How To Find Customers & Employees Who Will Fuel Your Business Growth (& Won't Churn After 6 Months)
- Usually the smaller you are, then you wear more hats and the bigger you are, the less hats you wear. So when you started your company, Charles I'm assuming you wore all of the hats cause it was you, right. - [Charles] Yeah. And then as you hired, you took a few hats and you gave it to this person and you took three hats and you gave it to this person and (upbeat music) - Charles, how's it going man? - Good thank you.
- Pumped for our conversation a few questions to kick things off. What is the name of the company and what do you do? And then how did you start the company? Where was the inspiration from? - Yeah, so the company that we're chatting about today is called Team Town. We do unlimited graphic design for a flat monthly rate. So we have another business as well. It's a property vacation rental and property management company, which has been around for about three and a half years or so. So in COVID times, obviously, no one's travelling.
So we pivoted that company at the same time. We didn't have too much to do so we made this we set this one up as well. Yeah. That's kinda the background and the Team Town has been around since about October or November.
- And where's the business at today, size, team, clients? - We are at 14 clients 130,000 annual run rate and team is about five. - Got it. What can I help with the most today? - Three biggest things that I wanted to... I guess the biggest questions In my notes I kind of wrote something very specific at the start but just based on the fact that one a one-on-one here, I wanted to ask something.
I couldn't just watch on your new YouTube doesn't matter necessarily. And on your course, because I went to your growth course, completely changed how we did things with the marketing - [Dan] Awesome. - Already is crazy.
Like that's why that's such a small thing but it sounds such a big difference. So I'll start just with a kind of a generic question I guess is a big one. So right now, in about 45 days so we've gone from 0 to 130 run rate. I'm just wondering from your point of view, from just a general thing, we want to be at a million annual recurring revenue in 12 months. What do you think are the biggest things that we should focus on? - I mean, the reality, Charles, when come this is what I see people make the mistake, right.
You know, as a client in Growth Accelerator you see the frameworks that I teach, the growth map, the focus, just the attention to doing less but doing the things right. And what I see people do is they actually start to get traction, but then they stop doing the things that they used to do to get traction, right. They think there's this other thing to do.
What I would recommend is look at what you're doing and just try to optimise and repeat what's working. So if I were to ask you that what's working rate now for you to acquire customers and get them onboarded and sticking around? - Yeah. So it's the ads. And I, we actually spoke about a week ago and I asked you, what should we do with the ads? And you said, if the ads are working, do more of them, do YouTube ads, to keep focusing on that. - [Dan] Yeah.
- And that's all we're going to do now. We are just going to keep focusing more and more on ads and improving and optimising them. - So it sounds like you're going to keep investing in the ads, investing in that. What do you think is broken or missing for you guys to continue to scale? - Well, we're so early on right now.
My thoughts just based off looking at the industry of our industry is that churn is incredibly high and it's happy churn. When people sign up for a service, it's estimated that 50% of good clients that sign up, will churn within six months and it'll be because of happy churn they just no longer need to sign that project's finished. So it looks like the business that we're in we have to scale so fast to cancel to that churn, because only 25% of clients will actually stay forever, a lifetime clients. But the average is about $6,000 and our cut is around 600 bucks. - So what I would want to ask is what's true about the customers that stick around versus the ones that don't? - What we've noticed.
It's niching down. So it would be agencies. The one, again, we're so early on this is what I'm guessing is that the agency is so there's two type of clients.
We have the small businesses which just sign up because they need graphic design. They'll churn because you know that their company doesn't need it. And then there's design agencies that work with 25 clients. And would need design for the rest of time, so they won't churn, they won't have happy churning lists. So that's what I'm thinking. That's what we want to niche down on a lot.
- So what I'm hearing is the ones that stick around have an agency model. So they have this ongoing need. - [Charles] Yeah. - So here's the reality, is that if you're losing 50% of your customers in the first six months, it makes it really tough to build the MRR because you're having to replace the lost MRR.
So there's thing called the growth ceiling where essentially, if you have 10% monthly churn for example, if you have 10 clients and you're adding 10 clients a month, you know, you're losing if you add 10, you're now at 20, you lost two. So you don't feel it until you get up into, the hundred where you lose 10 and you add 10. Does that make sense? - [Charles] Yeah.
- So even though your growth is the same every month you're adding an X amount of new clients per month because the number is a percent of total accounts, if you're losing 50% of those clients you're only retaining 30% of the customers long-term it means every year you're having to replenish 70% of your customer base. So it just gets harder and harder. So a decision you can make today to help long-term to avoid hitting what's called the growth ceiling, is choosing a better customer to position against and focus on in your marketing so that you don't have that 50% churn. So what I'm hearing is that that's potentially the agency client, is that correct? - [Charles] Yes. - Now, have you ever looked at segmenting just the agency client in regards to your cost to acquire a customer and your payback period? - That's kind of what we want to start looking at. We don't, we have a lot of agent- We have, well, not a lot.
We have six agencies now, so we can start looking at the numbers, our churn right now, again it's so early on the 71% is because we've had people sign up and say, Oh, this is not what, it just doesn't work for us right. So most of these people quit within our 15 day trial period. We've only had one person stay on and then quit after that. But the numbers again, we've only worked with-- - How many customers have you had? - [Charles] 20 I'd say. - Okay. It's super early. - [Charles] Yeah.
- Yeah. I mean, even when your business is super early you can start to see patterns, right? And like, one data point doesn't make a trend but there's like, you can kind of see like this customer seems to love us. And this customer seems to keep paying. And it means it's just a natural thing. It's like, what kind of customer needs ongoing graphics support? One that has a project and they come in and they're done or an agency that provides web design and has a continuous need for graphic design support? Right. So that's kind of, I think it doesn't
take a lot of data to make a bet on the second one. So obviously early days you're trying to figure that out. What are some other challenges you're dealing with in the business that you wanted to chat about? - So with both businesses that we have, the biggest challenge I think we have faced is hiring and people management. So I am, I would say six months ago, I was really bad at hiring.
I just think now maybe I'm just bad. I'm starting to get a little bit better but I don't really know what I'm doing with hiring. I don't know how to fund hiring, a couple of troubles. We're trying to hire and train a good sales team.
And I'm okay at sales rate. I've never worked a sales job before, but obviously as one of the founders you have I've done all the sales up to, up to hiring a first person. And then people management, I am willing to, I'm not like, I'm not that person who doesn't trust people and wants to do everything themselves but I've had a hard problem passing things on and then the max should be done because you'll pass them on and they'll prioritise their own tasks. So I guess to kind of wrap that up sum that up is, how do you hire well and how do you manage them so that they take the tasks on as their own responsibility and kind of work as a cohesive team? - Yeah. I mean, recruiting is one of those things just like a sales process that requires, you know multiple things to make it work. Right? So a few ideas that might give you some inspiration, one, this philosophy that I can't work with you until I work with you.
So that means that I've never hired somebody in my career now, because as a developer, when I started you know, I could on with somebody part time on some code base so I could see if they were good. And then over time I've been using that same principle. So I call that the test project, right? So everybody I hire has to complete a test project. I'll pay them for it if they want, 10 hours and they all do the same test project. So if I'm hiring a marketer, I'm hiring a salesperson I'm hiring a customer success person, I'm hiring a developer.
They all execute the same test project so that I can see how each one functions with clear direction, very little oversight and the quality of their work, right? So that is a non-negotiable in my world. To do that and to have three people at the finish line means you have to source a lot of people upfront, right? So having a strategy for getting your job placement you know, promoted amongst your network, promoted inside the different job banks, getting enough applicants, having an applicant tracking system like Bamboo or Breezy, or whatever ATS system you wanna use. And then the thing that I use to qualify people on the front end quickly is a video submission, right? And I ask people to submit a 60 seconds video and they have to answer certain questions. And honestly, if they can't figure out how to upload a video, to share a link or they can't stick to the 60 seconds or whatever. So, so really you want to create a process for recruiting. That's repeatable, scalable.
That's going to get you high-quality candidates. Even in there, I do a profile assessment. You can use whatever tool you want. There's Colby, there's Myers-Briggs there's whatever but understanding the psychology of people as they come into your world. Like at the end of the day, one of my mentors this guy, Brian, who started winning a hundred got junked.
He said, you can't teach people to smile. If you require somebody that's facing a customer to be high energy, empathetic, et cetera, you need to hire people that have that built into their character, right? Like, people are who they are. So having a lot of candidates apply, using video to qualify people out of the gate, using profile assessments to kind of weed through certain characteristics that you need, trying to build team dynamics. If you're a high quick start and you hire an assistant you don't want to hire a high quick-start assistant. You want to hire a high follow-through assistant. Right?
And then, the test project that to me is going to be like I don't force people on my team. I help them build a recruiting process. They get candidates. I do final interviews. And then the team decides which people they want to work with. Right. It's a lot of work, Charles but I'll tell you what's expensive.
Spending six months with somebody doing a function. Them not succeeding. You spending time training them and them leaving.
Right. So I'd rather spend that time upfront to get a really high calibre person than to try to fix it after the fact. Most people make this mistake they hire the cousins and referrals.
And this person that responded to a Facebook comment. That's not how you build great companies. - Okay. Yeah. At the moment, our process is we put an ad up. Then we handle a first interview and the second moment we bring them in.
And I guess the biggest thing that-- - You don't want to be doing first interviews. You don't ask them to submit a video? - I will now. - Yeah. Cause even the time to schedule in your calendar that first interview, I literally can look at a hundred videos and know real quick. If the person has the intellect, I can just tell by the way they talk, I can tell how to answer my questions. I can tell, you know, we ask them what are your top nonfiction books that you've read? They never read a nonfiction book.
That's great. You can't work at my company. If you don't believe in investing in yourself and knowledge you're just not going to gel with the culture of our company. Does that makes sense? - Yeah. So if it's across the board, right?
Let's say it's a lot of the jobs that we hire another company, it's more of the client success side. But since we're, I wouldn't even say that, even though it's three years old, definitely it was still in place. It's not necessarily, and there's no coding we're not hiring on the marketing scale. How would I put them through a part-time thing? Like see how they interact with clients or ... - Test project. So, for example, on the sales side we never put them on a call with a real prospect.
We just test it with our internal sales team. So they might do three sales calls following our sales script with an internal sales person, and then they'll vote and feed that back up to the sales manager. Right. - Okay
- So you want to protect your client base or your opportunities. Usually if somebody's got a job, I'll just say, look you have 10 hours to get a chance for us to work together. You know, if I can't work with you until I work with you, I think it just makes sense to have that person get to know me and me know them by working on a test project.
- [Charles] Okay. - Right. - I guess this is a pretty blank question. Not sure if you can answer it that details but do you think if I'm looking at hiring would you think that I should hire less people and hire more expensively? Or hire kind of, you know start early on and maybe provide a little equity position and pay less and take more people on.
So they'd have less people with more responsibilities or more people with less responsibilities. - Usually the smaller you are, then you wear more hats and the bigger you are, the less hats you wear. So when you started your company, Charles I'm assuming you wore all the hats and it was you, right? - [Charles] Yeah. - And then as you hired, you took a few hats and you gave it to this person and you took three hats and you gave it to this person and so it's the specialisation versus generalisation. When you're early sub 12 people are gonna wear whatever the hats are.
Right? So you want to find people that have the values, the drive, the hunger not necessarily the best practises. I mean, the truth is you can go on YouTube and learn how to do something. You can go buy a course online to learn how to do something. You can get a mentor, you can get a coach but what you can't hire or pay for is character and drive, right? So I would want to find people that have that first and foremost and then, so they have the characteristic and you can train for the skill. Now, obviously, if you're hiring car mechanics or designers you want to have that base level experience.
But once they come in you can put them through training to get more advanced experience. And you can ask somebody that's doing client work to also manage your social media account. And I think that that's the right way when you're small when you get bigger and you have enough work to have somebody busy and dedicated just to that one area of the business great hire and specialise, but it's kind of right time and right action and right now you might be too small to have somebody dedicated. So you want them to wear multiple hats. - Okay. Last question on that hiring part then,
we generally, so when you told us to specialise on the host shares company as a property management, we basically were doing five different types of marketing before I cut all four of them out and focusing on one of them, which is something kind of new. It's a new sales venture, again pretty not too much background information, but in terms of hiring at this mid stage, I'd say at just about the 1 million Mark annual recurring revenue, would you say that we should try it out ourselves see if it works and then hire someone or hire someone to figure out the model and work with them? - So, one of the biggest mistakes that people make on sales is that they hire somebody else to do the searching and repeatability part. And you can do that if you hire the right person that is motivated and curious and hungry and you know that, right? But the reality is that there's risks there that they won't figure it out fast enough a, to make you money or b, for them to be making enough money to stick around. Right? So I've always built that process in-house.
So if you think of like a normal sales process you have qualifying, you have closing and you have kind of customer success, right? You have your sales development reps you have your account execs and you have your customer success managers. Typically in the early days the founder does all three, right? The most logical thing to do is once you have enough volume of sales, you're documenting the whole time, you're creating a repeatable process. So if you don't have a sales playbook that you're starting to copy and paste emails into copy and paste outlines of the sales script, right? Answering questions like here's how I deal with objections, here's some case studies to recommend, here's some things to note, here's some ways to deal with guarantees, Here's the offer and have that documented, then you're never going to win hiring people because they need to be trained. And if you've got to sit there and train every person it's going to be a losing battle. Right? So typically you do the whole stack.
Then you're going to want to hire people for me to onboard new accounts because that's pretty predictable. Like, once you get them to buy, here's the process, this is the first a hundred days. Here's the sequence of things, document it have somebody else execute it, right? And while you're doing it, record yourself. Record the zoom video with your clients.
Record the sales calls, record the emails, record everything and save it in that document under training. So usually once you get 20% of your time dedicated to onboarding new accounts, give that to somebody else. Then the sales development rep side, right. Document that, give that to somebody junior. And then eventually what will happen is that your calendar, you qualify harder that person really makes sure you only get on calls with people that are qualified and ready to buy.
And you'll get to a point where you'll be spending 50-60% of your week doing sales. And then what you do is you'll hire somebody to replace the SDR, the Sales Development Rep. They'll become a salesperson, they'll sell in parallel to you.
And usually when I hire two sales development reps cause somebody might not work out. And then all of a sudden now you have two salespeople that are qualifying and setting appointments. You're now working your way out of selling and that person becomes a primary and you've built this career path for people to start here and eventually move up.
And if they get bored of selling usually about two years into it, then you can have a path where they can move into a customer success role because they really understand the customers and the product. That is how founders remove themselves from selling directly. - [Charles] Okay. So from what I understand
then I should be looking a lot of my time on the sales side. - So where should you be spending your time? It all depends. Okay. So it's a nuance question. When people go like, how do I scale my company? I teach this whole process called the buyback principle but the essence is simple.
There's certain types of activities that bring you energy and create value for your business. Okay? If selling takes energy from you and you absolutely hate to do it, then no it should not be where you spend your time. Right? But if you like to sell and it brings you energy and it creates value for your business, which it does, sales, then I would say, investigate how you spend more time there and everything else on your calendar. That's the buyback principle of saying I'm going to hire people to add, to buy back time out of my calendar, not just hire people to add capacity, right? A lot of people hire people like a support person a developer, a sales person to add capacity. But the only way that we build companies and free up our time to work on the business not in the business, is to have the time to think strategically, to have those partnership conversations, to refine the product, to look at the data, to connect and correlate innovation and say Oh, we're spending way too much time marketing this customer who doesn't stick around. Like that's the strategy side of the business.
That's on the business, right? So I'm a big fan of saying, if you've got any free cashflow you have any profits, you have any cash reserved, and you're trying to hire, you should hire first and foremost for your calendar, free up your time and use the filter of what creates value for me? What creates the most value for me as a business? What energises me the most? Keep those things and get everything off your plate. Because that energy that you bring to your day at that point will be contagious, right? Because all of a sudden you literally wake up and do everything you love to do. And when you stop loving to do it, spend more money buy back that time out of your calendar. - Okay. That makes sense. I'm trying to think which question for us then. Let's do this because this kind of came up as you mentioned it with the calendar side.
So with Team Town, I don't have too much of my attention on it right now, just because how she is. I feel like the team is not as good at, you know we haven't built a good team culture at the same time. So I'm focusing on that, but let's just say in two weeks I'll be done with that back of the Team Town.
At the current moment, we have two sales guys handling all the sales. You have someone doing client success, building relationship with the customers, someone building our product and managing the design team. So we're early on it feels a bit unnatural to me because I feel like I should be more because I guess it's my second startup. I feel actually more in there but I'm not saying I should. It just feels like, what should I be doing at such an early stage as the CEO? - Yeah. I mean, Charles, the reality of it is leaders set the strategy, manage the people, ensure the reporting is being done and then work on process, right? Like those are the four areas that leadership, right? It's like so.
If you have team members there that are doing stuff my question to you would be, what metrics are you monitoring, that lets you know and them know that they're making forward progress, right? What's your frequency for measuring that, right? How is it driving behaviour decision-making from your point of view. Never confuse activity in time invested with outputs and outcomes, right? Like you can literally spend an hour a week managing a company and having 50 people in that company execute and operate because you set up the game so that they can all perform incredibly well. And you don't think because it's only an hour a week that that's not important. That what makes you a great operator, right? Having to spend a hundred hours a week with a team of four that's producing no revenue, even though it might feel like you're doing something, it's actually very inefficient. It would just show me that you, that the maturity level of your leadership and operation is just lacking. Right? So always be careful to correlate activity to outcome, right? Or output to outcome.
I'm a big fan of having leaders that know how to lead people to be clear on the outcome, measure the criteria for success and then coach them to win. And if that takes a very few amount of hours because it's early days and there's not a lot of moving parts, then that's what you want to focus on. - [Charles] Okay. Makes sense.
- So, Charles as we wrap up I want to ask you what's been the biggest takeaway from you in regards to the things that I've shared today. What are your big kind of 'ahas'? - Two of them I would say number one would be how we hire going forwards. So that totally makes sense. When you said it, it's so obvious that we never did it before was hire people, give yourself more time. So that's number one I think, I think we were kind of on that process, but we didn't know about it but I'm going to focus a lot on freeing up time. So I can continue to work on the business instead of in the business.
And number two would be that way of recruiting what we're looking for. Because even in my mind we were thinking, 10 hours on interviews when I'm sure the video would take 10 minutes. (Charles laughing) - I mean, not only 10 minutes, I can tell, just the act of making a video, to qualify them out of the process. Cause they literally I've had people apply as an assistant that emails and says, I can't figure out how to upload my video to share a link with you. Now, Charles, do you think, as a tech entrepreneur I want to have somebody on my team that I have to teach something as basic as uploading to a Google drive or Dropbox. - [Charles] No.
- So do you think I might've dodged a bullet in that case? - [Charles] Yeah definitely. - Right. Or if I'm trying to build a team, that's got an open culture and a communicated culture and a culture of collaboration that an introverted programmer says, "I don't feel comfortable on video." and I have a distributed team and we spend most of our time on zoom on video, if that's the right hire.? Nope.
So just think about what makes a great person for your team and what are the filters that you could add and automate so that as people work through it, and the cool part is is as they go through that recruiting process they're telling themselves, man, this is a really smart company, thoughtful, organised, impressive. And it's just continues to sell them on the opportunity because if they make it to the end, then they know Holy moly, If everybody went through this process I know I'm not going to work with anybody on the team that isn't capable. - Because it wasn't easy to get to this point, if that makes sense. So even the filters you add helps in the sales process to get the right person engaged because they're going to feel accomplished. And if that's what it's like, just to get a job, imagine what it's like working for the team. - [Charles] Yeah.
- Awesome. Charles, I'm excited for your future, man. Keep up the hustle, keep the focus and focus on the business.
I mean two businesses, not a big fan of I know you got both, but if at one point or the other you have a chance to focus on one. That's usually where the biggest ROI is going to come from. But again, it's you need to understand what you want out of life and your entrepreneurial journey. And if it's two companies, fine but know that if somebody is focused on one they're going to be able to compete against you because they don't have the distractions.
That makes sense? - Yeah - Awesome. Cool. Well have an amazing day, Charles. Good talking to you. Cheers.
2021-05-26 09:04
