← The Side Hustle Show
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- [00:00]
Nick Loper
You probably already know that Airbnb can help you earn some extra cash when you're not using your home. Maybe you're traveling for work, you're taking an extended vacation, or you're just snowboarding someplace warmer. But here's where it gets interesting. You don't have to do all the work yourself. You can tap into Airbnb's co host network. This is a team of local pros who handle the nitty gritty so you can focus on what matters most. Think of it like outsourcing for your side Hustle. These professional co hosts help with everything from creating a killer listing that stands out to guest communication and even on the ground support. You provide the space, they handle the details, and you get paid. Personally, I'm a fan of income streams that don't require constant oversight. When I'm traveling for work, I'm at a conference or a mastermind. Or if I'm on vacation, I'm trying to be present with my family. Here's a way to add an extra income stream without having to be glued to my phone the whole time. When you're ready to get started, see how much your space could be worth and get connected with an awesome co host@airbnb.com host. Here's an oldie but a goodie from the archives from the Side Hustle show greatest hits collection.
- [01:09]
Tyler Gillespie
What's up, what's up? Nick Loper here. Welcome to the Side Hustle show. Because your 9 to 5 may make you a living, but your 5 to 9 makes you alive. Service businesses can get a bad rap. After all, there's still clients to deal with. There is actual labor involved in fulfillment.
- [01:26]
Nick Loper
They're just not as glamorous as the.
- [01:28]
Tyler Gillespie
Other more quote, passive income models.
- [01:31]
Nick Loper
But you should know that more side.
- [01:33]
Tyler Gillespie
Hustle show guests started with a service based business model than any other. And on today's show, you'll learn how to set your business up from day one to provide great value to clients. Yes, but without relying on you to do the actual work. I am excited to welcome Tyler Gillespie to the show. Tyler, what's going on?
- [01:52]
Not much, man. Thanks so much for having me. Excited to be here?
- [01:55]
You bet. So Tyler is a longtime listener. We first connected way back, I want to say 2014 over a world Domination Summit ticket. But in any case, Tyler today runs productized services where he helps people with this unique brand of service based businesses. And there are a couple huge benefits to Tyler's approach. One, all of a sudden, you're not limited by your own skills. You just have to have the ability to find clients and then other people with the skills that they need. So that's huge. That dramatically opens up the realm of potential that you could offer. And number two, since the business no longer relies on you as being the hands on mechanic, it becomes that much more sellable down the road, which is something that Tyler's done a couple times now. If you hit up Sidehustlenation.com Tyler, you'll find links to all the resources mentioned along with a full text summary of our call. While you're there, be sure to download my free list of 101 service business ideas that might just be ripe for the type of productization we're talking about today. So, Tyler, your latest service was called Applause Lab, which helped e commerce brands get video testimonials. Was this thing started with the exit in mind?
- [03:06]
100%, yeah. I think the timing as far as when the exit would happen or if it would happen definitely was not planned. And I think that's a lot of the part of what I kind of share and try to help other service businesses with is having the optionality. Right. Because I think that's something that a lot of people don't have. So when I started Applause Lab from day one, it was very much intentional with just how I was designing the business and thinking about and putting myself in investor shoes of if someone was going to buy this down the road. What can I start with right now? The more you do this right, the more you learn, the more businesses you start, you get better and faster at actually going from zero to a hundred. And I think the previous business taught me that. You know, I think the first few years running a content writing service which was called Content Pros, before we sold that business, there was a lot of things I wish I would have done a lot sooner. Right. So starting a plazalab, it was just like cool day zero. Here's exactly what I need to do. And I think that really helped set it up for success because yeah, it was about 13 months and we had a buyer come in and buy the business. So a competitor actually.
- [04:12]
Oh, interesting strategic acquisition. Like if we can't beat them, join them type of deal.
- [04:18]
Exactly, yeah. So the company actually and I did an interview with the founder of Testimonial Hero, who, I don't know if you know, Sam over there. And we had done some partnership stuff. We kind of targeted different avatars even though we both did video testimonials. So it started as just kind of a relationship and then grew into, you Know him actually being interested in acquiring the business. So it was a very natural and kind of fun. Yeah, like you said, strategic acquisition for them.
- [04:44]
Okay. That was something that was interesting in going through the selling process for the Virtual Assistant Assistant site, which we covered on an episode last month. It was surprising the number of other people in the space who were interested in it. And it's like, this would complement our existing operations. And so that wasn't something that was necessarily on my radar as potential buyers, but that was several of the interested parties. Did you have a background in video production? What gave you the confidence or inspiration to go into this video testimonial space?
- [05:17]
Yeah, zero background in video editing, production, et cetera. I think it's just more. It came from a knowledge of cool. This was something we wish. I wish I had with previous businesses. And it was always a lot of friction with gathering video testimonials. Right. And it was always like, man, these are like, one of the most powerful assets you can have in your business to leverage, having someone else kind of do the selling for you. But it was just one of those things that always got pushed to the bottom of the list. You know, it was like, cool, we need video testimonials. And then it turned into, okay, what if we just got written ones? And then it turned into, why don't we just write them for the customer and then ask them to approve them? It was just kind of. We went through that process, and I knew the power of them, so it was just really kind of solved that problem. And I looked in the market and there just wasn't that many solutions. So I thought I would kind of give a stab at it. But there definitely was a learning curve at the beginning with just hiring, training and working with a team of video editors, which. That aspect was definitely new to me.
- [06:19]
Which came first, the customer or the production staff?
- [06:25]
Customer, for sure.
- [06:26]
Okay. This is like the chicken or the egg solution.
- [06:29]
Yeah, yeah. So I put it out there. And actually, one of my first customers was a buddy of mine who runs an oil and gas company down here in. Well, he comes in and out of Columbia, where I'm based, but he's also from Oklahoma. And he said, man, if you can get me, if you can get these oil and gas guys out in the field to leave a video testimonial. I've been trying for years. I will pay you. So he signed up for a couple, and then I just kind of went to work. And we ended up capturing, I think, over 15 video testimonials for him or something. He had been trying to capture these and just never could. So that was kind of the first customer that kicked off the business, which was really fun.
- [07:06]
Okay. So I'm trying to think if I was going down this path first, starting with an idea or starting with a problem that either I've experienced in my own life or through conversations. Like you said, hey, we really could have used this in another operation that we were running from other people that we talked to, like the power of testimonials. But it's really hard. So if those kind of complaints or those kind of annoyances start to bubble up in your own thinking, in your own life, like, okay, maybe there's a business on the other side of that. Even if you don't necessarily have the skills to go out and solve that yourself, the odds are somebody does. And maybe you could position yourself as the branded solution, the middleman, the connector between those two, which, it sounds like that was the game plan here.
- [07:52]
Absolutely. Yeah. I mean, I think a lot of things start with scratching your own itch. And that was kind of the initial pain that I knew. And then I confirmed it with talking with people with inside my network. And then the validation was someone actually paying money, which then kind of gave me the confidence to kind of fully dive into the business at the time.
- [08:11]
What came next from this first customer, Was there a greater marketing push? Was there now, like, oh, shoot, we got to figure out how to fulfill this stuff. I'm curious what came next.
- [08:21]
I gave myself a little bit of a window to execute and deliver the work. So I think after that first kind of payment, it was building out some onboarding and then figuring out kind of how I wanted to actually leverage the service, because it started out where I was actually doing the interviews with the plan to have someone, you know, outsource the actual interviewing. So we would get connected with this particular customer's customers, and then we would interview them with a series of questions, and then we would hand that over to the video editor. Right. I quickly found out that that was not going to scale very well for many reasons. One was just the timeline at which a lot of this happened. Right. Because let's say I was doing some video testimonials for your customers, and I've now connected with them. Now it's coordinating schedules, which oftentimes became two, three weeks out before someone was available. Potentially some were faster, but that was the big thing was just the delay in actually getting it all done. So we ended up switching from the one to one interviews to More of an asynchronous interview style where we would actually pre record all the questions via what we called like a capture link. And then we would send the customers that link and they could just easily just record on their browser, phone or tablet whenever they wanted. And it would kind of guide them through a series of 10 questions automatically. So that's kind of what we ended up going to, which really streamline operations and made things a lot, a lot simpler. But it took a handful of customers to kind of get to that point and realize that that was going to be one of the issues there.
- [09:56]
That is an interesting way to streamline it rather than doing one on one like zoom recordings to get those reactions, like, hey, look, if we're going to ask the same questions to every person, like we might as well pre record that. And so that's kind of a cool way to do it. Was it similar with Content Pros, your previous business saying, I don't want to be the one doing the content writing, I just want to go out and find customers curious, like, what was the marketing like for that business?
- [10:23]
I don't think it was ever like I didn't ever want to do the work. I think you're kind of when you start a service business, right. In my case, like, I'm more of kind of the have the business owner mindset. So I always lean towards like outsourcing first. Right. A lot of people start service businesses and your audience might have skill sets, maybe they're a writer, graphic designer, etc. And for them to just go and start a graphic design business or writing business and do the work is very natural, which is completely fine. But when you're doing the work, you can get kind of in that service business trap right where you're doing and fulfilling and it's hard to get out of that. I think you want to as quickly as possible move to outsourcing, what we call the mechanism of your business. And I think just, I don't know if it was, you know, how I grew up or just the way I was approaching business, but even, yeah, Content Pros, the very first business or one of the first online businesses or product services we started, we outsourced the writing right away. The first customer that paid, we brought on a writing team. It was the same with Applause Lab. So I think that can be very advantageous to like immediately working on the business and is definitely one of those things that you're going to need to have implemented, you know, back to the point of like building a business to Sell down the road as well.
- [11:43]
Now it sounds like with Applause Lab specifically, there wasn't a ton of other players in the space doing the same or doing a similar service. But with content writing, there's a million in one places to get outsourced content written. Like, what gave you the confidence to say, we can stand out in this space, we can gain customers in this space.
- [12:02]
How we approached it was actually trying to stand out by not trying to be the cheapest. And I think to your point, there's a lot of content writing services and a lot of them are, I guess, kind of considered content mills in many ways. And we wanted to really be like, okay, well what if we took the other approach and didn't try to compete with everyone on price, but more of just priced ourselves higher and really kind of pushed quality industry experts and focused on more like thought leadership content. So that was really the angle that we took.
- [12:34]
Where'd you find your first customers? For the content business, it was network.
- [12:39]
Which is very common, and then cold email. So those were the two combos. And we really rode the cold email train for a majority of the growth of the business. To be completely honest. Cold email and then referrals kind of came naturally as well. But that was kind of at least somewhat of the predictable driver for us at the time.
- [12:58]
That's interesting to say. It was cold email. It was like, hey, nobody knows we exist, so we got to tell people that we exist. And that channel was through cold email. Now I'm curious, like, what was the initial pitch like? And I imagine it was honed and tweaked and improved over the years.
- [13:15]
Oh, man. We got the cold email systems that we'd built out for that business was just really, really intense. I think at one month we were sending 20,000 cold emails a month, which is absurd. And it was definitely we, as we got better, you know, that number went down, but we just, we had increased kind of the volume and we really tried to keep the quality up. And we had a great kind of a dedicated internal team managing it. Yeah, we just had some really unique reach outs. We were really, I think, ahead of our time with like personalization, which now is like very common. But, you know, we would pull in a lot of different stats at the time which weren't really common and create, you know, even though they were mass emails, they definitely felt and looked more personable than most people were doing at the time where most people just leveraged first name and company. We were leveraging like first name, company location, blog post, recent Blog post title that they wrote and different things like that as well, creating like a first line customization that we'd have a VA kind of personalize through all of the spreadsheets before they were uploaded and sent. So I think those really helped. I think we were averaging like a 3 to 5% positive reply rate on all of our campaigns, which was at the time really, really good.
- [14:32]
Definitely a volume based play here at 20,000 emails a month and hoping for just a few percent to take the bait and engage. Was there a specific ask at the end of the email? Was it directly pitching your services? What was the ask?
- [14:46]
Oh yeah, so it was a content strategy call. So we would push everyone to a call where we would kind of evaluate their current content strategy and then share with them some ideas. So more of a value, kind of a consultative type of close. So that was the pitch. So most people went through a phone call and then they would sign up and trial our service and we had like a discounted first post try us out. So that converted really, really well and we were able to, I mean, yeah, that was the huge driver really, to take us from few customers up to 70 or so.
- [15:19]
Yeah.
- [15:20]
Wow.
- [15:20]
Was it you doing those initial strategy calls initially?
- [15:24]
Yeah. So my partner and I, I mean, I think both of us, you know, very similar skill sets in like sales and you know, that stuff. So that was like one of the last things we, we outsourced essentially and we just really focused on hiring out operations, customer success, editorial team, writers and. And then we just really did sales and we rode that, you know, all the way till, you know, just about. Till we closed or sold the business.
- [15:48]
For those 20,000 emails a month. How did you figure out who to contact, like how to populate the receiver end of that for that business?
- [15:56]
We, we definitely tried a few different or quite a few different angles and that wasn't like our average. I think we got up to that. Um, I think. And even now, I mean today like cold email still works. It works if you get really personalized and specific and it's definitely a quantity play anymore. But for us it was converting and we were going after a lot of like agencies and SaaS companies. So those that 20,000 was segmented into like a few, three or four different avatars that we were kind of targeting. So that kind of helped as well. But yeah, that's kind of how we approached it.
- [16:29]
Nick Loper
More with Tyler in just a moment, including pricing, positioning and setting up for that big exit right after this. Years ago, I was sitting in a conference in Santa Barbara and the presenter asked this question, are you working on your business or are you working in your business? And at that point I'd already quit my job. I saw myself as a full time entrepreneur, but it was this moment of clarity that no, I'm still very much working in the business. So when I got back home, that's when I made my first full time hire. It was the first in a long series of steps of learning to truly take control by being okay, of letting go of certain tasks. Now when you find yourself in that position of needing to hire like yesterday, you need Indeed. With a sponsored job on Indeed, your post jumps to the top of the page for your relevant candidates so you can stand out and reach the right people faster. Plus there's no monthly subscriptions, no long term contracts, and you only pay for results. That's why for my next hire, I'm using Indeed. There's no need to wait any longer. Speed up your hiring right now with Indeed side Hustle show listeners get a $75 sponsored job credit. To get your jobs more visibility at Indeed.com Sidehustleshow just go to Indeed.com SidehustlesHow right and support our show by saying you heard about Indeed on this podcast. Indeed.com Sidehustleshow terms and conditions apply. Hiring Indeed is all you need. Friends don't let friends overpay for wireless which is why I'm excited to partner with Mint Mobile for this episode. Don't let the traditional big wireless carriers take you for a ride this year. I made the switch to Mint Mobile over five years ago and haven't looked back, saving thousands of dollars over that time. With Mint Mobile you get premium wireless plans starting at 15 bucks a month. All of those plans come with high speed D and unlimited talk and text on the nation's largest 5G network. You can use your own phone with any Mint Mobile plan and even bring over your existing phone number and all your existing contacts. So join me in ditching overpriced wireless this year and get three months of premium wireless service from Mint mobile for just 15 bucks a month. If you like your money, Mint Mobile's for you. Shop plans@mintmobile.com Sidehustle that's mintmobile.com Sidehustle Upfront payment of $45 for 3 month 5 gigabyte plan required equivalent to 15 dol per month. New customer offer for first 3 months only, then full price plan options available, taxes and fees extra. See Mint Mobile for details with Applause Lab.
- [18:56]
Tyler Gillespie
Has that shifted to more Personal outreach or what? What did you find effective in driving customers there?
- [19:04]
Oftentimes growth comes from your network initially just people closest. So I mean, that's why it's so vital to kind of build up your network and cultivate relationships, because that's going to just be about an asset you can have over time. So that was a huge driver initially with the plaslab was I had a pretty decent network and I just reached out to friends and people and colleagues in my network that I thought the service could be valuable to. And so that is really what kind of kicked off the business in many ways because it resonated with people and they were willing to pay for it. So that was great. And then after that I had a small cold email campaign, but it was super personalized. Um, I also did like a lot of networking, you know, which nowadays, you know, in some of some Facebook groups that were really relevant as well, like shared some of the journey on like indie hackers and places like that. So I think those are really viable places to go initially once kind of your, your network's tapped. But that's kind of where drivers initially that I was focused on.
- [20:07]
How did you figure out how much to charge for this type of service?
- [20:11]
Yeah, pricing is always, always challenging. I think initially I looked in the market, right, And Testimonial Hero, one of my competitors that ended up buying us, you know, they were doing in person video testimonials, but they were charging anywhere from six to $10,000 a video. So they were going very more enterprise in person, really high quality. So I was like, okay, interesting. And, but then on the flip side, there was really no other service doing this at a much lower cost. There was just pure software plays where it's kind of do it yourself type of video testimonials. You'll see a lot of services, you know, 50 to $150 a month that will just. You can use their software to capture testimonials, but then you still have to do all the editing and etc. To make it look good. So that was kind of my initial, like looking at the market kind of once I had kind of an idea of what that looked like and then found some agencies that were doing it for a couple thousand dollars a video or even around a thousand. So that was kind of anchored the pricing. And then I looked, okay, how much would it cost me if I built out my dream team, had a video editor, we captured these and really leveraged that to kind of set the pricing. And I came up with Kind of a very affordable option, I thought, which was around 3 to $400. A video testimonial, kind of fully edited prod and captured from your best customers. So that was kind of what we ended up pricing the service at, which was drastically cheaper than anything in the market. Which I think that also helped us look really attractive to a lot of people that needed that service.
- [21:49]
Yeah, that's interesting to say, hey, people were going really high end. Other companies were going really low. Kind of a DIY software model. But there was some room in the middle, which is interesting, and say, okay, here's what we can do. And then backing out some of your projected costs in labor to fulfill that. Is there a target? Especially when you're outsourcing the labor from the very beginning, is there a target margin that you're shooting for on this type of operation?
- [22:18]
Yeah, 100%. So typically the cogs or cost of goods sold of having someone fulfill the work for you, I always try to aim between that 30 and 40% mark, which gives you a 60 to 70% mark gross margin. So that's always kind of an interesting way to like, look. And when you're looking at price or services, it's like, can I like get this fulfilled? Like, what would the cost be if it was 30% of what I'm charging? So. So that's kind of how I looked at it. And not every service is like that, but it kind of helps you because you at least want that margin. Like, if you don't have at least a 50 to 60% gross profit margin, it's just going to make it really difficult to scale down the road if you want to hire other people and marketing, et cetera. So that's kind of a rough percentage to kind of aim for. At least I believe, initially.
- [23:12]
Yeah, it's an interesting space to play in because you see the same thing in virtual assistant companies. Well, they'll charge the client 35, 40 bucks an hour. And then to have any margin to play with, they got to turn around and pay that assistant half that or sometimes less. And it's an interesting one. Did you ever run into either in the writing business or the testimonial business clients saying if they're the ones doing the work, if this video editor is the guy doing the work, why don't I just go hire him directly? Like, I'm thinking, okay, if I hire a house cleaning company that operates on a similar model, maybe it's 100 bucks, but they're turning around and paying the cleaner 30, 40 to come and do it. It's like, well shoot, I'll just do business directly with the cleaner, pay them 50 and they're happier and I'm saving money too.
- [23:58]
Yeah, I think, well that's a dilemma with, with any business really. But service businesses specifically, I think you should be providing like it should be an obvious value that makes up for the pain, the switching cost for them to just manage it themselves. Because there's other things that come with that. Right. Like you could just go and hire, use the DIY software. But then someone needs to manage that capture. Someone needs to then hire the video editor. Manage the video editor. So like there was built in value that you know, hopefully, well, you know, makes up for the customer's time and the value they value their time at. So I think that's one way to look at it. I think for us like we ended up, and I'll just tell you, we ended up using a service called VideoAsk, which you may be familiar with, which is a really cool. It's a capture tool to capture video testimonials for applause that. But what we did, which was really unique was like cool. We're going to leverage this tool. Tool. You could go out and get this tool yourself, record your own videos, send it to your customers, get the footage edited, etc. But what we're going to do is we're going to leverage this, we're going to actually hire a spokesperson to record all these questions that are proven questions. We're going to build out the whole video ask. We're going to create your own special capture link and all you have to do is send that link to your customers once they submit it. All the footage comes into our video team, we review it, we take that 12 minutes of footage, pick out the best parts, edit it to a 90 to 122nd version that's fully produced, edited with your brand CTA and then we give that to you that you can just embed on your website. So that was kind of the value prop in kind of that specific business and process where once people could kind of see that was a no brainer for the cost because for them to try to do that all themselves and that's the benefit of a service. Hopefully you have the efficiencies of scale as well. Right. Like over time where even if someone wanted to do it on their own, it would probably still be the same or even more to do it themselves, you know.
- [26:04]
Right, I like that.
- [26:05]
That's always a common question for sure. But you know, hopefully you're you're marketing and looking for people that aren't the DIY crowd and they're happy to pay you to kind of do it for them, you know.
- [26:17]
Yeah, that makes sense. All right, so my understanding of Tyler's process so far is, number one, come up with a problem that is at once valuable to businesses, but difficult or expensive for them to solve on their own.
- [26:30]
Nick Loper
Number two, go sell a solution to that problem.
- [26:34]
Tyler Gillespie
And number three, go find a qualified contractor or employee to help create and deliver that solution. Tyler with Applause Lab, was there any recurring element to these customers that you found or was it just kind of a one and done? We'll go and conquest you. 3, 5, 10 testimonials, however many that you need.
- [26:52]
Yeah, and that's a great question. I think this is one of the things, obviously when you're designing to exit, recurring revenue is a huge thing. And I think I was like, immediately, let's get recurring revenue in from day zero. And I had to learn the hard way that not all business models for your audience fit into a recurring model or you have to get creative with how you position it with some of your offerings. Because for me, like a lot of people didn't need a video testimonial, just that model need a video testimonial every month on a recurring basis. So it definitely moved into the packaged offering where we would sell packages of 2, 4, 8, 12 or 24. And that seemed to work really well where you could buy a package and then you could use it whenever you wanted. So my packaged offerings were priced a little higher. And then I did, after someone tried us, offer them a subscription which was kind of on the back end, but it was a yearly subscription where you could buy any amount of video testimonials you wanted. You got a discount, it was a 12 month subscription and then you could use those whenever you wanted through the year. So that actually was a huge hit and that fit well. So I was able to kind of tackle the subscription element, but then as well gave my customers the flexibility where, you know, they're not getting charged every month for something, there's a lot of out of their control as well when they can get a customer to say yes. When someone's in the right stage in the buyer's journey or customer journey. So that was actually what we ended up moving towards, you know, small package upfront, try us out and then we would upsell them into a 12 month subscription on the back end.
- [28:31]
Okay. So if they happen upon a customer who is singing their praises now they have a system to capture that. And that system was Applause Lab, like, hey, here's somebody you ought to go and contact. Okay.
- [28:43]
That's what kind of made it nice and flexible for them as well. Because as those opportunities arose, they could easily just funnel them in. And that was what we were trying to create, was a system to capture these video testimonials so you could just have this social proof kind of engine going kind of effortlessly. So that's really kind of what we helped set up.
- [29:01]
From conception to exit in 13 months. Seems pretty quick considering I spent 9 1/2 years on the site that I recently sold. What was that process like in terms of either getting your books in order or listing on brokerages? Like, what was that process like?
- [29:20]
Yeah, great question. I think again to like designing from day Zero. So it's like, I think one thing I had was like super clean processes, very organized. I had a great manager in the business. We had detailed books. I highly recommend following like Profit First. So that was a huge help. And it's kind of an accounting system for people who don't know there's a great book on it. But you know, these were all things from day one that just made it really kind of effortless to potentially sell. And again, like that happened a lot faster than I thought. And kind of how it happened was I began creating relationships in the industry, one of which was with Testimonial Hero. And they actually brought it up when we had connected, you know, around that 12 month mark and kind of surprised me and caught me off guard a little bit. So I actually never listed with a broker properly. So it was kind of an out of the blue kind of thing. Because I think for a company like that, a lot of people like acquiring customers and acquiring video editors and an asset like that is much faster and that's the reason people do it than starting from zero or just doing it on their own. And I think that was the case the value add for, for Testimonial Hero as well. For them to just kind of buy the business, kind of add that as another product offering that was different from what they already had.
- [30:42]
Yeah, so their Testimonial Hero was the company that was targeting enterprise clients at five, ten grand a video.
- [30:50]
Exactly. Yep.
- [30:51]
Okay, so now here's a way for them to capture completely like enter a completely different segment.
- [30:56]
You know, I'll add as well that through relationship building with them, they were actually sending me leads already and we've set up kind of a referral system because they had a lot of people that would reach out to them and say, and once I found out how much they charged, it wasn't a great fit. So testimonial here would downsell or kind of down referral them over to me and if they close then I would give them a cut. So that was actually kind of how the relationship started. So that was interesting as well.
- [31:25]
That is interesting. A little referral. Strategic partnership, a service, affiliate marketing kind of deal. Are you comfortable sharing what the business was doing around the time of acquisition in terms of monthly, I mean, annual revenue? It's like, well, it's been one year. Here we go.
- [31:44]
Yeah, so let's see. Well, I can't reveal any of the numbers because I did have to sign an NDA with the buyer. But we had about five or six video editors that were going a full time customer success manager. And then over that year we had serviced about almost 80 customers and then about 20 plus of them were actually on recurring annual plans.
- [32:08]
Okay. So there was quite a bit in place there, including the team. And so that's one of the benefits here is like, okay, the team stays with the business. They're, you know, you're not going to have to go through the headache and expense of recruiting the service providers in this case. So that's part of what makes it an attractive acquisition.
- [32:26]
Yeah, no, 100%.
- [32:27]
With the content Pro's exit, was it similar, like was it a strategic partner who bought that or. Curious what that exit process was like.
- [32:37]
Yeah, we actually, that one we did list with a broker. So that was a little bit more of a traditional, if you could say that we listed and then we talked to quite a few like competitors and what would have been considered like strategic partners. But we ended up getting bought by a private equity fund. You know, that was just, that actually wasn't a strategic partner and I think they just wanted it for their portfolio. It was interesting because I definitely, I thought that one of the few people in the space or our space would have bought us. But they passed and we ended up going a different direction. But it ended up working well. They still have the business, it's growing, so it's cool to kind of see. And I still refer people over to them here and there as well.
- [33:17]
That is interesting. And that's, you know how many? Because you had a ton of writers. Did you have like a hundred writers or something on the team? Like there was a serious operation.
- [33:27]
Yeah, we had a lot of writers. I mean they were all contractors, but still like we built the team up and that's a big asset as well. I think that was one of the reasons we found out when we sold just because hiring training. I think we ended up hiring like 1% of applicants. We had a full time person that was, you know, constantly hiring. And I think for us, like since we didn't like specifically write for a very niche topic, we had a lot of writers that were bashed into kind of teams of topic matter experts which allowed us to write for a variety of industries and stuff like that. So that was why we opted for just building a larger team of contracted writers which I think worked really well.
- [34:09]
Nick Loper
More with Tyler in just a moment, including his laptop test for business owners and four other ways you can start to design your business today today for a potential acquisition down the road right after this Running a retail business is no joke, especially if you're selling online and in person, and especially if you're doing it as a side hustle. But Shopify Point of Sale makes it simple. Shopify POS is your all in one command center, seamlessly connecting your in store and online operations, whether you've got one location or a thousand. That means customers can shop however they want and you've got the tools to help close the sale every time. And here's the kicker. Acquiring new customers is expensive.
- [34:47]
Tyler Gillespie
You already know that.
- [34:48]
Nick Loper
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- [36:26]
Tyler Gillespie
How are you spending your time? Or how are you minimizing your time? Because as a potential business buyer, it's got to be more attractive that the owner is somewhat hands off. Curious how you're managing that relationship. Like, on the one hand, I'm still trying to grow this thing because the more it makes, the better multiple, the better exit that I can have, the more money I'm making today. But on the other hand, I also want to show that it doesn't necessarily require me day to day.
- [36:53]
I kind of wrote down five different ways that other service businesses could actually think about kind of designing their business for an exit. And some of the things I implemented and thought about as well. And the first one to your point of what you just kind of talked about was I had written down, like, passing the laptop test. And essentially what I mean by this is if you closed your laptop today, like, how long would your business survive? And that's really important because if someone's going to buy your business, it's a huge tell, like how dependent the business is on you. And the more team you can have implemented and built around yourself where you could close your laptop and step away for two weeks, a month, which is kind of the goal I try to set, then the better off your business is going to be. That's going to be really attractive for an investor.
- [37:44]
All right. Passing the laptop test. I like it. I went 36 hours without email, which is a pretty good streak for me this weekend. So I'm working on it a little bit.
- [37:52]
Yeah. And I think you can work towards it. I mean, there may be stuff you love doing. I think I'm just like, if we look at the mechanism of your business and the operation, like, there's always going to be things you're doing. But if you closed your laptop, could your business operate and survive without you? And I think it's fun to kind of, I mean, coders use this term as like a code freeze. Right. They'll code something and then they'll step away and see what breaks. And I think that's a great kind of approach for a lot of service businesses as well, is build your processes, build your team, and then take a tape, take a step back, wait a few days or a day and the problems are going to rise to the top. And you know, you kind of then have this checklist of what to fix. Right?
- [38:32]
Yeah. Okay, I do like that. What else is on your list?
- [38:36]
Number two, I had thinking like a software company, so thinking like a SaaS. So I think obviously there's all these different business models, but when you can think and operate like a SaaS. And what I'm specifically referring to is like cool, like SaaS companies, like, why are they so valuable? They have recurring revenue and mrr, they have low churn rate, long lifetime value. So these are things that service businesses 100% can implement. And when you start operating yourself and thinking like a SaaS company, that's going to put you in a really, really good position and category to someone who's maybe looking to buy you.
- [39:12]
Okay, that makes sense. What's next?
- [39:14]
Number three, we got positioning like a product. And I know you've talked about this before on other episodes, but productizing, and this is kind of, you know, obviously something I'm a huge advocate of and fan of, but it's like, how can you position yourself like someone is going to come to your site and buy something, like they're buying something on Amazon. So productizing your service offering, you know, fixed scope, fixed price, the ability to buy right then all that really helps and streamline kind of the thing that you're, the service offering that you are, are actually offering. Obviously there's a lot of we could dive into productizing, but that's a huge part of making a service business attractive and scalable.
- [39:53]
On the productizing thing, did you get people who still wanted to talk to you, like, okay, here's the menu of different offerings, here's what you get at different price points. Did you still get people like hitting the little live chat button or like, can I request a call? I just want to talk to somebody about this.
- [40:09]
Yeah, no, I think, for sure. I think it's not that you're not trying to talk to anyone. I think it's just how could you have, like, I think we have this goal or like I do at least, like, how could you make it possible to have a no sales close? Maybe it's not possible with your business, but moving that much closer, how could you make your marketing, your positioning Your social proof, the positioning of your product and the pricing in such a way that someone could buy without talking to you. I think oftentimes someone does, especially depending on the price point of your service offering. But even if that's the case, you know, then having how can I have like A1 sales close and that's like a huge shift and a huge step and like, I mean could drastically change like how most service business operate if you just kind of think in that, in that way.
- [40:54]
No, I like it.
- [40:55]
All right, number four, Number four, depersonalization. So I think this one's huge and it kind of flows into the laptop test. But you know, does the operations depend on you? And then depersonalization is, does the business depend on you? So I think that's a huge one because the more connected you are to the business, whether it's a personal brand, et cetera, or if everything depends on you from like a marketing and network and connection space, that one is going to kind of hold you back, especially on the sale of a business. So working to depersonalize the business and disconnect it from yourself is a huge one as well.
- [41:32]
This one is really a challenge for me and I'm going to pause here because the businesses that I've started that have had success have been me like front and center. My name is on it, like I'm signing my name to it. I've given it my stamp of approval versus the ones that I've tried to.
- [41:47]
Nick Loper
Kind of remain a little more anonymous.
- [41:50]
Tyler Gillespie
And try and throw up. Just generic. Hey, it could have been written by anybody type of content. Like those have not done as well. And I imagine for somebody starting out, especially in the so called skills trap of like, well, I'm an expert in graphic design, so I'm going to start a graphic design company. Something along those lines. Like you are really playing up that personal brand, your own personal expertise and credentials and everything. And so you're kind of saying like if you can avoid doing that from the very beginning, go down that path. Can you speak to that for a minute?
- [42:21]
For certain people it's going to be harder than others. I think depersonalizing your business lowers the risk profile for someone to buy it. Right. It doesn't mean that the business is invaluable, it just isn't. Might not be as sellable. So that's like a big thing, valuable versus sellable. But I think yeah, it's one of those things that if you start like that because you're right, it may be like you may have A huge network which you talked about before and people know you. And I think you can still be connected initially. But like, if it's Nickeloper.com or Nick Loper video editing versus, like a branded option, I think the goal is to work towards, like, it not being super dependent on you, even though you still might be the face because an investor is going to be like, cool, are you coming with the business or am I buying it from you? Do you want a job now or do you want to just sell it? And if I bought it from you, is it going to run the same and smoothly without you in the business? So that's really kind of what it comes down to. I don't think either one is necessarily bad. It's just if you have the goal to sell or want to sell, working towards depersonalizing is going to be really helpful.
- [43:29]
Okay, that's helpful because, yeah, you see, like Russ Perry is behind Design Pickle, but it's not like I'm doing the design for you and Chris Schwab. Same thing with Thinkmades. Like, hey, I'm not doing the cleaning, but hey, I'm running this company. And it's about the service and it's about the customer and who they're targeting and how they're targeting and how they're operating. And of course, hiring qualified people to do the work. Not shirking their responsibility on that front in any way, but just saying it didn't have to be about them, their specific skills and mechanics in delivering that labor. So depersonalization number four. What's number five?
- [44:06]
Number five is predictability. So I think someone who's going to buy your business wants predictability. They want to see predictability and kind of growth predictability. And that's why MRR or kind of positioning kind of your service or trying to either have, whether it's monthly recurring revenue or plaslabsig annual recurring revenue and that consistency. So the more predictability you can build in your business. And that could be applied to, like I said, revenue, team growth, rate, lead flow. There's a lot of areas there that's going to lower the risk profile to an investor and make your business more valuable. So that's something to kind of think about. And it could be applied in a few different areas as well.
- [44:48]
Okay.
- [44:48]
Yeah.
- [44:49]
What kind of consistent process are you applying either on the front end, marketing wise, like, how many leads are you generating a month? How many new clients are you generating a month? What's the churn look like? How many people are on recurring Plans, all that stuff. Like if you start the month, as I kind of often do, which is still weird to me, even though revenue has been really consistent and growing for several years, I don't have a lot of spoken for revenue on the first of the month and then 30 days later it adds up pretty well. But it is kind of a weird thing to say. Yes, it's predictable, but it's not necessarily spoken for in advance in terms of recurring contracts.
- [45:28]
So it's kind of one off orders that are coming in or revenue that's coming in. But it's not true mrr. Is that what you're kind of saying?
- [45:37]
Yeah, exactly. It's not true. Monthly recurring where I've got 100 people signed up on a membership basis. Nothing like that.
- [45:44]
Yeah, well, I think investors, what I've noticed as well in talking with a lot of different investors and brokers is your business could still be valuable. I think the MRR component and credit card on file is like that's a very clear like cool. That is predictable. That's why SaaS multiples are so high because they have that. But you could also show in your case, listen, I don't have MRR, but here's my 12 months of revenue that's been very consistent and growing or 24 months of revenue. And even though it's not MRR, you can see that it's still consistently coming in. So that could provide a similar kind of picture to someone who's looking to maybe buy your business. But MRI would be kind of the holy grail in many cases.
- [46:28]
Is there such thing as a typical multiple or sales price for a productized service?
- [46:34]
Yes. It's all going to depend on the market. I think it's going to probably be in that 2 to 4 or 5x range. Obviously the higher end of that range is going to be very dialed strong systems. All these different things we talked about to demand that. So that's going to be the multiple range on 0 to $2 million per se of what they call net earnings or seller discretionary income or you might have heard the term ebitda. They're all very similar, kind of getting to kind of the same thing. And the multiple is kind of based off that. Once you get over like the $2 million in EBITDA range, then the multiples kind of inflate a little bit more because you're at a certain size in the market that's worth a lot more. You're just bigger and people value that more. But for most people who are in that sub $2 million range, that 2 to 5x is pretty common. Yeah, that's kind of where I've seen a lot of people selling.
- [47:37]
Would you still go to an Empire Flippers or a Quiet Light or an FE International or is there, are there other brokers that specialize in service businesses?
- [47:48]
Yeah, 100%. I think each of these companies kind of have their own specialty, you know, as well like the size of businesses. So Empire Flippers really specializes in like Amazon, FBA. FBA businesses. Right. Quiet, like sells a lot of SaaS. Some Amazon, some service, but a much higher price point. So I think finding a broker that's kind of based on your business. We're specifically talking about service businesses. I would probably lean towards Quiet Light. And then there's also another agency called We Are Barney and they specifically focus on selling productized services and agencies. So I got in touch with their team and they've been. It's really interesting to kind of see what they're doing and kind of how they've niched out kind of the businesses they sell. So that's important as well, finding someone who like understands a service business model and. But I think before even going to a broker, you know, if you have a strategic connection or the ability to sell direct, that's going to be like the most advantageous to save that 10 to 15% commission.
- [48:50]
Yeah, exactly.
- [48:51]
If possible. But you know, also that's the value they bring. If they have that network and can sell your business fast, then sometimes it's worth it.
- [48:58]
All right, well Tyler, what's next for you? You can find. You've got the newsletter going on at Productized Services. You got the productized snacks podcast. What you working on this year?
- [49:09]
Yeah, so really the newsletter, I've got a weekly podcast where I interview a productized service founder, really every week. And so I'm really staying consistent, trying to stay consistent, as you know, on that. And I also have an asynchronous mentoring program where I help service businesses kind of scale and you have like one to one access with me on WhatsApp. So that's been a really interesting kind of way to work with some different productized founders and agencies and helping them grow. But really, yeah, the free newsletter Productize Services is the best place to get connected and then learn more about. Yeah. How to productize.
- [49:46]
Well, very good productized services. Check them out over there. Tyler, thanks so much for joining me. Let's wrap this thing up with your number one tip for side Hustle Nation.
- [49:57]
Yeah, so I was thinking about this and the first thing I thought of was a quote I'll start with first and it's you can't read the label while you're inside the jar. And that's by Keith Cunningham. And I think that's just really powerful, especially with any service businesses out there. Side Hustlers and the point of that quote is really, if you don't have a mentor mastermind consultant available to kind of share your progress, get a second pair of eyes on what you're doing. That could be one of the biggest things that could help you grow because oftentimes it's less about doing all the right things and more about avoiding the wrong ones. So a mentor coach can really help avoid those potholes, per se on the journey.
- [50:40]
I never heard that quote before. You can't read the label while you're inside the jar. A call to get some help along the way. Mentorship, coaching, masterminds, all this stuff has been tremendously valuable in my own journey and I take it as been in yours as well. Big thanks to Tyler for sharing his insight. Once again, you'll find the full text summary with all of Tyler's top tips from the call, along with links to all the resources mentioned@sidehustlenation.com Tyler While you're there, make sure to download my free list of 101 service businesses that might just be ripe for the type of productization we're talking about today. That is it for me. Thank you so much for tuning in. Until next time, let's go out there and make something happen and I'll catch you in the next edition of the Side Hustle Show. Hustle on.