There’s a tidal wave coming, and ad agency/marketing agency owners across America will either ride it… or get wiped out by it. But what is the tidal wave? It’s the commoditization of production services. A pretty technical term for a gnarly piece of the agency life. For the past 100 years, agencies (including our own) have made a significant portion of their income through graphics production, programming, web development—and all the other services we’ve offered in-house—to actually produce the work.
But as other professional shops have recently discovered—i.e. accounting firms—the only way to stay competitive and profitable for the long term is to outsource the commoditized services and keep the work that requires truly strategic, creative talent, in-house. In fact, in a very short time, we believe agencies won’t be able to compete locally if they don’t have a low-cost resource to produce the work they’ve dreamt about and strategized around. And, if the choppy water wasn’t indication enough, it’s getting more competitive every day… and it’s not going to get easier.
Transparency time. Four years ago, we encountered a pretty sick wave, i.e., we were forced to outsource when we parted ways with a 12-year-running gorilla client. So, we reduced our staff (including two in-house programmers), worked daily with an offshore (and much less expensive) team, and slowly built our way back post-gorilla. Essentially, we needed to paddle before we could stand. And it wasn’t easy. But, we learned a lot.
Today, we have a fully-vetted offshore team that works hard, smart, and compared to American standards, quite inexpensively. But don’t get us wrong, in their part of the world, they have wonderful careers. They do well. They are happy. They have better-than-average standards of living. And, we work hard to continue lifting their lives there as much as we do our team in the U.S. It’s this strategic, life-lifting advantage we’ve built and enjoyed the last four years that we’re now turning into an advantage for agencies like yours every day.
I actually hope the following paragraphs get you super stoked to ride the wave with a white label team—like us! Okay, so we added another surfing term.
Let’s say you land a new project or client that’ll require you to hire another developer. Indeed.com says a typical PHP or Java developer makes $88,945 USD as a base salary. That’s nothing to scoff at, as we’re all aware. Now let’s take it a bit further based on real world experience. Say you have a decent year and that employee has earned a $5,000 bonus. Okay, we’re at 90K. Next, add in health, dental, vision, FICA, and 401k match. Now they’re into six figures—but we’ll call it $100,000 to keep it simple. I think you know where this is going.
Let’s calculate how much of their time is actually utilized. Consider vacations, meetings, retreats, workshops, sick days, bathroom breaks, lunches, social media time, “water cooler” time, and any learning curve time due to limitations in their skillsets… all of a sudden, on average, this position is utilized at 50%. That’s means, productivity-wise, it’s actually costing you $200,000. After you’ve wiped away any nervous sweat, divide that by the number of hours they’re paid for each year (2,080), and that new employee costs you $96.15 every hour!
With a white label team at your side, your top rates get significantly cheaper.
Best part of all, it’s not just theoretical. We’re finding that a typical agency can make 40% more profit when they use a white label service, then mark-up the production services. Not to mention (but we will anyway), if your shop is growing more into the digital realm than traditional services, that rate could be even more.
Now, we don’t want to say cowabunga or tubular or anything, but we kind of just did.