Part 4: Growing agency news—we hit $500K
MRR in 2018

Damn.

That’s the first word that comes to mind when I look back at what our growing agency has accomplished in just three short years.

Why?

Because we hit our goal of $500,000 in monthly recurring revenue!
 

 
About two months ago (mid-March, 2018), our growing agency hit the humongous milestone that many of you have been curious about from previous milestone posts:

• Our Rookie Year - Hitting $100K
• Adding In Systems - Hitting $300K
• Spontaneous Vegas Trip - Hitting $400K

Then five months later, $500K.
 

 
And then immortalize the memory with swag, autographs, and a frame…
 

Three years goes by with the snap of a finger. This was us three years ago…
 

 
Now, we, of course, couldn’t celebrate a milestone without some new perks. Here’s what we decided on as a team:

• Full health insurance (before the company only partially paid)
• Friday catered lunches
• Monthly massages
• Company retreat trip to Oahu, Hawaii (that was the pool I was mentioning earlier + ocean + shark cage + luau - more on that later)

I can’t even put words behind the unbelievable work that all of our team members have done to get our growing agency to this point:

• Working 12-hour+ days when not even asked to
• Dealing with a disjointed leadership team that sometimes can’t agree on things
• Not having the proper training for certain situations

But the best part?

Our entire team from the leadership to the four-dogs-we-have-at-any-given-time-in-the-office (Damn you Luna and your ping pong ball addiction!) are made up of some insane, kick-ass, no-excuse people.

They continue to challenge themselves, their clients, and the status quo of what an advertising agency can and should do.

In short, everyone here is obsessed with progress.

This post will be a bit different from the previous ones, because I want to share some of the ugly things that sometimes happen behind the scenes too.

If I want to be transparent, then I can’t just share the good things ?.
 

Some quick stats on our growing agency:

• We hit $502,500 monthly recurring revenue on March 15th, 2018.
• Lost $155,000 of recurring revenue from last post to March 15th, 2018.
• Hit $1.4 million in profit in 2017.
• We’re getting close to an average of 96% retention rate.
• We have to move to a new HQ with at least 15,000 square feet (this will be our seventh location).
• Forty-five team members strong!
• Profit margins around operating expenses continue to stay around 40-50%.

 
And we have some new, insanely exciting things to share...
 

We have a new friend to introduce -- and we’re super excited about the launch! ?

Kite is a goal-based machine learning PPC assistant that oversees your Google and Facebook advertising campaigns. Kite provides prioritized optimizations based on the exact goals you have.
 

 
Done are the days with generic scorecards and meaningless opportunities. Kite only cares about one thing…
 

 
Now you can pair that with some other never-before-offered solutions:

1. Goal Based Optimizations: Why should you focus on improving your quality or relevance scores before you improve your conversion rates? Kite will prioritize recommendations in order of highest impact from our 100,000+ campaign experience and data.
2. PPC + CRO Hybrid Knowledge: PPC marketing is a three-step equation of traffic, conversion, and sales/fulfillment. So why do most solutions only focus on the first part? Kite will look at your PPC performance and landing page potential and make sure it can break through the ceilings with wider scalability.
3. Win/Loss Percentage Tracking: How often do you manually test something, then forget to check back in and make sure you hit statistical significance for a win or a loss? Kite automatically tracks all it’s suggestions and reports back whether a new change is worth keeping or not, ultimately making it smarter over time.

Day parting, bid optimizations, geographic adjustments are only relevant if you have a strong account foundation. Many of the tools out there today provide recommendations that don’t stand the test of time.

Pair the top three solutions with ad queue testing, copywriting angle variety, platform expansion (think direct response ROI on Display, YouTube, Audience Network, etc.) and you have a powerful cocktail for a growing agency that can continually increase your profitability.

Wanna invest in what we’re doing? Email me. johnathan(at)klientboost.com.
 

Do you know one of the many reasons why Amazon has been so successful?

Because Jeff Bezos has always believed in his long-term vision.
 

 
Now I’m not saying that we want to become a volume shop. But why not make it completely unfair for our competitors and do something that no growing agency of our size or reputation does?

Something like giving our services away for free.

Because we’re so confident in what we do at our growing agency that we'll put our money where our mouth is.

And that’s why we’ve launched a program that helps us work with more like minded companies, much quicker.
 

• We dedicate all the resources on the PPC and CRO side for you. Nothing is held back and we treat you as a regular client.
• We agree, together, on some goals to achieve within the two-month period. If we hit them, you sign a longer term agreement with us. If we don’t hit them, you get to keep everything we’ve built for you.
• You must be a company of certain margin, profitability, and ad spend for us to do this for you. If you have no ad history or sell widgets at $0.50 and have no marketplace traction, you wouldn’t qualify for our free service. You can see the terms on the landing page.

We’ve already spoken to a few companies (because we haven’t fully launched this yet) and here are some of their frequently asked questions:

• What if we’re already working with an agency and under contract? Tell them that you’re pausing for up to two months because you’re exploring a solution that can help you hit your goals and grow you faster. Keep paying them.
• What if we have an internal team working on our PPC/CRO? Consider the upside of working with our growing agency as a bandwidth extender, and helping your team get outside the trenches with new inspiration and execution.

Regardless of what your concern might be, there’s nothing but upside to giving us a try. Even if you don’t pay us, you’ll get new insights, information, and experience.

See if we’re a great fit -- get your free proposal here.
 

Because of the continued success with our blog, we want to expand our insights and value to another medium -- video.

We’ve brought on a full-time videographer to document our growth and journey, new educational content from our whole team, and client testimonial videos.
 
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So that you can watch our videos, like our first episode here:
 

 
And the other random things we might do, like taking the CRO team to Catalina Island via helicopter...
 

 
Or getting puppies for our Valentine’s Day team huddle:
 

We’ve had numerous new people reach out with potential interest in acquiring our business. We’ve even gone as far as figuring out what we’d be valued at right now.

Around 8-12X EBITDA.

Let’s say that we’re 10X, and our EBITDA on a yearly basis is $3,000,000 (50% profit margins = $250K/mo EBITDA). That puts us at a $30 million valuation, without Kite.

I was obviously insanely curious about how this all works (as a lot of business owners would be). I wanted to understand what helps with valuations and what doesn’t.

So the potential acquirer shared this with us…
 

 
We’re not good at judicious expense management. (I’m very random when it comes to spoiling the team and buying things for the office, like $26,000 for three call pods from Finland. Was it worth it? F’ yeah it was!) Also, our growth goals for clients are set every quarter, not yearly, so those were the only key drivers we’re not following yet.

But at everything else, we’re doing amazingly.
 

Not to mention we’ve built a brand that already has more SEO thought leadership momentum than many of the bigger players like 3Q Digital, Elite SEM, Wpromote, etc.
 

 
And not to mention our profit margin percentage (with less revenue) is higher than many other bigger agencies in the space -- and we’ve been able to keep it at that level as we scale.
 

“That’s cool, Johnathan,” I hear you saying. “But why didn’t the acquisition go through?”

We simply didn’t have enough enterprise clients.

Although our profit margins were stronger for the SMB market compared to the agency peers you see above, the acquirer wanted to make sure that the clients we worked on were similar to theirs.

If not, then their internal structures, systems, and processes would have to change to accommodate how we run things.

I’ll tell you this though -- going through this process was insanely distracting. But the things I learned were really eye-opening and reinforced the realization that we’re already on an amazing path.
 

Our growing agency has almost 150 clients now. And we’re seeing that verticalizing our teams into eCommerce, SaaS, Lead Gen, and Enterprise is helping out a ton.

This means we can dedicate different resources and potentially change up the pod structure (two account managers and one designer that are a team) into something different to help add resources in a simpler way to our specific clients.

In addition to that, we’re beefing up our...
 

We’ve started working with a phenomenal course platform named Podia that allows us to build out our training material, but also sell access to other people who want to learn.

From our previous milestone post, you might remember that we’ve launched our KlientBoost Academy and sold around $100,000 worth of access from our first announcement.

Since then, we’ve done nothing to promote it.

To remedy that, however, we promoted a Senior Account Manager to our Director of Training who will:

• Train all new KlientBoost people around hard and soft skills
• Give quarterly tests to all KlientBoost team members to keep their skills sharp
• Expand on our course content to continue to build it out and make it better
• Be in charge of selling access and run the academy as a standalone business
• Host in-person trainings a la Cardinal Path and LunaMetrics

Based, of course, on the effective teaching style of Mr. Garvey from Key & Peele.
 

A long time ago, I promised myself and our team that working at (and with) KlientBoost would be such a positive experience that two things would be true:

1. No one will want to leave.
2. If they do, they’re going to immensely regret that they left.

To be a growing agency and achieve that reality, I know we still have a long way to go. (The list of improvements is long, but exciting.) But there are a few things you’ll want to keep in mind:

• Having an “open door policy” isn’t enough. You have to seek out feedback from individuals.
• If people are unhappy (team members or clients), you need to welcome their feedback and find common ground. Many times, the other person doesn’t understand the full story.
• If people surprise you beyond the two points above, you can to guilt the crap out of them because they had the opportunity to give you feedback, but didn’t.

Just like I tell everyone on the team that no one will be surprised if they’re let go, I also don’t want to be surprised if someone quits.

It’s a two way street.
 

Our Director of Operations, Richard, says that I’m really good at creating a Reality Distortion Field, but I keep telling him that my intent is 100% the same and will always be.

“Challenge ourselves to continually make progress for ourselves and our clients.”

And that I know things can get done a lot quicker than what people say ?.

But over time, I can lose touch with people on the team, and I hate that. And this is the part that definitely makes me vulnerable.

Here’s a look at our anonymous Gusto happiness survey:
 

 
Some people on the team thought my sole goal in life was to hit $500K MRR and that it was the only thing that mattered. Growing for the sake of growing.

That wasn’t the case at all.

If it’s not sustainable, creating growth opportunities for team members, or making us better, then it’ll be like a raccoon trying to eat cotton candy by the pond.
 

 
So what changed to make things better?
 

I started adopting Servant Leadership -- and I’m definitely a work in progress ?.

But as you can see, it’s already working and the team has been loving it.

Before, leadership would decide on something, then tell everyone else to do it. Now, we present the problem to everyone, get feedback, and decide on a solution together.

Sounds almost too simple, right?

It really is. And it’s silly that it took this long to discover how empowering it is to help everyone out when both sides know the intent and background of the situation.

And it ripples through everything we do -- our NPS has been improving month over month as well.
 

Because I want to make sure everyone at KB is on the same page, I went out and bought 50 copies of two books that I highly recommend you read. (I honestly never read, as I prioritized writing or the act of doing above reading, so this is new to me lol.)

One is The One Minute Manager. This book talks about a management style that’s simple, fair, and increases accountability on all fronts.

The other one is What The Heck Is EOS? This one talks about creating an operating system for your business so everyone on the team understands the value of growing in the same direction.
 

The past year has brought some unbelievable opportunities outside the regular conference speeches that we give as a growing agency.

Don’t get me wrong, it’s a humongous pat on the back so speak anywhere. But I was especially proud of the opportunity to become a Stanford guest lecturer at their Graduate School of Business.
 

We asked for permission to film inside as part of our video content, but were unfortunately told that it didn’t abide by school policy -- so we snuck some pictures instead as proof.
 

In addition to the Stanford speech, we joined the Los Angeles batch of 500 Startups and helped around 10 businesses with their acquisition efforts.

From fintech to travel startups, there was no boring moment. We helped everyone devise a plan of PPC/CRO attack that they could use to see progress and results.
 

And lastly, we got asked by Google to join them on set and talk about our growing agency:
 

In the three years we’ve been active, we never pursued another acquisition channel other than our own content.

Isn’t that insane?

We’re a PPC agency, and we don’t even do PPC for ourselves.

So in just one month of testing the waters, we’ve already connected with 50+ potential partners that want to improve their clients’ PPC performance -- and we’ve already closed quite a few of those deals.

If we’re going to hit our next milestone, faster, more gas needs to go on the fire.

We’ve created the KlientBoost Partner Program to serve these new partners. (If you might be one of them, you can set up a time with me to chat about it.)
 

 
The next acquisition that cost nothing is a referral program. We’re currently not asking for referrals, but our clients are organically giving us them. What would happen if we were more proactive?

Only good could happen.
 

Many people have reached out and asked about the tools we use on a daily basis. Here’s the list:

• Asana for project management
• Highfive for video conferencing
• Flywheel for site hosting
• Unbounce for landing page creation
• Sketch, Adobe Creative Suite, Zeplin, InVision, Bannersnack for design
• Buffer for social posts
• Wordable for blogging
• Callrail for call tracking
• Quickmail for brand emails
• Mailchimp for marketing emails
• Google Suite for calendar, email, drive, etc
• Podia for our academy
• Zapier for app connections
• Slack for internal communication
• Intercom for site chat
• Close.io for our CRM
• Bench for bookkeeping
• Gusto for salary/HR
• AskNicely for NPS software
• Vimeo for video hosting
• Hiscox for business insurance
• Ahrefs for brand content/SEO
• Feedly for article gathering
• Hotjar for CRO
• Rollbar for bug detection
• Funnel(dot)io Super Metrics for reporting

That’s it.
 

After some internal discussions, it was clear that people always prefer black and white over grey.

So to help with transparency and aligning the company’s goals with each team member’s, we’ve instituted a bunch of changes, starting with a new compensation plan for account managers and designers.
 

Having uncertainty in your team members’ minds around their salary increases and when promotions could happen can be problematic.

Uncertainty can create a lack of trust between an employee and a manager, as the employee feels like personal progress could be unattainable if they don’t know what to expect.
 

 
You can see the plan by following this link. Then go to File > Make a copy and you can mess around with the numbers.

The benefits of our new compensation plan include:

• Commission opportunities for the design team.
• Increased commission percentage -- from 10% to 20%
• Raises are tied to bringing in more value to the company via revenue
• If a person wants to make more money, they can do so immediately via performance -- either growing current clients or request additional clients

Losing a client is one of the worst things that can happen to an agency. We try to prevent that by only letting clients leave for one of two reasons:

1. Acts of God: Earthquakes, floods, regime change with a new CMO, etc. -- there’s nothing you can really do to affect these things, other than showing your worth through past performance.
2. Not Hitting Goals: It can happen, but if we leave everything on the court and did everything we could, then it’s a fate we’ll accept.

Any other reason for a client leaving? Not. Acceptable.

So here’s what we’ve started doing and still do:
 

High-level views of big wins and losses that we formalize with the client as well as setting new goals for the quarter.

We also dig deep and ask for feedback from the client on anything we can do better, so we can address their concerns (regardless of how small) to improve the relationship.
 

Our reporting is both quantitative (numbers/metrics) and qualitative (telling what we’re doing for the week). What we weren’t doing consistently, however, was reminding the client of the progress we were making toward their quarterly goals. To address that, all weekly reports now start with a progress bar:
 

You may remember this from our last milestone post. It’s an amazing way to keep a monthly pulse on your clients. It’s a scale from 0-10 on how likely the client is to recommend KlientBoost.

If there’s anything short of a 9 or 10, we immediately let the account manager and designer know. Their job is to learn, understand, and potentially make changes to improve things.

It’s unreal how vital continuously asking for feedback is. Because the worst feeling is having a client put in their 30-day notice without seeing it coming. All of these tactics are trying to prevent that unknown.
 

In addition to everything above, our Director of PPC is also sending emails every two months to all of our clients asking if there’s anything we can do better for them.

Sounds simple, right? Super effective so far.

In addition to our regular agreement that has our standard legal talk, we also require all of our clients to sign an expectations agreement. This helps set a standard for an amazing, productive, and smooth relationship.

If any client starts veering outside of these expectations -- like, for example, trying to micromanage landing page designs -- we kindly remind them of the agreement, and why they chose to work with us in the first place.
 

In agency situations, you’ll often find that individuals won’t know how to easily prioritize the most impactful tests for their clients.

There’s no problem for us in getting things done, but what’s more valuable is when you can do one thing that has the same impact as ten other things.

That realization helped us create the Growth Team that meets every two weeks and looks at the goal progress at the individual client level. It collective brings up to six people from KlientBoost with the account manager and designer to challenge our way of thinking and launch initiatives that are more aggressive.

The goal with the Growth Team isn’t to do more, but to do things that are more effective.
 

 
Those are just a few of the bigger things we’ve set in motion since the last time you checked in on our progress. And I’m unbelievably excited to share our new learnings in the next post.

So the new question: how long will it take us to hit $1 million monthly recurring revenue?

Subscribe to our blog posts above and I’ll let you know... ?