One of UpBuild’s core values is Transparency, and while that idea gets a lot of lip service among startups, it’s important for us to walk the walk. This post is a part of that effort. If you want to take a peek behind the curtain, then come on in and read about how UpBuild’s 2018 went and what we’re setting out to do in 2019.
How 2018 Went
2018 was a great year for the UpBuild team. Yet, it was also our most challenging in more than a few ways. It was a year of dichotomy.
This really snuck up on me, but we’re an established 10-person company now! With that comes higher overhead, increased operational complexity, and exciting challenges. In short, being a company with a double-digit headcount is a more serious undertaking than running a company made up of 4 independent contractors (our Year 1).
Who would’ve thought?!
At the same time, becoming a more established company afforded us opportunities to do more interesting work, partner with more clients we’re excited about, flex our mental muscles while taking on new challenges, and support our team members to a better degree than we’ve ever been able to before.
Cut to the KPIs
To report on the easily-graspable financial results, we came within striking distance of the somewhat arbitrary $1MM revenue target that we were hoping to hit, but we didn’t quite make it. I think that’s okay.
One of the reasons why I’ve historically avoided setting revenue goals for UpBuild is that a revenue goal puts the emphasis on the wrong thing. Will more money in and of itself
When considering if any goal is worthwhile, some questions I like to ask are “can this goal be easily gamed?” and “if we overextend ourselves to hit it, does that effort create positive results overall despite the difficulty?”
Well, shooting for a top-line revenue goal of $1MM would have been really easy to game. If all we cared about was hitting that target, we could have taken on client work we didn’t feel great about (we turned down our fair share of poor fits), we could have overbooked the team to get more short-term cash, or we could have just switched to accrual rather than cash accounting and instantly boosted our numbers. Would doing any of that just to hit that goal make us a better company and create an overall positive result? Certainly not.
That’s why we passed on a few opportunities to try to collect some additional December revenue at the risk of annoying only slightly-overdue clients; that’s why we decided to ease off the gas in sales once we hit a comfortable capacity in Q4, opting to defer things to Q1 2019 when we could better serve clients. As a result, we didn’t hit our 2018 revenue “goal,” and I feel pretty good about that. Revenue grew by 5% which, if I’m being honest, isn’t quite what I would have liked to see, but I can absolutely sleep at night with that level of growth.
The Financial Metric that Matters
Our profitably was 13.6% for 2018, and that’s the real money metric. As Greg Crabtree says in his book, Simple Numbers, Straight Talk, Big Profits, “Revenue is for show; profit is for grow”. It’s cheesy, but it sticks with you and is a great piece of advice to carry around.
The Real Highlights of 2018
But if profit is so important, is it a bad thing that our profitability dropped from 24% in 2017 to just 13.6% in 2018? Not necessarily. All in all, I believe we made a conscious trade-off in 2018 where we exchanged profit for the opportunity do and support some incredible things.
- We grew the team to double digits by hiring two new full-time team members. We now have a self-supporting team structure that I love (e.g., there are always a few people available now, at varying levels of seniority, to come together to solve a problem as a team)
- We were in the financial position to give healthy raises (and bonuses) to the team without having to hesitate.
(Of Note: The top two bullets combined caused our salary expense to grow by 37%.)
- We reduced our non-salary expenses by 10% and stayed within 1% of our set budgets for the year (shout out to Ryan!).
- We continued to focus on supportive benefits for the team. This year we:
- rolled out a matched 401k in January (one year ago),
- continued to offer the best health insurance we’ve been able to find (needs to cover all 50 states so options are a bit more limited than if we were Oregon-only),
- matched non-profit donations for Giving Tuesday, and
- provided other small benefits to give our team all the support that we possibly can.
Points of Pride
Beyond all that, there are a few other highlights that I’m especially proud of.
- We tested the limits of being a remote team by supporting one team member in working from Iceland for nearly a month!
- Were awarded Happiest Company [Agencies] for 2017 by TINYpulse (earned for 2017; awarded in 2018).
- For 2018, our Team Happiness was 9.0 out of 10 compared to the 7.3 average for agencies.
- We helped two team members buy homes (2 more in progress for 2019)!
- This point almost makes me tear up with pride. Why? About a year-and-a-half into UpBuild’s journey, getting a mortgage was a non-starter for me. As self-employed folks may know, banks get really nervous about giving loans to the self-employed without two solid tax returns under your belt. Even after the two-year mark, getting a mortgage was a struggle and a half. The fact that UpBuild can now support other people in successfully getting their own home loans is a massive personal point of pride.
Perhaps more important than any of these highlights to me is the feeling that we’re a fully-operational technical marketing machine. It’s really starting to feel like we know what we’re doing — ::gasp:: — and that we’ve figured out how to be a real company.
We also had the unique opportunity to test our resolve and commitment to our values in the face of less than ideal situations.
I mentioned that our revenue didn’t grow as much as I would have liked, and I’ll honestly say that I had a few sleepless nights over our cash flow. 2018 was tough for a lot of agency owners who I keep in touch with, and Q4 is never easy to begin with. Q3 and Q4 were tough for us, but I loved the incredible client work, refinement of our discovery (AKA “sales”) process (shoutout to Laura!), and team bonding that came out of that adversity.
That said, I feel like I need to note that there was a point where I could clearly see why agencies see layoffs in the face of a business downturn as a valid option. Cutting out one or two salaries in one fell swoop is a lot of money saved and can make your financial picture look better overnight. But at what cost? Damaged relationships, team, client dissatisfaction (what client is ever excited about team turnover?), and many, many other consequences.
While layoffs are still not anything I could ever entertain, I looked into that abyss and it felt good that it wasn’t difficult to turn away. Keeping this team together is hugely important to what we’re trying to do. Our team is our product and every day that this team is able to work together is a day when that product is getting better. Opportunities to close more client work will invariably come our way; incredible team members definitely don’t come our way with nearly the same frequency.
In more than a few ways, I could say that 2018 was simultaneously our best year and our most difficult year. Nonetheless, we came out whole and we came out better than ever. We came out motivated to keep doing this thing and be the best version of UpBuild that we can be (we’re on version 3.0, for those keeping track).
Looking Ahead to 2019
I’m truly stoked for 2019. It might not be what other agency owners would consider “exciting” in terms of growth or getting closer to a rewarding sell-off (an acquisition is not anywhere on our roadmap), but we’ll be getting our hands dirty with what we’re best at: optimization. Internally, 2019 is the Year of Refinement and Stability. That means a few things.
- We’re not growing. Being 10 people feels great and we’ve really just graduated to this level. I’m in no mood to rush through that before we get really great at it first. Our goal this year is to perfect being a 10-person company before moving onto the next thing (which, honestly, might not even be growth; we’ll see).
- We’re going to make our technical marketing expertise available to a wider audience. No tweetable news yet on what we have in the works, but one of the clearer-cut initiatives will be figuring out how we can offer the “UpBuild experience” to businesses both larger or smaller than our typical mid-sized B2B SaaS and retail brand clients. You’ll also likely see more Builders out of the conference circuit this year.
- Our goal for the year will be to grow our top-line revenue a bit to hit that $1MM mark but, more than anything else, crank up our profitability by A) doing more great work, B) retaining clients even better, C) and improving our operational efficiency.
The optimization geek in me is very, very excited about working on all of that.
We don’t refer to UpBuild as an agency all that often. We think of this as a framework — a framework within which the best technical marketers in the world can successfully execute at a high level, under optimized conditions, for clients & causes they’re proud to be of service to. Full stop.
This year — the Year of Refinement — is about optimizing the framework and it’s going to be a great year.