Another year comes to a close – another year of countless decisions, experiments, and initiatives.
Like any other year, we made plenty of mistakes and did things that were either inefficient or straight up wasteful. And while I’d like to think we learned a great deal from these experiences, I’m also sure that we’ll continue to make mistakes in the future. My hope is that we can avoid making the same mistakes over and over again.
What I appreciated about this year was that we kept things fairly simple and focused on what we felt were the important things. Last year, I wrote about four lessons that I wanted to take into 2023, and we’ve managed to stay true to these throughout the year:
- Execution is Critical, Don’t Let Things Slip
- Don’t Delay the Hard Decisions
- Be Explicit About Expectations for Performance and Behavior & Hold People Accountable
- The Best Business Opportunities Come from Existing Relationships
Many of the decisions we made or initiatives we pursued were in service of these lessons. Heading into 2024, I’d like to roll these lessons right over and continue to make them the lens through which we think about our business.
About Agency Journey: This is a monthly series detailing the happenings at my agency Barrel, founded in 2006. You can find previous episodes here.
Some Wins Heading Into New Year
We got some positive signals on the new business front before heading into the holiday break. We signed a better for you snack brand to a website redesign project and very close to signing a creamery brand to an ongoing web retainer as well. We’re also finalists for a Shopify migration project for a popular NYC landmark that we’re excited about. And a couple of our web audits have turned into larger engagements heading into 2024.
These were much-needed wins that are helpful for us in making up ground especially since our historically slow Q3 and early Q4 put us in a bit of a hole. If we can square all of these away in terms of signatures and initial invoicing in early January, the Q1 picture will start to look rosier.
Another unexpected win was that our client who last month cut back on a significant web retainer has asked us to ramp things back up again for another month as they struggle with some bandwidth issues. While there are no promises that the extension will last more than a month, it’s possible that the initial plans to reduce us to zero may be delayed a bit longer.
On the project launch side, we were pleased to help our long-time client Well+Good with their annual Well+Good Trends Hub website. 2023 marked 8 years of collaboration with Well+Good. We also helped Two Blind Brothers with a web project, helping to rethink and redesign an experience specifically targeted at returning customers. And lastly, we launched a Shopify website for Encore, a new sustainability-conscious brand that just launched a line of bags created from deconstructed vintage designer handbags.
Org Structure Changes: PMs to Software Team
For much of 2022 and 2023, our project managers lived under the Client Services team. They worked in tandem with our account managers under the leadership of our Director of Client Services Kate Fulks. As our account management practices have taken root and grown, the project manager role has evolved to become more technical and closely aligned to the activities of software engineers and QAs. As a results, we made the move this past month to shift project managers to the Software Team under the leadership of our CTO Wes Turner.
This move required a revisit of the project manager job description. Our expectation is that PMs play the proactive role of assuming technical leadership on their projects, coordinating with software engineering leads and others to align on approach. What we are looking to avoid is project management that by default is a go-between messenger who cuts and pastes answers without truly knowing what’s going on. In order to drive project milestones, mitigate risk, and ensure everyone is in sync, a PM needs to have full grasp of project details and how things fit together.
We weren’t as explicit or clear about what we wanted out of our PMs in the past, so we would have a wide range of behaviors that could impact projects. In some instances, PMs did fill the technical leadership role and drive progress while in others, they assumed that a software engineer or strategist would take on the responsibility. When the latter happened, a void would often be created, leading to miscommunication, messy workflows, and quite a bit of rework.
Having a clear idea of what we want for the PM role will help with how we train existing PMs and recruit new ones. It’ll establish clear criteria for what constitutes a high performing PM and bring accountability to the role, something that’s eluded us in the past.
Activity at Bolster, BX, and Vaulted Oak
Rounding out the year, I wanted to give a quick shout out to the progress we’ve made beyond Barrel at our other agency businesses. A quick run-down:
- Bolster, our brand design studio launched this year, has been steadily making progress in signing new clients. We’ve found a niche with presentation/deck design, helping founders and executives with storytelling and visually compelling slides. Our unique Omakase offering continues to feed us opportunities. We’re close to having delivered free branding to nearly 50 businesses.
- BX Studio, our Webflow agency, had a banner year, posting significant growth in both revenue and profits. In addition to dozens of startups and small businesses, BX helped launch Webflow websites for brands like Headspace, TikTok, and IGN. BX also became a Webflow Enterprise Partner in 2023.
- Vaulted Oak, our Shopify and WordPress support & maintenance agency, continued its strong growth while deepening relationships with existing accounts. Brands such as The Woobles, Viva, Sticky Brand, and Sabai worked with Vaulted Oak to build custom functionality and roll out site enhancements throughout the year.
In 2024, we’ll continue to focus on growing these businesses. We currently don’t have plans to launch a new one but we are interested in pursuing potential acquisitions. If you run a sub-$2 million per year Shopify or WordPress business, let’s talk (DM me on Twitter or LinkedIn).
Top of Mind
Goal Setting for Next Year
My CEO coach Gerry talked about two types of goals one could set: 1) a very lofty goal so that even if you come up short, it’ll still be a commendable result or 2) a very realistic goal that you have a very high chance of exceeding.
Looking back one some internal presentations from early 2023, we set some very loft goals. In fact, the goals were so lofty and unrealistic that by the end of Q1, we had to adjust them down significantly. And even then, we came up quite short, so much so that what felt more realistic was actually still quite lofty.
This is all to say, we weren’t very good at goal setting. With some coaching throughout 2023, I think we’ve become a bit more thoughtful in how we approach goal setting. Heading into 2024, we’re targeting flat revenue but an increase in profits.
Why such uninspired goal-setting, you might ask. In a more granular fashion than in previous years, we projected various scenarios to see what the maximum amount of revenue we could expect in 2024 from all the clients we engaged with in 2023. The “best case” we could hope for was to hit 84% of 2023 revenue from existing clients. While that number was initially encouraging, keep in mind that this is the best case, which means everything across all of these accounts have to go perfectly, which is highly unlikely. The pessimistic case is around 65%, which would require a good amount of churn (not impossible) and many things going wrong.
We’ll most likely land somewhere in between. I think high 70% would be a realistic base to aim for, which would be an improvement over this year’s numbers, where we retained about 61% of client revenue from 2022 in 2023. Though keep in mind that we had a higher revenue base in 2022 (20% higher), so the 61% would be closer to doing 73% this year in absolute value terms.
All this is to say that it won’t be easy to repeat the same level of revenue this year. Let’s say we get to 75% of 2023 revenues from existing clients. That means we’ll have to find 25% of revenue from brand new clients, a number we exceeded in 2023 but not by much (about 5% more). Nearly 30% of new client revenue came from a single large project, and it was a project that was outside our core Shopify focus, so my bet is that we’ll have to replace that with a handful of smaller wins.
It’s possible that there’s a flurry of new business activity spurred on by macroeconomic factors, but nothing is for certain. I’d rather lean towards skeptical and protect our downside. If we match this year’s efforts in landing new clients (which was a lot of hard work), and assuming the 75% coming from existing clients, we’ll be up around 1-2%.
This is all top-line talk. The other goal is on the profit side. We think if we can stay disciplined on costs and get to the same level of revenue as 2023, then we stand to grow profits by nearly 80% year over year. This, once again, is a “best case” scenario, but even a 50% improvement would be a respectable result. Part of what is driving this projection is that we’ll be coming off of our NYC office lease in April 2024. While we’ve offset a large majority of the costs through subletting, we would still see a nice chunk of cash savings each month. We’re also starting off the year with a tighter payroll having gone through a combination of layoffs of attrition in 2023 that reduced our overall headcount. We believe we can generate 2023’s level of revenue with our current capacity.
So to sum it up: we’re aiming for flat to slightly better (1-2%) revenue in 2024 and a significant (50%+) increase in profits.
With these goals in mind, we’ve been laying out our plans for 2024. A lot of it is a continuation of what we prioritized in 2023 – delivering on all of our existing client engagements, weekly outreach to various contacts to develop leads, deepening relationships with various tech and agency partners, and social media marketing by the partners to stay top of mind to people in our network and beyond. We have a few other activities that we’ll be layering on top to potentially drive incremental opportunities beyond what we anticipate.
I’m also aware that goals don’t only need to be about hitting financial targets. The revenue and profits will often take care of themselves if we do the important job of continually bringing value for our clients. This entails ongoing skill-building, learning from experience, recruiting/training/retention of talent, and commitment to improving our processes and systems. Do these things right and we’ll be in good shape to take full advantage of opportunities that come our way.
Shared with Partners
“Tenure of relationships is also a key item to consider. Boutiques that generate billings from clients for years are attractive. This suggests that the client relationships are strong. If the boutique did not deliver value, clients would go elsewhere. A rule of thumb is that the average client tenure should be three years or more.” (Greg Alexander, The Boutique)
We ran a report on all of our past clients after coming across this quote. We’re right around 2 years on average. There was a period especially around 2020 to early 2022 where we experienced quite a bit of churn, much of it related to our paid marketing services. As we shift away from that period, I expect our client tenure average to increase.
“Quick promises Mean little trust. Everything easy Means great difficulty. Thus for the Sage Everything is difficult, And so in the end Nothing is difficult.” (Lao-Tzu, Burton Watson, Stephen Addiss, and Stanley Lombardo, Tao Te Ching)
I love this paradoxical quote. One thing the Barrel partners constantly remind each other is that “nothing is easy” and if something does feel too easy, chances are, we’re overlooking something and it’s about to get hard.
“Investor Charlie Munger once noted that the world isn’t driven by greed; it’s driven by envy.” (Morgan Housel, Same as Ever)
RIP Charlie Munger. His observations will remain timeless and relevant. As much as I try to focus on “running our own race” and not defining self-worth in relation to others, it’s impossible to exist in a vacuum. There’s always going to be a bit of envy, even if it’s not an explicit and malicious type of envy, and that feeling of wanting to achieve what someone else has will continue to drive our efforts. I personally like to call it “inspiration”, but yes, that too is a form of envy.
“In a way, an organization is like an automobile assembly line; it must be first class or the cars that come off it will be second rate. The exceptional assembly line comes first, before the quality car. My Standard of Performance was establishing a better and better “assembly line.” We were becoming a first-class organization in all areas.” (Bill Walsh, Steve Jamison, Craig Walsh, The Score Takes Care of Itself)
The inputs are what matter. This echoes what I wrote above when it comes to goals beyond the financial metrics – being hardcore about what goes into our work, obsessing about quality and standards, and being consistent will inevitability lead to great financial outcomes.
“Preserving or increasing cash should be the foundation on which all decisions are made. If you have sufficient cash, you can weather any storm and will have the resources to support the associated operating requirements of any level of growth.” (Michael E. Gerber and Fred G. Parrish, The E-Myth Chief Financial Officer)
This is top of mind as we look to replenish our reserves after a very busy and complicated tax season. Heading into 2024, with higher expectations of profit, we’ll need to put aside more cash for taxes and also steadily increase our emergency cash stash.