Should You Start An Agency Or A Software Business? (Contrarian View)

[Music] why did you do an agency so me and sam always talk about like uh we have many mottos on this podcast for example we don't do public math for example you don't say you're rich you say you're post-economic uh these are things we've picked up from from guests along the way and one of the one of the model one of the mottos that we say is uh you know agencies suck and uh it's like and and the reason we say is not because they uh like they do well that's not that they suck it's like they suck as a business choice like if i could i've always thought if i could choose between software or an agency i'd do software because it's like oh it's not a services business it's going to work while i sleep and it can scale up and i don't have to open up offices in poland and brazil and all these other places but you chose that you did software and you chose agency now why'd you make that choice and what's great about agencies that i'm kind of like not giving enough credit for so you're looking at business as in software is more scalable it's more desirable by public market ex hubspot versus accenture etc has way worse multiples than hubspot accenture is a bigger company from a revenue even a standpoint but now take a different approach okay i hope publicly traded companies you guys are both hubspot employees i'm assuming still is that correct kinda sure whatever your guys's deal is right but you guys are pretty much at hubspot now imagine creating a business and you don't plan on going public you don't care for the limelight you don't care for any of that in business what's a successful business good revenue growth and good revenue and profitability right all that really matters at the end of the day whether you grow or not grow is how profitable are you would you guys agree with that statement assuming you're doing something that's ethical and you're not selling drugs no i wouldn't agree with that i would say there's a third thing which is like is this enjoyable and like do i like my day-to-day and with the more people you have most people would say that's just a little bit more headache uh than than but that's not software or consulting anytime you build a big company you tend to have a large amount of people whether it's hubspot or whether it's accenture everyone has yeah but you can have you can probably have a much higher revenue per employee with software versus let's say you own a massive landscaping business you're gonna have to have tens of thousands of people but what's the difference from dealing with how many people does hubspot have like six thousand i don't know five thousand six thousand is probably a lot i'm guessing on the number but what's the difference of dealing with five thousand or six thousand people and twenty thousand people there's a point where it doesn't matter and it's a lot of people either way like it's not like you're at 50 people you still have thousands of employees to deal with and you need managers and layers and all that kind of stuff yeah but you're hiring at some good or bad you're hiring a different type of person so for example if you're vaynermedia they're based in new york they can probably only afford to pay some of their lower level employees 70 or 80 000 a year and so you just have to get a ton of people like that and have to have higher churn versus say a bigger company where you're able to pay a significantly higher salary because the revenue per employee is much higher so perhaps there's a slightly different day-to-day with because of that not necessarily let's say you're a vaynermedia he could be doing it to optimize for profit ones if i told you his ltv was six seven eight years right and you know that's great then at that point you can still hire high quality people and pay my arm and a leg you got what i mean right like you look at the accent they're charging accounts so much money and their contracts are long and i don't know what vaynermedia's ltv is but there's a lot of consulting companies that have ltvs of six seven years for clients and their clients are spending you know a hubspot yes there's more revenue per you can say potentially in software you can get to more revenue per employee but i know consulting companies that only take on contracts that are like five six million dollars and upwards so you have high margins and you can have a high revenue per employee but either way no matter what as you build a big business you're going to need more people and it's a headache to manage whether you pay them 70 000 or whether you pay them 150 000 it's still more of a headache and the notion that if you hire someone for 150 000 i'm not saying you're saying this it doesn't necessarily mean they're a better employee right and you know it just means different types of headaches correct exactly engineers for example are very expensive in this economy right so the point i'm getting at is a consulting company i had the demand for it a lot of people want to pay me for marketing and there was just so much demand it would have been silly not to do and if i'm not trying to go public or i'm not trying to sell money is money green is green as long as you're happy doing what you're doing take the cash will you ever sell the company i wouldn't say i would never sell the company but i don't care to ever sell the company because i love what i'm doing we also have good growth too right like i don't know what will grow this year 60 something percent which isn't bad you know with the market going up and down and fluctuating 60 something percent is my guess at our size is decent yeah the part i was actually talking about was a little bit more like i think you're you're totally right that like if you're gonna win big you're gonna end up with a bunch of employees and like you know it might look like 150 might look like a thousand it might look like 10 000 but like you know in either case you're gonna have managerial work and headaches and it's just different types the part i was really talking about is like you know i've now built let's say a media company content and then it's like um done educational stuff so courses which are like you know a different thing and then there's like a built software company and you know we ended up selling that one and then it's like and then there's um uh services which is like client services like like consulting or agency model and what i hate what i what i love about content media is it's actually pretty fun to create and it's cool because a lot of people consume it so they kind of you know you get that like hit um but you got to like you got to bake the cake every day right so like you know the hustle or like the milk road or this podcast like we have to come on and create the content again uh you know for the most part we we're not doing like super long evergreen stuff uh so you know like with the hustles the daily news that our milk roads a daily newsletter it's we gotta bake that cake every day whereas software it was like we built one product and yes we might we will improve it over the course of a year you know every year we're gonna improve it but like fundamentally um we didn't have to like recreate the product come up with a new viral story or a new great content segment uh that would like require like a new genius uh with software it's like you come up with one genius moment and then you sort of refine it make it work better over time and get rid of bugs and things like that so i prefer that part of software which was like making a product rather than making kind of like a disposable uh you know consumable piece of content or like i have an e-commerce company and like it's the pain in the ass to have supply physical products that are supply chain constrained and like we have a warehouse we got warehouse problems with our e-commerce business and so i'm like man digital was sweet compared to e-commerce but e-commerce is quite profitable that kicks off a bunch of profits that's nice so every business has these pros and cons and i always thought agency was like um the part i always thought was a pain in the ass was like the client services you are reinventing the next campaign and the next winning marketing you know formula for them and you have to keep clients happy all the time and clients are sort of like never satisfied in a way that like they if software is like you can have nameless faceless customers that like yeah some percentage of them will go right into your help desk that's in the philippines or whatever but like you're not having to like you know send account reports to your you know your your big clients and keep them happy yeah but you everyone has their own problems and software a lot of people have turned this issue and they can't figure it out or they have competitors who come into the marketplace and just undercut them on pricing for the same features because it's cheaper and cheaper to build software these days right so they all have their own problem to me i look at it as if you can find the right people so every time i start a company i find in people to put in place that have already done it multiple times before because your risk of failure are lower and they already know everything to do so i don't have to deal with client relationships i don't have to deal with customer service or anything like that i get to do what i enjoy doing which is go and create content be the face etc and uh my wife enjoys what she gets to do right she gets to donate the money although we don't really consider it as donations we look at as investing we're investing in people although we really don't ever collect any money back it's more so you're investing into making the world a better place for people's lives a better place or whatever it may be what's uh who were who were your first three clients at this at this agent because i don't know they were small companies and right now who's an example client like a fortune 100 software company like that is a typical company think of any big large corporation in b2b that's a great example of one of our customers or even b2c actually think of any fortune 500 company that's a prime example of a customer what's uh and who's the ceo of your agency are you no i'm never the ceo i'm a terrible manager i'm one of the worst managers ever uh his name is mike gullickson he was the ceo no he was the president of iprospect which is an ad agency owned by uh densu i believe in i prospect maybe they have four or five thousand people is my guess and what when you how early into the business did you have a hired ceo or hired leader day one i won't start a business without a ceo from daylight and what did you pay them in the first year first year was my co-founder for like a hundred grand and that's because you basically went and drummed up 100 grand worth of business and you're like hey mike uh i got i got those clients to give a hundred grand do you wanna run this thing for me and help it get deployed no uh our business didn't start off that way i probably put a total of five million bucks into the business and my own money so it was bootstrap but not really bootstrapped if that makes sense it's kind of cheating and it gets easier and easier as your entrepreneur right the more the more successes you have and i'm not saying i'm successful by any means the more capital you have to deploy into the next thing so reduces chances of failure and when it's your own money this is just my thesis and i could be wrong on this i have no data points when it's your own money you're much more careful than when if you raise like 15 20 30 million dollars of venture capital right you really look at every single dollar uh but mike was the ceo from day one he's a great operator has no agency experience eventually we got in a president and then eventually from there we got in a ceo and have you guys crossed a hundred million in revenue yet yeah we do nine figures that's crazy man so what i mean that's just pretty wild that you're able to like parlay this blog that was already always kind of a juggernaut but this blog into a nine figure a year business i mean that's amazing yeah it's been a good run i hope it i'm knocking on wood although you probably can't hear because of chris but uh i hope it keeps going and more so we're just having fun like for me what i enjoy doing is building a business um i know i have an expensive lifestyle i generally don't do stuff for the money like i overpay like house staff like nannies and stuff like that when i say overpay i drastically overpaid not by like 10 20 30 40 like i really mean drastically over pay because i look at people i'm like if you're cleaning the house how are you gonna live on this like i'll give someone six figures to do that i know that sounds kind of crazy or stupid but like i'm not giving my kids money so might as well take care of other people in this world who need it more than um but we do [Music] in the pirate business it's easy to fall into forcing sales but hubspot helps us treat our valued customers like people not conquests how's your tailbird i brought you a case of rob hubspot grow better

Channel: My First Million

Views: 20,605

Keywords: my first million, my first million podcast, my first million podcast episodes, the hustle, the hustle daily, the hustle trends, shaan puri, sam parr, sam parr the hustle, the hustle podcast, the hustle podcast my first million, startup podcast, entrepreneurship podcast, business entrepreneurship podcast, business, podcast, entrepreneurship

Id: Jb0u5C2CUN8

Length: 12min 36sec (756 seconds)

Published: Wed May 11 2022