Karl Hughes

Karl Hughes

How I'm Scaling My Service Business

How I'm Scaling My Service Business

When I left my job to start Draft.dev last year, I knew there were pros and cons to starting a service business. Unlike the venture funded startups I had been with before, Draft.dev required no outside investment, and it was profitable from the first month. The tradeoff - as any service business owner can tell you - is that scaling a service business is notoriously hard.

The Middle Ground: “Productized” Services

An approach that appealed to me from the moment I first heard about it is the productized service:

“A productized service is one that runs systematically and continues to produce and grow with or without your direct involvement.” - Brian Casel

In an ideal productized service, every process and role is so well-defined that the founder doesn’t need to be involved in any of the day-to-day work. This is in stark contrast to models like hourly consulting where you trade time for money. Productizing a service is hard to pull off, but if you can do it, it makes your company more valuable and less dependent on you.

After hearing Tristan King’s story on Tropical MBA and more recently Andrew Pierno’s on Indie Hackers, I decided I would chime in with my approach. In this blog post, I’ll outline the exact process I have used to productize my content writing service, Draft.dev. I’ll share some specific examples of each step and where the challenges lie in implementing them.

Even with these steps in mind though, starting a new business is really hard. In the past year, I’ve had some of the highest highs and lowest lows in my professional career, but I can’t imagine trading it for another day job anytime soon.

How to Scale a Service Business

When I started Draft.dev last year, it was essentially just me working as a freelance technical writer. Within 9 months, we have a team of nearly 50 writers, a full-time editor, a great marketing associate, and a handful of other freelancers helping with specialized tasks.

My wife jokes that I like delegating too much, but the truth is that’s what separates entrepreneurs from freelancers. Delegating isn’t magic though - it’s a lot of work. Here’s how I have approached it in my service business:

1. Niche Down

When I first started the business, I took just about any client that wanted help with their engineering blog or technical copywriting. I knew I wanted to do something at the intersection of software engineering and writing, but I wasn’t yet sure where the profitable, scalable niche was in this area.

Hedgehog concept from Jim Collins

After a couple months of trying variations on the theme and having countless conversations with prospects, competitors, and clients, I started to really narrow down what I did and for whom. Rather than writing any technical content on the internet, now Draft.dev exclusively offered blog posts for marketing teams at Series A and B funded startups that wanted to reach software developers.

You might think that choosing a niche that narrow would hurt my chances of ever closing a sale, but the opposite happened. As I’ve gotten more narrow, clients and friends refer me more and better new clients. These new clients come in with some understanding of what we do, so they’re easier to work with and more similar to others I already work with.

The more similar each of your clients is, the more scalable your productized service becomes.

The startup company I worked for was essentially a productized service using a similar model to Draft.dev, but in a totally different market. We always struggled to grow because we were afraid to define our market too narrowly, and looking back, I think that was our biggest mistake.

Admittedly, not just any niche will work, but the easiest way to grow a scalable service business is to do one single thing for one type of customer. The more narrowly defined, the better.

2. Separate and Track Each Task

Once I niched down narrowly enough that finding new clients wasn’t much of an issue, I started to define each step in the sales and production process. Initially, I came up with 5 categories:

  • Sales - calls, emails, follow-ups, etc.
  • Account management - planning content, delivering work, answering questions, renewing clients
  • Writing - outlining, researching, and writing each blog post
  • Editing - copy editing, formatting, and handling revisions
  • Administrative - setting up accounts, paying bills, tax stuff, etc.

Then, I started tracking my time spent on each of these categories. Yes, even when the business was just me, I was tracking how much time I spent writing vs. editing vs. renewing clients.

I also tracked (more qualitatively) my mood while doing each of these tasks. For example, I quickly realized that sales calls were fun, but I couldn’t do them all day - I needed a little time for focus work too. I also realized that I liked the writing process, but it took by far the most time of anything.

One of the biggest factors in building a successful business is being able to stick with it long enough to figure it out. This means I try to minimize the time I spend doing energy-sapping, annoying tasks and maximize my time spent doing the things I find interesting or fun. This has always led me to clear decisions about which task I need to focus on delegating next.

3. Break Down One Task

At this point, I decided not to document all of these tasks in detail. Processes will change as you hire other people, so it’s usually best to produce just in time documentation.

Instead, I decided to pick the task that took the most time and figure out how I did it. That first task was writing, so I wrote a style guide and started creating briefs for each article I was planning to write.

A lot of founders struggle with breaking down complicated tasks, and this ends up being a huge detriment to their company’s growth. I don’t know if I have any novel tips here other than the old saying, “You eat an elephant one bite at a time.” In other words, just get started by trying something and seeing what works.

Eat an elephant one piece at a time

4. Hire a “Trailblazer”

Outsourcing a task to another person - especially one critical to the business - is scary at first, so I usually start with a “trailblazer.” Trailblazers are smart, proven people who I knew based on prior work or a strong personal recommendation that they can handle the job - even if I did a poor job defining it.

My first trailblazer was my friend Josh Alletto. He had a background in writing and I had worked with him on side projects, so I knew he was a solid engineer. He was essentially a zero-risk hire who could help me refine my instructions and expectations for future writers I hired.

As I expected, Josh did a great job on his first article and in August, 2020, I had gone from freelance technical writer to agency owner. I had my first writer.

5. Make it Foolproof

I never expected to build Draft.dev off trailblazers alone. First, there aren’t enough of them out there and which I have access to. Second, trailblazers get expensive, and for good reason. They tend to be in high demand, so while starting with a trailblazer will help you figure out how to communicate your expectations effectively, you should build a process and instruction set that is nearly foolproof.

The next couple of articles I outsourced to other writers were not so great. One author completely missed the point of the article and even after I gave him instructions to revise it, it was still no closer to complete. I had to rewrite the whole thing overnight. Another one showed promise, but her grammar and formatting were wildly inconsistent, so it took almost as long to clean up as I would have spent writing it.

With these modest failures in mind, I tore down our writing and recruiting processes. I figured out how much detail I needed to give writers (hint: it’s a lot) and how to pick applicants which were more likely to produce high-quality work. I took some notes and automated some parts of this process to reduce the chance that I would miss some critical piece of communication.

As I iterated on this process, demand for our service was steadily growing. In the past, my clients had hired Draft.dev for direct access to me as a writer, but now, new clients came on knowing that I’d work with other writers.

6. Mind the Margin

While bringing on more writers meant I was writing less, it also meant I was paying more to other people while the baseline costs of running the business had not changed. I started tracking my margins and realized that I’d need to raise prices to continue growing.

A lot of freelancers are baffled by the fact that agencies can charge double or triple the hourly rate that they can as a soloist, but here’s the secret:

Companies aren’t paying just for your time in hours; they’re paying based on the value you bring in.

A single freelance writer (ie: me in the early days) could write 8-10 articles per month if they did nothing but write full-time. They could also only write about topics they knew well, so freelancers are severely limited in which clients they can take on.

An agency like Draft.dev though doesn’t have the same limitation. Once I started bringing on other writers, our output was limited by my pace of editing and onboarding new clients. So, Draft.dev is potentially much more valuable to our clients than Karl the freelance writer was.

Counterintuitively then, productized services can often increase prices as their capacity increases because larger capacity means working with larger, more mature, less price-sensitive clients. I know, this probably feels anathema to every economic intuition you have, but take my word for it. This is why my larger competitors can charge 2-3x what I do while individual freelancers can only charge about half.

7. Repeat

As I raised prices, improved quality, and increased our maximum output at Draft.dev, new bottlenecks started to arise. The next one was editing - which didn’t take that much of my time, but did sap my energy in a big way. I found a fantastic editor and brought her on for as many hours as I could justify. We’re now starting to look at bringing on a second editor to test our processes and make sure we’ve foolproofed that part of the business.

Once you get the basic process down, you realize that scaling a service business is not only do-able, it’s really fun. I love getting to help more clients and offer more writers the opportunity for consistent, well-paid work in their area of expertise. We have a long way to go, but I’m very excited about what we’re building at Draft.dev.

Further Reading

The Emyth Revisited book cover

If you like the idea of systematizing your business, read The E-Myth Revisited. This is the book I recommend the most to entrepreneurs who are struggling to get out of the day-to-day execution work in their business, and it’s the primary inspiration for my process above.

Finally, I’ve created this list of must-read books for startup founders. These include some of the most impactful reads for me as I started my business, so I hope they help you turn your idea into reality too.

Read more like this in Entrepreneurship, Growth