We sat down with Matt Inglot, founder of the web agency Tilted Pixel, and host of the Freelance Transformation podcast, to talk about growing an agency, how to get web clients, and the benefits of having a podcast.

Matt started his agency while still in university in the bustling tech hub of Waterloo, Ontario, Canada. After growing rapidly, Matt discovered that defining the reason why you want to have an agency is just as important than getting the work. Matt shares the details of his journey from building Tilted Pixel as a traditional web agency, then turning it into a focused micro-agency with a distributed team.

Matt is equally well know for his podcast, Freelance Transformation, where he interviews top consultants from around the world. He also talks about why he formed this podcast, and reveals where it’s going in the future.

This was an insightful interview, and jam-packed full of insights. Be sure to subscribe to Matt’s podcast, Freelance Transformation on iTunes.

Full Show Transcript

John: Welcome to WP-Tonic, episode 124. Today we’ve got a really great guest. It’s Matt Inglot, the founder of Tilted Pixel and the host of Freelance Transformation.

Before we interview Matt today, I’d like to remind you that WP-Tonic is not only a podcast, but we also offer WordPress maintenance. For all you designers and developers who are looking to transition away from your legacy clients and raise your rates, you can leave them in capable hands with us.

And with that, Matt would you like to introduce yourself to our podcast listeners?

Matt: Sure, thanks a lot first of all John, for having me on. I’m excited to be here. I have first and foremost myself been a freelancer an agency owner for the past 11 years. So that has been a career that I built. And on top of that, since last year 2015, I’ve been running a podcast called Freelance Transformation.

John: Definitely, it’s an awesome podcast, and if anyone isn’t checking it out, they definitely should subscribe to it. So, let’s jump right in.

You started an agency when you were fairly young. And what was that whole experience like? And when you were founding it, who were you looking to for examples of what and what not to do?

Matt: So when I founded the agency, it started off as just me working from my student basement apartment and just doing freelancing work. Specifically doing website development, because I needed pay the bills. I had a cool job at a startup, and then as startups tend to do, this one run out of money.

So that was my first very real taste of reality very early on, at 20 years old. One day you’re employed and then the next day you’re not employed, but the bills are still there and you’ve still got to pay them. So I went and started building websites. And I think partly because I just live in such an entrepreneurial community of Waterloo, Ontario, Canada – it didn’t really seem enough to just build websites for people. I decided that I really wanted to build a business. And I really wanted to build a bigger business.

So while still in University, I hired my first full-time developer and getting some office space – because back then it made sense to have office space for that developer to work in. And then I hired another developer, and another developer, and suddenly I had a team. And then a bigger office and at some point, I finally finished school. But for most of that office period of time, I was basically running an agency and I had a little team. And I was still going to school and basically burning the candle at all three ends.

John: Yeah that definitely sounds like a recipe for a burnout. And how did you manage that? What kind of sleep [how many hours] were you averaging each night?

Matt: That’s it…I wasn’t! Like, four or five hours of sleep would have been pretty typical. Luckily, I was in my twenties, but even still, my body definitely didn’t sustain that. And I just burnt out hard.

John: Definitely. So tell me a little bit about some of the missteps that you made early on – when you were forming Tilted Pixel and growing it. Just some advice that you would give to people who are starting out building their first agency?

Matt: Sure, I’ve reflected on this a lot. Because the other part of the story is, at some point I could realize that this whole [scenario] – everything I was doing – basically wasn’t working. I had an agency, and I wasn’t making any money. So on the exterior, I looked like the local success story. But things were very different if you actually bothered to look at our books, or actually look at how I was doing. It wasn’t good.

So I did look hard at what was working and what wasn’t working, and there was ultimately a number of mistakes I made. But the fundamental one wasn’t really figuring out a couple of things. First and foremost, I didn’t really figure out what I personally wanted running this business to look like in mind. It turns out that’s really important.

“So why are you starting a business? Why even go on this journey at all?” and “How do you want that journey to look like?” Because if you don’t define that, your business is just going to pull you in other directions, and they might not be the direction that you want your life to go.

Secondly, I didn’t really understand who we were serving at all. I modeled my business off every other local website development business in the community, and probably seventy percent of those are now gone, or bankrupt, or whatever. So maybe not the best models to model off.

So what ended up happening was, I was trying to serve everybody, and consequently I wasn’t charging enough money. I didn’t really have a business model. I didn’t have a marketing plan. I had no real way to scale this thing. So I committed all this money to scaling it without having the basic model in place. And that gave me the wonderful opportunity that every time I made a mistake, it was magnified. Because I had an agency. Everything was bigger, the dollar amounts were bigger. And what I really should have done was figure all of this stuff out first. And then and only then, [should I have] attempted to scale at all.

John: Yeah, definitely. There’s a couple things I want to circle back to here. But when you were starting Tilted Pixel, did you have any mentors that were agency owners? Or were you just kind of looking at what other people were doing, and just saying, “Well, I’ll just do what they’re doing”?

Matt: Yeah, I think that was a fundamental mistake. I did have mentors in the sense that – the wonderful thing about Waterloo is there are a ton of really senior business people that are happy to advise you. Happy to give you their time. I probably could have even made much better use of that. But the one thing I didn’t do, in retrospect, is to find someone that did exactly what I was trying to do. You find that person and get their advice.

And maybe if you want to go a little meta, I didn’t even really understand what I wanted to do. If you can believe it, I didn’t really understand what an agency was. And part of me thought that I could grow this thing big enough that we would become the website development company in North America or something. Which is kind of awesome from like a naïve, “ok young people should be super ambitious” [perspective]. And that’s great. But on the other hand, it was delusional about how service-based businesses actually work. And I wish, you know again, if I had talked to the right people, someone could have smacked some sense into me.

John: Definitely. Another thing that you said in there that really strikes me is, you said that you were trying to serve everybody. When it comes to that, were you just being too much of a generalist shop, or did you have any sort of criteria for you would accept, or who you wouldn’t accept as a client at that point?

Matt: Not a whole lot of criteria. Basically, if you had a pulse, and you had money, then we probably wanted to be talking to you. Which is not very good criteria. I did eventually learn to at least set a minimum budget, and that kind of helped at least qualify things. I wasn’t talking to somebody that wanted a five-hundred-dollar website.

I actually got sword-hacked once by a so-called potential client, because they call they called up my company and they started asking questions about a website. And I could kind of tell that things were a little off. The person was being a little cagey. I wasn’t clear if this was a business. And so I kind of brought out, “Ok, no problem. Our websites start at five thousand dollars.” And by the way, $5,000 is super cheap. I would never charge that these days. Back then, I thought $5,000 was a lot of money. But that person was just so shocked and outraged by that number, they basically called me a whole lot of things I can say on your show, and then hung up.

John: Oh well, better off in the rearview [mirror].

Matt: Yeah I definitely screen those people out, but that was the extent of my screening, which was definitely not enough. We had we had no real positioning, and we had no real understanding of what problems we were solving for people. I genuinely thought the problem I had been solving for your company was that you needed a website, and we could build websites.

John: A lot of good consultancies and agencies such as yourselves will tell you that it’s easier if you’re differentiating by serving one vertical or one audience, and you’re not just building a website. Because your clients don’t want a website, they want the result that comes from that. Can you speak just a little bit on that?

Matt: I mean, that’s really one of the breakthroughs that I ultimately had to rebuild my business back in 2011. When I look back at all of the different clients we had, I realized that ultimately, most of our revenue was coming from a very small selection of clients. And they were clients that were paying us significantly more money and they kept coming back to us. So that was kind of your classic 80/20 rule, where you suddenly realize that you’re getting eighty percent of results from twenty percent of your efforts.

And one of the things that was different about these clients is that they had very real problems that we were solving for them. Their website was fundamentally important to their business, and we were doing things with them that were delivering some pretty amazing results. Results in terms of actually increasing their sales. That’s actually the thing that I find most rewarding.

We’ll go and we’ll do a whole bunch of website work with you, and suddenly your sales have doubled. That is such a gratifying feeling. So there are clients in that category. There are clients where we are just saving them a ton of money via really cool process automation stuff. Or just clients that were frankly smarter than me, and they themselves knew that their website was important, and therefore they were happy to channel tons of money into a website.

And so those are people that we’re actually solving problems for. Whereas there were a lot of other clients that it was difficult to even get that 5,000 from them. And they definitely didn’t want to spend anything else on their website, because fundamentally I hadn’t established any sort of problem that we were solving with that website.

So all of those clients, thanks to me, simply had a website because it was kind of cool to have a website. They kind of knew you needed a website for your business. But there were never any underlying business objectives that were established for that website.

John: Right, definitely. So when you’re approaching clients now at Tilted Pixel, what’s the first step? Identify the pain?

Matt: Yeah, absolutely. So people can come to us with very little idea of what they want built or they could come to us with a very specific idea of what they want built. It doesn’t matter. It’s great if you have some ideas for your website, but we start off by just completely setting those aside.

Instead, the very first question I always ask is, “Well first of all, just tell me a little bit of all your business. I need some context.” Context is important.

And then the second thing I find out for them is, “What drove you to decide that you want to get this website built, and to get it built now.” And oftentimes the first answer that you get is not the real answer.

You’ll get a lot of stuff like, “because their website is old and outdated” and maybe sure, let’s agree that it’s old; it’s outdated. Why is the website important to your business? What are you trying to achieve for your business through this website? And you can keep digging into that.

You keep digging into those answers, you hopefully get past “our website is old” and into, “Okay, why does this website matter?” Or you might find out that this website doesn’t matter – at least not proportional to your fees. Maybe there is no marketing strategy. Maybe the company has no intention of an online marketing strategy, and you can tell it’s going to be an uphill battle, and they’re not going to value their website greatly. And if they’re not going to value their website greatly, why on earth am I going to spend a lot of time on putting together a proposal for a thirty or forty-thousand-dollar project. Which I know right off the bat they’re never in their right mind going to accept.

John: Now that’s a really great point. I mean, you do occasionally come across businesses where their online marketing really doesn’t contribute anything to the bottom line. So there is no pain there. But usually the people who are really begging to have something done, there’s either a competitor, or they are dipping in sales, or something’s going on behind the scenes. And doing that Socratic questioning is how you get to it.

You know, here’s another question. When you were growing Tilted Pixel originally and you were hiring employees, how do you know when it’s time to grow?

Matt: That’s a very good question. Because I think the first time I did it, I did it the wrong way. Luckily the second time I’ve been doing it, hopefully [it’s been a] much smarter way. Certainly the financials seem to make me believe that.

I think the time to grow is when you have basically got rid of all of your other options. So a lot of people do end up emailing me, thanks to the podcast, and ask me some variation of, “How can I hire employees? How can I hire contractors? How can I start an agency like you Matt?” And my answer is almost always, “Don’t.” Right? Let’s step back a couple steps.

“What are you currently charging for your services?” Very often the story that ends up coming out is that you’re not charging enough, and there’s some other reason that that’s happening. Maybe you made the same mistakes that I did, and you didn’t really position your business properly. Maybe you just are undercharging because you don’t realize that clients will happily pay more.

Whatever the problem is you’ve got to address that first, before you end up deciding to grow your business. Once you’re at a point where all of the numbers basically make sense…so you can comfortably hire someone and you can pay them premium rates. It’s easier to hire that person and pay them premium rates rather than you raising your own rates again – then and only then is it really worth it to even consider hiring someone. Because up until that point, the easiest and fastest and simplest way to scale is to just charge more. You can literally double your income overnight by just increasing your rates.

John: You know, that’s a really intriguing thing right there that you mentioned. That sometimes people try and grow the agency or start an agency, but they’re not charging enough maybe to even sustain themselves? Is that totally what I’m hearing?

Matt: Sometimes, yeah. Or they think they’re getting really good rates, but they’re only getting really good rates because they’re not actually valuing their own time properly. Because when you’re solo, even something like fifty buck an hour sounds outrageously awesome. Because if you’re an employee, most people, unless you’re in management or a well-paid software developer – if you’re an employee, you’re probably making like twenty or thirty bucks an hour. Maybe forty. Right?

But to actually consistently earn fifty bucks an hour – I don’t know what that works out to salary-wise – but I think that’s fairly above-average. So as a freelancer, where you feel like, “Okay, that’s a fair amount of money.” But what you’re not doing is you’re not calculating all the time that you’re not spending on client work. And if you’re running any sort of freelancing business, if you do a really honest hard look at your time you’re spending, there’s a very good chance that only half of your time goes towards billable work, right?

The other half goes towards finding clients, administrating your business, sending out invoices and taxes, all that dull and boring stuff no one likes to do, and yet is a very critical part of your business.

So suddenly you’re actually maybe making twenty-five bucks an hour. And that’s assuming that all the work that you do for your client is actually billable. But chances are it’s not. So suddenly fifty bucks [an hour] now is preposterously low. Even a hundred bucks an hour starts getting a little questionable. And you can kind of pull it off, [but then] it starts going into reality land.

But when you start hiring people, and you start realizing the actual cost of doing that – the direct money that you have to pay those people – and your own time that goes into managing them. And then if you hire them as employees, God forbid, then you’ve got a payroll taxes and all that other exciting stuff to deal with. You start realizing just how expensive those people are. And then you start realizing, “Holy cow, the money that was so amazing when I was solo, it’s barely keeping me afloat.” And you don’t want to end up in a position where you hire someone, and you’re actually making less money than you were before. Which actually brings up another point.

Hiring contractors is one thing, but if you actually go the route hiring employees, then you’d better be ready to grow a much bigger business. Don’t hire just a couple of employees, if that’s all you ever intend to grow, because the downsides of hiring employees? Like the fact that you have to keep paying them, even if you’re not bringing in work, and just all the overhead that comes with managing them, isn’t going to start paying off for itself if you’re not seriously growing a team.

So either you’re in it fully, or just hire contractors. But don’t think you’re going to grow a really super high-profitable business and only ever have two or three full-time employees. Because you don’t get the economies of scale that comes from having employees, and you don’t get the flexibility benefits of having contractors.

John: No, that’s really insightful. And I’m glad you brought that up.

So what you’re saying basically is, if you’re going to hire employees, you need to really step on the gas, because you’re going to have to pay tax on the employees, and obviously your agency rates are going to have to go up to be able to pay for these people.

So when you’re starting an agency like that, you’re obviously stepping into like a whole other ballpark of projects that you’re looking at. You don’t have time for the small fish so much. You’ve got to – you have to aim a little bit higher. Does it get easier as an agency to win those size of clients? When you have a team behind you? Is that some sort of credibility to those types of clients?

Matt: That’s a really great question. And I really do want to say yes. And I suspect academically the answer is yes. But my own personal experience has not really made a really good case for that. Because right now my agency is super small. I call it a micro-agency now, because I’ve lost all desire, at least at this present moment (don’t get angry at me in five years if I’ve changed my mind), but at this present moment, I have zero desire to grow my business any bigger.

Right now, it’s just myself and there’s a couple of people on payroll part time that deal with administrative stuff. Everybody else is contractors. Technically, I have a team. Each contractor, I know, and I’ve met multiple times, you know? They are my people, but they are also freelancers, also contract basis.

So it’s a really small company without offices and anything, and I’m closing business that’s way bigger than the stuff that I was generally closing back when I had a brick-and-mortar office, and back when I have people on payroll. So I don’t want to convey to people the idea that you’re not closing your deals because you don’t have a team, because you don’t have a fancy office, because you’re not in a skyscraper, something in New York or whatever success means to you. Because maybe, just maybe, probably your chances of closing a deal do increase if you have an office, and if you have a team, and so on. Probably.

But they don’t increase enough to use that as an excuse to get all that stuff. That’s not a good enough excuse to do that.

John: You’ve got to get the business first. A little bit, yeah. We’re going to go to our first break, and then when we come back, we’ll pick up this conversation. Back after the break.

We’re back from our break, and we’re talking with Matt Inglot of the agency Tilted Pixel, and of the podcast Freelance Transformation. And some of what we were talking about before the break is, growing an agency and stepping into that bigger a ballpark of getting clients and to grow an agency. You have to hire people. I mean, talent is your one resource. That is what you’re selling. Matt, what do you look for when you’re hiring people? Are there any traits, characteristics, or things that just have to be there for you to hire them?

Matt: Yeah absolutely. So if I’m going to work with someone, it’s really going to be two things. One, they do have to be good at what they do, because the stuff that we produce is good, and we can’t produce good stuff if the people I work with don’t produce good stuff. But if we establish that as the baseline, the next thing I’m looking for above anything else is just complete and utter reliability.

I love my clients, and I do not love disappointing my clients. So you can be the best possible designer or programmer in the world, but if you ever disappear on me, meaning you disappear and not tell me, and you’re not in an ambulance, or something terrible has happened, then that is the end of our relationship. That is over.

And that may sound so hard-ass, but it really shouldn’t be. That’s just like such a basic thing, that when someone hires you, they are depending on you, right? If there’s problems, that’s okay. You can bring them up, and we can deal with that. But if you just up and disappear, we can’t solve it, and we can’t move forward, and we can’t fix it for a client. We can’t put in contingencies, and it becomes a problem.

So being dependable, being able to deliver on your timeline, being able to communicate where there is a problem and not disappearing and putting someone in a position where they’re just hoping you’re still doing the work…would definitely be my next ultimately biggest criteria.

John: Communication is a big one and fulfilling what you say you’re going to do. I mean, your word has got to be your bond. And you know, as an employee or contractor, or whatever it is, you are responsible for setting expectations, too.

I know in in some agencies, the expectation is just to say yes to everything and figure it out later, but I think on the team, you have to set expectations correctly. Only promise what you can do, and definitely communicate, even if everything’s going fine – communicate.

So, when it comes to promoting and marketing yourself as an agency or a developer, what are some things that have worked for you? And what have you seen work for other people?

Matt: I’m really kind of on an old-school kick here. I think referrals are just absolutely key. Having your clients absolutely love your work, not just feel like you’re okay, or just have a neutral opinion on you. I really feel like you are the absolute correct person to work with is number one. Because that’s how you get referrals. You also get referrals by building your network, by going to events, by talking to people, by investing in that cup of coffee or that Skype chat – and just being out there.

I really think that if you’re looking to start out, whether you’re a freelancer or you’re an agency owner, those should really be your first starting tools, before you start worrying about anything fancier. Because yes, you can do cool stuff. I have seen a lot of little things work for us.

Personally, after referrals and just expanding my network, and meeting a lot of people and just yapping it up with people, the next thing that worked very well was local search results.

I still think in most markets, maybe not New York, but most markets, a local search can still be dominated. A lot of companies just aren’t doing a very great job of it, and these are web development companies, which is so funny.

But you can dominate local search results very easily. You can find lots of free guides on how to do local search optimization. Couple that with doing a podcast. So go out there and be a guest on podcasts, and suddenly you have between 10 and 50 links coming into your website from different podcasts. And suddenly, not only does your website have good on-page optimization, you suddenly have way more quality links coming in than anybody else in that market, and you win.

At one point, we were showing up four times on the front page of Google. Because we were showing up for AdWords, we were showing up for the Google local search results (that’s where they put you on a map) –

John: The three-pack [or local “snack pack”].

Matt: Yep. I think it was seven at that point. But Google has tweaked their page so much. We were showing up in the organic search results, and a video that I had made – and perhaps it was an accident –but I made a video, and got like crazy amount of views on YouTube.

John: Nice!

Matt: And because of that, the YouTube video was also showing up in the local search results. So if you can believe it, we were basically just destroying local search. And that’s just what worked for us. There’s other strategies out there, and we could talk for like two hours.

John: Oh yeah.

Matt: But from personal experience, that’s what worked.

John: Now, I love what you said, “Do great work”. Because you know your clients will other people that they know. And building your network, I think it’s definitely it. And that’s the thing, too. You’ve got to get from behind your keyboard, and people have to know what you do. Because we all get busy, or you know, something isn’t a good fit for us, and we need to know who we can give it to.

Matt: And that’s key. Sorry I don’t mean to interrupt.

John: No, go ahead.

Matt: That brings us to a whole other important point. There’s basically two types of client generation strategies. There’s client generation strategies that are a particularly amazing when you’re starting, and there’s client generation strategies that are only amazing what you want to scale. So when you get into things like Facebook ads and content marketing, and some of that other really fancy, heavy-duty stuff, those are great scaling strategies.

And they’re great, because once you understand who you’re targeting and what exactly you provide for them, and you know that people want to buy this, you can go and you can blow a lot of money on Facebook advertising, Google AdWords, on content writers…all of that fancy stuff. And it’s okay, because you know that it’s probably going to work, because you’re reaching the right audience with the right problem.

But if you start with those strategies, it’s generally very poorly advised. Because when you’re starting out, you don’t really understand who your target client is. You don’t really understand what their problem is. You don’t understand if they’re willing to pay you solve your problems. And that’s where, again, I really recommend a lot of these more old-school strategies. Because they actually work better for starting out. Because they allow you to interact with a client.

So if I hold an event and I start talking about targeting, and a problem I’m solving and talking to people, and their eyes glaze over, nobody has any referrals for me, nobody’s eyes light up – I know there’s a problem. But I’ve got a feedback loop here. Or I might meet somebody, and I’ll say, “I solve a problem for such-and-such business”, they’re not interested. But they’re interested in solving a different problem. Well, I can sit down, I can learn about their problems. I can learn about what they actually want me to solve. So again there, is that feedback loop there.

If I run a Facebook ad, and I tell you I can do something for your business, and you’re not interested, there’s no feedback loop. The only feedback that happens is the fact that you didn’t click. So I could blow tons of money on ads, and still be nowhere closer to really understanding who my target audience is, or what their problem truly is, because I’m not communicating with human beings. I’m just blasting a message out there.

John: And that is such great insight. You have to you know exactly who you’re targeting and to do that you have to talk to real people, and get a real understanding of those issues in that audience. Because then you start to see patterns and you start to see common threads, and then you can use that language and you can target those specific problems. Then you can do the stuff like blast out Facebook ads.

Where I see a lot of businesses, they just put money into e-blasts and stuff like that. And it just kind of feels like money flushed down the drain. But definitely, if you know who you’re targeting, you can really come to grips with it.

This brings me to a great question. I know there’s a lot of talk, a couple of years ago, [where] we’ve seen a lot of digital agencies talking about how things are drying up, and you know it’s going down. And yeah, maybe it’s a lot of generalist shops, big and small. We saw Teehan + Lax fold up and go over to Facebook. What is it about differentiation that that makes you the top choice, as opposed to just a generalist shop? But maybe even more than name recognition…what’s the difference to the client?

Matt: So I think the real difference here – the way I like to think about it is…what this question is really trying to do is it’s trying to blame the economy on personal success. And that’s something I do hear a lot from agency owners and pretty much any type of business owner.

[For example] “Well you know, times are tough.” That’s a very egotistical way to look at things. Because unless you’re Steve Jobs – or sorry not Steve Jobs I guess, but Tim Cook now – if you’re Tim Cook and you’re listening to this podcast, you know this doesn’t apply. But most people are small business owners, and the general economy has very little opportunity to actually influence your success. Because the amount of sales that you personally need versus the amount of dollars involved in general economic trends are so different that it really doesn’t matter. You don’t control the economy. Don’t pay tons of attention to the economy.

But what does happen is, when times are good and there’s really abundant work for people that have done a terrible job of promoting themselves – people that have done a terrible job establishing a business, people that don’t really have a business – end up getting work anyway. Because there’s basically just spill over. All the good companies are already full, so you can basically throw a hook in the water without any bait, and still catch a fish, right? That’s really what’s happening.

When times get not-so-good, what ends up happening is there’s no more spill over, and now you actually have to promote your business. Now you actually have to implement all of those fundamentals that you didn’t implement when things were good, and didn’t have to care about. Because, there’s just so many clients versus what you’re actually providing that it didn’t matter.

So that’s where it’s not just about differentiation. The differentiation is obviously a key part. But maybe just beyond differentiation, just actually having a sane strategy for attracting clients, a repeatable strategy for attracting clients.

So part of it is differentiation, and specifically understanding who you’re targeting, and the problem that you’re solving for them, and actually having validation. Meaning people agree with you that this is a problem that needs solving. But then beyond that, if you take it one step further, having a specific way to reach them. If you can do that, then you’re always going to be fine. You’re always going to be booked up.

If you’re a freelancer, you really only need about three to ten clients per year. I have done a lot of thinking on this…at least if you serve businesses. If you’re like a family photographer or something, your [business] model is a little different. But most freelancers or agency owners, I would say three to ten clients a year is all you need.

You can get that in the worst economy possible, as long as you continue to solve a problem that people desperately need. What you really need to figure out again, is who you’re targeting, what the problem is , [then] they have to agree that this is a problem, and then you have to have a repeat strategy.

It’s ideal to do this when times are good. That way you’re not scrambling when times are bad. That’s really the problem. That’s really why you see agencies grow and then decline and grow and then decline. It’s because there’s a bunch of them that – and I’m including myself in this – like it took me a while to figure all this out, and I still almost didn’t make it because of that.

John: Right.

Matt: But they don’t really establish a proper business, and then inevitably, they disappear when this kind of overage of clients disappears.

John: Now that’s great. I think that’s a great insight you’re saying about in the early days of the web, there was a lot of spillover. Everybody needed a site and the economy was kind of up. But in post-2008, the economy went down, and now web shops are everywhere. And so that spillover isn’t as much. So it’s not just differentiation, but it’s also finding a repeatable way of attracting your target audience clients and knowing what problem you’re needing to solve for them. And then getting those right clients into your roster.

We’ve got time for one more question in the regular podcast, and then we’ll go into the bonus content.

Here’s a question. When it comes to your podcast – Freelance Transformation, that’s where I first heard of you, and honestly I’d love everything that you put out – there I love the conversations you have with your guests. With that [podcast], it seems like the target audience isn’t so much clients, but it’s other freelancers and other consultants. Other people with very small agencies. What inspired you to target that particular audience?

Matt: So there’s two reasons. One is completely indefensible, and that’s really that I wanted to do that. After I reached the point where my business was doing pretty well, and it was just always just scratch – no, always this itch that I wanted to scratch. I just felt like this was something that I needed to do.

From a business perspective, that wasn’t necessarily the best choice. If you’re trying to optimize for growing your agency, don’t start a podcast for a completely different audience. That’s not how you optimize for growth. Personally, that’s not really what I have been optimizing for. And that’s really why I was also very slow to monetize Freelance Transformation. In fact, I think this year, it’s still technically losing money. Next year will be a very different story.

That’s because this is not my livelihood, but this is my passion project. But it’s a passion project with some very big ambitions in front of it.

The other reason I did that is a little more defensible, is it gives me the opportunity to rapidly build my network with a ton of other very successful people. So at the beginning of this episode you asked me who did I look up to? And who did I have to mentor me when I was starting my agency for the first first-round, shall we say? And the answer was “very poor”…how basically nobody that had actually done it. I like to think that I do learn from my mistakes.

So via the podcast and some of the other opportunities that I’ve had resulting from that, I now have a network available to me. a lot of people who are incredibly successful with their businesses. At all levels all of you are doing some type of freelance agency work, and a lot of a will pick up the phone and answer my call. So now I have access to this great mind of all these people put together, instead of trying to do it all on my own, like I did the first time around.

John: Now that’s a great way to not only network, but to learn from all these other smart people. Who are successful as consultants and I think that’s a totally legit way, and I think that’s a side benefit of you know any developers who are doing a podcast where they’re interviewing, they’re successful people and I can see like why like a lot of entrepreneurial podcast people do what they do, too.

Because they’re talking to other people who are successful, l and they’re learning from them. With that, we’re going to wrap up the regular podcast content. I will remind everyone that you can find the bonus content on the WP-Tonic website, and you can also find that on our YouTube channel.

Matt, how do people get a hold of you and is there anything you’d like to promote?

Matt: Sure. Honestly the thing that would make me very happy, especially if you’re listening to this on your podcast player right now…Just follow the little search icon type and “Freelance Transformation” and hit subscribe, and that way we can continue the conversation. If for some reason you’re not listening on your podcast payer, then go to FreelanceTransformation.com. There you can get a free course on Getting Started in Freelancing.

You can also find the podcast there, and I hope to see you there.

John: Very good, very good. Definitely – and my name is John Locke. You can find me at my website, which is LockedownSEO.com. I would encourage people to subscribe to the WP-Tonic podcast and definitely subscribe to your podcast Freelance Transformation and continue the conversation there.

For my co-host Jonathan Denwood, you can find him at his Twitter handle which is @jonathandenwood and you can find him at the WP-Tonic website as well.

With that we’re going to continue into the bonus content. Thank you for tuning into this podcast. Thank you for being a guest, Matt. We will continue the conversation in a second.

Alright, so now we are all into the YouTube bonus content. We kind of do this as a means of just saying “You know, don’t just listen to the podcast, but kind of find us on some other channels.” I don’t know, it seems to be doing okay.

Definitely something I want to ask you. Something you see with agencies and with other agency owners…do all agencies have a desire to move to products eventually? Or are there – is it very few agencies seem to want to stick in client services? And why do you think that is? Or do you even think that’s true?

Matt: That’s a very good question. I guess that depends who you ask. I think there is some selection bias in who you ask.

So I think there are pockets of people that definitely want to move into products. And those are probably a lot of the same people that you’ll find listening too many podcasts, subscribing to many email lists and so on. So they just tend to naturally be more out there. And so I think there’s more of them than it actually seems.

But then you also have a lot of agency owners that are like way more old-school. Including people much older than me, and who started out before the web was what it is now. And they’re pretty happy with their business, or they have more traditional ambitions of “Let’s go grow a proper big agency.” And there’s some cases with younger people too.

So I don’t think all agency owners want to move into product. Certainly some of them do. I think some of them want to build an agency in order to fund developing a product, which is cool. I don’t think there’s anyone wrong of her to it.

I do think some people maybe started an agency, and then decided “I don’t actually enjoy this. I’m going to go build a product instead.” You know, I hope they find the peace that they’re looking for.

But I think the other two answers are really either people, who do want to keep building their agencies or keep it the same – or very intentionally started an agency and they know that they started it to fund product development. And I’ve met all these different profiles of people.

John: I think you put your finger on something very insightful there. A lot of the older people that I see, that maybe even came from the advertising world, or founded agencies at the beginning of the web – they are very much rooted in client services. And I guess I didn’t notice until you really said it, but when you do see those people that maybe intentionally started an agency to fund a product – maybe it does skew a little bit younger.

I’m not saying that all young people are like that. But do you think that it takes a special – I don’t want to say special – but it takes a certain type of person to continue to do client services.

Because for one, you have to like people. I mean, you have to be good with people. And maybe that’s [it], product seems like it would be easier, and to me it just seems like you’re dealing with more people.

Matt: I agree. I’ve been reflecting on that a lot – which is actually harder? Doing client work or selling product? And I’ve had the great fortune of being able to do both on multiple occasions. And I’m still not sure what the answer is. I’m not sure that there is one right answer.

I have to say, right now I’m building a course. I’m building a course for freelancers. That’s been my second half of 2016. And it’s very interesting, because I’ve got my agency that I maybe 20 hours a week into, and which you know, delivers very favorable results.

And part of that is because I put in the time and filled up the systems and processes on the client base. It’s not like I started from day one, and I had the success. But it’s there now. It’s working very well.

Then I’ve got this other thing – this product, this course, that I’m finally building. After having started building it I was already a year and a half into Freelance Transformation. And the planning for Freelance Transformation started a year before I launched it. So really this has a project since 2014. It’s finally the middle of 2016, and I’m finally building the product.

I’m maybe going to break even if I’m lucky on this here on this endeavor. That’s a lot of time and effort and persistence and patience you have to put in before you actually see dollars coming back into the bank – that have enough zeroes attached to them that you can actually make a living off of them. I’m not saying, selling a few ebooks for a few hundred dollars. I’m saying, actually making substantial income.

Consulting, on the other hand, is a much faster reward. You win the client, and you have money in your bank account. And you don’t have to do that slow grind of learning how to build a product – building a product people actually want, and then finally getting the fruits of your labor.

So, different strokes for different folks. But I have a feeling it’s also one of those things where the grass my actually be greener, no matter what side you’re on.

John: Definitely, they both take time and effort, and a lot of work. But that’s very interesting that you’re building a course. What I’ve seen with consultants that have successful products – we can take a [look at] tons of all the people you’ve interviewed: Paul Jarvis, and Kai Davis, and all these different people. usually you have to build up [your audience]. People are buying more into your credibility and the goodwill that you’ve put out into the community, and the fact they trust in you.

Much like client services, selling a product very much depends on your good reputation within the community. So I think that is wise, building up all that time. You know, putting stuff out before you put out the product. And maybe that’s where a lot of people who put stuff online and expect to get a big return – maybe that’s where they miss out?

Matt: I think – sorry…

John: No, go ahead. I’m done. Go ahead.

Matt: Well okay, because what you bring up is just so interesting. So, you know they put something online and they expect the big return. So one of the big arguments with starting a product is, “I get to leverage my time. it’s a passive income. I’m sitting back and drinking mojitos on the beach, and money’s coming in.” And that’s not actually reality.

The reality is you’re front-loading the work. You’re doing all the work up-front, and then you’re finally getting paid for it later. So it’s kind of like doing a consulting engagement with Net 660 terms, where you get the payoff finally two years later. If you imagine letting a client wait two years to pay you. But that’s what you’re doing with a product.

So with a lot of people, they do build a product. They do hopefully eventually get that passive income. And I say passive income in quotations of course. But if you actually look at their effective hourly rate – so how much they’ve earned lifetime from that product versus the amount of time they’ve put into it, a lot of times it’s miserable compared to what you can earn from consulting.

So in the short term, consulting is actually probably going to deliver a much better hourly rate for the same net result. I can work for a client for three months, and I can relax on the beach for the other nine, if I really wanted to. Passive income and work products are interesting of course. At some point, the equation does start to change.

Because if you do build a product that people really want, you can have outlandish success, shall we say, where suddenly you’re bringing in millions of dollars. That’s admittedly much harder to do with a service-based business, although it’s still doable. But the thing is, a lot of people don’t get there with their product business. They expect that to happen in the first couple years.

So they’ll go and they’ll build a product; they won’t follow the correct process. They won’t put in the time and effort and it ill flop. And after it flops, what happens next is they run out of money, then they probably go back to their day job, and you know they’re still carrying on about how products allow you to leverage your time, and people are suckers for selling their time for money.

John: I think most people though, most people that you see with successful [businesses], they had to go through rounds of ones

that were not financial successes. Or smaller products, or just out and out flops.

But it’s teaching people to give you money. I think in a way, it’s like teaching people that you have products that are valuable, and then building a community. Or building a group of people who are willing to buy products from you. Because –

Matt: Absolutely.

John: They get value. So here’s last a question before we wrap it up. You started Freelance Transformation, and then you said that is your passion project, for sure. Podcasts had been around for a long time now, but they’ve only kind of recently entered the mainstream consciousness in the last maybe three or four years. You’ve seen a lot of people in the web – everybody has got a podcast now.

Why do you think now the time is ripe for everybody do this, instead of in the past, or five years from now?

Matt: Well first of all, I don’t think everybody should do this. I think, like with anything, a podcast is a huge commitment. Especially when you’re starting your own. Definitely go ahead and guest on other people’s podcasts. That’s a relatively low investment. Get a good podcasting microphone, and then go learn a few things about how to be a good podcast guest, and you can get a ton of value for appearing on people’s podcasts.

Starting your own podcast is a different animal. It’s like anything else. I just gave you this whole gigantic rant on the challenge of products. Again, not to say that products are bad. But if you want to start a podcast, it’s a very long road ahead of you. Provided, there’s a lot that’s involved in just starting the show. And there’s a lot involved in growing it.

So, this doesn’t really answer your question, but first thing is, I don’t think everybody should start a podcast. I think you need to have a reason to start a podcast. So that does bring us to your question. Which is why start a podcast? And why did I start a podcast? My guess is that’s really what you’re asking.

So I think the equation just worked out at this particular time. Podcasts, like you said, have taken off. So that’s wonderful, because it means that there’s a large audience that can be reached through podcasting. That wasn’t as true in previous years. In previous years, blogs were kind of still the main way to reach an audience. And in many ways, they still are. But podcasts are just a nice alternative.

Podcasting has something going for it that stuff like blogs don’t have quite as much. And that’s the fact that if you start a podcast, and it’s an interview show, you get to go and you get to bring on amazing people on your show relatively easily, and it’s kind of a win-win for everybody. Because you get to speak to amazing people and build your network. But it’s much more feasible for them to come on for half an hour or an hour on your show versus you interviewing them for a blog piece.

Because oftentimes, the interview is going to suck, because you’re going to send the list of questions and they’re going to answer them and email me back over a document. Or you’re going to have to do a good interview, which now means you’re going to have to go and you’re going to talk to them anyway, but then you’re going to have to write an actual piece of journalism, turning that interview into something that someone would enjoy reading. I personally I don’t like podcast transcripts. I love listening to podcasts, but if you just take that conversation and transcribe that, it doesn’t make for great reading.

John: No.

Matt: So basically, just the economics are there that you can interview a ton of amazing people, and you can do so in a way that takes up far less of your time, and far less of their time – and you can have a quality product in the end. And that’s kind of what drove me to podcasting, when you think back to what were some of my goals with Freelance Transformation – to build a network of amazing people that was a way to do it.

John: Yeah.

Matt: And when I started, I hated talking into the microphone – the show almost didn’t happen. Because it would be like three in the morning – I’m trying to get the podcast started. I’m trying to learn how to make an intro and outro, and I’m just hating the whole thing. It’s so difficult and my voice sounds terrible, and I can’t stand the sound of my own voice. None of the technology is working, and again, it’s three in the morning. I was frustrated and ready to give up.

So you’re going to start at that point, but I found out maybe thirty episodes later, I actually now really enjoy it. I actually prefer it to writing now.

John: Well, you do get in a groove. I do think podcasts are good, because there’s something you get from listening to people or even watching them on video that you don’t get from reading the spoken word – for reading the written word, I should say. It’s a lot harder, I think, to actually write something down and make it sound like a conversation. I think it’s a lot easier to just have the conversation.

The other thing I really think [has contributed to the popularity of podcasts] is the rise of people having a phone in their pocket. I think that’s made it a lot easier, because they can listen to a podcast while they’re at the gym, or on their commute. And they don’t have to stop and read. They can just do it when they’re doing everything else.

So anyway, I want to respect your time. And definitely thank you for being a guest. You were a guest on our panel – I think about three episodes ago, and it’s really appreciated.

Well I learned a ton just from talking to you in this last hour. and it definitely let’s keep in touch. Definitely, maybe we’ll cross paths somewhere along the way.

Matt: Absolutely, I am honored to be on your show. Thanks for having me on.

John: Well thank you, Matt. You’re beyond kind.

Alright man, I’m going to let you get on with your evening. Thank you so much. I appreciate it.

Matt: Take care.

John: All right. You too.

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