Chad Lane

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Content by Chad site by Worry Free Consulting

A Three Step Growth Algorithm For Startups & Small Business

December 15, 2017 By Chad Lane

As business owners, our primary goal is to create a highly desirable product or service that our clients love.

But in this society, it isn’t enough to be loved. We must also get paid.

Our deliverables must also be consistently profitable if we want to survive.

This is especially important when we are just starting a new endeavor.

Now, I know we hear about tech startups that raise (and burn through) millions of dollars on the path to success. But for normal, everyday startups – the new dental practice, the freelance copywriter who wants to expand her offerings, the new moving company – not getting paid isn’t an option. Our families depend on our ability to pay the bills!

When Matt and I started Worry Free Marketing a few years ago, we began with 3 clients. Our first year’s revenue was $45K.

Since that time, we’ve expanded our delivery capability, and in 2017 launched 40 websites and managed half of a million dollars in ad spend.

Along the way, we’ve learned some lessons that helped us grow, delivering excellent value to our clients while remaining profitable, without dying from overwork. These lessons combine to create an algorithm for growth, applicable to any small business or startup.

Step 1: Calculate owner hourly rate

In order to achieve growth, we must decide what we are growing.

Metrics that measure growth must be assigned, and they must provide the information we as business owners need to analyze our success (or lack of it) so that we can take action.

The metrics we use must be consistent and relevant no matter how large the company gets, and they must be easy to calculate.

One of the key metrics for our company is owner hourly rate.

This is exactly what it sounds like – how much are the owners being paid for an hour of work?

To do this calculation, we simply add our invoices in QuickBooks over a given time period and divide by the hours we’ve personally worked.

The goal is, of course, to increase the owner hourly rate. To do this, we analyze and adjust two specific aspects of our business: services offered and internal processes.

Step 2: Examine profit against services offered

As a startup marketing firm, Worry Free Marketing offered virtually any product or service that could fit under the broad heading of “marketing.”

You need a flier? Sure – we do that. Website? You bet. Postcards? Can do! Marketing plan? All day long.

However, by getting granular and calculating owner hourly rate by service, we soon found that many of these services were not as profitable as others.

We began pruning services that were less profitable. At the time, our most profitable services were:

  • Website design and development
  • Google AdWords for nonprofits
  • Digital advertising management
  • Strategic planning

Once we discovered this, we honed in on just delivering these four services for more than a year. The others, we found, were distracting. The time spent working on a flier design was much better spent promoting for and delivering a new website, based on our hourly rate.

We also knew that the services delivered must also produce maximum value for our clients. Without consistent results, our goodwill would be ruined and our business would dry up.

We found that of the four services offered, strategic planning was subject to misses. Sometimes, we were spectacularly successful. However, 30% of the time, the plans wouldn’t get executed or there were other factors that meant the plans didn’t provide the value for the client that we expected.

Because of this, we dropped strategic planning and now refer this work to people we trust.

What we’re left with is a suite of services that consistently produce much higher value for our clients than we charge and that also produce a high owner hourly rate.

Step 3: Adjust internal processes to maximize profit

As the owners of a startup, Matt and I wore all the “hats” in the company. From bookkeeping to answering phones, sales, project management, public outreach and delivery, we handled it all.

As our production increased, we needed to find a way to continue to produce high quality services and maintain (and increase) sales, all without giving up our personal dedication to our growing families.

To do this, we broke down how much of our days were spent on various functions.

We already knew our average owner hourly rate, but we took this a step further. We examined what each function netted in return for our work.

We located our highest value functions – those that produced the highest hourly rate – and then hired to replace everything else that could be turned over, as quickly as possible.

We calculated that as owners, the hours spent wearing any other hat other than those that produced maximum profit for our company represented lost profit and income. If we attempted to “save money” by doing a job ourselves that could be done by someone else – at a lower hourly rate than what we could produce on our high value functions – then we were leaving money on the table.

To ensure that the functions were done well, we broke down the production line for each of our products into checklists, then transitioned into managing team members who performed the checklists, instead of doing the work ourselves.

Bonus Step 4: Repeat steps 1-3

We redo these steps roughly once a quarter, looking for new hats to shed and ways to increase our hourly rate.

We’ll look for opportunities to provide additional services. If we feel something could be profitable and high value for our clients, Matt will sell a few and I’ll deliver them personally. We then review the profitability and results of these new services. If they are successful, we repeat the process of writing up production checklists and hiring team members to manage.

Starting 2018 on the right foot

The best time to use the above algorithm is right now – before the new year starts.

No matter how many times we go through this process, we always learn something that results in growth.

Good luck with it – we hope you can use it.

We’re very interested in hearing your results.

A small disclaimer…

Many of the ideas in this blog are not my own. Matt and I have learned to make full use of the brilliance of a number of well-known writers and thinkers, including:

Seth Godin, who taught us the value of creating value with Linchpin.

Perry Marshall, whose 80/20 Sales and Marketing shifted the way we examined our metrics.

L. Ron Hubbard, who discovered a pattern for organizing a company for success.

Chad Lane is the co-owner of Worry Free Marketing. He and his partner, Matt D’Rion, created Worry Free to help small business owners transform their digital marketing into a profitable source of leads and sales. Their team has won several small business awards in St. Louis, including being voted as a “Best in Value” digital marketing company in 2016 and receiving an award in 2017 as one of the fastest-growing small businesses in St. Louis.

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