Cooking up freelance success – revealing the secret sauce for how freelancers become agency owners

Over the past two years, gig economy participation has grown significantly. This article Reveals the Secret Sauce for How Freelancers Become Agency Owners. If you are a freelancer seeking to scale successfully and expand your business, this guide is for you.

NMW 398 research and reports cooking up freelance success revealing the secret sauce for how freelancers become agency owners

Last year, participation in the gig economy grew by 22%, with 93 million US adults earning a massive $1.2 trillion. The freelance revolution is a global celebration combined of remote working opportunities, access to niche talent and changing work expectations towards flexibility, autonomy and control.

But for many freelancers who have been in this game for several years already, the route to expanding success and taking their business to the next level is paved with questions. How should they make the leap from being an individual freelancer to becoming a freelance employer? How should they invest their time and money? What challenges are ahead if they want to scale effectively? Ultimately, what are the ingredients that make up the secret sauce of transforming a freelance business into an agency model?

At Payoneer, we champion the independent contractor and their ability to work and earn on their own terms. To support freelancers in getting the answers to these questions and more, we surveyed 200 freelance agency owners across the United States, Bangladesh, the Philippines and India who have scaled their business from an independent freelance model to become the CEO of a group of four, and often more, full or part-time employees. The survey was completed during May 2021 by Global Surveyz, an independent survey company.

The responses shine a light on the realities of agency owners around the world. As you will see, their success doesn’t come by chance. Those looking to expand their freelance business and continue the next stage of their journey can benefit greatly from their experience. Indeed, one of the surprising realities of owning and running a freelance agency is that the current challenges don’t match the fears these same agency owners had when they were once freelancers. In addition, one ingredient in particular, altruism, may well play a pivotal role in the secret sauce of success.

Of course, while there is no single route to a thriving freelance agency, one thing is clear: there are many lessons to learn and patterns to uncover from understanding the global experience of those who already made the leap.

Key ingredients

For the secret sauce

Ambition and self-reliance

Setting goals is an essential part of what it takes to be successful as an agency owner. 88% of respondents knew from day one that they wanted to expand their freelancer business to become an agency, with the top-three motivators being the drive to invest and expand, finding a new challenge, and discovering a gap in the market. 71% of agency owners started out on their own, and the vast majority used their own funds to do so.

Altruism is crucial

Customer satisfaction is the top priority for almost 1 in 3 agency owners. In comparison, pricing was the main priority for only 11% of agency owners. This trend of altruism pervades throughout the survey, with 28% of respondents saying that making customers happy was the most rewarding part of owning a freelance agency, followed by providing jobs (27%) and doing good in the world (18%).

Get the price right

67% of agency owners are successful in pleasing customers but less so in pleasing their pockets. With so much focus on customer satisfaction, it seems agency owners may be underpricing their services. When it comes to measuring success by revenues earned, the numbers drop to only 47% being satisfied. This could indicate a real opportunity for new agency owners to create a new secret sauce and strike a better balance of higher prices without sacrificing customer satisfaction.

Evaluate the expected challenges

To be successful, it’s important to think beyond your immediate concerns. While just 16% of agency owners were initially anxious about the legal aspects of running their business, this number jumps to 21% after expansion. Agencies can also overestimate challenges ahead of time. Agency owners initially worried most about client growth and administrative issues, but in practice these were far less of a problem.

Time vs, money

To overcome their challenges, agency owners are torn between the ‘time vs. money’ dilemma. 44% currently outsource their challenges to third parties, while 39% choose to learn the skills required themselves. As there is no right answer to this dilemma, it may explain why 17% remain unsure of which strategy is best for overcoming their challenges.

Timing is everything

If you’re looking to scale your freelance business, there’s never been a better time than now. 93% of agencies will grow their teams in 2021 and 2022 with more than 1 in 4 planning to grow them by 25% or more. As 47% of agencies say that their main source of growth is an expanding client base, it’s clear that there are more companies looking to leverage freelance talent, giving agencies a great opportunity to grow.

Top industries for freelance agencies

The top business focus for agencies is content writing (30%). When looking at the breakdown by country (figure 2) we see that the Philippines has a large focus on this industry (84%). Other areas of global business focus are marketing (16%), graphic design (15%) and IT (14%).

It’s important to note that there is no correlation between business focus and success rate. While writing may be the most popular choice in the Philippines, the data captured applies equally to all agency owners across the board, no matter what their business focus.

Ambition and self-reliance

The story of a successful freelance agency business begins at the earliest stages; turning a freelance business into an agency is not something that happens by chance but rather is deeply rooted in the personality of its founder.

According to 88% of survey respondents, the roots of expansion were planted from the very first day of their freelancing career (figure 3).

While the same sentiment is very high globally, there are some differences by country (figure 4). In India, nearly all (98%) agency owners intended to turn their freelance work into a business from day one, while in the US this is 90%, and in Bangladesh, 78%. Ambition, then, is the first core ingredient that serves as a strong indicator for determining success.

So, with such ambition in place, what is the driving force that helped freelance agency owners grow from being a solo freelancer to an employer?

The top two drivers, together accounting for over half of respondents, are the desire to invest and expand the business (32%) and the desire to find a new challenge (29%).

Both these reasons, along with that of spotting a business service not being offered by other agencies (21%), take a proactive approach to expansion, and further highlight the ambitious nature of agency owners.

In fact, only 18% of respondents had a passive reason for expanding, in that they were receiving too much work for a single person. Instead, an overwhelming majority, 78%, actively sought to expand according to their goals and on their terms.

This ambition is reiterated once more in the way most agency owners started their business.

Again, we see an example of how independent successful freelancers are, with 71% of agency owners starting their business on their own rather than joining forces with a partner (figure 6).

While this approach varies by country (figure 7), with the US and India showing 82% of respondents starting out on their own, 64% in Bangladesh, and 56% in the Philippines, the overall taste for becoming a freelance agency business is certainly based on a strong sense of ambition and independence.

With so much ambition, it’s not surprising, then, that over a third (35%) of agency owners are also highly self-reliant and financed their expansion using their own funds. A further 32% went to an independent financial institution, leaving just 19% relying on their friends and family to get the required capital. Once set up as an agency, it was then full steam ahead, with 98% expanding their service offering in general, almost two thirds of whom doing so from day one (figure 9).

Altruism is crucial

A major part of being successful as an agency owner is goals and priorities. As we saw earlier, most entrepreneurs had the intention to grow their mindfully business from day one. What may come as a surprise, though, is that the top priorities for agency owners are not financial, but rather altruistic in nature.

Customer satisfaction comes out on top at 28%, followed by offering something better than the competition (17%) and customer service (15%).

It is interesting to note that pricing (11%), offering something unique (10%) and speed & efficiency (5%) are all at the bottom of the priority list.

It seems agency owners are more concerned with providing 5-star customer service and would rather do it well than do it fast or at a low price.

It was the same story when we asked about the most rewarding part of owning an agency.

The most rewarding part of owning an agency is the ability to please customers (28%), with the US leading the way in this aspect. In fact, 40% of Americans call this their most rewarding feature. Globally, this is followed by providing other freelancers with jobs (27%) and doing good in the world (18%). As we will see shortly, making money comes in fourth place, with only 15% of agency owners considering the financial rewards to be the most rewarding part of their business.

It’s clear, then, that freelancing is a pay it forward type of industry, and that doesn’t change once you expand to the agency model. So, if you’re looking to see success with your own expansion, an altruistic nature should serve as your guide.

Getting the price right

But, do agency owners meet these goals? We asked survey respondents to consider how successful they feel their agency is in fulfilling their plans and expectations.

Overall, 43% consider their agency to be a success. But it’s when we look at the deeper numbers that we see the real story.

Breaking it down, 67% consider their agency a success in terms of customer satisfaction, 61% in customer growth, and 51% in staff satisfaction.

However, only 47% consider their companies to be a success when measured against their revenues. We’ve seen that agency owners clearly put a focus on customer satisfaction, but could this figure indicate that today’s agency owners are underpricing their services?

If so, and if you’re looking to develop your solo freelance business into an agency, balancing your pricing with customer satisfaction could be something to think about if you want to create your own secret sauce.

Evaluate the expected challenges

When taking a big leap in business, of course, it’s important to think about the challenges that lie ahead. However, it’s not always easy to know in advance which issues will turn out to be cause for the greatest concern.

Indeed, based on the responses we received, we see a mismatch between the biggest fears agency owners had before expanding and the reality of those challenges now that they have done so.

Top fears before expanding were not bringing in enough work for the team (20%), administrative work (17%) and the legal aspects of running an agency (16%).

But the biggest, unexpected challenge once they had expanded turned out to be managing the legal aspects of a larger business (21%). In fact, not having enough work dropped rapidly in significance compared to other aspects of running a larger business.

Furthermore, the biggest gaps between the fears beforehand, and challenges after are to be found in the realities of HR management (7% vs. 15%) and personal satisfaction (7% vs. 14%).

Time vs. money

So, what is a successful agency owner’s greatest fear? We found that losing customers is the number one issue, keeping up more than a quarter (26%) of agency owners at night (figure 15). Other issues include missing deadlines (21%) and damage to reputation (16%).

And finally, while 83% have found ways to overcome their challenges (figure 14), how they do so is split between the time old dilemma of time vs. money. While a large proportion (39%) are prone to teaching themselves the skills required, almost half (44%) use experts via outsourcing. This mirrors a common business challenge of deciding whether to invest time or money to solve problems. As this discussion is a complex one, it’s unsurprising that 17% are still unsure of the best route to take.

Timing is everything

Almost half (47%) of agency owners grew their business by exclusively expanding their client base (figure 17), but over half grew their business by putting an emphasis also on retaining existing clients. Their first hires were more regularly skill-based employees (32%) and over-half (57%) employ only full or part-time employees, compared to only 1% that rely exclusively on contractors, and 42% who leverage both employment models.

With customer satisfaction being so high up on the list of priorities, it may indicate why agency owners seem to prefer full and part time employees as they usually show more commitment to their employer and the end customer.

If you are thinking about expanding your business, though, there’s never been a better time than now. Despite the COVID-19 pandemic, 93% of freelance agencies have already grown their teams in 2021 so far, with 43% adding 10% to their staff numbers, 33% adding up to 25%, and 17% growing by more than 25%. None have reduced their staff numbers in 2021.

In addition, there’s more optimism ahead as many agencies are planning to grow even further in 2022. As we saw in our previous report, Freelancing in 2020: An Abundance of Opportunities, while there was a short-term drop in the amount of work for freelancers due to the pandemic, the gig economy has clearly bounced back, is flourishing, and is set to continue to grow even more in the future.

Survey demographics

Almost half (47%) of agency owners grew their business by exclusively expanding their client base (figure 17), but over half grew their business by putting an emphasis also on retaining existing clients. Their first hires were more regularly skill-based employees (32%) and over-half (57%) employ only full or part-time employees, compared to only 1% that rely exclusively on contractors, and 42% who leverage both employment models.

With customer satisfaction being so high up on the list of priorities, it may indicate why agency owners seem to prefer full and part time employees as they usually show more commitment to their employer and the end customer.

Country of residence

Size of agency

About Payoneer

Payoneer is the world’s go-to-partner for digital commerce. Everywhere. From borderless payments to boundless growth, we promise any business, in any market, the technology, connections and confidence to realize their potential. Payoneer’s digital platform streamlines global commerce for millions of small businesses, marketplaces and enterprises from 190 countries and territories. Leveraging its robust technology, compliance, operations and banking infrastructure, Payoneer delivers a suite of services that includes cross-border payments, working capital, tax solutions, merchant services and risk management. Powering growth for customers ranging from aspiring entrepreneurs in emerging markets to the world’s leading digital brands like Airbnb, Amazon, eBay, Google, Upwork, and Walmart, Payoneer makes global commerce easy and secure.

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