7 Useful Lessons You Can Learn From How We Earned $100,000 Our First Year In Business

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Featured Download: Get my "7 Point Perfect Newsletter Checklist" which I used to generate leads and engage with our email subscribers that first year.

I started AutoGrow as a web design company in 2010.

I began to work on building the business with great enthusiasm and purity of spirit, and it was largely for this reason that after 6 months of hard work we had gained traction and were growing rapidly.

However that first year was an extreme a roller coaster ride type of experience.

Now that I have some distance from it I can reflect on what I did right, and distill down the key lessons learned for your benefit.

I also saw that Mixergy.com is putting together a $100k interview series. Since I'm applying to be a part of that interview series (and because I've been writing this article in my head for the last 3 years) it seemed like the perfect time to finally put it down "on paper."

I'll start by giving you the numbers for the first 12 months starting in December 2010.

net-income

  • October to December 2010 was pretty much break even. We didn't make money and we didn't lose money.
  • January, 2011 we started to earn a little more revenue.
  • February 2011 was our first profitable month.
  • March was $2,100 in profit (and by profit, I mean positive cashflow for the month)
  • April we more than doubled our revenue to $10,000 and profited ~$5900
  • May was about the same
  • June was our biggest month. We almost tripled our revenue to $35,000 with profit ~$22,000
  • July was a loss (I'll get into the reasons for this below)
  • August we gained some of it back
  • And in September we lost about $8,000 (I'll get into the reasons and lessons learned for this below)

Net for our first 12 months in business: $106,000 in revenue, ~$28,000 profit

If you shifted this to focus on just the first full calendar year we were in business, January 2011 - December 2011, our revenue was $135,000, and profit in the range of $20,000.

Not bad for a first year you could say, especially since the previous SaaS startup I had just shutdown the year before had made maybe $6,000 in revenue with a net loss during the previous year.

But after after all I've learned in the 3 years in between then and now, it's easy to see how we could have

  • Grown faster
  • Operated more efficiently
  • and in general, made less mistakes
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To be completely honest with you, some of what I'm about to write is painful to remember.

This is because, despite the fact that I just "cooly" quoted you some interesting stats, those numbers don't show how this time was simultaneously one of the most stressful, depressing, and happy times of my life.

I'll do my best to be real and open for your benefit (as well as my own) and to not worry too much about appearances, good or bad.

1 - Begin with a focused mindset

"The nature of concentration is detachment." - Research paper on meditation

This was something I did right.

In the months before I started the company, I was essentially broke. I had maybe $200 in my personal checking account. I had graduated college the summer prior and after my previous startup failed to gain real traction, I moved back home with my parents.

I wasn't sure where to go next. I knew I had to do something. I dabbled with starting up my previous company again.

After an extended period of reading, thinking and also thanks to a mentor of mine who helped guide me through the process, I managed to figure out the next step forward.

I decided I would start a web design company. I had always been creative, I appreciated design, and I had actually generated significant income in college doing that on the side.

And I didn't see it as just a "web design business." Long term I could see it turning into something bigger -- a platform for not just designing beautiful, conversion-focused websites but for helping people quickly make their creative ideas and marketing campaigns a reality.

Throughout that first year, I largely ignored any competing ideas for my time.

Many people suggested new ideas for services and products (after all, telling people you're starting a web design company when you're in the tech / startup space isn't always considered "cool" or "sexy").

We stuck to design and branched out a bit into development since that fit nicely with our future vision. We stayed away from content marketing and SEO opportunities (even though, today, it's something we practice and write about).

I stuck to the original idea I started with. I just kept building on top of that one core nugget of gold.

[caption id="attachment_3819" align="aligncenter" width="542"]AutoGrow slogan The team and I were so passionate and excited about our mission and the long term vision that we would regularly churn our cool graphics like this one.[/caption]

We weren't profitable right away, but we starting to bring in revenue almost immediately.

Key Takeaway: It's the passion for a new idea that will drive you forward in those early days. Hold on that idea and that energy as long as possible.

2 - Email and in-person networking are the fastest, most cost-effective ways to generate revenue. Period.

(Note: if you want to exact checklist I recommend now for writing newsletters to nurture relationships and convert subscribers into leads and client, you can download it here)

As you might know, I write regularly on this blog about email marketing and the importance of building your email list.

But I don't think I ever mentioned that email is how we attracted both our first client and later our largest client.

First, I put together a list of several hundred contacts whom I had met and emailed with at some point over the course of being a college student and in running my previous business.

The email was simple and direct. I announced I was starting a new business, the services we would provide, why it would be unique, and examples of past work.

Less than 2 weeks after hitting send on that first newsletter I had signed our first client for what would end up being a little less than $10,000.

This happened repeatedly. Each time I sent out a new newsletter that first year, people would respond with referrals or inquiries.

In addition, those first few months were some of the most stressful because, as a solo founder, I had no one to rely on or talk to.

I was on my own and if I couldn't bring in enough cash each month I would miss rent.

That wasn't an option.

I started a weekly routine of attending networking events. My goal was to meet people and form real relationships. My hope was that some of those relationships would blossom directly or indirectly into a new clients for AutoGrow's business.

Most of the events I attended were more "miss" than "hit" (too many insurance guys and finance folk trying to sell you a life insurance policy). But with practice I learned which events were best to attend if I wanted to reach my target audience.

For example, I found that volunteering to speak in front of groups was one of the best ways to generate more interest and leads. Most people don't volunteer for these sorts of opportunities since public speaking is a serious fear of a lot of people.

Key takeaway: whether you're and established small business, or if you have a limited marketing budget, or if you're just starting out -- put your faith in email marketing and in-person networking as your two best bets for generating leads and new sales.

3 - Profit is a simple formula, but it's easy to get wrong

In hindsight, one of the simplest lessons I learned in that first year was how to turn a profit.

On a few occasions we would do hourly work for clients and in other cases we would do fixed budget projects.

On at least one occasion, I had a team member working on a project for a hourly rate, and yet the client's project budget was fixed. As a result, incentives were  not aligned between the contractor and the company. So as the client requested more revisions, our profit for the project shrank more and more.

After we lost money on that project I set a goal of making X% of gross profit per project or per hour. I made sure to always calculate in advance how much cash should be left over so that we could pay for overhead costs, rent, have some left over to reinvest, as well as build our cash reserves.

Key takeaway: always be profitable, calculate profit into the pricing equation up front.

3 - Avoid putting all your eggs in one basket.

Much of our growth that first year can be attributed to the fact that we had a couple of big clients. There were a couple of weeks there where 90% of our time would be spent only servicing them.

We were so busy doing work for them that we didn't budget any time to focus on acquiring new clients. We had no marketing plan to speak of.

Even though I recognized this as a problem early on, my mistake was not acting to head-off the coming drop in revenue after the projects we were working on were completed.

So while having these clients fueled much of our initial growth that year allowed us to hire 5 team members full-time, it wasn't sustainable.

Key Takeaway: Do not bet your business on 1 or 2 big clients because you're inviting trouble down the road.

4 - Grow your business on top of what's already working, don't get distracted.

Probably the single biggest mistake I made that first year was the decision to reinvest almost ALL of our profits and cash reserves into building out a Software-as-a-Service (SaaS) email marketing product.

This was my response to the increased risk of relying on a few major clients to bankroll most of our company.

It turned out to be the wrong decision though because the product was never finished. The development team kept missing deadlines and I was too mentally invested in taking the business in this new direction to make the smarter decision.

In total, we spent at least $20,000 by the end of that first 12 months on developing this product and at least $40,000 by the end of calendar year 2011.

In hindsight, I would have been better off investing that money in a nice vacation and then spending the rest of the money on designing landing pages and building out own sales funnel with autoresponders, in addition to writing useful articles on our blog.

Key Takeaway: Stay focused. Don't chase what's sexy or fashionable, build on what works.

5 - Hire slow, Fire FAST

Towards the end of that first year it became clear that we had over-extended ourselves.

The company was trying to move in two directions at the same time, unsuccessfully. To bring the company back to profitability, I would need to make some hard choices.

Our payroll at the time was about $16,000 a month... and it took me a month to decide who we had to let go.

Guess how much that cost us? ;)

I suppose I hoped that in that time that we might cross some development milestone with the SaaS product we were building. But as a mentioned, that never happened.

I had never fired anyone. Everyone on the team was friends. We hung out with each other outside of normal working hours and I knew their families. This further clouded my judgement.

In the end, I fired most of the team but it wasn't a clean break. I wanted to help my former colleagues so I tried to keep them on in a contracting capacity.

But there was too much bad blood. One of the contractors ended up poaching a client from us because he was so desperate for cash. After that it was clear the relationship had to end completely.

Key Takeaway: Don't let people who aren't producing results linger. Work with people who are honest, who deliver results, and let everyone else go by the wayside.

6 - If you're a B2B company, investing in getting Facebook Likes is worthless.

In the spirit of not hitching your wagon to someone else's cart, be practical when reinvesting your profits.

Remember, your goal as a business owner or marketer is to get a result -- a positive return on your investment.

For example, at the start of our second year in business I decided to invest about $1000 in running Facebook Ads which would drive people to Like our page on Facebook.

If you're not sure why this is a mistake, you might want to check out the recent article I wrote on how Facebook's page reach is dropping and what you should do about it.

Key Takeaway: Invest in building marketing assets that you have control over, like your website and email list. Facebook can and does work for some companies, but there are other channels which will yield you much better results.

7 - Don't expect to get lucky, build a lead generation system

Looking back on how great (and messy) that first year was, I'm glad to say that the best decision I made in 2013 and 2014 was the start building our up our inbound marketing systems.

This has helped us to solve one of the key blockages that was holding back our growth: always having to "hunt" for new clients.

Three of the key ways we learned how to do with this (and how you can too)

  • Implement "The Spider Web Technique" to drive more traffic and leads with smart content marketing
  • Practicing "The Every Page Rule" for building our email list
  • And other key marketing habits for building a "sales engine"

We got many hints that this would work, but we failed to put up on them. I couldn't figure out (at the time) how to line up all the pieces.

For example, you can see in early 2011 where I started blogging daily. This resulted in a quick and rapidly growing traffic increase.

blogging increases traffic example stats

However, I ended up killing off the habit after about 2 months because we weren't getting any results. What I didn't know then that I know now is this:

  1. Get your positioning right. You need to choose an audience to write for. I was writing about topics that interested me, and once in a while it might become a hit, but never with an audience that would be interested in buying from us.
  2. 70% of visitors to your website will never return. To combat this fact and to build a relationship with your visitors over time it's important to convert them into email subscribers.

One thing I did right though was to blog frequently, 5 times a week in fact, sometimes more. This is why in about 45 days we reached 5,000 monthly visitors. If I had kept up the routine and kept learning as I went, we would probably be at 200,000+ visitors today.

Key Takeaway: Building a sustainable lead generation system means producing value content regularly that is well-positioned to attract and help your target audience. Furthermore, email is the essential "bridge" in the lead generation equation which takes that traffic and turns it into leads and referrals.

Bonus - Don't forget to enjoy the ride

"The key to immortality is to first live a life worth remembering" - Bruce Lee

Despite the setbacks and rough road to success that first year, I loved the experience.

I felt alive and I loved the work I was doing (and I still do).

If there's one piece of advice I can give you though it's this: Chase down a vision of the future that you love, don't chase money. Of course, you need money to grow and sustain your business. But money is just a symbolic result of the value your company creates.

I was chasing money instead of meaning when we attempted to pivot to that SaaS product.

Our original business model was plenty profitable. But instead of solving the growth problems with that, I was off chasing down a vision of a "sexier" business model.

Beyond that I realize now that I never took ANY time off to truly enjoy the growth milestones we hit that first year. I was always too concerned with "the next thing." As a result, there were days when I felt totally burned out.

These days, I still work hard, but I'm finding more time to relax and get inspired.

Key Takeaway: There will always be "a next thing" and there will always be other opportunities for profit and growth. But as it's often said, "Know thyself," and as entrepreneur and author Guy Kawasaki has said, "Know thyself and niche thyself." In other words, know what you want your business to be known for and how exactly it will make a contribution. Further more, know what kind of life you want to lead outside of business. Otherwise, you'll just keep working without stopping to enjoy the rewards of your labor.

Conclusion

  • Hold on that core passion and motivation for why you started down your path in business or marketing; let it drive you
  • Email and networking are the best ways to generate leads, especially for a young comapny; focus more on email later on
  • Diversify your income by building our multiple service offerings and/or expanding your base of clients
  • Stay focused; don't chase what's fashionable or sexy just because you see other people succeeding in it.
  • Hire slower, and fire faster to avoid "death by a thousand paper cuts"
  • Make your own luck, build a "sales engine"
  • Enjoy the ride, love your work, chase meaning and the opportunity to provide value for others and the money will come.

Featured Download: Want to see the newsletter template I used to generate leads and get responses that first year? Click here to access it and I'll show what I wrote and why it worked.

What's are some of the most important lesson's you've learned from building your company as a marketer or business owner thus far?

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