As many of our subscribers already know, Bright Ideas is on the verge of launching our own marketing agency. As we have been making this fact known to our tribe, all sorts of questions have been coming in, and rather than addressing those questions via individual email replies, I thought it would make more sense to create a series of posts that would chronicle our journey from startup through to success.
Ed Note: If you are brand new to Bright Ideas, please know in advance that what you are about to read is not theory. The author of this post has already built and sold a $2 million per year business.
Who is This Post For?
If you are either looking for a viable online business to start, or you’ve already started your marketing agency/consulting business and want more success, this is a post that I believe you will find immensely valuable because I’ll share numerous insights. These are things that will not be obvious to entrepreneurs who’ve not yet been through the entire cycle of starting a company from scratch, building it up to millions in revenue and then selling it for over a million dollars.
As you might guess, having already gone through this full cycle of a business, I have been fortunate enough to experience a great deal of things (good and bad) that have afforded me with many valuable insights that I wish I would have had access to prior to starting my first business.
It’s my hope that by reading this post, you will begin to think about some of the “big picture” things that will ultimately play a very large role in how successful you ultimately become.
How to Pick a Business with Big Potential
When it comes to picking a business to be in, there are a number of factors that I always consider. For those who like bulleted lists, here they are (in no particular order):
- Will my business provide real value to actual customers?
- Is there a positive trend in the need for the products and services I plan to sell?
- How much start up capital will I need?
- Is there a compelling financial model?
- Does my product or service help customers to make money?
- Am I passionate about it?
- Do I have (or have access to) the skills and credibility needed?
- Can I run it from anywhere there is an Internet connection?
- Can I outsource and automate large portions of the work?
- How big can I scale it?
- Will someone want to buy it from me at some point?
- How will it affect my lifestyle?
Often, when I see new entrepreneurs looking to start a business, particularly an online business, I don’t see them asking any of these questions. Instead, the only question they are asking themselves is “how fast can I make a buck?” And, even worse, “how can I do it without actually doing any work?”
As you might guess, looking only at how quick you can make a buck is not nearly enough due diligence on whether or not a given business idea is worth pursuing, and forging ahead without asking some or all of those questions will more than likely cause you to either fail miserably, or start a business that generates little in the way of profit and/or doesn’t end up living long!
Now that you’ve seen which questions I ask myself, let’s dig a littler deeper into each one of them.
Will My Business Provide Real Value to Actual Customers?
If you want to build a sustainable business than has enough economic horsepower to make you wealthy, it is critical that you choose a business that provides real value to your customers. If you don’t, how on earth do you expect your business to last?
For experienced entrepreneurs, the answer to this question was obvious; however, for new entrepreneurs, I want to emphasize how important this is.
For example, almost every day, I see someone launching a product that, more or less, says something that sounds like, “take advantage of this Google/Facebook/Twitter/Pinterest/Youtube traffic loophole and you will make big money fast!”
Really? If the loophole is so good, why tell anyone about it? Most often, these business opportunities are complete BS.
And if they aren’t BS, how long will it be until the loophole is closed and you’re out of business?
My point is this: chasing loopholes may make you a couple of bucks in the short term, however, it’s not a strategy that you can hope to use to build a real business that has the economic staying power needed to make you wealthy. (Admission of guilt: yes, I’ve tried the loophole route, made some decent money, and then saw it all collapse after Google changed their algorithm. Shame on me.)
By providing real value to real customers, you won’t need Google/Facebook/Youtube, etc…. because your customers will keep buying from you and they will tell their friends/colleagues about you and your company will continue to grow.
This is exactly what happened with my last 7-figure company and this is also what will happen with the marketing agency that we are launching now.
Is There a Positive Trend In The Need For The Products and Services I Plan To Sell?
As with the first question, this one seems obvious, right? Well, oddly enough, it wasn’t something I thought too much about prior to starting my last business because I didn’t have enough experience to know that it was something I needed to think about.
Back then, I knew I could sell IT support services to small businesses for a long time; however, I didn’t give any thought to what might be happening in the industry as a result of changes in technology – primarily because I wasn’t yet very familiar with the technology or the industry.
Fortunately for me, I (unknowingly) picked a business that had a very bright future thanks to recent and ongoing changes in technology.
Thanks to these changes, very shortly after I started my last company, we were able to start delivering our services over the web and began doing more preventative maintenance in exchange for a monthly retainer fee instead of doing reactive “fix it” work for just an hourly fee.
This was a game changer!
Had the technology in my industry not changed, the change in the business model would not have happened and the Managed Service Provider (MSP) industry would not have taken off like it did.
I cannot emphasize enough how much of a positive impact this had on my company…and it’s the reason I was able to sell it for over a million bucks. When you have an ongoing recurring revenue stream for your company, it’s worth substantially more than if you don’t because buyers are willing to pay a premium price for the predictable cash flow that retainer fee income provides.
Here’s another reason why it is so important to understand the trend: when a new business model emerges (which in my case was the MSP business model) in an existing industry, all sorts of scrappy entrepreneurs (like me) will go chase after it. Then, over time, some of the larger companies (who are slow to move at first) will see that there is an opportunity to go buy up all these little companies (this is called a roll-up strategy by those in the financial world) and then take these companies (now one larger company) and sell it for a big profit to an even larger company. When this happens, the little guys (like me) get to sell for big profits.
That is where I was and it is definitely where you want to be!
Now that you understand that concept, let’s apply it to the marketing agency space.
In the last few years, online marketing has gained a lot of traction; however, the vast majority of small businesses in your town are still pretty clueless about how to do it well. This means opportunity for you.
Agencies, for the most part, have been somewhat slow to transition their businesses to digital marketing for a number of reasons; the biggest of which is this: they are fearful that doing so will cannibalize their current revenue stream. Prior to digital marketing, agencies earned their money from branding & strategy consulting, print, direct mail and a variety of other offline services. They have also been building websites; however, for the most part, they’ve stopped short of a vast array of other digital marketing services that are easy to offer to small business customers. (Obviously, early adopters exists, however, many/most are just now catching on)
Now is the time to take advantage of this very positive trend, and providing marketing services to small businesses, in my opinion, is the way to do it.
How Much Start Up Capital Will I Need?
Unless you are sitting on a pile of cash or have access to a pool of angel investors ready to fund your venture, start up costs are a critical factor. Thankfully, starting a marketing agency can be done for next to nothing.
If you’d like to hear me interview two entrepreneurs who’ve done it, check out my interviews with Sam Ovens and Graig Presti. Both reported that they were able to achieve seven figures in their first year.
The reason an agency costs so little to start is that you really don’t need that much “stuff” to get going.
Sam Ovens had a one-page website and an email account – he didn’t even have a business card. What he did possess was enough knowledge about how to find outsourcers to do the work, as well as enough determination to go out and get clients.
To get clients, he just started telling everyone in his personal/social network that he was looking for clients; and then once he got a few, they referred him to more. This was exactly how I got my very first client with my last company, so I can promise you that it actually works!
Is There a Compelling Financial Model?
As I said before, having retainer fee income is a compelling financial model. So is being able to sell downloadable products (software or information) via your website 24×7. A marketing agency can easily do both – especially if you focus on just one niche.
If you plan to bill only by the hour, that is not a compelling financial model.
Billing is not the only aspect of the financial model that you must pay attention to. In fact, what I’m about to discuss next is arguably even more important.
If you are going to build a profitable and sustainable business, you need a business where the cost of customer acquisition is less than the lifetime value of that customer. Without this, profit will be impossible.
With a marketing agency, there are many low cost ways to attract customers, which is one of the reasons I believe it’s a good business to be in.
Direct mail isn’t very expensive, email is even less, and networking in your community costs little more than your time. For a budget-constrained startup, this is all good news.
Even better is the fact that, so long as you continue to deliver value, the lifetime value of your customer is likely to be substantially higher than your cost of customer acquisition.
For example, if you send 100 pieces of direct mail at a cost of $1 each, and you get just one customer, you’ve spent $100 to acquire that customer. If your customer has a lifetime value of say, $10,000, you are going to be in very good shape, and you will be able to afford to spend a substantial amount on direct mail to acquire more customers.
This is just one example of using direct mail as a “marketing system” that can be repeated over and over to cause meaningful growth.
However, if your product is sold for $47 and you don’t have any additional products to sell, the math just doesn’t work in your favor. Keep this in mind when choosing a business to be in, especially if you hope to acquire customers by something other than your own personal labor – which you’ll have to do if you want meaningful growth.
With a marketing agency, you will be able to keep on delivering marketing services for years to come, so it passes this test with flying colors!
Does My Product Or Service Help My Customers To Make Money?
Back when I sold IT support services, I learned a valuable lesson that I carry with me to this day.
Here it is: it is substantially easier to sell people things that will help them to make money, than it is to sell things which, while necessary, are only viewed as an expense that must be paid. (IT support was one such expense)
The best part about running an agency is that you are selling marketing services that are going to help your client attract more customers and earn more from each customer.
The value of this cannot be understated!
When you are having a conversation with a business owner about helping them to increase their profits, they are going to be all ears, I can assure you. (Assuming of course that they believe YOU can help them to achieve this.)
Am I Passionate About It?
In my case, I am absolutely nuts for digital marketing and marketing automation. Why? Because, had I known about all this stuff back when I was running my last company, it would have grown a lot faster than it did. True, we were were already growing pretty fast (ranked as one of Canada’s PROFIT 100 fastest growing companies for two years in a row), but the manual effort required to cause that growth to occur was exhausting, not to mention extremely expensive (headcount).
It’s true that there are people making money in a niche they aren’t passionate about (I was definitely not passionate about IT support), however, speaking from personal experience, running a business that you aren’t passionate about it not nearly as much fun as one that you are.
Don’t make the same mistake as I did. If you aren’t passionate about marketing, starting a marketing agency probably isn’t a very good idea.
Do I Possess The Skills and Credibility Needed?
If you are regular reader of the Bright Ideas blog, I’m going to suggest to you that you already know substantially more about online marketing than 95% of small business owners. Want proof? Call up 10 of them and ask if they’ve ever heard of WordPress. I’ll bet they haven’t. If they have, ask them if they know what an auto-responder is. Again, most will not.
For folks like you and I, this is really basic stuff!
You are likely already more than qualified to offer marketing services. However, if you are brand new to this, and have a passion for it, let me offer up two ideas.
1. You will learn fast by doing. Within a month or two, I knew plenty about IT support and could have very intelligent conversations with my customers.
2. You can outsource virtually everything (that is my plan and if you join my mastermind group, you can have access to my team) to a competent provider who can be hired as a sub-contractor on an as-needed basis (this is how Sam Ovens did it)
As for credibility, that is what blogging and client references are for.
If you are just starting out, sit down and write 10 blog posts about marketing. Not sure what to write about? Just think about the questions that your would-be customers might ask and then blog about the answer. It’s not rocket science, I can assure you, and it’ll take you just a few days of your time.
Then, when a prospective customer comes to your blog, they will read some or all of these 10 posts and conclude that you are more than qualified to work with. Pick a single niche to go after, and your content will be even more powerful.
Guess how much I knew about IT support when I started my last company?
Not a damn thing, yet I built a $2 million/year business :)
Can I Run My Business From Anywhere?
For me, this is a huge factor in my decision to proceed or not. Case and point, as I’m writing this, I live in San Diego, CA. San Diego is gorgeous, but it is an extremely expensive place to live.
To lower our housing costs, my wife and I have decided to relocate to Boise, Idaho. There houses are only a fraction of what they cost here and we were able to buy a house that would have cost north of $900,000 for less than half that amount.
Will moving impact our business? Not one bit, because ours is a location independent business. (Actually, it will probably help because when/if we do hire full-time staff, they will cost less in Boise than they would in San Diego.)
Does that mean that we’ll never get face to face with a client? Not necessarily.
In our case, we are pursuing what I’ve called a “rich niche” (explained later) and because of this, our clients can afford to fly to see us for the initial consultation. Now, I realize that having a new client fly to you might sound crazy, however, if you position yourself correctly, and the benefits to your client are significant enough, they will do it. How do I know? Because I’ve been the client in the past and I’ve been the guy on the plane.
Getting this kind of traction is all about perception of value and the niche you choose. Obviously, if you are just trying to sell $500 websites, there is no need for a client to fly to you. In fact, there is no need for a face to face meeting at all. Skype or GotoMeeting will do just fine.
Can I Outsource Or Automate Large Portions Of The Work?
Outsourcing is key to growth.
Now, go and read that sentence again.
Most solo-preneurs remain a solo-act because they don’t outsource. They want to do everything themselves (exhausting!) and they (mistakenly) believe that they are the only ones with the skills needed.
Wrong. Wrong. Wrong.
Sam was selling projects for $10,000 that he paid an outsourcer $200 to deliver. Now that is the kind of profit margin that you can use to build real wealth!
My point is this: in choosing to launch a marketing agency, you will be able to outsource or automate a great deal of the marketing and service delivery. Read on and I’ll give you an overview of our plan further down in this post.
How Big Can I Scale It?
Some people say that service business don’t scale (grow) very well. While that can be true, it doesn’t have to be true. It really depends on how you choose to deliver your services.
If you are hiring full-time employees and doing everything custom for each client, that will definitely be harder to scale. This is how most people do it because they don’t bother to pick a single niche and then create a portfolio of products/services for that niche.
If you do pick just one niche, you can easily create a menu of pre-made products and services for that niche, and when you do do, scaling your business gets a whole lot easier.
Let me give you an example. In our case, we’ll focus on dentists, and because of this, we’ll be able to create marketing campaigns for each problem that a dentist is looking to solve. These campaigns will address things like: new patient attraction, stimulate referrals, re-activating inactive patients, selling Invisalign or any number of other high margin dental services.
Will we have to create these campaigns from scratch each time? Heck no.
Will I have to be the one actually recreating the campaign in Infusionsoft for each new client? Definitely not!
We’ll create training videos and our overseas VA team will do all the legwork.
Hopefully you can see that, when structured correctly, a service business can grow like crazy. The key is to outsource and have management controls in place to ensure high quality work is being delivered.
Will Someone Want To Buy It From Me At Some Point?
Unless you want to run your business until the day you die, one day you are going to want to sell it. This is called an “exit strategy”.
Before I start any business, one of the very first things I think about it how I’m going to exit the business. When I started my last company, I didn’t really think about this a whole lot, at least not to the degree that I do now. Back then, I knew that if I had a profitable business selling to other small businesses, that someone would want to buy it at some point.
Luckily for me, the trend in IT support was very good and as a result, I was able to have a very successful exit from my company.
I see the very same opportunity in the marketing services space right now and that is one of the reasons why we are entering the space.
When thinking about your exit strategy some of the things you should be considering are:
- Are there larger companies in my industry doing what I am planning to do that might want to buy my company one day?
- Is the trend in my industry positive (discussed earlier)
- Do I anticipate having other owners or managers that could one day buy me out?
How Will It Affect My Lifestyle?
Having been fortunate enough to have already sold a company and from there build a reasonably solid financial foundation, for me, the effects on my lifestyle of any new business venture are something that I consider with great care.
Many new entrepreneurs (mistakenly) think that there is a great deal of freedom being your own boss.
The truth often turns out to be that they end up having the “freedom” to work 12 hours a day, 7 days a week!
Obviously, every person that reads this post has their own unique set of circumstances, values, and desires, so that I cannot possibly provide you with the “right” answer as to what you want for your lifestyle. I will say that this is a very real issue and one that is worthy of your careful consideration.
Why Start an Agency?
So why start an agency? Well, in my case, a marketing agency fits the criteria that I’ve laid out. For the skim readers, here’s a summary of what we’ve discussed above:
- The startup costs will be measured in hundreds of dollars, not thousands.
- There is a very positive trend in the industry, supported by advances in technology
- Delivering marketing services provides real value to customers
- Delivering ongoing services allows me to charge my clients a retainer fee, thereby making my business more profitable and more valuable to future buyers
- Marketing services help customers increase profits, so, as long as they see me as credible and qualified, they will want to buy from me
- I have a huge passion for marketing, so running my agency and seeing my clients succeed will be a lot of fun!
- I definitely have the skills and credibility, so client attraction won’t be that difficult
- I can run it from anywhere I want, so I can enjoy geographic freedom
- Much of my client attraction will be automated and service delivery will be outsourced, giving me high levels of freedom and profits
- I can definitely grow this into another 7 figure business if I desire to do so. Given the profit margins, mid-six figures might be enough to support my lifestyle
- With retainer fee income, profits, and a book of clients, this is a business that will definitely be attractive to another buyer should I ever wish to sell it
- Because of all of the above, this business is a fit with my lifestyle
How and Why We Chose Our Target Market
I’d like to be able to say that we chose our target market out of sheer brilliance.
Sadly, that would be a lie :)
The truth is that my love of marketing automation and Infusionsoft led me to interviewing a dentist who was extremely successful. That conversation, in turn, led me to the entrepreneur who actually handles all the day to day operations of this dentist’s marketing.
After a few phone calls and a trip to Washington DC, I discovered that selling marketing services to dentists was very lucrative, if done correctly. (I do want to point out that he and I wrote out another 10+ niches that met this same “rich niche” criteria so don’t worry if you don’t want to sell to dentists. There are plenty of other niches!)
Having agreed on how we’d work together, I now have in place everything I need to begin selling to dentists with all the credibility in the world. If you want in on this, make sure you join my mastermind group and you’ll have access to everything that I am using to attract clients and deliver services.
The bottom line about niche selection is this: pick a profitable niche that sells high-ticket items, because companies in this niche will have much larger budgets to hire marketing agencies to work with them!
Our Plan for Attracting Qualified Leads
Now, just in case you can’t afford to participate in the Bright Ideas mastermind (I haven’t determined the cost yet, but it won’t be priced like a typical course on Internet Marketing), I do want to share with you some additional details on the area that most agencies (ironically) struggle with most: client attraction.
To attract customers, we plan to make extensive use of marketing automation and outsourcing. Here’s how it will work.
Step 1: Pick a profitable niche (discussed earlier)
Step 2: Have virtual assistant reach out to prospects exactly as I teach in my Best Buyer Formula using the MobiLead Magnet plugin. In addition, we’ll also be sending direct (lumpy) mail to prospects. The direct mail will direct them to a landing page that will offer them either a free report or the chance to register for a webinar. We’ll be split testing the landing page to see which offer converts better. (Mastermind members will get all our “stuff” as well as split testing results.)
Once the prospects register, the webinar will be automated. This is how Graig Presti does it. It’s also the method I’ve been using with some of my other products. The follow up to the webinar will also be automated. (Mastermind members will be able to use our webinar with their own branding.)
The key to this approach to prospecting is to put enough prospects into your funnel to ensure that the most motivated ones actually reach out to you. These are the ones who are most likely to fly to your town for their initial consultation, which, by the way, is a one-day session for $4,750. This does NOT work unless you target a rich niche. (Mastermind members will be able to have our expert in DC meet with your clients and close them for you if you wish.)
As I’m writing this, we are very close to signing our first client using this very method. He called me, we did a 20 minute phone call and now I’m waiting for him to send payment and book himself into my calendar for the initial consultation. (It’s not already booked because I’m not available until September and August is crazy busy for him as well.)
Remember how I talked about the importance of blogging to establish credibility? We didn’t reach out to this prospect. He found us as a result of my blog and podcast. By the time he contacted us, he had consumed so much content that he was already pretty sure he wanted to hire us. That is the power of content marketing. If you aren’t blogging or podcasting, you are losing out.
That’s it. Hardly rocket science, but, as I’m sure you can imagine, the details of our direct mail, our landing pages, our webinar, what we say on the phone, and available references are incredibly important. As a member of our Mastermind, you’ll get it all.
If this sounds like a business that you’d like to be in, then I’d suggest you get started right now. There is a mountain of opportunity and all you have to do is go chase after it. Not sure where to start? How about writing those ten blog posts? How about doing some local networking? How about sending out a few hundred postcards to a finite list you can easily buy from any list broker?
For those who want to take the shortest path to success, I would strongly recommend you get on the waiting list for our upcoming Mastermind. You’ll be glad you did!