Two Years to $2M...
šbusiness philosophies with 'Pneuma' Founder David Riggs
The Come Up highlights successful business ownersā & operators ācome-upā stories in an easy-to-read, written interview format.
All content is transcribed from live interviews, this one, from Jan 2023.
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For the fifth issue - an interview with Pneuma founder David Riggs!
Quick Stats:
š¤Business Model: Agency (Marketing & Digital Products)
š°Annual Revenue: $2.1M
šProfit Margin: 30-32%
š§¾Avg. CLV: $50k
šBest Performing Month: $192k Revenue
š„Headcount: 24 employees & contractors
ā³Time In Business: 2 years
ā©Best Growth Channels:
Content Marketing
Partnerships
Referrals
#ļøā£Businesses Started Prior: 0Ā
On businesses before Pneumaā¦
Let's go all the way back to the day in grade schoolā¦Ā
I lived just off a golf course; halfway down from the first tee. It's the first hole and nobody's warmed up, which means people are putting the golf ball in our backyard, hitting the house, hitting cars - everywhere except the fairway. So I would sit at home in the summer and wait for people to just put them in the backyard.Ā
I'd see one, run out, grab it, run back inside and hide.
And the golfers would walk by and be like, āWhere's my golf ball?āĀ
Iād do that hundreds of times, and at the end of the summer, package up the golf balls and sell them back to the same golfers that would hit them in the yard.Ā
It was my first offer creation ever - and I did this for years until one time I snuck out a little too late, and the guy who caught me knocked on our door and that was the end of that. laughsĀ
But that was hustle number one; stealing golf balls and reselling them.Ā
Later that evolved into selling shoes - I got really into Jordans and started flipping shoes in high schoolā¦
But Iād say things actually started to get serious in college, when I helped start and manage a TEDx event on my college campus.Ā There was a guy before me named Sam who started it, but I came in year two, helped grow it and took over in year three.
It was a full-fledged speaking event - we registered with TED and we would bring speakers to the campus and itās really where I think I started to cut my teeth and get really good at business and client management. A lot of those people are just giant balls of ego so managing and coaching them through was a really great experience.
On starting the agencyā¦
Iāve got no background in marketing,
no background in software,
no background in techā¦
I actually graduated college with a Financial Economics Major, so was geared up to hit Wall Street, but I did a few internships and it never really vibed with meā¦
So despite getting a full time job after college, I kept building the mini marketing agency I started in junior year which became what Pneuma is today. We started with social media management but pivoted because I learned I actually hate managing other brands' socials. laughs
It's hard to scale an agency when you are responsible for something as important as their brand āvoice.ā Tone is such an important piece, it's a really hard offer to build. There's a reason why it can be a really high retainer - it requires a ton of client service.
So we pivoted to website design and development, added on SEO, website management and hosting on top of that as well, and that's where we sit today.Ā
On multiple service offeringsā¦
If you look at our business like a pie chart, 25%-30% of our revenue is all things website - website design, development, management, and hosting. And thatās pretty straightforward - itās so cut and dry, itās really all about speed, communication and providing good service.Ā
I can go get a website from a number of different people on Fiverr and Upwork; at a cheaper rate even, but they wonāt have the same process and customer experience that makes the client comfortable. Most clients want somebody to kind of hold their hand and walk them through it and be a partner in it which is where we excel.
About 60% of our business is search engine optimization (SEO) - we're focused on leads, conversions, content marketing, brand awareness, brand equity, and really helping them build their brand using Google.Ā
And an extremely small percentage is ad hoc stuff - just random IT problem solving and support. We just had somebody come in with a big malware issue and we helped them out for a small, one-off fee.
That's a very small line of the business, but something that if we can help, itās a big win for us because it keeps us top of mind and builds trust with people who may have a need for our larger service offering somewhere down the line.
On finding their nicheā¦
There are a lot of mom-and-pop shops which I love - your roof, plumberā¦home buildersā¦
Businesses that arenāt Apple and Amazon - true small businesses that canāt throw out $500-700k a year for some marketing vendor to help them but still need help growing their business. I think as we grow we'll move upstream a little bit, but you'll never catch me prospecting into a brand like Target, like, āI want to redo your website.āĀ
Theyāre just way too bigā¦
We have a few clients now that probably max out at about $25M-$30M in revenue but that's probably about as big as we've gotten so far, and might be as big as we get.Ā Realistically, we like going after smaller businesses at a higher volume - there are a ton of businesses out there that have an $8k-$12k annual marketing budget and they just don't know what to do with it.Ā
And Iām a true systems guy at heart - I love creating systems that allow us to work with a ton of smaller clients at scale and eventually try to increase their marketing spend to around $40-60k dollars a year, because as they grow, they have more money to invest in their marketing.
A lot of these smaller companies canāt afford to miss, so our goal is to come in and make sure that, while we might not hit a home run, we're going to consistently hit doubles and triples - enough to keep them in the game and build a really good small business.Ā
Once we show them we can do that for them, the trust remains exceptionally high and they donāt really have a reason to move on from us.
On pricing modelsā¦
I push for a flat fee; I think flat fee is easiest on both parties.Ā
A huge trend on Twitter right now is to be a growth partner and take percentages of your growth for the other company, and things like that.Ā
Thatās totally cool, but if I was to explain a growth partner to my 62-year-old client, I'm probably not getting a deal because their comfort level isnāt the same. The majority of people we work with just want to sign up, know their budget, and get it done with - that's it.Ā
And I can see the growth partner stuff kind of backfiring because they might initially be impressed, but when I blow your campaign out of the water,and you look at what you have to pay out your likely reaction is not positive, but probably more like,
āOh, my goodness, 10% is like another $12k a month.
Okay, I'm looking at this contract again.ā
That's a big opportunity cost, whereas, for me, I'm like,Ā
āYeah, a flat $3-4k; just pay us and I'm going to keep crushing it for you.
Your returns are going to get higher; my flat fee stays the same.āĀ
If we were going after a different market maybe that could be our offer, but for us, our thinking is: how easy can I make it for you to get to a "yes" quicker?
On customer acquisitionā¦
To be honest, ironically SEO is not our best growth channel, because itās really hard to sell SEO with SEO - youāre competing with every other SEO person, who are all competing for the sake of it, which makes it way too expensive.
That said, we obviously still do a lot of it and have one keyword that does really well for us. So if a client is like, āWell, do you guys do SEO for yourself?ā We can point to our own brand as a case study.
But I'd say one of the biggest things that is actually done well for us - and this isnāt very tactical but - is just being a nice human.Ā I've found, for me, whether or not you're going to buy from me, I'm going to set aside time to meet you, get to know you, invest in you, be your guy in the corner for all things web and SEO.
Just building a friendly brand - and really that just comes down to meeting people, being nice and being a consistent voice in the space.Ā
I see a lot of brands going out there with messaging like,Ā
āHey, I'm going to guarantee you 100 clients in three days or you'll never pay.āĀ
And what theyāre banking on is that will help them close ten extra contracts a month, fully knowing theyāre going to have to refund seven of them.
That means these other agencies have a huge churn but they're still gaining a few new clients so they don't care - but itās short term thinking and they're putting the company's reputation at stake.Ā
More people leave unhappy than those who stick around happy, which is a situation I never want to be in no matter the growth.
On using social media to fuel growthā¦
That piece kind of comes naturally to meā¦
I mean, if you go all the way back on LinkedIn, I was posting on LinkedIn as a junior in college, and I didn't even have a business - I was just posting about TEDx.Ā
Iāve always felt it's fun to engage with people online, and now, most of my close friends I've only met a few times in person, but are all just people Iāve bonded with over the internet.
If you put yourself out there, like-minded people will come to you and become your network or your community. Twitter is a freakishly cool thingā¦ I can talk about morning workouts and I'll have a hundred people respond to be like, āOh, I love morning workouts.āĀ
It can be hard to find your own audience locally, but the internet allows you to find a lot of those like-minded people, and if you're smart, use it to your advantage.Ā
And now, a lot of those like-minded people see me talking about agency growth and itās been great for building a referral network. The deal that we had come in this morning was someone who follows me on Twitter who just said, āI think David does this, you should chat with him.ā
That's where our lead came from - being out there, being nice to people, putting our name out on the internet and then some random guy throws it back and is like,Ā
āHey, you should go talk with Davidā¦David does SEO.āĀ
The ROI is really hard to measure but the leverage is priceless over a longer time frame.Ā
On the biggest challenges to dateā¦
The biggest thing I've really struggled and continue to struggle with is managing the daily emotional highs and lowsā¦Ā
It almost felt like at the beginning, every day I said something like,
āI suck at this,ā
orā¦
āI'm going to be the next Steve Jobsā¦ā laughsĀ
Every day was just a roller coaster of emotionsā¦
Our revenue has pretty much been a straight line up and to the right, meaning we continue to growā¦but if you were to make a separate line on that same chart representing my emotional stress levels?Ā
Dudeā¦They're all over the place!
Iāve tried to reduce the frequency and severity of the emotional highs and lowsā¦so the daily lows become weekly, become monthly and so onā¦
I've really learned to stop and think, okay, if I feel anxious about business - why?
Let's investigate this and think about itā¦
It can be great to trust your gut, but emotions are a dangerous thing to really lean into in business, and I think nowadays, culturally we really overvalue emotionā¦
If you're not happy, youāve got to be happyā¦
If you don't like your job then you gotta like itā¦
You need to quit and go find something elseā¦
People really prioritize happiness but I think a lot of great businesses are almost the oppositeā¦ For example - I could feel great about the state of my business, but is that substantiated in logic?
Have I enough to feel great about the businesses this week or is that a false hope?Ā
Or on the flipsideā¦if I feel terrible about the business, I again, have to ask myself - is that a fair assessment and rooted in logic?
We were coaching a project manager the other day - and he actually handled the situation well - but it was really funnyā¦
I was like,
āHey, how do you feel about client A?
PM: ā...Well, I feel good.ā
Me: āOkay, but why?ā
PM: āWell because he sent a smiley face in Slack today. I think heās goodā¦ā
Me:āI get itā¦You're trying to read the body language, but have we gotten the results we need?
PM: āOh no, we're like a week behind on this.ā
Thereās an example where how my PM felt about things, vs the reality of the situation being way off. We love to buy into emotions, but culturally we need to dig deeper.
āHe sent a smiley face, so I'm not investigating any further,ā isnāt really good enough.
Favorite Booksā¦
A couple different ones but first and foremost a book called the John Maxwell Leadership Bible, which is really solid.
So if I'm struggling with managing people, finances, the Bible is one of the best business books, in my opinion, and we'll use that as a great big resource as like a guiding light.
One of my favourite financial books is Increase Your Financial IQ, by Robert Kiyosaki.Ā
Do Better Work, by Max Yoder ended up being a huge resource for us...
Winning, by Tim Grover - he was Michael Jordan and Kobe Bryant's personal coach.
The Art of Warā¦
This Won't Scale by Dave Gerhardtā¦
And I'd honestly say the number one book, besides the Bible, is called Factfulness by a guy named Hans Rosling.Ā
He was a big tech guy, he had multiple TED Talks - it completely changed my outlook on the worldā¦
Where you go for inspiration or answersā¦
I will say the one rule of thumb is that whenever I need a true opinion on something difficult, I'm getting as far away from my own team as possible - and I mean that in the nicest way possible.Ā
I want somebody super unfamiliar with the situationā¦Ā
I want somebody that's raw and unbiased to give me that opinion.Ā
I'm going to someone that's been there before and maybe has the experience or somebody in general that I just trust and then continues to show good faith and good feedback.Ā
But really I always come back to the Bible - for me, it's like a handbook.
On planning for scary momentsā¦
So far, weāve been fairly steadyā¦consistently growing revenue and headcount - no real scary moments yetā¦
But there's an old quote,
āEvery surfer enjoys the wave they're on because they know it's going to endā¦āĀ
Weāre in a headspace where we know - sure, weāve had 2-3 years trending in the right direction, but we need to have a good strategy if our situation changes. We do disaster walk through meetings - almost coming up with ways to kill the business and really start to prepare for some of thoseā¦
There are a lot of agencies that I think are going to die in the next 24 months, but I really don't think we're going to be one of them because weāve walked through a battle plan for most of the bad situations we think could happen.
On future challengesā¦
I think the scariest thing Iām going to have to deal with in the next 24 months is a misunderstanding of marketing based on the state of the economy.Ā
We had a client yesterdayā¦actually we just lost themā¦
It's funny - we were getting them a 5x return on their ad spend, $1 in and $5 out, but they canceled because they're nervous about the outlook of the economy.Ā
I was trying to walk them through in a sense of like,Ā
āDon't even pay me - this isn't to save our retainerā¦
I just donāt want you making bad decisions out of fear.āĀ
And back to what I said about emotions - I think emotions are going to get the best of a lot of people moving forward, and people are really going to make some uneducated and poor business decisions.Ā
If I'm putting one dollar in and getting five dollars out, that is a 5x return.Ā
500%!!! Where else are you getting 500%?Ā
But they still canceled because, look at the economy - it's scaryā¦Ā
I think that's going to happen a lot and will be our biggest challenge.
We've already started to see it, and have started to change approach like:
āhow can David and Pneuma become your pseudo-business therapist?ā
We're actually starting to coach our clients like - forget the SEOā¦
I want to know, what are they typically worried about?Ā
I want to figure out what that person's going to care about because it's going to be the quickest way to really build trust.
Thoughts on quittingā¦
Early on, a lotā¦Ā
But the number of times I almost quit because I thought I was going to fail is probably zero. The number of times I wanted to quit to do something else that was a shiny object - a true shiny object - has been a ton.Ā
I told you - some days, I still hate what I do because it's challenging, it's difficult, it's intenseā¦I never wanted to quit because I had a fear of failure, but was always a, āshould I let this go to pursue X, Y, and Z?āĀ
And very rarely do I say yeah, I'm going to put that on hold to go do something else.Ā
Shiny object syndrome is like the number one killer of businesses today.Ā
On retentionā¦
This is where I spend my time in the businessā¦Ā
If I was to give a multiple-choice test on the reasons clients leave agencies, most people would assume bad performance is the number one reason for leaving - they think agency decisions are purely based on ROI.Ā
That is rarely the caseā¦
Agency performance actually tends to be number four on the list.Ā
The number one reason for leaving is bad communicationā¦
Number two is they don't like their project managerā¦Ā
āā¦I don't like Jerryā¦I wish I had somebody other than Jerryā¦
I'm just going to leave, even though I'm getting a great ROIā¦ā
So the biggest thing around retention is not actually doing a killer job - which is part of it, don't get me wrong - but itās all client management.Ā
Retention is more about customer experience than just providing the service...
So every ~90 days with most of our clients, depending on their retainer size is a full business review with them.
We will go in and talk about SEO stats, but we'll also dive into,
How's your business doing?Ā
How else could we serve you?Ā
What other problems are you facing?
What's your target audience look like?Ā
We may be one of the few firms that maybe encourages scope creep in a weird way, because we just want to help you, we want to be your partner in it.Ā
It's about good customer experience.
A lot of agencies get really egotistical and prideful around scope creepā¦
āWell, you didn't sign up for that, so we can't do it, that's going to be an extra three grand.āĀ
Like, āDude, shut up!ā
Theyāre asking for an extra call or an extra meetingā¦
Go do itā¦ Make a customer happy.
I think people really are short-term-minded with a lot of the customer experience and management - you got to really put yourself as the servant leader to a customer.
Tech Stack
Slack, all things communication; I would set fire to e-mail if I couldā¦Ā
Airtable for all things project management.Ā
Stripe for all things billing,
Ā Notion for documentation.Ā
Semrush,Ā
Google slides, and the whole Google suite for that type of stuff.
Thatās it for issue no. 5!
To learn more about David check him out on Twitter or LinkedIn!
Read past issues here:
If you, or someone you know would like to be featured, or just want to connect, feel free toĀ message me on LinkedIn!