What is the scaling?
Remember how simple it was? You and your closest friend dreamt of a small company. Both of you in love with computers, you started out in your parents’ garage, motivated only by your enthusiasm and vision. At some point, your web development agency became demanded (yep, it’s not the story of Apple). It grew up – but so did the expenses. Your agency’s efficiency stayed right where it was at the start.
“What’s the problem?” you kept asking your friend, but they just stared at you blankly. “Don’t ask me. I am an imaginary person introduced for the sake of this article’s intro,” they replied.
Jokes aside, the problem was in scaling.
To scale your business means to increase its productivity without ramping up the expenses. In other words, your web development agency should be able to do more work, process more orders, for the same (ideally – lower) operating costs and without the quality suffering.
Key factors for success here are:
- High customer retention rates
- Diverse sources of income
- Predictable revenue
Proper scaling promises high revenues but the process is challenging. But, those who have a “why” can withstand almost any “how,” as a philosopher said, so here are some reasons why you should consider scaling your business once your company starts generating stable revenues.
Why scale at all?
So, a small agency you created several years ago has finally settled down and generally feels good. And then, one night you wake up in cold sweat, realizing that you want:
- A larger share on the market
- Increased profitability
- The ability to attract and hire more of the qualified developers
- More customers, more orders to work on
- Increased bottom line
- Greater financial viability (banks trust you, you get bigger loans easier)
- Diversification of the products and services your agency can provide.
And this is what agencies scale for.
Scaling vs. Growth
Surprisingly, when it comes to such a necessary step in a company’s life as scaling, many entrepreneurs seem to often confuse it with growth.
We talked about this with Chris Bolton, Strategy Director in Murmur Creative. He believes that scaling is about doing more of what you have already been doing.
Growth, on the other hand, means spending more money to make even more money.
Let’s say your team of devs has been creating 8 WordPress websites per year. In this situation, scaling would look like creating 12 WordPress website per year – with the same number of developers, for the same amount of resources, and of the same quality. At the same time, if you want to grow your agency, you would need to hire 10 more developers (which would increase your expenses, naturally), so that they could create 20 websites and 5 mobile apps per year.
Growth has many forms. Bigger budgets your agency operates with, more staff, cooperating with freelancers, entering new markets, creating new services and products, etc. Scaling has just one form: doing what you do best, with higher effectiveness.
Identifying the proper time for scaling
Alas, no marketing gods will call you to inform the time for scaling your agency has come. You will have to figure out this time yourself. Or, according to Chris Bolton, you should always have scaling on your mind.
Every time you work on a customer’s order, you should speculate on how to save yourself work next time: what can be done faster, easier, or how you can do more of the same thing – without losing in quality, of course. In this regard, process documentation is a valuable habit. By encouraging yourself and your employees to keep records on what and how is being done, you will be able to refine your business processes and scale quicker.
But one thing is to be aware of the necessity to scale and plan it ahead, and another is to live in blissful ignorance until push comes to shove. And it does so when your agency reaches the bottleneck.
A philosopher (not the one before – a different one) said that a smart man can learn anything from everything. In other words, even unrelated things can give you valuable insights. Watch us prove it to you.
When you pour a liquid into a bottle using a water funnel, you know you want to keep the trickle steady to fill the bottle as fast as possible. Naturally, it makes no sense to pour less. But, if you pour more (hoping to fill the bottle faster), things get interesting. Instead of speeding up the process, this way you will only do yourself a disservice: the water will clog the funnel and pour over its top.
Now, can you already see where it’s getting?
In business, this effect is called the bottleneck. Even if you grow, while the scale of your agency remains the same, you are fine.
But as you increase the workloads or change the balance in some other way, a well-established mechanism falters.
This effect is called “bottleneck,” and there are several red flags which can signal you that you are close to it – or in it already.
Your agency cannot handle the workload using the resources which are currently at its disposal
Let’s say you can successfully complete three big projects in a month. Good for you. But how about four? Five? At some point, your team will fail to maintain the equal quality of work on all the projects your agency is working on. Or, your only account manager will get a nervous breakdown. Or, your servers won’t be able to withstand the loads. Or, your hardware will turn out to be not powerful enough.
Whatever it is that happens, you will find your team backlogging, and yourself turning down clients – just because there is too much work.
Your team members are stressed out by the piling up routine
When your employees have to work on the same repeating tasks over and over again, and there is no end to this, their stress levels will rise. It’s even worse if this routine is not what they should normally do (imagine your web designer having to create PowerPoint presentations because your graphic designer is… well, because you haven’t hired a graphic designer yet).
You can visualize it as a black progress bar above the head of each of your devs. Just for fun, like in a video game. Oh, wait, it’s not funny at all.
You cannot achieve your long-term business goals
You know where you want to end up. You know how to get there. What you lack are the capacities, and there is no workaround.
Not only the bottleneck can serve as a reminder. If your web development agency meets the following criteria, it may also mean that you should consider scaling it up:
You know how much revenue your agency generates when.
Stable conversion rates
Leads don’t just come and go: you manage to turn a constant percentage into customers, and this index remains the same or grows.
Multiple sources of income
You web development agency does not depend on 1-2 big clients. Instead, you have multiple loyal customers. Perhaps, each of them brings you small or medium profit, but together they form a solid revenue stream.
When your services are in high demand
Obviously, if you do your job well, it will be in high demand. If you want to keep up, you will have to scale up.
When your business processes are optimized
Well-organized business processes allow the professionals in your team to show even more impressive results.
That being said, it is important to notice that missing an opportunity for scaling when you get one is not the end of the world. Your business won’t collapse to ruins, and your employees won’t run off in a panic. There will be more opportunities for you, and the next time you see one, you’ll make good use of it. Probably.
How to do scaling right
So how do you scale a web development agency properly? Although the whole process probably cannot be boiled down to formulas like, “Top 5 easy ways to scale up your business,” there is an algorithm that will help you navigate through.
Speaking of scaling tips, by the way, you might want to check Chris Bolton’s Creative Agency Podcast for a ton of advice on scaling, growth, recruiting, agency finances, and much more. As for now, let’s take a closer look at what he believes you can do to scale up your web development agency correctly.
What you should do
Document and refine your business processes
To know what part of your business you can scale, you should first learn what exactly is going on in your agency. Motivate your developers to keep records of what they’ve been doing, what roadblocks they faced, and what they would require to work better.
After you collect some data this way, look into modifying ineffective and outdated business processes. You want them standardized and automated as much as possible. When your team is not distracted by the routine, it works more productively.
Identify what your team can and cannot do
Perhaps, your team performs great when working on smaller short-term projects and starts to lose focus and stamina when facing large orders. Or maybe, you know you’ve got some top-notch front end devs, and thus specialize mostly in client-oriented development. Or, you outsource for marketing specialists since it’s not your strongest side.
You should know what your people can do best, and focus on it.
Advertise your agency’s strengths
Use what you’ve learned about your agencies strengths to inform your marketing and messaging departments. You want to present your agency in a way which promotes exactly what you can do best.
When the time comes, hire to accommodate additional work
As your agency attracts new customers, at some point you will realize you need more working hands to maintain the increasing workloads and to avoid getting into the bottleneck. You can read more about the proper ways of hiring web developers in our article, “How to Hire the Best Web Developer (Ultimate Guide)”
Rinse and repeat
Scaling is proactive and intentional, and your agency will continue to scale up until you want it to. Just keep an eye on your numbers and follow the algorithm.
What you should not do
“We’ve always done it this way”
A.k.a. “It has always worked out for us.” Maybe, it has. Maybe, you’ve been doing things in a certain way from the very first day of your agency’s life. But if it’s the only excuse for a business process to exist, it probably should be revised, reformed, or eliminated.
“We can’t fire that guy, he stayed with us since the very beginning”
Once again, if it is the only reason to continue employing an ineffective worker, you might want to reconsider.
“We’ll just ramp everything up”
Hire more people from the start! Buy fancy computers! Upgrade all the servers!
Better don’t, unless you know it is exactly the time for your agency to do so. Unlike many people tend to think, having more developers in your agency does not mean being more productive. First, you need to understand how to make the best possible use of what you already have (remember the algorithm above?)
“This is our valued client, we can сertainly do some extra work for them”
Even the most valued client can scope creep. And scope creeping is something you want to avoid at all costs because it directly impacts your team’s productivity. If your devs waste time doing a bunch of “small and simple, one-minute” tasks for free, even for your most loyal clients, you can forget about scaling your agency up. You will get bogged down in it.
“We’ll learn in the process”
Nope. No matter how prospective and lucrative an order looks, if your agency does not have people with appropriate skills, you’d better turn it down. You will waste more time, resources, and effort on learning something new headlong, than on finding a new order that matches your expertise precisely.
“A mistake that we’ve made plenty of times is spending too much time chasing projects that are outside of our expertise. I think it’s fine to try new things, but don’t forget to pick the low hanging fruit first. I think this often happens to agencies when a big name brand comes along asking for things that are outside of the agency’s purview. It’s easy to get caught up in the romance of a potential relationship even though you probably aren’t qualified to do the work. “We have the talent. We can figure it out. We’ll hire freelancers.” is different from “This will be easy. We will kill it,” says Chris Bolton.
Scaling with freelancers?
Anticipating your possible question: yes, it’s possible. At some point, you may realize that freelance web developers actually make a nice option – at least, for a time being. There is a bunch of reasons, why it is so. But mostly, people like to work with freelance developers because they are:
Many freelancers work for lower hourly rates than in-house developers. Plus, consider the fact that with freelancers come without a ton of extra charges (payroll taxes, insurance cost, social security tax, Medicare tax, federal unemployment tax, and so on).
There are millions of freelancers all over the planet, and many of them possess skills invaluable for web development.
The problem is that the quality of a freelance developer’s performance often depends on how much time you spend to find one. If you just recruit the first person who says, “Yes, I know how to do the job,” you put yourself at risk of dealing with an unskilled beginner, or even a scammer.
On the other hand, you might have no possibility and resources to spend hours (and even days) browsing popular freelance platforms, looking for the Chosen One.
This is fine, we’ve got you covered.
As a platform for vetted freelance developers, Coding Ninjas specialize in testing independent contractors. Freelancers who work with us get a steady flow of orders, but instead have to undergo a series of testing procedures, known as the vetting process.
Typically, it consists of four stages:
- Overall check (we review the candidate’s portfolio, accounts on GitHub and Stack Overflow, contact their previous employers for feedback, and so on)
- Proficiency tests (obviously, we want to ensure the candidate’s ability to write clean, high-quality code, their programming language knowledge, etc.)
- English language test
- Live interview
After a freelancer passes, we start assigning them to orders.
As you can see, with Coding Ninjas you can enjoy the benefits of working with freelancers and scale your agency up at the same time. It’s like having a trusted, reliable in-house dev in your team, but cheaper.
Contact us, and we will find you some good developers in no time.