A couple of clients started with agencies, contracted us to generate leads and then once the leads start coming in, they’ve decided to step away from production as well and start outsourcing the production, so this is for people like that. If you want just to outsource production.
I want to talk about a quick rule that I found for doing this correctly, and it’s very good as a digital agency if you can get it to work because basically what you’re doing is you’re charging full rate, let’s say you charge $200,000 for a mobile app, contracting another agency to do it for a 100 o 50 and if it works out it’s basically all profit and all you have to do is focus on sales .So, the ideal, the winning scenario is amazing I’ve only seen it work a couple times although tons of agencies want to try it. So, here are three things to look out for:
- Protecting your brand. When you’re outsourcing projects like this especially at first, there’s a huge risk that something can go wrong, so it’s very important to have a sub-brand or let the clients know upfront that things are going to be different with this project. The way I recommend doing that is by framing it like this, so let’s say there’s a client that comes in, and normally you charge $400,000 for an app, this client only has 200,000, there’s no way you can really make that work, so you say to the client, hey, we’ve got this other program, it’s called X27 Express, it’s our lower-level teams, so our more junior teams, the quality of work’s still going to be good, the timing’s still going to be good, the thing that’s different is it’s a slightly lower team, and it’s a little bit lower of a rate. If you want me to quote that out for you and normally they’ll say yes especially if you price yourself out by saying $400,000 for a mobile app to start but that’s the way you frame it. X27 Express is the sub-brand in this hypothetical scenario which separates X27 so you know that the high-quality work at Experiment 27 is always going to be that $400,000 number whereas the sub-brand can be any price.
- Build in a good margin, and this works to the next point as well. Ideally, you want to aim for at least a 50% margin to make it worth it. So, at our agency, at we’ve got around a 30 to 40% profit margin and most agencies in the industry are about that, so if you want to make this worth your while, you need to target a bigger margin or else it’s not gonna be worth it and ideally you want to get down to about 50% because that way if you get paid 100,000 you basically pocket 50,000, you send 50,000 to the partner agency, everybody’s happy, so that’s the ideal scenario, but you want to make sure that you’ve got more than a 50% margin to start as you’re vetting partners, even as much as a 75% margin.
- Point three which has a ton of partners at first. We’ve tried this at a couple agencies and had it fail before having it succeed, and the place where it fails is almost always on the partner side. So, let’s say somebody says they can build a mobile app for you for 25,000, you sell it for 200,000, and they fail.