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Challenges for digital agencies adopting a SaaS business model

Challenges for digital agencies adopting a SaaS business model

Are you tempted by the SaaS business model for your digital agency? The SaaS model has a lot going for it, from scalable growth to recurring revenue. Before your agency can get the most out of a SaaS approach, you have three main challenges to overcome.

Transformations Are Time Consuming

A switch from a traditional agency business model to a SaaS model doesn't happen overnight. You have a lot of moving parts in this process and trying to rush it results in many problems. Save time in the long run by sitting down and carefully considering every aspect of your agency and how it'll be impacted by the SaaS model. Your business strategy may move in a much different direction than you originally planned. How are you going to structure your business during this transformation? Can you estimate how much time you need to manage the change period for your staff and customers?

Large agencies face a longer transition period due to the complexity and the sheer amount of people involved. Small firms have the advantage of flexibility and agility, meaning they can switch to a SaaS model on a much shorter timeline. One way a big organization can increase its flexibility is to establish a smaller, SaaS focused division that is separate from the core business.

You can keep this under your brand or create a new company altogether to reflect the change in direction. Most transformations start with the change being quarantined and tested, rather than impacting your entire organization. Clients slowly move from the primary agency into the new agency and SaaS model. This gives you the flexibility and control you need to accomplish the transformation.

Set concrete goals and timelines to keep this process moving along. Keeping a steady pace is difficult if you try to consider every step at once. By breaking things down into more manageable pieces, you'll get more consistent progress.

Your Digital Agency Business Model Needs Reassessment

Your current business model is unlikely to fit cleanly into the SaaS structure, so it's time to take a good hard look at the client services that you're offering. Whether you're a full service or a niche agency, put some thought into what your customers need and the way that fits into a subscription model.

Go through your service offerings to determine the ones generating the greatest returns. You need to stick with the most profitable services while dropping or restructuring anything that loses you money. Niche agencies have an easier time with this process, as they already have focused services and a strong value proposition. Full-service agencies, on the other hand, may do a little bit of everything. More is not always better. Use your available data to pinpoint the best options moving forwards. You can narrow your focus to the most requested services that don't waste your agency's time. Prospective clients may have an easier consuming information and be more likely to covert, as they don't end up with an overwhelming array of choices in front of them.

If you have a hard time thinking of your current offerings as subscription-based services, spend some time researching agencies that have already embraced a SaaS business model. You'll gain insight into the way you set the package scope and discover trends for commonly offered services. Don't be afraid to reach out for help if you find yourself stuck.

Transitioning Your Staff

Generally, digital agency employees embrace change. They're willing to pursue new strategies, business models, technology and anything else that has a chance to improve the agency and their jobs. They thrive in an environment filled with new opportunities and challenges, so often, transitioning to a SaaS model is music to their ears.

Buy not all employees feel the same way. Resistance to change can create many difficulties in your transformation. In many cases, you can avoid it by getting staff briefed early in the process. Be as transparent as possible. Go through the reasoning behind the change, exactly what that change will look like and how it helps them in their daily processes. Get feedback from your employees to see which changes are working and which may need to go back to the drawing board. If you have anyone on hand with experience working at a SaaS model agency, pull them aside for a one-on-one meeting to learn about what worked elsewhere.

No matter how good your change management plan is, you may end up with employees who simply won't accept the transformation. Look at the resources and staff you have internally to determine whether you're getting the most value for your organization. It may sound harsh, but business is business. If an employee refuses to work with the new SaaS model, they're costing you money and it's time to have a tough conversation. You may need to move them to a different channel or service line, or cut ties completely.

In Conclusion....

The SaaS model transformation challenges for digital agencies may be difficult to overcome, but it's well worth it in the end. You position your company as a forward thinking, high growth agency capable of scaling operations due to tightly scoped services. You eliminate the endless back and forth time spent on creating custom quotes and keeping projects from exceeding their originally established terms. That means more time to work on your own business and bringing in new work.

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