Working out the code behind a $1m a year agency
The blood, sweat and tears involved in building an agency
Hey friends,
My analytics agency, projectBI, will generate over $200k in top line revenue this year, with a healthy net profit margin north of 40%.
In my first year providing business intelligence related consulting services I made $46k.
In this post I share my journey going from a $50k a year freelancer working with SaaS startups to running an agency with a small team doing multiple 6-figures.
The start of the journey
I started working as a business intelligence consultant in November 2017. I was registered as a freelancer and offered services to early stage SaaS companies based in Tel Aviv. I had no team and charged an hourly rate of 200 - 250 shekels (roughly 55 - 65 USD).
Since I was new to the game of entrepreneurship I had to leverage what I knew and my environment. I was fortunate that there was a demand for BI services and I ended up finding a nice little niche helping pre-series A SaaS startups implement product and marketing analytics.
At a certain point SaaS startups need to implement BI so they can confidently calculate key metrics that their investors are interested in. I had the skills to help these businesses set up the necessary infrastructure and reporting to track themselves.
Getting smarter and understanding leverage
After a few years working as a freelancer I was burnt out and unhappy. I was tired and not progressing fast enough on my path to financial freedom.
Each year I got better at avoiding problematic clients, and raise my prices. This was the best I could do to optimize my income as a freelancer providing custom services.
In 2020, my last year as a freelancer I made $57k.
$57k is not a lot of money but keep in mind that since the start of 2018 I had been living as a minimalist and digital nomad. The $57k was enough for me to live a comfortable life and put some money into the S&P 500 each month. The problem was that I’d never achieve my goal of financial independence making $50 - $60k a year. I needed a different approach.
Around the start of covid I was fortunate enough to stumble across Naval Ravikant. Naval is a tech entrepreneur and modern-day philosopher who has put out some incredibly useful content. Naval has a famous tweet storm which was a game changer for me.
You can read the tweet storm here - https://twitter.com/naval/status/1002103360646823936?lang=en
I also highly recommend The Almanack of Naval Ravikant, an almanack of Naval’s best content.
In the tweet storm, Naval talks about the importance of leverage for building wealth.
Since I was a solo freelancer doing mostly custom work, I had little to no leverage. I was selling my time for money which I came to learn was one of the lowest levels on the ladder of business vehicles.
The easiest way to understand this concept is the difference between a solo chef making hamburgers from a food truck compared to McDonalds. McDonalds has unmeasurable more leverage than the food truck chef because they have worked out a system of inputs and outputs which scales.
I realized, thanks to the wise words of Naval Ravikant, that I had to make some major changes.
Birth of projectBI the agency
At the start of 2021 I pulled the trigger and made two major moves to create more leverage. The first was pivoting from working with SaaS businesses to a new market, direct-to-consumer eCommerce, and the second was rebranding myself as an agency.
Moving into a new market
The move from serving SaaS to eCommerce was high risk. I had never served this market before and knew I had a lot to learn, but I was confident in my abilities. I also believed that at least in theory my model for serving SaaS should work in the DTC space.
The reason I made this move was because working with SaaS was completely custom. If I was going to scale I needed to try and standardize and templatize the work as much as possible. Moving into the DTC space where most brands leverage the same 5 - 10 services (think Shopify, Facebook ads, Klaviyo, Google Analytics etc) should make the work a lot more standardized.
An agency vs. freelancer
An agency is a scalable business vehicle which can take advantage of different forms of leverage from human resources, to outside capital. An agency has infinitely more leverage than a freelancer, so making this change was a no brainer.
When I started working as a freelancer in 2017 I started a blog called projectBI. I thought I could generate leads for my freelance business through the blog so instead of trying to come up with a new brand for my agency, I simply adopted projectBI as the name of the business.
2021: A year of frustration and learning
2021 was a challenging year. Moving into a new market is never easy and there were a lot more differences between the SaaS and DTC markets than I realized.
I was lucky in that I closed my first DTC client in February of that year which was a win and allowed me to start paying down my “ignorance debt”, but it was slim pickings that first year. I made a lot of mistakes and found it difficult to close DTC clients at the price point I needed in order to grow the business.
Since I was new to the DTC space I didn’t have many leads coming my way and was forced to work with a combination of SaaS and eCom businesses while I was learning the DTC space. This was frustrating but over time I had more wins in the DTC space and become better at understanding how to sell to these businesses.
Ironically I had some awesome SaaS clients on retainer most of the year and ended up closing a $20k deal in Q3 with a fortune 1000 company in US. These wins helped me close over $167k in revenue in 2021, almost 3 times what I had made the previous year.
I had my sights on turning projectBI into a world-class BI agency for DTC businesses, and even though 2021 was a great year financially, we were far from achieving that goal.
2022: Struggling to break through
2022 was similar to 2021 in that I didn’t succeed in pivoting the business towards working with DTC only.
I had a few good retainers in place at the start of the year, 2 eCom and 1 SaaS which kept the revenue flowing, but to be honest I was struggling.
Instead of providing a great service to our DTC clients, we were constantly putting out infrastructure-related fires. This held us back from scaling.
In mid-Q3 my mother passed away which took all the wind out of my sails and the business suffered. I spent the last few months of 2022 in South Africa dealing with the loss. It was a dark time for me.
When it came to the business, I was tired, frustrated and getting desperate. I hadn’t made the model work and felt something was missing. I was running out of patience.
We closed the year just shy of $130k.
The breakthrough
I still remember the moment quite clearly. I was sitting at a coffee shop in my hometown of Port Elizabeth in South Africa sometime in November 22 when it hit me.
“If I could convince Glew to work with me at a reasonable price, the infrastructure headaches should disappear and I can then scale.”
Glew.io is a major analytics solution in the BI space. I had identified them as the best ETL solution in the market but their pricing model made it impossible for a small agency like mine to use their platform.
I decided to get in touch with them again and try and convince them to work with me on a different model. After some back and forth they agreed, and I signed the contract in December 2022.
In short, I would use Glew as my ETL and data warehouse which would allow me to provide DTC brands with an infrastructure + service package for a reasonable price. Glew would eliminate most of my infrastructure headaches, and it was highly scalable. The code we wrote for one client could be reused for the next, and the next. I was excited.
I updated my senior analyst (the only other member of the projectBI team) that we now worked exclusively with Glew. We would either onboard retainer clients onto our Glew account, or support clients already using Glew.
This pivot meant that I narrowed down our focus but instantly eliminated the major bottleneck we had faced in 2022.
I swore to myself that this pivot would be the last one I’d make. If I couldn’t make this pivot work, I’d shut down the agency and move on.
2023: A year of scaling, optimizing and brand building
The pivot towards working exclusively with Glew had an immediate effect, but not in the way I anticipated.
Since I had built a good relationship with Glew, they started to send me leads. Glew has a great platform but many DTC clients need another pair of hands to leverage it fully. Glew realized that agencies like projectBI could help out in this area.
Every other week I was being introduced to mature DTC brands, some of them doing hundreds of millions of dollars of revenue a year. This was a game changer and the main reason the business has generated over $150k so far this year.
I was also lucky that the fortune 1000 company I had worked with in 2021 approached me for more work. We signed an annual contract which was a huge help financially, since the end of 2022 was more or less a write off.
The increase in revenue, and more experience working with DTC has allowed me to start growing the team again. We added a dedicated Tableau freelancer as a resource about 2 months ago, and soon I’ll be onboarding an account manager / project manager.
Once the new hire is onboarded we’ll be a cross-functional team of 4 specialists that can support 4 - 6 large DTC brands with all their BI needs. I’ll have built significantly more leverage by growing the team and partnering with Glew, than what was in place last year.
Thanks to Glew, I’ve been able to close some large deals with 9-figure DTC brands. This has allowed me to raise my pricing to high 4-figure a month retainers. It’s taken me 2 years but now the business is generating more than 80% of its revenue from DTC businesses.
When I break down our numbers it’s looking more and more likely that projectBI can become a $400k+ a year agency with a 50% net profit margin (after I pay myself a nice salary). Can I get it to $1 million a year? Only time will tell?
Thanks for reading.
Justin