Thinking about agency owner vs. solo designer

I saw a post on X from Oykun comparing agency life to freelancing, with freelancing appearing to have the edge. My gut tells me freelancing fits me best too, but I wanted to dig deeper to see if that’s really the case.

Notes & Assumptions

Calendar Year

Working with 47 weeks per year
Accounts for 2 weeks of holidays
Accounts for 3 weeks of PTO

Billable Hours

Even in the best circumstances, designers rarely bill a full 40 hours from a 40-hour week due to:

Internal Meetings: Team check-ins, planning sessions, and design reviews
Administrative Work: Timesheets, project updates, and internal communication
Training and Development: Learning new tools or processes, especially for junior staff

Because of these and other interests competing for time, the best billing ratio someone can hope for is about 75% of their time, in my experience.

Other Considerations

All financial figures are estimates based on industry trends
Calculations assume consistent work throughout the year
These numbers reflect my experience in the US market and are not meant to be a universal truth. Possibly they are too high or too low. Read this more like a thought experiment.

When analyzing the financial realities and operational trade-offs of being a solo designer versus running an agency, some clear insights emerge. Below, I’ve broken down individual salaries, billable time, and other considerations, while also thinking through the broader implications.

Agency Owner (John)

Financial Overview

Labor Costs: $900,000/year (salaries and benefits)
Operational Costs: $100,000/year (office, software, hardware, advertising)
Total Annual Costs: $1,000,000/year

Team Structure and Billable Time

Sales and Project Manager
- Salary: $100,000/year
- Billable Time: 0%
- Role: Client relationships, project management, sales
Office Manager
- Salary: $60,000/year
- Billable Time: 0%
- Role: Administration, scheduling, billing
Junior Designer
- Salary: $60,000/year
- Billable Time: 50% (940 hours/year)
- Role: Client work, training, internal collaboration
Mid-Level Designers (2)
- Salary: $80,000/year each
- Billable Time: 75% (1,410 hours/year each, 2,820 combined)
- Role: Client projects, internal reviews
Senior Designers (2)
- Salary: $100,000/year each
- Billable Time: 75% (1,410 hours/year each, 2,820 combined)
- Role: Complex projects, mentorship
Creative Director/Owner (John)
- Salary: $140,000/year
- Billable Time: 50% (940 hours/year)
- Role: Strategy, client meetings, team management

Billing Analysis

Total Billable Hours: 7,520 hours/year
Break-Even Hourly Rate: $133/hour
Potential Revenue at $160/hour: $1,203,200/year
Break-Even Utilization Rate at $160/hour: 83% (6,250 hours)

Benefits

Selective Project Work: Choose which projects to personally contribute to while delegating others
Administrative Support: Office manager handles billing, scheduling, and bookkeeping
Scalability: Team structure enables larger, higher-paying projects and multiple simultaneous clients
Passive Income Potential: Can draw salary without personal billable hours if team performs well
Business Equity: Agency becomes an asset that can be scaled or sold

Drawbacks

Extended Build Time: You don’t just become an agency owner, it takes years of effort to build reputation, client base, and team
Cash Flow Pressure: High overhead requires steady project pipeline
Management Load: Supervising team and client relationships demands significant time
Reduced Design Time: Less hands-on design work as management duties increase
Economic Risk: Responsible for covering fixed costs during slow periods
Team Dynamics: Managing conflicts and turnover requires ongoing attention
Mental Load: Balancing leadership, client expectations, and creative direction

Solo Designer (Kate)

Costs

Labor Costs: $125,000/year (salary and benefits)
Operational Costs: $4,400/year (marketing, hardware, software)
Total Annual Costs: $129,400/year

Billing Analysis

Billable Time: 75% (1,410 hours/year)
Break-Even Hourly Rate (30 hours/week): $92/hour
Break-Even Hourly Rate (25 hours/week): $110/hour
Potential Revenue at $150/hour: $211,500/year
Break-Even Utilization Rate at $150/hour: 61% (863 hours/year)

Time Management Note

Like agency designers, Kate’s time is divided between client work and non-billable tasks. While we’ve estimated 75% billable time, experience suggests that billing 25 hours per week as a solo designer often represents a full workload due to administrative and other duties.

Benefits

Simplified Operations: No team to manage and minimal overhead
Creative Control: Complete autonomy over all work and decisions
Flexibility: Ability to set personal hours and workload
Higher Margins: Greater percentage of revenue goes directly to personal income
Direct Client Relationships: Build stronger connections without intermediaries
Quick Decision Making: No need for team consensus or approval chains

Drawbacks

Wearing All Hats: Responsible for marketing, portfolio, client communication, billing, and project management
Income Instability: Revenue varies monthly without consistent team pipeline
Scaling Limitations: Income directly tied to personal billable hours
No Built-in Support: Lacks colleagues for collaboration or backup coverage
Administrative Burden: Business operations reduce available design time
Professional Isolation: Limited team interaction and creative collaboration
Client Dependencies: Greater pressure to accept all client requests
No Passive Income: Earnings stop during vacation or illness or even taking a walk.

Summary Comparison

Agency Owner (John) - Key Advantages

Higher Income Potential: Base salary of $140,000/year plus profit sharing
Team Support: Delegation reduces personal workload and stress
Business Asset: Building long-term equity through agency ownership
Project Selectivity: Freedom to choose strategic involvement
Scalability: Ability to handle larger, high-profile clients
Passive Income: Potential earnings without direct billable hours

Solo Designer (Kate) - Key Advantages

Operational Simplicity: Minimal overhead and management duties
Creative Freedom: Direct control over all design decisions
Schedule Flexibility: Autonomy over workload and hours
Higher Profit Margins: Lower costs mean more revenue becomes income
Direct Relationships: Personal connection with every client
Quick Adaptation: Ability to pivot quickly without organizational constraints

Category	Agency Owner (John)	Solo Designer (Kate)
Financial	Higher income potential	Less overhead
Work Style	Specialization	Solo and wear all hats
Business Value	Long-term equity	Simplicity and portability
Project Control	Teamwork	Creative freedom
Growth	More scalable	More flexible

Conclusion

The choice between running an agency and working as a solo designer ultimately depends on personal goals and work style preferences. Agency ownership offers greater scalability and potential for passive income but requires significant management responsibilities and overhead costs. Solo design work provides more creative freedom and flexibility but limits growth potential and requires constant personal involvement.

The key trade-off appears to be between scale (John) and simplicity (Kate). With success, John can potentially step away from day-to-day operations, while Kate must maintain active involvement to generate income. However, Kate’s path offers a more direct route to work-life balance and creative satisfaction, while John’s path could lead to greater long-term financial rewards.

Neither path is inherently better - success depends on how you define success. Art is not the easy path to wealth, though you can get there. But wealth isn’t the only measure of success.