7 things I’ve learned running a $3M Productized Agency: 1) Lifetime value and AOV are more important than MRR - Especially in the early days. You will grow faster and have better cash-flow starting out if you can increase your AOV and if possible, collect all of that upfront or as fast as possible. Churn on most marketing services is very high so services MRR isn’t as recurring as you may think anyways. Starting out, focus on solving customer problems and billing upfront if possible—even if that means sprints or projects. 2) Moving beyond monthly billing unlocks new service design options and value for the customer. When you operate from the stance of “we have to solve problems that we can bill for monthly” that drastically boxes in the type of services you can deliver. Do not let the MRR tail wag the delivering value to the customer dog. Ask yourself what expensive problem can I solve for the customer, that I am uniquely qualified for, that eventually I can put a process behind and completely remove myself. 3) You still want to get to recurring revenue eventually, but think about it more broadly: You do need recurring revenue but it can take different forms. For example, could be re-ocurring projects every few months, vs monthly recurring. It could also be billed quarterly, bi-annually, or annually. If you bill people monthly, you must deliver serious impact every single month. Think about the timeframe you actually can deliver serious impact in. What time frame is that? Would you be better off charging more and billing at a different timeframe? 4) If your business model means cash-basis and accrual-basis accounting look different, start doing accrual asap (and understand the difference). If you’re collecting upfront payments (which is ideal for cash flow early on and highly recommended to grow quickly) cash and accrual will look very different. It’s critical to understand this and be aware that what is earned revenue vs unearned revenue. You can still use unearned revenue to grow quickly, it can be a fantastic way to finance growth. But you want to be sure you know what you’re doing and avoid any surprises. So if you’re collecting upfront on quarterly, annual, project, sprint, or ANY type of work, make sure you understand the concepts of accrual revenue recognition and transition to semi-accrual or basic accrual (in addition to cash basis) as soon as possible. 5) 6)Gross Margin is the most important line on your P&L. Profitability is a war and the frontlines of that war are your gross margin. You can always change around OPEX to hit certain net margin targets, but if you mess up your gross margin, there’s not a lot of pie to go around. Make sure to account for your founding team’s time as well, if you plan to hire for that role eventually. A lot of people find out their margins only worked in hindsight because they were doing the service delivery - they didn’t account for the COGs correctly at market rates for when AFTER they try to bring in more team members. At scale, with a team etc, 50% is basically the minimum gross margin target. 60%+ is very good. 6) Obsess more about solving the customer's problem than if you are a productized service or agency etc. A lot of people will argue this defines a productized service vs this defines an agency etc etc. Focus much more on simply solving an urgent and expensive problem than the precise categorization. Also, it’s something that will change and evolve with your strategy. Sometimes you want to be more productized. Sometimes, it pays to be more of an agency. It’s a spectrum that changes through the lifecycle of your company so don’t worry too much about semantics. More and more, I like the term “Productized Agency” as it incorporates both ideas though. 7) Work with a coach who has achieved what you want to achieve in the agency or productized service world. Monthly or bi-weekly calls with productized agency founders who are where I want to be in 2-3 years has been transformative for me. Find someone who is where you want to be in 2-3 years and ask to pay them for a 60 minute monthly call. Come to the call with an agenda of everything you are stuck with, things that are stressing you out, issues and opportunities etc and get their perspective. I’ve done this with multiple folks ahead of me and it has helped me dodge a TON of landmines.