Maybe you’ve identified a unique set of pain points that you strongly believe can best be solved by a custom software solution (powered by AI!). You also believe that, if done well, this solution can then be offered and sold to others with the same pain point and can help you shift from an agency business model to a software one, or at least a hybrid.

Our own personal experiences tell us to avoid building software internally. It’s hard to execute well, it’s hard to maintain in the long-run, and it’s also a distraction from focusing on agency fundamentals like delivering for clients, developing talent, running a tight ship, and keeping the team fully utilized. Plus, there are tens of thousands of off-the-shelf software solutions already out there that can get 80-90% of the job done, not to mention the hundreds of upstarts looking to solve the exact same problem you are.

But there are exceptions and many instances where an agency was able to successfully build software that either improved their workflow or enabled them to shift their business model.

If we were tasked with launching software within an agency business today, here are some things we'd consider doing:

1/ Set a budget and timeline, treat it like a real project

Instead of trying to build software during the team’s down-time or in-between projects, we’d treat this no differently than a client project with a real budget and timeline, with real dollars allocated.

We made the mistake in the past of treating software builds as extra-curricular activities that the team was expected to work on when they had a bit of time. Things never quite got going and we never had a clear idea on how much time and money we spent. Bringing in a 3rd party to build out the software could actually force you to be more disciplined about outcomes.

2/ Assign a product owner, preferably not you

This is especially for agency principals who are involved in business development or some other critical part of the agency business – don’t juggle your primary responsibilities while also trying to build software. Set a vision and be clear about the outcome while handing over day-to-day responsibilities of the software build to a product owner, who’s empowered to make decisions to keep the project going.

I remember the days of trying to personally run an internal software project while neglecting my business development responsibilities and not paying attention to client work – the agency suffered greatly for it.

3/ Map out scenarios in advance

Take the time to envision the different paths this software can go. What’s the best-case scenario? Are you able to license it out to clients and generate a new revenue stream that complements your consulting services? Are you able to spin it off as a separate company? Does it become a sellable asset? Imagine these scenarios and take one more step to ask yourself what you’d do in those situations. At what point would you want to spin it off or sell? Or if it remains a part of the business, how would it continue to run and who would be responsible for it long-term?

And what’s the worst-case scenario? The software is subpar or too buggy. Usage never takes off and people find ways to work around it. It becomes a money pit where you have to keep allocating resources or paying external developers to fix or enhance things. There are no viable business opportunities for the foreseeable future. Take a moment to write down at what point, perhaps a date or dollars spent, that you’d be okay putting the software dream out of its misery.

One could argue that with the proliferation of no-code web app tools and AI, it should be easier and easier for teams to build software. I think this is true, but there’s a fine line between software that enhances workflow for efficiency purposes only and software that an agency wants to eventually commercialize.

When you bleed over into thinking that you can turn the software into its own business, you’ve put yourself at a crossroads, or rather, 3 paths: stick to agency work, go all in on software (spin out, raise money, be 100% focused), or try to straddle both & hope for the best.

There are agency/consulting businesses that have pulled off the software build and been successful in various ways (hybrid, full pivot, spin-off, sale of software, etc.). Be sure to go into it with intentionality.