Chasing quick wins? Small AI projects might be secretly draining your profits.
While the allure of consistent cash flow from small AI projects is strong, agencies often overlook the hidden costs that can significantly impact their bottom line. Let’s dive into why focusing solely on small projects might be a costly mistake.
1. The Admin Black Hole
The administrative overhead for a small $1,000 AI project can be surprisingly similar to that of a $10,000 project. Think sales calls, proposal writing, scope refinement, and contract negotiations. This time investment drastically reduces your hourly profitability, leaving you working for less than you’re worth.
2. Missing Out on the Big Picture
Constantly chasing small projects can blind you to more lucrative opportunities. You might miss out on:
- High-value clients: Larger projects often come with greater financial rewards and boost your agency’s credibility.
- Compelling case studies: Challenging projects provide impressive material to attract top talent and win bigger clients.
- Skill development: Simple projects can hinder your team’s growth and limit your ability to tackle more complex, higher-paying work.
3. The Low-Ticket Client Paradox
Ironically, smaller clients often demand more attention and are more prone to scope creep and endless revisions. This translates to more work, increased development time, and ultimately, lower effective hourly rates.
4. Reusability and Scalability Roadblocks
Small, custom projects often require starting from scratch, leading to repetitive development and limited scalability. Focusing on larger projects or developing niche solutions allows you to leverage your work, creating efficiencies and boosting profitability.
5. Impact on Company Culture and Talent
Top AI developers crave challenging projects. A constant stream of small, repetitive tasks can demotivate your team and lead to higher turnover. Attracting and retaining top talent requires showcasing exciting, innovative projects.
Making the Strategic Choice
Ultimately, choosing between small and large projects depends on your agency’s goals:
- Short-term cash flow: Small projects can provide immediate revenue.
- Long-term growth: Building a reputable agency with a strong team and valuable IP requires strategically pursuing larger projects and niche solutions.
By understanding the hidden costs and prioritizing your long-term vision, you can make informed decisions about project selection and steer your agency towards lasting success.
