In previous articles, we looked at what an AI Automation Agency (AAA) is, if AI Automation Agencies are a scam and the types of niches AI Automation Agencies target. However, we have yet to delve into the particulars of the AI Automation Agency business model. How exactly does an AAA make money? What does it sell, and how does it sell it? This article will be handy for budding AAA entrepreneurs and those curious about the new world of AI agencies.
A business model is a company's plan for generating revenues and profit in a specific market. This article will examine how AI Automation Agencies are structured, their target market, their services, and how they price their services. We will also look at the expenses an AI Automation Agency will face and how they look to turn a profit on the revenue they earn.
It is important to note that no one-size-fits-all business model exists. AI Automation Agencies are a new concept in online business. What we outline here is the general approach owners are currently taking. Some may do things differently, and that is ok. No AI Automation Agency rulebook exists that must be adhered to.
A smart company will regularly review and update its business model to anticipate trends and challenges ahead. In a space as fast evolving as AI, AI Automation Agencies would be wise to do likewise.
Structure of an AI Automation Agency
The first piece in the AI Automation Agency business model is the setup and structure of an AAA. Most AAAs adopt one of three structures:
1. Sole trader
A single person sets up an AAA. They do all the AAA's work, including product development, marketing, client onboarding, and the technical part of AI automation delivery.
2. Partnership
Two or more founders join together to create an AAA. Often the founders will have complementary skills so that each can focus on a specific aspect of the AAA's business.
For example, a marketer and software developer may join forces to create an AAA. The marketer is in charge of identifying potential clients and selling the AAA to the potential clients. The developer oversees service delivery and the technical side of using AI tools to automate tasks and processes.
3. Agency
An owner, or owners, founds an agency and hires employees or freelancers to work in the agency. Different teams or departments in the agency will have different roles and responsibilities.
An AAA might start as a solo venture or partnership before evolving into a fully-fledged agency as demand for its services grows.
AI Automation Agency Value Proposition
The "value proposition" is a core component of any business model. A value proposition describes the products/services an AI Automaton Agency offers and why they are valuable to potential clients. An AAA must also explain why its product or service is different and better than its competitors.
There are two items an AAA must define for its value proposition:
1. Define a specific problem the AAA will solve
There have to be problems or pain points companies have that the AAA can identify and define so that they can use AI to solve these problems. An AAA could specialise in a single issue or solve multiple problems. The key is that these problems must exist and be painful enough that a business owner is willing to pay to solve them.
2. Define the Target Market
Agency owners must define a specific target market. The agency's AI product/service must solve the target customers' problems. Many AAAs target businesses with the following characteristics:
Small and medium-sized (potentially sole traders too)
Have issues/pain points the AAA can identify, define and solve with AI
Do not have AI expertise in-house to solve the problems/pain points
Are open to hiring and paying outside agencies for their expertise
Products and Services an AAA Sells
Once an AAA has a target market and identifies a problem/pain point to solve, they can finalise the products and services they will offer. The product portfolio of an AAA largely depends on market needs.
Below are four examples of services AAAs are currently offering. Note that this list is merely indicative of services AAAs can offer. The range of services an AAA can offer is vast.
Over 200 AI tools in 30 different categories are currently listed on Aiifi. An AI Automation Agency's services will only be limited by the imagination and business nous of its owner:
1. AI Content Generation Models
Content in this context means marketing material, social media posts, product descriptions etc. With AI, you can train a content generation model on a company's existing content. The new content the model generates will then match the company's style and tone.
Jasper is an example of an off-the-shelf AI marketing tool companies use to create new content. AAAs can use off-the-shelf tools or build more complex proprietary models for clients using other available AI tools.
2. AI Business/Data Analysis
AAAs can offer AI-powered tools that provide new insights to help businesses in their decision-making processes. Many companies generate vast amounts of data every day. Before AI, they could not utilise or analyse this data meaningfully. An AAA can create a model to ingest and analyse company data automatically. This analysis can identify trends, patterns and anomalies to help businesses make informed decisions.
3. Internal & External AI Chatbots
AI Chatbots can be integrated with a client's own data that is stored in their existing data/knowledge bases. Employees/clients can then query the chatbot to get answers to questions where the stored data/knowledge contains the answer to that question. Chatbots are used for many reasons, such as customer service, internal training and HR queries.
4. AI Integrations and API Flows
AI automation tools like Zapier and Make, for instance, help different software applications communicate with each other. AAAs can automate workflows between various applications so that humans do not need to transfer data between the systems manually. Doing this saves time and increases accuracy as it minimises the chances of human error during the data transfer.
Pricing AAA Products and Services
Fee-for-service model
An AAA will charge a set fee for an agreed service. The price can be a one-off, hourly/weekly monthly rate, or a client can engage the AAA on a retainer basis. Consider an example where an AAA is building an internal chatbot for a 15-person legal firm:
One-off fee
The AAA and the legal firm agree on an amount for the AAA to deliver the completed chatbot. This amount is agreed upon before the AAA starts to build the chatbot. Whether it takes the AAA 10 or 100 hours to build the chatbot, the amount they receive will remain the same.
Hourly/weekly/monthly rate
The AAA and the legal firm agree on an amount the AAA will be paid for a period of time worked. Again, the amount is agreed between both parties upfront. In this case, the AAA will get ten times the revenue if the chatbot takes them 100 hours instead of 10 hours.
However, it would be difficult for the legal firm to measure how productive the AAA is during the hours they work. This method is more suited to short projects or AI automation consultancy work you may do for a client.
Retainer basis
Regarding an AAA, working on retainer means you agree to a scope of work or deliverables with a client in advance, and they pay you a certain amount each week or month.
In our law firm chatbot example, the AAA agrees to work on retainer and is paid a monthly fee by the law firm. The AAA agrees to monitor the chatbot to ensure it is operational, ensures new data is feeding into it, and fixes any problems that arise with the chatbot directly with the chatbot service providers.
AI Automation Agency Expenses
One benefit of the AI Automation Agency business model is that starting with very little upfront investment is possible. Start-up costs are minimal compared to starting a franchise or brick-and-mortar retailer. You can also manage and minimise ongoing costs. Such a model enables entrepreneurs to launch an AAA with minimal initial investment.
It is important to note that you will require some cash to start, and you need to identify where this cash will come from - personal savings, a loan, an investment etc. You will also need to budget how long the money will allow you to fund your AI Automation Agency, as you may not have revenue coming in the door for some time at the start.
As AAAs grow, other expenses inevitably emerge. The below costs are vital for an AAA owner to consider from the very start:
Building and hosting a website for your AAA
A professional-looking website is essential for an AAA. You can build your website with a service like WordPress or Wix to keep costs low.
The website can be as simple as a homepage, an about us page, a services page and a contact us page. Ideally, you will have articles/videos showing some of the work your agency has done for marketing purposes.
Business email address with your AAA website domain
Whatever website domain you use, you need a business email with that domain. If your website is: www.aiifi.ai, your email needs to be: sales @ aiifi.ai, support @ aiifi.ai or similar. A @gmail or @outlook address will do, but any serious business will have a business email address.
Cost of using AI tools to train and learn how they work
You must familiarise yourself with the AI tools you expect your AAA to use before you start soliciting clients. Ideally, you will use the tools for your own business/side project or friends and family first. You learn how the tools work and can now create articles/videos/prototypes to show potential clients.
If you have a prospect interested in a chatbot and you can show them a working example of a chatbot you built that they can test, it is an invaluable marketing tool.
Cost of using AI tools to deliver your AAA services
Your most significant cost will be the cost of the AI tools you use to deliver your services. For some tools, you need to decide who pays for the tools and whose name the tool accounts are in. Either the AAA sets up the account in their name and pays for the tools, or the account is set up in the client's name, and the client is charged directly for the tool usage.
Remember that some tools charge on a per-usage basis, so it is vital to monitor usage levels to ensure an unexpected bill does not suddenly arrive.
Concluding AI Automation Agency Business Models
The AI Automation Agency (AAA) landscape is rapidly evolving. For those interested in AAAs, a clear grasp of the AI Automation Agency business model is essential. Understanding their structure, value proposition, service offering, pricing models, and expenses provides an excellent foundation for anyone considering starting or hiring an AAA.
As highlighted, smart businesses will review and update their business model periodically. I expect AAAs to do the same and look forward to the evolution of this new type of agency.