Agency Journey Episode 19 (Y15M10)

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We’ve been steadily plugging away with the business–cleaning up at-risk accounts, cutting costs, launching projects, and winning new work. As I mentioned last month, my focus is ensuring that we’re executing as a company and holding each other to high standards. I think we’re headed in the right direction.

About Agency Journey: This is a monthly series detailing the happenings of my agency Barrel, founded in 2006. You can find previous episodes here.


A Couple of Launches

I want to share a couple of launches we delivered for our clients in the past month.

barrel launches for the outset and headspace health website screen caps

Proud of the Barrel team on these two launches – an ecomm site for clean beauty brand The Outset and a Webflow website for Headspace Health.

The first was The Outset, a new clean beauty brand co-founded by Scarlett Johansson and Kate Foster Lengyel. The team did a great job of creating a beautiful ecommerce experience.

We built this as a headless website, which, simply put, means the front-end is decoupled from the back-end, allowing you to have full control over how the front-end is built regardless of what platform you’re running on the back-end (see this guide on headless published on the Barrel website). In addition to the flexibility, headless can, in some cases, improve site speed, which is a driver of conversions for ecommerce websites. Headless sites aren’t the easiest to execute and bring with them a bunch of complications like figuring out how to properly tracking analytics and ensure they are optimized for search engines, things that are more easily handled in traditional sites where the front-end and back-end are intertwined under a single platform like Shopify or WordPress.

We’re excited to continue our partnership with The Outset and help them expand their website as the business grows and to continually find ways to improve performance and conversion rates.

The other launch from the past month was a new website for Headspace Health, the result of a merger between meditation app Headspace and Ginger, a mental health service app. The project came with a very quick turnaround time requirement and our team hustled very hard to deliver. The cool thing about this opportunity was that it marked our first start-to-finish collaboration with Barrel Holdings company BX Studio, which focused on the Webflow development piece of the project. In 6 short weeks, we were able to go from project brief to full site launch.

While Barrel’s primary focus continues to be on direct-to-consumer e-commerce, we’re excited to continue collaborating with BX Studio on select Webflow projects. We have a couple in the hopper now that will launch in the coming months.

Boomerang Hire

This month, we welcomed back Scott Polhemus, a former Barrel web developer who, after 6 years away, rejoined us as Director of Software Engineering. We’re incredibly excited to have him on board. Scott worked at Barrel for four years and was a wizard with front-end development, helping launch some of our most recognized work. He comes back with a great deal of experience, including a great deal of ecommerce exposure at Casper, where he was a senior engineer. Now he comes back to join forces with our CTO Wes Turner and build up our engineering capabilities and talent.

There’s something incredibly rewarding when a former team member comes back for a second tour. We’ve had a handful of such instances at Barrel, and I’ve cherished these occasions. It’s an opportunity for the team member to bring back new skills, learnings, and attitudes, and it’s an opportunity for the org to show how we’ve evolved as a culture and business. A fresh start but with some familiarity built in. When it works, it’s a beautiful thing. Perhaps I should add this to my list of “Five Types of People Success to Celebrate in Business”.

Top of Mind

Staying Tight on Costs

Last month, we took hard steps to rein in our costs by making our first ever round of layoffs. We’ve continued to look for opportunities to reduce costs across the board.

I was reminded of a book I had read 7 years ago, Double Your Profits: In Six Months or Less by Bob Fifer. Fifer lays out strict guidelines for business owners: cut whatever isn’t making you money, invest only in things that help differentiate your business and make it more valuable for customers, and create a culture where no cost is sacred and the team has to prove that a cost is absolutely necessary. Fifer emphasizes the importance of striving for excellence, embracing a meritocratic culture and continuous improvement to continually increase profits. He also advises on making decisions quickly and without hesitation, especially when cutting costs.

In addition to Fifer’s book, we adopted a mental model for costs that helped motivate us to look deeper. To illustrate this, let’s take one of our cost savings as an example: Adobe Creative Cloud licenses.

We realized that with more of our design work taking place in Figma, people were not using Adobe software as much. In fact, some people hadn’t touched Adobe software in over a year. And yet, we were paying subscription fees that added up to thousands of dollars per month. We surveyed the team and rolled back the number of subscriptions, cutting the cost by over $2,000.

$2,000 per month is $24,000 for the year, which can seem small when thinking about annual budgets, and this was typically the way we thought about expenses–most are negligible if you can keep growing topline revenue and have decent gross margins. But, as I wrote about in the last episode, our revenue and gross margins haven’t been great, and so, if we’re not making money, we’d best be cutting costs.

In order for our business to make $24,000 in gross profits (our revenue minus the cost to deliver the work, which for us is mostly labor costs), we would have to land a project with a budget of at least $60,000 and execute on it really well to hit a 40% gross profit margin ($60,000 x 40% = $24,000).

We took this perspective and felt motivated to make further cuts, especially with non-essential costs. Getting to a savings of $5,000/month without disrupting our productivity could be the equivalent of landing a $150,000 annual contract with a client ($150,000 x 40% gross profit margin = $60,000 divided by 12 months = $5,000/month), not an insignificant sum!

And this is why we’re dead set on getting out of our Manhattan office lease. We’ve shifted to a fully remote model. Our hope had been that the office could be a useful asset in getting the team together occasionally. We had a few subtenants who’ve helped defray some costs, but not enough. Our landlord has been very cooperative and we’ve been actively showing the space. Hopefully, someone will pull the trigger in the next month or so and take over. All in, with the monthly cost of cleaning, HVAC, utilities, and other costs, the office is a $30,000/month hit. In other words, getting rid of this cost would be equivalent to winning a $900,000 annual contract and doing a pretty good job ($900,000 x 40% gross profit margin = $360,000 divided by 12 months = $30,000/month).

I have no doubt that we’ll continue to see more “wins” of this nature in the coming weeks, but this is just one facet of the business. We’ll need to continue winning new work and delivering on projects at high gross profit margins. We’ll have to keep our clients happy so they feel compelled to do more work with us and to refer us new business. We’ll have to innovate on the way we work, becoming more efficient and finding more ways to generate value for our clients. I’d love to be able to say that I look forward to tackling each facet one at a time, but the reality is that all of these things need to be happening all of the time. But that’s why we have a team, and as I’ve written before, it’s going take heads down execution to see progress.

Shared with Partners

“Don’t fear suffering. The strongest steel is forged in the hottest fire. The facts are always friendly. Without a little agony, none of us would bother to learn a thing. The earth has to be tilled before the seeds can be planted. In much the same way, sometimes we have to be stirred and ripped apart so that the seeds of compassion, wisdom, and understanding can be firmly planted in us. A knight does not protect the truth; he lives inside it and the truth protects him.” (Ethan Hawke, Rules for a Knight)

This is a gem of a quote and something worth revisiting every now and then. The past few months have been some of the toughest for me professionally, but they’ve also been very rewarding. That last line–”A knight does not protect the truth; he lives inside it and the truth protects him”–is just a ::chef’s kiss::

“Among the worst mistakes a professional can make is underinvesting in marketing to existing clients. Existing clients are not only more likely to give you new business, but the business they’ll give you (if you work to earn it) is likely to promote the value both of your skill asset and your client relationships asset.” (David H. Maister, Managing the Professional Service Firm)

Timely quote to have resurfaced – I actually summarized the section from this book in this blog post about marketing to existing clients. Revisiting the list of tactics, there are so many ways we can be investing time to deepen our relationships with existing clients. Last year, we rolled out the role of Executive Sponsors on accounts, ensuring that Barrel Partners stay on top of client accounts and check in periodically to catch up on the client’s business and their evolving needs. This has been very important in our efforts to win add-on work.

“MANY PEOPLE are haunted by a fear that in some cases significantly constrains their freedom, namely, the fear of failure. The individuals in question might contemplate doing something that will test their courage, determination, and ability, but then decide against the attempt, with the key factor in their decision being the fear of failure. From their point of view, it is better not even to attempt something than to fail while trying to accomplish it.” (William B. Irvine, A Guide to the Good Life)

I’d like to think that I don’t suffer from a fear of failure and that I’ve been good about giving most things a try, but upon deeper reflection, I still believe I have a bunch of limiting beliefs about what I can and can’t accomplish which has shaped a lot of my choices. For example, writing and publishing a book is something I’ve always wanted to do but I’ve made many excuses for myself over the years to not go after it. I’m working to change this.

“Culture, productivity, and profitability must all live in harmony. Culture becomes extinct without profitability. Profitability becomes extinct without productivity.” (Greg Crabtree, Simple Numbers, Straight Talk, Big Profits!)

A couple months ago, I noted that the results for our Q12 survey, which measures our team engagement and how they’re feeling, saw steep declines across the board. One conclusion we drew from it was that the lack of profitability and productivity really impacted team sentiment. When you’re losing on the scoreboard, it’s hard to be excited about being part of the team. The opportunity now is to turn things around so that we see productivity driving profitability and ultimately signaling a strong culture.

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