Spilling the Secret Sauce — What we discovered building Skyward that made all the difference
You may not have heard much about Skyward, my Software agency that I started with Ben Roux and have quietly been running over the last 5 years. That’s because we didn’t need to make noise. We built a ~1mill ARR business without the grind.
The reason we could be so quit is early on we discovered something incredibly powerful, a secret that reduced our need to market ourselves to near zero. I’m here to spill the beans and let you in on what we discovered.
Building a software agency isn’t a very unique endeavor, it’s been done thousands of times over the last decade. There are entire categories of media on the subject, coaches, even conferences to help you get there. There is one thing that always strikes me when I talk to agency founders, however, and that is they describe the process of building their business like a “grind”. If a startup is a sprint, an agency is a grind. You’re always grinding for more clients, for more employees, for that next contract to keep the cash flowing. Maybe if you’re smart and lucky you can do what Pivital Labs did and grow so large you’re worthy of a real acquisition. But in general, the grind is all about cashflows. More cashflows = a higher paycheck.
But what I think all agency founders realize pretty early on is that cash flows are effectively arbitrage on your cost of work. If you can build an app for $20k and sell it for $100k, than you’re doing well. That $20k goes to the salaries of the builders you pay to actually accomplish the work. Thus, most agencies, including marketing and creative agencies, become a race to the bottom — how cheaply can you acquire low-skilled labor and charge the most premium price for that work. The clients suffer because the quality of work is poor — spaghetti code and poorly thought out designs, and the business suffers because quality dips and founders are grinding down their employees.
Just ask my old pals over at MeetMindful, who after paying an agency a huge sum to build the first version of their app ended up having to re-write EVERYTHING just to clean up the work of their previous agency.
Size Down, not Up
So how do you escape the grind? You have to chose not to play the Agency game in the first place. The first variable you have control over is size.
When Ben and I first started our first conscious decision as a company, outside of incorporation and other busywork, was to commit to staying small. We never wanted to grow beyond 5–6 people. Staying small allowed us to maintain the ability to build on the projects we cared about, but more importantly, it meant that as Senior+ level ICs, we were able to build at a high standard that mattered to us.
Retention is King
The second variable is client retention. Most agencies work with a client long enough to build a product for that client, and then poof, they’re gone. The project is over and they’re on to the next project they have lined up. The Grind. Instead, we focused on keeping and maintaining clients. We were especially good at getting on the phone with clients and talking through their concerns and their aspirations. Who would you want to hire, the company that doesn’t respond to your emails, or the company you can pick up the phone and call at 9pm when you’re panicking about a big launch?
And it worked. Some clients we had for over 2 years. And our cost per acquisition was near $0, in both money and most importantly, time. As founders we spent very little time having to hit the circuit drumming up new clients. We closed over 50% of the projects that came across our desk, and we kept those clients.
The Real Secret
The final ingredient in our sauce is the most important. That is — changing the structure of Agency work. The truth is that building software is not about the individual product. It’s not about how pretty you can make it, or how cheaply you can build it, either.
Software is a product, and products are built by companies to make money. Companies are complicated, multi-faceted entities. They have people; founders, employees, and investors, all who have different ways of thinking. They have different areas of focus, from marketing to finance branding. Nothing is static.
Agencies build static products on the periphery of a company. They take requirements and turn them into products.
Skyward integrated into our clients companies. We worked internally, helping our clients as if we were actual team-members, seeing their business challenges with the 20/20 vision that an employee or founder would have. And we were radically honest with how we communicated with those companies. You wouldn’t want your business partner only telling you what you want to hear, so why do we accept that from agencies?
So the three ingredients were:
Stay small, build quality
Retain clients with a personal touch
Go Deep. Integrate into your clients companies, care about them as if they were your own
The reason this special sauce was so powerful was that we almost never had to market. Our marketing budget was almost always $0 and our website and other marketing materials were famously ignored. Yet we continued to grow the business year over year in revenue and profits. This is the stuff that founders kill for. One of my good friends and agency mentor — Andy Stone, once said to me that he never made less money than when they doubled their size.
There is a different way.
We’ve closed Skyward, and you can read more about that in my other post. However, that doesn’t mean that I’m going to forget the amazing lessons we learned on this journey. While I’m in transition out of Skyward and into something new I am open to freelance opportunities, and I’ll be applying the same lessons to my freelancing as I did with Skyward.
Build quality. Go deep with clients. Ensure that clients want to stick around. These lessons can be applied almost anywhere in life.