- A couple of our clients at Experiment 27
are people that 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 video is for people like that.
If you wanna just do sales for your agency
and outsource production, stay tuned.
I wanna talk about a quick rule that I found
for doing this correctly.
We've helped a few agencies spin up this outsourcing program
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 wanna try it.
So, here are three things to look out for.
Number one is protect 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 gonna be good,
the timing's still gonna 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 gonna be that $400,000 number
whereas the sub brand can be basically any price.
Point number two is to build in a good margin
and this works with 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 Experiment 27
we've got around a 30 to 40% profit margin
and most agencies in the industry are about that,
so if you wanna make this worth your while,
you need to target a bigger margin
or else it's not gonna be worth it
and ideally you wanna 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 wanna 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
which actually brings us to point three
which is have 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.
All of a sudden you're in a legal battle with them
or you're trying to get a refund for 25 K
and you have 175,000 now left to play with,
that's the ideal scenario.
If you go for a 50% margin off the bat though,
let's say you pay that company that fails 100 K,
all of a sudden you only have $100,000 left
to make this project
and there's very few ways for your agency
to make it profitable
if you're working at those prices now.
We had this happen several times
at one of my past agencies on a website build.
We said we could build a website for 50 K,
we outsourced it for 5K,
that company couldn't do it,
we also said again for 15 K,
that client couldn't do it
and we ended up after all of this
with a pissed off client
and having to build it internally
and losing money on the project,
so trying a ton of partners is super important
and the only real way to do that
is to have a lot of inbound leads,
so this is like an advanced strategy,
you only wanna do this
if you have four or five million in revenue
and good lead flow,
although I've seen it work also with a few
of our smaller clients.
If you found this valuable
or you want more info on this sort of stuff,
leave a comment below with an exact question,
would love to answer it in a future video.
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Thanks.