1516: Niche Marketing Strategy: Grow from $0 to $2.5M and Acquire Businesses Like a Pro with Digital Service Business Expert Karl Hughes

Robert Plank 0:01 He scaled a Content Agency to $2.5 million in two years, and then shifted gears to buy and grow other agencies with untapped potential. If you own a niche marketing agency and you dream of handing it off to other excited, eager owners who are growing it without seeing it die, then this episode is all about what thoughtful acquisition really looks like, that entrepreneurial roller coaster and all those amazing things. It's Mr. Carl Hughes from Carl l hughes.com return guest he was on a bunch of years ago talking to us about draft dot Dev. But so much has changed with both of us, and it's just it's an amazing journey. So Mr. Carl, he was glad to see you again. What are

Karl Hughes 0:47 you up to? Yeah, good to see you, Robert. It's been a fun and interesting five years of some growth, some contraction, some learning, some failing, some succeeding. So as it is, in entrepreneurship, it's a roller coaster, but it's been a lot of fun.

Robert Plank 1:03 Well, yeah, and I feel the same way. I feel like, you know, pandemic, the probably the best thing to come out of it was the increased zoom of it, all right? It's like, before that. It's like, well, zoom. Well, should I have my camera on or off? Is internet fast enough? Do people know how to use it? And, like, we all had to figure it out. And I feel like for at least for me, it went from like feeling left out because I kind of scaled back going to offline events, and to now, like podcasting and computers are faster, and if you want to just get all your work done, you don't have to wait for the computer to boot up. There is cloud, it's there's AI, it's a completely different world. And so what does that look like for you? What's your current focus and passion?

Karl Hughes 1:49 Well, I think one of the things that the pandemic opened up for sure was the willingness of companies of all sizes to work with agencies in a fully remote capacity. And so kind of compare and contrast. Here, it used to be, probably 1020, years ago, really, any tech company that raised funding would go down to the let's call it the corner marketing agency with the big, you know, name and the big downtown address and go work with them on marketing their business, whereas now, because of the pandemic and going remote, people have really shifted those budgets from work with the big name agency to work with the specialized agency that knows our niche, that knows our customer base better than anything else, anybody else. And I think that's been really interesting, and that's been the macro trend that I've sort of seen in the last five or 10 years, probably that we've been aware of and sort of leaning into as hard as we can with our with our agency, holding company. So yeah, to give you kind of a quick backstory on five years, I started draft dot dev in 2020 during the pandemic, it grew really quickly, hired a team, worked myself out of the day to day, got to a point where I took a whole month off, and it was like, without checking any email, doing any calls. And it was, in a way, liberating, but also, like, kind of, I felt alone on an island, like, what do I do next? You know, in a way, I like, hit the quote, unquote entrepreneurial dream of, like, running a business that paid me without a lot of my time, but at the same time, it was also like a bit of a nightmare, because I didn't have a direction. I felt a little rudderless. So I started working with a business coach and talking to a lot of people, building a support network. And one of the things that came out of that was I needed a bigger, kind of 10 Year Vision for what I was going to do. And it couldn't just be make some passive income and sit on a beach, because that's just not I mean, you know, realistically, the people who start companies are not the people who just want to sit back and, you know, collect a check doing nothing. It's just not interesting, you know, like there's only so many video games that I can play. So the what I kind of came to was, let's figure out what worked in draft dot Dev, build a template for running a niche, productized agency, and start buying more of them and improving them, and then sharing some of the back office resources. So in 2023 we bought the podcast consultant.com does podcast production, mostly in the finance industry, and that business has continued to kind of grow, and we've continued improving over the last couple of years, and seeing if we can apply some of those same learnings from draft dot dev over there, it's also been a good way for us to start combining some of the costs that all agencies of these sizes are going to share and to go through the experience of buying another company. You know, we had never done that before, and it's as an entrepreneur, it's very different coming into someone else's business and is going on your own from scratch. So that's a bunch of things that we've been working on. We we've done a couple other really small acquisitions, like add on acquisitions, and we've looked at, then looking at a couple other bigger ones as well in the next year. So don't know exactly what the next year will bring, but the goal is to continue this, this, this build up of niche marketing agencies like that.

Robert Plank 4:52 Very nice, the upward trend and the momentum. And I have to confess that, because I've been doing I've been podcasting for 10 years or so in a. Couple years in this idea of, like, buying and selling these digital companies, it like just hearing these stories, it opened up a whole other world, right? Because it's like the way that people talk about it. It's like real estate, right? It's like, well, would it make more sense to find, like, an empty plot of land? And you go and you take a hammer and some nails, and you hammer together a rickety old house, and that seems like that's how a lot of people, including me, like, start and run their businesses. But then there's these people out there that just are more business minded. They say, Hey, there's this, there's this company here, and it has potential, and because they are listing it up for sale, they have financials. I can look into it, I can see if it makes sense, and I can buy it. And it already has, like, all this turn key elements in place, right? They have employees, they have number, they have operations, they have traffic. It's like all these things that are already working, and you can grow it, and you can flip it, or you can sell it, or you can improve it, or you can hang on to it, or you can kind of say, like, Hey, we got this to work. And let's find some other companies that maybe are struggling, or they put it up for sale and, like, acquire them. And it's just, it's such a a fun like, kind of like assembling of the Lego imagination ticker, if you will. And so, like, so, I mean, tell me more about this, because I think it's just a it seems like the simplest thing, but it's, it's exciting for me. I feel like I don't know enough about it.

Karl Hughes 6:29 Well, it's, it's you, you put it very well, and that's the best case scenario. Is you buy this business. You could stay relatively out of the day to day of it. You can collect the cash flow from it. Use the cash flow to pay any debt you take to buy the business like there's a lot of cool things you can do when things are good. What I've realized in the last couple years of doing this now and owning a couple agencies is the hard part, is when either market externalities change and the business needs to change, or you lose a key team member. Because again, these are small companies under, you know, 3 million in revenue each. So we're not talking big enough businesses where they have full on, you know, teams of multiple sales people, multiple production leaders. It's like, usually five to 10 employees full time, and a lot of freelancers kind of fill in in the gaps. And so the truth is, they're also pretty brittle companies. And so unlike a truly passive investment, or a buying a really large company that has a whole operating board and machinery behind it, you're buying a fixer upper. You're buying something you need to put some elbow grease into, and then you need to continue to put elbow grease into every so many months or years. So the tricky part as an owner is you have to be willing to roll your sleeves up and do the hard work, like, for example, in the last six months, I've been doing all the sales and all the onboarding with new clients at one of the companies, because we lost a salesperson, and there's nothing. There's no substitute for me stepping in and doing that for a while till we can hire somebody to, kind of like, fix pipeline and hire somebody again to do it. So it's a it's really tricky. So again, it sounds easy, and on paper, it can work really well, and certainly the economics of it can can be very beneficial, because you're not starting at zero, you're not trying to find product market fit, you're not wasting all those cycles figuring out, what can I sell and who do I sell it to, how do I build the first 20 customers? All that stuff is like that stuff is really hard. And I think that a lot of entrepreneurs think of that as entrepreneurship, and certainly that's one. That's the first flavor of it that we all go through. But if you can kind of skip that step and jump right into a working business that is cash flowing, in other words, paying money out every month, and has a successful client base and has inbound leads coming in every month, it is a lot easier to operate that kind of business and stay relatively out of the day to day. But again, you got to be willing to roll your sleeves up, deal with the crises as they come up, deal with market changes as they come up. You know, you can't have a lot of you have to be humble. And I think that's something that's definitely taught me, learning to run a couple businesses at once. And you know, as we continue to spread this out, and we get into three or four, it's just gonna those problems will just get harder and more things we have to solve, but that's also the fun of it. I never look at it like because something is hard, it should be avoided. My attitude is more like because it's hard and not many people do it. That means we should try it, you know, and we should see how we learn how to do it. So once you get into this rare air where you're doing things that only a few other people do, like, for example, by like, starting a small agency. Lot of people start small agencies, getting it to a million in revenue, you're starting to get into the top 10% of entrepreneurs or so in the US, buying another company, you're getting into the top one or 2% of entrepreneurs in the US. Not many people do that. And then, you know, scaling multiple companies to over three or 5 million revenue, you're now up in the point of 1% of entrepreneurs. And it's not that that makes you better or worse. It's just a matter of, like, there's not many people doing this. So you get to learn some really interesting things and go through really interesting challenges that have no straight answer, no textbook answer. And I personally really love that.

Robert Plank 9:51 Oh, yeah, and that's such an entrepreneurial cliche. Is solving the hard problems. And I don't know about you, but I since the very beginning of all this. 20 years or so, like, I've always been, like, introspective about, well, what do I like to do? What motivates me? Why do I keep doing it? And then, like, the people that I have in my orbit on my like, partners, employees, things like that, mentors, I'm like, What am I looking for? What do I like? And it seemed like, early on, I really liked the persistence. Like, if I, if I joint venture, to partner up with someone, and if one little thing didn't go their way in the launch, they just give up. They say, off to the next thing. And I found that really frustrating. And then it seems like there it, but it's, it's not like all or nothing, like there's a gradient, right? And I found some people that were, like, a little more persistent, but then gave up, like, a few years into the business, when that got hard. And so speaking to you, it seems like the the ingredients, in the in the in the bacon, the cake, or whatever is like, well, hard work is definitely a part of it, but so is the fun and the freedom. And it seems like maybe some, some people get into entrepreneurship for the wrong reasons, and they're focused on avoiding the hard work part of it. But you're saying, well, the hard work means there's like a thinner herd, there's more uniqueness. And so, of course, no one wants to be burned out, right? No one wants that hard work without their award or build themselves another job. But it seems like that hard work like you can't avoid it, because there's also the upside of it, of like, the flexibility, the freedom, the no cap on your income, and just the the adventure, the fun of it all. And so do you have similar thoughts? Do you sometimes, like, psych yourself out about like, well, am I working too hard? Should I just go get a nine to five or join a startup or something?

Karl Hughes 11:41 Yeah, that's a good that's a good question. It's funny because when we talk about these challenges of entrepreneurship, this sounds very obscure if you're not, if you're not in the game right now, if you don't own your own business, like, what does it mean to have a hard time when you're running a three or $5 million company? Like, how hard could that be? Carl, and it's like, well, here's the thing, here's what's hard. Going to your team and saying, Look, guys, the market is not trending our direction. I got to let half of you go over the next three months. I don't know which half of you it's going to be, but I got to figure that out. We got to figure this out together and how this company's going to keep running afterwards. Like, that's really hard, and it really sucks, and it means that you're going to, like, have to let a lot of really good people go that you may never get back. And they're going to be gone off and doing other things, right? So that's the kind of hard thing. The other harder things are waking up and realizing, like in the middle of the night, that our monthly payroll is, you know, going out tomorrow, and I have just enough cash in the bank to cover that, but nothing else left. And it's like, what does that mean for next month? You know, what are we going to make it clear? Is it going to happen? And so those are the kinds of challenges we're talking about here. Would I ever want to or do I ever think about leaving those kinds of challenges and then, you know, going relegating myself back to getting a full time job now that I've crossed this Rubicon? No, I can't imagine it. It's it's simply too empowering to see my ideas get like me, taking an idea, selling it to a company as a, you know, a customer, client, whatever you want to call it, and then executing on that idea with a team, seeing that cycle happen, and clients come back with really positive feedback and success stories that we help generate. Seeing that positive feedback loop happen makes it just so hard to imagine giving up. I do agree that it's hard, harder a than getting a job. If you are somebody who just knows you, you're you know, your only reason to looking for entrepreneurship is you want a more flexible arrangement, or you want easier money or work fewer hours. Like this is just not the path. Like there go be a freelancer or something. Don't try to start a real like a full company. It's just, it's too much, too hard. So Anyway, point being, I can't imagine going back to full time employment unless it was like something like, you know, my company got bought, to have to go work somewhere for a couple of years, like limited time sort of engagement. But I do, I do appreciate that that answer is sort of five years in. If I had known the mental stress and fatigue that entrepreneurship would give me five years ago when I started, I probably would have just gotten another job. Like, honestly, like in hindsight, like at the time, I was not ready to take this on. I didn't know what I was getting into, but at some point it was like the bridges were burned. I was out here at sea. I got to keep going right like there's no there. It gets really hard to turn back, especially again, once you've got payrolls, you've got people who depend on you, you've got contracts you have signed, you got to figure out ways to do that stuff and execute on it and deliver on what you've said you will. So it's a long and complicated answer and but I think that's that's just the truth of entrepreneurship is that it is a complex thing, and you're right that thinking of it as thinking of it as way to easy money or passive income is not the way you get successful at it. The people who do end up getting to a point where they can truly take a step back and make it more passive and act like just investors or sell their company are the people who worked really, really hard in the intervening times and did really hard. Things and face some of these kinds of like mental challenges to get where they are. So it you can't have the good without a bit of what feels bad.

Robert Plank 15:09 Yeah, of course you have to pay the price. And that doesn't mean that it's an unlimited price or a price that's too high, but there are things that must be done to get over the hill, so to speak, and to be in more of an investor, not just, not just a dabbler, and so like a lot of what it seems like you're talking about, like, there's this mindset of not dropping the ball right when you sell a company. Like, I hear so many stories about, like, it takes, you know, two or three years and so much revisiting, and it's like all this, like, waking up, going to sleep, revisiting the plan. And that's like something like, I think that's like, the hardest part of my mindset to, like, install and keep in there. It's like, you think, Well, when you walk into like, a Disneyland Park or a McDonald's, like, you're taking care of every step of the way, and, like, if you're building a funnel. It's like, you have to, like, when someone goes through a funnel, it looks real simple. But then as you're building something, like, there's just all this like, paradox complexity that you, like, never anticipated. And this idea of, like, if you could see five years in the future, you wouldn't have done it. It's like, if you were running a marathon, you're like, Well, I'm not in shape enough to run this marathon, but maybe halfway through, my muscles will be built enough, and then I'll kind of get myself there. And so like, can you? Can you help a little bit with that mindset of like, of like, not dropping the ball and making sure like that feedback loops in place, your customers, your employees are taken care of, because it seems like I don't know how to apply that obsession to the extent I think I need to,

Speaker 1 16:45 that's a good question. You're hitting on two things I think are really important when it comes to when I look out at the really successful entrepreneurs that I know, and when I say success, I actually don't think of success as like necessarily they have the biggest businesses, it's more that they have the lifestyle that they want. So that's my definition of success, personally. But you know, you could take that as whatever you want. So when I look at the people who have the lifestyle that they want from their business, whether it is a function of money, free time, whatever, all of them have done a couple things. One is, they've been consistent over time. In other words, they figured out a way to just keep in the game sometimes, like I've met several guys in here in Chicago that have owned businesses for 20 plus years and have been everywhere from three times as big as they are now to zero. And it's crazy to see those swings. You know, a lot of people assume that entrepreneurship, or any kind of venture like this, will be a slow, steady, up to the right line of like, you know, every year I tack on 10% more revenue, that would be nice, but that's almost never the case. That is the rare exception when it comes to entrepreneurship, the way growth happens, it happens in these fits and starts. You have huge years that you double and triple, and then you have huge years where you cut in half and you you missed, you know where the market was going, or major externalities change things. So that's one is like they're consistent despite this roller coaster. And then two is they continue to stretch themselves and do things that make them uncomfortable. So it's easy, and I know a lot of business owners who are like this, that to build a business to 500 or 1,500,000 or a million in revenue, and kind of just coast there, because there's these natural plateaus that happen at different business sizes. And it has to do with the entrepreneur taking themselves out of more of the day to day operations, and hiring and trusting people to take on those roles, and also taking a cut to their margins to do it. So depending on where you're at, size wise, as a company, there are these points where you need to hire somebody that you can't truly afford. It means you basically have to say, I have to be willing to pay myself less until hiring this person gets me over the dip to cross that next line of revenue where I can go pay myself more again. And a lot of people aren't willing to do that. And so that and so that means their companies get stuck at these thresholds. And again, these thresholds are different places, 500k maybe a million, maybe 3 million, maybe 10 million. I think there's a couple of people that define those thresholds. But either way, if you feel stuck, the point is, if you're an entrepreneur and you feel stuck and the business is not doing what you want, you have to be willing to kind of tear it down and fix things. And that means making yourself uncomfortable again, going back down into these like, unknown roles, where you don't know if this is going to work, but you have to take a risk and try it. So those two things consistency and like sticking with it, even through the ups and downs, and learning to, like, separate your mental health from the businesses success and failures or whatever. And then the other side is just continuing to make yourself uncomfortable when you get stuck. Those are the two skills I like constantly think about developing, because those are the ones that the really successful people have done this for 20 years and have lifestyles they want now tend to have,

Robert Plank 19:53 ooh, yeah, that's that's great. And it's a fun thinking about both sides of the coin, right? There's like, that aspect of like, sticking to. Do it and be disciplined with mental health, those good habits. I mean, it's like all these successful entrepreneurs, I know they've got, like, a kind of, like the their goals, right? They got their to do list, and they stick with it, and they don't just write it down as, like a New Year's resolution, like the average person does. They have these kind of, like stoic habits and the mental solidarity, and then what that ends up giving you, in this weird way, is then you can, like, make those weird sacrifices and those kind of the more long term leaps. And it's, like, fascinating to kind of pontificate with you, and think about it, but I feel like I'm being selfish with the kind of personal list questions, and I want to make sure that we focus on what's most important you Mr. Carl, l hughes.com, and so in this conversation that we're having, what do you think is the missing question? What should I be asking you? I just don't know to ask you

Karl Hughes 20:57 that's a good question. Something that we haven't mentioned, that I think is a little more tactical, but also super important to think about for all business owners, especially smaller business owners, is knowing your like knowing your finances. In other words, like understanding some of the basic lingo for Financial Health for your business is super important, and I'm always shocked by how misunderstood a lot of it is by business owners, even ones that are fairly successful and go on for quite a long time. For example, I talked to a guy last year and just kind of asked him the basics of like, well, do you have books in place, and do you do you know how much money the business made last year. And, you know what, all this, and he just didn't know any of that stuff. And it was like, you know, he knew there was cash in the bank, which is fine. And you know, if you're a freelancer, you can kind of operate that way. But if you're running a company with real employees, and you want to sell it someday, or you want to, you know, you want to find a way out to hand it off to somebody else, you kind of need a little more than that. So there's a lot of good resources on that. Greg Crabtree has a book called simple numbers. That's a really good, you know, kind of simple overview of this for for business owners. But that, again, if you're whether you're looking to sell now in five years, 10 years, whatever, get a handle on your numbers. Know all the lingo. It's going to help you a ton, because otherwise you can get really, you really miss a lot, both in the short term and long term.

Robert Plank 22:23 Oh, yeah. And I've come across that so much in my podcasting adventures, too. It makes people that say, Well, I know how much it sucks to have to learn these things, right? You learn these accounting principles and, ah, messing with my numbers and not my favorite thing either. It's like, but the end goal is that, is that, you know, say you're 60 or 70, and you say, hey, built this business with all this cash flow, all this employees, if you want to sell it for this multiple great, because you had healthy numbers that you tracked, versus, well, this business that maybe dies with you, or that you don't even get a fraction of what you want. Like, that's the trade off. So it's like, it they say, choose your heart, and you could choose it now or choose it later. And it's like, yeah, and it's I'm still on that path, and it took me so many years just to even know, like, what my personal take home income was, never mind the business, and then just to get in the another mindset of, like, getting excited about the numbers. I used to dread it. I used to avoid it. And then that's back in average land, right? The average person, they don't want to look at their finances, their bank, their bills, because it's scary, especially if it's not what you want it to be, but what you focus on grows. And if you can get past all that uncomfortable, uncomfortableness seems to be the trend in our conversation here, Mr. Carl, then it's like there's, there's many amazing results and achievements on the on the other side of that little bit of difficulty. And so if someone was inspired, amazed, encouraged by our conversation today, how can they find out more about you, your agency, these companies, what are some next steps here?

Karl Hughes 24:00 Yeah, sure. I, you know, I'm very open and available on LinkedIn, Carl l Hughes and Carl's with a K, so you know, you have to look for the link or type that out, and then Carl, Carl l hughes.com as well as my website. I write on there about every month on things I'm learning on the agency world. You can find links to our two companies as well there, and all that good stuff. So yeah, I'm always happy to talk to agency owners who are looking to level up or learn more, or learn just how acquirers look at their business, especially if you're in that one to 5 million in revenue range. That's kind of our sweet spot. So happy to chat with people at any size. They're just trying to get to

Robert Plank 24:36 them very nice. Well, you're accomplishing amazing things and helping people, business owners, employees and and it's and you're doing it right, where you're documenting and sharing publicly what you know right on your website, on your blog, including here on a podcast. And we say that website is Carl l hughes.com that's Carl with a K and L right there in the middle. And that is. Where you can find those latest blog posts, plus the hub where you can get to the YouTube and the rich chained trust podcast LinkedIn. Send him an email, subscribe to his newsletter, all those wonderful things. That's Carl l hughes.com and then Carl Hughes on LinkedIn, where he posts about buying and scaling digital service businesses. It's always great to add someone on LinkedIn, and that way you can just kind of subscribe to their feed, so to speak. So that's Carl l hughes.com but before I let you go, Mr. Carl, it's time for the scary part of the podcast where I try to stump you. I try to put you on the spot by asking you about a fun or interesting quote or lesson that has served you, and you've already given us so many amazing sound bites. But what comes to mind, as far as a fun or interesting quote or lesson,

Karl Hughes 25:49 good question. So something that I've been working with my business coach and kind of personal business coach on this last year is, and I don't know this is probably like a brand of stoicism or something. But the way I think about it, I'll just put it in my own words, is the idea that the business's performance will constantly be doing this, and I'm making an up and down motion with my hands, like it'll be going up and down and up and down. It's riding the waves, right? How do I get my own mental health, my own stability, psychological, you know, emotional stability, whatever you want to call that level, regardless of the ups and downs of the business. And so that's my life's work. And I think that is honestly the life's work to do it, just in general, it's like figuring out how you can separate the performance and the the output of things that you're doing from your own confidence, mental health, stability, super important skill to learn. And some people have it more naturally than others. I think, you know, maybe I'm, I'm okay at it, but I could definitely be better, because that, you know, when the business is good, I feel good. When the business is down, I feel bad. That's got to stop. That's not a productive way to live. So anyway, that's, that's my like challenge and life's work challenge to anybody out there who wants to live a more fulfilled and just full life, because that is really the work we all have to do.

Robert Plank 27:09 Oh yeah. And it's like a almost like a warrior, athletic parallel to it, right? Like if you were a professional basketball team and you were playing the best game that you could play, I know nothing about basketball, but it's like if, if everyone was kind of having a down day, or, like, a bad season or something, would you like kind of do it halfway? No, you'd like give it your all. And so we need to figure out a way to do that in our own business, on our own trajectory. And if you are struggling with that, well maybe it's because you're going it alone, or you're listening the wrong people, or you just haven't solved some of these problems yet, and your very first step is to get this guy, Mr. Carl Hughes, on your radar. That way you can improve your mindset and improve your results. That is k, A, R, L, L, H, U, G, H, E, s.com, that's Carl l hughes.com he buys and scales digital service businesses. It's so fantastic to have you back on the show, Mr. Carl, after five years, let's see you again soon, but not in five years sooner than that. But it's great to see you.

Speaker 1 28:14 Thanks, Robert, good to see you too. Hey.