We are one year in business today! Our highs and lows of running a $400k/year productized service + lessons

Hey guys,

Our business just turned 1 year old today so I feel this is the right time to give an update to this community.

I think entrepreneurship is not all that glamorous so I want to be transparent and share the good but also the bad things that happened to us since we started.

Background:

• In December 2017 I was thinking of starting a subscription-model for design services.
• Saw it was complicated to hire freelancers for small ongoing design tasks, developed a MVP in 5 hours where you could pay, submit your design requests via email, and get them completed within 24 hours.
• Moved to Indonesia after a month to hire more designers and I am still there today.

Before we start here are some proofs:

1. Total revenue since we started
2. Pictures of our office and the view
3. A video of one of our designers making an illustration
4. Our website

Some of our highs:

1. We went from 0 to $400,000 in revenue in 12 months, with a 25% profit margin (after paying ourselves salaries)
2. More than 80+ designers got full-time, stable income this year!

Our lows:

1. Our biggest low: We failed to deliver for quite a big portion of our customers at the beginning mostly due to three things: i) No customer fit: Our service was great for a small subset of customers but not for everyone. ii) No productization: Our scope of service was too broad, and as design is subjective we couldn't execute properly. iii) I am not sure anymore about the unlimited model: I really believe in productized services, but I am less sure about the whether the "unlimited" model is the way to go. More on this below!
2. Had to part ways with one of our co-founders.
3. We got accepted to the second interview round of YCombinator (and they flew us to San Francisco) but unfortunately got rejected. Lots of learning though that I am happy to share about.

My two biggest lessons of 2018:

 

1. You are your own biggest blocker.

 

After all these years of running companies I start to realise more and more the meaning of "good execution". In my opinion, good CEO execution boils down to making good decisions.

Here are a few tips I have in that regard:

• i. Seek high context advice (mentors, advisors who have been there before helps!): For example we took last month an advisor Alex McClafferty (who sold his productized service to GoDaddy) and also did a couple of calls on Clarity.fm to understand how to manage remote workers better.
• ii. Know your own limitations: I am good at sales and starting things but not so good at operations or following through projects. I found a co-founder a few months ago who was really good at that and even loved that I dreaded doing every day. It tremendously helped and made me happier at work too.
• iii. Once you know your shortcomings, read books on emotional intelligence, mental models, decision-making, game theory. Business books are great to learn practical advice but I found that using mental models and improving your decision-making skills / problem-solving skills helps you make most of the decisions.

 

2. Partner up.

 

Whenever you think about working with an employee, co-founder, or a partner, make the decision in revert: "What are this person goals, and how do they fit into my vision?".

For example one of my goal this year is to work with more marketing agencies. I asked one potential agency on Twitter: "Hey, what are your goals with your project "blablabla" this year?" We then took it from there and saw how we could be working together.

Now for employees, I think it boils down to two things: Growth + Independence. Everyone wants some kind of freedom and everyone wants to know what's next, and what they are doing today to achieve that next step. Seeing you make progress is a highly fulfilling activity more so than the reward you get at the end of the journey. If you can position yourself to be the partner helping people around you making steps towards their objective, you'll be incredibly successful.

Now more about the lessons I gained on the day to day of running a productized service business:

 

3. Productize as soon as possible.

 

The big idea behind my company is that services are scalable and repeatable if they are productized (in other words: if their scope is neatly packaged / defined).

I realised that when you buy a product in a shop it says: "This is the product, this is what it does, and this is how you can use it to fix your problems". Services on the other hand are built the other way around: "This your problem. This is what we are going to do to fix it."

This is not scalable because all problems are different, so the service becomes different too and you have to start again for each customer.

So how do you productize? In my opinion there are two steps to do that:

• a. Reduce your offer. This is 90% of it. Force your customers to buy the same service again and again. My big bet was that everyone kind of likes the same type of designs (same fonts, same type of illustrations) and I want to be able to offer that at scale.
• b. Define your delivery. Now there are two ways to do this:
  • i) Either you can create a very defined service delivery blueprint (this is basically making recipes to deliver the services).
  • ii) Or another way (how we do it at my company): Augment your staff (with technology or tools). While we have some light rules for service delivery (example: Deliver your images in less than 1.5mb), we mostly try to give them the tools or learnings to help them work better. I believe this approach is far more scalable and far more human but this is still a work in progress.

 

4. Customer-fit is super important when running a productised service.

 

Product/market fit is a great concept (make what people want), but I believe that's not enough for productized services.

You also want to find customer fit. Your service might be really great but the customer simply isn't going to be a good customer for you for these three reasons:

• i. Your customer has no clear value proposition -> If they do not have a business providing value: Red flag. It will probably mean they will churn at some point or be unhappy because your service will not help them succeed.
• ii. You do not know who your customers' customers are (or they simply do not have customers yet) -> If they do not have past customers or provided value for them, this is also a red flag because you do not know how to serve them.
• iii. Your customer never used a service like yours before -> Third red flag. What I like to ask my customers is: "Have you already ordered design services? If so, can you show me a few of the designs you had already done?"

Our plans for 2019:

Our plan for 2019 is to hit $2m ARR and hopefully do more than 100,000 graphic design requests.

1. Most probably make the move from unlimited for new customers to on-demand only (per task or per subscription but with a limitation). Formers customers will still enjoy the unlimited plans though.
2. Automate, automate, automate. We are building a lot of tech to make the life of our designers more easy.
3. Build a better ordering experience.
4. Develop a strong distribution network. There are a couple of ways to do this and I will update you in the next weeks/months.

Damn! That was fun :) Let me know if you have any questions!

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