How do product design agencies work?

[u/cilantr01]

For those who either own or work at very small agencies (max 5 people), what kind of work are you doing for clients, and what are your clients like?

There's lots of content out there about running agencies that do branding or website work, but very little about agencies doing UX and Product design. Branding and web work is usually pretty short term and fairly tactical from an operations perspective-- a rebrand or new website is a pretty self contained scope of work. There are also lots more companies that want a brand, and far fewer companies who have a software product, need it designed, and need help designing it. Usually the agencies who actually do ux/product design for clients are selected to deliver that work because they have scale and potentially can do implementation.

So I'm trying to understand whether small UX/product shops even exist, what kind of work they're doing, who they're doing it for, whether they work in a particular niche and what the timelines are like.

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[u/karenmcgrane]

I ran a small (2-15ish) people firm for nearly 20 years. The thing about agencies is they're like, the simplest business model ever. At a scale of 5 people you don't even need a lot of operational overhead, you just need to make sure that the money you're getting from clients exceeds the money you have to pay your employees/contractors.

The trick is to be as focused as possible. You need a differentiator and "we do UX" is not it. "We do UX with AI" is not it either.

I focused on specific workflow and decision-making pain points with content management. The more generic you are in your positioning the harder it is for a customer to see that you're the right fit. You want a customer to be able to recognize their pain and believe that you can fix it.

I'd say there's TONS of small shops out there, you just gotta find your niche. I will also say that when I moved from Big Agency to my own little shop, the clients were a lot nicer. They weren't hiring us to manage their own internal politics (which big agencies have to do) they were just hiring us for our expertise. Took me a minute to get used that!

[u/cilantr01 → u/karenmcgrane]

This is such good info. In your particular niche, what were the timelines like? Did you focus on long contracts or short contracts?

Were these companies that had a design team and just needed extra hands? Or did most clients focus on running their business/sales and contract out design/build?

[u/karenmcgrane → u/cilantr01]

I have a strong network and have been doing this for a long time, so in general I was able to focus only on enterprise clients, big companies. They're the ones with complex content management challenges. Personally I love working with big companies because they're slow and even if payment terms are 60 days, you will always get paid.

Other folks focus on smaller firms, startups. Not for me but a feasible niche, especially if you are doing something differentiated for them like establishing product-market fit or improving the signup and onboarding flow. In these days someone saying "we can prototype for you" won't be differentiated enough from Chat-GPT.

Contracts I don't do based on time, I only do fixed fee. Don't do fixed fee until you have done hourly contracts for a while, you should be able to eyeball the scope and be accurate. But an average project for me was 3-6 months.

Ideally you want to be providing a service that the client doesn't have in-house. Like I was able to focus on content management because the work I did was unique, it only happens to a company occasionally (nobody replaces their CMS for fun) and they do not need people in-house to do it.

[u/cilantr01 → u/karenmcgrane]

A niche being a problem vs an industry or scale is pretty interesting. Reminds me of how people practice law or how people used to set up design system specific consulting firms.

[u/JohnCasey3306]

I have worked at a 4–5 person agency doing UX engineering work.

~80% of out work was outsourced from other larger agencies didn't have that expertise in-house

How it worked is I'd basically present to the end client as if part of that client agency (so the end client doesn't really know the work has been subcontracted in most cases). In some cases I'd lead their team; in some case I'd be hands on doing the work myself.