Part 3: Growing an agency to $400K MRR in 2017

Let's talk a little bit about what goes into growing an agency. If you’ve been following along on our journey to hit $500,000 in monthly recurring revenue, you’ve already laughed, scoffed, and somewhat nodded your head in agreement. ?.
 
Here are the two previous posts if you’re curious:
 
Eating Crap & Hitting $100K MRR
 
Moving To Our 4th Office & Hitting $300K MRR
 
The truth is growing any business isn’t easy, and I’m by no means an expert. But being in the trenches and wearing every hat possible, it gives you a perspective that many people are curious about.
 
And with a team that I’m so unbelievably damn proud of, I want to give them props for a few things:

• Literally being the best friends that I’ve ever had (we get to work and have fun every day)
• Always being up for the challenge of improving and making progress
• Continually raising the bar of being the best at what we do (new KB’ers keep telling us that this has been the toughest/yet most rewarding job they’ve ever had)
• Not being afraid of giving me feedback and challenging me to get better

 
Like my favorite junior college marketing professor once said:
 

“Success is the progressive realization of a worthy goal.”

 
Here’s what has happened in the last 6 months...
 

Keeping our profit margins the same as last year, we’ve added an extra $100k of recurring revenue to hit $402K during September.
 
Our growth has now accelerated for the entire year and our lead generation efforts from our content have been the biggest reason for this.
 

 
Our client roster has eclipsed 100 clients and now sits around 120. Some other cool metrics to look at:

• Our biggest client is only 3% of our revenue.
• We have clients across SaaS, lead gen, and eCommerce.
• We currently work within 40+ different verticals/industries.

 
What this shows is that we’re extremely diverse and found that our methods work for all different types of companies and industries.
 
This is something that gets me super excited, as we’re not reliant on any one thing that could hurt us (other than Google, Facebook, LinkedIn, Twitter, Yahoo!, and all other free media platforms) ?.
 
We’ve also realized the “retention rate ceiling” and luckily broke through (which wasn’t easy).
 
We were hovering around a 95% retention rate, and if you make $100k/mo, that means you have to sell $5k of new business just to remain steady.
 
Now pair that math with $400k/mo and you have to sell $20k/mo of net new revenue to break even. So, if your business grows and your retention rate stays the same, you’ll have to sell more and more on average to prevent yourself from falling deeper into the quicksand -- if you also want to grow at the same time.
 
 

 
But if you can sell more AND increase your retention rate, things get much easier for you.
 
Some of things we’ve done to improve our retention rates:

• Implemented AskNicely NPS (best tool out there imo) tracking, which has been insanely valuable to catch smoke before it turns into fires
• Create a separate expectations agreement that basically increases communication promises, honesty, and transparency between us and the client
• Hire outside consultants to audit our processes and come with different views -- we sometimes get lost in the forest
• Monthly audits of all clients around CPA and conversion volume numbers
• Practicing much harder than we play -- our internal expectations are greater than external ones

 
These new things have given us much more confidence when it comes to investing in acquisition--but the truth is, our content drives 99% of our business with an average of 10 leads per day with companies that want to be our client (not newsletter subscribers or higher funnel conversions).
 

Three different companies have reached out to us this year with the interest in potentially acquiring us.
 
Either the timing was off or the proposed offer was something we weren’t interested in.
 
But the experience of going through the diligence of such conversations has sharpened our focus and helped us roll out new metrics that we’ve never tracked before.
 
A few of those metrics are:

• Revenue per team member
• Avg client LTV per team member
• Avg client tenure per team member
• NPS per team member
• Fee/spend ratio per team member

 
This has also given us the idea to acquire smaller agencies (as you might have read from the last check in post) -- and we’re in talks with quite a few.
 

Just like hitters swinging with heavier bats before taking the mount or basketball players dribbling with medicine balls, we can easily kick way more ass if our reality internally is a lot tougher than the external one.
 
Things just become easier ?.
 
It’s very obvious, but hard to implement as well -- and you have to be careful that team members aren’t saddened by the screws getting tighter.
 
As long as they understand your intent and the “why” behind it, they get excited as well because it ultimately makes their lives easier.
 

I buy books, but I never end up reading any.
 
In fact, I don’t even read blog posts anymore--because I focus my time around the “learning by doing”, not the “learning by learning”.
 
But the new thing that got me super excited was when I was speaking at the GrowthHackers conference in Los Angeles.
 

 
Not only did I get to present, but I listened in on some insane talks from people at Uber, Instagram, Adobe and how they all run high tempo experiments.
 
Armed with that, I decided to have every person on the brand team come with 5 monthly ideas that they would run during that month, with the goal of achieving some minimum levels of proof to determine if they idea had traction or not.
 
We call them smoke tests, and we got a ton of wins from things like referral programs, guest post strategies, retention improvements, etc.
 
And no idea was ignored, lol.
 
We literally had “hire a mariachi band to play a custom song for a prospect” as an idea. It got on the list, but might not have been prioritized high enough.
 
 

 
The premise with our smoke tests is that they’re quick and don’t require a lot of resources. So, you can quickly gain knowledge on 20 things instead of spending the time to perfectly execute one idea that may take two months and lots of resources to see the results of.
 
The challenge was then for us to implement the idea after we got a win that hit our minimum proof goals. So, we’re still working on that ?.
 

I’ve never been a believer of comparisons, but we got data that our client acquisition efforts were the highest among our peer set of other agencies.
 
That led to the opportunity of joining Google at their HQ in Mountain View, CA to have an interview with them.
 

 
Not only was it an amazing time, but the recognition that followed was even more impressive.
 
Our Director of PPC (Joel Neustaedter) and our Garlic Bread Specialist (Luke Roshon) got to go to a week-long Google event in NYC, and join other high performing agencies that are part of the Elite Premier Google Partners.
 
 

 
Amazing that we’ve gotten there in just 2.5 years.
 

As you may already know, we’ve launched all three courses of our KlientBoost Academy and already got almost 50 students to sign up = around $100,000 in sales already.
 

 
But even more importantly, we finally put together all the requirements of what we hold ourselves to internally.
 
So, not only can we make money from our efforts, but we improve the education and create a flat bar of expectations when it comes to technical knowledge.
 
The other students who have joined are in-house marketers, other agency owners, and freelancers.
 
If you’re interested in joining and getting a full year of Slack support from us, take advantage of the last final four seats we have at a 78% discount here.
 

We’ve moved into our 5th location here in SoCal, and we’re now about seven spots away from being at max capacity.
 
So, in addition to our NYC office, we’re also going to open an SF office (otherwise, our West coast clients would have to be serviced from New York and that wouldn’t make much sense).
 
And with that, we created a careers page that anyone can apply from. :)
 

 
We’re going to update our footer with the link, and also add our new locations to our site once the address is figured out.
 
 

 
That’s it for now. See you at the $500K mark! ?