After penning 37 newsletters, you'd think the opening sentence would come easily. Yet, each time, I'm at a crossroads: do I start with the usual 'Hey everyone,' or should I attempt a witty hook to draw you in?
There is a parallel between this predicament and the juncture at which I find myself with the workflow company.
But, before delving into these broader reflections, let's first tackle the business updates from November.
Business Update
The two initial pilot projects are still in progress, and I’ll be honest, they are taking longer than I originally projected. The delay is due to a combination of underestimation on my end and a bit of delay in responses from clients. The good news is that I’m learning from these experiences, so I’ll be able to fine-tune my business model and not make the same mistakes. More to come on this below.
I’ve added one more client in November - a friend of mine who operates a business in the logistics space. We got into a conversation about integrating AI and automation into sales strategies, and it sparked an idea. We're now setting in motion an automated outbound sales campaign, aiming to generate leads and grow his customer base. I am quite excited about this project as it sits at the intersection of sales, automation, and AI.
Lessons learned
1. There needs to be a logical alignment across customer segment, service offering and pricing model.
So obvious when I write it out like that. To jog your memory, my initial business model was/is a broad sweep:
Customer segment: Startups and SMBs
Service offering: Automation for any manual workflows
Pricing model: Pay what you think it’s worth, per project
Back to the point about the newsletter opener - whenever I get a writer’s block, I just start writing. And the model above is an email’s equivalent of “To Whom It May Concern”. As I shared in my October update, I didn’t want to get stuck in paralysis analysis, so just went for a really broad approach.
But alas, I quickly noticed a few issues with the current setup.
Choosing to offer automation services to SMBs meant that I had to provide a wide array of services
Providing a wide array of services led to a wide array of potential problems and solutions
This in turn required more preparation than I’d anticipated in terms of scoping and research for each project
Even without a pay-what-you-can pricing scheme, it is hard to price in the time and effort investment for prep work while remaining competitive
These insights have prompted me to rethink my approach:
New Approach #1: A subscription model for a comprehensive automation-as-a-service offering, catering specifically to SMBs. This model acknowledges the broad functional needs of SMBs while allowing for the sustainability and long-term engagement needed for such extensive services
New Approach #2: An automation service targeted at a specific function within startups. This model narrows the focus, catering to startups’ specific needs and ideally fostering longer-term partnerships, which could reduce the time and resources spent on client acquisition
My inclination is towards serving startups, given my comfort with the tech industry. But the bar for automation is higher with startups who are already tech-savvy, necessitating a more niche focus. Which function should I niche down to? That brings me to the second and third lessons learned.
2. Not all automations are equal in terms of effort required.
Another obvious lesson, but perhaps the context and details are important here.
An automation of a process that is deeply embedded in a company’s custom business workflow requires much more effort than an automation that is relatively standard across companies and can be modularized.
For example, the data dashboard project I am working on required understanding the company’s database architecture. The company is a logistics marketplace, meaning there are two sets of users and geographic data tied to each set, which adds many layers of complexity. The project required writing hundreds of lines of SQL, and hooking up Google Sheets to the company’s database, just to get the data needed for the actual analysis and visualization work. That’s a deeply integrated project that 1) takes substantial effort and time to wrap my head around, and 2) isn’t easily transferable to other clients.
Contrast this with the outbound sales automation project I've recently embarked on. This project is more detached from the company's core operations. Sure, it demands an understanding of the company's value proposition and crafting compelling email pitches. But the bulk of the work – setting up outbound email infrastructure; building an automation to scrape, enrich, and qualify leads; and leveraging AI for personalized pitches – is more standardized. These tasks don't require deep dives into unique business processes, making them more replicable for different companies.
And this isn’t always the case, but usually, Go-To-Market automations that handle the beginning of a customer journey tend to be less tangled up in complex business logic.
So here's the takeaway.
The more an automation is intertwined with a company’s specific processes, the higher the effort and the lower its scalability to other clients. And if scalability across multiple clients is important, focusing on automations that are closer to a 'plug-and-play' model makes more sense.
3. Not all automations are equal in terms of perceived value.
Apologies if it feels like I'm harping on the obvious here, but this one's worth repeating: Not all automations are created equal in terms of the value perceived by the client.
At its core, business automation does one of two things: it either boosts revenues or cuts costs. Interestingly, there's a distinct difference in how these two impacts are valued.
Revenue-generating automations are often seen as more valuable. Why? Because clients tend to be more willing to share a piece of the additional revenue pie they didn't have before. For instance, imagine an automation that adds $10,000 to your monthly revenue. If I ask for a 20% cut, you're likely more amenable to that deal compared to me saving you $10,000 in costs. The tangible addition to the top line is just more appealing.
I think the concept of “loss aversion” can be used to explain this:
Loss aversion is a psychological and economic concept which refers to how outcomes are interpreted as gains and losses where losses are subject to more sensitivity in people's responses compared to equivalent gains acquired.
- Wikipedia
Giving up a portion of cost savings feels more like a loss of what is yours, versus sharing a portion of incremental revenues, which is perceived to be a gain.
Another angle to consider is measurability. Revenue gains from automations, especially in Go-To-Market functions, are typically easier to quantify. Metrics like qualified leads, conversion rates, and average customer value translate directly into dollars. Cost savings, though beneficial, can be a bit nebulous. How do you put a clear dollar value on time saved or errors avoided? It's not always as straightforward, and that can make these savings seem less immediately impactful.
What’s Next
As I pull together these lessons and reflections, I'm contemplating a niching down in our agency's business model:
From
“We automate any manual workflow for SMBs and startups for a fixed fee”
To
“We partner with early stage B2B startups to automate your Go-To-Market motions”
This isn't a change I plan to rush into. Instead, I'll take an iterative approach, testing this new value proposition to gauge its impact and resonance.
What are your thoughts on this shift? I’d love to hear your insights or any advice you might have.
Thanks for reading, and happy holidays!
Joe
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p.s. Below are the poll results from last month. Stay tuned for more LinkedIn videos like this one!