Helping a Marketing Agency Stuck at $2.5M Scale to $10M

0:00Unternehmer/Gast I sell marketing to MSPs, which is basically a local IT support company. All right. Uh we do about uh 300,000 a month in recurring revenue. We'd like to be at 10 million annual revenue. Um we're right now we're built the company as an agency and we had good year-over-year growth until we got kind of past 2 million, 2 and 1/2 million, things started slowing down, more things started breaking, required a lot of human resources.

0:33Um about a year ago, we launched a lower ticket offer towards emerging MSPs, IT guys that just wake up one day and want to start an MSP. Um we're doing their website in high level, doing a high level offer for them, charging about $500 a month. That's been getting good we added 60 in the first year, we're now at like five a week um pretty consistently. What's the stake?

1:01Their website is built into high level. Let me say differently. What's what's uh annual revenue retention or monthly churn if you have either of those? It's um with the agency, it's about 2.5% monthly churn. With the low ticket guys, it's like 1%. Interesting. Yeah. Okay. Okay. So, what's the decision? Kind of like what a lot of the people have asked already is like am I just doing something new because I'm facing friction in the agency model?

1:32>> are. Yeah. >> [laughter] >> Well, so what is the gross margins on the $500 a month thing after you set it up? 75%. Huh. What's the other 25 go to? Uh we add a little bit of extras in like live chat agent, uh unlimited website tickets, things like that.

1:58Could you 100x that? I think so, yes. How many agents do you have to How many customers do you have You said you have um the 60? Is that what you We have 60 on the low ticket offer. >> Currently. How many reps do you have to service the 60? It's done through a partner, so we pay $5 uh per chat and then $35 a month base fee for that. $5 per chat. Okay, that's for the 75% margin is. Okay.

2:25Um so, you really just need to have a sales machine to set Just You just do the setup. And then you hand it off more or less. >> Yes. Yeah, we do a little bit of onboarding, but after that, yeah. Yeah. Um hm And how do you get customers right now? We word of mouth, Google ads, SEO, but now we just started for the first time we're having success with meta ads. Uh and I'm guessing a lot of the people coming in are the the $500 people,

2:53>> Yeah, exactly. Okay. Well, I I don't normally say this, but I actually like the low ticket thing better. Yeah. Main reason, so this is not common. Uh the fact that you have one you have lower churn on that and I'll bet you have higher gross margins on that than you do on the core service. >> Yes. And so, I actually do think it's a better business. I don't normally say that, but I think just for a lot of reasons like there's a lot more of them.

3:21Alex You have higher gross margins and if we needed to just say cool, let's just 10x bend and you go from five a week to How many could you take a week max right now? Right now, I would be testing it, but I think I could get to 10 and then I could expand pretty quickly. Yeah. So, I mean even if you signed up 500 a year, right? Uh that's 250 a month, so you're adding 3 million per year Yeah. uh to ARR and that's a super high value enterprise value business. Yeah. Cuz it's sticky, right? It's a 1% per month is like you're you're you're you're retaining 9% plus.

3:53Alex No, 90% 85, whatever percent plus annually, which is pretty good. Especially with a with a with a an avatar that there's so many of. Yes. Uh which is really really outstanding. It's like a prosumer avatar. No like those are really good numbers for prosumers. Um and so I would yeah, I would strongly consider uh making the pivot. I don't normally say this, but I actually think that for your business, it does make sense. Thank you. You're welcome. If you are a business owner and you are not growing as fast as you'd like, I'd like to give you a free gift. So, my team and I put together the $100 million scaling road map, which is basically 200 hours of us looking over all the portfolio companies we've had and what stages of growth they went through and more importantly, where they got stuck and how they got past it.

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