I have 1M€ ARR agency business - Here's how I failed twice before

I have 1M€ ARR agency business - Here's how I failed twice before

I had an idea of scaling what I do when I started my career in affiliate marketing as a kid. Now it's a 1M€ ARR business, but before making it work, I failed twice.

I had an idea of scaling what I do when I started my career in affiliate marketing as a kid. In short, I was building and monetizing websites before people were using terms like "search engine optimization" or "growth hacking."

I struggled for years to find or come up with the correct term for what it was that I actually did: growing stuff in whatever way possible I could figure out by testing. Instead, I found myself stuck in marketing again and again.

Round 1

My transition from affiliate marketing professional to consulting started in the mid-2000s. At the time, I didn't really consider myself a marketing professional because my tactics — which are these days called performance marketing — weren't something that most people considered marketing.

Back then, marketing was ads. It was things like purchasing a TV ad, space on a billboard, or the cover of a newspaper. It definitely had nothing to do with business or product development, which for me, seemed like a very natural part of marketing. Also, marketing back then didn't seem all that concerned with the business of generating revenue.

When I ran my first agency, I had zero knowledge of entrepreneurship or being a CEO. I had just turned 20 years old, and I'd only figured out that I could sell websites because someone accidentally asked me to do so.

With no mentors or entrepreneur network to guide or advise me, I was lost. As a result, I made several mistakes as a first-time entrepreneur.

#1. I had no idea how a company entity works

I paid over 10K€ taxes upfront before I figured out I didn't need to do that if I didn't make any money. In short, I learned how companies work.

#2. I had no idea how to monetize my product

The first website project that I sold was worth €250 minus taxes. After accounting for my labor and endless changes, the actual hourly price I received was around 2 euros an hour.

From this experience, I learned two lessons. First, I learned to value and charge for my time. Second, I understood how to draft contracts that limited my deliverables in concrete terms.

#3. I had no idea of how to choose clients

When I first started, I was desperate for money. As a result, I sold something to any shady company I could find on random public discussion forums.

It might not surprise you to hear me say that I was scammed by quite a few individuals who never had any intention to pay me. In fact, I ended up with over 50K€ credit loss.

However, I learned that you need to choose your customers carefully. Additionally, I also got familiar with the debt collection system.

Despite the setbacks, I scaled my business to around 150K€ annual revenue. To reach that total, I consulted in various sectors, did some website building projects, and did a little bit of really old-school SEO. Additionally, I took on some programming jobs (such as SMS advertising platform of IRC-Galleria) and outsourced what I didn't have time to do.

Overall, it was a stressful and lonely existence. Lots of worries, chasing up clients and working late into the night. By 2009, I was thoroughly burned out. I needed to make a decision. Should I do something else? Or should I continue to do this vague internet thing that no one seems to really understand, where everyone just tries to scam you?

I dusted myself off and decided to travel down a different path.

For a while, I gave up entrepreneurship. Instead, I worked for a few different consultancy firms providing consulting services to enterprise clients. Most of the businesses were big corporations like banks or insurance companies. The job was pretty straightforward, and it paid well. But there was one issue: I hated it.

You see, the only thing I was expected to do was produce reports. After that, nothing really happened. I'd spend my time examining the businesses and finding ways that they could do things better, but none of the changes I'd consulted on were ever put into practice. It felt pointless.

Round 2

And so, during this period of my professional life, I started to get restless. I wandered around and found myself getting into startups as the black sheep of the ecosystem: someone without any connection to university, which was the usual path into startups.

By accident, I also again tried to scale what I do. I found a co-founder as I was networking with local startups and decided to found a new consultancy agency with him and someone he knew.

This time I was able to avoid the mistakes I'd made the first time around. Additionally, thanks to my co-founder, I wasn't so alone. We quickly scaled the business to 500K€ annual revenue. It all seemed so easy.

My co-founders opened up doors and opportunities I could never imagine accessing alone. As a very short woman who looked younger than her age, male decision-makers often overlooked me. But my male co-founders didn't have that problem.

I got amazing deals from huge corporations like banks, media, and insurance companies. My salary was five times what it was when I was consulting as an employee. However, I still faced the same issues that had caused me to leave my last consulting job: I was doing reports that no one really cared about.

A few problems started when I tried to scale the business. Again, these were the big mistakes.

#1. I was the only domain expert co-founder

I had to learn the hard way that being the only domain expert co-founder had some serious disadvantages. Once the doors opened, I did everything: the sales, the actual work, the recruiting, all the CEO stuff. It didn't really work. I was close to burnout again, and I couldn't really give anything my complete focus or attention.

From this, I learned that you really need to think about who you choose to be the co-founders of your company. You need to pick people that have something that complements your skills. Additionally, you need to have something that adds to their skills.

#2. I was the only one who really seemed to care about the mission

At the early stage of a startup or business, you need only to hire people who care deeply about your vision. You need to hire people who are out there trying to proactively bring value to the business in whatever way they can.

I still didn't know anything about building a company from the talent perspective, so I hired a handful of sales reps. And not just any sales reps, extremely expensive sales reps who exacerbated my first mistake.

I was still the only domain expert, so I did the actual sales after we opened our doors. Then, when the number of doors multiplied, I had less time for the actual job. I had no time to concentrate on essential tasks like thinking about what kind of help I needed for my core duties and actually running the company.

Soon, sales rep salaries started to eat all the profits, and tax debt piled up. I'd learned before that when you didn't make any money, you didn't need to pay taxes. Now, I was learning that you most certainly needed to pay taxes when you did make money. Once I'd realized how bad the situation was, I had two choices: Find a way to pay off 25K€ of tax debt or file for bankruptcy.

#3. Even when you have co-founders, you can find yourself alone

When things are going great, people stick around. However, some people tend to disappear when your business goes through a hard time. With a 25K€ tax debt looming over us, I found myself alone once more.

I had to burden the responsibility of paying off the debt with my other sources of income. I paid it back in full, and we avoided bankruptcy. And I'd do it all over again if it was the difference between my mission failing and succeeding.

Once I got rid of the tax debt, I began my familiar process of wandering around. I worked at some startups, did some ICOs, and even tried out dropshipping.

But that feeling kept bubbling under. I wanted somehow to do this growing-stuff thing in a scalable way.

In 2017, Freska hired me as Head of Growth. Finally, I had a mandate to do whatever I could to grow the business, which means a lot more than just marketing in the home cleaning context.

At last, I was liberated from the restrictions of marketing. I was able to dig into the entire ecosystem of a home cleaning business to do marketing when it was relevant, product development when it was relevant, and cleaner recruiting when it was relevant.

The company grew 15% MoM with excellent client retention, and it felt like I was doing affiliate marketing again. I knew that this "growth" or "growth hacking" thing was what I'd been waiting for my whole life. All I wanted was to build a company doing just that.

During Freska's growth, one of my biggest challenges was to convince people to try out home cleaning services for the first time in their life. In essence, we had to gain their trust. But before I found a scalable way to earn that trust, I arranged a lot of events at the Freska office.

My hypothesis was that you could gain trust at the Freska office because the hallway is covered with happy, smiling faces of people working at Freska. It didn't feel like just another cleaning company when you entered the HQ, and I could always convert a couple of people into home cleaning service subscribers.

During one of these events, my guest speaker was the co-founder of an agency called Truly. They were speaking about a case where their lead generation service generated over 1M€ profit for a local B2B SaaS company. I got extremely excited about this tiny agency because it resonated with my core mission of doing something practical to improve north star metrics such as revenue and profit.

After several months of negotiation, in 2018, I bought a piece of this company.

Round 3

We started to call our service growth hacking without a clear understanding of what that actually is. No one else really understood it either: clients or potential hires. If you hire a growth hacker, what you usually get is a very bad performance marketer. And when a client buys growth hacking, they typically want Facebook Ads or SEO. That wasn't exactly what we wanted to do.

We made our fair share of hiring mistakes. Most of the client cases didn't go anywhere. By December 2019, the company had one month of runway left. But we decided to give it one last shot. But this time, something was fundamentally different. I'd finally found co-founders who wanted to make it work just like me.

During COVID-19, the company rose from the ashes, and we managed to nail multiple essential milestones.

#1. We built a product for our service

We figured out what growth hacking actually meant. It meant a weekly cross-functional test iteration subscription service. Understanding how to define our data-driven approach meant we were able to sell the service.

#2. I started to train people in our methodology

I started to train people to use our growth hacking methodology. As a result, we also learned how to teach it. This information meant that we were able to onboard people to deliver the service.

#3. I learned who was good at growth hacking

In the process of figuring out how to teach our methods, we also learned what type of people take to it naturally. This knowledge meant that we were able to get far more efficient at hiring.

We got to 1M€ ARR (subscription-based deals) during 2020, producing almost 200K€ in profit.

Of course, that's not the end of the story, it's the beginning.

After reaching 1M€ in subscriptions, we found multiple new scaling issues. Lead generation is completely dependent on my personal brand, and some critical internal processes are missing entirely. Additionally, we've run into problems with confusing leadership due to lack of simple tools like company charts and various roles we suddenly needed to handle, such as hiring a lot of Growth Leads and managing them efficiently.

Still, the core of the company is more resilient than ever, and fundamental things seem to be in place, creating some kind of baseline to find a way to scale this thing.

First 10M€ ARR, then above.

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Written by

Mari Luukkainen

Mari Luukkainen

Pre-seed investor, Startup growth advisor, keynote speaker, ex 15% MoM (profitable) growth startup Head of Growth.
I have 1M€ ARR agency business - Here's how I failed twice before
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