What I Learned Scaling From $5k to $25k Per Month

 

On November 6th, 2015 I boarded a flight bound for Buenos Aires, Argentina. In doing so I entered a new phase of my life. Over the last 4 months I had grown my company’s revenue from $5,000 to $25,000 per month. I had also hired a small team and freed myself from the daily operations of the business. For the first time in my life the amount of money I made was no longer tied to the hours I worked.

Freedom, was the idea that came to mind as the wheels lifted off the runway at SFO Airport.

In Part 1 of this series I wrote about the process of starting my business, SimpleData, and how I generated the first $5,000 per month in revenue. In this story I will share how I grew revenue 5x over the course of 4 months and scaled operations. Each lesson includes some backstory, practical tips, and examples you can use to scale your business.  

#1 — “You gotta be Henry fucking Ford, dude”   

Two months before I whispered the word “freedom” to myself on the flight to Argentina, I whispered a different word. Hell. It was 11pm sometime in September and I was feeling burned out.

When I quit my job to work on my business full-time I promised myself that I wouldn’t work late nights. I said I would go camping in the middle of the week. I would live the life of my dreams. But life has a way of altering seemingly flawless plans. In August I doubled revenue from $5,000 to $10,000. And as a solo-founder in a business without a scalable product offering that meant I doubled my workload.

A few minutes after 11pm I answered one last email and stared into space. What am I doing with my life? I thought to myself.

The next morning after hitting snooze a couple times on my alarm I woke up and made a coffee. At noon, after a few more hours of staring into space, going for a couple walks in my neighborhood, and pacing around my house, I called an advisor to ask for help. After listening to me vent about my frustrations he asked me to do two thought exercises that set me on a path to freedom and sanity.

Thought exercise #1
Go to the park with a notepad and answer this question: “What would you do if you had to scale revenue to $50,000 per month in 6 months and could only work 10 hours per week?”

Thought exercise #2
Imagine it’s 1-2 years from now. Make me a presentation explaining why SimpleData just sold for $10 million.

At first I thought the exercises were a waste of time. I had emails to answer, customers to please, and other pressing things to do. But that evening I went to a park by the beach and took out my notepad. One of the first things I wrote was “Hire someone to manage sales and someone else to manage operations.”

Then I hesitated.

For as much as I had talked about passive income and delegating tasks to other people, I couldn’t imagine handing over customers to someone else. I couldn’t imagine anyone else representing the brand.

At this point the genius of these exercises emerged. While they were both hypothetical situations, the answers I wrote down provided a practical roadmap of exactly what I needed to do, which was simple: get over my concerns and hire a team. Thinking about them in extreme examples, like scaling revenue 10x while working half as much, forced creative thinking and radical change.

A couple days later I spoke with Hiten Shah, the founder of Kissmetrics, who stated it more simply: “You gotta be Henry fucking Ford, dude. Turn this thing into an assembly line.”

Need help producing engaging thought leadership content like this? Visit Campfire Labs to learn about my new business.

#2 — Document the process

“Be Henry fucking Ford” is an inspiring quote to stick on the wall, but as a practical goal or strategy it wasn’t very helpful. Luckily, Hiten and a few other entrepreneurs gave me a list of books to read in order to turn my business into an assembly line.

The e-Myth by Michael Gerber introduced me to the idea that a business has three types of people.


Technicians — People who produce the thing a business sells. In his example of a bakery this is the person who wakes up at 2am to put the dough in the oven.

Managers — People who manage the technicians, set goals and manage processes. In the bakery example this could be a store manager that makes sure that costs stay low and inventory is purchased at the right time each month.

Entrepreneurs — People who set the vision for the company.


According to Gerber most entrepreneurs get stuck in the technician role forever. For some people, like a baker that loves their craft, that’s ok. But for others it becomes hell. I fell into that second category.

Rather than think about new products to offer customers or come up with new marketing strategies I was stuck answering my customers emails, managing our virtual assistants, and taking sales calls. I desperately needed to hire my technicians and managers.

But what role should I hire for?

In order to make that decision I needed to figure out what work I was doing to serve every customer. What activities was I doing everyday and what skills would be required to perform those tasks?

Per my advisor’s recommendation I sat down one day and thought about the step-by-step process of working with each customer from the first moment they hit the website to the moment they happily refer us to their friend.

Here’s the Evernote I put together.

If you’ve ever taken a programming class you may recall the first “algorithm” you built. The professor probably told you to document the steps required to make a peanut butter sandwich. Then maybe you wrote something like:

  1. Grab bread

  2. Spread peanut butter

  3. Spread jelly


But designing algorithms is all about specificity. Where did you find the bread? What type of bread is best? What happens if you grab the heel of the loaf? These are all things you need to tell the computer program. Documenting business processes is no different.

My business was simple: we asked customers what type of leads they needed and then told virtual assistants how to find them and sent them to the customer. Bread, peanut butter, jelly. Yet, the process outlined in that Evernote was 47 steps long.

 
 
This is the Evernote where I outlined the entire customer journey. Note: this is only the first half which documents the sales and free trial process.

This is the Evernote where I outlined the entire customer journey. Note: this is only the first half which documents the sales and free trial process.

 
 

You can also convey this information visually. Here’s a flow chart of the customer journey at Campfire Labs that we recently designed:

flow chart

#3 — Create specific job descriptions and scorecards

In this process I realized that my work was broken down into two categories: operations and sales. So I set out to hire two people.

Quickly I found someone that looked perfect. She had worked at Zirtual, a similar company to ours, and had a lot of experience managing operations.

That same week my parents came to visit me in San Francisco and my Mom gave me some of the best hiring advice I’ve ever received. She had recently started a flower shop and had run into problems managing people. When I told her that I was hiring someone she asked if I’d written a job description and scorecard to measure their work.

“Of course I have,” I responded.

“I don’t mean the job description you posted online. I mean an internal document for you to know after a month if she’s doing the job you hired her to do,” she said.

Reluctantly I followed her advice.

In my job description I had written, “Manage customer emails.” This was the equivalent of writing “Grab bread.” After a month how would I know if she was successful? How could I trust that it was getting done properly? I had no system for answering these questions.

With my Mom’s help I rewrote all the job responsibilities. For example, “Manage customer emails” became:

Manage customer emails

Check my email in the morning and organize by urgency, then take care of any easy emails or questions that she is trained to answer

Create tasks in Trello based on emails that I need to respond to

Success: if she helps me develop a system that keeps me in email for no longer than 30 minutes a day by the end of the first two weeks I’d consider that success. Secondarily, if she helps get the response time per customer down to 2-4 hours, that’d be a success.

By designing a job description and scorecard with this level of specificity I could confidently delegate the task and measure her effectiveness. For example, I could use a time tracker like RescueTime or Harvest to know how long I was spending in email everyday. Or we could set up a help desk software to measure response times and know how well she was communicating (most software has a feedback button at the bottom of every email conversation).

My Mom had helped me build my first assembly line and create a system to measure its output.

Over the next month I was able to document and delegate 90% of the business’ activities. I hired two people and freed myself up to work on the business instead of in the business as e-Myth author Michael Gerber says.

 
 

#4 — Continue doing things that don’t scale

While I was hiring the team that would eventually take over sales and operations I also spent a lot of time trying to grow revenue. By July I reached $5,000 per month. As I mentioned in Part 1,  most of that revenue came from “Doing things that don’t scale” and being scrappy. I sent really personalized emails, took friends out for coffee, and helped people with no clear idea of how it would help me. But by August I decided that it was time to start doing things that would scale.

That was a mistake.

The first channel I tested was Facebook ads. I spent a few hours one day writing copy and building profiles in the Ad Management tool. Then I entered my credit card, set the budget to $500, and waited.

In order to run a few tests simultaneously I tested ads on LinkedIn too.

Quickly I started seeing new people on the website and watched my Cost Per Click (CPC) closely. At first it seemed promising. $1-3 per click isn’t bad I thought to myself. At the time my conversion rate on the website was 5%. I did some back of napkin math and guessed it would cost $20-60 per new lead. And I was converting 25% of leads into customers paying between $500-2,500 per month. With those numbers I could acquire a new customer at $80-240 and make my money back immediately. But that’s not what happened.

After spending about $1,000 on ads and getting hundreds of targeted visitors I didn’t see a single conversion.

After a few weeks of testing I decided to go back to what had worked in the past and get scrappy again. I emailed an old boss and a couple friends and offered to help think through their outbound sales strategy. I started asking for referrals on sales calls. I sent hyper-personalized emails to companies that I respected.

And it worked.

My old boss introduced me to his new VP of Marketing and I closed a deal that ended up being worth $30k over the next 4 months. My friend introduced me to his Head of Sales and Marketing and I closed a deal worth $10k.

After seeing success again I started thinking about how to scale up the strategy based on what I knew best: outbound sales.

#5 — Double down on what you know best

After talking to dozens of prospects and customers I started to realize a trend in the people buying our product. One day I reviewed all my call notes to create a more targeted ideal customer profile. I wrote down two broad categories:

Startup founders that don’t have time to prospect but want to find new customers.

Sales teams that need to hit a high quota and find a way to accelerate lead flow, pipeline, and revenue.

This ideal customer profile gave me demographic information to look for (tech industry, small company, B2B, etc.) But I knew the real opportunity was combining this with behavioral data. The behavioural element is the buying signal which tells you whether or not they might need your service. I needed to find a trigger that indicated a company’s need for prospect lists.

Then it hit me. A company hiring a sales development rep (SDR) would likely need prospects for that SDR to email and call. And all of those companies list open positions on sites like LinkedIn, Craigslist, and Indeed.com. Suddenly, I had a combination of demographic and behavioral data to run a targeted email campaign.  

The results were staggering: 22% of the leads I emailed replied and I generated $4,800 / mo in net new monthly revenue.

Here are the instructions I sent our virtual assistants and the email templates I used:

Step 1 — Go to Linkedin jobs section

Step 2 — Go to “Advanced Search”

Then enter the following:

Job title = “Sales Development Representative”

Country= “United States”

Please prospect the following job titles at all companies that are hiring an SDR:

  • VP of Sales

  • Director of Sales Development

  • Sales Development Manager


Email templates

Subject line: Your SDR position on LinkedIn

Hi {{first_name}},

I noticed your open SDR position on LinkedIn and wanted to reach out.

For the last year I was an SDR at Highfive. I learned everything I know from Aaron Ross and Max Altschuler. And during that time I realized how many hours I was spending building lists.

I decided to leave Highfive and start a company that enables companies to outsource their prospecting. As you grow your SDR team does that seem like something that would be useful?

Would love to get your feedback, and get you started on a free trial if it makes sense!

Results:

57% open rate

10.7% response rate


Subject line: Persistent founder

Hi {{first_name}},

“Energy and persistence conquer all things”

Quotes like that always get me fired up! Read that one this morning on GoodQuotes and thought I’d reach out to you again.

Do you have 7 minutes this week to touch base and see if there is a mutual fit between SimpleData and {{company}} regarding lead generation?

I also feel like a great sales email should have puppies in it so…

(image of cute puppies..)

Results:

48.1% open rate

2.7% response rate (ouch!)


Subject line: Should I call for help?

Hi {{first_name}},

I’ve reached out a couple times and have not heard back which tells me one of three things:

1. Everyone at {{company}} is all set on the prospecting front.

2. You’re interested in SimpleData, but haven’t had the time to respond.

3. You are being chased by a hippo and need me to call for help.

(image of hippo chasing man)

Please let me know, as I am beginning to worry…

Results:

46% open rate

8.9% response rate


The entire campaign led to about 10 conversations and $4,800 / mo in net new monthly revenue. Most importantly though, it was a repeatable strategy that could be delegated since dozens of sales jobs are posted on sites like LinkedIn, Craigslist, Indeed.com and others every day.

After documenting the activities in my business, hiring two people, and building systems to measure their output, I decided it was time for a stress test. In November I packed my bags and boarded my flight for Argentina. The 5 hour time difference meant that I would no longer be available to take customer calls or answer my team’s questions at all hours of the day. But more than anything it was a mindset shift, a clear separation between my time working in the business and my time working on the business.

At first I was worried. Would customers be upset if I didn’t respond immediately? What would they say when I told them I was unavailable for calls and introduced them to the salesperson I hired? Would my team make mistakes?

But there was a much more important question to ask. “What could I gain?”

Before leaving for Argentina I read a Tim Ferriss blog post that I’ve come back to many times since. In it he wrote, “Once you realize that you can turn off the noise without the world ending, you’re liberated in a way that few people ever know.”

The questions I wasn’t asking myself were: What would it be like to not wake up every morning to a flurry of emails? What would it be like to take a couple days off and drive up the coast of Uruguay? What would it be like to finally have time to write the stories I wanted to write?

When I didn’t answer my customers emails immediately some were probably unhappy. I’m sure we lost a few of them. We probably missed a few opportunities to close deals. But that was a small price to pay for a new life of freedom.

Over the course of the next year I worked on my business for about 5-10 hours per week. I spent the rest of my time traveling, reading books, and pursuing a childhood dream of writing for magazines (a process I wrote about here). By letting a few bad things happen I freed myself to achieve the big things that meant so much more to me than an additional $1,000 here or there.

In Part 3 I’ll break down how I sold the business one year later. Stay tuned for more.


About the author

Hi! I’m Michael Thomas. After selling SimpleData I wrote stories for magazines like The Atlantic, FastCompany and Quartz and helped start a code school for refugees. Now I’m on a mission to fund ambitious social impact projects and help companies tell stories that inspire with new company Campfire Labs.

 
Michael Thomas