Growth Pilots 2018 Year in Review and Looking Ahead

At the start of every quarter I hold an all-hands meeting with our team to review our results from the prior quarter, recap highlights, and share upcoming initiatives for the new quarter ahead. You can find our last quarterly update here if you’re interested.

In Q1, this meeting is instead focused on reviewing the prior year and the outlook for the new year. Below is an overview of our most recent quarterly update that took place two weeks ago.

Before diving into our updates, I always take some time to remind our team what the vision for Growth Pilots is and what makes us unique. Here is a quick overview of what makes us tick:

Our vision is to build the agency of the future by focusing on the long-term in everything that we do. First and foremost, that means focusing on the long-term partnership between us and our team members. We are nothing without great people and we do everything we can to make sure our people are happy, healthy, and advancing in their career growth.

Next, we focus on ensuring long-term partnerships with our clients. We achieve this by working with fewer clients who are a better fit, allowing us to spend significantly more time and resources across those clients and truly acting like a partner integrated into their team.

Finally, we practice adaptability. That means we embrace the changes that happen in our industry as opposed to viewing them as a threat and remaining complacent.

A Quick Overview of 2018

2018 marked our 5th year of operations at Growth Pilots. I spent a lot of time reflecting over the holiday break about the past five years and how excited I am about the next five. I started Growth Pilots because I saw an opportunity to help startups and high-growth companies scale their paid digital customer acquisition channels.

Today, we have the privilege of being partners to some of the most innovative and successful companies in the world. We’ve been fortunate to have built a strong business that has never required any outside funding, and we have been profitable and cash-flow positive from our first month in business. I’m very grateful for what we’ve been able to accomplish these past 5 years and I want to thank all of our dedicated team members and clients for their partnership over the years.

We did encounter some major challenges in 2018 which ultimately allowed us to uncover new opportunities that will dramatically change how we operate in 2019 and beyond. These challenges have pushed me as a leader to rethink how I run our business and in keeping with our principles, forced me to invoke adaptability to change my approach. I’m extremely excited and energized to tackle these challenges and look forward to sharing our progress along the way.

Annual Revenue Growth

We grew revenue by about 10% year over year when comparing 2018 to 2017. This is not what I consider an acceptable growth rate for an agency of our size.

A large reason for our lower growth in 2018 was due to losing a meaningful amount of revenue from a few of our core clients who decided to migrate their paid channel management in-house, which is something you have to accept when you partner with high-growth companies. But there were some much more critical underlying issues that we discovered as a result of losing this revenue and they will have some serious (positive) implications for us once we solve them.

Referrals are Unpredictable at Scale

Growth has always come naturally for us. We have never had hard growth targets or goals because for the past five years nearly 100% of our clients have come from referrals, so we have never been in direct control of our revenue growth. Rather, it has come naturally from the high quality of our work which has then translated into clients and others in our network promoting our brand to their own networks when they were in need of a digital marketing agency.

On the one hand, it is great that we have been able to achieve growth by doing nothing other than high quality work. On the other hand, growth from referrals is not predictable. We might get 20 referrals in one month and 5 in the next, with varying degrees of fit level. This makes growth goal setting and forecasting very challenging, especially as the denominator (revenue) grows, since it requires much more incremental revenue to attain the same growth rates from the year prior.

Goal Setting Without Control is Challenging

Up through most of 2018, I managed Growth Pilots in a very unconventional way – without having clearly defined growth goals. Instead, I had an approximate and loosely defined growth goal/expectation in my mind and we always met that (except in 2018) because our denominator was small enough where the referrals, regardless of their consistency, allowed us to sign more than enough clients that were the right fit.

When there is no stated revenue growth goal and you are relying on referrals to drive growth, running a business becomes a form of art. It means you can’t hold the people responsible for revenue growth accountable since they don’t know what to aim for.

Instead, you have to resort to using qualitative goals and indirect quantitative goals as a proxy. The problem here is that there is not a perfect direct relationship or correlation between these qualitative goals or indirect quantitative goals and revenue growth.

Our Approach to Business Development

Since we primarily rely on referrals, we’ve never had the need for a conventional sales or business development team. As CEO, I am the face of Growth Pilots and that translates to me being our de facto head of business development when referrals come in.

While I am responsible for “business development”, I never focused on it since I was operating on the expectation that referrals would continue driving our growth as they always had. So you have the person responsible for business development (me) operating without clear goals or the ability to impact new revenue. This led to me all but ignoring business development, and optimizing for the qualitative goal that I knew drove referrals: best-in-class service quality.

I don’t at all regret focusing on service quality as it has allowed us to build the brand and reputation that we have today. But once we stopped growing at my expected pace, it was clear that something needed to change as the inconsistency of inbound referrals was not allowing us to achieve the growth I expected us to.

Building A Predictable Growth Engine

When I realized in the latter half 2018 that we were not on track to achieving my growth expectations, it was a big wake up call for me as we had never been in this situation before. That set off an existential crisis of sorts, and I spent a lot of time reflecting on what we needed to change to continue growing.

What was obvious was that we were way too reliant on the ebbs and flows of referrals, and it would take a lot of luck for us to attain consistent growth going forward.

I decided we needed to build a growth engine that we could better control, and this is precisely what we are focusing on in 2019. We will be investing in our own growth efforts for the first time ever, which I am very excited about.

The irony is not lost on me – we have spent the last 5 years helping other companies build predictable growth engines but we have ignored building one ourselves.

It’s worth mentioning that we are not switching over to an outbound sales or business development model; rather, we are building more predictability and consistency into our referral network as well as developing warm and inbound lead channels to harvest demand for the first time. We will also continue being very selective about our clients to ensure maximum partnership fit level.

In addition to needing much more control over growth, we also needed a more quantitative and input-driven approach to goal setting and forecasting instead of this living loosely in my head with no accountability.

I mapped out how all of our core functions interrelated with each other, and then determined the core metric that each function head should be responsible for so that we could collectively achieve a clearly defined growth goal.

I recently listened to an interview with Khosla Ventures’ Partner Keith Rabois, who says every business boils down to a simple equation with variables that correspond to the various drivers of the business. I couldn’t agree more having just gone through this exercise.

Process Development and Workflow Automation

Outside of goal setting and building a growth engine, I realized we also needed to introduce much more process internally to maintain and measure our work quality so that as we grow we don’t compromise the underlying foundation of our service offering.

In 2019 we are overhauling the processes for our service offering. We have always been a process-driven company with a clear playbook that has allowed us to achieve superior service quality and results for our clients, but we are now reinforcing those processes even further to accommodate growth.

As we have assessed our processes and workflow, we have also identified opportunities for workflow automation improvements. Over the past four years we have developed an internal software platform called Propel, which has helped our account team achieve optimal performance within our clients’ accounts using much less time than it would take to do so manually.

Propel was originally built to compensate for the lack of optimization features and accuracy within Google and Facebook. Our automated optimization engine would achieve superior results when compared to platform-native optimization tools, third-party tools, or manual optimization. When factoring in the removed cost of using a third-party tool and the removed time from doing manual optimization, this was a huge win for us as an agency and our clients’ bottom lines.

As the advertising platforms have evolved and become more automated, our workflows have also evolved and parts of our software platform have become less useful than they once were as a result.

We have now been able to achieve similar, if not better, performance when using the platforms’ native optimization tools when compared to our internal tools. Since we don’t sell software and this is an included value-add to our clients as part of our service offering, this is not a business threat to us.

This platform automation shift is a much welcomed improvement that will ultimately make our lives easier and our workflow more efficient. It has allowed us to rethink our workflow and explore new automation opportunities that now exist. We will be investing significantly more time and resources here in 2019.

Looking Ahead

The digital marketing agency landscape is currently undergoing tremendous change. The platforms are becoming more automated and will require a change in the value proposition that many agencies offer. The channels are getting more competitive due to lack of new inventory and this puts more pressure on agencies to prove their value. We view these changes as a cycle that will ultimately morph what successful agencies look like, and we feel well prepared to adjust and adapt to these changes.

In addition to the macro challenges facing digital marketing agencies as a whole, we have our own unique challenges to navigate this year as outlined above. Where there are challenges there are opportunities, and we’re excited to tap into them. I am confident we have the right plan in place to do so. Our brand and our team are stronger than ever, and at the risk of sounding cliche, I honestly feel like we are just getting started.

Stay tuned for our future updates at the end of each quarter. I wish you all a happy and successful 2019.