Agency Founders: Red Pill or Blue Pill?
If you could take the red pill and switch to being a SaaS company with $1m+ in ARR in a relatively short period of time, or take the blue one and your agency stayed as it is, which would you choose?
If you are happy with where things are then fair play to you. But I know that there are a lot of frustrated agency owners out there who would love to be able to focus on their own product and watch that revenue grow over time. How do I know this? Firstly I was one of those agency owners, and secondly I talk to agency owners just like you all the time who are having the exact same thoughts. And there are some really good reasons why:
Selling ‘time’ is hard. It’s a treadmill of winning work, doing the work and then winning more work to replace the work you’ve just done. It often feels like you’re sprinting just to stand still. SaaS allows you to layer customer upon customer and is much easier to scale.
Agency work often means you have to compromise on what you produce, SaaS means you are the final judge of what does and doesn’t make the cut.
Valuing a services business is generally a multiple of EBITDA. You could be doing $10m in annual revenue and making $1m profit and only be valued at $3-$5m. A SaaS business is valued on a multiple of Annual Recurring Revenue. And whilst nothing is guaranteed, the multiples often exceed 10x.
Having already run a successful agency for years, an agency founder has certain superpowers that give them a head-start when it comes to launching and scaling a SaaS startup.
So would you take the red pill or the blue pill? This was a choice me and my co-founders grappled with. We chose the red pill and it was the best financial decision we ever made. Today our SaaS business, ScreenCloud is almost at $20m in ARR and growing fast.
But it wasn’t straightforward and we made a lot of mistakes in previous attempts at product launches before we landed on the successful formula. Having lived through the journey I know what it takes. I’m working with a handful of agency owners who are serious about making this leap and growing a SaaS business that generates at least $1m in ARR. If this is you or someone you know, I’d love to talk.
