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    Breaking down my video production company's first $1,000,000 in revenue small business

    Breaking down my video production company's first $1,000,000 in revenue small business


    Breaking down my video production company's first $1,000,000 in revenue

    Posted: 11 Jan 2018 12:01 PM PST

    TL;DR: https://imgur.com/CafApMG

    In January 2014, my partner and I officially launched our video production company. Focusing on a niche area of video technology in a large metro area in the US, the two of us dedicated ourselves to building a company that was sustainable, profitable, and made the world a better place.

    To be honest, neither of us really knew what we were doing. We didn't know other entrepreneurs or business owners. As introverts, even thinking about cold-calling prospective clients was enough to bring on a case of the "fuck-its". And I think between us, we probably had about $1,000 in savings. Not exactly "quit your job and go all-in" kind of money.

    While building the company, I spent a lot of my free time learning how others had done it. I read everything I could on entrepreneurship and small business management. Whenever I met other small business owners, I would squeeze every drop of advice from their brains I could. Using a networking app called Shapr, I met dozens of like-minded folks with all sorts of backgrounds: finance, technology, public speaking. Everyone had advice for me. I absorbed it all.

    One thing I learned right away: people are scared to share their business numbers. This secrecy always frustrated me: how do I know if I'm spending my money right?

    A week before Christmas in 2017, we billed our millionth dollar as a company. It took us almost four years to cross that threshold. What follows is a breakdown of how we spent that money. I'm hoping that others may be able to absorb the information here and use it to make their businesses better.

    Look #1: Total Revenue, Year-over-year https://imgur.com/j8cZXuQ

    Our company's growth since 2014 has been linear. With no formal marketing or sales team, we rely heavily on word-of-mouth and repeat business. As we add more clients to our roster, we have more repeating business. That and word-of-mouth referrals account for about 65% of our annual revenue growth.

    The other 35% comes from new clients, who primarily find us through our website. Since we operate in a particular niche, I knew it was going to be important to optimize our website for search. Although I have no formal training in SEO, I understand it conceptually: in order to rank highly for certain keywords, you must demonstrate that your content is valuable to the audience. Signals that search engines look for include bounce rate, time on page, referral links from other trusted domains, mobile-friendliness, and site load times. Regardless of how Google's PageRank algorithm changes, those are the variables you need to optimize.

    We built our website on WordPress, mostly because it was a framework with which I already had some experience. Looking at other companies' sites for inspiration, we settled on modern, responsive, brand-friendly theme. Over time, we've added some plugins to help with search engine optimization (Yoast), security (WordFence), page optimization (W3 Total Cache), and data collection (Google Analytics, Contact Form 7). That's basically our entire web framework.

    Look #2: Advertising Returns

    https://imgur.com/kHdBUgm

    In 2014, we did not participate in any paid traffic promotion. It felt risky, because we didn't have a lot of money to waste. In 2015, we began performing small ($100 or less) ad campaigns on Yelp, Google, LinkedIn, Facebook, and Twitter. We saw near-immediate results on Yelp, but the quality and type of projects were not a good fit for us. Advertising on LinkedIn, Facebook, and Twitter got us nowhere. It wasn't until we experimented with Google Adwords that we began to see results.

    Once we recognized that money gained > money spent on Google Adwords, we retained a SEO firm to manage a campaign for us. We gave them a budget of $1,250/month and paid them a $250 monthly management fee. It took about three months before we booked our first project from a Google Ad, so we sunk nearly $4,000 before our first contract.

    Our run with them lasted for all of 2016. During that year, we saw our biggest change in revenue: a gain of $125,904.11. However, our Advertising Return Rate (total change in revenue divided by advertising budget) was only 5.39.

    Having finally collected enough data to be statistically meaningful, we released our SEO firm at the end of 2016 and began managing campaigns ourselves. We spent less money and, though our revenue increase was smaller at $103,956.10, our Advertising Return Rate increased to 7.27.

    In addition to PPC campaigns, we have experimented with event advertising, premier listings on industry websites, and reverse-IP tracking. We haven't been able to gauge the success of those campaigns, but we did kill our reverse-IP experiment because it felt a bit like a breach of privacy.

    Look #3: COGS https://imgur.com/1pcyL4m

    As a service-based business, our COGS (cost of goods sold) is quite low. Other than equipment rental, crew, and development costs, there's not much other than hours of our time that goes into a production.

    Because we were bootstrapped with almost no money, we started with a very small equipment inventory: just a camera, tripod, microphone, and computer. As such, we have to rent gear for most of our jobs. While renting increases the overall size of your projects, it eats heavily into your margins. Over the years, we have slowly added to our equipment inventory by keeping diligent notes on the items we rent most frequently and purchasing them when we have the opportunity. The growth in equipment rental costs is attributed to the growth in scope for our projects.

    Our biggest cost has always been subcontractors. We pay our freelancers better than average because we want them to stick around. (They also serve as an informal referral network.) Some productions require a crew of 10 or more, often with specialty positions like sat truck engineering or teleprompter operation. For those positions, we will likely always have to hire outside of our company. But as we've added full-time employees to our company, we've phased out much of our freelance hires.

    We hired our first full-time employee in 2016, and added two more in 2017. Even though our gross profit grew substantially from 2016 to 2017, our COGS stayed relatively flat.

    Look #4: Compensation https://imgur.com/D63tKrX

    The business has been our sole source of income since 2014, so it's critical that we're able to pay ourselves a living wage. It's an LLC and operates as a pass-through entity, so net income flows to us at tax time anyway.

    We decided at the very beginning to pay ourselves a regular salary rather than just cashing checks whenever they came in. This made our cash flow much more predictable.

    Over the years, we have experimented with different methods of payment. For 2014, we had no real system in place so we just paid ourselves via guaranteed payments. That made taxes a nightmare, so in 2015, we invested in a payroll system (ADP) and paid ourselves regular paychecks. When we finally got tired of doing our own taxes, we retained a CPA firm who helped us pay ourselves more efficiently. They recommended we move back to guaranteed payments for 2017, and since they handled all our tax filings, we agreed.

    Since we used guaranteed payments in '14 and '17, you don't see the full tax picture for those years. We paid about $16,000 in taxes in '14, and an additional $28,000 in '17.

    Look #5: Putting It All Together

    https://imgur.com/CafApMG

    So how does that million dollars break down? Like this:

    29% - Guaranteed Payments/Owner Salaries. With two owners, we've each averaged a little over $38,000 per year.

    21% - Total Cost of Goods Sold. Every dollar we sell costs $.21 to make. We plan on reducing this by making better equipment investments.

    20% - Employee wages/payroll expenses. As we add employees, this percentage will likely increase while owner salaries decrease.

    11% - Net Operating Income. This is our profit after everything is left over. Most of this gets re-invested into the business or paid out in taxes.

    5% - Advertising. We've proven that advertising increases our revenue, so we will continue to spend in the same range while increasing our efficiency.

    I hope that someone is able to use this information. I'm happy to answer any questions!

    submitted by /u/kosherbacon
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    My family business is $110k in debt. We have plenty of sales but no cash flow to pay for goods. [x-post r/personalfinance]

    Posted: 11 Jan 2018 10:19 AM PST

    r/personalfinance suggested I bring this to this sub. I would have earlier had I known about it.

    I came in last year to help out the family business by making it leaner and more efficient. At the time I was told a little about the debt but not much. The business runs smooth now and we reduced costs by moving out of the office, selling a delivery vehicle, and letting someone go we couldn't afford.

    That said I recently found out we owe $80,000 to two credit cards and about $30,000 to suppliers and we still have orders to fill. We've had to dismiss some larger orders because we couldn't afford it. We do have about $45,000+ net30 invoices owed to us by customers but it trickles in and we have to divide it between monthly upkeep costs which is about $13,000 mo for family and business interest etc.

    We have a house in Mexico that my mother and I want to sell but my dad wont or hasn't reduced the price to get it sold faster. I feel super stuck as he won't listen about the need to sell that home and get out of debt.

    I know this is business related but its also very personal as I'm tied to all of this and I know the business can do great should we get cash flow going.

    Any and all suggestions are greatly appreciated!

    submitted by /u/ThatTrowAwyTho
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    Website or no website?

    Posted: 12 Jan 2018 12:23 AM PST

    Is it just an awful idea to not have a website and associated email set up for an online business/brand? Or do you think gmail and social marketing and social media accounts could suffice (at the beginning stages of business, first year or so)?

    Honest opinion and thoughts. Thanks!

    submitted by /u/anew39
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    How to register a business name

    Posted: 11 Jan 2018 11:48 PM PST

    Event coordinators & Wedding/Party planners, what did you do to get your foot in the door in the field?

    Posted: 11 Jan 2018 04:23 PM PST

    I recently discovered my interest and talent when it comes to planning/organizing events and think that this would be a very cool thing to start up on the side from my regular full-time job. I don't have much experience in the field, but I am helping (doing most of the work) planning a coworker's wedding & I think I have a knack for it. I live in a pretty wealthy area with NO shortage of events that need planned. Wedding season around here is no joke.

    My question to you is how can I get some actual experience doing this? What can I do to build some rapport without quitting my real job (which I only work 14 days a month, overnight) and working for an event coordination company? My endgame is to work for myself in this venture, so... where do I start?

    submitted by /u/pemarma
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    Anyone successfully franchise their business?

    Posted: 11 Jan 2018 08:44 AM PST

    Any insight is most appreciated. Tips? Good resources? Do's and don'ts?

    submitted by /u/biggcb
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    ADA website lawsuit

    Posted: 11 Jan 2018 12:26 PM PST

    Hi Everyone.

    Just wanted to give a heads up about a new trend in lawsuits. My business is in the process of being sued because our website was not able to be fully viewed by a blind individual.

    The lawsuit claims that we are in violation of the Web Content Accessibilities Guidelines. The most frustrating part of this suit is that there are no official laws on the books regarding what is required for a website.

    There are a couple of cases that are being settled in appeals court at the moment, mostly siding with the plaintiff. These cases are all with large companies (Dominos, Dave & Busters, Hobby Lobby) but my company is relatively small. We do not offer anything for sale on our website. It is strictly for informational purposes only. You can only find pictures of our products and pricing.

    The corrective action was very inexpensive, only 2 hours of work from our website designer (alt text on pictures / embedding a PDF file onto the actual site so it can be viewed by a text to speech application). On the other hand, the violation fees will total around $10,000.

    Protect yourself. Make a couple of small changes to your website to avoid a frivolous lawsuit.

    Robles v. Dominos, Gorecki v. Dave & Busters, Gorecki v. Hobby Lobby

    submitted by /u/Pour_grahamer
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    Hoping someone can help me concerning PayPal and godaddy

    Posted: 11 Jan 2018 09:42 PM PST

    I have a website on godaddy, specifically a gocentral online store that uses PayPal express. My problem is frequent customers need a PayPal account to buy from me and for whatever reason some people don't like that. I signed up for a 30 dollar a month PayPal virtual terminal. Im just not smart enough to integrate it with my site. The set up page confuses me for some reason. Does anyone have any experience with PayPal virtual terminal?

    submitted by /u/maybensfw95
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    Business Management Software...

    Posted: 11 Jan 2018 04:17 PM PST

    I am starting my first business up after working the last 16 years and I feel it's time to create my own thing. I've got the LLC established, finances in place, working on the website, just doing the set up work you'd expect, to be live the earliest March 1st.

    I'm having some difficulty finding the right software/programs to keep everything organized. What I need the software (or different ones) to do is:

    • Appointment Scheduling
    • Time Clocking
    • Payroll
    • Finances
    • Taxes
    • Invoices/Receipts/Payments

    The business is in the realm of entertainment. It will consist of only the one employee until it expands hopefully by the end of the year where it could grow to three or more employees.

    I'm open to suggestions on what software would be best. For the time clock needs and scheduling whatever used should be mobile (phone app or accessible by phone). I will not have a physical location at least for the next year.

    Thanks, sorry for the wall of text. Wanted to be detailed so you are clear on my needs.

    submitted by /u/PrimusPalus
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    Food catering business advice? Anyone here have experience in the industry?

    Posted: 11 Jan 2018 06:00 PM PST

    Looking for tips from someone with experience to help us avoid any pitfalls!

    We are launching a food catering business in Southern California. We want to be able to help elderly and veterans with our business, but also need to be able to make a profit of course, so we're not trying to be a non-profit (I wouldn't even know how to do that to be honest).

    We have the equipment and are sourcing our food locally. I'm going to be getting the licensure and everything to have a legal food handler license.

    What are some recommendations for grand opening marketing campaigns? Where and who to target to get the best return on investment?

    I guess driving sales will be the main concern since we will be able to do the work once we have the customers. Our main issue is that we currently work other jobs so finding time to manage and market everything is difficult. Outsourcing seems possible but ROI and managing our limited finances is tricky.

    Thanks!

    submitted by /u/Bjornskald
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    Partnership LLC Tax Help

    Posted: 11 Jan 2018 01:42 PM PST

    Started a partnership llc with my wife (50/50 split) back in june of 2017. We have had zero income with ~7k loan for equipment. I have never filed taxes for a business. What are my options?

    submitted by /u/bbrochachofy
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    Best tool for high volume outbound text messaging?

    Posted: 11 Jan 2018 05:08 PM PST

    Looking for a tool where a large batch of cell numbers can be uploaded and sent customized messages. Price is important.

    submitted by /u/searchbug
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    Sourcing Ethical Clothing Manufacturers

    Posted: 11 Jan 2018 09:17 AM PST

    Ideas on places that with give me a quote for ethically manufactured clothing, to a custom design. Where do you start looking for these things to get a quote? Any good resources for starting a business (23, UK Based)

    I'm looking to start my own business. I think I have a decent idea for a business model, but I've literally no idea where to start looking for manufacturers. I just need some ballpark quotes so I can start making decisions

    submitted by /u/BecomingLoL
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    Our grand opening is this Saturday - how would you go about marketing on Facebook(or any other socialM)?

    Posted: 11 Jan 2018 04:48 PM PST

    Our brick and mortar store has it's grand opening this Saturday. We are already open, but Saturday is what we've been advertising. What's the best use of our money to get this out via the "paid" social media highways? We bought a featured ad in our local Patch, and that is at the top of their Facebook page(which purportedly has 27k followers). We are considering "boosting" a facebook post, or something similar. What about Instagram? We've gotten a lot of customers through Instagram.

    To all of you social media gurus: What is the most cost-effective means of "flash-flooding" an ad to a small geographical area around our store?

    submitted by /u/SurvivalBloke
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    Questions about launching bridal subscription box (X-posted from r/subscriptionboxbiz

    Posted: 11 Jan 2018 04:21 PM PST

    I am launching a new bridal subscription box. In it we are going to put tips, tricks, gifts, samples, etc., and send them out according to the planning stage they should be on our timeline that coordinates with the date of the wedding.

    We are wanting to send the following, and I have questions on them:

    1) We are going to make and send our own bath bombs and lotions. Do we need any kind of licensing for that?

    2) We are going to send out music suggestions according to genre. Do we need to have any sort of permissions to do that?

    Thanks in advance. I'm clueless about these things.

    submitted by /u/reineluxe
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    Banks that open business accounts for foreign companies?

    Posted: 11 Jan 2018 06:34 AM PST

    Business Loan to Buy an Existing Business

    Posted: 11 Jan 2018 03:47 PM PST

    I have been looking at buying an existing business, but I am kind of green to that process. I've heard conflicting accounts (from non-business owners) and I can't find any personal contacts with knowledge on the subject so I'm bringing my question to Reddit:

    If a potential buyer requires a business loan to purchase a business, do they need to secure approved financing before or after making an offer to the seller of the business? After making the offer (like a mortgage) would make sense. But if you have to secure approved financing before making an offer, I see a couple of issues that could arise. 1. Someone steps in and purchases the business while you are in the month or longer process to get approval. 2. You get approved financing, make the offer and the seller rejects and counters with a higher price, thus requiring you to go back to the bank for further evaluation. It would seem appropriate to make the offer contingent on securing financing, but I would really like to hear from Redditors with experience on this.

    Thank you in advance!

    submitted by /u/dickon-tarly
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    Do I have to get a DBA before I start selling a custom made-to-order product?

    Posted: 11 Jan 2018 03:45 PM PST

    I feel just wiped out from getting my business to the launch point. Short-term, I'd like to delay taking the 2-3 days to just stand in line at the various offices.

    I'm concerned I'll have to pay quarterly estimated taxes in advance -- is this true? Im just starting up, how in hell am I supposed to "estimate" how much I'll make?

    submitted by /u/sighbourbon
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    How do you take a CC for a security deposit without getting a credit/debit machine?

    Posted: 11 Jan 2018 03:32 PM PST

    Survey: I’m building a product around direct mail. Would be a huge help if you gave me input.

    Posted: 11 Jan 2018 10:56 AM PST

    I've been building a product that makes it easier to send direct mail. If you're a business owner, or if you're involved in the marketing (direct mail, email, or otherwise), it would be super helpful if you took a minute to give me some input.

    Also, I'd love to give anyone who's interested access to try it out. There's a place at the end of the survey to join the beta, or you could just PM me.

    Link: https://mailfold.typeform.com/to/kDvGzt

    Thank you!

    submitted by /u/allang
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    Sending an e-mail to a former client (from previous employer) letting them know you started your own business

    Posted: 11 Jan 2018 10:08 AM PST

    I am looking to send an e-mail to a "client" from my former employer to let them know that I am no longer with that company and started my own. I do not want to come across that I am trying to poach the "client" but at the same time do want this company to think of me when the time comes. Also, I know that my old employer will probably be closing down soon as he has no employees left and cannot do the work on his own. It is only a matter of time.

    To add - the reason I put "client" in quotes is because the company that I would reach out to is an organizer of an event who appoints recommends their exhibitors different companies to perform different tasks. The actual, paying clients, are the exhibitors who are welcome to use whomever they like.

    With this in mind - any ideas on how I can word such an email to this organizer?

    submitted by /u/squirrelandnut
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    Customs Broker

    Posted: 11 Jan 2018 01:42 PM PST

    I'm a new small business in Canada. I import maybe a dozen shipments from the US a year...say a couple boxes at a time. At what point should I look into a customs broker? In other words, is it a long costly process? If so, I'll just keep letting UPS/FedEx clear for me.

    Thanks

    submitted by /u/mikeopenshaw
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    Help? What are alternatives to door-to-door shipping from China?

    Posted: 11 Jan 2018 04:40 AM PST

    I have been ordering through Alibaba using door-to-door shipping, but as my orders have increased this shipping method is starting to get out of control expensive ($600 for a $700 order).

    I know there are alternatives. And I have vaguely heard of freight forwarders as an option. But I'm honestly not sure where to go to get started with an alternative. I would really appreciate some help or referrals to good company that can walk me through this.

    submitted by /u/terwixsten
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    CRM with email followups and mobile app?

    Posted: 11 Jan 2018 01:17 PM PST

    This is a cross post from /r/entrepreneur.

    I feel like I have spent days worth of time trying to find a CRM with email follow-ups and a mobile app. I am basically looking for Close.io but with a mobile app. I don't want a CRM that I have to CC to get an email into it. I want to look at a customer / contact record and see all of my email history and if I send them an email, I can set a reminder to follow up if I don't hear back. I also want a mobile app for the CRM that I can use while on the road to send email and get contact information for making a phone call.

    Does something like this even exist?

    Thanks!

    submitted by /u/thestepafter
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