This is our Deep Dive Into Local from July 16th, 2018. In our Deep Dive series, we take a closer look at one thing in local that caught our attention and deserves a longer discussion.
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Mike: Hi. Welcome to Local News Deep Dive. This week we're going to be speaking with Craig Mount, he did a nice little whiteboard video on costs and issues associated with starting up your own local search practice. Craig, why don't you give people an introduction to who you are and a little bit about you.
Craig: Sure. first of all I just want to thank you for having me, I really appreciate it. And I appreciate you letting me use your platform to promote this. And yes, hi, my name is Craig Mount. I run a digital marketing agency in Colorado Springs, Colorado called Classy Brain, and we have three focuses at Classy Brain. The first one is just to help hyperlocal businesses, businesses like your local dentist, chiropractor, electrician profit more through online marketing channels like Google search, AdWords, Facebook ads, email, even Yelp ads in some cases. And we look at digital marketing as this system where the whole is worth more than the sum of its individual parts. So, what I mean by that I guess is that I think that all these marketing channels work better together.
AdWords and Google search, for example, have great synergy. And the second focus is just to help business owners understand online marketing. as Sy Syms used to say, "An educated consumer is our best customer," and I believe that. And, I've spoken with you in private, Mike, about how I feel about this massive knowledge gap in our industry. The difference between what we know and what average small business owners know, that only grows every day, with every algorithm update, meta shift in strategy, terms of service update, newly passed legislation like GDPR compliance and things like that. I just want to help people better understand that. And then the third focus is relatively new, but I really want to also help small business owners...I'm sorry, digital marketers who are looking to move into this space, I just want to help them better understand the business side of things.
Whether it's a graphic designer or a web developer who wants to add SEO as a service offering, or a marketing manager who's tired of working at a larger firm and maybe they want to branch off and start their own consultancy. I want to show them things like how to create a proposal, how to add a proof of concept in their proposal or influence them on what they should be selling, right? Like what services they should be selling. that was the space that I wanted to fill in creating this content. Sorry, Mary. Go ahead.
Mary: So, Craig, you made a video on how to start a consultancy and I think you plan to continue making more of these how-to videos, is that correct?
Craig: yes. That's correct.
Mary: And how long ago did you start your agency?
Craig: There's one thing that I'm an expert at and that's being new, Classy Brain being only three years old. And I know what it's like to have to, come up with all sorts of, where's our office space going to have to be? Who's our accountant going to have to be? What insurance do I need? What legal do I need? What software do I need? And I think that there is are a lot of freelancers who are starting up their own agencies. I've noticed some of my own keyword phrases in Colorado Springs are harder to rank for, anymore. And I think that's a great thing and I want to help those people.
And so, again, this video series is tailored to shed some light on the other side of things, the things that aren't talked about as much. I feel like there's a lot of content on how to create great content or how to build links, but there's nothing that really shines a lens through the harder side of running a month-to-month consultancy. And so that's the focus of this series.
Mary: And I think that's very, very much in demand
Mike: Go ahead, Mary.
Mary: I do a lot of consulting and teaching at Planted Ocean and Search Engine News, and that does seem to be the area where people have the most questions is what do you charge? What tools do you use? How do you decide which clients you are going to take and which ones you aren't? What did you find to be the hardest thing about getting started?
Craig: yes, sure. That's a really good question. I think the hardest thing and the topic of one of the upcoming videos that I have is going to be just how do you get leads? where, what's a practical way to get existing leads, right? Because we work in internet marketing, but in my opinion, the best way to get leads is just through networking. sometimes it's outreach, but it's just getting in the door of one small business and then getting referrals from other businesses, things like that. That was just our journey and I just think that, maybe it's not the answer but I think that people would find value in just hearing that and knowing that, all right, this is how this person got leads and they grew their company from X amount to X amount. what's a good? What should I do, right?
Mary: Right. And there is no one right or wrong way to do any of this. We all have to figure it out as we go along. I know that when I first started out on my own, there were a lot of things that I completely just ignored until I was forced to deal with them, which may not have been the smartest thing to do. How about with you, Mike?
Mike: So, I don't like running a business. And I've always I was forced to, and I really do best when I am a lieutenant someplace rather than the captain. So my whole predilection is around education, but I was able to leverage that as a way of achieving scale outside of my local market. And my local market is very slim. I don't think I could put food on the table if I just focused on my local market. So, fortunately, my predilection for writing and communicating sort of overcame my reticence to do the networking sort of stuff. But like you said, it works differently. So, I noticed in your video you put together sort of broad strokes of numbers in terms of the costs of setting up a new agency. Why don't you run through those briefly?
Craig: yes, sure. I think the cost was something that I tried to put myself in the shoes of somebody who had just started. And again, Classy Brain only being three years old, I was really good at that. And so it was still fresh to me and letting people know again, I think that there's going to be a variety of different people, buyer persona, so to speak, or audiences who this might speak to. But let's say you're just a freelancer just getting started and you don't even know where to have office space, right? And just letting people know you can use your home office like, I'm doing today, you can have actual office space or use something like a co-working space. I didn't even know about co-working spaces when I first started.
But just knowing that that's a good way to get free internet and electricity paid for, that helps, right? Because when you're just getting started and maybe you only have like a handful of really loyal clients that you're taking care of, cost becomes a huge issue. And so you don't want to make decisions that are cost prohibitive long term, right? Because business leases are typically at minimum about three years and a lot of people don't realize that.
So, again, having that month-to-month co-working option, that helps and might relieve pressure. Now, again, in the sake of transparency, I do want people to know all the options, right? But I think that, internet, and then having the important things taken care of like accounting, right? Because you gotta pay taxes. And again, people don't often times think about that stuff and then just knowing what insurance you should have, right? Or where to get legal services, what legal issues might you come across. And it, obviously it's not always in the nature of like getting sued, but it's more like, in the nature of like, if you have somebody you'd like a, let's say, there's a large reputation management software company who doesn't like a blog post you wrote, right? Sorry, an inside joke there.
But, just somebody to read your contracts, somebody to know how to set up your contracts for your employees, things like that. those things are all relatively, like I said, important, and there's costs associated with each of them. I wanted to give some options out there and, let people make their own decision. But I feel like if it's a decision, everybody's situation is unique. The more information they have, the better decision they can make for whatever their situation requires.
Mike: I have two things to add. One just when I chose an office, I originally worked at home and it was not right for me. I needed to get out and I needed to at least have a point where the day started and the day ended. Otherwise, one I would have eaten all day long and weighed 300 pounds instead of 200 pounds, which is still too heavy, but I just wanted some more social ambiance. So I think there's a psychological component to some of these things that people might not even know about themselves till they actually do it.
In terms of the insurance, to some extent that depends on the size of client you want to deal with. If you're dealing with large, multi-location national clients, they're typically going to require that you have like errors and omissions insurance, which is quite expensive, and you have to decide if it's worth it. banks, for example, they're going to require the same thing. Not that what you're doing is likely to ever lead to the need for that insurance. It's just they require it if you're not big enough, and you don't get it you're not going to get the business.
Mary: yes, and some of us, are a lot more structured in what we do than others. I know that when Joyce saw your video, your initial video, she said something about how she paid thousands and thousand dollars, thousands of dollars to lawyers. she was somebody who wanted to get all her ducks set up in a row before she opened her doors for business. Whereas I slid into this as doing side work while I was working for an agency and being very laissez-faire about things, like I say, until I had to deal with them. So as I say, there's no right or wrong way to do any of this, but everybody does have to figure out what works for them, what type of clients are best for them.
Mike: So, we have these initial costs, law, accounting, insurance, rent, and internet. What's your estimate on the total, range of that broadly to get started?
Craig: yes, well, I put together a number that I felt like it was just like a starter package. So, I imagined somebody like myself, I always like use my own experience. And Mary, I had an experience very similar to you where I worked at a larger marketing firm as well and then pivoted and I became a freelancer then. And so I just thought, what would be a good starting point for someone like that, somebody who does need office space, that mentality that you had just spoke to Mike, and somebody who also is trying to, they have a handful of clients, they're trying to keep costs as low as possible? I came up with a number, $533.97 after you collect...and I know that's really, really specific, but my point isn't to get to a specific number, it's just to show people how inexpensive it is overall. I mean, that is a monthly number, but the point of that number is just to say, hey, look like this isn't a lot. And if, typical marketing retainers for small businesses is anywhere from, I've seen as low as 500 to as high as 5000, right? And if it's multi-location businesses, obviously it gets higher than that. Our average account size is about $1,000, right? And so that pays for itself very quickly.
And that was my point is that if you're looking at doing this it's easier than you would think. There are some important things that you probably should take care of up front, but at the same time, don't let that hold you back. get out there and contribute. I mean, I think that more freelancers, more people moving into this space is a positive thing, because I think that there's a lot of larger marketing companies who, they pile on work on their account. For example, like in larger marketing companies, they calculate something called a burn rate, right? Which is the average...like they anticipate losing clients. Typically they try to keep their burn rates at about 10%.
And so, they expect to lose customers every month. A percentage of their profit, they want to cover with new customers and so, I think that the more freelancers there are, like I said I feel like small businesses benefit more from that because it's very profitable right now to hire a marketing manager, give them, in extreme cases somewhere around 70 plus clients, right? For just one person and, you make a bunch of money off that. But the small business typically tends to, they don't get the attention that they need, and so again, I think that the more people here, more boutique agencies that are a little bit smaller that have smaller teams, I feel like that's the future, and that's what I'm trying to help.
I hope that software companies adopt this mentality as well because I think that more freelancers would benefit them as well. Like I said, from a content perspective, I was actually talking with Chris from Get Five Stars who I'm a huge fan of. That guy's really smart, and I really like talking with him. He and I were talking about what content appeals to small business owners because he was having a hard time getting his foot in the door With some, through cold calling or whatever. And I told him that was the one thing that I'm really interested in hearing about from you is you used to work at a large digital marketing agency, and what tips did you have to share with me, right?
And he would tell me different strategies for AdWords for different types of companies and I just thought that was so interesting, And so, that's, again, what I'm hoping to do here. But this industry overall, I just feel like there's so much red ocean like strategies where these larger companies are trying to, make as much money as possible while paying their employees as little as possible.
Mike: Sorry, sorry...
Mike: yes, that's right. Cover your mic for a second. I was just going to say, as Mary points out, that is the nature of the beast, unfortunately, is to maximize profit and typically, it comes at the expense of either the customer, or end, or the employee, one or the other. And it's unfortunate, and you don't have to run your business that way. I mean, there are businesses, but I think if you're going to run your business differently then from the beginning, you need to model it to run it differently. Which means you need to model adequate pay for your employees. You need to model adequate charges to your clients, so that you can afford to pay appropriate wages. I mean, I feel this really strongly that you have to live what you believe in that regard, and I think you can run a different business. ...it's easy to fall into the trap of, let's deliver $400 a month with little value to the client, and let's find out how cheap we can get employees. I think that's easy to fall into that trap when you have trouble paying your bills.
Mary: yes, I agree. And I think one of the most critical things with doing work for clients is being able to figure out what clients you can do a really good job for, and which ones you're going to like working with and can get along with and are going to be happy with you. And those clients will stick around forever. But when somebody comes to you and says, "I want to rank for every plumbing term in the Shenandoah Valley in a year," that's probably not the right type of customer that you want because their goals are just not realistic.
Mike: So how many employees do you have now, Craig?
Craig: yes, so I run a pretty small team. We have five people and two of those are full time, and then we have three contractors as well that we use.
Mike: And are the contractors local?
Craig: No, you meet a lot of people networking and there's a lot of talent in different markets, And so, one of the strategies that we use for link building, for example, is to hire freelance journalists who are maybe in a different market. And sometimes you come across ones that you have great synergy with and that you want to continue working with. their rates are great and they're also just really great people. So, we work with some of those as well. So...
Mary: Go ahead, Craig. Any last advice for people getting ready to make the big jump into working for themselves?
Craig: I would say that I wish there was like some perfect phrase that would get somebody motivated to get out and do this, but the reality is that it's really hard. It's not easy. And the best thing to do is just to not overthink it and just do it. I mean, sometimes we're...sometimes I feel like I had the luxury of being forced into starting my own small business. And because I think that having not, thought about it, I wouldn't have taken that leap. But again, I just wish that, for people who are in my...or were in a situation similar to mine might be thinking, how do I get into this? But, there's all these walls that I might come across that I have to climb over. Again, I want to make it easier for them and I would just encourage you to just do it. I mean, it's a great lifestyle, right? I think that every small business owner would agree that, the freedom that comes along with it is definitely worth it. But at the same time, it is a lot of responsibility and, I just want to help these guys out.
Mike: I would point out two things. One is that the risk that we all take, whether it's an employee of another company or running your own company, is roughly the same. You obviously got fired or laid off by large companies, so there's no more security in a job than there is running your own company from where I sit. The second thing is that you can start small. You can even if you're employed in another company, you can start a side effort that you can run nights, or weekends, or early mornings and dip your toes in the water to get a couple clients to overcome some of these early hurdles, so that you can create a viable business before you walk out the door. I don't know that I would encourage or discourage people from doing it. I think there's a...I think like in whether you rent, whether you stay at your home, or whether you go out to get a place to rent, there's a large psychological component about whether the risks that you occur which are...they're not greater, they're just different, whether you can live with them or not. And not everybody finds...I grew up month, month to month, never knowing whether my family was going to have enough money and I ran my businesses in the same stress and it never bothered me that much. but other people are going to find it much harder. But like I said, you can start small and work your way up to the point where you're running a profitable business.
Mary: And at this point, I'd just like to make a pitch for Local U, and the forum, and the blogs, and our advanced Local U events. I know that's how we met Craig through our Local U Forum, through being an active participant in the local search community. And even though big agencies tend to think of other big agencies as their competitors, what I found in the world of small local SEO agencies is that it's very cooperative, that people really aren't competing with each other. And that we all have a lot to learn and a lot to teach others, so that it's important to find some...there's a local youth forum that Linda Bouquet runs, there's still a couple of active Google Plus, Google Search groups. So, put yourself out there like Craig did. He sent us a video and said, "What do you guys think about this?" And we told him, "Well, this sucks, but you can improve it." And he did. So, make sure that you're putting yourself out there, that you're networking, that you're going to events and meeting people because that is going to really going to pay off for you in local search.
Mike: Well, thank you both very much for joining us and for the great discussion. We'll see you next week. Bye-bye.
See Craig video here: https://classybrain.com/cost-of-starting-digital-marketing-agency/