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Listen Now To This Essay On The BS-Free Service Business Show
One of the loudest, and most damaging conversations in the online business world is about scale. There’s this idea that we should always be growing no matter what, and there’s little detail provided about what it really looks like to grow. This conversation makes big promises and ignores the practicalities of building a business that lasts.
In this episode, we’re going to dig into how to really build a small, simple, and sustainable service business. One that’s profitable and that doesn’t drive you into the ground.
A very large part of the online business world is rooted in the idea that we need to scale. There’s little understanding of what that really means, but as long as that’s the dream being sold, this industry will continue to thrive. This is because the industry relies on us believing that we need coaches and courses and all the things to help us scale.
Growth Isn’t Always Linear
As a service business owner, I want you to know that growth isn’t necessarily going to look the way you think. It’s not always linear. And many times, it’s going to cost you.
To illustrate my point, I wanted to get real about my business journey. As I’ve shared here before on the show, I don’t share revenue numbers as it’s not really helpful, and I’m not here to convince you to trust me based on the income I claim to make. (More to come on income claims in an upcoming episode!)
For the purposes of this episode, I’m sharing expenses and net revenue from 2013 to now and the context of what was going on in that particular year. Please keep in mind that both my taxes and my personal draw come out of my net revenue. I consider this for the purposes of the business to be the profit, and I’m aware that there are different schools of thought about this approach.
2013 & 2014: Entering the Online Business World
Early 2013 was when I really jumped into the online business world, and decided it was time to change up my existing freelance business. I was eight years into my journey and was completely enraptured with the idea of doing business online.
I had big plans, which included not offering services anymore. Over the course of 2013, I let corporate clients go, and was ready to launch my first course. Let me tell you, that was a wake-up call when I sold one spot. I quickly realized I was going to be happiest and way less stressed doing services and filled up my client roster doing copywriting and PR for other entrepreneurs.
That year, 32% of my revenue went to expenses. That was mainly coaching, courses, and hiring a VA. I ended the year with a very healthy net revenue of 68%. It was also the first year I’d invested that much in my business. Before 2013, I was running at 10% or less per year in expenses, while making the same amount of gross revenue.
Going into 2014, I was fully committed to doing services, and it was the biggest revenue year I’d ever had in my business. My revenue increased by 40% year-over-year, and that jump was based primarily on finally raising my prices after being in business for eight years.
However, it was also the highest percentage of expenses I’d ever had at 45%. My net revenue was at 55%, which was a big win considering the two years I’d spent establishing myself in a new market. As I wrapped up what I termed the “freelance” years, the bulk of that net revenue went right into my pocket.
2015: Big Growth
Having seen year-over-year growth in 2014, I was confident that I’d be able to continue to grow in 2015, and I did a number of key things. First, I held the line on my expenses and I raised my prices. I knew that I was at risk of having my revenue growth be eaten by expenses if I didn’t get things in check.
The year landed with expenses being 26% of revenue and year-over-year growth of 100%. While revenue doubled, my expenses only went up by a few thousand dollars, so I’m pretty proud of how this year turned out.
There are a number of factors that lead to this being possible, but in large part it was a factor of both pricing, and reaping the efficiency benefits of the two previous years. Getting everything to a point where it was simpler, and more sustainable mean energy was able to be focused on revenue generating activities.
2018 to 2020: The Scoop 2.0 Years
By mid-2018, my business partner was out of the business, and I knew I had an opportunity to streamline everything. I was deeply committed to ensuring that moving ahead anything we did was simple and sustainable.
Part of this was realizing that many of the dreams I was holding on to, they weren’t mine. They’d been fed to me by coaches and the industry as a whole, encouraging me to make a 7-figure business a reality.
2018 was a tough year for me on a personal level, and I did a lot of work to let go of external expectations. As part of that, I committed to living my life and not just chasing a million-dollar business as a badge of honor.
Don’t get me wrong, I make good money and I have a very comfortable life. But what’s more important to me is living my damn life. Everything I do now comes back to a deep commitment to not having regrets as my time on this planet is finite.
Especially as by nature, I’m a hard worker. I’m a hustler. So if I’m left to it, I will do everything in my power to make something happen. Uncoupling myself from the million-dollar business dream that I’d been brainwashed into believing took some real inner work.
Now everything goes through a filter of how do we stay small? How do we make this simpler? How do we ensure this is sustainable.
Because my energy? It’s best channeled into not hustling myself into exhaustion so I can make a little extra money. (Also, I realize this is from a place of extreme privilege, but I wanted to share as there aren’t enough counterpoints of people saying, listen, I DGAF about the dream we’re being sold.)
With that backstory out of the way, let’s talk revenue and growth at Scoop 2.0.
2018 is a bit of a hot mess records-wise as I have half a year with my business partner and then half a year on my own. What I can tell you is that after freaking out for a week thinking I was finished, that we ended the year strong
For the part of the year that was Scoop 2.0, we ended the year with 40% in net revenue. Expenses for the year were significant as we had to hire to fill some gaps with the business breakup, but we ended up in a much better position than anticipated. The bulk of net revenue for this year went to my pay, taxes, and building savings within the business.
Going into 2019, we were in a strong position having simplified our services to focus purely on content strategy and production, and diversifying our lead gen efforts.
We saw a 28% year-over-year revenue increase, with 60% in expenses and 40% in net revenue. (It’s worth noting, this doesn’t reflect all 2018 revenue, so it’s likely more like a 15% jump.)
A big expense for the year was finishing the buyout with my ex-business partner and dealing with some lingering tax issues resulting from the breakup. That said, I was able to clear both of these liabilities, while paying myself a healthy salary, and increasing my business savings.
This brings me to the rollercoaster that was 2020. We were fortunate in that we saw a 15% year-over-year jump in revenue despite the pandemic. What was interesting for 2020, is how much we were able to increase net revenue. While revenue went up, expenses went down due to holding the line on existing team costs and no travel.
We ended the year at 48% expenses, and 52% net revenue, which for an agency is solid. (Keeping in mind, taxes and my draw also come out of this pool.)
As context, typical agency profits are in the 15% to 30% range based on data from Hubspot.
Like past years, net revenue was used for tax and general business savings, and my monthly draw. To say I’m grateful for where we landed at the end of 2020 is an understatement, as there were a few weeks in March where things were touch and go. In full transparency, our agency client base of mainly tech companies was minimally impacted by COVID-19.
Why This Matters to Your Service Business
I share all of this as context for what “normal” or even healthy growth looks like. It’s not doubling every single year forever. It’s not continuously making more and more money with no impact on your expenses.
Most of all, I wanted to show that you can grow without buying into the bullshit of scale, and do it in a way that’s simple and sustainable. A service business can be profitable despite what the celebrity entrepreneurs say, and this is a business model that can stand the test of time.
When you look carefully at my agency years vs. my freelance years, you can see how while revenue is greater in the agency, my expenses have increased, and my net revenue has decreased. It goes to show that while the agency model may be viewed as the best possible service business, that’s there’s more nuance that goes into it.
The other key thing I think we can all learn from here is that there’s always a lag effect between our efforts to grow and when it happens. My story is a far cry from the stories of making money quickly that are constantly being shared online.
If you look at my freelance years carefully, you can see it took two years for me to have a year with incredible growth, and it’s not realistic to have that kind of revenue growth without the right foundations in place.
You can also see that with Scoop 2.0, again, it’s taken two years to not just have increased revenue, but to get net revenue on track. The expenses of running an agency can be significant, and while I love this business model, it may not be right for everyone as it takes time to build.
As I’ve talked about in the context of TrustDNA, time is a critical factor in building a business, and we need to normalize that it may take years to accomplish our goals.
I’m living proof of that, as in the next couple of weeks I’ll be hitting the 16-year mark of being my own boss. Every one of those years I’ve been running a service business. While I’ve dabbled in other business models from consumer products to digital offerings, services have always been the easiest, most profitable way for me to make a living.
As I often say to clients, services are the fastest path to cash, but it doesn’t mean your bigger vision will happen quickly. And it definitely doesn’t mean you have to have a big business. There’s a lot of advantages to being strategically small, keeping it simple, and ensuring it’s sustainable.
Lessons in Being Small, Simple and Sustainable as a Service Business
To wrap up, I wanted to share a few key lessons for service business owners on being small, simple, and sustainable.
Because if there’s anything I want you to take away, it’s that you get to do this your way. You don’t have to follow my path, and you get to choose what growth may look like for you. And some months, quarters, or even years you may decide growth isn’t a priority.
There’s zero truth to the idea that if you’re not scaling you’re failing. In fact, I’d argue that if you’re always focused on scale, you’re likely missing out on other opportunities that can make a critical difference in the quality of your work and the satisfaction you bring.
Why I’m Staying Strategically Small
First, let’s talk about staying strategically small. After managing the complexity of a bigger team, I’m not super interested in having a team that grows much beyond where we’re currently at.
Right now, there’s me, Sara, who’s full time in the client services director role, two contract writers, a contract graphic designer and our video and audio editor on our core team. We also work with a bookkeeper on a monthly basis, and then get legal and accounting help throughout the year.
I’m recognizing that we very likely will need to hire a part-time, permanent role to support us on Small Business Boss, but beyond that, I’m really not convinced. I’ve done the math and for the time being, adding more to the team doesn’t make sense, especially as I’m still in the business full-time.
That may change down the road, but hiring doesn’t automatically mean we’ll have revenue growth, and honestly, I’m not super interested in leading more people.
I wanted to be fully transparent about our team today as I see so many people fronting that they’ve got this multinational conglomerate in order to look fancy.
And for someone like me that started a business for freedom, the way things are strategically small right now means I have the freedom I want. I reserve the right to change my mind, but I’m not willing to grow to pursue a goal that’s purely driven by ego or external expectations.
When you think about your vision for the future, assess what you’d like your business to be and examine what your motives are. As I learned, just because you could build a much bigger business doesn’t mean that’s what’s going to make you happy.
How We’re Consistently Simplifying Everything
When I look at 2020, part of the reason we were able to grow is that we’re constantly working to make everything simpler. It’s an ongoing work in progress to identify places in the business that aren’t working or are wasting time.
Both Sara and I are committed to asking how we can do less better. Asking questions like: What’s not working here? Do we really need to do X or try Y?
Part of that as the owner of the business has been being extremely candid about what’s not working for me. Because let’s be real, so much complexity comes from owners and visionaries in the business that don’t trust their teams or are frustrated by what’s happening.
And complexity? It wastes time. It breeds inconsistencies and erodes confidence.
Seeking out simplicity will be an ongoing commitment through this year and beyond. I have a number of things on my list that I definitely can see opportunities for greater simplicity moving ahead.
Use the questions I shared above to look at what may not be working in your business and what may be needlessly complex. Even if you’re one person right now in your business, there’s no need to make things harder than they need to be.
Building a Sustainable Service Business
Finally, let’s talk about sustainability and what that means as a service business owner.
One of the biggest reasons people abandon their services is because of burnout, so when you think about your business, you need to figure out if it’s actually sustainable. You may have seasons that are more intense than others, but if you’re constantly going flat out, it’s not going to work.
It’s always going to be better to grow a little slower, or even choose a year to pause and build the foundations you need than to go full force and end up crashing and burning. This is a pattern I’ve seen so many times where someone builds their business seemingly overnight, then they quickly disappear.
10x results may seem sexy, but I can tell you first hand that most times it’s a dumpster fire and a train wreck all rolled into one. It’s not something most of us can handle, and it’s rarely ever worth it.
For me, sustainability has meant passing on new business opportunities, declining invites, not playing the online business cool kid game and so much more. There’s a limited amount of me to go around, so focus my efforts and energy on the places that are most impactful.
As a writer, one thing I came to realize that wasn’t sustainable was my being responsible for creating so much of our content. I needed to ensure that if I was out of the mix, clients would still get the content they’re used to. It’s taken effort on my part, but I’m confident that if I’m out not available writing projects (which are the bulk of our revenue) can continue without me.
It also means stepping out of things I don’t need to be involved in as it’s burning up my precious energy. I can always jump into things if needed, but on a day-to-day basis, I don’t need to be wearing all the hats.
I’m not going to say this was easy for me, but it’s been such a relief for both me and Sara, as I’m not always inserting myself where I don’t need to be.
In the context of your own business, ask yourself if what you’re doing today is sustainable or how you could make it more sustainable? There are always opportunities for you to streamline, systematize or step out of doing things.
If you’re solo, you may be thinking, “but it’s just me”, and trust me when I say, it’s not just about the deliverables for your clients. Being sustainable means ensuring that you’re not doing things in a way that you can’t do with all your clients or creating expectations that will lead to burnout.
A great place to start is by looking at your client load today, and how you’d be able to grow that without burning out. Think ahead to how you want your business to be longer-term and start doing that now, so you know it’s something you can do not just for months, but years to come.