In the wake of the COVID-19 pandemic, the software agency landscape has undergone significant changes. One of the most noticeable shifts has been the emphasis on headcount, treated almost as the only measure of success. However, as the market has slowed, this metric has proven to be more of a vanity measure than a true indicator of a thriving agency.
During the height of the pandemic, many agency owners were focused on expanding their teams. The assumption was simple: more people equaled more capacity, and more capacity equaled more success. However, this approach has led to an unfortunate aftermath – layoffs. As the market slowed down, the inflated teams became unsustainable, and many talented individuals found themselves without a job.
This situation has brought to light a critical error in the industry’s approach: the overemphasis on headcount and underemphasis on the right people. Hiring in large numbers and overpaying for certain specialists was a short-term strategy that has proven to be a dead end.
Moreover, many agencies that overhired were delusional, subsidizing their expanding bench from previous profits. This led to a paradoxical situation where agencies saw a meaningful increase in revenue but a significant decrease in profit. The illusion of growth, fueled by an inflated headcount, was ultimately detrimental to the bottom line.
In the post-pandemic era, it’s time for agency owners to shift their focus. Instead of chasing the vanity metric of headcount, it’s time to invest in specialization and niche expertise. It’s about learning how to bring tangible value to clients’ projects, rather than simply trying to lease as many bodies as possible.
This shift in focus could also pave the way for a much-needed consolidation in the market. The current fragmentation seems unsustainable, and a more unified approach could lead to greater stability and success in the industry.
The real value in a software agency lies not in the number of people it employs, but in the expertise and specialization of its team members. It’s about finding the right people who can bring unique value to a client’s project, not just filling seats.
In conclusion, the software agency space needs a paradigm shift. The focus should be on quality over quantity, on specialization over generalization, and on value over vanity. As we navigate the post-pandemic world, let’s redefine what success looks like in our industry.