How I Started A $4M/Year Digital Product Agency
Hello! Who are you and what business did you start?
I am Anthony Tumbiolo, the founder of Jakt–a digital product and innovation studio based in NYC.
So, what exactly does this mean we do?
Companies come to us when they want help designing and building a custom piece of software to solve a problem.
We’ve worked with both startups and large enterprises over the years and worked on 100+ projects. Projects range from mobile apps to web applications to IoT projects. We’re technology agnostic and use whatever the best technology and platform is to solve the problem identified.
Here’s a few examples:
Rally Rd: Rally Rd. is a platform where blue-chip collector cars are turned into stocks. We worked with Rally Rd to build the first version of their app. Since then the company has gone on to raise $10M in funding.
CityRow: CityRow operated in-person rowing classes and came to us to help them turn this into an at-home digital experience.
Hedge Fund: Unfortunately we can’t disclose the name, but we worked with a very large hedge fund to help them design and build a web based platform that allows traders from all over the world to participate in creating trading algorithms.
You can view more examples on byJakt.com
In 2018 we did $4 million in revenue with a 20% profit margin.
I am also the moderator of ServiceBasedBusinesses.com, a private community for agency owners and the creator of FinanceForAgencies.com, a course that teaches agency owners the exact financial system used to help us achieve those nice profit margins in 2018.
What's your backstory and how did you come up with the idea?
It started with… women’s purses.
I know, it’s weird. But let me explain:
When I was fifteen, I’d run to the store a few times a week, buy designer bags, and sell them for a higher price on eBay. This showed me the power of the Internet.
Later on, in college, I ran an events business while teaching myself how to code.
Learning how to code gave me a new perspective on what was possible to create.
I started looking for a software idea that I could turn into a business but couldn’t think of something I truly wanted to build so, in the meantime, I consulted for other businesses.
I started helping businesses with product strategy and software development, which eventually turned into Jakt, the company I founded.
I even did it for free at first, and that turned into our initial paying clients. That’s actually how we got our first customer back in 2012, an educational technology company called CiteLighter that was focused on helping students write better - the company got acquired in 2017.
I started Jakt from the realization that I loved helping other businesses succeed and in turn help many other people.
I originally wanted to build a software company because of how software can scale, but I found that by helping a smaller group of companies create software, I could indirectly impact a lot of people.
The other benefit to this model was that I didn’t have to limit myself to one product or solution. Or one industry. Or one business model.
I could constantly learn, and take ideas from one industry and apply them to another.
In short, I created a business that allowed me to continuously learn and impact many people at the same time.
Describe the process of launching the business.
Back in 2011, I moved into an apartment in NYC with 4 other people.
One of them happened to be a software developer.
We hit it off and started working together and collaborating on many side-projects right from the very beginning.
Since I was more business/product-minded, and he was a better developer, together we figured we could build whatever we wanted.
He was working at a job at the time though, so he told me:
“If you can replace my entire salary, I’ll quit my job and join you.”
A week after, I managed to successfully work out a deal with one of our ex-roommates from the apartment.
We signed him as our first client for a six-month contract, and my partner resigned from his job.
We created a legal entity with $500 each (we didn’t have much more at the time), and Jakt became a real thing.
At first, we didn’t have a website. Or a name for that matter. All we had was a legal name (ATJK Ventures LLC) just so we could accept money. Our first client was the one who actually came up with Jakt by rearranging the letter of ATJK.
In the first year we learned on the job, found clients, and did all the work ourselves.
I remember we only had a handful of clients back then and they all came from our network and relationships.
We actually didn’t know if we really wanted to grow the business or not. Our goal was to basically make enough money to pay rent and keep the lights on. And we thought about building a SaaS product instead of growing the agency. We didn’t fully go all-in on expanding our business until the following year.
But that first year was a challenging time, and I loved it.
We even had some big wins like working with a Fortune 100 company…
...until they shut down the project one month later!
It was of no fault of our own (higher ups there decided to shut down the project), but also a big realization for us. We actually thought we were financially secure after signing such a big client, but it became a great lesson for us to learn from.
And in hindsight, our first two clients ever -- CiteLighter and StyleCoalition -- were both acquired in 2017, which is another win for us looking back.
Really though, our biggest win that first year was proving that we could actually do the work and make an impact on other people through the work we did with our clients. It made me realize we didn’t need to start our own SaaS company, but we could work with our clients and in turn impact a ton of people.
Since launch, what has worked to attract and retain customers?
What’s worked well for us to attract customers has been mainly two things:
Referrals and Channel Partnerships.
When I was starting out, I had little money and few connections.
So what did I do?
I started talking to people.
And helping them in whatever way I could.
And through these conversations and interactions, business opportunities started popping out and my network started growing.
I was constantly talking with people, sharing my story, bringing as much value as I could, and staying top of mind with everyone.
Once, for example, we had an office in a co-working space in NYC. There was a guy I’d met there who had an office in the same space. I knew him for about 3 years. We never did business together, but always saw each other around and kept in touch.
Because we had a good human relationship, stayed top of mind, and he had heard of our reputation, he eventually referred someone to us which turned into a half a million-dollar deal with a healthcare company.
The healthcare company did over $500M in sales -- it was a large enterprise -- and normally these deals take many months to close. We closed the deal within a week because the referral came from someone they really trusted.
And this isn’t the only time something like this has happened. We’ve gotten these types of deals through our network quite a bit, so it’s not just a random occurrence.
If you’re looking for something a bit more strategic though, channel partnerships were (and still are) a large share of our new business.
Instead of talking with our leads about 1 to 2-month projects, frame them as 6 or even 12+ month long relationships. Framing it like this instills confidence in the buyer that you are really care about their future success.
Back then, we didn’t offer design in-house (we do today though), so we partnered with a design agency that was complementary to what we did.
By adding Jakt as a partner, they were now able to offer one more service to their mix –which helped them close more deals and add more value to their existing customers.
Since they were already trusted by their clients, it was easier for me to sell because their referral passed over the “trust juice” to me, and I also didn’t have to hunt for new customers myself.
We could also offer design now to our clients. It was a win-win.
When I realized the power of channel partners, I starting forming relationships with many other complementary companies where there was some sort of win-win scenario. This led to millions in business over the years.
As far as retaining clients, I believe a few key things come into play:
1. The client’s transition from the sales to the production team is super important.
Ideally, they’re coming from having a great experience with your sales team. You were able to gain their trust (and their business).
So you don’t want to lose it now. You need to make sure that the onboarding system is up to the same standards.
One tactic you can potentially use is introducing your production team during the sales process. You want your clients to be familiar with them and not tied to your sales person -- because he’ll eventually go away.
Another thing to keep is mind is making sure that whatever you told your client during sales, that’s also what the production team tells them. They need to be 100% aligned with each other with clear communication and effective expectation management.
Your onboarding meeting also has to be really solid. Everyone needs to be on the same page, up to speed on things, organized, and there can’t be a disconnect between the sales and production or that you don’t talk to each other.
But also everything else leading up to that point -- the emails you send, how you send them, what information you give them, how fast do you provide next steps after the contract is signed, how you’re introducing people… There needs to be a process behind all this.
Sales doesn’t end after closing the client. All points of interaction with the client moving forward need to be even better, both from a product-delivery AND customer experience standpoint.
2. Frame your sales process from day one as a long-term relationship.
Instead of talking with our leads about 1 to 2-month projects, frame them as 6 or even 12+ month long relationships. Framing it like this instills confidence in the buyer that you are really care about their future success. And this should be true, because the truth is your success as an agency depends on their success.
3. Deliver amazing work and results.
If the work isn’t good, there’s only so long a customer will stay.
4. Deliver an amazing customer experience throughout the engagement.
Even if the work is good, running an agency means you’re in the client services business. If the customer experience is poor (e.g., poor communication and expectation setting), it can kill a relationship.
How are you doing today and what does the future look like?
We had an extremely successful 2018.
Compared to 2017, our revenue grew by 134% taking the business from ~$1.7M to ~$3.94M.
Gross margin was 50% and net profit was just over 20%
And as things are looking out, we’re on the same track for 2019.
In regards to our future...
As of June 1st, we’ve been acquired by a larger agency.
Jakt is still fully operating, just owned by a larger parent company.
I’m also now on the board of directors of the parent company.
So what now?
I’m turning my attention to helping other agency owners.
I’ve created a community for agency owners called ServiceBasedBusinesses.com and I’m also creating a course called FinanceForAgencies.com to share the financial system we used at Jakt to run a profitable business for so many years.
Through starting the business, have you learned anything particularly helpful or advantageous?
Yes, a ton.
I could write a whole book on it.
But for now, I’ll share a few.
During our first year in business, we had two customers that each made up around half of our revenue.
In about two weeks, one reduced their budget by 50% and the other one went away completely. Our monthly revenue was reduced by 75%, which put our company’s livelihood in danger.
If your customer concentration is high and you have customer turnover (which can happen at any time), it can really hurt your finances and puts you in a position of weakness.
Lesson 1: From that experience, I learned how important it is to always be selling and maintain a full pipeline.
The truth is, you can’t control what other companies do with their budgets. But you can control how ready you are, in case that happens.
Lesson 2: Something that also helped was shifting from selling myself - “Anthony” - to selling Jakt.
This way when people sign with the company, they don’t expect you to be doing everything.
This allowed me to slowly move away from production work and focus more on building the business.
As you transition to working ON the business, that’s one of the things that will happen. You’ll stop being the one doing all the work -- and you have to charge like you aren’t as well.
Yes, you’ll make less money in the short term, but it will pay off later on.
Lesson 3: Work ON the business sooner. Your job as the CEO is to design and build the machine. This means understanding that a business is comprised of various systems, and your job is to design them so they all work together. Your goal should be to design the machine such that it can run without you.
Lesson 4: In order to accomplish Lesson 3, you need to understand that people and culture are the foundation of this. Without a great culture and people, building a company that lasts is impossible.
Ok, I could keep going on for many more paragraphs here, but I’ll stop for now.
If you want to hear more lessons, find my blog, newsletter or podcast, I try to share as much as I can on those.
What platform/tools do you use for your business?
There’s a lot that we use to run a business of this size, but here’s a few that are crucial.
Back-Office
Finance, Accounting, and HR
- Accounting and bookkeeping: Quickbooks Online
- Paying W2 employees & contractors (US based): Justworks
- Paying contractors outside of US: PayPal, Wire via Bank or Transferwise
- Bank (checking/savings): Chase
- Line of Credit: Chase
- Credit Card: American Express Platinum
- Health insurance: Justworks
Collaboration
- Team Collaboration & Email: Google Apps / G Suite
- Passwords (both internal & with clients): 1Password
Sales
- Sales CRM: Pipedrive
- Scheduling Assistant: Clara or Calendly
- Email: Superhuman or Gmail + Mixmax
Communication:
Other
- Zapier - do cool automation things between various services
- Process.st - process management
- LucidChart - documenting workflows
What have been the most influential books, podcasts, or other resources?
There’s actually a ton of them…
But to keep it short and sweet, I’ll list 5 out for you:
I based our hiring process at Jakt on the method in this book.
A peek behind the scenes of how Ray Dalio built his company and the principles he instilled (both in his business and daily life) to do so.
One of our core values at Jakt is to "Be radically candid" -- it was inspired directly from here.
This book helped me along my journey to improve my mental and emotional health, and I highly recommend to anyone that’s currently riding the proverbial “emotional rollercoaster” of entrepreneurship and is interested in turning that rollercoaster into a smoother ride.
Classic book. Business is a people game. This book helps you understand people and how to build real relationships.
Advice for other entrepreneurs who want to get started or are just starting out?
While I don’t really like to give “advice” because I think what worked for me won’t necessarily work for everyone, I can definitely share things I’ve learned over the years.
I could probably list out 100, but here’s 5:
1. Make sure people are actually willing to pay for your thing.
And by “willing to pay”, I mean real money, not hypothetical. There are too many people out there designing products and services that no one actually wants.
2. Focus on working ON the business as soon as you can.
I truly understand why some business owners and CEOs have a tough time transitioning from IN the business to ON the business –I did too!
When you’re starting out, especially with no money, you’re just trying to keep your head above water and make enough money each month to cover living expenses
But you, the business owner, are the architect of your machine --and you need to design its systems. The earlier you start the better as it compounds over time.
3. Focus on the new business engine, and double down on what works for you.
Even when referrals and channel partners did great for us, I saw other agencies trying and implementing social media platforms like Facebook or Instagram as funnels for bringing in new leads.
And so I tried to do the same for a time. To make a long story short, it didn’t work for us.
The thing is, what worked for others won’t necessarily work for you too.
I should have just ignored what others were doing and doubled down on what was getting us results in the first place.
But the real important thing to note is, get that new business engine going. Without new business and sales, there is no business.
4. The business you have today, and what is required today, is going to change over time.
During Jakt’s early years, I remember how focused I was on sales.
I really believe that, while they should always be a priority, they require even more of your time and effort in the early days.
But once you have the engine going, you’re at a very critical point in your company’s growth. What brought you here won’t take you to the next level.
It’s time to find the right people, and foster a culture that supports your business growth and lets you scale.
The thing is, that requires a different skillset that you needed until now. And many business owners and entrepreneurs struggle to make that transition.
5. Your growth as a business can be hindered by yourself.
There’s more to being a CEO than just running numbers or being great at sales.
Your development as a leader, and as a person, is equally important and necessary to your company’s growth.
And unless you’re growing as a person at the same rate as your business, you can single-handedly stunt your business’s growth.
Where can we go to learn more?
If you have any questions or comments, drop a comment below!
Personal:
Business:
Jakt -- If you’d like to know more about the agency I spent 7+ years growing and scaling.
Service Based Businesses Group -- If you’d like to have me as a guide along your journey to build an agency and become part of an amazing community of agency owners.
Finance For Agencies- A course I created detailing the financial system I created at Jakt that allowed us to run so profitably.
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Download the report and join our email newsletter packed with business ideas and money-making opportunities, backed by real-life case studies.
Download the report and join our email newsletter packed with business ideas and money-making opportunities, backed by real-life case studies.
Download the report and join our email newsletter packed with business ideas and money-making opportunities, backed by real-life case studies.
Download the report and join our email newsletter packed with business ideas and money-making opportunities, backed by real-life case studies.
Download the report and join our email newsletter packed with business ideas and money-making opportunities, backed by real-life case studies.
Download the report and join our email newsletter packed with business ideas and money-making opportunities, backed by real-life case studies.
Download the report and join our email newsletter packed with business ideas and money-making opportunities, backed by real-life case studies.
