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Is It Worth Creating A Separate Division For New Products?
Is It Worth Creating A Separate Division For New Products?

For mid to large sized agencies, the concept of transitioning to a new way of doing business can be intimidating. Small agencies are faster to adapt to change as their size allows flexibility. Large agencies have more moving parts to consider.

Some larger agencies navigate this hurdle by partitioning off the change. They assign small departments or, in some cases, entirely new off-shoot companies to test the new model. Sometimes the schism is opportunistic – they see a chance to sell a new set of services, facilitated by SaaS-based technology. Sometimes it’s an act of cautious progress. But is it worth the effort?

When we speak about transitioning to the SaaS model, we generally think about the ideal transition: an agency agile enough to transition smoothly but ambitious enough to take advantage of scaling opportunities down the track. But SaaS isn't just for small and ambitious agencies. Large companies with hundreds of staff can still transition to a SaaS business model, they just might have to learn to compartmentalize.

If you're part of a large agency who would benefit from a slow transition to the SaaS platform, we have a few tips from big SaaS players on how to manage the change.

Create Streams

Some clients will be averse to change regardless. They might have genuine reasons (perhaps they feel the current agency model works well for them) or they might be skeptical about change in general. Either way, don’t expect to win every battle. As we’ve mentioned before – no transition is without resistance. You may have to cull clients who genuinely don’t fit in with the new model. In the meantime, you can divide your clients into two streams: traditional model and subscription model. Divide your staff accordingly as well. If you keep your traditional clients and subscription clients and their associated staff separated, it’ll be a good litmus test. You’ll notice differences in revenue, productivity, and services rendered between the two types of clientele. Hang onto that info – it’ll become invaluable as you refine your service packs.

Most likely, you’ll notice a difference between the two streams. The ethos of SaaS is templating and setting in place rigorous processes to service more clients with less effort. It’s natural (and a sign of a healthy SaaS model) that subscription clients will require less pandering.

Create a Beta List

Some clients embrace change and would be perfect for beta testing or trialling new programs. Sit down with your team, make a list of clients you believe would benefit from the SaaS model and make time to sell them on it. If you package SaaS well, clients who make the leap can give you candid, integral feedback at an early stage.

Impress upon your beta testers their experience and feedback will dictate how the agency handles the transition. It can work to their advantage. If you can make your service packs work for a small group of clients, theoretically you'll be able to roll that model out to all clients. But make sure to troubleshoot with this group thoroughly. Be candid about mistakes and improvements. Make the process a team effort.

Recognize Exceptions

Of course, there will be outliers. There will be clients who come along, wanting an $80k custom website and all the trimmings. They won’t fit into a SaaS service pack. You need to learn to recognize when to capitalize on these opportunities and identify when it’s worth your while. Is it an interesting project? Having a few hero pieces under your belt is important for your agency's marketing strategy. Will you make enough money from the project to make it worth your while? Is a good relationship with a prestigious client going to be valuable down the track?

It’s important to recognize that there will be exceptions who fall outside the boundaries of your service packs. You should design a game plan to address these scenarios that you can implement quickly should the opportunity arise. If you get enough valuable custom work, separate a team for that purpose. If the custom work is more casual, think about having a list of trusted partners and freelancers.

One of our clients, the Australian Associated Press (AAP), focuses on selling custom work. However, intrigued by the SaaS concept, AAP created a new division called Publish to absorb all their service pack customers. Having a selection of small service pack clients allowed them to break into a new market and dig through opportunities when they arose. They also have the chance to develop smaller clients and eventually upsell them custom work.

Expand Your Client Business

Small agencies know a trade secret that’s wasted on large agencies. Smaller clients are often the most fruitful in the long term. Say, a small agency partners with a small client. As the client grows, in no small part thanks to the agency’s attention, they work their way up the service pack chain, through service upgrades and add-ons. Eventually, they’re a mid-size client. And once they become big fish, the relationship is already established and they become a very valuable client indeed.

A SaaS model allows large agencies to efficiently take on small clients, when before it wouldn’t have been worth their while. Once the relationship is established, they can monitor their clients as they grow and become ready for an upsell or cross-sell.

While smaller agencies have the advantage of executing fast changes, mid to large sized agencies need to take a more methodical approach. Creating a new division for new services might just be a great solution for a smoother, long-term business transition to the SaaS model.

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