Scaling Up a Service Business: From Idea to $400k in Monthly Recurring Revenue (Greatest Hits)

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1:17Scaling up a service business from idea to$400 ,000 in monthly recurring revenue. What's up, what's up, Nick Loeber here. Welcome to the Side Hustle Show because your idea of success might not coincide with your bosses. Our recurring revenue theme for the month rolls on this week with the crazy story of a side project that's turned into a multi-million dollar a year business in a little over two and a half years with just one service offering. You've probably heard of productized services before. These are businesses that take skills normally sold on a project basis or an hourly basis and it sells them like their products with flat fee packages and they're often sold on a monthly subscription model.

1:58Like most recently, we heard from Gabe Arnold from Copywriter Today, which sells article writing as a monthly subscription. And when we caught up in episode 205, he was up to$20 ,000 in monthly recurring revenue. But today, I want to introduce you to Russ Perry, who took this model and took some inspiration from another Side Hustle Show guest and created a really cool business called designpickle.com. The service offers unlimited graphic design tasks for a low flat monthly fee. And maybe the exciting part is, as you'll hear Russ say, is that he sucked at design. It was never about him doing the work.

2:33So I invited Russ on the show to learn, look, how did he get his customers and how did he build up his team to deliver consistent quality results? The pain point for a lot of entrepreneurs and side hustlers in the freelancing or consulting world is how to decouple their income from their time, right? how to stop trading hours for dollars. That's something I think Russ has done extremely well, and I invite you to listen in to hear how he's scaled the unscalable, a service business. Notes, links, and a free PDF download with all of Russ's top tips from this conversation are at sidehustlenation.com slash Russ.

3:07It's R-U-S-S. I'll be back with my top takeaways from this chat with Russ after the interview. Ready? Let's do it. The best place to start is after I had closed my creative agency. So I had an agency here in Arizona and on paper, it seemed like we were doing good from the outside. It seemed like we were doing good, but personally I was falling apart. I was depressed. I hated the business. I hated my clients. I felt like I was in a prison of my own creation, which is not a good place to be in. So I closed it all. And in late 2014, found myself with a sizable amount of freelancing clients, considering I was just me going from 20 employees of my agency to down to no employees and a laptop and a coffee shop and ended up like kind of creating the systems around Design Pickle that were the foundation of what we do today.

4:04Because I was fearful of creating another agency. I was on this path. I was like, oh crap, I'm getting these clients and now we're doing this design work. And pretty soon I'm going to have to hire people. And it was this flashback, like, no, I don't want to do this again. I'm just following the same abusive path that I just escaped from. And so I actually then took a moment and stepped out and kind of created a little automation, a few really simple things between a ticketing service and a generic email address and a couple of freelancers that became the bones of design pickle to manage inbound design requests really seamlessly and pull me out of those weeds.

4:46And it wasn't until December, well, probably late November, 2014, when I read seven day startup by Dan Norris. And I was like, dude, this is my business. Like he has the same thing, but he's doing WordPress updates and I'm doing design. I need to brand this sucker. I need a launch. I need to go, which is of course the feeling you get after you read that book, you're like ready to launch anything. And we did. And we launched in January. Had you connected with Dan before the book? No, dude, I didn't even know. I think I knew of him because of the Dynamite Circle content and connections, but I didn't even know.

5:21I didn't know him personally. I just picked up the book and I was like, this is a great book. And this is really, really applicable to where I'm at. A couple notes here. Dan was a guest on the Side Hustle Show in episode 132. If you want to check that out. We talked about the seven day startup book and his experience in running several different businesses, including WP curve, which offered unlimited WordPress support for a flat monthly fee and was ultimately acquired by GoDaddy about a year after we recorded that episode for an undisclosed sum. Also the dynamite circle that Russ mentioned is a private membership community that focuses on location, independent businesses, location, independent entrepreneurship, and it's run by the hosts of the Tropical MBA podcast, one of my longtime favorites.

6:10All right, let's jump back in. Yeah, because it sounds like he kind of came from a similar background of having this web design agency that sucked. And despite getting more and more clients, like having to hire more and more people to service those clients and just going backwards, like not making any money, not having a good life. And maybe we can really strip this back, simplify it and say we offer one thing. Yeah. And it's the path I think every creative agency type person wants to go down and ends up some are successful on that path. But ultimately, I think what you see people really break out and, you know, just not design people, I've seen people break out with niche photography service, niche copywriting services.

6:55It's like finding an angle and a niche and making it super streamlined, making it really smart how that experience is driven. And that kind of is the name of the game now. You know, that like to me is you see a lot of products, whether they're SaaS products or service-based where you have somebody who escaped and now just does one little piece of it really, really well. Yeah. Was it primarily design that people were hiring you for? It was a really broad spectrum. Initially, I was doing design, but I was doing website buildouts for WordPress sites. And I was doing branding and logo design and brand strategy and trade shows.

7:31So these little projects were annoying. They were important when the CEO of your consulting gig that's paying half of your life's expenses needs a business card. But at the same time, I mean, I was out of the design game for a long time. I hadn't cracked open Illustrator in years because I always had a team. So I was like, well, the truth is I kind of sucked at design. So I was like, man, I need to find someone else to do this. Otherwise, I'm going to give them a really crappy business card. And that ultimately was when I hired some freelancers. But again, I was like, I'm not going to just, I'm not going to be that same model.

8:09How can I be smarter about this? And I thought, well, ticketing tools, they're really helpful. I use them in customer support situations all the time. What if a client could just email this generic tool and some backend support could grab it, design it? And if it was overly complicated, that's when I would jump in and be like, help out a little bit more. Okay. Yeah. So maybe beyond that, that's all it was. And that's what it remains to, to this day. It was just, let's just create a really focused, really reliable way to get this piece of design done. And ultimately when I took a step back, when I had all this spectrum of design work, then creative work and branding and consulting and marketing that I was supporting, I said, hey, it's not that sexy just to focus on Facebook ads and brochures and trade show graphics and the blah, blah, blah design.

9:00But dude, that's running really well. And then of course, when I saw the model that existed with WP curve, I was like, I got to go for this. I'm going to try to go the scale route and try to go down a path that I think I could provide this. And then I closed out, it took me six months actually from January 15 to July 15 to unload all of my consulting clients fully. But that was because Design Pickle was growing and growing and growing. So we ended up getting to a point where I could swap out all my income with Design Pickle and went full pickle, as I call it, in July 2015. Those first six months, dude, anyone who would listen to me speak.

9:45I was speaking at the Hispanic Latina business conference and every angle of every business. Were you at Icon in that spring, 2015? I was. Yeah. I was dressed up as the pickle. That was our first marketing event we ever did. Okay. And we were too late to get a booth. So I negotiated a pickle handing out sponsorship where I could stand on the tile in the convention center. I couldn't leave the tile. I was like a dog. It was like hot lava. Okay. Yeah, exactly. Exactly. The hot, if I step on the carpet, I burn to death. But I could stand on the tile and hand out pickles. And as far as marketing and branding, it was massively successful.

10:31But I couldn't even talk about Design Pickle because I was by myself and everyone wanted pickles and it was like a madman rush for the pickles. Wow. So I totally remember seeing the pickle guy there. This is Infusionsoft's conference in 2015. And it turns out it was you. It was me. I'm now retired though. Now you got people to put on the pickle costume for you. Okay. Well, let's dial it back a little bit. Tell me about your first customer. Who hires you specifically for this service? Well, my very first customer was a friend of mine named Will Humphrey And he owned a physical therapy clinics, actually a few of them in Arizona, more rural Arizona cities, not necessarily in Phoenix.

11:13And he, to this day, I know there's still a client and they use this every day. And it was just to help out with an office marketing collateral. So they have a promotion, a special on, you know, back massages or whatever products go on in physical therapist offices. And they had the front desk girl that was doing the design. She was not a designer. She was designing, I think, in Microsoft Word and with whatever resources were available to her. And he wanted to kind of level up his, you know, he had a cool website, a nice brand, good logo, but just not the need for a full-time designer. And we were able to kind of come in and give him a dedicated professional designer, but at a rate and a commitment financially that isn't going to just, you know, crush a small business.

12:03Right. After that, what happens in terms of signing on more people? You say, hey, I got somebody to pay me for this. They put their money where their mouth is. And what happens next? Well, one of our keys to success was charging a lot of money relative to software. Now, it's not a lot relative to a full-time designer, but getting$370 a month, which technically early days, we were only$195 and we upgraded. But even that, getting a couple hundred bucks in immediately, and I get 10 of those clients. It's actually, I think I got 15 clients the first month. That's cashflow. Like, I'm like, oh my gosh, I actually have cashflow.

12:41I can pay myself. I can buy Facebook ads. I could invest it in a sponsorship, which we ended up doing the second month in Infusionsoft. So the price point was so instrumental to our success because we just had money immediately. Now, where'd those 15 clients come from? We did a lot of guest blogging. I did a lot of spamming. In fact, I got blocked by Gmail for a while because I just was like BCCing my entire contact list emails. They did not like that. I'll admit, I got every list of every marketing lead I could find and just blasted them and just said, Hey, we're new. Here's what we do. Check us out if you want to sign up.

13:25And we didn't have a software. We didn't have... I was every job except for design. And it was, we had three different plans, which that was a big mistake. Cause it was, it was all the same thing. I just was like made up some plans that looked different with different limitations. Cause I thought that's what you did when you were a company selling stuff online. Tell me about that. Cause that's an interesting observation on the pricing because yeah, the traditional sense is like, Hey, I have a small, medium, large, cause you never know. Some people are going to pick the large one, you know, but you said, no, we're going to do one service, one price.

13:59I think there are reasons why that works in particular with pure SaaS products or let's say really complicated service models that there's a lot of exposure of risk for the person providing it where they would need to have different limitations because they don't want to just lose money on a client. But for us and what I found was my initial reason to break up these plans. And I created a lot of false limitations because I was afraid of getting taken advantage of. And I didn't really know what to charge truly either. I didn't know what the right price point was. So ultimately, the real simple decision why I eliminated tiers and plans was because all of the differences were Russ Perry made.

14:47They were limitations I had just created for no real reason. And it was creating a lot of sales questions I didn't want to answer. Okay. I was like, well, what's the difference between this plan and this plan? What's the difference between this plan and this plan? And when you're the sales guy and the accountant and the tech support and the customer support and everything else, I just was like, dude, I want to eliminate these sales questions. Here's one plan. There you go. No more sales questions on the difference between plans. Yeah. Fair enough. And it worked. And at that point we had enough data because we did lower, we had the low price, we increased it to 370.

15:20Then we went up to 495 and really saw a drop off. And then finally just settled at 370. And we've been there ever since because it's enough, but it's not too much. You could put that on a credit card and not necessarily raise any flags. Hey, just a heads up that plans and pricing have shifted a bit since we recorded, but the basic value prop remains the same. Sidehustlenation.com slash design pickle is my direct referral link if you want to check them out. And I'll be right back with Russ after a quick word from our sponsors. A lot of side hustlers suffer from what if-itis. What if it doesn't work?

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18:22They, at least the clients we want. So everyone spent that enough, that amount, like two or$300 on some project in the past. So they have a point of reference. And that's another thing that I learned in terms of pricing. If you're selling something like design, my customers have a lot of experience buying design. If I was to sell, say this like Zencaster software we're using for your recording, well, you know, maybe people have experienced podcasting, but more people don't. So you're really having to sell why there's these features and benefits and why you're different and why you even need to do podcasting.

18:59I never needed to do that for sales. In fact, sales for us was really easy. It's like, hey, do you need design? Okay, here's our price. And again, if you've had that price, if you've bought, say you hired a guy, a freelancer, and he charged you a couple of hundred bucks for a brochure, then you see our offer and you're like, well, wait a minute. I paid just as much of that for one project and you're telling me I can get, I can use you whenever I want. And if the price doesn't change. So those sales, that's that price point was really important to have price context. If I want to call it that I'm just kind of making that up, but like pricing context where there's experience around whatever it is you're trying to sell.

19:37Okay. Have you gotten pushback from people about like, well, you're, you're commoditizing my art or real design can't be done for this price. Yeah, I call that the underemployed graphic design community that hates on us. And it's kind of like, yeah, we've had all sorts of funny things. We actually had a protest, like a coordinated protest from some podcaster in California. and it and they're like form of protesting us was having his listeners dress up as a pickle like a photoshopped pickle and they put their faces in and everyone's giving thumbs ups so it was like this bizarro like avant-garde protest that ends up just like really branding us really well because everyone's dressed up as pickles but yeah people push back and you know unfortunately the reality is if they were making any kind of real money in their life and doing something meaningful, they wouldn't really care about us.

20:35But in fact, they're not, and they're probably broke. So they, they attack us. And my argument is like, it's probably worthwhile, like going to getting clients versus attacking us because truly, because people want to use a design service that doesn't have an attitude and doesn't have an ego and is actually friendly and helping. Now we don't do everything. And that's the other non-chip-on-my-shoulder argument, because he clearly can tell I care about this. It's like, dude, we're not creating responsive websites and we're not creating mobile apps and we're not designing brand structures and hierarchies and content strategies and all these things that creatives can do that we're not for.

21:14But if a dude really wants to go toe-to-toe because he's really passionate about designing Facebook ads, then yeah, we're totally f***ing up his world. And I'm sorry, but that's like, pick a different design niche because we're going to totally eat you for breakfast. Let's talk about the people who are delivering the work. Who's actually doing the design? Like, tell me about your team and kind of the hiring that you've had to do to scale that up. So this is why I'm so passionate. And especially like when people do attack us, because there's a lot of trolls online. I'll light them on fire. We have the most amazing full-time team out in the Philippines.

21:51And we are like, they're our brothers and sisters. We talk with them every day on Slack. They work for us full-time. I mean, technically, they're 1099 contractors from a structural and legal standpoint because they work from home. They meet every box in the 1099 requirement, but they're working for us. We make it a point. We want to be the best employer in the Philippines for graphic design. So we actually pay three times the average salary. We provide health reimbursements. We provide training. One of our team members had a baby recently and we supported her through that process. So it's like a massive big family and we just recruit through word of mouth.

22:31And we have a big event once a year in Manila that we host everybody at. We've done it two years in a row and we're going to do it again this March. But But that's the other thing is like to the designers that hate on productized services for design, the 99 designs and the Fiverr's of the world actually have kind of messed things up for everybody because those business models are designed to increase volume. It's like a credit card company. Credit card companies just want more people to use credit cards because they take a percentage. Fiverr doesn't really care about the quality of the work. They just want more volume.

23:05Whereas we're the opposite. We want quality. We want a good experience. We want everybody together working together and having a great experience because we're going to get paid the same regardless. Like if you use us more, I'm not going to get paid more. If you stay longer and you love us, then I'm going to get paid more because you're going to stick around longer. So that's the big difference. And so that's why we have such a commitment to our team and what you really experience when you sign up for our service. Have you found any specific, I mean, you don't have to give away like, you know, all your hiring secrets.

23:35Do you send somebody over to interview people in person? What's that look like? Managing a remote team, I imagine, is a sizable number of people at this point. What does that look like, trying to scale that from halfway around the world? Yeah, I mean, we're at, I believe by now, over 100 people over there. And dude, the answer I'm going to give you is one that I can't even believe I'm about to give you because I used to just scoff at this kind of stuff. But it's all about mission, vision, values. I kid you not having mission vision values our vision is to change lives through creativity Our mission is to be the most helpful creative company in the world And our values are friendly smart working service and truth And we live by those we hire by those we talk about them we train on them You could have a great portfolio as a designer, but if you're not a friendly person You will get fired or you won't even get hired.

24:26You won't even an interview So it's all about just creating that culture and then I have a look I have a local team and local management team out there. So of those hundred people, about 80 are designers and the other 20 are people running those designers. And that was really important from the beginning is I'm not going to mess with that. I don't know the culture. I don't speak the language. I'm going to have someone who I can work with directly and then they can work with the team. Okay. Okay. If I submit a design request, does it go through that management layer? Does it go directly to my designer?

24:59It does go directly to your designer, but there is layers in case things aren't going well. We have layers of control and we actually have full-time customer support people here in the US. So right now we have four full-time people in the US where we have 12 team members total here in the US, but we have four of them. Third of them are dedicated to the clients. So when something does go wrong, we can take a look, chat with them because our Filipino team works in the middle of the night US time. So if something, you know, you can't really, the communication is asynchronous. So if something goes wrong, it's not like 3am email.

25:36You're like, Hey, what's up? So we have that team here working US hours so that they can chat and diagnose. Anytime something goes wrong, it's communication. Our designers are really good. Most designers who make it into the design pickle system are good designers. it's always like the request that says, Hey, make this awesome. And you kind of are like, all right, well, awesome. Like game of Thrones dragon. Awesome. Or awesome. Like touchdown football. Awesome. Like, or unicorn. Awesome. Which awesome do you mean? And once we can peel back that and understand what the client actually means, then we can get back on track.

26:15Are you communicating directly with the designer and they're sending the file back to you and then you request provisions? Yeah. You know them. You know them by first name. They wish you happy birthday. You get to know them. You love them. You hate them. You love them when they're doing great. You hate them when they stress you out because a link was broken or something. But yeah, you're working directly with them. And our designers manage a pool of clients and work on your stuff every day. So they're only going to be able to get done depending on what the total volume of that pool of clients submits in a day.