TMBA 570: Productizing Your Way to Freedom
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Today's podcast is all about one listener of this show who took the concept of productizing and applied it incredibly well at a very high velocity.
More than that, it's a story about endurance, applying systems intelligently, and the power of community.
Ian Horley left a long stint at a successful corporate job in 2014 to create his own web agency, but he ultimately found himself incredibly stressed and unhappy.
Today, Ian is the founder of HubSnacks, a productized service which offers unlimited tasks on the HubSpot platform for a fixed monthly fee.
In this week's episode, Ian joins us to recall his tale of leaving the corporate world, why he struggled with the day-to-day of running an agency, and how productizing has finally allowed him the freedom to create a business on his own terms.
Listen to this week's show and learn:
The moment that Ian decided to create his own agency. (7:02)
Why Ian feels like his agency was a "cage of his own making." (11:29)
How HubSnacks almost ran out of cash in the early days of the company. (25:18)
Ian's advice for those who are struggling to productize right now. (35:50)
How to recognize when your business has plateaued and what you can do about it. (43:31)
Mentioned in the episode:
Before the Exit - Our New Book
TMBA Masterminds
Partner With Us
The Dynamite Circle
Dynamite Jobs
Dynamite Deals
Tropical MBA on YouTube
Ian Horley
HubSnacks
HubSpot
GoVirtualized.com
Dr. Jeff Spencer
Dan Norriss
Bean Ninjas
Traction by Gino Wickman
What Evernote's Phil Libin Learned from Jeff Bezos, Reid Hoffman, and Others - The Tim Ferriss Show
Enjoyed this podcast? Check out these:
TMBA367: The Business Idea Bonanza with Dan Norris
TMBA373: Should You Base Yourself in Southern Europe?
TMBA563: How Software With a Service (SwaS) Startups Can Succeed Big in Traditional Industries
This week's sponsor:
Today's podcast is sponsored by Woven. Woven is an all-in-one calendar that helps you manage and blend both your work and personal lives, enabling you to spend time on what matters the most.
With Woven you can sync all of your calendars in one place, including Google Suite and Microsoft integration, create new scheduling links from directly within your calendar, and much more.
Woven makes it easy to plan, join, and manage video events, helping you schedule with Zoom and Google Hangouts. With multiple timezone integrations, Woven is ideal for remote workers and productivity hackers.
Woven is a calendar for power users and those who are serious about their productivity, allowing you to schedule time with others and protect that precious maker time for yourself, all while giving you analytics so you can track your time and gain insights into your week.
Check them out over at Woven.com and a huge thanks to the folks at Woven for sponsoring the show.
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Have comments about the show?
Do you have ideas for things you'd like Dan and Ian to discuss on future episodes?
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Thanks for listening to our show! We'll be back next Thursday morning 8AM EST.
Cheers,
Dan & Ian
FULL TRANSCRIPT
Ian:If you have productized well, you are a dangerous weapon inside that ecosystem.
Dan:Welcome back to the pod. The recent episodes we've done about SWAS or ‘software as a service’, and how it varies from a productized service, or even consulting using a software product has really stirred up an interesting and thoughtful, let's call it a hornet's nest, in our private community, the Dynamite Circle people, people that are much smarter than me.
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Now, some of it centers on the idea of definition. And well, today, I don't think coming up with a concrete version of what SWaS is versus a productized service is the mission of today's episode. I don't want to compile a dictionary in real-time, I do think that debate does throw up some interesting conversations about the pros and cons of agency and consulting work, versus owning some kind of services product that isn't a SaaS or software as a service. So, you know, how do you own an asset that you can sell over and over again? That's ultimately the way to time freedom and a kind of wealth that is very unique. And today's story is about that, we're going to hear how a listener of the pod took these concepts and applied them incredibly successfully with a high velocity that is the promise ultimately, of a productized service versus, you know, services or consulting in general.
Today's interview is with someone who left a corporate job via founding an agency, a successful corporate job and now owns a company whose core purpose is to help businesses maximize one software product. So is this a SWaS or productized service? Listen and send me your thoughts. I want to hear him. And he's done it with an incredible focus on systems, which forget about the definitions, that's ultimately what entrepreneurship is all about. More than all that this story, which was one of the highlights of DCBKK last year, is all about endurance, applying systems intelligently, and the power of community. And here it is.
Music
Ian: So my name is Ian Horley. And I have a productized service that helps HubSpot owners to squeeze the most value out of HubSpot. So HubSnacks, which is the productized service, is a little under 30 people around the world, everyone working from home or remote. It launched around the beginning of 2017 that was the very first version of it. And in less than 36 months, it's gone from zero to seven figures in dollars of annualized monthly recurring revenue and has gone from absolutely nothing to the top-rated HubSpot partner in the world in its price category.
Dan: And where are you located? What's your life look like?
Ian: So I spent the longest time in Denmark and the UK. But two years ago, I moved to Lisbon, actually as a result of listening to this podcast as an episode about where to locate. I was up for a relocation and designed my business to support that one day and picked Lisbon and have loved every minute since.
Dan: Can you describe, just for some context? What exactly HubSnacks customers get when they purchase something from your website? What are some example tasks or product or service that they receive?
Ian: So HubSpot has a pretty big suite of software tools that help companies grow. So that's everything from marketing the company to helping them close sales and communicate with customers through a service desk. Basically, if it's inside the HubSpot menu, we will do it for them. So that could be anything from creating landing pages, thank you pages, email templates, website templates. Then also in the background, how to hook them together into workflows, and then on into creating sort of bigger recipes to solve real marketing problems. So it's everything from basically from marketing automation, through to the actual technical development of everything inside HubSpot.
Dan: I'm super excited to just decode some of the ways in which you sort of conceptualize such a fantastically successful and fast-growing business. So I think I want to reel it back just a little bit to sort of your entrepreneurial moment.
Ian: Basically, in 2014 or so I was pretty tired of the whole corporate world. I had been in telecoms for years. And I thought, ‘Hey, you know, this agency, this agency thing looks like I'd actually have my I could have my own business’.
Dan: Wait a second, so you're in telecoms, how do you even know about agencies? What are you doing in telecoms?
Ian: I'm basically doing strategic marketing, which has nothing to do with marketing like websites and things. It's like, where do you put data centers, what kind of services are rolled out in the data centers? How the underlying infrastructure around the world that supports the internet you know, the bits and bytes that are exchanging right now between you and me Dan, they all go along fiber optic cables that lie under the sea because you're in the States right now, you're in Austin, I'm in Lisbon, these ones and zeros need to get around the world. And there is an underlying infrastructure in that. And I sold huge chunks of the global internet infrastructure to large telecom and ISP, around the world.
Dan: Okay, so that sounds pretty interesting. How long were you doing that?
Ian: Fifteen, almost 20 years, While I was doing that telecom business, I was also trying to start up product companies, my own SaaS companies with a modicum of success. So I had the bug to start my own thing. And I wasn't a very good employee, either. The times I did best as an employee, was when I went off and created something new and innovative. And that happened more and more often. And the vision required to deliver what I wanted to deliver was less and less supported in a large corporate organization. They generally want people to dig a number, just go off and dig a number. Shut up, keep doing a number. But if you have that spirit, that entrepreneurial spirit, it's very hard to be an intrapreneur, inside a large machine organization. So that’s why I had to get out.
Dan: Why did it take you 15 years to decide it was time to express it?
Ian: Got four kids, had to pay for them. And a big mortgage had to pay for that. I guess I come from a time when going into big businesses was kind of what you did, a lot of us just fell into that.
Dan: You mentioned there was a moment when you had this entrepreneurial switch, what was that moment all about?
Ian: So I was sitting in Heathrow Airport, and had my four kids spread all over the world. And, you know, say all over the world. That's a slight exaggeration. It's kind of Denmark and the UK. And it was pretty miserable, we'd gone through a number of, you know, the chapter elevens of corporate restructurings, and mergers and acquisitions, and you never know how your career path is going. I felt like I was just a leaf in the wind. And I was fed up with it. And I happen to be listening to a podcast with a guy called Jeff Spencer talking about the ‘champion’s blueprint’. And he said about how if you really want your life to go in a certain direction, you need to know what that the end result of that direction looks like, your legacy, and how you, you work back from that legacy towards something.
And I sat down in the airport and then on the plane, and I reverse-engineered from that podcast episode, everything it said and I went through that very exercise, that was in 2014. And literally, everything I've done since 2014, has folded out the way that I'd written down on that bit of paper. So it's what I'm going to end up having, being, what I'm going to end up being known for. And this all requires a consistent set of behaviors and values over time if I want to get that in the long term. So I need to start right now. And you know, it's literally as if by magic, things started unfolding. So as opportunities came around that supported that journey, I'm saying yes to them. And I was saying no to opportunities, including working for the telcos, there was a large UK telco that was really headhunting me quite aggressively at the time.
I was literally actually, weirdly enough at a telecoms conference in Dubai, bumped into an old mate that used to share a house with. And he said, ‘Hey, I've got this growing business, we need a website. Do you know what you're doing? And I kind of went, ‘Not really, but I can work it out’. So I knew I had to get out of the current job I was in any way, The company just been sold, being restructured. And we all knew we were going. So I started my first website up and immediately I got contacted by some, some other friends saying you're going to this big telecoms conference, I said, ‘No, I think I'm building websites’. And they went, ‘Oh, well, we actually need one that was well, because we've actually just left the telco we're in and we started a company up, can you do outs for us? And suddenly, I had an agency’. I was really good at finding out the business problem. And finding people who could help me develop and build those websites super quick and cost-effectively, they don't really care at all, who's doing the coding and what's going on. But the real difficult bit that's out there is having someone who's experienced with business problems, understanding those, to know what to put on the site and how to put this thing together. And that's kind of how it started.
Dan: Could you then describe to me some of the elements of that legacy vision, or how it works.
Ian: It was extremely specific. And one of the things was, I knew I wanted to feel like I had not thrown my talents and opportunities away like my father had thrown his away. It was very painful to watch him not reach the things that he thought he was capable of in his life and how much damage that did to him later in his life when he realized he had not made what he wanted to make. And I was determined not to do that. So in order to do that, I wanted to make sure that I had a product company that was relevant and current in my older age. That also does not have to be the source of, so it could be another business, but a source of recurring revenue, some kind of income stream, whether it's passive or, you know, semi-active, I didn't really mind. But there needed to be a flow of income that fundamentally gave me a freedom of schedule, and finances, to be able to go and have great experiences with all the people I love. And when I'm with them, I want them to be there with me, not because I'm some old fart that they got to push into the Christmas party but because I'm relevant in that current time, with the people they know and the information that they need in the world, I am fun and interesting to them. They want to be with me not because I'm their dad, granddad, uncle, whatever it is. So, therefore, they feel obliged, I want them to be with me. And because of the nature of my family, my background, they're going to be in multiple countries around the world. So this thing's going to be frickin expensive. And I'm going to need a lot of free time, and a lot of money to make these things happen.
Dan: Can you bring me back to that first year of running your agency? What was your assessment of how things were going as an entrepreneur versus your previous life?
Ian: So I knew I could close customers real easy. I knew I could recruit people to deliver services to customers. But it didn't feel like I was in control. It felt like I've gone from having one boss to like six, seven or eight bosses in the agency world, because suddenly I’m beholden to what I promised them, and I keep my promises. So rather than feeling like freedom, it became a cage of my own making. And that cage was worse than the one I used to be in. Because at least the one I used to be in used to throw out, you know, a tonne of money every month that me and kind of leave me alone as long as I kept bringing the contracts in. But suddenly everything was on me. And then I got divorced. So now everything I do in my family is on a plane. I was getting really sick over the first year, year and a half of you know, taking client calls, dealing with staffing issues, having to do actual client work. Many people think entrepreneurship is not having an employer, but it's not, real entrepreneurship is when you place bets on business assets, and let them grow. Otherwise, what you've done, if you're an agency owner, you can be an agency owner with an agency that's doing millions a year even. But really, what you do is you just own your job, real entrepreneurship is when you start building assets and making business decisions, not decisions on what's easy for you, but how you're going to build a business. And as the leader of an entrepreneurial venture, you define the reality for everybody. So if you don't know what you want your reality to be, any old rubbish will happen, and it will hurt you eventually. You will have reached a mediocre goal, you'll start giving up and wishing you could leave. And there is a marketplace out there of agency owners who are all screaming to try and get out of their business, who thought they were going to be worth a bunch of money because they applied a multiple to all they earned. And then a VC comes in and just destroys their valuation by asking a few simple questions. What happens when you leave? What about your business insurances? How have you codified all the decisions you make? How do you make the decisions in your business, so that we know we can run it without you? And the valuations just tank. So the legacy they thought they were going to have or free life they thought they were going to have, they don't get. And this is the point where when it comes to six, session, succession planning is very often when they get to the point of a sale, when they realize they're not going to get the money back they thought they were going to get and b), they realize that they don't know how they really got to where they are, they sabotage the sale and stay inside the business and make an excuse for it because their ego and identity are so tied up with the agency, they're created. They're an important person in the middle of a group of people. And that's the only thing they've really got.
And as an entrepreneur, you have to see yourself as something apart from that. So whilst I have nothing against agency owners and the lives they build for themselves and people who work in agencies, it just wasn't for me, my situation changed. I'd been quite happy in the beginning, I really enjoyed the creativity of doing all this marketing work for them. I felt it like a massive creative release. But the actual business of having the agency started to make me very miserable when my circumstances change. And let's face it, circumstances change. We've all just gone through one of those, everyone in the world's gone through one of those recently. So the emotion I had was one of temporary freedom to suddenly becoming a cage of my own making. And I knew something fundamentally had to change. Because I'd already set out my champions blueprint, I was already committed to that path. Something has to change. Is it difficult? Yeah. Sure. But your job as an entrepreneur is making difficult decisions all day long. So if you're not in the habit of, and develop the skill and the muscle to make difficult decisions all day long, don't go into entrepreneurship, whatever you do.
Dan: Well, you don't have to answer this question. You don't answer any question, but it's quite personal, which is, did your champions blueprint create friction in your marriage? Or the relationships around you?
Ian: No. I think if I had found them earlier, it probably would have saved everything.
Dan: How so?
Ian: It wouldn't have staved things, but it might have made things a lot easier because it's really hard living with someone who's earning a lot of money. But then when you say, ‘Well, where are we going on holiday next year? You say, Well, I'm not sure that company's just been bought and another laying everyone off, etc’. It starts to play in your mind because those trappings can go away very easily. You're in no control of your destination.
Dan: Yeah. And there's like always a third person in every conversation.
Ian: You got no visibility into it. Yeah, you don't have any security.
Dan: I asked the question because I had done a similar exercise when I started. I recently was looking at the notebook of my vision. And I realized that a lot of the friends .. part of the I mean, I was young, but part of the hardest part about that, for me was changing who I spent my time with. And it just reminded me of that, how so many of my relationships changed when I realized that I wanted to be somebody different than I was right at that moment?
Ian: Well thanks for sharing that. I didn't like who I was. It feels like in that corporate world very often, you know, and I see people like this and, you know, I love them. I've got friends in there. But it's like, you're just walking through life backward reacting to the things you're arse bumps into. No, at any point, do you have the agency and have the vision to say ‘Right, well, that's actually what I'm going for’. In the end, you start calling bs on yourself, eventually, whether you're doing it out loud, or subconsciously. And you can only call bs on yourself so many times before you start disliking yourself. So it gets the point where you've got to start having convictions, knowing where you want to go. And saying, ‘This is where I'm going, this is what's going to happen, the exact details of how to get there are not exactly defined. But the decisions I make will steer me on a course towards that end goal’. And once you've got that you feel like you have agency, at least if you don't get there, you didn't get there on your own terms.
Dan: So just to get the timeline you were going from 2014 to 2017 with 6, 7, 8 bosses, fulfilling your promises, you know, running an agency. Were you making a decent living at the time doing it?
Ian: Yeah, I mean, it's boom or bust isn't it the agency world? So you have months where you're making way more than you used to, and then suddenly, you know, it doesn't go quite so well, for a few months, your costs go up or something changes, and you got to manage that, never really ran out of money, but it's kind of slow growth. And it's the end of 2014. So it's actually just, it's around about the two-year mark. And I knew something had to change. So I started thinking a lot about, am I going to go into, like a consulting role.
Dan: And it would be similar to your old job, except just outside of the organization sort of thing.
Ian: Exactly. And way more money. However, it was not consistent with me reaching my goals. Because whilst I got rid of the agency, and all the people in it, it got up to about 16 people at the time. And the revenue would have been pretty about $40=50,000 a month at one point. But I would have had a ditched that happily because I would have replaced that easily with just no cost and no complication. But I now have an obligation to be a consultant in front of my clients. And I would be on that treadmill forever. Probably. That was the assumption at the time, at least. And then I happen to be listening to a Tropical MBA podcast episode with Dan Norris, on I think it's something like, you know, the Business Idea Roundup, or whatever it was,
Dan: Donations, yes, we were donating our mediocre business ideas.
Ian: Exactly. And I love that guy because he shared his Genesis story and eight years of failing, which means you never run out of money, but you don't make it big either. And he was saying some things that really resonated with me, for example, I'm a little bit older than most of your guests probably, but I come from that generation where when you start a business, you get on the phone and talk to some people first like you want to find out what the real crux of the matter is. And very often, we're surrounded by people who just want to say, ‘Hey, I'll set up an automation funnel, I’ll do some paid Facebook ads, and I wouldn't talk to anyone, I'll just assume that my idea is awesome’. And we're in a bit of an echo chamber of all people saying, ‘You're awesome, you're the boss’, but you're not. Because you may own the rights to your final life, what you do in life, nobody owes you their money. So if you don't have product-market fit, you can't expect them to pay you money so you can have the lifestyle you want. You need to actually have product-market fit. And he was saying things like, he didn't like sales, for example. He loves developing, but he didn't like sales, so he said, ‘You know if you want to be a really good business owner, and you don't like doing sales, get good at doing sales’. It's as simple as that. And as soon as you said that, I agreed with them. So he carried on talking about various ideas.
Dan: And so you took that as to mean that you could be good at it because you were good at sales?
Ian: What it really was, is that I identified his mindset. Whatever it is you don't like doing, you're gonna have to get good at doing it if you want to be in business?
Dan: I see
Ian: And he starts talking about all these business ideas. And one of them, I’d thought about the idea of productized service. But how do you productize an agency, you just can't, everybody wants everything. And then he made one comment about how you could start a productized service because he's, for the sake of your listeners, he and another guy built WPCurve, the first really well known productized service which sold to GoDaddy for some money. So we know him was kind of one of the very early pioneers of the productized service movement if you want to call it that. And then he says this thing about Bean Ninja and they are a productized service, but instead of being, for example, anything inside WordPress, they would do anything inside Xero, the accounting platform. And I'm walking around and suddenly I went well, but we don't support a platform but then I realized we got a couple of people who are really good at HubSpot, so why don't I build a productized service around HubSpot. The very next morning I write down in my journal the decision has been made, literally the line in my journal says, it's in January 2017 ‘a decision has been made. I will not become a consultancy, it is not consistent with me reaching my personal vision. We are pivoting to become a productized service’, I didn't know the details. What I did do though, was I got my guy Mitesh, my WordPress guy, to go and jump into the Wayback Machine and completely rip off WPcurve’s website. We stuck a cart on the front of it. I made up some pricing and got our first customer a few days later just to see what happens.
Dan: What was that product that you were selling?
Ian: It became HubSnacks. And it has not changed that much since that day. Because we nailed it pretty good. Because I got on the phone and talked to a lot of people. So my first sales calls were less sales, they were more really me interviewing people about what their pain was. On the face of it, it became unlimited HubSpot tasks for a low fixed monthly fee, you know, three tiers. And anything inside the HubSpot platform will do it for you by experts, anything. But actually what it became, which I can go on to talk on more about, around the SWAS movement, or the productized service movement is it really became - if you don't wanna work with freelancers, or you don't have the budget or the inclination to go and work with a full agency that's going to sell you everything that they do, you just want HubSpot executed perfectly, then we make the users of HubSpot heroes in the journey of them helping their employers get the most from HubSpot, there’s a subtle nuance inside there. So we're making great HubSpot users basically, by using our service you become a great HubSpot user. We're not training you. We're doing the actual work inside your HubSpot portal for you. So you can see how it's done great. If you then feel like you want to do it yourself, fill your boots, cancel your subscription and go away. No one does. Because once they've seen you doing it that cost-effectively, that fast, they generally stay. And now we're moving into a world where it's not just doing tasks, we actually have a roadmap for them with a concept we came up with called the ‘next adjacent impactful task’, which means when they give you something to do or you've suggested something to them, we already have a database in the catalog of the adjacent tasks that sit around it, which when completed, complete an actual business function for them.
Dan: Now, if this model of, ‘Hey, we'll do stuff for you for one low monthly cost’. The last thing I think an entrepreneur would want to do is suggest more things that you can do for that company. What made you think about strategy?
Ian: Retention. So if you have the mindset of, ‘Well, hopefully, we'll charge people this money, and then no one will use it completely, and we'll make our money out of not giving full service’, then people will leave you pretty quickly eventually.
Dan: They'll join for like one or two tasks, the tasks that they needed to get done, and then they don't use it anymore.
Ian: Yeah, exactly. And churn is a killer in any kind of SaaS model and the productized service model is not the same as SaaS, because unlike SaaS, which has servers doing the work in the back end, we got people doing the work in the back end. But we've productized it very deeply. So it is very efficient to deliver. And you keep people by constantly adding value. And if you make that your mission and your goal, then you will develop a very profitable business that grows. Proof of that is that we've done pretty much zero marketing and don't really have much of a sales team either. It has grown to seven figures in three years, just by product-market fit, we solve a problem in the market really well. And there was a queue of people that want to use that service all the time.
Dan: I'm trying to figure out because … like the story so far makes it sound like you know, this one morning in 2017 you woke up and washed away all of your business problems. What were the new challenges that you face, you know, as a product entrepreneur, as opposed to an agency owner?
Ian: The immediate challenge you stop getting those project bumps of cash. So you stop getting that, by the way, I had stripped the team right down to the essentials of if it isn’t HubSpot, you're not employed. So we went down to the core, the absolute basics. So the costs were very low. Obviously, I resisted the temptation to get offices all along. So we had no fixed costs, the variable cost was almost nothing as well. And you don't get those bumps of cash, but we did inherit some of the costs and legacy so that was a bit of a cash flow issue, just at the point where we realized we could get customers quite easily and we were acquiring customers really quickly, we almost ran out of cash, we were within 24 hours of closing. It was tough. But businesses don't give up when they run out of cash, they give up when the founder runs out of either energy or just gives up. And because my vision was really big, And I didn't want to give anyone the satisfaction of telling me that, productized services don't work. And that I couldn't make it in business …
Dan: Were people telling you that?
Ian: Oh, yeah, absolutely. And even if they didn't, the voices in my head were saying that they were saying that, they probably weren't saying actually some of them, the voices in your head of self-doubt just fill in the gaps for you, right? And I said, no, I'm going to dig really, really deep. I'm going to put the bait on the hook in the stream where all the fish are, which is wherever there are HubSpot people who are known to be HubSpot customers who want to get a task done. We will do anything for them pretty much for any price just to get them in the door, so we can learn and understand this product. And then from that moment, we managed to get in enough money, I actually had to borrow a little bit of money from my daughter, who was a university student at the time. And that got me through the next sort of 48/72 hours. And it's amazing how the universe does conspire once you get very focused on making money, rather than messing around with Facebook ads or landing pages or campaigns or website rebuilds or strategies or tactics. When you say, ‘I need to get money into this thing to keep the lights on to pay everyone right now’. It's amazing how the universe starts to line up behind you and go, ‘Okay’. I just made it really clear to a few people that if I called in a few debts. I don't want to swear too much on this podcast. But I basically said to a few of my old agency clients, f you pay me and then as soon as they paid me, I just shut it off. Because it's time to grow up and be a business person. I have commitments, I have staff, I have a family. I can't mess around being a nice guy anymore. I've just got to bring that money in. So I brought that money in. Because they were previous agency clients, I was not gonna do more work for them. That's the money that came in over there 72 hours that …
Dan: They were taking advantage of your service, nice agency owner mindset sort of thing.
Ian: Oh, yeah, we had one client, my very first client, actually was ordering more services, not having paid for six months, was ordering more services. And when I said, ‘We're not going to give you any more service now,' wrote to my whole team and said, ‘This is disgusting. I do not expect you to stop delivering services just because I'm not paying you’. He actually wrote that to the whole team. And that was the F you pay me. ‘You really owe a lot of money. Now, you're taking advantage’. And that was it. And that's, I'm afraid that's what you got to do. And it's a decision to speak to somebody like that. It's a decision that you're going to have to make, which is why I said early on in this interview, it's about making decisions. If you can't make decisions like that don't go into business.
Dan: Tell me about that cash crunch, like what was different about running a productized service that you didn't see or anticipate. Tell me about how that cash crunch occurred. And how you think about it now.
Ian: I totally envisaged it, because I knew I was building effectively what is more like a product than a service. So instead of going out and charging a big upfront payment, and a nice big fat retainer and some project money, I was saying to someone, we’ll do anything for you for .. and the first couple of people, we discounted very heavily, so for almost nothing. And the third customer absolutely, you know, took us to the cleaners in one task. The team, the tiny team I had was complaining like crazy like we're not making any money in this customer. But I was adamant that everything we did was about getting information about the pain we are solving. And it paid off. Because what we actually learned on that customer, it was actually a huge American company. And we were building an email template for them that was just impossible to build, it was crazy, it was months of work pretty much to build a template that big. And I just kept going for this tiny little fee. Because every single time we were faced with a challenge, we learned something. And I said if we can make a service that can solve that problem for that person, we can do it for anybody, we’re done, we made. And I was committed to that monthly subscription service. And committed to not holding people into a contract. If you want to survive in this, you have to be really good and keep solving a pain constantly. And it's that attitude, and it's that learning and those lessons we had in the beginning that basically got us to seven figures in three years. And there are some companies that have gone quicker, but I can talk as to why it might have been a bit slower for us than, a service that does, for example, design files, things like that.
Dan: So why is that? You know, it's not coming in, it seems relatively quick to me to get to seven figures in three years.
Ian: It feels slow when you see the opportunity. If you have a very simple service to deliver, you have a very small moat. So let's say, for example, you're doing design services. So it's just let's say, for example, we'll do your banners and maybe a logo, maybe not a logo, simple page designs, things like that, there are a lot of people that can copy it. So your only moat around your business is really the ease of using you, how pleasant you are to use, so you're pain-free for your customers and your culture, assuming you're charging a low monthly subscription for that service. That's all you've got. And there are a few people who you and I both know, who have got very successful, probably eight-figure businesses by now, very quickly from offering services like that. However, the moat is so shallow and so easy to attack, that there are copycats very quickly.
What we found out that actually took about three or four months to find out is that the service we were supporting, which is HubSpot customers, is - you know HubSpot is a big suite of services, there is more than one skill to deliver one task to somebody, there are multiple skills required. HubSpot’s, a great tool to use is really straightforward and easy to use. But any company has an onboarding time with anything. So what happens is you actually start to build a slightly more complex back end to your service, there's more in the back end going on. However, once you have solved that problem, which we have, you have a very deep and difficult moat for somebody else to cross. It takes a little bit longer to scale. But once you start hitting scale, the margins are actually way bigger. Because it's a bit more expensive than a simpler service generally. It's still you know, the price range is still I always wanted to make sure that our most expensive service was well below the cheapest agency service you're ever going to see. It should be night and day difference. And that's what we did.
What it means is that, unlike a product company where you've got to raise VC money because it's very difficult to build a product and make money from it anytime soon. We've got the benefits of having customers paying for the development of the product and it growing. But we'll never be a billion-dollar company. But I never wanted a billion-dollar company, I'd be quite happy with a few 10s of millions, that'd be fine. So that solves that problem. It's that beautiful niche between service and product. And, you know, Gino Wickman the guy who wrote ‘Traction’ and runs the ‘Entrepreneur Operating System’. He talked, in an interview recently, about there being two types of company and basic service and product. But I believe that they've missed this productized service bit in the middle.
But the thing is, with productized services is that it's a very nascent business. So the people haven't got all the business disciplines around it, some of them have suffered a little bit, struggled, or some of them just don't have a big enough vision, and they've productized not deep enough. So they're kind of stuck at around the sort of $20-30,000 a month model. But by really looking at productizing deeply and understanding the customer deeply from all those initial sales calls, it meant that we've built something that can grow much quicker than a normal product business, and yet achieve similar profit margins, to a product business way, way higher than the agency's ever gonna get.
Dan: You mentioned that productized services are nascent. And, you know, you heard some theories generated by some early-stage productized service entrepreneurs who implemented them, had great success with them. If you could kind of zoom back to 2017 and you were a guest on that podcast, what are some important caveats or additions or disagreements or things that you would want to add for future entrepreneurs who are considering making that change? There's a lot of us sitting around that don't want to put the credit card down on another order of inventory from China, or that don't want to raise money to hire software developers because they don't understand the difference between, you know, Java and Assure, and whatever, insert programming language, there's a lot of agency owners who know that they can pick up the phone on a Tuesday morning, and make themselves you know, pay the rent and pay the mortgage that month. But they're thinking of doing something. So, you know, these people are dissatisfied with their business models. And you're suggesting a potential solution to that?
Ian: It is nascent. It's important not to get confused about definitions. Definitions in a nascent business, are only useful for helping to structure conversation and debate around something. That's the only point. And that's because none of us really know if anyone's saying the productization doesn't work. Well define productization, they can't. Most people who think they’ve productized haven't productized at all. I think the real change that happened for me was when, I’ve got the business in less than three years so that I only have to work now on Tuesday mornings. And I've not just employed a general manager and implemented Traction in the business. So I've not just handed a partially thought out semi baked product or company and given it to someone else for them to mess up. Like we have a fully productized, very well run machine that's working, and yeah, now somebody else runs the day to day for me. So I only now work Tuesday mornings on that business. The real difference came to me is when I tried to codify what I'd achieved, and what the team had achieved and realized that the biggest lesson was it's not just productizing. So productization is a really useful technique for driving down the cost inside a business. But so is team virtualization.
Dan: Okay. So while we're going to use these words, can you take a stab at a definition of productizing? In that first instance, you said it's about driving down the cost of delivery.
Ian: Yeah, that's why you productize everything. I think it's in ‘Meet the Parents’ and Ben Stiller makes a funny comment when his Samsonite bag gets lost on the plane or whatever. And he's back there. And he's trying to describe it's a black Samsonite bag. And he turns around, says, you know, ‘Maybe a cunning ploy to try and drive profits, they built more than one’. It's like, that's it. So basically, what you gotta do is unpack the real problem and the solution that you solve for people into a series of smaller parts that can be replicated. And I actually have developed a model for doing that and teach that today, it's called ‘chunking, and hierarchizing and cataloging’. So you break things down into very small component parts that are accurate enough that you can create a stock keeping unit for them. They can be packed and bundled together. So they can be sold very effectively and quickly and delivered very cost-effectively. It also means you have to say ‘no’ to things.
Dan: I think on the surface Ian, if you look at a productized service that offers unlimited tasks, you'd say, ‘Oh, there's probably, you know, 25 people in some country that the salaries are really low. And when a task comes through, you dump it on somebody's desk, and you say, ‘Do it’, and we charge that person … And what you seem to be saying is ‘Oh, no like that, that backside of it. It's actually a product that we're delivering. It's not just a product on a sales page. But actually, there are component parts to what we will and won't deliver’. Is that what you mean?
Ian: That's exactly what I mean. There are component parts, they have SKUs, they actually have component numbers inside the database. ‘This is what we do. And this is how that goes together’. Now there is, when I say this is how that goes together, there is a massive advantage of offering a productized service, which supports a known technology stack, like for example, HubSpot, it could be Salesforce, it can be whatever you want to call it. Because you can make a statement like ‘if it's inside the HubSpot menu will do it for you’. The minute you start saying, it depends, you know, what do you do give everything for us. But it depends, you know, we can do this, we can just keep taking your money. There's nothing productized in there, which means it gives you the power to say no to a lot of stuff. However, it means you're inside an ecosystem that is growing really quick and rising all ships on that tide. And if you have productized well, you are a dangerous weapon inside that ecosystem. Because you have the power to go in and acquire customers really cost-effectively and quickly. You solve problems for the customers of that software stack, you solve problems for the owners of that software stack because you are making great users of their product by helping these people so cost-effectively. And you are reducing the risk for everyone. Because unlike having to have a large expensive agency contract along with the software subscription, you have a very low price and still very profitable for us service, which you can cancel at any time.
Dan: How is your team changed? What do they think about all this?
Ian: Well, in the beginning, there was a lot of blowback from the team, because a few of them associated themselves as agency employees. But the role of any leader is to define the reality for their company. And this is where you got to stand up and stop being everyone's best friend and say, ‘Okay, I hear you, you're being paid’, you need to come up with a vision, and you have to explain that vision to them. And so you need to stick with it. ‘If you don't like it, really you have to leave. But if you want to go along for this ride and move into a world where you're moving away from needy shouty clients or, you know, people telling you what to do all the time, you want to move to a world where everything is productized, so you move towards a more easy and lucrative and fun life with it, then you're gonna have to stick with me, but there's going to be some adjustments on the way’.
Now, in the beginning, it was composed of a few freelancer type people or people on very low, you know, low commitment for our side. But one of the biggest changes happened when we started recruiting them as though they were employees. So they have to be independent contractors because we don't have legal entities in every country. But yeah, we employ people around the world. And we put them on an independent contractor agreement that has benefits, that treats them like a full employee, with bonuses, with training, we pay them for HubSpot certifications. We do everything that makes them better at delivering value for our customers. And that was when the biggest change made is when I stopped hiring part-timers and went to only employing full-timers even when we didn't need the full-timer. Because they're the downtime, they can get more trained, or they can start working on some internal prioritization work and, you know, some building out of templates and things like that, there's always something they can be doing. Also, it puts pressure on your sales team, which we don't really have, but it means that you can sell with competence, you're not worrying that you're not going to better deliver that service. And now, what's happening is - that as we're growing, we have a delivery scaling system and a team scaling system that means we can scale the team very quickly. However, as the productization of the service becomes more and more productized, and more deeply productized, the requirement for people is going down. So all that potential we have to scale super fast isn’t actually being used at the moment. But it means that one day, I've got a massive lever and a huge amount of potential that if I wanted to suddenly crank on a bunch more sales, I can do it real quick.
However, I'm using this time now to recruit better and better people at doing what they do, paying them more, and developing the product so that we solve the problem better and better. So this concept of ‘next adjacent impactful task’, or NATE becomes more and more built out and an integral part of the service we offer people. So rather than it just being them submitting tasks on a very transactional basis, it's more like, ‘Okay, you've done a few tasks for us. And every time I've given you a task, and you've returned it to me, it's come back to me with an understanding of what the next thing I should be doing is. Now I trust you. Now I'm just going to let you lead me through getting the most out of HubSpot’. And you can only do that when you’ve productized your service. If you try and do that, when anything is random, you just can't do that effectively. Because when you don't know what the destination is, you know, any road will take you there. So you just chase any road that's got money on the end of it. And that's nice for the top-line revenue, but it destroys your bottom line profits.
Dan: You mentioned that you notice a lot of entrepreneurs who get stuck at $20-30,000 a month. And you said because they don't productize enough, but there might be some other reasons. I'm curious as to what are some of those reasons?
Ian: Well, I can't explain exactly why but there is something called a ‘law of threes and 10s’ Phil Libin of Evernote mentions it in a Tim Ferriss podcast, and he quotes a Japanese gentleman his name I can't quite remember. But basically, there is a general law of what's known as ‘threes and tens’. Companies and organizations tend to get stuck either you know, you have one employee, then it's great when you got you and your mate and you're the third one, and suddenly the communication breaks down, or you are stuck at $10,000 a month in recurring revenue, every time we get near $30,000, you run back down to 10 again, or you have maybe 30,000 a month in revenue, and then suddenly get up near the hundred thousand. But it collapses again, things start breaking down. And what it says is that every three and 10, which can also be 3 million and 10 million, etc, kind of what got you here won't get you there, you will need to create new systems and methods for taking you to the next organizational stage, whether it be revenue or team size. Now, the one thing I've also noticed is there is a well-known phenomenon of ‘S curves’, it's the ‘Innovation S curve’. And what I've noticed, especially in agencies is that the S curves, which relate to - as something as being adopted, you get the early adopters, then suddenly lots of people start adopting your technology or innovation in this case, a productized service. And then suddenly, the growth starts to slow down because now you've got the laggards that are adopting it, the early adopters you've got, so it forms an S shape on a graph. And what happens is you know that this S shape is going to happen in advance. And you know that at some point, you're going to then have to innovate again to get you to the next stage up.
So it's called ‘jumping the S curves’, you’re jumping from one S curve to the next to the next. And what I've noticed is conflating these two theories together. If you know when this S curve is going to happen, you know to plan for that jump in advance, and you don't get stuck inside one of these S curve jumps. And I've noticed that that conflicts with that law of threes and 10s. So for example, if you're at 1 million in your revenue, and you keep getting close to 3 million a year in revenue, but things just keep sort of dragging you back down to one again, you know you're stuck in the threes and 10s. As soon as you get to 3 million revenue, you know you're going to have to stop for a while, rev the machine you've got while the leaders go off and find a way of taking you to the next innovation.
When you know these fundamental principles in advance, you don't get stuck and trapped in them. So to answer your question, why do people keep getting stuck and going back down, it’s because they don't know that these phenomena occur, or phenomena occur so they don't plan for it, they don't know how to work their way through it. They can't innovate through it. And very often, it's because their vision isn't big enough or they don’t care enough. So they get to about $20, $30,000 a month in revenue and think ‘I'm going to sell my business or I'm getting bored of it’. And they ditch four cents on the dollar, it's not worth anything. So the true art of making this work is to, and this is what I now teach, you didn't actually know this when we started talking today, then, but I've actually codified everything that's gone on inside HubSnacks, and turned it into a program that teaches agency owners how to go from working in their business to working on their business, and whilst doing so, create a business asset or an enterprise asset that is worth something when they leave the business if they leave it or if they just choose to own it but from afar. And the proof in the pudding,
Dan: What's the URL?
Ian: It's called Go Virtualized dot com. It's kind of pretty much in stealth mode, I don't talk about it much.
Dan: Why bother with I mean, it's obviously a way to make money, but you could make more money if you know, built HubSnacks, why bother teaching other people how to do what you've done?
Ian: Well, HubSnacks is built. I just really like helping people and I know the pain some, not all, agency owners, but many agency owners are in when they started a business by doing a website for themselves, hired a bunch of people around them to help them do a bit more, and then suddenly find themselves in the middle of what feels like a family. And they feel guilty when every time they try and move out the business a bit. And they're simple things to learn, once you have been taught them. And the main case study is HubSnacks itself. But now it's also a number of HubSpot agency partners who have signed up for the programme and now gone through it. And they're now beginning to roll this out themselves. And also some Dynamite Circlers have joined as well because they heard about it. I do believe that's going to be my life's work. It's that relevance thing. So I would have HubSnacks, going back to the champion’s blueprint, because it is that product company that keeps spitting money out by itself. And I will also be doing something that makes me relevant in the world, which is Go Virtualized, Just going back to the champion’s blueprint. There it has manifested itself. It's taken three years. Well, if you look at when I originally did in 2014, it's taken since 2014. And it's currently being recorded in 2020. But those first couple of years is just trying to work it out.
Dan: Speaking of delivering, one of the observations we made about you recently, and I'm glad you brought up Go Virtualized, and Jeff and I were talking about you recently, and Jeff helps me run the Dynamite Circle events. And he mentioned about you, that he cannot remember another speaker, that puts so much effort into sharing their story with the DC membership, which was interesting, given that you had no financial gain, that your customers weren't in the audience, you didn't have Go Virtualized at the time, there was really no reason for you to put so much effort into that, from our perspective. And yet, you did. So the question is, is why?
Ian: I'm not sure I have a very nice tidy answer for you. Because no, I don't do public speaking, I've not done podcast interviews or anything. And yeah, I did put a lot into that. But it's because I've received so much from the Dynamite Circle, the event at DCBKK. So the first one I was at was in 2017. So it would have been about six months after I started the productized service, and I was in one of the masterminds in the big room there. I sat at a table full of people who've been through productized services. And what I learned in those moments on that table are lessons I took away and implemented immediately. Because that's the power of that community. You share so that other people share. And the more that other people share, the more you learn as well.
So if you're just sitting there taking and not sharing, then you're not going to get anything back. And the Tropical MBA podcast, I mean, I'm in Lisbon because of that podcast, I started HubSnacks as a productized I service for HubSpot users because of the TMBA podcast. It was a hunch that I had that by sharing the stories, and sharing what I've learned, was going to pay itself back by people coming to me and saying, ‘Hey, how can I help you?’ And that's exactly what's happened. Also, I genuinely care about people who are going through these painful struggles.
And I fear for people who haven't gone far enough into life yet that some of these struggles that can happen later in life. They haven't happened to them yet, and they feel invincible today. And I know I'm sounding like an old codger. But to be frank, you know, me, I don't really care what I sound like. If you really think you're indestructible. Yeah, okay, good on you. One day, you'll remember me saying that. And you'll go, ‘Maybe Ian had a point’, you need to start building business assets that are worth something, that change something in the world that are valuable. If you don't go and get a job, just don't go into entrepreneurship.
Dan: Ian thanks for joining us on the TMBA podcast. We really appreciate it.
Ian: You're welcome Dan. Anytime.
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Dan: Big up to my guy, Ian Horley. You can check him out at HubSnacks dot com and also Go Virtualised.com. I think regular listeners of this show are going to know why I'm so connected to this story. I love the idea that ideas, frameworks, systems can empower us no matter where we're at in our lives to make a positive change and really profitable businesses in the process. You got a story like this, let me know about it. Do you want to hear about something on the pod? Drop us a voicemail, send me an email Dan at tropicalmba.com we appreciate your stories, questions, prompts, they help inspire us to bring episodes like this to you. I hope it inspired you today to grow a better more profitable location independent business. Finally, I'd like to give a big thanks to woven dot com for sponsoring the show. Check them out over at woven dot com That's it for this week. We'll be back as always, next Thursday morning 8 am. Eastern Time.
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