I started my business in a cafe in Medellin, Colombia, with a childhood friend. I'd recently begun a new chapter in my life after leaving an old business partnership and was excited to start something new while living abroad in Colombia. Building something from the ground up while living in a completely new country was an amazing experience and something I'll never forget.
The initial years were not glamorous. I went through the entire difficult freelancer-to-agency-to-business-owner's hero's journey of successfully productizing a business. I experienced the highs and lows of doing everything myself, building a team, and discovering why I never want to be at a traditional agency. After all that work, I finally reached a point where I was only working one to two hours per month. I then sold my business to a private equity fund.
I want to share what I learned during my journey of designing, building, and exiting my business so you can leverage them today in your own journey to productize your service. Some things I've shared are resources and tools you can use right away, and others are powerful ideas and frameworks you can carry with you throughout your business journey.
Read on if you're ready to learn how to successfully productize your business.
1. Follow a profit first strategy
If you're like most business owners, you probably operate from one core operating bank account. This is the easiest system to set up, and it's how 98% of businesses are run: you bring money in, and then you send money out.
The system probably looks like this: Sales - Expenses = Profit
But this setup is actually a horrible way to run your business, especially if you have a service-based business like an agency or consultancy, or if you're freelancing.
This is because you lack a true “pulse” on your business and money structure. Profit is an afterthought here. And when you position it as such, all you'll get is the “leftovers.” Humans are great at expanding resources and time to the maximum amount available. This is especially true when it comes to money and spending.
Luckily, my business partner and I both read Mike Michalowicz's Profit First, and the light bulb went off for each of us. The book's philosophy resonated so strongly with us that we wondered why we hadn’t been following this strategy from the beginning.
Early on for us, profit was an afterthought, and our expenses grew with our revenue. Rarely did we set money aside for taxes, paying “what felt right” as owners that month. (I’m sure you can relate here.) But after reading Profit First, we started wondering what would happen if we could operate in a way where Sales - Profit = Expenses.
A shift to a profit first mindset is extremely powerful within service-based businesses and, in my experience, is a core step to productizing your service. And the sooner you put financial systems in place, the sooner you can start leveraging that data into core financial dashboards and reporting tools to help you grow.
Executing a profit first system
While the profit first system is very simple as a concept, it takes effort and discipline to execute. It took us over six months of hard work to fully operate under the profit first framework, even after my business partner and I decided to fully dedicate ourselves to carrying out the concept.
If you—like most businesses—don’t have the fortune of starting with the profit first system from day one, you now have to course correct and adjust your business to this new way of doing things. It’s like losing weight: it won't happen overnight.
But from my experience, it's a fruitful transition process once implemented and completed. Flexing your financial six-pack feels good. This knowledge is something we wish we'd had from the start of our business.
The Profit First system will help shine a light on things you may have wanted to keep in the dark, including:
- How profitable are you?
- Are your margins sufficient enough to operate and scale in the current state?
- Can the business support paying you right now?
- Is your business model able to support your current team? Did you hire too soon?
- Will you have to let people go?
- Are your prices and margins crappy?
Setting up your profit first system
The profit first philosophy can help shift your mindset to start operating differently. Instead of relying on traditional GAAP accounting methods, you'll focus on putting profits first and systematizing your money. It allows you to create a financial structure and “money buckets” instead of guessing where you are and where your money is going each month.
A quick and simple overview of the system looks like this:
- Top Line Revenue - Materials & Subs = Real Revenue that flows into the following buckets:
- Owners Pay
- Operating Expenses
To make this easier to track, set up a series of bank accounts to operate from. These accounts will vary based on your business model, but you'll have clear “buckets” to transfer money from twice a month based on preset percentages.
For our agency, the specific accounts we used included:
- Owners Pay
I still remember the look on my banker’s face when I asked her to set up six bank accounts for us. She told me I was the first person she'd done this for. This just shows you how many lack a system for a successful business.
We then set up percentages we wanted to hit each month for each account for true financial operational efficiency.
My biggest takeaways from fully implementing Profit First in our business:
- Clarity about where every dollar was going
- Zero stress each month when it came to what was happening with our money
- Core team hiring decisions based on how we were truly doing financially
- Better control of expenses with the help of an expense budget
- Increased team creativity in terms of growth
- Clear financial dashboard for the business
- Clear monthly marketing budgets
- Simple and clear owners' pay and distributions—no more guessing
- The ability to celebrate our wins with quarterly profit payouts
Following this system was one of the core advantages that allowed us to sell our business for the highest multiple possible. Focusing on operating lean, following a set financial system, and putting profit first truly made our business an asset that someone wanted to buy. It also helped in our decision-making during our building and growth phases.
2. Rethink acquisition as a growth strategy
Did you know that Amazon has made over 40 acquisitions to date and that this number continues to grow? Strategic growth through acquisition is one of the most underestimated ways of growing your business, yet the largest and most successful companies do this every day.
Luckily, this strategy isn't limited to billion dollar companies, which was an amazing lesson I learned while growing Content Pros. I personally challenged myself with this concept of acquiring businesses and wanted to see how I could bring strategic value via acquisition to our core offerings at Content Pros.
The process took around six months. I was able to locate a business (Proofreading Pros) and acquire it to help Content Pros become more efficient and grow more strategically. It was an incredible learning process that involved a mindset shift on my part.
I started by brainstorming a number of ideas and areas within our business that could use optimizing. Although our editing process wasn’t broken, it took around 24 hours to complete in our workflow. I wondered how we could decrease this turnaround time without having to manage a ton of freelance editors. This would save us time and money, add value to our service, and create happier customers.
Proofreading Pros had amazing software and a vetted team of professional editors, which checked all the boxes for us. I was able to structure a deal that let me acquire the business for a very small upfront investment and pay the owner off over time from a percentage of the real revenue (remember, profit first) each month. This allowed me to acquire an asset with revenue that could bring immediate value to our business with little to no downsides.
After acquiring Proofreading Pros, we were able to increase our editing team by 40 and shorten the editing process time from 24 hours down to 15 minutes or less. We were also able to increase the quality of our work by leveraging Proofreading Pros's technology and the talent of their editing team. It's now a company I'm currently focusing on growing and scaling.
I encourage you to explore how you could either partner with or structure strategic acquisitions within your business. Timing is everything, but I challenge you to push your limiting beliefs to see what's possible. Buying Proofreading Pros was something that opened a lot of doors, gave us confidence, and helped us make a lot more money. Even going through the buying process is valuable, even if you don’t pull the trigger.
A few questions to ask yourself:
- Where in your business does it make sense to buy an already existing asset rather than try to build a solution from scratch?
- How can you break down weak areas in your business where an outside solution could bring a lot of value?
- How could an acquisition help you reach your long-term goals?
3. Know when to take a step back from your business
Before selling Content Pros, we incorporated a concept called Code Freeze, which was extremely helpful in completely removing me and my partner from the business. At one point, we were only working a few hours a month while our business ran on autopilot.
This concept is simple, and coders use it frequently when creating and building software. It's something I continue to force myself to do, no matter what I’m working on.
When implementing Code Freeze, you simply pause your work and walk away for a certain amount of time, let’s say one or two weeks, and let your “machine” do its thing without you. You can then return and see what worked, what broke, and what now needs to be fixed.
Code Freeze can be extremely useful for online service-based businesses, where founders and operators are typically buried in their business with not much hope or light at the end of the tunnel. When you’re deep into your business, you don’t see everything. Be real with yourself and ask whether you're allowing your business the space to breathe—or if you're letting yourself breathe. In order to succeed, you need to think differently, which comes from stopping and reflecting.
If your goal is to have your business run, operate, or grow without you, then Code Freeze is something you should try.
Ask yourself how you can implement a Code Freeze in your business this month. Mark it as a mandatory scheduled occurrence in your calendar. Pause and do nothing for half a day, then a full day, a week, a month. After your pause, make a list of everything that broke during your absence. Start small, push yourself to scale up your Code Freezes, then analyze the data.
When I implemented Code Freeze, I started with a day each week, then moved to a week, two weeks, and finally a full month. My business partner and I got into a nice cadence of alternating work weeks, with each of us taking two weeks off each month while the other ran the business. Based on your goals, I encourage you to stretch the limits of what you believe is possible for your business and play with different methods.
Remember that in most cases, working more doesn’t actually equate to more work being done. Taking a Code Freeze encourages more strategic business moves and systems, as well as leveraged thinking.
4. Find tools that optimize your business
The tools we use to operate our businesses determine how simple your life will be as an agency and service business owner, as well as how smooth your customer's experience and journey will be.
While real, hard-working people execute your core business processes, you'll still need to build and leverage software. Making sure you leverage the right tools is vital in ensuring that your team operates as efficiently and smoothly as possible.
Luckily for me, I’m an INTJ, so systems, operations, and team building are some of my core strengths. As the architect of my business, I love playing business chess when it comes to service-based operations.
But even with my enthusiasm for business chess, finding a good system and software was one of the biggest challenges we faced and nearly cost us our business during the first few years of Content Pros. I wasted a lot of time and energy early on by focusing on the wrong things.
Early on, we tried setting up systems and leveraging software like Google Drive, Asana, Trello, Basecamp, Zapier, and some other industry-specific tools. Duct taping all these solutions did work... to an extent. But ultimately, they failed to provide the operational efficiency we were searching for.
Eventually, we started to consider building a custom solution that would allow us to solve the operational issues we were facing. We wanted a tool that would include all the things we were currently accessing separately: a client portal, order management, customer management, deadlines, billing, invoicing, subscriptions, order workflow, contractors, etc. However, we ultimately decided that the busywork of building custom solutions would distract us from more important business goals.
Then a friend recommended we check out ServiceProvider (SPP). It looked promising, but I was still skeptical after trying and struggling for so long to find a solution that could fit a service business model like ours.
However, we found SPP to be an incredible bridge for anyone looking for something more tailored toward those on the productizing journey. I'd tried nearly every tool, project management software, CRM, and billing solution, and none compared to SPP as an all-in-one, foundational tool to run our service-based business.
We ended up fully moving over and integrating SPP, rebranding our business at the same time. SPP allowed us to scale our operations, team, and systems, and do it in a way that felt effortless. Not only did we leverage this software to grow and sell Content Pros, but I've personally implemented it in other productized service businesses, and all my consulting clients use it.
5. Focus on the right growth questions
Ask anyone running a business what their biggest growth problem is, and they'll respond with a variation of: “I need more traffic,” or “I just need more leads.” In the early years, this would have been my answer as well.
I’m not discounting more leads, more sales, or more traffic. They're awesome, but rarely are they the true problems within your business. They're actually just symptoms of a greater problem.
So how can you find the real problems in your business?
Enter Keith Cunningham's growth funnel from The Road Less Stupid.
Cunningham’s The Road Less Stupid is one of my favorite books from the past few years. It's a powerful read if you want to take your "thinking time” and “designing abilities" in life and business to the next level.
I could write hundreds of articles and spend days talking about the lessons and takeaways from this book alone. But the one takeaway that had a strong impact on me during the growth of Content Pros was Keith's specific approach to strategic growth.
Cunningham's growth funnel framework is a powerful tool to help you step back and focus on the most important areas of your business in an order that allows you to prioritize your approach. When you create some space to refocus your energy on the most important growth levers, you can start to see incredible results.
I encourage you to look at this framework and see where you might be asking and focusing on the wrong growth questions. Assuming you have at least a few clients, this can be a powerful strategy to leverage and continue to circle back to. It's so easy to get pulled off track here because these growth strategies aren’t “sexy” compared to typical sales- and lead generation-focused advice.
Here are some questions that really helped when we focused on implementing these growth strategies in our business:
- If you had never lost a customer since starting your business, how many customers would you have today? (Fill the holes in your ship before continuing to paddle)
- If you could only grow your business through referrals, what would you do? What would your strategy be?
- What offers could you create or launch to your current customer base to increase your expansion revenue?
- What actions do you need to take to ensure that your customers purchase from you more frequently?
While the growth funnel framework is an important tool, I'd highly recommend reading Cunningham's whole book, as it will provide you with value at every stage of your growth journey. It contains incredible wisdom and is one of the best business books I've ever read.
Do something different
You've probably noticed that most of my advice is about thinking differently. In my experience, changing my mindset and finding systems that worked for my business—even if they weren't widely adopted by most businesses—was what allowed me to scale and sell my startup.
Obviously, the systems and tools I mentioned worked well for me, which is why I recommended them. But ultimately, I recommend trying new things and finding methods and frameworks that work best for your business until your business is in the place you want it to be.