Oh my... finally a topic I'm well acquainted with.

Source: Solo digital agency owner (6yrs here in Australia) who's been up, down, up, and recently made the decision to roll back to a single person consulting firm that's now WFH (gone from WFH - Office - WFH & 10 FTE to 0 )

I've found the last 3 years hugely difficult as an agency owner, when people are your business it cannot be underestimated how challenging (read: stressful) it can be. I got to the point where I was so anxious about opening my inbox in the morning.

However, there are ABSOULTELY some types of agencies that do work well and can scale effectively. Interestingly, these seem to be mostly accounting firms. Who in recent times have been able to easily add capacity through off-shore labour, who's client expectations are comparatively low and who's business is largely unaffected by the macro - You still need to do your bookkeeping at the end of the day! This makes for half decent retention rates and your customers don't expect a bookkeeper to solve every problem in their business.

The WORST type of agency to build is the mid-tier marketing agency or even bespoke dev firm - You get clients who are highly demanding and staff who are relatively expensive (agency owners will be nodding their heads here)... And it leads to a stuck-in-the-middle feeling where its hard to get out of the 5-10 person range and build any scale, and you'd honestly be more profitable and less stressed as a single person consultancy.

We used to work with large enterprise, and this is probably when we were most profitable. However, these types of customers have differing challenges and remote-style firms are at a disadvantage unless their sales teams are located where the big fish are.

The idea that agencies are 'booked without trying' is laughable. You get this by doing great work consistently over a long period of time, exceeding customer expectations and staying in constant contact with prospects. And this comes from great people... But you first need the work to be able to hire great people, which comes from the grind of agency sales. It doesn't change, no matter if your WPP or a local agency. Your pipeline is your lifeblood and what enables you to choose the right type of work.

If I did it again, I'd be looking at segments of the market where you can build easier client expectations and have more cost effective/simpler delivery, as ultimately this is where the game is won. I'd also be doing it with another 1-2 founders so that we could better achieve more freedom for each founder (as ultimately, this is a large drawcard alongside financial rewards to start). Id then leverage the cashflow better in productising... But in all honestly, I do think a large portion of you needs to like the 'work'.

On exit (if you're lucky), you're also stuck with more lengthy exit conditions. Meaning even when you want out, you're going to be tied up with the business in order to support the transition of clients.

On the flipside, I have found it to be pretty lonely just working away on client work. For some this is OK and I guess it seems novel, or maybe fits your lifestyle? But for me it's difficult because I always found it rewarding to be building things together with a team. That feeling of alignment when everyone is building the same thing is cool.

In some ways, its never been easier to start a serviced-based firm. However, in others, it feels like it has never been harder.