“Past a certain age, taking pride in referrals as your primary lead source can be a bad thing”

We (ProductHype [.] com ) made this one for Woden, I think it came out really well.

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People who complain about the agency business model often fall into two camps. The first group? Those who got stuck at a few hundred thousand dollars of revenue. It's a grind, and they became jaded and burnt out. That's real and legitimate - it can happen. In my experience, you've got to get through the agency grind in the beginning as soon as possible. You need to get above seven figures in revenue quickly. Once you're there, you can afford more help, and your quality of life improves significantly. Running a sub-seven-figure agency perpetually can be incredibly hard. But here's the thing: if you can do a few hundred thousand dollars in revenue with your agency annually, there's no reason why you can't do a few million. Most people just need help or mentorship. They need to fix their strategy because they're doing a few things wrong. Often, they're not going after the right target market. Because of this, they can't charge enough. Without charging enough, they don't have good gross margins. Without good margins, they're not profitable enough. And without profitability, they can't bring in the right team to deliver better service and get more clients. It's a vicious cycle that keeps them stuck in the weeds. With agencies and product services, it's all about the quality of your team. That really makes or breaks your experience and the growth of your agency. You need to grow and have margin to bring in great people, or else it is very hard. The key is breaking this cycle. Fix your target market, increase your prices, improve your margins, and invest in your team. That's how you transform from struggling at six figures to thriving at seven.

Gross margin is one of the most critical metrics for agencies and productized services, yet it's often overlooked or miscalculated. Why is it so important? Because gross margin tells you how good your fundamental unit economics are at the project or monthly level. If your unit economics don't work well, you need to fix that before focusing on growing the business. Here's the thing: If your unit economics are broken or inadequate, just growing the business further is going to give you a larger business with the same challenges. You'll get to a point where you're struggling to be profitable and grow, and you don't know why. The root cause? Your cost of fulfillment is too high, leaving you with nothing left over to reinvest in the business if you also want to be profitable. One of the most important things you can do is fix your gross margin. And to fix it, you need to calculate it accurately to begin with. Another reason this is so crucial for agencies and professional services is that your gross margin isn't very flexible. It's much harder to change quickly compared to other aspects of your business. You can make changes to it over time, and you should always be looking at it and making those adjustments. But if you have to do work and it costs you to fulfill that work, you're going to have to fulfill that work one way or another. It's not like a marketing campaign where you can turn it off and save $5,000 a month immediately. Short of doing very disruptive things like layoffs, your cost of goods sold (COGS) are really fixed. On the net profit side, there are a lot of things you pay for that are optional or flexible. You can move them around. But your gross margin? That's the foundation of your business economics. Take it seriously. Calculate it accurately. And always be working to improve it.

Don't underestimate the power of taking a simple idea, and taking it seriously.

If you run a project based agency or productized service, it's imperative to understand deferred revenue:

Episode and show notes: nuoptima.com/saas-podcast/te… Youtube: youtube.com/watch?v=vDSqmZY4…

Very impressed with @jon4growth and his first book. Getting any book done is incredible, getting a good quality book done is even harder. Highly recommend if you’re in B2B want to get to your first $1M in revenue. Jon nails all the fundamentals around ICP, messaging, P/M fit, growth concepts, and more.

YouTube: youtu.be/S7HHMJiG7Ac?si=bQPz… Spotify: open.spotify.com/episode/0tx… iTunes: podcasts.apple.com/us/podcas…