The video discusses the different types of businesses that the speaker has been involved in, namely agencies, software companies, and consulting companies. The speaker explains why he prefers software companies, as they are more scalable and require less daily effort compared to agencies or consulting. However, he acknowledges that building a big business will always involve managing a large number of employees, regardless of the industry. Overall, the speaker values enjoying his day-to-day work and prioritizes profitability and revenue growth in his business ventures.
- Every time I start a company,
I find people to put in place
that have already done it multiple times before.
because your risk of failure are lower,
and they already know everything to do.
So I don't have to deal
with client relationships,
I don't have to deal with customer service
or anything like that.
I get to do what I enjoy doing.
(gentle upbeat music)
- Why did you do an agency?
So me and Sam always talk about
like we have many motto's on this podcast.
For example, we don't do public math.
For example, you don't say you're rich,
you say you're post-economic.
These are things we've picked up
from guests along the way.
And one of the model motto's
that we say is, you know, agencies suck.
And it's like, and the reason we say
is not because they, like they do well,
it's not that they suck.
It's like they suck as a business choice.
Like if I could,
I've always thought if I could choose
between software or an agency.
I choose software.
Because it's like,
oh it's not a services business.
It's going to work while I sleep
and they could scale up,
and I don't have to open up offices
in Poland and Brazil and all these other places.
But you chose that.
You did software and you chose agency.
Now, why did you make that choice?
And what's great about agencies
that I am kind of like
not giving enough credit for.
- You're looking at business
as in software's more scalable,
it's more desirable by public markets.
EX HubSpot versus Accenture.
Accenture has way worse multiples than HubSpot.
Accenture's a bigger company
from a revenue EBITDA standpoint.
But now take a different approach.
Okay, HubSpot's publicly traded company.
You guys are both HubSpot employees,
I'm assuming still.
Is that correct?
- [Sam] Kind of.
- Sure, whatever your guys' deal is, right.
But you guys are pretty much at HubSpot.
So now imagine creating a business
and you don't plan on going public.
You don't care for the limelight.
You don't care for any of that.
In business, what's a successful business?
Good revenue growth and good revenue,
and profitability right.
All that really matters at the end of the day,
whether you grow or not grow
is how profitable are you?
Would you guys agree with that statement?
Assuming you're doing something that's ethical
and you're not selling products?
- No, I wouldn't agree with that.
I would say there's a third thing,
which is like is this enjoyable?
And like, do I like my day to day?
And with the more people you have,
most people would say
that's just a little bit more headache.
- That's not software or consulting.
Anytime you build a big company
you tend to have a large amount of people.
Whether it's HubSpot or whether it's Accenture.
Everyone has a life
- Yeah, but you can have.
You can probably have a much higher
revenue per employee with software.
Versus let's say you own a massive
landscaping business, you're going to
have to have tens of thousands of people.
- But, what's the difference from dealing
with how many people does HubSpot have?
Like 6000, I don't know, 5000, 6000.
That's probably a lot,
I'm guessing on the number.
But what's the difference of dealing with
5000 or 6000 people and 20000 people?
There's a point where it doesn't matter.
And it's a lot of people either way.
Like it's not like you're at 50 people.
You still have thousands of employees
to deal with, and you need managers
and layers and all that kind of stuff.
- Yeah, but you're hiring, some good or bad.
You're hiring a different type of person.
So for example, if you're VaynerMedia,
they're based in New York,
they can probably only afford to pay
some of their lower level employees
70 or $80,000 a year.
And so you just have to get a ton of people
like that and have to have higher churn,
versus say a bigger company
where you're able to pay
a significantly higher salary
because the revenue per employee is much higher.
So, perhaps there's a slightly different
day to day with because of that.
- Not necessarily.
Let's say you're VaynerMedia,
he could be doing it to optimize for profit.
What if I told you his LTV
was 6, 7, 8 years, right?
Then at that point,
you can still hire high quality people
and pay them an arm and a leg.
- [Sam] Okay.
- You get what I mean right?
Like you look at Accenture,
they're charging accounts so much money
and their contracts are long.
And I don't know what VaynerMedia's LTV is.
But there's a lot of consulting companies
that have LTVs of six, seven years for clients.
And their clients are spending.
You know, at HubSpot,
yes, there's more revenue per,
you can say potentially in software
you can get to more revenue per employee.
But I know consulting companies
that only take on contracts
that are like five, $6 million and upwards.
So you have high margins,
and you can have a high revenue per employee.
But either way, no matter what,
as you build a big business
you're going to need more people.
And it's a headache to manage,
whether you pay them 70,000 or
whether you pay them 150,000.
It's still more of a headache.
And the notion that if you hire someone
for 150,000 , I'm not saying you're saying this.
It doesn't necessarily mean
they're a better employee right?
- No, it just means different types of headaches.
- Correct, exactly.
Engineers for an example,
are very expensive in this economy, right.
So the point I'm getting at is,
a consulting company, I had the demand for.
A lot of people wanted to pay me for marketing.
And there was just so much demand,
it would've been silly not to do.
And if I'm not trying to go public
or I'm not trying to sell.
Money's money, green is green.
As long as you're happy doing what you're doing.
Take the cash.
- Will you ever sell the company?
- I wouldn't say I would never sell the company,
but I don't care to ever sell the company.
'Cos I love what I'm doing.
We also have good growth too, right.
Like I don't know what we'll grow this year.
60 something percent, which isn't bad.
You know, with the market
going up and down and fluctuating.
60 something percent is my guess.
At our size is decent.
- Yeah, the part I was actually talking about
was a little bit more like,
I think you're you're totally right
that like if you're going to win big,
you're going to end up with a bunch of employees.
And like, you know, it might look like 150.
It might look like a thousand.
It might look like 10,000.
But like, you know, in either case
you're going to have managerial work and headaches.
And it's just different types.
The part I was really talking about
was like, you know I've now built
let's say a media company content.
And then it's like
done educational stuff.
So courses which are like, you know,
a different thing.
And then there's like a built software company,
and you know, we ended up selling that one
and then it's like, and then there's services.
Which is like client services.
Like consulting or agency model.
And what I hate.
What I love about content media
is it's actually pretty fun to create.
And it's cool because a lot of people
consume it so they kind of, you know.
You get that like hit,
but you got to like.
You got to bake the cake every day, right.
So like, you know, the hustle
or like the milk road or this podcast.
It's like we have to come on
and create the content again.
You know, for the most part
we're not doing like super long evergreen stuff.
So you know, like with the hustles,
the daily newsletter, milk roads,
the daily newsletter.
We got to bake that cake every day.
Whereas software, it was like we built
one product and yes we might.
We will improve it over the course of a year.
You know, every year we're going to improve it.
But like fundamentally,
we didn't have to like recreate the product.
Come up with a new viral story,
or a new great content segment
that would like require like a new genius.
With software, it's like you come up
with one genius moment.
And then you sort of refine it.
Make it work better over time.
And get rid of bugs and things like that.
So I preferred that part of software,
which was like making a product.
Rather than making kind of like a disposable,
you know, consumable piece of content.
Or like I have a e-commerce company
and like, it's a pain in the ass
to have physical products
that are supply chain,
constrained and like we have a warehouse.
We got warehouse problems
with our e-commerce business.
And so I'm like man,
digital is sweet compared to e-commerce.
But e-commerce is quite profitable.
That kicks off a bunch of profits.
So every business has these pros and cons.
And I always thought agency was like.
The part I always thought was a pain in the ass
was like the client services.
You are reinventing the next campaign.
And the next winning marketing,
you know, formula for them.
And you have to keep clients happy all the time.
And clients are sort of like never satisfied
in a way that like.
If software is like, you can have
nameless faceless customers.
That like yeah, some percentage
of them will write into your help desk,
that's in the Philippines or whatever.
But like you're not having to like,
you know, send account reports to your
big clients to keep them happy.
- Yeah, but you everyone has their own problems.
In software, a lot of people
have tons of those issues
and they can't figure it out.
Or they have competitors
who come into the marketplace
and just undercut them on pricing
for the same features.
'Cos it's cheaper and cheaper
to build software these days, right.
So they all have their own problem.
To me I look at it as,
if you can find the right people.
So every time I start a company
I find in people to put in place
that have already done it multiple times before.
'Cos your risk of failure are lower.
And they already know everything to do.
So, I don't have to deal
with client relationships.
I don't have to deal with customer service
or anything like that.
I get to do what I enjoy doing.
Which is go and create content,
be the face, et cetera.
And my wife enjoys what she gets to do, right.
She gets to donate the money.
Although, we don't really
consider it as donations.
We look at it as investing.
We're investing in people.
Although we really don't ever collect
any money back.
It's more so you're investing
into making the world a better place
or people's lives a better place
or whatever it may be.
- Who were your first three clients?
At this agent.
- I don't know, they were small companies.
- And right now who's an example client?
- Like a Fortune 100 software company.
Like that is a typical company.
Think of any big large corporation in b2b.
That's a great example of one of our customers.
Or even B2C.
Actually, think of any Fortune 500 company.
That's a prime example of a customer.
- And who's the CEO of your agency?
- No, I'm never the CEO.
I'm a terrible manager.
I'm one of the worst managers ever.
His name is Mike Gullickson.
He was the CEO.
No he was the president of I prospect,
which is a ad agency owned by Densu.
I believe in, I prospect
maybe they had four or 5,000 people, is my guess.
- How early into the business
did you have a hired CEO or hired leader?
- Day one.
I won't start a business
without a CEO from day one.
- And what did you pay them in the first year?
- First year was my co-founder.
So like a hundred grand.
- And that's because you basically went
and drummed up a hundred grand worth of business.
And you're like, hey Mike,
I got this client
says he'll give a hundred grand.
You want to run this thing for me
and help it get deployed?
- No, our business didn't start off that way.
I probably put in total of 5 million bucks
into the business, of my own money.
So, I was bootstrapped,
but not really bootstrapped
if that makes sense.
It's kind of cheating.
And it gets easier and easier
as you're an entrepreneur, right.
The more successes you have.
And I'm not saying I'm successful by any means.
The more capital you have
to deploy into the next thing.
So it reduces chances of failure.
And when it's your own money.
This is just my thesis,
and I could be wrong on this.
I have no data points.
When it's your own money,
you're much more careful
than when you raise like 15, 20, 30 million
of venture capital, right,
You really look at every single dollar.
But Mike was the CEO from day one.
He's a great operator, has no agency experience.
Eventually we got in a president.
And then, eventually from there we got in a CEO.
- And have you guys crossed
a hundred million in revenue yet?
- Yeah, we do nine figures.
- That's crazy man.
So, I mean that's just pretty wild,
that you're able to like parlay this blog.
That was always kind of a juggernaut.
But this blog,
into a nine figure a year business.
I mean that's amazing.
- Yeah, it's been a good run.
I hope it, I'm knocking on wood.
Although you probably can't hear it
because of Chris.
I hope it keeps going
and more so we're just having fun.
Like for me what I enjoy doing
is building a business.
I know I have an expensive lifestyle.
I generally don't do stuff for the money.
Like I overpay like house staff.
Like nannies and stuff like that.
When I say overpay, I drastically overpay.
Not by like 10, 20, 30, 40%.
Like I really mean drastically overpay.
'Cos I look at people,
and I'm like if you're cleaning a house,
how are you going to live on this?
Like I'll give someone six figures to do that.
I know that sounds kind of crazy or stupid.
But, like I'm not giving my kids money,
so might as well take care of other people
in this world who need it more than we do.
- Did you just say you're not giving kids money?
- Yeah, I'm not going to give my kids money.
- Nothing, leave nothing.
- We have a trust set up.
What they'll get maximum
is like if they're on the street
and they can't provide
and they're going to be suffering.
Like I will help pay their bills.
Or put them in a normal home.
Or like if my kid's like, I want to be a doctor.
And I want to go spend all my time in Africa,
helping other people out.
And I won't get paid for this and I need,
you know, x $5,000 a month to live or 10,000
so I can just go volunteer all my time.
I'll be like, sounds good, I'll pay for that.
But like I won't give them money
for the sake of it.
Like if they're like,
I want to go travel to see Italy.
Or I want to a Honda Accord.
And I'm like, go buy your own Honda Accord.
Go travel on your own with your own dime.
Like, you know,
I don't believe in just giving people money.
'Cos I think there's other people
who need it more than we do.
- Shaan, are you going to give your kids money?
- I haven't really thought about it.
Like my oldest is two.
So I think I got some time to figure that out.
But I lean more toward.
So I've kind of heard both arguments.
Like I know somebody who they.
If some people are like you know.
There's some people that I,
I'm definitely not in the camp of,
I do this for my kids.
I want to leave my kids
with a whole bunch or something.
That may be the worst thing you do for them.
Not because it means of the ruins but.
- Yeah, you have drug addicts.
- Yeah, you take away,
you know, agency in a way, right.
Like you want people to.
It's not that it's good or bad.
It's actually just.
It's just way lower
on the totem pole of priorities.
It's like I just don't even focus on that.
It's like if I'm going to leave them something,
it's going to be a certain set of character.
Character traits and skills and like mentality.
That's what I'm trying to leave.
Money is like, I don't know,
15th on the list of like, I don't know.
We haven't even gotten to think about that yet.
But I've thought a lot about
what are the character traits and mentality.
And like mindset and skills
that I think I can help build.
And like that's the focus.
That's the one that matters.
That's the gift.
If whatever else comes from beyond that,
I don't know, we can figure out.
It's like the footnotes.
- So like we're very similar.
I have a two year old,
and a less than one year old, right.
And I look at it as you want them
to be productive units of society, right.
You want them to be ambitious, hungry,
caring, thoughtful happy.
Like whatever it is.
There's a lot of characteristics
that you may want children to be.
But I look at it as like they don't need money.
Even like with my wife and I,
we go over our expenses,
and we look at what we spend on travel.
And we do some of this cause it's easier.
But like my wife and I are actually considering
cutting out all private
and just going commercial now.
The main reason our expenses are high
is due to Covid.
So if it wasn't for Covid,
I would just be going in a normal airport.
I didn't know how Covid
was going to impact with young kids.
Could afford it.
I was just like,
yeah, just start flying private.
And we haven't gone back to commercial yet.
But we're thinking about going back.
because like my wife and I look at the money.
And it's like yeah we spent all this money
on travel and airfare and hotels.
If we donated the money,
people would have a better life.
Do we really need it that much?
- What do you do when you donate that?
Like, what's a good way
to donate in your opinion?
So there's like, you know,
ranging from not donating,
to donating to one thing,
to donating to a bunch of things,
to like getting involved.
Or seeing the impact or like,
you know, I know people who.
If they donate to Africa, they'll actually.
Their family will go take a trip every year.
So that they're more connected to the people.
And they actually see the impact,
and they take their kids with them
so that they see the impact.
Like what have you found
that's a good way to give.
- So we have a balance.
It's my wife and I team up.
This is going to sound bad,
but I don't like volunteering my time.
My wife loves volunteering our time.
I think it's very inefficient
for me to volunteer my time.
I should make the money
versus volunteering my time.
Because the money or the hours spent,
if we donated the money,
it would have a much bigger impact
to the cause than if I actually spent my time.
- I don't think that's sounds bad.
- And my wife loves spending the time.
And like from going to soup kitchens
or whatever it may be.
So she picks the causes.
We have a few theses.
So like one thesis is,
or not really thesis but rules.
One rule is we don't like money
going to organizations
that have tons of high overhead.
We actually want our money going to the causes.
So if it doesn't go to the cause,
then we tend to not pick that organization.
The second thing that we look for
is organizations who are
like self-sufficient, right.
It's just like how can this continue going,
even if someone wasn't managing.
So like a great program for example
is my wife likes donating to women's education.
We used to donate
also to men's education as well.
So you find these people in these villages.
You say, hey you can't afford
to go to school, get a degree.
We'll pay for you to go to college.
Go get a degree, come back,
teach kids in your village for a few years.
Whether it's under a tree or anything.
People can learn anywhere, right.
And then, you know,
go move on with your life
and do whatever you want.
But at least you're giving back
to your own community.
And what we found is, when we started giving.
'Cos we've been doing this for so long now.
Well actually not that long.
But when I mean long,
I'm talking about like 10, 11 years
where we've been donating.
And it's picked up quite a bit
over the last like five, six years.
When we started giving the money to men,
a lot of the men we saw very low conversion rate
from them actually coming back
and teaching people in the village.
Well when we gave the money to women
for their education,
a lot of them came back
and fulfilled on the promise.
because it's not like you get
a signed contract, right.
It's just like, hey,
we're going to pay for everything.
Come back, help people out within your village.
- Which country
- We've done this in both India and Africa.
So different parts to Africa and in India.
And then another program that we've done
is like growing gardens.
Where a lot of people who have Aids
don't take the right.
Don't take their medication
and aren't doing well.
They're given the medication for free.
But if your body
doesn't have the right nutrients, it rejects it.
So what we'll do is, we'll do programs
like growing gardens.
We'll give them money, they grow food.
And then not only do they
eat nutritiously or well.
They'll more likely to take their medication,
and you're also growing enough food.
So that way other people
in the village can also eat.
I was like, but my wife picks all the causes.
She vets them, she loves it.
Like she'll go, this is Wednesday,
In two days she'll end up going to a function.
Scouting out more nonprofits and organizations.
I won't go.
Like, I think it's a waste of time.
I'm like, if I will make more money,
she can donate it.
It's a better ROI,
than if I go spend three four hours
mingling when she could just do that.
And I can go make more.
So that way we can donate more.
- Other than your own private businesses,
what have been your best financial investments
that's allowed you to to donate
and and make a lot to give away?
- Stock market has done really well.
Companies like Apple, Amazon, Google, Facebook.
I know Facebook's down,
but they still have been a tear
if you just bought the stocks early enough.
'Cos some of these companies
have grown 30, 40% a year.
And the public market's compounding right.
And it really adds up.
Angel investments have done really well for me.
And I would say
probably those are the two biggest.
The stock market still has done well.
Although in the last six months
I've taken a beating.
'Cos I'm in a hundred percent tech companies.
Like I don't diversify.
Like, everyone's like,
oh, you need some oil, and you need this.
And I'm like, yeah, I'm just going to go all tech.
And people are like, oh, you're silly.
Look how much you lost.
But if you look at the whole time
when I first got in,
I've done well and I invest
in what I understand and I'm 37,
so who cares?
You know, another 10 years, everything should rebound.
Assuming you pick the right companies.
What's your portfolio look like,
in terms of percentages?
- Not including private businesses.
- My public portfolio, if I had to guess,
I probably don't even have more than 20 stocks.
Amazon, I won't be able to name them all.
But Amazon, Google, Facebook, apple, Microsoft,
HubSpot, Salesforce, Adobe, Atlassian, Shopify.
I'm missing some as well.
In the world of business, there are many different paths you can take. Some choose to build software companies, while others opt for consulting or agency models. In this blog post, we will discuss why agencies may not be the most desirable choice from a business perspective.
One of the main reasons agencies are deemed less favorable in comparison to software companies is scalability. Software companies have the ability to work while you sleep and can be easily scaled up without the need for multiple office locations around the world. This means less hassle and more focus on what you truly enjoy doing.
From a financial standpoint, software companies generally fare better in terms of revenue growth and profitability. Public markets tend to value software companies more highly than agencies, as evidenced by the better multiples of companies like HubSpot compared to Accenture.
However, it's important to consider other factors when evaluating the success of a business. While revenue and profitability are crucial, the enjoyment and satisfaction derived from day-to-day operations should not be overlooked. Building a big company, regardless of whether it's a software company or an agency, comes with its fair share of challenges and management responsibilities.
One argument in favor of software companies is the potential for higher revenue per employee. With software, you can generate more revenue without necessarily needing a large workforce. On the other hand, agencies may need to hire more people to meet the demands of client work, resulting in higher churn rates. The revenue per employee may be lower, but it can still be lucrative if managed effectively.
Furthermore, the type of company and industry can also influence the day-to-day operations. For instance, consulting companies often work on long-term contracts with high margins, allowing them to pay higher salaries and attract top talent. It's all about finding the right balance between profitability, employee satisfaction, and the demands of the industry you operate in.
While software companies may have their advantages, agencies should not be disregarded as a viable business choice. Agencies, especially in the marketing and advertising sector, have a consistent demand. Companies need marketing services and are willing to pay for them, creating a steady stream of revenue.
Additionally, agencies have the opportunity to work closely with clients, establishing strong client relationships. This aspect of agencies can be fulfilling and enjoyable for those who thrive on connecting with others and delivering tailored solutions.
Agencies also offer the chance to create diverse content and generate unique ideas. Unlike software companies that focus on refining and improving a single product, agencies constantly develop new content and campaign strategies to capture audiences' attention.
Finally, agencies can often offer a personalized experience to clients. Clients appreciate the attention to detail and focus on their specific needs. This level of customization can result in stronger client loyalty and long-term partnerships.
The choice between a software company and an agency can also have implications for customer support. While software companies may have automated support systems and require less direct interaction with customers, agencies often take a more hands-on approach.
Agencies rely on effective customer support to maintain client satisfaction and address any concerns or issues promptly. This personal touch can lead to stronger client relationships and increased trust in the agency's services.
In contrast, software companies may prioritize self-service support options, such as FAQs and online forums, to handle customer inquiries. This approach allows for scalability and reduces the need for extensive customer support resources.
Ultimately, the choice between starting a software company or an agency depends on individual preferences, industry dynamics, and growth strategies. Both have their pros and cons, and it's crucial to evaluate factors like scalability, revenue potential, employee satisfaction, and customer support requirements before making a decision.
AI innovations and digital marketing strategies are crucial for business growth. The future will bring shifts from businesses to platforms, transactions to experiences, and data to insights. Investing in digital capabilities is vital for successful digital transformation.
Implement marketing attribution strategy to understand which channels drive leads and sales. Use lead scoring to prioritize prospects. Improve social media engagement through quality content, authenticity, and user engagement. Master product marketing to establish a go-to-market strategy for SaaS companies. Use various communication channels with LiveAgent.
Learn how to build your personal brand and drive website traffic with strategic marketing tactics. Collaborate with influencers, optimize your website for SEO, use email marketing, and provide exceptional customer support. These 10 hacks can boost your online presence and establish you as an industry authority.
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