
Since many freelancers go on to found agencies, it might seem surprising that the chronic agency problem soon emerges in their companies. The thing is, it is difficult to apply freelance principles to a growing team. When you only have a few employees, it might be feasible. But as you grow, take on multiple projects in parallel, hire non-programming staff, and splinter off into teams, it becomes near-impossible.
What can agencies do to combat this, then?
For one, they can agree to preserve resources and dismiss small projects right off the bat. This will allow them to focus on finding long-term clients that might hire a whole team indefinitely. It will also save everyone involved a lot of time.
A different approach is to have some personnel dedicated to one-on-one work with clients — the sort of work that doesn’t require all levels of management to get involved. Almost like freelancers, but working for a salary. Even if this doesn’t pay off financially in the short-term, some of the clients these workers serve might come back with bigger and better projects for the agency.
In each approach, the name of the game is: avoid overhead. Agencies must organize in a way that minimizes resource usage and maximizes output. For freelancers, this comes naturally.
Whether you’re a freelancer or an agency founder, it is worth considering the issues above and planning a solution from the start. Implementing a system while you are working solo or in a small team is much easier than trying to cut overhead in an organization that spans 30+ employees.
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