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This isn’t another one of those podcasts where someone talks about how fast they grew their company without stepping in 💩 first.
You know….where they talk about how perfect everything went as they grew from zero to 100 clients.
You’re a genius. Your clients love you. We get it. But no one cares.
And, let’s be honest, during the first year of growing your business, you probably weren’t summoning a bar cart over to your VIP lounge at a tropical paradise.
But, if you don’t make mistakes, you can never grow.
That’s we sat down with Brad, Codeless’ founder, to chat about all the terrible mistakes (or “happy accidents,” as Bob Ross likes to say) he made along the way to growing $70k MMR.
The mistakes they discuss in this episode of Codeless Radio are:
- Moving too slowly
- Compromising quality
- Making it too easy to start new engagements
- How moving cautiously may cause a company more harm than good
- What the dreaded middle ground of a market is and how Brad got Codeless out of it
- The benefit of making it difficult for clients to start new engagements
Hello, welcome back to Codeless radio. This is Daniel Midson-Short and I am joined once again by Mr. Brad Smith. Hello sir.
Hello Daniel. How’s it going?
I’m doing very well. How are you?
Good, thank you. Good.
That’s good. Good to speak to you again. And today we’re going to talk about something that I’m interested to hear about, which is based on an article that you wrote a couple of years ago, I believe, which was called seven agency mistakes on the way to 70K MRR, which is a pretty impressive number and seven mistakes that you learned to get to that. So there’s a bunch of things that you listen to the article and I just want to talk through each of them because I think it’s worth hearing a little bit about all of them from your perspective. And this is a companion to the first interview we did talking about the story of Codeless and how it started. So if you haven’t heard that one, I’d recommend jumping back into that first because it will give you a bit more context what we’re going to get into today. So, um, yeah. So let’s jump in Brad. So I mean, do you want to talk about the journey a little bit and what 70K MRR means and all that to begin with?
Yeah, I would. Thanks, Daniel. I would love to relive all my past awful mistakes or experiences. I really appreciate it. So I wrote this article probably a year after we had repositioned Codeless in this new direction. So that’s 70K monthly recurring revenue in around a year or so, a little over a year, something like that. The reason I wrote it was kind of twofold. One was because I think we’re onto something and we did it pretty quickly. But the other reason is because, especially in the marketing space, a lot of people write these kinds of articles and especially if they grow fast or they have success, the usual tone is look at how smart I am. And I’m such a genius and everything we do is amazing and all my clients love me. And, uh, I’m so, you know, whatever. And so I, I just think it’s super disingenuous. Like all those, like pretty much.
You should have written a self-help book.
Yeah. I just my personal viewpoint is that it’s just super disingenuous and these people are either lying and, or, uh, making bullshit up and just trying to make themselves sound better and smarter than they are. And so I was going to take the opposite track because I like being a contrarian and I was just gonna say, yeah, we grew really fast. But that’s because of all these like terrible mistakes that I made it. So it’s really just like the culminated like success of any sorts is just going through all the failure to figure out how to do it. And so that’s, that’s kind of where the idea from this came from.
Oh, that’s so cool. I think it’s great that you, you had the guts to admit it, number one. And then even just share publicly, like that’s like, cool. So, now we’re going to go through two parts actually this episode will be episode one. And so we’ll cover a couple in this and then the rest in the second part. But, the first one that you mentioned, that article, which is, I know you’ve sort of espoused this, and I’ve learned this from you, is the mistake of moving too slowly. So do you want to share about that?
Yeah, for sure. I think when you’re doing anything new, whether it’s not just like a new company, but it could be just working with a client. It could be a new project, like you’re in house somewhere and you’re trying to spin up a new project or you’re trying to test a new project. And a lot of times you’re trying to get all the right variables in line before you’re comfortable doing it. And in most cases, that’s not the right approach because the overwhelming odds are that it’s going to fail. It’s way more predictable that whatever, you’re thinking about if you’re trying for the first time, it’s gonna fail. It’s almost guaranteed. And so you’re better just getting through that first failure and then the second, the third, rather than trying to, make sure everything’s perfect and aligned and people are happy and whatever. It’s not easy to do anything well, but it’s easier to get to that finish line if you just embrace all the shit that happens at the front end.
Mmm. Totally makes sense. And it’s almost like that’s a reality check before you even need it, you know, in a way. I’m probably gonna fail at this so let’s just do it fast. Bite the bullet, whatever.
And it even still colors my worldview through today. So middle of last year we were bringing on a big client and building a writing team for them from scratch and building processes and style guides and training programs and workflow. Like literally building all this stuff from scratch. We were starting from zero and our conversations together, I kept just trying to tell them, don’t worry so much about these things cause like I guarantee you we’re probably gonna change all of them. And then all that applied to like a bunch of stuff to writers even and now we’re kind of all in sync. But even when we’re testing new writer I tell them, like most of these people are probably not gonna work out. And people think that’s weird at first to hear something like that. And it’s like, no, you just have to embrace that and understand the easiest way to find good writers is just to look at a lot of writers.
That’s the easiest way to do it. And it’s the most predictable way. That’s the other thing. It’s not predictable to just go out and try and hire like the top three writers in each space. You know there’s no such thing as this unicorn. They’re going to be perfect for your skillset, your background, your market, exactly who you’re looking for, exactly in your price range. Like that shit doesn’t exist. That’s all made up. I live in the real world, unfortunately. Like I don’t have a VC behind me or whatever. Like, I just have to deal with what’s in front of me. And it’s way easier if you just look at 10,000 writers to hire one.
Yeah, totally makes sense. And I like what you said in the article too. You know, most of the problems you have speed is the antidote, which was really interesting I thought just in terms of delivering results faster made you solve the problems faster. A lot of the time it seems like dwelling is the problem. You know something.
Do you get paid faster? So like if you complete the project faster, if you get to the point of showing results faster, because it’s probably not going to happen immediately because the first few things you try are going to fail. So the faster you get to completing something, the faster you turn something around, the faster you get to actually moving forward, the faster you start solving your own problems. Like, Oh I can’t, I need more money. I need more resources. I need more people on my team. Like, yeah, all those things are true, but they’re always going to be true. Even today, we have a lot of people in our company, but we still need more. I still want more people. I still need more people around. I still to get all these projects that I want to do, I still need more of these things. The answer isn’t to just like bitch and complain. The answer is just figure out how to make it work with what you have. And sometimes like right now my audio sucks because I don’t have a good microphone in front of me but whatever, you just gotta do it and then get it over with and then go out and get a new microphone next week. You know what I mean? Like, keep moving forward. That’s really the only option that most people have.
Yeah, 100% and I also think too, that kind of plays against the idea of the whole work-life balance thing of taking time off, all that kind of stuff. Especially in the early days of starting a company. I mean you just, you cannot do that. There’s no, there’s no room for that in the short term.
Yes, unfortunately not. I think it depends. Like everything, it depends on what you want to do. It depends on what company you want to have. If you want to have a company where you’re the only person and you work 30 hours a week and you never make more than like six figures, then you could do that. With enough experience and understanding of how to sell and package your services and all that kind of stuff. You could easily do that. Or you’re some as little product company. Like a little indie product maker, a little guy who like developed some, some product on the side. Start selling it. Yeah, it’ll probably make five figures, six figures and you can have work-life balance. But if you’re trying to like break through these glass ceilings, the only way you do that is just by effort. Because again, the effort is easier.
I’m no genius. I didn’t create some programming language from scratch or I didn’t create some like new app that like everyone just loved. The only way I know how, and the only way that’s nearly guaranteed to succeed at the end is just to work longer and harder initially. Not always because you have to get smarter. Especially now, I work less now and my work is a lot easier now than what it was five years ago, 10 years ago. And I make way more money now. Like it’s not even close, not even close. You have to go through those types of periods to get through to the other side where then you can start leveraging time.
It always reminds me of that analogy that I talk about, you know, when a rocket’s leaving the earth, it has to spend most of its fuel, you know, to get gravity pull or whatever, you know, then it’s fine because it’s out of that. So yeah, it’s what you’ve got to do in that early stage and speed seems to be part of that.
For sure. And again, this is anything, a product, a website. I’ve experienced redoing websites and other stuff and it’s like if you’re redoing a website, it’s projected to take two months and then how come six months later we’re over budget and it’s still not live yet? Because it just, scope creep, more people like stuff just start adding up, adding up, adding up and it’s like, no. Let’s, let’s divide it into phases. Let’s get phase one done in this crazy short time period. Yeah, it’s probably not going to be super realistic at first. We’re going to get it live. Some stuff might break. You gotta be okay with that because you’ve got to keep pushing forward and then eventually you’ll get it done faster and better. But the only way to do that is to just move faster.
So true. When I started my company freelance writing, I just had the shittiest website. It was literally like, it was the equivalent of Wikipedia, you know, just white pages with black text. That was it. And I got clients, you know, cause I just was fast. You’re right. You know, I wasn’t spending hours deliberating the design, I didn’t care.
Oh no. Yeah. Thankfully we have new branding and a site coming out very soon. But I’ve had the shittiest website for like three or four years now. And it didn’t matter. Like the company’s still grown a ton. It’s been like doubling almost more every year. Over the past few years. And it’s a terrible website that I put together literally like on a Saturday night when I was drinking about half a bottle of whiskey. Like that’s how, and I was like watching movies in the background. That’s where the website came from and it didn’t matter one bit at the end of the day.
Now to contrast that, so that’s point number one. Don’t waste time, don’t move too slowly. But mistake number two, which is kind of an interesting paradox in light of what we just talked about is not compromising quality. And you know what you were saying there was basically if you’re charging less to try and be more affordable to the market, but you have to compromise quality a lot of the time.
Yeah. So it’s, it sounds completely contradictory but I mean it in different ways. So one of the things I learned early on was we tried to do more of this on-demand content service. It didn’t work. And I alluded to some of the reasons in the last episode. Essentially, there is this awful middle ground in a market where you don’t want to get stuck. And so in content you have everything on the bottom end you have the content writing services, you have bad freelancers, you know all these people charging 50 bucks, a hundred bucks an article, then you have this middle ground and then you have the premium end of the very top. And I was trying to initially price somewhere in that middle, but my clients that I was working with have the expectations more of the premium and I couldn’t get the two to join together.
So for example, if I’m charging $500 an article, but my quality on that is a six out of 10, I’m better off doing what we’ve done is charge a thousand plus per article but deliver a nine out of 10. And that’s where compromising quality on my website doesn’t matter as much because it’s like if you’re hiring a content company because of their website design, that’s kind of foolish. Your decision making maybe needs to, you need to rethink that about what you’re prioritizing, but when it comes to like what you’re getting paid to do, and we also made recent changes too where it’s like before, I couldn’t hire the extra support people I needed so I couldn’t hire on billable or non-billable people, enough of them. So all the people not responsible, not the specialists doing the work, not the writer.
All the support around that, like editor, account managers, assistance, all the stuff around that to help deliver a better experience. I couldn’t do that because I wasn’t charging enough and because I wasn’t charging enough, I couldn’t keep clients long enough because my quality wasn’t good enough. And my responsiveness wasn’t good enough. So it’s this whole like black hole where if you don’t charge enough and your quality is subpar, you can’t keep client clients long enough, which means you don’t have extra money to reinvest in non-billable activities or people that just, all that does is bring down your profit margin from a financial perspective. But what it does, is it keeps clients around longer because you’re way more responsive. So you have people answering emails within minutes or answering a Slack message within minutes versus, you know, a couple of days because you just don’t have enough bodies to go around.
So it’s kinda like all these things that people don’t factor in typically. And again, this applies to like marketing teams, whatever. You need to understand what, what is quality and what is the right quality for the right circumstance. Because also too, like investing, like what was that color app was like a photo app. It was like the 10th photo-sharing app and they raised like a billion dollars and then it failed.
I missed that one somehow.
It was a while ago. But it was like, the problem is well number one, you’re the10th photo app. So quality in that space doesn’t really mean you need $1 billion. You just need some basic working thing. Cause it’s already been done a million times. So it’s over-investing is also a problem in certain ways or certain cases.
So it’s very nuanced and it’s something that you have to figure out as you go. But even for a team, if you’re putting a marketing team together and your biggest issue or problem is creating content assets but you hire someone who’s like super good at optimizing shit. That guy’s not gonna have anything to optimize because you should’ve put more budget into the creation of the assets, not the link building and the optimizing that comes after. So like you need to understand where do your actual dollars drive ROI and then how do you optimize for quality in whatever that means to you or your scenario.
Yeah. Yeah. So it sounds like, you know, what is quality to your customers? Like know, that really, well first of all. And then, having the guts or the courage to charge for it, you know, say, Hey, I can do this really well for you, but it costs more. It costs more because it’s going to be the best quality.
Yeah. And going back to, I think I talked about again, super high-level theoretical stuff, a blue ocean strategy. But even today, there are a lot of services that we don’t offer right now and probably won’t ever offer. So we don’t do that much strategy. I don’t like doing audits. We don’t really do in-depth reporting. We don’t do promotion and distribution. We purposely don’t do a lot of that stuff. So we can just focus on one thing that we’re good at and put all of our money and resources into improving that one thing. And so for us, we see better results in mileage out of that. And I think it’s similar to other apps too cause you see a lot of like new software products are really just like a feature. They’re not a business, they’re just like one feature and then they try to add features. But that’s not always the solution. Like adding a million features to one thing doesn’t necessarily make it better for your customer. Maybe just going deeper on that one thing or maybe going deeper on like two things is. So it’s again it’s a way of thinking and the only way you figure that out is by making mistakes and over prioritizing or under prioritizing things incorrectly. And then you have to be aware of that and of course, correct as you go.
Nice. Very smart. So the third mistake was something you called under-capitalization. And what I liked about this was you were very honest about the fact that it takes a lot longer than you think to get a new client going. We’re getting excited because there’s a new client. We’re all pumped and whatever but you realize, Hey, this is actually costing me a lot more than I realized to get this happening.
Yes, SaaS companies deal with negative cash flow where they only charge 10 bucks or 100 bucks per month, but actually they need someone to stick around six months to break even. And then you have the lifetime value and everything else to help offset that initial cost of acquisition. The same thing applies to every business, but you don’t really realize it, especially client services business. The problem exacerbates over time as you grow faster, which is another kind of hidden lesson I didn’t really understand. So if we bring on a new client today, that means I probably needed to hire a writer a month or two ago and I needed to train them for a month or two and I needed to essentially foot the bill to get them to the point where they can take on a new customer. The same goes for other activities or other roles like account managers for instance.
If an account manager could handle so much work, there’s a break-even point in there and when you start them, it’s pretty rare that they’re at the break-even point when they first start. So what you’re doing is you’re funding like a month or two at least of people’s salaries and overhead just to be in a position where you can bring on a new client. That doesn’t include a lot of other stuff though, like marketing and sales. So if you’re spending money today on ads or on a booth at a conference, that’s not going to translate to a dollar until six months down the line a year down the line. If I bring on expensive software like if I pay market muse, I’m going to pay them annually. And that’s a bill I need to foot six months ago to use today for a new client.
Right? And so what happens is as you grow faster, you consume more cash just to keep up with existing demand. And that’s something that’s this dynamic at a big scale when you’re moving that fast, I didn’t really grasp or understand. The problem is that you need a lot more cash or working capital than you think you do also. Because clients don’t always pay you on time. And so you are running in this dangerous game where you’re constantly waiting for people to pay you. So you’re trying to manage your accounts receivable, but at the same time you’re fronting a bunch of cash on the other side and you’re essentially like acting like a bank, almost you’re funding activities out of old cash, just waiting for the new cash to help come in and pay it off. And so as I mentioned, I didn’t understand that the faster you grow like this, the faster those numbers start to move
and the worse position you get in temporarily. And you need to figure out ways that you’re going to be able to fund those operations for 60 days without seeing the money come in. And that’s where you get into a tricky point where your payroll due and you don’t have any of that cash and you already used some of your cash last month to pay off all the other stuff and you’re constantly playing catch up until you kind of figure all this stuff out.
Yeah, it’s so true. It’s like, you know, people brag, Oh we just signed this new contract, this new client, whatever. But they didn’t pay you. Yes, you get to brag about it, but you’re actually broke.
Yeah, for sure. So I mean, it changes how you should do certain things, changes how you should bring people on changes, how you should train people.
It changes how you look at how fast someone ramped up to being in a position where they can deliver value quickly or quicker. It changes how you should do your payment terms. It changes how you should price things. It changes how you put budgets together. Because you should just be like crazy pessimistic. So in my budgets, I just assume the worst in like everything. And then I also have a little buffer that’s like 5% of top-line revenue. I don’t know what I call it, but it’s just like, this is probably going to get eaten away by something. I don’t know what yet. And I don’t know why, but it’s probably just going to go away and I’m probably not going to see it. So it just changes everything. And until you get to that point you’re going to be in that constant hamster wheel.
Yeah. Yeah. Makes sense. And that’s good to know that it’s just a reality is that people pay late, you know, it’s how it goes. Especially working with bigger companies, right? They’re going to have 30-day net terms and it’s going to be, you know, actually 65 days after.
Yeah. I think too from a client perspective, if you’re in house, I think it’s important for you to understand this. Because to me, pay is a sign of respect and payment timing and other things like that. And so if you think your vendor is being an asshole, like maybe, but maybe too you’re kind of screwing them. And so if you want to be a better client. And again, in our space, if you’re in a fast-growing space, like in our space, there are way more clients than vendors. So there are not as many good solutions out there other than us and a couple of other people who I would recommend, I think they’re all good at different things. But outside of that, it’s a huge drop-off. And so there are only so many people going around that are really good at this kind of stuff and we’re not in shortage of clients. And so I won’t hesitate. I think we might get to this later in this episode, but I don’t hesitate to stop working with people or fire people or whatever because there’s always another one, you know, around the corner.
Yeah. And that’s, I mean, that’s a mindset that I guess is, you’ve developed over time, but it’s, yeah, it does kind of lead to the next point you made, which is, you know, making it too easy to start new engagements. Like just, making it too easy for clients to come on board with you quickly just because you want to have all these clients but the damage that does to your business.
Yeah. So again, that’s another weird one where it can kind of sound a little contradictory. So I’ll try to frame it in a few ways. Number one, from a marketing perspective, marketers try to optimize for things like conversion rates. So we try to optimize for things like the number of people who are gonna fill out a free request form or quote form or sign up for a free trial. And that’s usually the end of a marketer’s responsibility. And so most people are in that mindset where it’s like, I just need to get as many people to fill out this free trial. And it’s a little different for product companies because once that person filled out the free trial, you can wipe your hands of it and they’re not your problem anymore. But in a service company, you have to keep dealing with that person long after they’ve filled out a free quote form.
So it’s counterintuitive because you should actually do it. And the more complex the sale and the more consultative and expensive the sale typically is, you want to be a lot more judicious in who you allow in the door so to speak, and who you start to work with because you actually have to work with them over time. And it just changes a lot of things. But then there’s a flip side even though we do a lot of bigger sales and stuff, most of our sales close within like 30, 45 days. And it’s because a lot of times we look for urgency and we look for people who are ready and willing because we can kind of cherry-pick. Most people who say they’re gonna hire you and then it goes beyond 30 days aren’t. If stuff falls through, they lack urgency, they put budget somewhere else.
So this is one of those weird things where it’s like you have to find the nuance, whether, again, it’s for a product company or whatever. I remember back in the day, Moz, maybe when they were SEO Moz, I can’t remember, but they increased the number of people signing up for a free trial by like some crazy percent. But then when they looked at like churn and lifetime value, those metrics went down unsurprisingly. And what was happening is they were getting a lot of people who are unqualified and they didn’t really understand the product and understand the value behind it and they weren’t required to like put down a credit card or anything else. And so they opened the funnel and had all these people coming in. But then those were also the first people to start leaving and bouncing.
And when they looked at who were the customers that stuck around the longest, who were the customers, the highest lifetime value. It was all the customers that had been to the website like a hundred times before they actually signed up for it. So that’s part of it. But then there is the other part of it where, don’t confuse what we’re saying here with, more of a sales conversation of like budget, timing, urgency, need. Like all those types of things are a little different and the rules don’t always apply. Because when it comes to that, once someone is qualified, then you need to move fast. Need to get them in the door and you need to get the process going. Otherwise, it usually doesn’t happen.
Yeah. But it is, I mean it’s just having that mindset of not everyone’s a great prospect, you know, being, being picky about it for the right reasons, not just going to try to grow your business as you said, getting thousands of signups or whatever. And especially in service-based businesses, that just doesn’t work.
For sure. This dovetails actually well with the last point. In that the first month we work with a client we barely break even. Like we essentially lose money the first month we work with a client. Because we’re still catching up from all this stuff, we just prepaid. And so if we only keep a client for a month or two, we don’t make, we literally make no money. We don’t make any profit. It doesn’t help the company at all to keep a client for one small project or two months. And so going back to quality and some of the other things we’ve talked about, it changes the way you think about things and that we optimize for longterm engagements. And if some people might be a good fit, but they’re trying to just do a small trial or a test and they just want to do something really tiny. A lot of times I just tell them like, no, and here’s why. There’s a much broader reason why. It’s that literally we just lose money. If we took on your project right now, we would just lose money.
And if you actually care about the vendor, if you actually care about the people you work with, then you need to kind of meet us halfway. And if they’re unwilling or unable to do that, then I want to know that up front. I don’t want to know that two months after working with them.
Yeah. 100%. That’s, it’s a, it’s a very wise way to do it, but it takes, you know, years of being a business to learn that. Right. And that’s why you were able to do it, to have the confidence to sort of be like that upfront to have that conversation. So, yeah, very wise. Well, I know I’m in terms of this episode, we’re going to end here because that was, that was four really great points, you know, make sure you don’t move too slowly. Don’t compromise quality where it matters. Don’t under-capitalize- know it’s going to cost you more than you expect and make sure you’re not taking on your engagement
too quickly. So the four points of wisdom that we can take away, we’re going to cover another three in the next episode, but for now, I will say thanks so much Brad for your sage advice and we will chat soon.
Thank you. Looking forward to it.
Why moving cautiously may cause more harm than good on the path to success. (03:32)
A lot of times you’re trying to get all the right variables in line before you’re comfortable doing it. And in most cases, that’s not the right approach because the overwhelming odds are that it’s going to fail. It’s way more predictable that whatever, you’re thinking about if you’re trying for the first time, it’s gonna fail. It’s almost guaranteed.
And so you’re better just getting through that first failure and then the second, the third, rather than trying to, make sure everything’s perfect and aligned and people are happy and whatever. It’s not easy to do anything well, but it’s easier to get to that finish line if you just embrace all the shit that happens at the front end.
What is the dreaded middle ground of a market and how did Brad find himself there? (11:35)
Essentially, there is this awful middle ground in a market where you don’t want to get stuck. In content, you have everything on the bottom and you have the content writing services, you have bad freelancers, all these people charging 50-100 bucks an article, then you have this middle ground and then you have the premium end of the very top. And I was trying to initially price somewhere in that middle, but my clients that I was working with have the expectations more of the premium and I couldn’t get the two to join together.
This mistake changed Brad’s perspective on working capital needed for projects. (19:19)
The problem is that you need a lot more cash or working capital than you think you do also. Because clients always pay you on time. And so you are running in this dangerous game where you’re constantly waiting for people to pay you.
So you’re trying to manage your accounts receivable, but at the same time you’re fronting a bunch of cash on the other side and you’re essentially like acting like a bank, almost you’re funding activities out of old cash, just waiting for the new cash to help come in and pay it off. And so as I mentioned, I didn’t understand that the faster you grow like this, the faster those numbers start to move.