A friend of mine has a growing creative agency doing copywriting work. Recently things have started to explode and she's going through a rapid growth phase. Here's some advice I'd give her, and anyone else going through a similar transition.
First, some background:
- I graduated from college in December 2004 and got a great job working as a software engineer for a computer security company in Idaho.
- I started my company on the side in 2005 doing web hosting, which quickly evolved to doing web development for those I hosted.
- In 2006, I made my first hire (subcontractor) to handle the work I couldn't do. By the end of the year, I had two subcontractors.
- In June 2007 I left my full time job to do web dev full time. At that time I had 1 full time employee and 3 part time subcontractors. This is around the time I stepped more into Manager role rather than being so hands on with our clients. Like many in this position, it's a hard transition to not be in direct contact with every client, but it was necessary for me to grow my business
- By August 2009 I had 13 people working for me. Most were part time. That's when we made the decision to move from Idaho back to our home town in St George, which meant a lot of change for our company. We scaled back to 3 full timers and a few subcontractors to do design and such.
- We then started really grow after that. By 2011 we hit over a half million in revenue. We cleared $1M in revenue two years later, and moved into a 4,000 sq ft office.
- By August 2015, we were on track to doing nearly $2M in revenue and I had 32 employees.
The more we grew, the less profit we made and the more pressure I had to keep feeding our pipeline to keep our team employed and busy. To keep growing, we ventured into new territory such as developing a Point-of-sale solution for retail stores, mobile app development, SEO and copywriting services, drop shipping software, interactive presentation software, real estate home show management software and the like. Branching out took us away from our core. Although they were fun and made sense at the time, looking back half of them turned into the red-headed step child that didn't get the attention they really needed in order to be great.
Then a very wonderful thing happened to me: someone approached me about buying my company!! I sold it September of that year to another tech company in town. They bought it because they wanted our skilled developers, designers, marketers, writers, managers, and support people for their own product, not for our book of business. We said goodbye to almost all of our 800 active clients we were serving.
...and then 11 months later I went through a big trial that changed my life again. The company we all went to work for, the one that aqui-hired us, ran out of money. We all lost our jobs. The worst part was that I never got my promised payout from selling the company in the first place. We had plans to pay off our mortgage, get our kid's colleges funded, maybe buy a fancy car, etc. All hopes and dreams lost. I cried in the closet for about a day and decided to get to work to starting over. That happened in September 2016, so about 18 months ago.
Looking back, it's been a blessing in disguise because it gave me a chance to start over. It's rare we get a chance to "reboot" a business!
I started over by cherry picking the three best programmers I ever hired in my 12 years running my company.
Although we still do web and mobile app development, the company I run now is different in many ways:
- We know what we're really good at and only do that: programming apps for startups. It's important to emphasize that we only do that, and nothing more. We decline projects outside of that, as tempting as they may seem (we turned down a $100k opportunity last week. it was a hard decision, but it was enough outside of our core that we decided not to do it). For the projects we don't take on, we tell the prospect to work with someone else we trust for that work. We set up referral partners who give us a commission.
- I don't plan on increasing the number of hires. We're staying small on purpose. This is really key to our success: because we're small, we don't have the constant pressure like I used to have to go out and find new business to replace the projects we wrapped up in order to keep my team employed. This is more valuable than I thought it would be for many reasons (below are a few more):
- We raised our rates
- We raised everyone's pay
- We now offer some modest benefits
- My overhead is much less (smaller office, less food expenses, etc.)
- We only work with clients we feel like we're a really good fit for.
- My stress is half of what it used to be when we had lots of revenue and lots of employees
- I spend ZERO time dealing with employees, drama, schedules, etc. This has freed me up tremendously.
- Most of my time is spent in creative activities where I feel like my talents are best applied. Before, it was the opposite: about 70% - 80% of my time was managing other people and the leftover time was for
- I can personally give our clients the attention they need
- Last year our little team of four did $650k in revenue, of which $200k was profit -- more profit in a single year than we ever made, even when were on track to doing $2M in revenue. We've decided to not spend this money yet and save it for our next big project (and also to provide a cushion / savings in case we run into hard times in the future)
- I have free time during the work day to explore new interests (such as the Ultimate Intimacy app, and another new project I'm working on)
- Can go home from work and be present with my kids. I'm not up late at night getting work done I couldn't get done during the day. This makes me more emotionally and mentally available to Emily than ever, and our intimacy (in the whole sense of the word, not just the physical) has improved tremendously.... and what can be a greater source of happiness than that?
My advice for anyone at this stage is to think about these things:
- What are the long term consequences of increasing the size of my team?
- Is it worth the stress?
- How much "grandfathering" do I do to keep old clients happy as I adapt to the new needs of new clients? Supporting different rates and platforms for different clients is really difficult.
- Is my net company profit going up or down as I bring on more people and these clients?
- Who are my very best clients? Would they still stay with me if I increased my rates a little?
- What can I do to generate residual income from my clients?
- Are there repetitive things we do as a company that we've gotten pretty good at that I can sell as a package for a flat fee? This is called creating "productized services".
- Do I have any employees that really aren't rockstars at what they do? Who are the very best? Can I run a company with just them?
- It's hard work to grow a team, but it's even harder to shrink a team. I hate confrontation, and really hate disappointing people. Telling people they no longer have a job with my company is really, really hard. It's agonizing, so I don't do it unless it's absolutely, totally necessary. As a result, I'd rather find projects for a team to work on to keep things steady rather than grow and shrink my team. This turns into a problem I call "Feed The Beast" -- the beast is your team, and the bigger it gets, the hungrier it gets. So you find more projects to satisfy the beast.... and then because you now have so many new projects, you turn around and hire more people. The beast grows...and so does it appetite, so it grows and grows.
I attend a conference last year for owners of creative agencies (like yours and mine). It was interesting to learn that the "sweet spot" for most of these companies was either 10-15 employees or 55 - 100 employees. Those in the middle struggle and struggle and either shrink or somehow manage to blow past the 55 employee mark (usually those catering to large, enterprise-level clients).
In conclusion, I recommend you take growth opportunities wisely, and consider the advantages of staying small!