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Growing A Consulting Team To $20 Million with Jacob Baadsgaard
I’m excited to have Jacob Baadsgaard joining us. Jake, welcome.
Thanks for having me, Michael.
Your company, Disruptive Advertising, made the Inc. 500, 5000 lists. At that time, it showed your company’s revenues at around $9.3 million. Now you’re up to about 160 employees or so, $20 million in revenue. First of all, congratulations on that.
Thank you. It’s been quite the journey.
That’s what I’m excited to dive into with you and uncover a lot of the gems I hope that others can benefit from and everyone reading this. I want to start by exploring how you got to where you are now because before Disruptive you worked at Adobe, from what I understand. Was that how you started getting to the digital and marketing world or did you have something before Adobe that got you into that?
It’s interesting because my degree was in Information Systems. If you had asked me if I had any intentions of going into marketing with my career, it never even crossed my mind. I’m a big believer for most entrepreneurs, consultants, those types of things. The best place to start is to get good at something. Become the expert at something and the entrepreneurial ideas, consulting opportunities, seem to start presenting themselves. I got started as a web analytics technical implementation consultant at Omniture that was later bought by Adobe. All I did was I helped a lot of these Fortune 500, Fortune 100 companies implement web analytics so that they could see which marketing channel was producing the best relation to their goals, revenue, those types of things.
That’s where I started to see some patterns in the data as I worked with large companies like John Deere and American Express. All of a sudden, we were digging into the data together and figuring out what works. That’s where I started to get introduced into pay-per-click advertising on search and social media. What I loved about it was now that I could track this, I don’t know that I need to be a great marketer because the data are telling me what to do anyway. I can go and iterate and test on that. What I ended up doing is leaving. I took a job somewhere else. I thought I was going to start an analytics consulting agency. I was waiting out the non-compete period that I had. What it ended up being was people didn’t want help with web analytics. They wanted help with web analytics could help them the value that it could add to their business.The best place to start for most entrepreneurs, consultants, and the like is to get good at something. Click To Tweet
Take me back to that time when you were at Adobe. Omniture is acquired by Adobe, you’re working there. What was the real impetus for you leaving that company and decided to go off and do something different?
It was something that I had thought about quite a few times while I was there. The moment that ultimately led me to pull the trigger was sitting in an annual review, seeing how I was performing in comparison to my organization of 250 people, performing at a very high level, being sat down and being told how amazing and great I was and I was going to be rewarded with an 8% raise. All of a sudden, it didn’t scratch the itch. I believe that my manager was doing the best he could within the budget that he was given for the team. I didn’t feel any resentment towards the business or towards my manager or anything like that. I realized, “This doesn’t work for me anymore.” If I keep coming in now, I’m not going to be motivated to do my best anymore because whether I do my very best or just enough to be above average, it’s going to net me about the same. That’s not my personality to come in and settle. That’s when I realized I needed to do something different.
That resonates with a lot of people in one of the studies that we did. This one specifically was in 2019. We found that the number one reason why people get into consulting is that they want to realize their full and true potential, far more than money. It’s able to realize that potential. It makes sense if you feel that you can’t hit your full potential, you’re not as motivated that it was time for a change. When you decided to leave Adobe, you had a non-compete, is that correct?
How long did that last for?
It was for a year.
What did you do to work around that? A lot of people as they make that transition from corporate, especially when you’re a valued player, those organizations want to try and keep you out of the market as long as they can. Tell us a little bit more about what you did during that time of a non-compete or how you worked around that as much as you can.
Once I realized I wanted to do that, the way that it played out is I had a former client that was no longer engaged in consulting services with Adobe. I had a conversation with him where he was interested in having me come and work for him as his director of digital marketing. Not knowing exactly what the implications are and whether or not that was or was not okay, I addressed that with management and my organization made sure that was okay. Ultimately, they were bummed to see me leave but decided that it was okay. I took a job. One of the conditions that I told him was that, “I do plan on starting my own agency and doing consulting. I want to make sure that you’re okay with that and that may mean that I’m doing some things on the side. Obviously, that would not impact what I would bring to the table for you, but I want to make sure you’re okay with that.”
That’s how I navigated through that and leave. The place that I went to understood that I probably wasn’t going to be there long-term. He’s still a client and a great friend. He said, “That’s great. As long as you can produce while we’re working together and go. If that time comes, I’ll become a client. In the meantime, you’ll have a salary and benefits for your family.” I was pretty lucky that way. I took that year and worked for them. That’s where I realized, “I’m not going to be an analytics consultant, which is where my non-compete was applicable anyway.” I ended up going into the marketing side and that’s where I started picking up some of my clients and doing that work.
Let’s talk about that. You landed this first client right through that transition of the existing relationship that you had, which many people are able to do or at least have the opportunity to do if they’re open to it. The next clients, where did they come from? That’s often a challenge for people once they’ve maybe exhausted their network or they’ve moved to a new place and they don’t feel like they have that network that they used to enjoy. How did you go out? What did you do to land the second, third, fourth, fifth client?
The second client was the company I worked with when I was going through college. I reached out and I said, “I know things that are going to help you and let’s talk through this together.”
When you say you reached out, what did you do specifically? Is this someone that you were in contact with on an ongoing basis or is this someone you hadn’t spoken to for a very long time? What did that look like?
We had enough of an ongoing relationship that it was comfortable for me to text, call or email. I remember the bulk of the conversation happening over Google Chat and saying, “Here’s what I’m working on. These are the things that I’m good at now and that could help your business.” We had a conversation. I remember talking through that with him. He said, “Let’s give it a shot.” I said, “Let me get some of this and let’s make sure it’s working. I’ll even do that for you for free. I want to make sure you’re getting good value.” I don’t know if it’s a mistake, but it’s very common with new consultants to undervalue ourselves. I got a few of the dots connected with their CRM, their ad platforms, analytics and all of those things. He said, “You’re set up for success now. That’s great but I don’t have the time or know how to do anything with all this information you’ve got.” I said, “This would be a good opportunity for you to go ahead and pay me to do that for you.” They signed up for $800 a month. I thought it was pretty sweet.
How good of a move do you think that was that you did some of that early work for free, provide a lot of value without receiving direct compensation? Was that a smart step for you to take or is it one that you would suggest people don’t do?Once you become the expert at something, the entrepreneurial ideas or consulting opportunities will start to present themselves. Click To Tweet
It was. The reason why is because we’re not only compensated monetarily. The experience and the value that we receive in servicing the client and helping figure things out for ourselves as well becomes almost a lot more valuable than what I was paid. I would say, “In that situation, I feel great about it.” I could certainly tell you about a lot of later situations where I did too much work for not enough or nothing at all that I regret doing for sure.
I’m glad you said that because I feel the same way. That’s often how we’re going to speak to consultants that reach out who are at the early stages, which is even if you’re not receiving direct compensation from some of that early work, you’re not receiving the level of compensation that you want. The value that is sometimes invisible or hard to see is the leverage that you’re creating of that case study or that client that makes a referral to someone else or in your case, which is also quite common. It’s like you do that front end piece of work that you didn’t get compensated for. The back end, that $800 a month has probably gone on for a little while. That more than made up for it and hopefully, it was a profitable engagement.
Not only that, but we’ve set ourselves up for success because now they had the right information to make smart decisions for their business. They grew from an $800 a month client to a $2,000 or $3,000 a month to $5,000 to $30,000 a month client. We’re one of the best-case studies for me to say, “I went and did this for Fortune 100 companies and here’s how it applies for a normal small business.” No one gets this level of service or support in the industry because usually, the only ones that can pay for it are the enterprise organizations. It fortunately did pay off from an ROI standpoint, but even if it didn’t, I would still say it was the right thing for me to do.
Some of our audience might be thinking, “Michael, Jake talked about something there. He moved a client from $800 a month to $30,000 a month. How do you do that?” Don’t let them pass over and go to the next question. I’ve got to dive into that a little bit more. What did you do to increase your fees with that one client from $800 a month to $30,000? Was it additional services that you added on top? Was it, “We’re better than we were last year, we need to charge? Was it your ad budget has increased, our fee also increases? Is it we’re generating more results for you so we’re doing on a percentage of that or maybe something completely different? How did you connect or have that conversation with the client to increase their fees from $800 a month to $30,000 a month?
There are a couple of iterations to that process. The first one was, “This scope has changed. I’m doing way more for you now than I was a few months ago. This is what I need to charge for that.” That’s when we went from $800 to $2,000. They got it because they were spending more there. We see good results from it, etc. The second go-around was the same thing. We’ve gone from a $20,000 to $30,000 ad budget per month, spending over $100,000 that the scope has gone up. You’ve even gotten me in working with your sales team members to make sure they’re selling this right.
I said, “$2,000 doesn’t make sense anymore.” I proposed $5,000. They said, “No.” I remember saying, “Okay, I’m not interested in working with you. If you don’t value my services, feel free to go on and see what else you can get in the market.” After interviewing for some in-house positions and interviewing some other agencies, they came back and they said, “$5,000 sounds fantastic.” Sometimes it’s okay to put it on the line. At that point, I had a few other clients as well. I’ve always been somewhat conservative and making sure that I wasn’t too dependent financially on any one client. When I started the business, we had done a good job of getting out of debt and having a lot of money saved up. I didn’t have to make an income if it wasn’t working for a while. That way I didn’t have to bend over and take whatever price they were willing to give me.
Was the saving up from the corporate career or was that from client revenue when you started the business?
It was both, client revenue savings and from corporate. I had a small stint wholesaling some products that did pretty well that built up some of those reserves as well. I grew up in a conservative family with ten kids where we didn’t have a lot. I tried to be a little bit more conservative on the budget and not put myself in an overly compromised situation. The phrase that I always like to live by is that “It’s good to be hungry. It’s not good to be starving.” If you’re starving, you’ll make unethical decisions. If you’re hungry, you’ll get after it.
That was the second client. Take us through as the business progressed and I’d like to contrast that with what you’re doing now for your lead generation and bringing in new client business.
I’ll take us from $5,000 to $30,000 a month in the management fee. It will dovetail perfectly into that. I started to see how their business was working and what it was going to take to help them scale. I knew that we could deliver that for them. I proposed a performance contract rather than a management contract. It was purely based on performance that got them additional leads. We’d get a piece of that or if we could get the cost per lead down and get a piece of that. We scaled pretty fast and went from a few grand a month management fee to upwards of $30,000. They taught me an interesting lesson. There are a lot of niche agencies that use that approach.
I decided I didn’t want to do that after that experience. I had to go in and have a yelling match to get them to pay me that first big check because they said, “That’s great. Are you worth $30,000?” “Yeah, because that’s what we agreed to.” It was this game back and forth after that of, “What about the lead volume or the quality or all those things. All of a sudden, our incentives weren’t that well aligned. It helped me understand that I can’t scale this because the complexity around this performance plan is not scalable. It’s taking so much of my time and energy to do that. I’m not interested in doing that anymore.
I decided what the value is that we bring to the companies that we work with. On average, we can deliver the specialty services that we do in implementing the analytics, optimizing and running the paid search and paid social campaigns, optimizing the website for conversions and doing all of those things with specialists in each area for the price that it would take to hire one person internally that doesn’t have all those expertise and sometimes even less. All of a sudden, we could align on what their goals were. Maybe have a small portion of performance in there as ad spend increased or those types of things as a percentage. It created a more stable, aligned and cost-effective model that I could repeat a lot of times.
That’s why companies that started to hire us was, “We don’t have the bandwidth or the expertise to do what you guys can do. You’re a lot more cost-effective. Me trying to hire people internally, I’ve tried other agencies and they’re not working out good. Let’s give you guys a shot.” It was understanding that was our angle into the market and understanding that. Sales started to come from me hustling, going to networking events, speaking at some conferences. That wasn’t what ultimately allowed us to scale. That was, “I’m building a business that’s completely dependent on me to sell, strategize and make all this happen.” That was what got us from me being an individual consultant to having a team that helped amplify my personal abilities, which probably what got us to the first ten to fifteen employees.
What would you say on the revenue at that stage where do you max out revenue-wise?
It’s probably between $1 million to $2 million.
Fast forward from there, what’s the difference between that hustle of everything supporting you as the brand and getting up to $2 million to now taking into 10x to $20 million? What changed in your marketing, prospecting and lead generation?
The first thing was understanding that what I was the most passionate about was the vision, marketing, sales and making that happen. The first thing I needed to do was to develop a team that was competent and confident enough to execute on our contracts, deliver high-quality output and an experience that was great for our clients as well. I had to replace myself in that area. That just took time.
How hard was that for you to do it from an emotional mindset perspective in terms of delegating and moving that off? Did you feel at any time, “I can’t take myself out of this because the clients want me and if I’m not there, they’re not going to want to continue working with us. They won’t sign up?” Was there any of that concern?
I still have those concerns.
For you, what was the decision or how did you decide to move forward with that even though you still had those thoughts and still do?
What it came down to was, “This is an excellent opportunity for me to train someone, not in theory, but to have them alongside doing all of this with me. Letting them take it over a little bit by a little bit until they had a relationship with the client, the confidence and those types of things. It wasn’t until I lost those larger clients that I did have to remove myself from and my fears were realized. They did cancel. It’s probably one of the best things I ever did for the business.
Why is that?
As we started to sell accounts that weren’t dependent on me and they did trust the team, it worked out fine. I had my time and energy to do the marketing and sales to deliver it to the team and to have that be the relationship right out of the gate. It was painful, but a lot of the times, I’d probably successfully transitioned half of them that had a dependent relationship on me. The other half probably didn’t work out either short or at least medium-term afterward. It freed me up to start focusing on the things that I wanted and for that, the operations in fulfillment to start becoming its own unit in the business. What led me to what was hard to let go of, which was sales. A founder based sales especially in a service or a consulting-based business, that’s challenging to get past that because oftentimes we’re selling ourselves. Getting someone in that can at least do a comparable job and sell it, but they’re not going to be able to sell it the same way that a founder would be. That was probably the more difficult challenge to overcome was getting that off the ground and getting the point to it where sales could be self-sufficient.
If you weren’t selling yourself in the early days and getting up to that first several million or so, do you think you could have made that transition successfully to getting someone else to make sales instead of you?
The challenge is affording things as you’re navigating that stage of a business. I would’ve gotten someone sooner. I had a couple of misses where I tried to hire experienced people that could come and take sales off my plate and hand it over to them, which failed horribly every time I tried that. What ended up working was getting people that had sales background but were very junior in their career and saying, “Come along. I’ll even close a lot of these deals for you. You come and learn from me and help me make sure I’m doing my follow up. Let’s do this together.” It took a while to get someone up to speed. I would’ve done that a lot sooner.
Rather than hiring someone, putting them 100% in control, “Run this.” Taking them off the leash right away, you’d keep them on a leash. Maybe not the best analogy and image there, but hopefully people understand it. You still maintain some control collaboratively working with them on this. That’s going to empower them and put them in the right place. I see a lot of people who do bring salespeople on, but what their goal is that salesperson does everything. They offload them very quickly oftentimes with poor results.
Even now that we’ve got a sales team, we’re up to about fourteen people now, everyone still goes through the same process of, “Why don’t you screen the people that are reaching out to us to see if we’re going to work together,” and start from the bottom up. Even if you’re coming over as a senior account executive, let’s start one step at a time and make sure that you’re up to speed on how this whole system works and that you’re effective at each stage. It’s proven to be a good model for us to get people up to speed on as we’ve grown the organization.
People often have trouble deciding how soon they should hire. Do they wait for more work to come in before hiring someone? They can’t go after more work because they can’t handle the delivery on that project without more team members. What are your thoughts and best practices especially now that you’re well over 100 team members? When’s the right time to start hiring, adding and building out your team?Consultants not only get compensated monetarily. The experience that they receive in servicing clients becomes almost a lot more valuable. Click To Tweet
I wish that there was an equation that I could follow. One of the things to understand is that there are invest modes in a company to grow. There are times to reap profits and the rewards of that investment. In order to grow as a company, there does need to be some level of risk tolerance that says, “I’m going to hire these two or three people that the revenue doesn’t currently support, that we’ve got to go and increase revenue to support these people.” That immediately takes margin down. When those three people are up to speed, we’re now producing more profit than we would have before. We not only make up the difference, but we’re now further ahead. Revenue can almost grow more linearly, but costs tend to step along that line where they are fairly flat, increase pretty steeply and margins drop. You’ve got to work through that revenue catch up. We go through that phase several times a year. It’s uncomfortable every time. I never like it. I prefer margins were great all the time.
We call it our marketing for consultants’ study, the 2019 version of it. What we continue to see is that consultants, in general, don’t spend a lot of money on advertising. That is an area where you have deep expertise and experiences helping organizations to maximize their advertising online opportunities. Even though they might be smaller than your average client, an organization that you work with, someone who may be doing a little bit of advertising or is cobbling together or leveraging a CRM. They have a website. They have some analytics, but they don’t have a ton of traffic. What might be some best practices or common mistakes that you see people making that people could benefit learning about or at least identifying and looking more into?
I remember thinking for quite a while in the business, I don’t know how we got those sales last month, but I’m sure glad it worked out. How is that going to work out this month? That ultimately making the decision of, “I want consistency in demand and leads that are coming to me to work with so that I can build an organization.” That decision ultimately meant, “I’ve got to start investing in this and being consistent with the activities that I’m doing to generate that demand and those leads.” A few things that I decided to do is I’ve always been a big advocate of leveraging LinkedIn. There are some great techniques that you can use to get in touch with a lot of great people on LinkedIn.
What are you referring to there?
It’s something as simple as identifying a short list of people that you want to work with, finding them on LinkedIn, connecting with them in a non-aggressive manner and saying, “I came across your profile because I’m in the industry as well. I’m impressed with your background. I will love to connect if that works for you.” Most people accept it. Send a message that says, “Thanks for connecting. I’m interested and curious about what’s got you to where you are. What got you down this path?” You can begin this dialogue of getting to know people and doing it hopefully genuinely and sincerely. Naturally, they’ll see what I do and what I’m good at because I’ve looked at my profile as well. The conversation will touch on that topic and it’s going to go somewhere where it’s not and you do that enough times. It’s a pretty inexpensive way to be doing that with a short list of 100 to 300 people or businesses that you’d like to do business with.
That’s great that you’re sharing that. This is a big part of what we counsel and coach some of our clients on because I agree with you. LinkedIn is a huge opportunity. A lot of people are doing it absolutely wrong. They’re using it as a tool to try and aggressively or persuasively sell and try and make offers on things without getting to know someone. Try and add value and build a relationship with the way that you’ve outlined there is in line with what we’ve seen work well for clients.
It’s not only that, but you build up a network that you get to keep forever. There’s residual value in relationships there that I’ve had some that I connected with several years ago that has turned into a business. We’re still having, and that’s okay. It’s more of a long-term play. Now I’ve got over 30,000 connections of people that got a regular input into what they’re seeing and experiencing when it comes to my industry. That’s one way to do it. There are tools that help streamline and automate some of that as well that you can look into. You’ve got to be careful because LinkedIn’s got some strict policies around that. You can get your account suspended, which is definitely not worth happening. You’ve got to be careful, but there are plenty of tools out there that can help streamline the process. LinkedIn has its own with LinkedIn sales navigator as well.
The other question that I had for you is we’re going over a lot of different aspects here. You touched on scaling the business and when you started to hire people. The other thing that I noticed that caught my attention when I was going through your website, Jake, is that your model, it looks like it’s part consulting, partly done for you and software. Is each of those marketed and sold separately? Are they all put together as one package when you’re having conversations with buyers?
It’s one package. For more of the small, mid-size market, our software is going to be a viable and a good solution for them. For the larger mid to large enterprise businesses, our software is not going to be a good fit for them. I would consider us more of a tech-enabled service. We’ve developed some automation and software to help us deliver excellent value. Clients not only get what I described in terms of you get all these specialists working on your account from a designer, a developer, a Facebook specialist, Google specialists. You’re getting the amount of time you need from all of them for the price that it would be to get one person internally doing that for you. You get our technology on the back end that’s making sure all the things got done. All the I’s got dotted, all the T’s got crossed because there is human error component to this. We’ve got both of those coming together.
One other stat that caught my attention is you mentioned on your website that 76% of ad budgets are wasted. This may apply more to organizations that are investing a lot more into online advertising, but from what you’ve seen of some of the smaller accounts and smaller organizations that you’ve worked with. Anything else that stands out? LinkedIn is one thing that people can do when it comes to online advertising or online outreach, building the relationships and building that pipeline and visibility. Any other best practices when it comes to CRM or online ads or things that people could be doing on even a small scale that could have some good benefits and results for them?
We do for ourselves what we do for our clients. We have about 1,000 businesses that reach out to us a month. Not very many of those are directly from LinkedIn. That’s a strategy that is more to build a personal brand and to get some business from. I don’t know that you can scale a large organization from that, at least not from what I’ve experienced. We’ve invested in writing a lot of the best content in the industry. We published close to 1,000 articles at this point. We started with one.
How frequently do you publish?
It’s usually about three to four a week now. Early on, it was maybe one every other week.
You’re using content marketing, a lot of articles, long-form content. You’ve got some best practices, images, nice sections. That’s the idea. Is there anything else going on there that’s critical that might not be apparent to the people right away?It's good to be hungry but not starving, because if you're starving, you'll make unethical decisions. If you're hungry, you'll go after it. Click To Tweet
We write content to help people, not to get them to sign up as clients. When you write it in that format, you tend to get more clients anyway because you help them and they want more of it. The other thing is that anyone that comes to our website, we’ve done retargeting since day one. If you’ve already made all the effort to get somebody to come to your website, put together some good ad creative that educates, entertains and inspires them because following them around with a retargeting ad is peanuts from a cost standpoint. There’s that. We also invest in paid search and some other things to catch people that are lower in the funnel and looking to buy now. Unfortunately, we live in a world with CEOs and marketers that think that they’re always one silver bullet away from blowing it up. The reality is a balanced marketing strategy that you are consistent with over time is what’s going to blow you up.
A couple of years of hard work is going to make you look like an overnight success, but it comes down to being consistent, diversifying, making sure that you’re doing the basics, getting some good content out there, demonstrating expertise, retargeting, maybe a little bit of paid search and some efforts on LinkedIn. “I didn’t get an ROI from month one or month two of doing this.” You and everyone else that’s tried it. The ones that hung in there and continue to perfect, optimize that and were consistent with it for six, twelve, eighteen months. Those are the ones that start to gain some real traction and build a moat around themselves in the industry versus the 95% of people that spent the money, didn’t get the return they were looking for and immediately gave up. Now every dollar they spent was a waste.
That’s true in so many areas of marketing and business building, entrepreneurship in general. Those that are truly committed to the long-term, that understand that they’re going to encounter roadblocks, challenges, resistance, and rather than getting knocked down, staying down, get back up, keep moving forward and learn from that experience are ultimately those that succeed. Jake, this has been great. I want to thank you for coming on and sharing some of your wisdom and experiences with us here. I want to make sure that people can learn more about your company and what you’re up to. What’s the best place for them to go?
Personally, I’d love to connect with you. We do consulting and I started as an individual consultant. I’d love to connect on LinkedIn. That’s where I’m the most consistent, active. I’m Jacob Baadsgaard. When in doubt, use another A in my last name and you’ll find me. Professionally as a business, people come to us. We’ve got about 1,000 people that reach out to us a month right now. We tell 75% to 80% of them, “We’re not the right fit,” and we tell them and give them some ideas on what they should be doing. If you’re interested in getting a free audit or consultation or some help thinking through this, reach out to us on DisruptiveAdvertising.com. If you’re already spending money, we’ve got an audit tool that we can push a button and give you a great report on what’s working and what’s not. If you’ve never done it before, we can give you a consultation on where to start, even if that’s not with us.
Jake, thanks again so much for coming on.