TMBA 307: The One Where a Business Starts on the Show

TMBA307: The One Where a Business Starts on the Show post image

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Today we are going to try something new: we’re going to follow and record a new business as it starts.

We’ve been having a lot of trouble with email marketing lately. We’re on a very basic email marketing platform and we have kind of outgrown it. There are more robust email platforms out there, but a lot of them are really expensive and hard to operate. Eventually we discovered that Drip was a great for us, but we didn’t want to commit the man hours to learning to use it.

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I reached out on Twitter to ask if anyone was interested in starting a SWaS business around the Drip platform. Jeff Pecaro was the man who answered the call. We invited Jeff on to the show this week to give our listeners an inside look on the process of starting a new business.


Listen to this week’s show and learn:

  • The definition of a productized service business.
  • The five steps to starting a successful productized business.
  • The upsides and downsides to this business model.
  • The specific pain points in our business that Jeff has been able to remedy.
  • What Jeff’s business is going to do and how much he plans to charge for that.
  • A special opportunity that Jeff is offering to TMBA listeners who are interested in this service.

People on this episode:

Mentioned in the episode:

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Thanks for listening to our show! We’ll be back next Thursday morning 8AM EST.


Dan & Ian

Published on 09.24.15
  • Excited to see how this goes, I have a wee bit of experience in this market. ;)

    Good luck Jeff, curious to hear in BKK what you think your lifetime of a customer will look like?

    Great series Dan, looking forward to hearing more stories from more people.

  • PS: Jeff check your footer columns

  • thanks DT, we are defo echoing you here in more ways than one, will be looking forward to hearing your feedback/input on a future episode.

  • Love the format and a BIG fan of your first guest in the series so color me excited.

  • Oooooooh snap guys. Another great one. Four months ago I heard the SWWAS episode, and that gave me the push to get on Infusionsoft. I thought I could use it primarily to blow up my own business, then eventually consult/productize/etc on the back end. Since then I’ve been down a rabbit hole, crossing paths with several potential consulting clients and one potential employer, not finding a match with anyone yet. All-the-while, my primary business has continued to grow as I go down the list of ways to squeeze extra performance out of the funnel.

    I have a couple of takeaways from this episode – first of all, having crash-coursed myself on consulting proposals, it’s nice to check-in with the Varsity Team, to hear how Dan and Jeff speak about the deliverable, baking in productization at the beginning, etc. It’s also instructive that Jeff’s had seven years in the business. I’m in the unique spot to know what that’s like in my primary business – drums, and know what being only six months in and intermittently hustling for the meta-business. I think what seven years gives you is the Random Access Memory, and the ability to apply the 80/20 principle really quickly. Best Practice, in other words. In drumming, I know the 3 major mistakes most drummers make (it’s in my sales copy;), and it’s clear that Jeff knows the corresponding things in email marketing. At this point in my “consulting” career, I have an N or 1, maybe 3-or-4 if you count people I’ve helped informally.

    At this point I’m happy with the Infusionsoft CRO Guy thing being a Slow Burn. Gradually posting things about my wins in the DC, continuing to focus on the primary thing but always alert to opportunities to help others with their email marketing and learn in the process, all-the-while being totally transparent.

    Anyway, great “check in” to remind us how it’s done. Bravo, guys!

  • Jeff Pecaro

    Thank you kindly

  • Awesome show fellas, thanks for the shout out to my article!

    Great concept for a SWaS built around Drip. Looking forward to hearing the rest of this series.

  • Jeff Pecaro

    Most thought-provoking post I’ve read this year, Brian. Thanks!

  • So I’m going to play Devil’s advocate, because I’ve seen it from both sides of the fence.

    (I’ll get the pleasantries out of the way first: love the show, love the new concept and I’m good pals with Brian)

    That said, I’m really starting to second guess the glamour of a productized service. It sounds great at first and believe me, I’m trying to make my own components of this work at my own agency — but it’s just not as easy as it looks on paper — because clients.

    I think the biggest hurdle in the beginning is getting the client to FULLY understand the expectations. As Jeff Pecaro eludes to, most clients have other areas where they are failing and that’s why they hire us. They either don’t have the time, the talent, or they are looking to rectify some *thing*. It’s because of that, which may bleed over into their expectations of your responsibilities.

    Here’s a bite-sized sample, Take Drip for instance:

    -Say you need to get the pop-up working and the customer isn’t using a popular CMS (I know there’s javascript snippet).

    -Perhaps you need to change some copy on a page and no one has the keys to the website.

    -Say we need to create a better landing page for the optin to our funnel and they want you to *design* something better.

    -What happens when they want you to link this up to Facebook ad spending?

    -What if they don’t have a good content writer in-house?

    You become their technologist/designer/copywriter/optmizer — you’re solving these problems for them, which you can surely handle — but it’s really not part of the gig. You can point to your terms of service and say “that’s not on us” but then they start second guessing their spend on you.

    “Why are we paying $1k a month for an e-mail guy when we’re hosted on GoDaddy and that kid we hired last summer to build our website only cost us $500 bucks?!”

    I’m just trying to paint the picture. Find the right clients and such I get it, but eventually something spills over which could make the client ponder if they should have just hired a full-stack agency to begin with.

    Then there’s the whole, “you get what you pay for” saying.

    As you move up market, someone is going to expect to see this stuff work or at least want to bring it back in-house. What about when they start asking for more leads or better opt-in conversions? Up sell? Higher better talent? I don’t know, it just starts feeling like an agency and it breaks down the walls of the product box you’re trying to stick them in.

    And that’s my dilemma — why not just sell a client on a $50k/$100k/$250k contract and handle everything versus picking off these smaller wins. Maybe I’ve been in the agency biz too long and all I see are clients that need and want the full-stack service, so I’m bias.

    Believe me, I’m not against this model, but it’s hard for me to see the bigger dollars behind it. Maybe not even that, but just pitching the *right* expectations and keeping the relationship that way. Hell, I’d love to not have to explain DNS to a marketing team :)

    Obviously Brian is seeing some traction with his new company and now Tropical MBA is taking it for a spin so I’m *very* curious to see how it goes.

    Sorry for the rant, but I’d love your feedback.

  • cheers Brian! Hopefully we can get your perspective on this series at some point!

  • Great stuff Matt I 100% appreciate you weighing in, perhaps we can address some of your points directly on a future show, as I agree that this business model has many many challenges. I certainly hope we didn’t present it as glamorous! my hope here is that by tracking Jeff in real time we can get some fresh perspectives on the challenges that service providers face… i agree that churn is the biggest issue, but if you can get the value proposition right you can make it work, we have been paying hundreds monthly for a handful of services, we’ll do our best to bring in other entrepreneurs who’ve failed with PS businesses and made it work as well.. but all your points are very well taken!

  • Thanks Nate appreciate your perspective, I think there are many advantages as well to 1) just getting started with a service/skill and 2) applying it directly in your own business both have the potential to give you a fresh approach and practical know-how that many consultants, focused on “best practices” never see… keep us updated on your progress and hope you find the series useful

  • Would love to weigh in anytime Dan! You guys have made a ton of great points, especially about productized services being a smart “next step” for consultants.

  • Thanks, Dan!

  • Kiri Masters

    A great new concept for the show and can’t wait to hear the story unfold in real-time!

    This came at a great time personally as I’m also scoping and validating a Productized Service, 7 Day Startup style. The process being the same as what you outlined in the episode. Listening along, it was validating to hear that I’m thinking of all the right things. Ah, it all seems so fresh and clear and logical and straightforward in the beginning stages!

    I hope you keep it real with the actual face-palm moments, nagging doubts and existential moments, a la the original Startup podcast. The world needs to hear it all!

  • Jeff Pecaro

    Matt – cracked up at “because clients.” Couldn’t be more true.

    I think all your points are valid, and that an agency is the inevitable conclusion for both the buyer and provider under a certain set of assumptions. For me, it comes back to the notion of multiple currencies – I like the kind of people who buy productized services, and I value the workflow advantages productization can provide.

    For now, this seems like the ideal way to validate a need and perfect a process.

    Thanks for the rant!!

  • Great concept and episode, like the biz model Jeff in terms of a hybrid between one off project and 3 month gig, interested if you’ll be asking for the $3k up front or will be 3 months at $1k? Also interested to see what products / services will be created for customers after the 3 months is up (or if the focus will remain the 3 month setup). With Funnel Engine I’m focussed right now on selling one off marketing & sales funnels to then be able to get customers into MRR whether that’s affiliate checks (Affiliate With A Service anyone?) or monthly traffic packages. Cheers!

  • my sense is that a lot of this depends on value prop, and the higher price point ‘client’ phase at the beginning can often point to something more ‘100 true customery’ price point range down the line. That’s where design pickle and wp curve have had success

  • thanks Kiri good luck with your new biz, agreed after there is episode is where things will most certainly get messy, we’ll do our best to put it to tape.

  • thanks Richard!

  • Good stuff guys keen to see how this one goes. I reckon this is a hard nut to crack for a few reasons:

    1. Every customer is going to want something completely different. I know a few people who have tried to productize this type of service and after a strong start they have ended up having issues.

    2. It’s much more complex a job than something like making a website tweak which means you need much more expensive western staff. This creates more risk and puts more pressure on margins. It’s much harder to sell something at $1,000 / month than $100 / month. In fact I’d say it’s infinitely harder to profitably sell something at $1,000 / month than it is to sell 10 people at $100 / month because high touch sales are probably needed and they are expensive to scale.

    3. This type of work is heavily front-loaded and I think most clients are going to find that it’s not really recurring in nature. That’s going to create churn problems. Yes the LTV will be there if you charge a lot but the recurring brings consistency and it’s very hard to build a great business without consistent growth.

    I’ve been working with another DCer Richard from Funnel Engine in the same thing. He’s helped me set up Drip for my personal group and 7 Day Startup training course. It’s been great to have someone there to help but now that it’s setup I’m ok to look after it myself.

    I think the answer probably lies in figuring out a specific need that is more ongoing in nature. One thing I’ve thought of before is the idea of doing sequences for content marketers where you would have a post-specific lead magnet (or as everyone is calling them these days ‘content upgrades’) and have a sequence that is based around the lead magnet that also pitches the business. Any high traction post could be analyzed have a lead magnet create, and a sequence to sell the product or service. It would be ongoing because startups who do content marketing are going to keep pushing out content.

    There are probably other options and maybe just choosing the customers carefully will get you there.

    Anyway, keen to see how this goes and looking forward to catching up at DCBKK.

    p.s. Brian Casel who was mentioned in this episode wants to join the DC, you should let him in haha.

  • I agree with this Matt but this isn’t the fault of the concept of ‘productized service’ it’s just the service that was chosen in this case. Marketing automation is incredibly complex. You need to now about funnels, copywriting, software (probably more than 1 piece of software realistically) onsite conversions, content marketing and more. For productized services to work they need to be fundamentally profitable which is to say if you were to hire (at market rate) for every piece of expertise you need, you can still run a profit. Choosing a really simple black and white problem where you can easily hire affordable people to solve is workable. Trying to cram everything an agency does into a monthly service is much more difficult and you will ultimately run into the fundamentally unprofitable issue.

  • Yah this looks so familiar ;)

    Glad to see Jeff picking it up, though. Boom.

  • Yes, price and value prop are 2 out of 4 things that will eliminate “bad” clients.

  • Good points!


    1. You turn down clients who want something different. Being crystal clear on what you do, and for whom, will also do most of the elimination for you. That’s also to say: don’t serve the unwashed masses who want anything and everything.

    Most people don’t have the balls to turn people down, or being crystal clear.

    2. Entirely depends on what market you’re selling to. You’ll find that particular businesses, within a particular revenue range and person(s) on staff will drop, say, $5,000 for something similar to what Jeff is doing. Or, at least that’s what I’ve seen over and over again.

    And I disagree that it’s infinitely harder to profitably sell something for $1,000 / month vs. $100 / month. Not a chance. Maybe to a particular market segment and customer, but $1k vs. $1c in terms of selling? Nope. Not harder.

    3. There are several possibilities to what you can offer once you have things setup. Content is one, maintenance is another (even if you don’t need that, there are thousands who do), traffic something else. As long as you have your back-end figured out (what to sell next, etc.), you’ll make this work.

    You’ll figure most of that out during validation. Also, monthly recurring is sexy and all but not the panacea people make it out to be.

    I’ll take MRR any day, but not if the rest of the business model sucks.

  • lol, all very true.

    If a client things/says: “Why are we paying $1k a month for an e-mail guy when we’re hosted on
    GoDaddy and that kid we hired last summer to build our website only cost
    us $500 bucks?!”

    Then they’re a bad client? Don’t work with them. I wouldn’t want to (and don’t know many who do).

    Short of it: Yeah, as an agency, you know/see all the contingencies and dependencies that may or may not come up during an engagement (I know, I ran an agency myself for a while), but there’s a fundamental difference between agency services and “productized services”.

    You can do the latter without having to be the former. Clarity on who you’re selling to, what you’re selling them, all the deliverables, etc. will mitigate most of the risks you brought up.

    If your productized service starts attracting people who want the whole pizza, then you’re positioning it wrong and taking money from the wrong people. You may have uncovered a need, but then sell something else to meet that need.

  • martyn

    Absolutely love the format of this series, and will keep a keen eye on how you progress. I’m trying to break into the SwaS space for analytics but still struggling on new client acquisition. Good luck!

  • I haven’t listened to this episode yet, but this service reminds me to DripSherpa, a productized service around Drip by Philip Morgan. He offers “done-for-you account-level customization and funnel design”

  • Agree with this. This is a big reason why I stepped away from a recurring productized biz situation.

    It’s a super easy start and just about anyone can make enough to move to Thailand in 3 months, but I don’t see the potential for scale as much as Dan and Ian.

    It’s basically just a job for multiple clients. Here’s your salary… You have to deliver each month…

    I’m currently just doing plain old hourly consulting simply because any month I want, I can say no, and be free.

    Productized services only give location freedom, but they leave you working all day, just in a different part of the world.

  • Kelton Manzanares

    Great podcast Dan and Ian. Over a week of TMBA binging is really bringing some clarity to the fact that I need to start something new.

    One thing I’ve really been struggling with is that most of my career (albeit short) has been in software development and project management and I’ve been looking for ways to leverage my understanding of market in that space without much luck. I’m totally remote (managing a team in India) and have a good rate with flexible hours and location, but I want to break out of trading time for money and start building something.

    A lot of product/service ideas/businesses in your podcasts are centered around marketing. Should I start transitioning away from development and learn how to do marketing in a niche I’m passionate about so that I can start building a more scalable business than what I have now doing software contract work? Is there any way to leverage the experience I’m gaining or am I just learning how to be a better employee?

  • Mobileappdevelopment

    Mobile app development in USA, is growing fast on wave of mobile ecommerce or mcommerce. As per a latest survey, more than 400 etailers based in United States will grow sales derived from smart-phones and tablets to tune of 36.5% ~ US$ 90 billion. While the biggest online merchants in the United States, such as Amazon, Wal-Mart Stores and Apple Inc are riding mcommerce wave, mobile app development companies in India are focusing on mobile engagement (33%), mobile enabled ecommerce (23%), mobile targeting (22 percent), app development & innovation (22 percent).

  • Chris Thorne

    I’m looking forward to an update on this Dan, Ian, Jeff.

    I’ve just started using Drip for a personal project, while using Hubspot daily on the day job. I’m curious to see if you’ve got the value prop right for a $50 a month tool, and also with everything that’s happened with Drip in the last year, has this affected your business?

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