AI transcript
0:00:04 Here’s an oldie but a goodie from the archives, from the Side Hustle Show, greatest hits
0:00:05 collection.
0:00:06 What’s up?
0:00:07 What’s up, Nick?
0:00:08 Aloper here.
0:00:13 Welcome to the Side Hustle Show, because your 9-5 may make you a living, but your 5-9 makes
0:00:15 you alive.
0:00:18 Service businesses can get a bad rap.
0:00:20 After all, there’s still clients to deal with.
0:00:22 There is actual labor involved in fulfillment.
0:00:28 They’re just not as glamorous as the other more, quote, “passive” income models.
0:00:33 But you should know that more Side Hustle Show guests started with a service-based business
0:00:35 model than any other.
0:00:39 On today’s show, you’ll learn how to set your business up from day one to provide great
0:00:45 value to clients, yes, but without relying on you to do the actual work.
0:00:48 I am excited to welcome Tyler Gillespie to the show.
0:00:49 Tyler, what’s going on?
0:00:50 Not much, man.
0:00:51 Thanks so much for having me.
0:00:52 Excited to be here.
0:00:53 You bet.
0:00:54 So Tyler is a longtime listener.
0:01:00 We first connected way back, I want to say 2014, over a World Domination Summit ticket.
0:01:06 But in any case, Tyler today runs productized.services, where he helps people with this unique brand
0:01:08 of service-based businesses.
0:01:11 There are a couple huge benefits to Tyler’s approach.
0:01:14 One, all of a sudden, you’re not limited by your own skills.
0:01:18 You just have to have the ability to find clients and then other people with the skills
0:01:19 that they need.
0:01:20 So that’s huge.
0:01:24 It practically opens up the realm of potential services that you could offer.
0:01:30 And number two, since the business no longer relies on you as being the hands-on mechanic,
0:01:34 it becomes that much more sellable down the road, which is something that Tyler’s done
0:01:36 a couple of times now.
0:01:41 If you hit up at sidehustlenation.com/tyler, you’ll find links to all the resources I mentioned
0:01:43 along with the full text summary of our call.
0:01:49 While you’re there, be sure to download my free list of 101 service business ideas that
0:01:52 might just be ripe for the type of productization we’re talking about today.
0:01:58 So Tyler, your latest service was called Applaus Lab, which helped e-commerce brands
0:02:00 get video testimonials.
0:02:03 Was this thing started with the exit in mind?
0:02:04 100%.
0:02:05 Yeah.
0:02:10 I think the timing as far as when the exit would happen or if it would happen definitely
0:02:11 was not planned.
0:02:15 And I think that’s a lot of the part of what I kind of share and try to help other service
0:02:18 businesses with is having the optionality.
0:02:21 Because I think that’s something that a lot of people don’t have.
0:02:26 So when I started Applaus Lab from day one, it was very much intentional with just how
0:02:31 I was designing the business and thinking about and putting myself in investor shoes.
0:02:35 If someone was going to buy this down the road, what can I start with right now?
0:02:39 The more you do this, the more you learn, the more businesses you start, you get better
0:02:43 and faster at actually going from zero to 100.
0:02:46 And I think the previous business taught me that.
0:02:49 I think the first few years running a content writing service, which was called Content
0:02:53 Pros, before we sold that business, there was a lot of things I wish I would have done
0:02:55 a lot sooner.
0:02:59 So starting Applaus Lab, it was just like, “Cool, day zero, here’s exactly what I need
0:03:00 to do.”
0:03:05 And I think that really helped set it up for success because it was about 13 months and
0:03:09 we had a buyer come in and buy the business, so a competitor actually.
0:03:10 Oh, interesting.
0:03:11 Like acquisition.
0:03:14 We can’t beat them, join them type of deal.
0:03:15 Exactly.
0:03:16 Yeah.
0:03:19 So the company actually, and I did an interview with the founder of Testimonial Hero, who
0:03:23 I don’t know if you know, Sam over there, and we had done some partnership stuff.
0:03:27 We kind of targeted different avatars, even though we both did video testimonials.
0:03:34 So it started as just kind of a relationship and then grew into him actually being interested
0:03:35 in acquiring the business.
0:03:41 So it was a very natural and kind of fun to use a strategic acquisition for them.
0:03:42 Okay.
0:03:46 That was something that was interesting in going through the selling process for the
0:03:51 virtual assistant site, which we covered on an episode last month.
0:03:55 It was surprising the number of other people in the space who were interested in it.
0:03:57 And it’s like, “This would complement our existing operations.”
0:04:03 And so that wasn’t something that was necessarily on my radar as potential buyers, but that
0:04:05 was several of the interested parties.
0:04:09 Did you have a background in video production?
0:04:14 What gave you the confidence or inspiration to go into this video testimonial space?
0:04:15 Yeah.
0:04:17 Zero background in video editing, production, et cetera.
0:04:21 I think it’s just more, it came from like a knowledge of like, “Cool, this was something
0:04:23 we wish I had with previous businesses.”
0:04:27 And it was always a lot of friction with gathering video testimonials, right?
0:04:32 And it was always like, “Man, these are like one of the most powerful assets you can have
0:04:37 in your business to leverage having someone else kind of do the selling for you.”
0:04:41 But it was just one of those things that always got pushed to the bottom of the list, you
0:04:42 know?
0:04:44 It was like, “Cool, we need video testimonials.”
0:04:47 And then it turned into, “Okay, what if we just got written ones?”
0:04:51 And then it turned into, “Why don’t we just write them for the customer and then ask them
0:04:52 to approve them?”
0:04:57 It was just kind of, we went through that process, and I knew the power of them.
0:04:59 So it was just really kind of solved that problem.
0:05:03 And I looked in the market, and there just wasn’t that many solutions.
0:05:05 So I thought I would kind of give a stab at it.
0:05:10 But there definitely was a learning curve at the beginning with just hiring, training,
0:05:16 and working with a team of video editors, which that aspect was definitely new to me.
0:05:22 Which came first, the customer or the production staff?
0:05:23 Customer for sure.
0:05:24 Okay.
0:05:25 This was like the chicken or the egg solution.
0:05:26 Yeah, yeah.
0:05:29 So I put it out there, and actually one of my first customers was a buddy of mine who
0:05:35 runs an oil and gas company down here in, well, he comes in and out of Columbia where
0:05:37 I’m based, but he’s also from Oklahoma.
0:05:42 And he said, “Man, if you can get me, if you can get these oil and gas guys out in the
0:05:47 field to leave a video testimonial, I’ve been trying for years, I will pay you.”
0:05:52 So he signed up for a couple, and then I just kind of went to work, and we ended up capturing
0:05:56 I think over 15 video testimonials for him or something.
0:05:58 He had been trying to capture these and just never could.
0:06:01 So that was kind of the first customer that kicked off the business, which was really
0:06:02 fun.
0:06:03 Okay.
0:06:09 So I’m trying to think, if I was going down this path, first starting with an idea or
0:06:14 starting with a problem that either I’ve experienced in my own life or through conversations,
0:06:18 like you said, “Hey, we really could have used this in another operation that we were
0:06:22 doing from other people that would talk to you like the power of testimonials, but it’s
0:06:23 really hard.”
0:06:29 So if those kind of complaints or those kind of annoyances start to bubble up in your own
0:06:33 thinking, in your own life, like, “Okay, maybe there’s a business on the other side of that.”
0:06:38 Even if you don’t necessarily have the skills to go out and solve that yourself, the odds
0:06:44 are somebody does, and maybe you could position yourself as the branded solution, the middleman,
0:06:49 the connector between those two, which sounds like that was the game plan here.
0:06:50 Absolutely.
0:06:51 Yeah.
0:06:53 I mean, I think a lot of things start with scratching your own itch, and that was kind
0:06:59 of the initial pain that I knew, and then I confirmed it with talking with people inside
0:07:04 my network, and then the validation was someone actually paying money, which then kind of
0:07:08 gave me the confidence to kind of fully dive into the business at the time.
0:07:11 What came next from this first customer?
0:07:13 Was there a greater marketing push?
0:07:16 Is there now, like, “Oh, shoot, no, we got to figure out how to fulfill this stuff?”
0:07:17 I’m curious.
0:07:18 What came next?
0:07:21 I gave myself a little bit of a window to execute and deliver the work.
0:07:25 So I think after that first kind of payment, it was building out some onboarding and then
0:07:30 figuring out kind of how I wanted to actually leverage the service, because it started out
0:07:35 where I was actually doing the interviews with the plan to have someone outsource the
0:07:37 actual interviewing.
0:07:42 So we would get connected with this particular customer’s customers, and then we would interview
0:07:46 them with a series of questions, and then we would hand that over to the video editor,
0:07:47 right?
0:07:51 I quickly found out that that was not going to scale very well.
0:07:55 For many reasons, one was just the timeline at which a lot of this happened, right?
0:08:01 Because let’s say I was doing some video testimonials for your customers, and I’m now connected
0:08:02 with them.
0:08:07 Now it’s coordinating schedules, which oftentimes became two, three weeks out before someone
0:08:09 was available potentially.
0:08:14 Some were faster, but that was the big thing, was just the delay and actually getting it
0:08:15 all done.
0:08:22 So we ended up switching from the one-to-one interviews to more of an asynchronous interview
0:08:28 style, where we would actually pre-record all the questions via what we called like a capture
0:08:33 link, and then we would send the customers that link, and they could just easily just
0:08:38 record on their browser phone or tablet whenever they wanted, and it would kind of guide them
0:08:40 through a series of 10 questions automatically.
0:08:45 So that’s kind of what we ended up going to, which really streamed the line operations and
0:08:46 made things a lot simpler.
0:08:50 But it took a handful of customers to kind of get to that point and realize that that
0:08:53 was going to be one of the issues there.
0:08:58 That is an interesting way to streamline it, rather than doing one-on-one, like Zoom recordings
0:09:03 to get those reactions like, “Hey, look, we’re going to ask the same questions to every person.
0:09:05 We might as well pre-record that.”
0:09:07 And so that’s kind of a cool way to do it.
0:09:10 Was it similar with Content Pros, your previous business, saying, “I don’t want to be the
0:09:13 one doing the content writing.
0:09:18 I just want to go out and find customers,” curious like, “What was the marketing like
0:09:19 for that business?”
0:09:23 I don’t think it was ever like, I didn’t ever want to do the work.
0:09:27 I think you’re kind of when you start a service business, right?
0:09:33 In my case, I’m more of kind of have the business owner mindset, so I always lean towards like
0:09:35 outsourcing first, right?
0:09:39 A lot of people start service businesses and your audience might have skill sets, maybe
0:09:43 they’re a writer, graphic designer, et cetera, and for them to just go and start a graphic
0:09:49 design business or writing business and do the work is very natural, which is completely
0:09:50 fine.
0:09:54 But when you’re doing the work, you can get kind of in that service business trap, right?
0:09:57 Or you’re doing and fulfilling and it’s hard to get out of that.
0:10:03 I think you want to as quickly as possible move to outsourcing what we call the mechanism
0:10:05 of your business.
0:10:11 I think just I don’t know if it was how I grew up or just the way I was approaching business,
0:10:16 but even Content Pros, the very first business, or one of the first online businesses or product
0:10:22 services we started, we outsourced the writing right away, the first customer that paid.
0:10:26 We brought on a writing team, it was the same with Applause Labs, so I think that can be
0:10:32 very advantageous to like immediately working on the business and is definitely one of those
0:10:37 things that you’re going to need to have implemented back to the point of like building a business
0:10:39 to sell down the road as well.
0:10:44 It sounds like with Applause Labs specifically, there wasn’t a ton of other players in the
0:10:50 space doing the same or doing a similar service, but with content writing, there’s a million
0:10:54 in one place is to get outsourced content written like what gave you the confidence
0:10:59 to say we can stand out in this space, we can gain customers in this space.
0:11:05 How we approached it was actually trying to stand out by not trying to be the cheapest.
0:11:10 I think to your point, there’s a lot of content writing services and a lot of them are I guess
0:11:14 kind of considered content mills in many ways and we wanted to really be like, okay, what
0:11:18 if we took the other approach and didn’t try to compete with everyone on price, but more
0:11:25 of just priced ourselves higher and really kind of pushed quality industry experts and
0:11:28 focus on more like thought leadership content.
0:11:31 So that was really the angle that we took.
0:11:34 Where do you find your first customers for the content business?
0:11:40 It was network, which is very common and then cold email.
0:11:45 So those were the two combos and we really wrote the cold email train for a majority
0:11:49 of the growth of the business to be completely honest, cold email and then referrals kind
0:11:54 of came naturally as well, but that was kind of at least somewhat of the predictable driver
0:11:55 for us at the time.
0:12:01 That’s interesting to say it was cold email, it was like, hey, nobody knows we exist.
0:12:06 So we got to help people that we exist and that channel was through cold email.
0:12:10 Now I’m curious, what was the initial pitch like and I imagine it was honed and tweaked
0:12:12 and improved over the years.
0:12:18 Oh man, we got the cold email systems that we built out for that business was just really,
0:12:19 really intense.
0:12:24 I think at one month, we were sending 20,000 cold emails a month, which is absurd and it
0:12:29 was definitely, as we got better, that number went down, but we just, we increased kind
0:12:33 of the volume and we really tried to keep the quality up and we had a great kind of
0:12:35 a dedicated internal team managing it.
0:12:37 Yeah, we just had some really unique reach outs.
0:12:42 We were really, I think ahead of our time with like personalization, which now is like
0:12:47 very common, but we would pull in a lot of different stats at the time, which weren’t
0:12:53 really common and create, even though they were mass emails, they definitely felt and
0:12:58 looked more personable than most people were doing at the time where most people just leveraged
0:13:00 first name and company.
0:13:07 We were leveraging like first name, company, location, blog posts, recent blog post title
0:13:12 that they wrote and different things like that as well, creating like a first line customization
0:13:18 that we’d have a VA kind of personalized through all of the spreadsheets before they were uploaded
0:13:19 and sent.
0:13:20 So I think those really helped.
0:13:25 I think we were averaging like a three to 5% positive reply rate on all of our campaigns,
0:13:28 which was at the time really, really good.
0:13:30 Definitely a volume-placed play here.
0:13:36 We had 20,000 emails a month and hoping for just a few percent to take the bait and engage
0:13:40 was there a specific ask at the end of the email?
0:13:42 Was it directly pitching your services?
0:13:43 What was the ask?
0:13:44 Oh, yeah.
0:13:45 So it was a content strategy call.
0:13:50 So we would push everyone to a call where we would kind of evaluate their current content
0:13:54 strategy and then share with them some ideas.
0:13:57 So more of a value kind of a consultative type of close.
0:13:58 So that was the pitch.
0:14:03 So most people went through a phone call and then they would sign up and trial our service
0:14:06 and we had like a discounted first post try us out.
0:14:08 So that converted really, really well.
0:14:13 And we were the, I mean, yeah, that was the huge driver really to take us from a few customers
0:14:16 up to 70 or so.
0:14:17 Yeah.
0:14:18 Wow.
0:14:19 Was it you doing those initial strategy calls?
0:14:20 Initially, yeah.
0:14:24 So my partner and I, I mean, I think both of us, you know, very similar skill sets and
0:14:27 like sales and, you know, that’s it.
0:14:30 So that was like one of the last things we outsourced essentially, and we just really
0:14:37 focused on hiring out operations, customer success, editorial team, writers, and, and
0:14:41 then we just really did sales and we rode that, you know, all the way till, you know,
0:14:44 just about till we closed or sold the business.
0:14:49 For those 20,000 emails a month, how did you figure out who to contact, like how to populate
0:14:52 the receiver end of that?
0:14:57 For that business, we definitely tried a few different or quite a few different angles
0:14:59 and, and that wasn’t like our average.
0:15:02 I think we got up to that, I think.
0:15:05 And even now, I mean, today, like Coldy Mail still works.
0:15:10 It works if you’re getting really personalized and specific and it’s definitely not a quantity
0:15:11 play anymore.
0:15:15 But for us, it was converting and we were going after a lot of like agencies and, and
0:15:16 SaaS companies.
0:15:20 So that 20,000 was segmented into like a few three or four different avatars that we were
0:15:21 kind of targeting.
0:15:23 So, so that kind of helped as well.
0:15:26 But yeah, that’s kind of how we approached it.
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0:17:45 With applause lab, has that shifted to more personal outreach or what did you find effective
0:17:46 in driving customers there?
0:17:50 Oftentimes, growth comes from your network initially.
0:17:51 Just people closest.
0:17:55 So I mean, that’s why it’s so vital to kind of build up your network and cultivate relationships
0:17:59 because that’s going to just be about an asset you can have over time.
0:18:03 So that was a huge driver initially with applause lab was, you know, I had a pretty decent network
0:18:08 and I just reached out to friends and people and colleagues in my network that I thought
0:18:14 the service could, you know, be valuable to and so that is really what kind of kicked
0:18:19 off the business in many ways because it resonated with people and they were willing to pay for
0:18:20 it.
0:18:21 So that was great.
0:18:27 And then after that, I had a small cold email campaign, but it was super personalized.
0:18:33 I also did like a lot of networking, you know, which nowadays, you know, in some of some Facebook
0:18:38 groups that were really relevant, as well, like shared some of the journey on like indie
0:18:40 hackers and places like that.
0:18:45 So I think those are really viable places to go initially once kind of your, your networks
0:18:49 tapped, but that’s kind of where drivers initially that I was focused on.
0:18:53 How did you figure out how much to charge for this type of service?
0:18:55 Yeah, pricing is always, always challenging.
0:18:58 I think initially I looked in the market, right?
0:19:02 And testimonial hero, one of my competitors that ended up buying us, you know, they were
0:19:08 doing in person video testimonials, but they were charging anywhere from six to $10,000
0:19:09 of video.
0:19:13 So they were going very more enterprise in person, really high quality.
0:19:15 So I was like, okay, interesting.
0:19:21 And but then on the flip side, there was really no other service doing this at a much lower
0:19:22 cost.
0:19:28 There was just pure software place where it’s kind of do it yourself type of video testimonials.
0:19:34 You’ll see a lot of services, you know, 50 to $150 a month that will just, you can use
0:19:38 their software to capture testimonials, but then you still have to do all the editing
0:19:42 and et cetera to make it look good.
0:19:46 So that was kind of my initial, like looking at the market kind of play.
0:19:50 And once, once I had kind of an idea of what that looked like, and then found some agencies
0:19:55 that were doing it for a couple of thousand dollars, a video, or even around a thousand.
0:19:57 So that was kind of anchored the pricing.
0:20:01 And then I looked, okay, how could, how much would it cost me if I built out kind of my
0:20:03 dream team, had a video editor?
0:20:08 We captured these and really leveraged that to kind of set the pricing.
0:20:11 And I came up with kind of a very affordable option.
0:20:16 I thought, you know, which was around three to $400, a video testimonial kind of fully
0:20:20 edited, produced, and captured from your best customers.
0:20:24 So that was kind of what we ended up pricing the service at, which was drastically cheaper
0:20:28 than anything in the market, which I think that also helped us, you know, look really
0:20:31 attractive to a lot of people that needed that service, you know?
0:20:32 Yeah.
0:20:35 That’s interesting to say, hey, people were going really high end.
0:20:41 Other companies were going really low kind of a DIY software model, but there was some
0:20:45 room in the middle, which is interesting and say, okay, here’s what we can do.
0:20:51 And then backing out some of your projected costs in labor to fulfill that.
0:20:55 Is there a target, especially when you’re outsourcing the labor from the very beginning,
0:21:00 is there a target margin that you’re shooting for on this type of operation?
0:21:01 Yeah.
0:21:02 100%.
0:21:09 So like typically like the cost of goods sold, of like having someone fulfill the work for
0:21:14 you, like I always try to aim between that like 30 and 40% mark, which gives you like
0:21:18 a 60 to 70% gross margin.
0:21:22 So it’s always kind of an interesting way to like look in when you’re looking at price
0:21:25 or services is like, can I like get this fulfilled?
0:21:30 They’re like, what would the cost be if it was 30% of what I’m charging?
0:21:32 So that’s kind of how I looked at it.
0:21:35 And not every service is like that, but it kind of helps you because you at least want
0:21:36 that margin.
0:21:40 Like if you don’t have at least a 50 to 60% gross profit margin, it’s just going to make
0:21:47 it really difficult to scale down the road if you want to hire other people in marketing,
0:21:48 et cetera.
0:21:53 So that’s kind of a rough percentage to kind of aim for at least I believe initially.
0:21:54 Yeah.
0:22:00 It’s an interesting space to play in because you see the same thing in like virtual assistant
0:22:01 companies.
0:22:06 Well, they’ll charge the client 35, 40 bucks an hour and then to have any margin to play
0:22:10 with, they got to turn around and pay that assistant half that or sometimes less.
0:22:12 And it’s an interesting one.
0:22:17 Have you, did you ever run into either in the writing business or the testimonial business
0:22:21 clients saying, if they’re the ones doing the work, if this video editor is the guy
0:22:23 doing the work, why don’t I just go hire him directly?
0:22:28 Like I’m thinking, okay, if I hire a house cleaning company that operates on a similar
0:22:33 model, maybe it’s 100 bucks, but they’re turning around and paying the cleaner 30, 40 to come
0:22:34 and do it.
0:22:37 It’s like, well, shoot, I’ll just do business directly with the cleaner, pay them 50 and
0:22:40 they’re happier and I’m saving money too.
0:22:41 Yeah.
0:22:46 I think, well, that’s a dilemma with any business really, but service businesses specifically,
0:22:53 I think you should be providing, like it should be an obvious value that makes up for the paying,
0:22:56 the switching costs for them to just manage it themselves because there’s other things
0:22:58 that come with that, right?
0:23:06 You could just go and hire, use the DIY software, but then someone needs to manage that, capture,
0:23:10 someone needs to then hire the video editor, manage the video editor.
0:23:19 So like there was built-in value that hopefully, well, makes up for the customer’s time and
0:23:21 the value they value their time at.
0:23:23 So I think that’s one way to look at it.
0:23:27 I think for us, like we ended up, and I’ll just tell you, we ended up using a service
0:23:32 called video ask, which you may be familiar with, which is a really cool, it’s a capture
0:23:36 tool to capture video testimonials for a Plaza.
0:23:39 But what we did, which was really unique was like, cool, we’re going to leverage this tool.
0:23:45 You could go out and get this tool yourself, record your own videos, send it to your customers,
0:23:47 get the footage, edit it, et cetera.
0:23:50 But what we’re going to do is we’re going to leverage this, we’re going to actually hire
0:23:55 a spokesperson to record all these questions that are proven questions.
0:23:57 We’re going to build out the whole video ask.
0:24:00 We’re going to create your own special capture link.
0:24:04 And all you have to do is send that link to your customers.
0:24:07 Once they submit it, all the footage comes into our video team.
0:24:08 We review it.
0:24:14 We take that 12 minutes of footage, pick out the best parts, edit it to a 90 to a 120 second
0:24:19 version that’s fully produced, edited with your brand CTA, and then we give that to you
0:24:21 that you can just embed on your website.
0:24:26 So that was kind of the value prop in kind of that specific business and process where
0:24:30 once people could kind of see that, it was a no brainer for the cost because for them
0:24:34 to try to do that all themselves, and that’s the benefit of a service, hopefully you have
0:24:39 the efficiencies of scale as well, right, like over time where even if someone wanted
0:24:45 to do it on their own, it would probably still be the same or even more to do it themselves,
0:24:46 you know?
0:24:47 Right.
0:24:48 I like that.
0:24:52 That’s another question for sure, but you know, hopefully you’re marketing and looking
0:24:59 for people that aren’t the DIY crowd and they’re happy to pay you to kind of do it for them,
0:25:00 you know?
0:25:01 Yeah, that makes sense.
0:25:02 All right.
0:25:07 So my understanding of Tyler’s process so far is, number one, come up with a problem
0:25:12 that is at once valuable to businesses but difficult or expensive for them to solve on
0:25:13 their own.
0:25:18 Number two, go sell a solution to that problem, and number three, go find a qualified contractor
0:25:22 or employee to help create and deliver that solution.
0:25:28 Tyler, with applause lab, was there any recurring element to these customers that you found?
0:25:33 Or was it just kind of a one and done, we’ll go and conquest you three, five, 10 testimonials,
0:25:34 however many that you need?
0:25:35 Yeah.
0:25:36 That’s a great question.
0:25:40 I think this is one of the things, obviously, when you’re designing to exit, recurring revenue
0:25:41 is a huge thing.
0:25:47 And I think I was like immediately, let’s get recurring revenue in from day zero and
0:25:52 I had to learn the hard way that not all business models for your audience fit into a recurring
0:25:57 model or you have to get creative with how you position it with some of your offerings.
0:26:03 Because for me, like a lot of people didn’t need a video testimonial, just that model,
0:26:06 need a video testimonial every month on a recurring basis.
0:26:15 So it definitely moved into the packaged offering where we would sell packages of 24812 or 24.
0:26:20 And that seemed to work really well where you could buy a package and then you could
0:26:22 use it whenever you wanted.
0:26:26 So my packaged offerings were priced a little higher.
0:26:30 And then I did, after someone tried us, offer them a subscription, which was kind of on
0:26:36 the back end, but it was a yearly subscription where you could buy any amount of video testimonials
0:26:40 you wanted, you got a discount, it was a 12 month subscription, and then you could use
0:26:43 those whenever you wanted through the year.
0:26:46 So that actually was a huge hit and that fit well.
0:26:51 So I was able to kind of tackle the subscription element, but then as well gave my customers
0:26:55 the flexibility where they’re not getting charged every month for something.
0:27:00 There’s a lot of out of their control as well when they can get a customer to say yes when
0:27:04 someone’s in the right stage in the buyer’s journey or customer journey.
0:27:08 So that was actually what we ended up moving towards.
0:27:12 Small package up front, try us out, and then we would upsell them into a 12 month subscription
0:27:13 on the back end.
0:27:14 Okay.
0:27:20 So if they happen upon a customer who is singing their praises, now they have a system to capture
0:27:26 that and that system was applause lab, like, hey, here’s somebody, you ought to go in contact.
0:27:30 That’s what kind of made it nice and flexible for them as well, because as those opportunities
0:27:32 arose, they could easily just funnel them in.
0:27:36 And that was what we were trying to create was a system to capture these video testimonials.
0:27:41 So you could just have this social proof kind of engine going kind of effortlessly.
0:27:43 So that’s really kind of what we helped set up.
0:27:50 From conception to exit in 13 months, seems pretty quick, considering I spent nine and
0:27:53 a half years on the site that I recently saw.
0:28:01 What was that process like in terms of either getting your books in order or listing on brokerages?
0:28:02 Like what was that process like?
0:28:03 Yeah.
0:28:04 Great question.
0:28:08 I think, again, to like designing from day zero, so it’s like, I think one thing I had
0:28:12 was like super clean processes, very organized.
0:28:14 I had a great manager in the business.
0:28:16 We had detailed books.
0:28:19 I highly recommend following like Profit First.
0:28:23 So that was a huge help and it’s kind of an accounting system for people who don’t know.
0:28:29 There’s a great book on it, but you know, these were all things from day one that just made
0:28:32 it really kind of effortless to potentially sell.
0:28:35 And again, like that happened a lot faster than I thought.
0:28:40 And kind of how it happened was I began creating relationships in the industry, one of which
0:28:47 was with Testimonial Hero, and they actually brought it up when we had connected around
0:28:52 that 12 month mark and kind of surprised me and caught me off card a little bit.
0:28:54 So I actually never listed with a broker properly.
0:28:58 So it was kind of an out of the blue kind of thing because I think for a company like
0:29:05 that, a lot of people like acquiring customers and acquiring video editors and an asset like
0:29:11 that is much faster, and that’s the reason people do it than starting from zero or just
0:29:12 doing it on their own.
0:29:18 And I think that was the case, the value add for Testimonial Hero as well for them to just
0:29:23 kind of buy the business, kind of add that as another product offering that was different
0:29:25 from what they already had, yeah.
0:29:31 So their Testimonial Hero was the company that was targeting enterprise clients at five,
0:29:32 ten grand a video?
0:29:33 Exactly, yep.
0:29:37 Okay, so now here’s a way for them to capture completely, like enter a completely different
0:29:38 segment.
0:29:43 Yeah, and I’ll add as well that through relationship building with them, they were actually sending
0:29:48 me leads already, and we’ve set up kind of a referral system because they had a lot of
0:29:53 people that would reach out to them and say, and once I found out how much they charged,
0:29:54 it wasn’t a great fit.
0:30:00 So Testimonial Hero would downsell or kind of down referral them over to me.
0:30:02 And if they closed, then I would give them a cut.
0:30:06 So that was actually kind of how the relationship started.
0:30:08 So that was interesting as well.
0:30:13 That is interesting, a little referral, strategic partnership, service affiliate marketing kind
0:30:14 of deal.
0:30:19 Are you comfortable sharing what the business was doing around the time of acquisition in
0:30:22 terms of monthly annual revenue?
0:30:24 It’s like, well, it’s been one year.
0:30:25 Here we go.
0:30:30 Yes, well, let’s see, I can’t reveal any of the numbers because I didn’t have to send
0:30:37 an NDA with the buyer, but we had about five or six video editors that were going full-time
0:30:39 customer success manager.
0:30:44 And then over that year, we had serviced about almost 80 customers.
0:30:50 And then about 20 plus of them were actually on recurring annual plans.
0:30:51 Okay.
0:30:54 So there was quite a bit in place there, including the team.
0:30:58 And so that’s one of the benefits here is like, okay, the team stays with the business.
0:31:03 You’re not going to have to go through the headache and expense of recruiting the service
0:31:04 providers in this case.
0:31:08 So that’s part of what makes it an attractive acquisition.
0:31:09 Yeah, no, 100%.
0:31:13 With the content pros exit, was it similar?
0:31:19 Was it a strategic partner who bought that or curious what that exit process was like?
0:31:23 Yeah, we actually, that one, we did list with a broker.
0:31:26 So that was a little bit more of a traditional, if you could say that we listed.
0:31:32 And then we talked to quite a few like competitors and what would have been considered like strategic
0:31:33 partners.
0:31:36 But we ended up getting bought by a private equity fund.
0:31:39 You know, that was just, that actually wasn’t a strategic partner.
0:31:41 And I think they just wanted it for their portfolio.
0:31:46 It was interesting because I definitely thought that one of the few people in the space or
0:31:51 our space would have bought us, but they passed and we didn’t go in a different direction.
0:31:52 But it ended up working well.
0:31:53 They still have the business.
0:31:54 It’s growing.
0:31:56 So it’s cool to kind of see it.
0:31:59 I still refer people over to them here and there as well.
0:32:00 That is interesting.
0:32:05 And that’s, you know, how many, because you had a ton of writers, didn’t you have like
0:32:07 a hundred writers or something on the team?
0:32:08 Like there was a serious operation.
0:32:10 Yeah, we had a lot of writers.
0:32:14 I mean, they were all contractors, but still like we built the team up and that’s a big
0:32:15 asset as well.
0:32:21 I think that was one of the reasons we found out when we sold, just because hiring, training,
0:32:24 I think we ended up hiring like 1% of applicants.
0:32:28 We had a full-time person that was, you know, constantly hiring.
0:32:33 And I think for us, like since we didn’t like specifically write for a very niche topic,
0:32:38 we had a lot of writers that were bashed into kind of teams of topic matter experts, which
0:32:43 allowed us to write for a variety of industries and stuff like that.
0:32:50 So that was why we opted for, you know, just building a larger team of contracted writers,
0:32:51 which I think worked really well.
0:32:55 More with Tyler in just a moment, including his laptop test for business owners in four
0:32:56 other ways.
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0:35:26 As the owner operator, how are you spending your time or how are you minimizing your time
0:35:32 because, as a potential business buyer, it’s got to be more attractive that the owner is
0:35:33 somewhat hands-off.
0:35:37 I’m curious how you’re managing that relationship.
0:35:40 On the one hand, I’m still trying to grow this thing because the more it makes, the better
0:35:45 multiple, the better exit that I can have, the more money I’m making today, but on the
0:35:50 other hand, I also want to show that it doesn’t necessarily require me day-to-day.
0:35:56 I wrote down five different ways that other service businesses could actually think about
0:36:00 designing their business for an exit, and some of the things I implemented and thought
0:36:02 about as well.
0:36:07 The first one to your point of what you just talked about was I had written down passing
0:36:08 the laptop test.
0:36:15 Essentially, what I mean by this is, if you closed your laptop today, how long would your
0:36:17 business survive?
0:36:21 That’s really important because if someone’s going to buy your business, it’s a huge tell
0:36:27 like how dependent the business is on you, and the more team you can have implemented
0:36:33 and built around yourself, where you could close your laptop and step away for two weeks
0:36:38 a month, which is kind of the goal I try to set, then the better off your business is
0:36:39 going to be.
0:36:41 That’s going to be really attractive for an investor.
0:36:43 Passing the laptop test, I like it.
0:36:47 I went 36 hours without email, which is a pretty good streak for me this weekend, so I’m working
0:36:48 on it a little bit.
0:36:52 Yeah, and I think you can work towards them, and there may be stuff you love doing.
0:36:57 I think if we look at the mechanism of your business and the operation, there’s always
0:37:01 going to be things you’re doing, but if you closed your laptop, could your business operate
0:37:03 and survive without you?
0:37:07 I think it’s fun to kind of, I mean, coders use this term as a code freeze, right?
0:37:12 They’ll code something, and then they’ll step away and see what breaks.
0:37:16 I think that’s a great kind of approach for a lot of service businesses as well, is build
0:37:23 your processes, build your team, and then take a step back, wait a few days or a day,
0:37:27 and the problems are going to rise to the top, and you kind of then have this checklist
0:37:29 of what to fix, right?
0:37:30 Yeah.
0:37:31 Okay.
0:37:32 I do like that.
0:37:33 What else is on your list?
0:37:40 Number two, I had thinking like a software company, so thinking like a SaaS, so I think,
0:37:43 obviously there’s all these different business models, but when you can think and operate
0:37:48 like a SaaS, and what I’m specifically referring to is like, cool, like SaaS companies, like
0:37:49 why are they so valuable?
0:37:52 They have recurring revenue and MRR.
0:37:58 They have low churn rate, long lifetime value, so these are things that service businesses
0:38:03 100% can implement, and when you start operating yourself and thinking like a SaaS company,
0:38:07 that’s going to put you in a really, really good position and category to someone who’s
0:38:08 maybe looking to buy you.
0:38:09 Okay.
0:38:10 That makes sense.
0:38:11 What’s next?
0:38:15 You’ve got positioning like a product, and I know you’ve talked about this before on
0:38:19 other episodes, but productizing, and this is kind of obviously something I’m a huge
0:38:24 advocate of and fan of, but it’s like, how can you position yourself like someone is
0:38:27 going to come to your site and buy something like they’re buying something on Amazon.
0:38:34 So productizing your service offering, fix scope, fix price, the ability to buy right
0:38:41 then, all that really helps and streamline the service offering that you are actually
0:38:42 offering.
0:38:46 Obviously, there’s a lot of, we could dive into productizing, but that’s a huge part
0:38:50 of making a service business attractive and scalable.
0:38:55 On the productizing thing, did you get people who still wanted to talk to you like, okay,
0:38:59 here’s the menu of different offerings, here’s what you get at different price points?
0:39:03 Did you still get people like hitting the little live chat button or like, can I request
0:39:04 a call?
0:39:05 I just want to talk to somebody about this.
0:39:06 Yeah.
0:39:07 No, I think for sure.
0:39:11 It’s not that you’re not trying to talk to anyone.
0:39:15 I think it’s just, how could you have, like, I think we have this goal or like, I do at
0:39:19 least like, how could you make it possible to have a no sales close?
0:39:23 Maybe it’s not possible with your business, but moving that much closer, how could you
0:39:29 make your marketing, your positioning, your social proof, the positioning of your product
0:39:32 and the pricing in such a way that someone could buy without talking to you.
0:39:36 I think oftentimes someone does, especially depending on the price point of your service
0:39:42 offering, but even if that’s the case, then how can I have like a one sales close?
0:39:46 And that’s like a huge shift and a huge step and like, I mean, could drastically change
0:39:50 like how most service business operate if you just kind of think in that way.
0:39:52 No, I like it.
0:39:53 All right.
0:39:54 Number four?
0:39:55 Number four, depersonalization.
0:40:01 So I think this one’s huge and it kind of flows into the laptop test, but does the operations
0:40:06 depend on you and then depersonalization is does the business depend on you?
0:40:10 So I think that’s a huge one because the more connected you are to the business, whether
0:40:16 it’s a personal brand, et cetera, or if everything depends on you from like a marketing and network
0:40:21 and connection space, that one is going to kind of hold you back, especially on the sale
0:40:22 of a business.
0:40:28 So working to depersonalize the business and disconnect it from yourself is a huge one
0:40:29 as well.
0:40:33 This one is really a challenge for me and I’m going to pause here because the businesses
0:40:38 that I’ve started that have had success have been me like front and center.
0:40:39 My name is on it.
0:40:41 Like I’m signing my name to it.
0:40:44 I’ve given it my stamp of approval versus the ones that I’ve tried to kind of remain
0:40:48 a little more anonymous and try and throw up just generic.
0:40:51 Hey, it could have been written by anybody type of content.
0:40:54 Like those have not done as well.
0:40:58 And I imagine for somebody starting out, especially in the so-called skills trap of
0:41:01 like, well, I have an expert in graphic design.
0:41:05 So I’m going to start a graphic design company, something along those lines, like you are
0:41:10 really playing up that personal brand, your own personal expertise and credentials and
0:41:11 everything.
0:41:15 And so you kind of say it like if you can avoid doing that from the very beginning, go down
0:41:16 that path.
0:41:18 Can you speak to that for a minute?
0:41:20 For certain people, it’s going to be harder than others.
0:41:26 I think depersonalizing your business lowers the risk profile for someone to buy it, right?
0:41:28 It doesn’t mean that the business isn’t valuable.
0:41:31 It just isn’t, might not be a sellable.
0:41:34 So that’s like a big thing, valuable or sellable.
0:41:38 But I think, yeah, it’s one of those things that if you start like that, because you’re
0:41:42 right, it may be like, you may have a huge network, which you talked about before and
0:41:43 people know you.
0:41:46 And I think you can still be connected initially.
0:41:53 But like if it’s nickloper.com or nickloper video editing versus like a branded option,
0:41:58 I think the goal is to work towards like it not being super dependent on you, even though
0:42:03 you still might be the face because an investor is going to be like, cool, if are you coming
0:42:04 with the business?
0:42:05 Or am I buying it from you?
0:42:07 Do you want a job now?
0:42:09 Or do you want to just sell it?
0:42:14 And if I bought it from you, is it going to run the same and smoothly without you in the
0:42:15 business?
0:42:16 So that’s really kind of what it comes down to.
0:42:19 I don’t think either one is necessarily bad.
0:42:24 It’s just if you have the goal to sell or want to sell, working towards depersonalizing
0:42:26 is going to be really helpful.
0:42:27 Okay.
0:42:32 That’s helpful because, yeah, you see like Russ Perry is behind Design Pickle, but it’s
0:42:36 not like I’m doing the design for you and Chris Schwab, same thing with ThinkMades.
0:42:41 Like, hey, I am not doing the cleaning, but hey, I’m running this company and it’s about
0:42:46 the service and it’s about the customer and who they’re targeting and how they’re targeting
0:42:51 and how they’re operating and of course hiring qualified people to do the work, not shirking
0:42:55 their responsibility on that front in any way, but just saying it didn’t have to be
0:42:59 about them, their specific skills and mechanics in delivering that labor.
0:43:03 So depersonalization, the number four, what’s the number five?
0:43:05 Number five is predictability.
0:43:09 So I think someone who’s going to buy your business wants predictability.
0:43:13 They want to see predictability and kind of growth, predictability and like that’s why
0:43:18 MRR or kind of positioning kind of your service are trying to either have whether it’s monthly
0:43:24 recurring revenue or plosalistic annual recurring revenue and that consistency.
0:43:27 So the more predictability you can build in your business and that could be applied to
0:43:35 like I said, revenue, team, growth rate, lead flow, there’s a lot of areas there.
0:43:39 That’s going to lower the risk profile to an investor and make your business more valuable.
0:43:43 So that’s something to kind of think about and it could be applied in a few different
0:43:44 areas as well.
0:43:45 Okay.
0:43:46 Yeah.
0:43:51 What kind of consistent process are you applying either on front end, marketing wise, like
0:43:54 how many leads are you generating a month, how many new clients are you generating a month,
0:43:59 what’s the churn look like, how many people are on recurring plans, all that stuff.
0:44:04 Like if you start the month, as I kind of often do, which is still weird to me, even
0:44:08 though revenue has been really consistent and growing for several years, I don’t have
0:44:14 a lot of spoken for revenue on the first of the month and then 30 days later, it adds
0:44:19 up pretty well, but it is kind of a weird thing to say like, yes, it’s predictable,
0:44:25 but it’s not necessarily spoken for in advance in terms of like recurring contracts.
0:44:29 So it’s kind of one off orders that are coming in or revenue that’s coming in, but it’s not
0:44:33 like on a, it’s not true MRR, is that what you’re kind of saying?
0:44:34 Yeah.
0:44:35 It’s not, yeah, exactly.
0:44:38 It’s not true monthly recurring where, you know, I’ve got a hundred people signed up
0:44:41 on a membership basis, you know, nothing like that.
0:44:42 Yeah.
0:44:44 Well, I think investors, what I’ve noticed as well in talking with a lot of different
0:44:48 investors and brokers is your business could still be valuable.
0:44:53 I think the MRR component and credit card on file is like, that’s a very clear, like
0:44:55 cool, that is predictable.
0:45:00 That’s why SaaS multiples are so high because they have that, but you could also show in
0:45:06 your case, listen, I don’t have MRR, but here’s my 12 months of revenue that’s been very consistent
0:45:10 and growing or 24 months of revenue.
0:45:14 And even though it’s not MRR, you can see that it’s still consistently coming in.
0:45:19 So that could provide a similar kind of picture to someone who’s looking to maybe buy your
0:45:25 business, but MRR would be kind of the holy grail in many cases.
0:45:31 Is there such thing as a typical multiple or sales price for a productized service?
0:45:33 Yes, it’s all going to depend on the market.
0:45:39 I think it’s going to probably be in that two to four or five X range.
0:45:44 Obviously, the higher end of that range is going to be like very dialed strong systems,
0:45:48 all these different things we talked about, like to demand that then it.
0:45:54 So that’s going to be like multiple range on like zero to $2 million per se of what they
0:46:00 call kind of net earnings or seller discretionary income or you might have heard the term like
0:46:06 EBITDA, they’re all very similar kind of getting to kind of the same thing and the multiple
0:46:08 is kind of based off that.
0:46:14 Once you get over like the $2 million and EBITDA range, then the multiples kind of inflate
0:46:18 a little bit more because you’re at a certain size in the market that’s worth a lot more.
0:46:22 You’re just bigger and people value that more.
0:46:29 But for most people who are in that sub $2 million range, that two to five X is pretty
0:46:30 common.
0:46:34 Yeah, and that’s kind of where I’ve seen a lot of people selling.
0:46:40 Would you still go to an empire flippers or a quiet light or an FBE international or
0:46:44 are there other brokers that specialize in service businesses?
0:46:45 Yeah, 100%.
0:46:50 I think each of these companies kind of have their own specialty as well, like the size
0:46:52 of businesses.
0:46:59 So empire flippers really specializes in like Amazon FBA businesses, right?
0:47:06 Quiet light sells a lot of SaaS, some Amazon, some service, but a much higher price point.
0:47:10 So I think finding a broker that’s kind of based on your business for specifically talking
0:47:13 about service businesses, I would probably lean towards quiet light and then there’s
0:47:20 also another agency called We Are Barney and they specifically focus on selling product
0:47:22 services and agencies.
0:47:26 So I can’t get in touch with their team and it’s really interesting to kind of see what
0:47:30 they’re doing and kind of how they’ve niched out kind of the businesses they sell.
0:47:35 So that’s important as well, finding someone who like understands the service business model.
0:47:41 But I think before even going to a broker, if you have a strategic connection or the ability
0:47:46 to sell direct, that’s going to be like the most advantageous to save that 10% to 15%
0:47:47 commission.
0:47:48 Yeah, exactly.
0:47:52 Well, but also that’s the value they bring if they have that network and can sell your
0:47:55 business fast, then sometimes it’s worth it.
0:47:56 All right.
0:47:57 Well, Tyler, what’s next for you?
0:48:03 You can find, you’ve got the newsletter going on at productized.services, you got the productized
0:48:04 snacks podcast.
0:48:06 What you working on this year?
0:48:07 Yeah.
0:48:11 So really the newsletter, I’ve got a weekly podcast where I interview a productized service
0:48:17 founder really every week and some really staying consistent, trying to stay consistent
0:48:18 as you know on that.
0:48:24 And I also have an asynchronous mentoring program where I help service businesses kind
0:48:28 of scale and you have like one-to-one access with me on WhatsApp.
0:48:31 So that’s been a really interesting kind of way to work with some different productized
0:48:34 founders and agencies and helping them grow.
0:48:40 But really, yeah, the free newsletter productized.services is the best place to get connected and then learn
0:48:43 more about, yeah, how to productize.
0:48:44 Oh, very good.
0:48:47 Productized.services, check them out over there.
0:48:49 Tyler, thanks so much for joining me.
0:48:53 Let’s wrap this thing up with your number one tip for side hustle nation.
0:48:54 Yeah.
0:48:57 So I was thinking about this and the first thing I thought of was a quote, I’ll start
0:49:02 with first, and it’s you can’t read the label while you’re inside the jar.
0:49:04 And that’s by Keith Cunningham.
0:49:08 I mean, I think that’s just really powerful, especially with any service businesses out
0:49:10 there, side hustlers.
0:49:16 And the point of that quote is really, if you don’t have a mentor, mastermind, consultant,
0:49:22 available to share your progress, get a second pair of eyes on what you’re doing, that could
0:49:27 be one of the biggest things that could help you grow because oftentimes it’s less about
0:49:31 doing all the right things and more about avoiding the wrong ones.
0:49:37 So a mentor or coach can really help avoid those potholes per se on the journey.
0:49:38 I never heard that quote before.
0:49:42 You can’t read the label while you’re inside the jar, a call to get some help along the
0:49:46 way, mentorship, coaching, masterminds, all this stuff has been tremendously valuable
0:49:51 in my own journey and I take it has been in yours as well.
0:49:53 Big thanks to Tyler for sharing his insight.
0:49:58 Once again, you’ll find the full text summary with all of Tyler’s top tips from the call,
0:50:03 along with links to all the resources mentioned at sidehustlenation.com/tyler.
0:50:07 While you’re there, make sure to download my free list of 101 service businesses that
0:50:11 might just be ripe for the type of productization we’re talking about today.
0:50:12 That is it for me.
0:50:13 Thank you so much for tuning in.
0:50:17 Until next time, let’s go out there and make something happen and I’ll catch you in the
0:50:19 next edition of the Side Hustle Show.
0:50:20 Hustle on.
0:50:30 [BLANK_AUDIO]
0:00:05 collection.
0:00:06 What’s up?
0:00:07 What’s up, Nick?
0:00:08 Aloper here.
0:00:13 Welcome to the Side Hustle Show, because your 9-5 may make you a living, but your 5-9 makes
0:00:15 you alive.
0:00:18 Service businesses can get a bad rap.
0:00:20 After all, there’s still clients to deal with.
0:00:22 There is actual labor involved in fulfillment.
0:00:28 They’re just not as glamorous as the other more, quote, “passive” income models.
0:00:33 But you should know that more Side Hustle Show guests started with a service-based business
0:00:35 model than any other.
0:00:39 On today’s show, you’ll learn how to set your business up from day one to provide great
0:00:45 value to clients, yes, but without relying on you to do the actual work.
0:00:48 I am excited to welcome Tyler Gillespie to the show.
0:00:49 Tyler, what’s going on?
0:00:50 Not much, man.
0:00:51 Thanks so much for having me.
0:00:52 Excited to be here.
0:00:53 You bet.
0:00:54 So Tyler is a longtime listener.
0:01:00 We first connected way back, I want to say 2014, over a World Domination Summit ticket.
0:01:06 But in any case, Tyler today runs productized.services, where he helps people with this unique brand
0:01:08 of service-based businesses.
0:01:11 There are a couple huge benefits to Tyler’s approach.
0:01:14 One, all of a sudden, you’re not limited by your own skills.
0:01:18 You just have to have the ability to find clients and then other people with the skills
0:01:19 that they need.
0:01:20 So that’s huge.
0:01:24 It practically opens up the realm of potential services that you could offer.
0:01:30 And number two, since the business no longer relies on you as being the hands-on mechanic,
0:01:34 it becomes that much more sellable down the road, which is something that Tyler’s done
0:01:36 a couple of times now.
0:01:41 If you hit up at sidehustlenation.com/tyler, you’ll find links to all the resources I mentioned
0:01:43 along with the full text summary of our call.
0:01:49 While you’re there, be sure to download my free list of 101 service business ideas that
0:01:52 might just be ripe for the type of productization we’re talking about today.
0:01:58 So Tyler, your latest service was called Applaus Lab, which helped e-commerce brands
0:02:00 get video testimonials.
0:02:03 Was this thing started with the exit in mind?
0:02:04 100%.
0:02:05 Yeah.
0:02:10 I think the timing as far as when the exit would happen or if it would happen definitely
0:02:11 was not planned.
0:02:15 And I think that’s a lot of the part of what I kind of share and try to help other service
0:02:18 businesses with is having the optionality.
0:02:21 Because I think that’s something that a lot of people don’t have.
0:02:26 So when I started Applaus Lab from day one, it was very much intentional with just how
0:02:31 I was designing the business and thinking about and putting myself in investor shoes.
0:02:35 If someone was going to buy this down the road, what can I start with right now?
0:02:39 The more you do this, the more you learn, the more businesses you start, you get better
0:02:43 and faster at actually going from zero to 100.
0:02:46 And I think the previous business taught me that.
0:02:49 I think the first few years running a content writing service, which was called Content
0:02:53 Pros, before we sold that business, there was a lot of things I wish I would have done
0:02:55 a lot sooner.
0:02:59 So starting Applaus Lab, it was just like, “Cool, day zero, here’s exactly what I need
0:03:00 to do.”
0:03:05 And I think that really helped set it up for success because it was about 13 months and
0:03:09 we had a buyer come in and buy the business, so a competitor actually.
0:03:10 Oh, interesting.
0:03:11 Like acquisition.
0:03:14 We can’t beat them, join them type of deal.
0:03:15 Exactly.
0:03:16 Yeah.
0:03:19 So the company actually, and I did an interview with the founder of Testimonial Hero, who
0:03:23 I don’t know if you know, Sam over there, and we had done some partnership stuff.
0:03:27 We kind of targeted different avatars, even though we both did video testimonials.
0:03:34 So it started as just kind of a relationship and then grew into him actually being interested
0:03:35 in acquiring the business.
0:03:41 So it was a very natural and kind of fun to use a strategic acquisition for them.
0:03:42 Okay.
0:03:46 That was something that was interesting in going through the selling process for the
0:03:51 virtual assistant site, which we covered on an episode last month.
0:03:55 It was surprising the number of other people in the space who were interested in it.
0:03:57 And it’s like, “This would complement our existing operations.”
0:04:03 And so that wasn’t something that was necessarily on my radar as potential buyers, but that
0:04:05 was several of the interested parties.
0:04:09 Did you have a background in video production?
0:04:14 What gave you the confidence or inspiration to go into this video testimonial space?
0:04:15 Yeah.
0:04:17 Zero background in video editing, production, et cetera.
0:04:21 I think it’s just more, it came from like a knowledge of like, “Cool, this was something
0:04:23 we wish I had with previous businesses.”
0:04:27 And it was always a lot of friction with gathering video testimonials, right?
0:04:32 And it was always like, “Man, these are like one of the most powerful assets you can have
0:04:37 in your business to leverage having someone else kind of do the selling for you.”
0:04:41 But it was just one of those things that always got pushed to the bottom of the list, you
0:04:42 know?
0:04:44 It was like, “Cool, we need video testimonials.”
0:04:47 And then it turned into, “Okay, what if we just got written ones?”
0:04:51 And then it turned into, “Why don’t we just write them for the customer and then ask them
0:04:52 to approve them?”
0:04:57 It was just kind of, we went through that process, and I knew the power of them.
0:04:59 So it was just really kind of solved that problem.
0:05:03 And I looked in the market, and there just wasn’t that many solutions.
0:05:05 So I thought I would kind of give a stab at it.
0:05:10 But there definitely was a learning curve at the beginning with just hiring, training,
0:05:16 and working with a team of video editors, which that aspect was definitely new to me.
0:05:22 Which came first, the customer or the production staff?
0:05:23 Customer for sure.
0:05:24 Okay.
0:05:25 This was like the chicken or the egg solution.
0:05:26 Yeah, yeah.
0:05:29 So I put it out there, and actually one of my first customers was a buddy of mine who
0:05:35 runs an oil and gas company down here in, well, he comes in and out of Columbia where
0:05:37 I’m based, but he’s also from Oklahoma.
0:05:42 And he said, “Man, if you can get me, if you can get these oil and gas guys out in the
0:05:47 field to leave a video testimonial, I’ve been trying for years, I will pay you.”
0:05:52 So he signed up for a couple, and then I just kind of went to work, and we ended up capturing
0:05:56 I think over 15 video testimonials for him or something.
0:05:58 He had been trying to capture these and just never could.
0:06:01 So that was kind of the first customer that kicked off the business, which was really
0:06:02 fun.
0:06:03 Okay.
0:06:09 So I’m trying to think, if I was going down this path, first starting with an idea or
0:06:14 starting with a problem that either I’ve experienced in my own life or through conversations,
0:06:18 like you said, “Hey, we really could have used this in another operation that we were
0:06:22 doing from other people that would talk to you like the power of testimonials, but it’s
0:06:23 really hard.”
0:06:29 So if those kind of complaints or those kind of annoyances start to bubble up in your own
0:06:33 thinking, in your own life, like, “Okay, maybe there’s a business on the other side of that.”
0:06:38 Even if you don’t necessarily have the skills to go out and solve that yourself, the odds
0:06:44 are somebody does, and maybe you could position yourself as the branded solution, the middleman,
0:06:49 the connector between those two, which sounds like that was the game plan here.
0:06:50 Absolutely.
0:06:51 Yeah.
0:06:53 I mean, I think a lot of things start with scratching your own itch, and that was kind
0:06:59 of the initial pain that I knew, and then I confirmed it with talking with people inside
0:07:04 my network, and then the validation was someone actually paying money, which then kind of
0:07:08 gave me the confidence to kind of fully dive into the business at the time.
0:07:11 What came next from this first customer?
0:07:13 Was there a greater marketing push?
0:07:16 Is there now, like, “Oh, shoot, no, we got to figure out how to fulfill this stuff?”
0:07:17 I’m curious.
0:07:18 What came next?
0:07:21 I gave myself a little bit of a window to execute and deliver the work.
0:07:25 So I think after that first kind of payment, it was building out some onboarding and then
0:07:30 figuring out kind of how I wanted to actually leverage the service, because it started out
0:07:35 where I was actually doing the interviews with the plan to have someone outsource the
0:07:37 actual interviewing.
0:07:42 So we would get connected with this particular customer’s customers, and then we would interview
0:07:46 them with a series of questions, and then we would hand that over to the video editor,
0:07:47 right?
0:07:51 I quickly found out that that was not going to scale very well.
0:07:55 For many reasons, one was just the timeline at which a lot of this happened, right?
0:08:01 Because let’s say I was doing some video testimonials for your customers, and I’m now connected
0:08:02 with them.
0:08:07 Now it’s coordinating schedules, which oftentimes became two, three weeks out before someone
0:08:09 was available potentially.
0:08:14 Some were faster, but that was the big thing, was just the delay and actually getting it
0:08:15 all done.
0:08:22 So we ended up switching from the one-to-one interviews to more of an asynchronous interview
0:08:28 style, where we would actually pre-record all the questions via what we called like a capture
0:08:33 link, and then we would send the customers that link, and they could just easily just
0:08:38 record on their browser phone or tablet whenever they wanted, and it would kind of guide them
0:08:40 through a series of 10 questions automatically.
0:08:45 So that’s kind of what we ended up going to, which really streamed the line operations and
0:08:46 made things a lot simpler.
0:08:50 But it took a handful of customers to kind of get to that point and realize that that
0:08:53 was going to be one of the issues there.
0:08:58 That is an interesting way to streamline it, rather than doing one-on-one, like Zoom recordings
0:09:03 to get those reactions like, “Hey, look, we’re going to ask the same questions to every person.
0:09:05 We might as well pre-record that.”
0:09:07 And so that’s kind of a cool way to do it.
0:09:10 Was it similar with Content Pros, your previous business, saying, “I don’t want to be the
0:09:13 one doing the content writing.
0:09:18 I just want to go out and find customers,” curious like, “What was the marketing like
0:09:19 for that business?”
0:09:23 I don’t think it was ever like, I didn’t ever want to do the work.
0:09:27 I think you’re kind of when you start a service business, right?
0:09:33 In my case, I’m more of kind of have the business owner mindset, so I always lean towards like
0:09:35 outsourcing first, right?
0:09:39 A lot of people start service businesses and your audience might have skill sets, maybe
0:09:43 they’re a writer, graphic designer, et cetera, and for them to just go and start a graphic
0:09:49 design business or writing business and do the work is very natural, which is completely
0:09:50 fine.
0:09:54 But when you’re doing the work, you can get kind of in that service business trap, right?
0:09:57 Or you’re doing and fulfilling and it’s hard to get out of that.
0:10:03 I think you want to as quickly as possible move to outsourcing what we call the mechanism
0:10:05 of your business.
0:10:11 I think just I don’t know if it was how I grew up or just the way I was approaching business,
0:10:16 but even Content Pros, the very first business, or one of the first online businesses or product
0:10:22 services we started, we outsourced the writing right away, the first customer that paid.
0:10:26 We brought on a writing team, it was the same with Applause Labs, so I think that can be
0:10:32 very advantageous to like immediately working on the business and is definitely one of those
0:10:37 things that you’re going to need to have implemented back to the point of like building a business
0:10:39 to sell down the road as well.
0:10:44 It sounds like with Applause Labs specifically, there wasn’t a ton of other players in the
0:10:50 space doing the same or doing a similar service, but with content writing, there’s a million
0:10:54 in one place is to get outsourced content written like what gave you the confidence
0:10:59 to say we can stand out in this space, we can gain customers in this space.
0:11:05 How we approached it was actually trying to stand out by not trying to be the cheapest.
0:11:10 I think to your point, there’s a lot of content writing services and a lot of them are I guess
0:11:14 kind of considered content mills in many ways and we wanted to really be like, okay, what
0:11:18 if we took the other approach and didn’t try to compete with everyone on price, but more
0:11:25 of just priced ourselves higher and really kind of pushed quality industry experts and
0:11:28 focus on more like thought leadership content.
0:11:31 So that was really the angle that we took.
0:11:34 Where do you find your first customers for the content business?
0:11:40 It was network, which is very common and then cold email.
0:11:45 So those were the two combos and we really wrote the cold email train for a majority
0:11:49 of the growth of the business to be completely honest, cold email and then referrals kind
0:11:54 of came naturally as well, but that was kind of at least somewhat of the predictable driver
0:11:55 for us at the time.
0:12:01 That’s interesting to say it was cold email, it was like, hey, nobody knows we exist.
0:12:06 So we got to help people that we exist and that channel was through cold email.
0:12:10 Now I’m curious, what was the initial pitch like and I imagine it was honed and tweaked
0:12:12 and improved over the years.
0:12:18 Oh man, we got the cold email systems that we built out for that business was just really,
0:12:19 really intense.
0:12:24 I think at one month, we were sending 20,000 cold emails a month, which is absurd and it
0:12:29 was definitely, as we got better, that number went down, but we just, we increased kind
0:12:33 of the volume and we really tried to keep the quality up and we had a great kind of
0:12:35 a dedicated internal team managing it.
0:12:37 Yeah, we just had some really unique reach outs.
0:12:42 We were really, I think ahead of our time with like personalization, which now is like
0:12:47 very common, but we would pull in a lot of different stats at the time, which weren’t
0:12:53 really common and create, even though they were mass emails, they definitely felt and
0:12:58 looked more personable than most people were doing at the time where most people just leveraged
0:13:00 first name and company.
0:13:07 We were leveraging like first name, company, location, blog posts, recent blog post title
0:13:12 that they wrote and different things like that as well, creating like a first line customization
0:13:18 that we’d have a VA kind of personalized through all of the spreadsheets before they were uploaded
0:13:19 and sent.
0:13:20 So I think those really helped.
0:13:25 I think we were averaging like a three to 5% positive reply rate on all of our campaigns,
0:13:28 which was at the time really, really good.
0:13:30 Definitely a volume-placed play here.
0:13:36 We had 20,000 emails a month and hoping for just a few percent to take the bait and engage
0:13:40 was there a specific ask at the end of the email?
0:13:42 Was it directly pitching your services?
0:13:43 What was the ask?
0:13:44 Oh, yeah.
0:13:45 So it was a content strategy call.
0:13:50 So we would push everyone to a call where we would kind of evaluate their current content
0:13:54 strategy and then share with them some ideas.
0:13:57 So more of a value kind of a consultative type of close.
0:13:58 So that was the pitch.
0:14:03 So most people went through a phone call and then they would sign up and trial our service
0:14:06 and we had like a discounted first post try us out.
0:14:08 So that converted really, really well.
0:14:13 And we were the, I mean, yeah, that was the huge driver really to take us from a few customers
0:14:16 up to 70 or so.
0:14:17 Yeah.
0:14:18 Wow.
0:14:19 Was it you doing those initial strategy calls?
0:14:20 Initially, yeah.
0:14:24 So my partner and I, I mean, I think both of us, you know, very similar skill sets and
0:14:27 like sales and, you know, that’s it.
0:14:30 So that was like one of the last things we outsourced essentially, and we just really
0:14:37 focused on hiring out operations, customer success, editorial team, writers, and, and
0:14:41 then we just really did sales and we rode that, you know, all the way till, you know,
0:14:44 just about till we closed or sold the business.
0:14:49 For those 20,000 emails a month, how did you figure out who to contact, like how to populate
0:14:52 the receiver end of that?
0:14:57 For that business, we definitely tried a few different or quite a few different angles
0:14:59 and, and that wasn’t like our average.
0:15:02 I think we got up to that, I think.
0:15:05 And even now, I mean, today, like Coldy Mail still works.
0:15:10 It works if you’re getting really personalized and specific and it’s definitely not a quantity
0:15:11 play anymore.
0:15:15 But for us, it was converting and we were going after a lot of like agencies and, and
0:15:16 SaaS companies.
0:15:20 So that 20,000 was segmented into like a few three or four different avatars that we were
0:15:21 kind of targeting.
0:15:23 So, so that kind of helped as well.
0:15:26 But yeah, that’s kind of how we approached it.
0:15:30 More with Tyler in just a moment, including pricing, positioning, and setting up for that
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0:17:45 With applause lab, has that shifted to more personal outreach or what did you find effective
0:17:46 in driving customers there?
0:17:50 Oftentimes, growth comes from your network initially.
0:17:51 Just people closest.
0:17:55 So I mean, that’s why it’s so vital to kind of build up your network and cultivate relationships
0:17:59 because that’s going to just be about an asset you can have over time.
0:18:03 So that was a huge driver initially with applause lab was, you know, I had a pretty decent network
0:18:08 and I just reached out to friends and people and colleagues in my network that I thought
0:18:14 the service could, you know, be valuable to and so that is really what kind of kicked
0:18:19 off the business in many ways because it resonated with people and they were willing to pay for
0:18:20 it.
0:18:21 So that was great.
0:18:27 And then after that, I had a small cold email campaign, but it was super personalized.
0:18:33 I also did like a lot of networking, you know, which nowadays, you know, in some of some Facebook
0:18:38 groups that were really relevant, as well, like shared some of the journey on like indie
0:18:40 hackers and places like that.
0:18:45 So I think those are really viable places to go initially once kind of your, your networks
0:18:49 tapped, but that’s kind of where drivers initially that I was focused on.
0:18:53 How did you figure out how much to charge for this type of service?
0:18:55 Yeah, pricing is always, always challenging.
0:18:58 I think initially I looked in the market, right?
0:19:02 And testimonial hero, one of my competitors that ended up buying us, you know, they were
0:19:08 doing in person video testimonials, but they were charging anywhere from six to $10,000
0:19:09 of video.
0:19:13 So they were going very more enterprise in person, really high quality.
0:19:15 So I was like, okay, interesting.
0:19:21 And but then on the flip side, there was really no other service doing this at a much lower
0:19:22 cost.
0:19:28 There was just pure software place where it’s kind of do it yourself type of video testimonials.
0:19:34 You’ll see a lot of services, you know, 50 to $150 a month that will just, you can use
0:19:38 their software to capture testimonials, but then you still have to do all the editing
0:19:42 and et cetera to make it look good.
0:19:46 So that was kind of my initial, like looking at the market kind of play.
0:19:50 And once, once I had kind of an idea of what that looked like, and then found some agencies
0:19:55 that were doing it for a couple of thousand dollars, a video, or even around a thousand.
0:19:57 So that was kind of anchored the pricing.
0:20:01 And then I looked, okay, how could, how much would it cost me if I built out kind of my
0:20:03 dream team, had a video editor?
0:20:08 We captured these and really leveraged that to kind of set the pricing.
0:20:11 And I came up with kind of a very affordable option.
0:20:16 I thought, you know, which was around three to $400, a video testimonial kind of fully
0:20:20 edited, produced, and captured from your best customers.
0:20:24 So that was kind of what we ended up pricing the service at, which was drastically cheaper
0:20:28 than anything in the market, which I think that also helped us, you know, look really
0:20:31 attractive to a lot of people that needed that service, you know?
0:20:32 Yeah.
0:20:35 That’s interesting to say, hey, people were going really high end.
0:20:41 Other companies were going really low kind of a DIY software model, but there was some
0:20:45 room in the middle, which is interesting and say, okay, here’s what we can do.
0:20:51 And then backing out some of your projected costs in labor to fulfill that.
0:20:55 Is there a target, especially when you’re outsourcing the labor from the very beginning,
0:21:00 is there a target margin that you’re shooting for on this type of operation?
0:21:01 Yeah.
0:21:02 100%.
0:21:09 So like typically like the cost of goods sold, of like having someone fulfill the work for
0:21:14 you, like I always try to aim between that like 30 and 40% mark, which gives you like
0:21:18 a 60 to 70% gross margin.
0:21:22 So it’s always kind of an interesting way to like look in when you’re looking at price
0:21:25 or services is like, can I like get this fulfilled?
0:21:30 They’re like, what would the cost be if it was 30% of what I’m charging?
0:21:32 So that’s kind of how I looked at it.
0:21:35 And not every service is like that, but it kind of helps you because you at least want
0:21:36 that margin.
0:21:40 Like if you don’t have at least a 50 to 60% gross profit margin, it’s just going to make
0:21:47 it really difficult to scale down the road if you want to hire other people in marketing,
0:21:48 et cetera.
0:21:53 So that’s kind of a rough percentage to kind of aim for at least I believe initially.
0:21:54 Yeah.
0:22:00 It’s an interesting space to play in because you see the same thing in like virtual assistant
0:22:01 companies.
0:22:06 Well, they’ll charge the client 35, 40 bucks an hour and then to have any margin to play
0:22:10 with, they got to turn around and pay that assistant half that or sometimes less.
0:22:12 And it’s an interesting one.
0:22:17 Have you, did you ever run into either in the writing business or the testimonial business
0:22:21 clients saying, if they’re the ones doing the work, if this video editor is the guy
0:22:23 doing the work, why don’t I just go hire him directly?
0:22:28 Like I’m thinking, okay, if I hire a house cleaning company that operates on a similar
0:22:33 model, maybe it’s 100 bucks, but they’re turning around and paying the cleaner 30, 40 to come
0:22:34 and do it.
0:22:37 It’s like, well, shoot, I’ll just do business directly with the cleaner, pay them 50 and
0:22:40 they’re happier and I’m saving money too.
0:22:41 Yeah.
0:22:46 I think, well, that’s a dilemma with any business really, but service businesses specifically,
0:22:53 I think you should be providing, like it should be an obvious value that makes up for the paying,
0:22:56 the switching costs for them to just manage it themselves because there’s other things
0:22:58 that come with that, right?
0:23:06 You could just go and hire, use the DIY software, but then someone needs to manage that, capture,
0:23:10 someone needs to then hire the video editor, manage the video editor.
0:23:19 So like there was built-in value that hopefully, well, makes up for the customer’s time and
0:23:21 the value they value their time at.
0:23:23 So I think that’s one way to look at it.
0:23:27 I think for us, like we ended up, and I’ll just tell you, we ended up using a service
0:23:32 called video ask, which you may be familiar with, which is a really cool, it’s a capture
0:23:36 tool to capture video testimonials for a Plaza.
0:23:39 But what we did, which was really unique was like, cool, we’re going to leverage this tool.
0:23:45 You could go out and get this tool yourself, record your own videos, send it to your customers,
0:23:47 get the footage, edit it, et cetera.
0:23:50 But what we’re going to do is we’re going to leverage this, we’re going to actually hire
0:23:55 a spokesperson to record all these questions that are proven questions.
0:23:57 We’re going to build out the whole video ask.
0:24:00 We’re going to create your own special capture link.
0:24:04 And all you have to do is send that link to your customers.
0:24:07 Once they submit it, all the footage comes into our video team.
0:24:08 We review it.
0:24:14 We take that 12 minutes of footage, pick out the best parts, edit it to a 90 to a 120 second
0:24:19 version that’s fully produced, edited with your brand CTA, and then we give that to you
0:24:21 that you can just embed on your website.
0:24:26 So that was kind of the value prop in kind of that specific business and process where
0:24:30 once people could kind of see that, it was a no brainer for the cost because for them
0:24:34 to try to do that all themselves, and that’s the benefit of a service, hopefully you have
0:24:39 the efficiencies of scale as well, right, like over time where even if someone wanted
0:24:45 to do it on their own, it would probably still be the same or even more to do it themselves,
0:24:46 you know?
0:24:47 Right.
0:24:48 I like that.
0:24:52 That’s another question for sure, but you know, hopefully you’re marketing and looking
0:24:59 for people that aren’t the DIY crowd and they’re happy to pay you to kind of do it for them,
0:25:00 you know?
0:25:01 Yeah, that makes sense.
0:25:02 All right.
0:25:07 So my understanding of Tyler’s process so far is, number one, come up with a problem
0:25:12 that is at once valuable to businesses but difficult or expensive for them to solve on
0:25:13 their own.
0:25:18 Number two, go sell a solution to that problem, and number three, go find a qualified contractor
0:25:22 or employee to help create and deliver that solution.
0:25:28 Tyler, with applause lab, was there any recurring element to these customers that you found?
0:25:33 Or was it just kind of a one and done, we’ll go and conquest you three, five, 10 testimonials,
0:25:34 however many that you need?
0:25:35 Yeah.
0:25:36 That’s a great question.
0:25:40 I think this is one of the things, obviously, when you’re designing to exit, recurring revenue
0:25:41 is a huge thing.
0:25:47 And I think I was like immediately, let’s get recurring revenue in from day zero and
0:25:52 I had to learn the hard way that not all business models for your audience fit into a recurring
0:25:57 model or you have to get creative with how you position it with some of your offerings.
0:26:03 Because for me, like a lot of people didn’t need a video testimonial, just that model,
0:26:06 need a video testimonial every month on a recurring basis.
0:26:15 So it definitely moved into the packaged offering where we would sell packages of 24812 or 24.
0:26:20 And that seemed to work really well where you could buy a package and then you could
0:26:22 use it whenever you wanted.
0:26:26 So my packaged offerings were priced a little higher.
0:26:30 And then I did, after someone tried us, offer them a subscription, which was kind of on
0:26:36 the back end, but it was a yearly subscription where you could buy any amount of video testimonials
0:26:40 you wanted, you got a discount, it was a 12 month subscription, and then you could use
0:26:43 those whenever you wanted through the year.
0:26:46 So that actually was a huge hit and that fit well.
0:26:51 So I was able to kind of tackle the subscription element, but then as well gave my customers
0:26:55 the flexibility where they’re not getting charged every month for something.
0:27:00 There’s a lot of out of their control as well when they can get a customer to say yes when
0:27:04 someone’s in the right stage in the buyer’s journey or customer journey.
0:27:08 So that was actually what we ended up moving towards.
0:27:12 Small package up front, try us out, and then we would upsell them into a 12 month subscription
0:27:13 on the back end.
0:27:14 Okay.
0:27:20 So if they happen upon a customer who is singing their praises, now they have a system to capture
0:27:26 that and that system was applause lab, like, hey, here’s somebody, you ought to go in contact.
0:27:30 That’s what kind of made it nice and flexible for them as well, because as those opportunities
0:27:32 arose, they could easily just funnel them in.
0:27:36 And that was what we were trying to create was a system to capture these video testimonials.
0:27:41 So you could just have this social proof kind of engine going kind of effortlessly.
0:27:43 So that’s really kind of what we helped set up.
0:27:50 From conception to exit in 13 months, seems pretty quick, considering I spent nine and
0:27:53 a half years on the site that I recently saw.
0:28:01 What was that process like in terms of either getting your books in order or listing on brokerages?
0:28:02 Like what was that process like?
0:28:03 Yeah.
0:28:04 Great question.
0:28:08 I think, again, to like designing from day zero, so it’s like, I think one thing I had
0:28:12 was like super clean processes, very organized.
0:28:14 I had a great manager in the business.
0:28:16 We had detailed books.
0:28:19 I highly recommend following like Profit First.
0:28:23 So that was a huge help and it’s kind of an accounting system for people who don’t know.
0:28:29 There’s a great book on it, but you know, these were all things from day one that just made
0:28:32 it really kind of effortless to potentially sell.
0:28:35 And again, like that happened a lot faster than I thought.
0:28:40 And kind of how it happened was I began creating relationships in the industry, one of which
0:28:47 was with Testimonial Hero, and they actually brought it up when we had connected around
0:28:52 that 12 month mark and kind of surprised me and caught me off card a little bit.
0:28:54 So I actually never listed with a broker properly.
0:28:58 So it was kind of an out of the blue kind of thing because I think for a company like
0:29:05 that, a lot of people like acquiring customers and acquiring video editors and an asset like
0:29:11 that is much faster, and that’s the reason people do it than starting from zero or just
0:29:12 doing it on their own.
0:29:18 And I think that was the case, the value add for Testimonial Hero as well for them to just
0:29:23 kind of buy the business, kind of add that as another product offering that was different
0:29:25 from what they already had, yeah.
0:29:31 So their Testimonial Hero was the company that was targeting enterprise clients at five,
0:29:32 ten grand a video?
0:29:33 Exactly, yep.
0:29:37 Okay, so now here’s a way for them to capture completely, like enter a completely different
0:29:38 segment.
0:29:43 Yeah, and I’ll add as well that through relationship building with them, they were actually sending
0:29:48 me leads already, and we’ve set up kind of a referral system because they had a lot of
0:29:53 people that would reach out to them and say, and once I found out how much they charged,
0:29:54 it wasn’t a great fit.
0:30:00 So Testimonial Hero would downsell or kind of down referral them over to me.
0:30:02 And if they closed, then I would give them a cut.
0:30:06 So that was actually kind of how the relationship started.
0:30:08 So that was interesting as well.
0:30:13 That is interesting, a little referral, strategic partnership, service affiliate marketing kind
0:30:14 of deal.
0:30:19 Are you comfortable sharing what the business was doing around the time of acquisition in
0:30:22 terms of monthly annual revenue?
0:30:24 It’s like, well, it’s been one year.
0:30:25 Here we go.
0:30:30 Yes, well, let’s see, I can’t reveal any of the numbers because I didn’t have to send
0:30:37 an NDA with the buyer, but we had about five or six video editors that were going full-time
0:30:39 customer success manager.
0:30:44 And then over that year, we had serviced about almost 80 customers.
0:30:50 And then about 20 plus of them were actually on recurring annual plans.
0:30:51 Okay.
0:30:54 So there was quite a bit in place there, including the team.
0:30:58 And so that’s one of the benefits here is like, okay, the team stays with the business.
0:31:03 You’re not going to have to go through the headache and expense of recruiting the service
0:31:04 providers in this case.
0:31:08 So that’s part of what makes it an attractive acquisition.
0:31:09 Yeah, no, 100%.
0:31:13 With the content pros exit, was it similar?
0:31:19 Was it a strategic partner who bought that or curious what that exit process was like?
0:31:23 Yeah, we actually, that one, we did list with a broker.
0:31:26 So that was a little bit more of a traditional, if you could say that we listed.
0:31:32 And then we talked to quite a few like competitors and what would have been considered like strategic
0:31:33 partners.
0:31:36 But we ended up getting bought by a private equity fund.
0:31:39 You know, that was just, that actually wasn’t a strategic partner.
0:31:41 And I think they just wanted it for their portfolio.
0:31:46 It was interesting because I definitely thought that one of the few people in the space or
0:31:51 our space would have bought us, but they passed and we didn’t go in a different direction.
0:31:52 But it ended up working well.
0:31:53 They still have the business.
0:31:54 It’s growing.
0:31:56 So it’s cool to kind of see it.
0:31:59 I still refer people over to them here and there as well.
0:32:00 That is interesting.
0:32:05 And that’s, you know, how many, because you had a ton of writers, didn’t you have like
0:32:07 a hundred writers or something on the team?
0:32:08 Like there was a serious operation.
0:32:10 Yeah, we had a lot of writers.
0:32:14 I mean, they were all contractors, but still like we built the team up and that’s a big
0:32:15 asset as well.
0:32:21 I think that was one of the reasons we found out when we sold, just because hiring, training,
0:32:24 I think we ended up hiring like 1% of applicants.
0:32:28 We had a full-time person that was, you know, constantly hiring.
0:32:33 And I think for us, like since we didn’t like specifically write for a very niche topic,
0:32:38 we had a lot of writers that were bashed into kind of teams of topic matter experts, which
0:32:43 allowed us to write for a variety of industries and stuff like that.
0:32:50 So that was why we opted for, you know, just building a larger team of contracted writers,
0:32:51 which I think worked really well.
0:32:55 More with Tyler in just a moment, including his laptop test for business owners in four
0:32:56 other ways.
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0:35:26 As the owner operator, how are you spending your time or how are you minimizing your time
0:35:32 because, as a potential business buyer, it’s got to be more attractive that the owner is
0:35:33 somewhat hands-off.
0:35:37 I’m curious how you’re managing that relationship.
0:35:40 On the one hand, I’m still trying to grow this thing because the more it makes, the better
0:35:45 multiple, the better exit that I can have, the more money I’m making today, but on the
0:35:50 other hand, I also want to show that it doesn’t necessarily require me day-to-day.
0:35:56 I wrote down five different ways that other service businesses could actually think about
0:36:00 designing their business for an exit, and some of the things I implemented and thought
0:36:02 about as well.
0:36:07 The first one to your point of what you just talked about was I had written down passing
0:36:08 the laptop test.
0:36:15 Essentially, what I mean by this is, if you closed your laptop today, how long would your
0:36:17 business survive?
0:36:21 That’s really important because if someone’s going to buy your business, it’s a huge tell
0:36:27 like how dependent the business is on you, and the more team you can have implemented
0:36:33 and built around yourself, where you could close your laptop and step away for two weeks
0:36:38 a month, which is kind of the goal I try to set, then the better off your business is
0:36:39 going to be.
0:36:41 That’s going to be really attractive for an investor.
0:36:43 Passing the laptop test, I like it.
0:36:47 I went 36 hours without email, which is a pretty good streak for me this weekend, so I’m working
0:36:48 on it a little bit.
0:36:52 Yeah, and I think you can work towards them, and there may be stuff you love doing.
0:36:57 I think if we look at the mechanism of your business and the operation, there’s always
0:37:01 going to be things you’re doing, but if you closed your laptop, could your business operate
0:37:03 and survive without you?
0:37:07 I think it’s fun to kind of, I mean, coders use this term as a code freeze, right?
0:37:12 They’ll code something, and then they’ll step away and see what breaks.
0:37:16 I think that’s a great kind of approach for a lot of service businesses as well, is build
0:37:23 your processes, build your team, and then take a step back, wait a few days or a day,
0:37:27 and the problems are going to rise to the top, and you kind of then have this checklist
0:37:29 of what to fix, right?
0:37:30 Yeah.
0:37:31 Okay.
0:37:32 I do like that.
0:37:33 What else is on your list?
0:37:40 Number two, I had thinking like a software company, so thinking like a SaaS, so I think,
0:37:43 obviously there’s all these different business models, but when you can think and operate
0:37:48 like a SaaS, and what I’m specifically referring to is like, cool, like SaaS companies, like
0:37:49 why are they so valuable?
0:37:52 They have recurring revenue and MRR.
0:37:58 They have low churn rate, long lifetime value, so these are things that service businesses
0:38:03 100% can implement, and when you start operating yourself and thinking like a SaaS company,
0:38:07 that’s going to put you in a really, really good position and category to someone who’s
0:38:08 maybe looking to buy you.
0:38:09 Okay.
0:38:10 That makes sense.
0:38:11 What’s next?
0:38:15 You’ve got positioning like a product, and I know you’ve talked about this before on
0:38:19 other episodes, but productizing, and this is kind of obviously something I’m a huge
0:38:24 advocate of and fan of, but it’s like, how can you position yourself like someone is
0:38:27 going to come to your site and buy something like they’re buying something on Amazon.
0:38:34 So productizing your service offering, fix scope, fix price, the ability to buy right
0:38:41 then, all that really helps and streamline the service offering that you are actually
0:38:42 offering.
0:38:46 Obviously, there’s a lot of, we could dive into productizing, but that’s a huge part
0:38:50 of making a service business attractive and scalable.
0:38:55 On the productizing thing, did you get people who still wanted to talk to you like, okay,
0:38:59 here’s the menu of different offerings, here’s what you get at different price points?
0:39:03 Did you still get people like hitting the little live chat button or like, can I request
0:39:04 a call?
0:39:05 I just want to talk to somebody about this.
0:39:06 Yeah.
0:39:07 No, I think for sure.
0:39:11 It’s not that you’re not trying to talk to anyone.
0:39:15 I think it’s just, how could you have, like, I think we have this goal or like, I do at
0:39:19 least like, how could you make it possible to have a no sales close?
0:39:23 Maybe it’s not possible with your business, but moving that much closer, how could you
0:39:29 make your marketing, your positioning, your social proof, the positioning of your product
0:39:32 and the pricing in such a way that someone could buy without talking to you.
0:39:36 I think oftentimes someone does, especially depending on the price point of your service
0:39:42 offering, but even if that’s the case, then how can I have like a one sales close?
0:39:46 And that’s like a huge shift and a huge step and like, I mean, could drastically change
0:39:50 like how most service business operate if you just kind of think in that way.
0:39:52 No, I like it.
0:39:53 All right.
0:39:54 Number four?
0:39:55 Number four, depersonalization.
0:40:01 So I think this one’s huge and it kind of flows into the laptop test, but does the operations
0:40:06 depend on you and then depersonalization is does the business depend on you?
0:40:10 So I think that’s a huge one because the more connected you are to the business, whether
0:40:16 it’s a personal brand, et cetera, or if everything depends on you from like a marketing and network
0:40:21 and connection space, that one is going to kind of hold you back, especially on the sale
0:40:22 of a business.
0:40:28 So working to depersonalize the business and disconnect it from yourself is a huge one
0:40:29 as well.
0:40:33 This one is really a challenge for me and I’m going to pause here because the businesses
0:40:38 that I’ve started that have had success have been me like front and center.
0:40:39 My name is on it.
0:40:41 Like I’m signing my name to it.
0:40:44 I’ve given it my stamp of approval versus the ones that I’ve tried to kind of remain
0:40:48 a little more anonymous and try and throw up just generic.
0:40:51 Hey, it could have been written by anybody type of content.
0:40:54 Like those have not done as well.
0:40:58 And I imagine for somebody starting out, especially in the so-called skills trap of
0:41:01 like, well, I have an expert in graphic design.
0:41:05 So I’m going to start a graphic design company, something along those lines, like you are
0:41:10 really playing up that personal brand, your own personal expertise and credentials and
0:41:11 everything.
0:41:15 And so you kind of say it like if you can avoid doing that from the very beginning, go down
0:41:16 that path.
0:41:18 Can you speak to that for a minute?
0:41:20 For certain people, it’s going to be harder than others.
0:41:26 I think depersonalizing your business lowers the risk profile for someone to buy it, right?
0:41:28 It doesn’t mean that the business isn’t valuable.
0:41:31 It just isn’t, might not be a sellable.
0:41:34 So that’s like a big thing, valuable or sellable.
0:41:38 But I think, yeah, it’s one of those things that if you start like that, because you’re
0:41:42 right, it may be like, you may have a huge network, which you talked about before and
0:41:43 people know you.
0:41:46 And I think you can still be connected initially.
0:41:53 But like if it’s nickloper.com or nickloper video editing versus like a branded option,
0:41:58 I think the goal is to work towards like it not being super dependent on you, even though
0:42:03 you still might be the face because an investor is going to be like, cool, if are you coming
0:42:04 with the business?
0:42:05 Or am I buying it from you?
0:42:07 Do you want a job now?
0:42:09 Or do you want to just sell it?
0:42:14 And if I bought it from you, is it going to run the same and smoothly without you in the
0:42:15 business?
0:42:16 So that’s really kind of what it comes down to.
0:42:19 I don’t think either one is necessarily bad.
0:42:24 It’s just if you have the goal to sell or want to sell, working towards depersonalizing
0:42:26 is going to be really helpful.
0:42:27 Okay.
0:42:32 That’s helpful because, yeah, you see like Russ Perry is behind Design Pickle, but it’s
0:42:36 not like I’m doing the design for you and Chris Schwab, same thing with ThinkMades.
0:42:41 Like, hey, I am not doing the cleaning, but hey, I’m running this company and it’s about
0:42:46 the service and it’s about the customer and who they’re targeting and how they’re targeting
0:42:51 and how they’re operating and of course hiring qualified people to do the work, not shirking
0:42:55 their responsibility on that front in any way, but just saying it didn’t have to be
0:42:59 about them, their specific skills and mechanics in delivering that labor.
0:43:03 So depersonalization, the number four, what’s the number five?
0:43:05 Number five is predictability.
0:43:09 So I think someone who’s going to buy your business wants predictability.
0:43:13 They want to see predictability and kind of growth, predictability and like that’s why
0:43:18 MRR or kind of positioning kind of your service are trying to either have whether it’s monthly
0:43:24 recurring revenue or plosalistic annual recurring revenue and that consistency.
0:43:27 So the more predictability you can build in your business and that could be applied to
0:43:35 like I said, revenue, team, growth rate, lead flow, there’s a lot of areas there.
0:43:39 That’s going to lower the risk profile to an investor and make your business more valuable.
0:43:43 So that’s something to kind of think about and it could be applied in a few different
0:43:44 areas as well.
0:43:45 Okay.
0:43:46 Yeah.
0:43:51 What kind of consistent process are you applying either on front end, marketing wise, like
0:43:54 how many leads are you generating a month, how many new clients are you generating a month,
0:43:59 what’s the churn look like, how many people are on recurring plans, all that stuff.
0:44:04 Like if you start the month, as I kind of often do, which is still weird to me, even
0:44:08 though revenue has been really consistent and growing for several years, I don’t have
0:44:14 a lot of spoken for revenue on the first of the month and then 30 days later, it adds
0:44:19 up pretty well, but it is kind of a weird thing to say like, yes, it’s predictable,
0:44:25 but it’s not necessarily spoken for in advance in terms of like recurring contracts.
0:44:29 So it’s kind of one off orders that are coming in or revenue that’s coming in, but it’s not
0:44:33 like on a, it’s not true MRR, is that what you’re kind of saying?
0:44:34 Yeah.
0:44:35 It’s not, yeah, exactly.
0:44:38 It’s not true monthly recurring where, you know, I’ve got a hundred people signed up
0:44:41 on a membership basis, you know, nothing like that.
0:44:42 Yeah.
0:44:44 Well, I think investors, what I’ve noticed as well in talking with a lot of different
0:44:48 investors and brokers is your business could still be valuable.
0:44:53 I think the MRR component and credit card on file is like, that’s a very clear, like
0:44:55 cool, that is predictable.
0:45:00 That’s why SaaS multiples are so high because they have that, but you could also show in
0:45:06 your case, listen, I don’t have MRR, but here’s my 12 months of revenue that’s been very consistent
0:45:10 and growing or 24 months of revenue.
0:45:14 And even though it’s not MRR, you can see that it’s still consistently coming in.
0:45:19 So that could provide a similar kind of picture to someone who’s looking to maybe buy your
0:45:25 business, but MRR would be kind of the holy grail in many cases.
0:45:31 Is there such thing as a typical multiple or sales price for a productized service?
0:45:33 Yes, it’s all going to depend on the market.
0:45:39 I think it’s going to probably be in that two to four or five X range.
0:45:44 Obviously, the higher end of that range is going to be like very dialed strong systems,
0:45:48 all these different things we talked about, like to demand that then it.
0:45:54 So that’s going to be like multiple range on like zero to $2 million per se of what they
0:46:00 call kind of net earnings or seller discretionary income or you might have heard the term like
0:46:06 EBITDA, they’re all very similar kind of getting to kind of the same thing and the multiple
0:46:08 is kind of based off that.
0:46:14 Once you get over like the $2 million and EBITDA range, then the multiples kind of inflate
0:46:18 a little bit more because you’re at a certain size in the market that’s worth a lot more.
0:46:22 You’re just bigger and people value that more.
0:46:29 But for most people who are in that sub $2 million range, that two to five X is pretty
0:46:30 common.
0:46:34 Yeah, and that’s kind of where I’ve seen a lot of people selling.
0:46:40 Would you still go to an empire flippers or a quiet light or an FBE international or
0:46:44 are there other brokers that specialize in service businesses?
0:46:45 Yeah, 100%.
0:46:50 I think each of these companies kind of have their own specialty as well, like the size
0:46:52 of businesses.
0:46:59 So empire flippers really specializes in like Amazon FBA businesses, right?
0:47:06 Quiet light sells a lot of SaaS, some Amazon, some service, but a much higher price point.
0:47:10 So I think finding a broker that’s kind of based on your business for specifically talking
0:47:13 about service businesses, I would probably lean towards quiet light and then there’s
0:47:20 also another agency called We Are Barney and they specifically focus on selling product
0:47:22 services and agencies.
0:47:26 So I can’t get in touch with their team and it’s really interesting to kind of see what
0:47:30 they’re doing and kind of how they’ve niched out kind of the businesses they sell.
0:47:35 So that’s important as well, finding someone who like understands the service business model.
0:47:41 But I think before even going to a broker, if you have a strategic connection or the ability
0:47:46 to sell direct, that’s going to be like the most advantageous to save that 10% to 15%
0:47:47 commission.
0:47:48 Yeah, exactly.
0:47:52 Well, but also that’s the value they bring if they have that network and can sell your
0:47:55 business fast, then sometimes it’s worth it.
0:47:56 All right.
0:47:57 Well, Tyler, what’s next for you?
0:48:03 You can find, you’ve got the newsletter going on at productized.services, you got the productized
0:48:04 snacks podcast.
0:48:06 What you working on this year?
0:48:07 Yeah.
0:48:11 So really the newsletter, I’ve got a weekly podcast where I interview a productized service
0:48:17 founder really every week and some really staying consistent, trying to stay consistent
0:48:18 as you know on that.
0:48:24 And I also have an asynchronous mentoring program where I help service businesses kind
0:48:28 of scale and you have like one-to-one access with me on WhatsApp.
0:48:31 So that’s been a really interesting kind of way to work with some different productized
0:48:34 founders and agencies and helping them grow.
0:48:40 But really, yeah, the free newsletter productized.services is the best place to get connected and then learn
0:48:43 more about, yeah, how to productize.
0:48:44 Oh, very good.
0:48:47 Productized.services, check them out over there.
0:48:49 Tyler, thanks so much for joining me.
0:48:53 Let’s wrap this thing up with your number one tip for side hustle nation.
0:48:54 Yeah.
0:48:57 So I was thinking about this and the first thing I thought of was a quote, I’ll start
0:49:02 with first, and it’s you can’t read the label while you’re inside the jar.
0:49:04 And that’s by Keith Cunningham.
0:49:08 I mean, I think that’s just really powerful, especially with any service businesses out
0:49:10 there, side hustlers.
0:49:16 And the point of that quote is really, if you don’t have a mentor, mastermind, consultant,
0:49:22 available to share your progress, get a second pair of eyes on what you’re doing, that could
0:49:27 be one of the biggest things that could help you grow because oftentimes it’s less about
0:49:31 doing all the right things and more about avoiding the wrong ones.
0:49:37 So a mentor or coach can really help avoid those potholes per se on the journey.
0:49:38 I never heard that quote before.
0:49:42 You can’t read the label while you’re inside the jar, a call to get some help along the
0:49:46 way, mentorship, coaching, masterminds, all this stuff has been tremendously valuable
0:49:51 in my own journey and I take it has been in yours as well.
0:49:53 Big thanks to Tyler for sharing his insight.
0:49:58 Once again, you’ll find the full text summary with all of Tyler’s top tips from the call,
0:50:03 along with links to all the resources mentioned at sidehustlenation.com/tyler.
0:50:07 While you’re there, make sure to download my free list of 101 service businesses that
0:50:11 might just be ripe for the type of productization we’re talking about today.
0:50:12 That is it for me.
0:50:13 Thank you so much for tuning in.
0:50:17 Until next time, let’s go out there and make something happen and I’ll catch you in the
0:50:19 next edition of the Side Hustle Show.
0:50:20 Hustle on.
0:50:30 [BLANK_AUDIO]
Service businesses can get a bad rap.
After all, there are clients to deal with, and actual labor involved in fulfillment. They’re just not as glamorous as other more “passive” income models.
But you should know that more Side Hustle Show guests started with a service-based business model than any other.
This week’s guest has a unique approach to service businesses — one that doesn’t rely on your skills as the expert.
Tyler Gillespie has built two successful service businesses and had a clean exit from both — the last being just 13 months from startup to sale.
Tune in to hear:
- how Tyler comes up with ideas for productized service businesses
- the processes he implements to put his business in a position to exit
- how he outsources the mechanism of his businesses
Full Show Notes: Built to Sell: Design a Business to Run Without You
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