Collective OwnershipHow Our Team Built a $1.5MM Agency in 3 Years with No Managers

Over the last three years, Optimist has grown tremendously. 

We started as an outgrowth of my personal freelancing work. Within a year of launching, we reached a $500,000 annualized run rate. By the end of year 2, we had doubled in size–building a seven-figure agency and reaching our goal of $1 million run rate about 18 months after we officially launched.

Since then, the growth hasn’t stopped. 

We achieved our growth goal for 2019 an entire quarter early, shooting past the $1.5MM ARR mark in September.

But the weird thing is how little our organization has changed from the original vision. 

While the systems and processes that we have put in place in the early days have had to evolve to accommodate more work and a bigger team, the core values and structure of Optimist have remained unchanged. 

In particular, we have remained entirely flat. 

We have no managers.

No project managers, account managers, supervisors, or any of the other layers that an agency of our size usually needs to remain successful. Instead, we have a team of specialized creatives that collaborate to get work done without oversight. We have transparent and collaborative communication with clients. And we have a shared vision and strategy for the agency and for each client that we work with.

Most important, we haven’t succeeded through sheer force of will either. No one on the team is killing themselves to pick up the slack for lack of management.

We haven’t succeeded despite having no managers, but because of it.

The flat structure means that we have to pull everyone in. Even though everyone is a freelancer, they have a baked-in incentive to understand the client’s needs and deliver on them like they’re their own clients–and they are!

We’ve developed a work model that allows our team to work a reasonable and healthy amount, earn a comfortable income, and have all of the freedom and flexibility that they want in work and in life. 

In other words, we’re exact opposite of most agencies.

So, WTF did we do that’s so different?

I think that the most important element of Optimist’s success can be boiled down to just a single word: Ownership. 

Our entire model, from the outset, has been built around maximizing ownership for the individuals on our team and building the company in a way that could remain both flat and scalable. These two ideals may seem to be at odds, but our approach seems to have found the balance.

Today, I’m going to unpack this idea of ownership and why it’s so central to our operation.

Agency Ownership: A Collective Approach

Ownership is a two-sided term.

On the one hand, ownership means to take responsibility for something–to be accountable.

But ownership isn’t a burden. The other side of the ownership equation is the possession of something that has value. Hopefully this thing that you own and are responsible for is also valuable and you will possess its value while being responsible for its existence.

This is how ownership works.

And this is the foundation of the new business model we’re building at Optimist.

Optimist is not a traditional agency.

If we were, we’d hire 10 full-time people instead of 22 freelancers, pay them each $50k/year, and the owners would pocket $1 million.

But, none of those employees would have the same professional or financial buy-in to our agency’s success as the collective owners that make up our team. They wouldn’t be deep experts. They’d need management, oversight, coaching, and mentorship. The model wouldn’t be the same and we wouldn’t be able to create the same value for our clients.

Optimist is not a traditional freelancing outfit, either.

If we were, we wouldn’t pay rates near the top of the market. We wouldn’t offer a profit share to contractors. We wouldn’t have team-wide retreats, invest in helping freelancers learn and grow, or any of the other “stuff” that doesn’t come with normal freelancing work.

And, if we didn’t do those things, we couldn’t expect that our team of freelance creatives act as strategists in everything they do, understanding the “why” behind the work that they do and the way they do it.

But, we break all of these rules that define both an agency and a freelance operation.

So what does that make Optimist?

It makes us an experiment.

Our entire business is built to test a simple idea: Can we build a new agency structure–a new economic model for businesses–that creates the right set of circumstances and incentives to marry the best parts of freelance work with the best parts of an agency?

Optimist is a collective.

We operate in a collective ownership model that gives each individual freelancer an ownership stake in the success of our firm. Likewise, we give each freelancer an extensive amount of ownership over the work that they produce and the relationships that they build with each of our clients. 

This is the Yin and Yang that makes our agency’s existence possible.

Our hypothesis is that with the right distribution of ownership–in both senses of the word–Optimist can defeat the mind-numbing parts of agency life while elevating the most rewarding parts of being a freelancer and an entrepreneur. 

With the right structure and the right amount of ownership, we can create an environment for freelancers to do career-defining work. And, we can give them the freedom and space to do that work without the tedious and time-consuming parts of freelancing that most creative people hate (meetings, sales calls, pitch decks, etc).

Most importantly, we can give those freelancers ownership over the value that they create, the profit that they generate, and the success of the company that they’re helping to build. 

That’s the grand experiment that we’re testing here.

We want to create a world in which the smartest people are able to spend the majority of their time doing the work that they care about, that they’re best at, and that feels most fulfilling. 

But, the experiment can only work if both sides of the ownership equation hold true.

1. Individual freelancers must commit to the complete ownership of the work that they do
2. The company must create an ownership structure that rewards them for that effort

In this model, freelancers work together to build something great. They’re paid for their time, but also for the value that they create as a group. Freelancers have ownership over the company itself–a financial stake both in their own work and in the collective work and output of the entire team.

Ownership is the connective tissue that ties together a group of people around a common goal. 

It’s the element that transforms a bunch of freelancers into something greater than the sum of their individual efforts.

Collective Ownership: Aligning Incentives

For most freelancers, there’s a tenuous relationship with the idea of ownership.

Yes, most freelancers technically “own their own business”. But, most freelancers are also the entirety of their business. The financial success of the company is determined only by the effort of the individual. 

Most freelancers simply trade their time for dollars. They own the work, but they don’t own the value that they create.

If they want to earn more, they must work more. 

But wealth is built through ownership of value, not work.

In the same way that renting doesn’t lead to equity and wealth, freelancing can be just as constricting for individuals looking to build a sustainable lifestyle. It can be impossible for freelancers to break out of this mousewheel and achieve the kind of financial freedom that’s usually associated with owning a business. 

What Optimist is attempting to do is reinvent the idea of ownership for freelancers–to give them a way to collectively own the company for which they create value. In other words, transforming multiple individual freelance businesses into a single collective that generates value above and beyond the hours that each individual works.

Then we distribute that value across the team. 

This is the basis for our profit share program. 

Each member of the Optimist team is eligible for a share of the profits that we generate each month. That share is determined by a combination of three factors:

1. Seniority
2. Client workload and role
3. Operations roles

Most members of our team earn between 2-5% of our net profit each month in addition to their hourly earnings. 

And, as our company grows–and profits increase–each member’s income grows as well.

Even when freelancers can’t take on more work, their earnings can continue to climb because they retain ownership over a share of our profits. Each member of our team is building equity in the company itself and each person has a real financial stake in the work that we create and the relationship that we build with our clients. 

And because we remain flat and lean as an organization, we can do this.

Rather than retaining the value as earnings for the firm, which would pay for things like executive and management salaries, our flat structure means that we have very low overhead costs. And, because our goal is to balance the ownership of work with ownership of the firm, that value creation is distributed to the team each month as a type of dividend. 

In most companies, the “labor” of the firm is compensated for their time and the excess value that’s created by the combination of each worker’s efforts is the profit that flows through to owners and managers.

This is the basis for capitalism.

Those who have the means to hire others to do the work are able to reap the benefits and turn their money into more money.

In the Optimist model, we embrace a more equitable division of both labor and profit. No individual was asked to risk capital in order to start the company. And, since there is minimal overhead or management, it only makes sense that the profits from the value would flow to the individuals creating that value rather than the first one to the table. 

As long as everyone owns their work, we’re able to distribute the value back to the team. 

Ownership of Work: Making Every Team Member Matter

Ownership of value is only possible if our team also practices ownership of work.

Freelancers are generally used to being responsible for the work that they deliver to clients. They are used to owning the “product” that they create.

Optimist is built on that ownership.

At the most fundamental level, every member of our team must take ownership of the work that they create and deliver to our clients. 

This can mean many things depending on the context. It means editing, proofreading, and standardizing. But it also means understanding the context of the work and identifying when it needs to be restructured or reimagined to become something more valuable.

It means going the extra mile in every instance. It means making sure that we deliver the best possible work that we can deliver—something that holds water as a resource for readers and an asset for our clients. It means exceeding expectations and taking pride in the craft and the product that we deliver, not just going through the motions in order to check off the task.

This central theme reverberates through our organization. 

Ownership of work frees us from the traditional agency model that’s muddled by hierarchy, bureaucracy, and layers of management. 

Rather than following strict protocols to standardize our process and our deliverables, we rely on individuals to be experts and owners of the work that they’re creating with other members of the team. It’s because of this structure that ownership must exist in order for us to continue to be successful. 

There’s no manager or creative director to own the work.

Everyone owns it–collectively.

Without ownership of work, ownership of value is not possible. 

Protecting the Culture of Ownership

Ownership as a concept cannot function on its own.

The reason that we’re able to both expect and provide ownership is because our team is a group of people who are capable of that ownership. 

Our operating thesis has always been that anyone who is an experienced, full-time freelancer is used to the balance that comes with this kind of role. We can expect more from a freelancer with a vested interest in our success than an employee who was being paid a set salary.

In other words, our collective model is our competitive advantage, not a detriment. 

The fact that freelancers comprise our entire team makes us better, not worse.

Having zero managers results in better work, not a sacrifice in quality.

For this to hold true, the concept of ownership must balance on top of a work environment where people are truly engaged and and encouraged to take ownership.

In Dan Pink’s book, Drive, he explained that the concept motivation could be distilled into three  core components:

1. Purpose
2. Mastery
3. Autonomy

Optimist is built, in part, on these concepts. The idea is that in order to everyone on the team to practice and maintain ownership, they must be capable of autonomous work. But, that autonomy doesn’t come on its own. It’s a function of the other components.

Without purpose, there will be no mastery. 

If the team doesn’t feel invested in their work, they won’t have motivation to learn and grow. They won’t be driven to master their craft.

Without mastery there can be no autonomy. 

If each member of our team isn’t a master of their craft, then we can’t allow them to work autonomously. 

And without autonomy, there can be no ownership.

If our team doesn’t work autonomously, then they can’t fully take ownership for the work that they produce. Someone else will have to. And that person will also take ownership over the value that’s created–that value will pay their salary. 

What this means is that our competitive advantage–what makes us unique as an agency–stems from these 3 elements, which enable the ownership model that validates the entire business model. 

It’s a delicate balance.

If we remove any of these components from the equation, it could be a recipe for disaster. But if we continue to maintain the balance, we have a special recipe that seems to give us superpowers in growth, client retention, and client success. 

Optimist 2.0: Deeper Ownership

Since surpassing our original revenue goal ($1MM ARR) and now meeting our stretch goal of $1.5MM ARR even before the close of the year, we’ve been stuck with one key question for Optimist.

What’s next?

Do we continue to grow the firm in the same way that’s gotten us here?

Do we adapt our structure to scale even further?

Do we create something completely different with our combination of talents and cashflow?

I posed this question to the team at our last retreat in Nashville. 

As a collective, we decided on the trajectory that we want to pursue for Optimist.

The results were interesting.

First of all: We’re focused on stabilization. Growing from $0 to $1.5MM in revenue in 36 months has been a tremendous ride. But it’s also exposed some of the weaknesses and threats to our business model.

If our goal is continued growth, what got us here definitely won’t get us there (assuming we set an equally ambitious goal of moving to $5MM to $10MM in the coming years.)

We have a lot of underlying systems and processes that need to be refined, improved, and changed to help us maintain balance at our current size. 

So, our first order of business is finding balance.

But, that’s just a temporary phase of business growth.  While we discussed the idea of an indefinite period of stabilization, that wasn’t the vision that most people wanted to pursue.

They wanted to turn the corner.

Our team is still hungry for more–growth, change, and experimentation.

One of the missing pieces of this equation is that while the members of our team own the value that they create for us, we have little financial stake (and ownership) over the value that we create for clients. 

So, the next phase of Optimist will be focused on a slow and controlled transformation. 

We’re pivoting Optimist into an startup incubator of sorts.

We’ll always prioritize the work of our existing clients, but we’ll slowly transition away from taking on new clients and shift toward building, launching, and monetizing our own projects. Our team will use our talents and revenue to build products and services that we can own—fully. 

Our vision is to create new revenue streams that generate income for our team, without an endless loop of trading time for work.

But, more importantly, it’s a vision for creating shared wealth for everyone who has worked so hard to build our company to this point. 

As we embark on this new vision for Optimist in 2020, we’ll face a huge number of obstacles. There are so many unknowns that it’s hardly even worth giving them a thought at this point. We have an incredible amount to learn and we know almost nothing about the journey that’s ahead of us. 

But, there’s one thing I know for sure.

The Optimist team has built something special. 

We’re a collective that’s greater than the sum of each individual contributor on our team.

With a team full of strategists who truly give a shit about what we’re building, we can overcome any obstacle and solve any problem–together.

Cheers,

Tyler