Agency Journey Episode 46 (Y18M1)

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In early June, we publicly announced that I would be stepping aside as CEO of Barrel, handing off the role to longtime Barrel partner Lucas Ballasy. It’s been a couple years in the making, and I couldn’t be prouder of the fact that Lucas is more than ready to lead Barrel and take it to a new level.

Check out the LinkedIn post of the announcement by me and by Lucas.

My co-founder Sei-Wook and I will be moving out of Barrel’s day-to-day operations and turning our attention to building out a more robust infrastructure for Barrel Holdings, providing support across all of our portfolio agencies (Barrel, Vaulted Oak, BX Studio, and Bolster) as well as exploring opportunities to add new agencies through incubation and acquisitions.

After 18 years, Sei-Wook and I felt the time was right to take this leap. We’re fortunate to have in Lucas a more than capable leader to take the helm, even as Barrel works through some tough headwinds.

In terms of this series, I intend to keep on writing. I’ll be sharing the activities of building out our holding company infrastructure, the interactions and goings on of our various portfolio companies, special projects we may undertake on behalf of our portcos, our thinking on creating new agencies or pursuing acquisitions, and the usual ups and downs we’ll be exposed to across all of our businesses.

My chapter as CEO of Barrel may be over but the agency journey continues.

About Agency Journey: This is a monthly series detailing the happenings at our Barrel Holdings agencies. You can find previous episodes here.


Early Progress in Barrel’s New Approach to Selling Services

Last month, I shared how we were moving away from selling buckets of hours at Barrel and adopting a fixed price approach, encouraging clients to be in conversation with us throughout the year. This “All Access” plan, spearheaded by Lucas, began as a few presentation slides and talking points. Weeks later, we now have multiple clients who’ve signed up, gladly switching away from the hours.

The feedback we’ve received so far has been positive. Clients had complained about the limiting nature of hours. With All Access, we’re starting to have deeper conversations about their quarterly and annual budgets and how best to allocate them towards discrete projects.

There are still a handful of clients who are on the hours-based model, but I think in due time, we’ll end up switching those clients to our All Access model. I also think we’ll probably end up pricing All Access differently based on the needs of our various clients. This may mean creating some differentiation around level of access, response turnaround times, and a few other activities so that clients can opt for a tier that best meets their needs while we can also capture more value via the price segmentation.

Related: see my LinkedIn post on price discrimination

Our Partnership with Contra

In late 2023, I received a LinkedIn message from Ben Huffman, CEO of Contra, a network for freelance talent. I usually ignore unsolicited messages from SaaS folks believing most of them to be automated spam, but Ben’s message felt real so I took a call with him.

Contra has become our go-to platform for managing our collaborations with freelancers including managing their payments.

Fast forward a few months, and Barrel became a Contra customer, leveraging their platform (Contra for Teams) to manage our growing network of freelancers. Contra helped us to move away from static spreadsheets and onto a more dynamic portal for our team to access and collaborate with new and long-time freelancers on Barrel projects. As fairly early adopters of Contra, our team has been vocal about certain features we’d love to see and the product team at Contra have been incredibly accommodating, working with us to clarify our needs and to quickly roll out the features, some within weeks.

We think there’s great potential for Contra to be an essential part of an agency’s software stack. As they continue to grow their network of worldwide freelancers and roll out more and more robust features for managing them, I think Contra can become a talent management platform for many lightweight agencies of the future.

Barrel co-hosted a Summer Kickoff with Contra and Framer in Williamsburg. Middle, I caught up with ex-Barrel designer Nick Kramer (currently at Red Antler).

In early June, we co-hosted a summer event with the folks from Contra and Framer in Williamsburg. It was a good time as we brought together various agency folks. The Contra team put together a video clip commemorating the event.

80 Omakase Engagements Later, What It Means for Bolster

Last year, our brand design studio Bolster rolled out its “Omakase”, a free offering that provided clients with a lightweight brand design package that included a custom logo, color and font selections, and applications of the brand across various mockups. I wrote about this in The Agency Cold Start Problem and hoped that the Omakase would prove to be an effective growth hack for us, allowing us to acquire new clients by quickly building up a portfolio and establishing a network with business owners and startup founders.

This Sankey diagram shows the impact of our Omakase experiment. From an ROI perspective, we’re basically around breakeven, having generated enough revenue to cover the cost to produce the free designs as well as delivering the paid work. Not a smashing success, but still a shot to be a profitable bet.

Nearly a year later, we’ve got 80 Omakase engagements under our belts. However, the promise of robust revenue growth hasn’t quite materialized. We have a handful of clients who’ve engaged us beyond the first paid design engagement, but the value of these projects have been low. While running quite lean, we have some months where revenues haven’t been able to cover costs, not a good sign.

A few reasons:

  • For a long time, we didn’t have a good way for Omakase participants to easily convert into a paid client. Many just thanked us for the free work and went on their way. We’ve experimented more recently with easier-to-buy packages to help clients convert. These include a “launch kit” to help turn the Omakase designs into usable logo files and brand style guide and another package for clients to explore revisions to the Omakase designs.
  • We burned some Omakase engagements on clients who clearly had budget to spend and should have been offered our standard branding package vs. the free option. They ended up not valuing the Omakase because it didn’t meet the expectations they had for what a traditional brand engagement should entail (more intake & research, more workshops, brand strategy work, multiple concepts and revisions, etc.).
  • Beyond the standard brand design package, we didn’t offer any meaty project options. Our attempt to sell design subscriptions and buckets of hours both saw its challenges, and in hindsight they were probably priced too low. Many projects ended up being one-time, sub-$5,000 engagements. This would be fine if we were doing a great deal of volume, but that wasn’t the case.

We’re looking to try a few different things moving forward:

  • Be pickier and more intentional about our Omakase approach, using it to qualify and understand prospective clients and find ways to turn the Omakase into building a valuable long-term relationship.
  • Build out our Framer capabilities so we can offer website design and build services. Larger sites we’ll still refer to BX Studio to build on Webflow, but we see opportunities for certain sites to be built on Framer, allowing Bolster to capture entire website budgets, which could be higher than what we’d get for just the designs.
  • Lean more into quoting fixed fee pricing for requests vs. trying to sell 25-hour design packs. What we found was that we would shortchange ourselves, stuffing way too many deliverables into the 25 hours whereas a client would’ve been perfectly happy paying a fixed price for each request. I think this approach will also allow us to avoid the tension and hassle that comes from explaining how we spent the hours to our clients.

We’re going to push forward and complete 100 Omakases as we originally planned. Beyond that, I’m not 100% sure we’ll continue. We’ve managed to become very efficient in how we produce Omakase work, but we need to be very realistic about its long-term potential. It’s very likely that we could see greater returns by investing our efforts into something else, like deepening relationships with existing clients or further building out our Framer capabilities.

Top of Mind

Growing the Portfolio of Agencies

While July 1 is the official date we had for the CEO transition at Barrel, we decided to make June a dry run to give Lucas the momentum heading into Q3. This meant that since early June, Lucas has effectively been acting as CEO of Barrel. Sei-Wook and I have stopped attending weekly check-in meetings and have transitioned out of our various client accounts.

But what we gained by clearing our schedules of Barrel obligation quickly got filled up by Barrel Holdings initiatives. Our initial focus was on streamlining finance ops across all the agencies, cleaning up reporting and filling gaps where we hadn’t been as diligent. But a week or so in, a couple of opportunities presented themselves both with time sensitivities.

I’m not yet able to share details, but if all goes well, it’s possible that our portfolio of agencies may grow. What’s exciting is that Sei-Wook and I are very much in startup mode–moving fast, being scrappy, learning a ton, and talking with a lot of different people.

We didn’t mean to ramp up the action so quickly, but we both agreed that given the opportunities at hand, we should act fast. This is only possible because we now have the bandwidth for these sorts of things. Just a month ago, we wouldn’t have been able to move as quickly.

What I want to avoid with Barrel Holdings is creating or acquiring agencies just for the sake of having more. We want to make sure that our agencies are high quality, profitable, and have strong growth characteristics. Right now, the portfolio is a mixed bag, with Barrel and Bolster struggling and BX Studio and Vaulted Oak in growth mode. We’ve got much work to support all of these businesses.

When we act to create or acquire another agency, there has to be strong reasons: very apparent synergies, little to no downside risk, and/or huge potential upside. With the two projects that we’re working on, Sei-Wook and I feel like they satisfy these requirements. Whether or not we’ll be able to capably execute is to be determined, but we’re eager to try.

Shared Quotes

“Believing your firm—and the services it offers—is a commodity is a self-fulfilling prophecy. If you think you are a commodity, so will your customers. How could they believe otherwise? This notion of selling a commodity is one of the most pernicious beliefs, which leads to price wars, incessant copying of competitor’s offerings, and lack of innovation, creativity, and dynamism, not to mention suboptimal pricing strategies.” (Ronald J. Baker, Implementing Value Based Pricing)

I wrote last month about the commoditization of web design and development services, but I think I overlooked an important point – even these services can be packaged up and framed as premium offerings if you are able to demonstrate value to the client through unmatched client experience and deep expertise. I know agencies that do this well and part of why Barrel’s been struggling is, well, we just aren’t performing up to their levels. So I don’t mean to blame commoditization for our struggles, it’s just our inability to provide a differentiated service offering that’s valuable for clients, which is why we’re working on finding a set of services that’ll get us there.

“How different our lives are when we really know what is deeply important to us, and, keeping that picture in mind, we manage ourselves each day to be and to do what really matters most. If the ladder is not leaning against the right wall, every step we take just gets us to the wrong place faster. We may be very busy, we may be very efficient, but we will also be truly effective only when we begin with the end in mind.” (Stephen R. Covey, The 7 Habits of Highly Effective People)

Such a profound message that never gets old. Begin with the end in mind, focus on the things that matter. Family, friends, health, emotional well-being of people in my life, service to others.

“Perhaps the most indispensable tool for human beings in modern times is the ability to remain calm in the midst of rapid and unsettling changes. The people who will best survive the present age are the ones Kipling described as “those who can keep their heads while all about are losing theirs.” Inner stability is achieved not by burying one’s head in the sand at the sight of danger, but by acquiring the ability to see the true nature of what is happening and to respond appropriately.” (W. Timothy Gallwey, The Inner Game of Tennis)

This is a useful message to reflect on during periods like election cycles and tech-fueled bubbles (e.g. AI right now) – changes are coming and we’re contending with a great deal of uncertainty, but there’s no upside to working ourselves up into a frenzy and being overly worried. Remain calm, keep a level head, see things as they are, and proceed with confidence.

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