Sam Shepler: how Testimonial Hero hit $5M without MRR

Full transcript

Edited for reading. Select a time to play the audio from that point.

Six years since the last coaching call (00:00)

Alex: It’s been a minute, man. I think maybe five or six years since we last spoke. I don’t know.

Sam: Yeah, I think we last did a coaching call in 2019. I was checking my inbox and it said 2019.

Alex: Man, how much time has flown. OK, let’s take it from the top. You run Testimonial Hero. Talk me through what Testimonial Hero is, just so everyone out there can track along.

Sam: Testimonial Hero is an agency, or productized service, focused on customer storytelling. Primarily video testimonials, but also, more recently, written case studies. We have a little over 40 full-time team members, doing a little over 5 million in revenue. Our whole mission is to make world-class customer stories effortless, to help B2B marketers build trust and close deals faster.

Alex: That is about as clean a description as you’re going to hear from a founder. How many times do you think you’ve said that?

Sam: Probably hundreds. Not as much recently, but probably hundreds over the years.

Alex: Dude, I love it. It’s one of those things where you get that muscle memory out. But it doesn’t sound like you’ve checked out, which I sometimes hear when people are pitching their thing over and over again. They’re just like, “We did X for Y,” and you’re like, oh, cool, OK.

Where Sam was in 2019 (01:36)

Alex: All right, rewinding all the way back to when we last chatted. Do you remember where you were? Do you remember what you were working on at that time, and how things were going?

Sam: When we last chatted in 2019, I had just started the business the previous year. I started the business in earnest at the beginning of 2018, so it was probably a year and a half in at that point. And we did our group coaching session with Jake and a few other good friends. People who have become really great friends over the years.

I was probably dealing with a lot of the same challenges that a lot of founders have at that stage. At the time we were probably doing 600,000-ish dollars of revenue a year. I was working a lot on: how do I remove myself from being such a key person in the business for so many different things? How do I delegate, bring in people, and fire myself from a lot of different key roles, so there’s not this bottleneck where everything has to flow through me?

From a generalist video agency to Testimonial Hero (03:02)

Alex: Yeah, the old key person risk. And you had a bit of a production or agency background, if I recall. Before you were doing Testimonial Hero, is that where you were at?

Sam: Yeah, that’s correct. Before Testimonial Hero, I spent probably four or five years running a generalist video agency with a couple of good friends. That was great, but I experienced the pitfalls of a generalist agency. A lot of the projects are completely different and bespoke, and it’s very hard to extract yourself from the business as the owner or the founder, because you’re always doing these bespoke projects.

After that business I had the opportunity to start over, and I was very reluctant to get back into another agency. I spent about a year trying other, non-agency businesses. I tried some software companies, just other ideas. And then finally I had to pay some bills.

So I was like, well, what do I actually know I can do? Why don’t I take one of the most popular services at our generalist agency, which was video testimonials, and try to productize that?

This was in 2018, when this concept of productized services had begun to gain steam, thanks in large part to you and Dan at WP Curve, and all the stuff you guys had done to popularize it. Brian Casel was also talking a lot about productized services at that time. You and Brian were honestly some of the people I learned from a lot back in those early days, a lot of it virtually, remotely, just learning from a distance. And then obviously we did some coaching calls as well.

Productized gets you to a couple of million (05:18)

Alex: What were some of the mindset shifts you had to make, going from agency land into productized service land?

Sam: It’s a great question. One caveat first. I still think being very productized is the fastest way to go from zero to a couple of million in revenue. But going from two or three to 10 million in revenue, I think becoming a little less productized makes a lot of sense.

That’s the journey we’re on now. We started ultra productized, and now we’re doing a little over 5 million a year in revenue. Don’t get me wrong, we’re still very productized, but it looks a lot different. Some parts of it are almost more agency-esque. It’s just an interesting observation. What got you here is not necessarily going to get you there, in terms of eight figures in revenue. That’s the next big milestone for us.

But in going from the agency mindset to the productized mindset, the hardest thing initially was: how do we stay so focused? Honestly, when I first started Testimonial Hero, I thought it would just be a pretty small, niche thing. Otherwise I might not have had the courage to be so ultra niche in the name Testimonial Hero. You know what I mean? So it’s kind of funny that it worked out the way that it did.

It was an aggressive niche down, especially at the time, to be like, “We’re going to focus on testimonials, and it’s in our name.” In hindsight it helped a lot. But if I’d known I would be doing this for eight years, I’m not sure I would have had the courage to do it from the start.

Why the niche is in the name (07:44)

Alex: Was the idea behind getting narrow in the niche that it helps to keep the scope narrow through definition, so people know who you are when they engage? It’s like, “We do this, and that’s it.” Is that how you were thinking, or were there other motivations behind it?

Sam: I love a good brand name for instant credibility when it comes to marketing and positioning. There are a lot of different ways to brand and name companies. You can have more of an empty vessel name, one that maybe doesn’t mean as much, that you imbue with meaning. There are tons of examples of companies that have been successful doing that.

But personally, I love names where you hear the name, then you hear the value proposition, and it gives you a little aha moment. I guess I’m a bit of a branding and positioning nerd in that respect. I always think: if I’m a prospect and I’m getting a cold email, or I’m seeing an ad, who is this ad being served from? How is the name of the brand going to enhance, or potentially detract from, my appreciation of the ad and my willingness to engage further with it?

Alex: So it helps your customer understand exactly who you are from the jump.

Sam: Yeah. It buys you another couple of seconds of their attention, if it’s a good name and it’s relevant to the value prop.

Alex: And I think that’s a common pattern in agency land. These agencies have numbers and letters and weird things that only mean something to the founder. Then you get an inbound email from them and you’re like, what is Agency 7X.32? I don’t know what these guys do. They sound pretty futuristic.

The first milestone was a honeymoon (09:58)

Alex: OK, so that’s a pretty healthy start. What I saw with productized services, especially back in those days, is that it was often folks who had a consulting background and were trying to get out of consulting. You came from more of an agency background and were trying to get to something a little more structured. Healthy jump-off. Now, if we put it on a timeline, over the last five or six years, what have the major milestones been along the way?

Sam: It’s a good question. One big milestone was going on my honeymoon in the early months of 2020. I got married in the fall of 2019, and my wife and I went on our honeymoon in Thailand in late January and early February of 2020. We literally came back just before all the COVID stuff. Just in time.

The milestone there was that I was gone for two weeks, completely checked out of the business, and we still grew our revenue. I had hired our first salesperson in November of 2019. I think he closed a deal before the end of the year. That was great, but I was still there, helping him. Then I was able to check out for two weeks completely, for the first time in the history of the business, and a bunch of deals were closed. It didn’t even matter that I wasn’t there. That was a huge first milestone.

That’s one of the things productized services do so well compared to more full-service agencies. They’re so much easier to sell, and they’re so much easier for someone else to sell, someone who’s not you, not the founder. So that’d be the first milestone.

Alex: Just on that, I remember an email or a message about it, because that was definitely an anchor point for you. You were running towards that goal where you could actually unplug, because you’d been plugged in for so, so long. I think you put it in the Slack group or something like that, or maybe an email. And we were like, yeah, he did it, he did it.

Sam: Yeah. I’m sure I did, because it just felt so good. As a business owner, especially one who cares about their lifestyle, which is something I’ve always cared about, until you achieve it you’re always wondering: am I going to be able to have the lifestyle I want, along with the financial benefits I want? So that was the first taste.

COVID stops the on-site filming (13:24)

Sam: The next big milestone came a couple of months later. COVID-19 happened, and our core product offering, our main service of on-site video testimonials, ground to a halt, because no one was filming in person.

So we had to figure out a way to… well, actually, at that time we were like, OK, how do we keep the business afloat? What do we sell? We tried a few different things. A lot of our customers were SaaS companies, so we tried some product demo videos. And we also tried fully remote video testimonials.

We figured out a way to do fully remote video testimonials at a very high quality compared to anything that was available at the time, and really anything that still is available. It was a “constraints breed innovation” situation. We have to figure this out, or the business is not going to be around, because our main source of revenue is now functionally not possible. We have to figure out how to sell things and produce them remotely.

Once we had sold a few of those and delivered them successfully, I think that would be the next big milestone.

Remote testimonials shot on a smartphone (15:00)

Alex: You said it’s something you figured out, and it’s still head and shoulders above the competition. As a process nerd, there’s part of me that wants to dive in and understand more about that. I’m assuming some of it was around instruction to people, and how they can best set themselves up to capture good video. Is that a portion of what the process was to get that good stuff out?

Sam: Yeah. The biggest thing about it was our whole point of view: let’s have people capture the testimonials with the best camera they have on them, which is their smartphone, not their webcam. Smartphone cameras are so much better than webcam cameras, especially in 2019 and 2020, when fewer people were working from home.

There was a lot of process innovation to figure it out. How do we do quality assurance? How do we help them set up their camera? How do we get the footage from them? And how do we do all of those things and more, and also make it a really easy customer experience? One of our core values is effortless experience, both for our customer and for the testifying customer who’s actually participating in the process.

That was one of the big value innovations. And that’s the thing that I think can separate some productized services from others, the ones that maybe make a bigger impact. You need some sort of value innovation if you want to get outsized returns compared to the market. If you’re just copycatting someone else, you’re going to get their results or less.

So we’ve always been focused on innovation, value innovation that benefits the customer. That’s something that takes you from average to something that can be a lot larger, from a revenue and impact standpoint, when it comes to productized agencies.

Why so few people copied it (17:36)

Alex: I’ll take a slight detour and then we’ll come back to milestones. You made a point about copycatting. One of the patterns I saw over time, and definitely saw at WP Curve, was that there were about 150 variants. WP Banana and WP whatever. You just add a word after WP and you’ve got yourself a support business. Did you see much of that for Testimonial Hero? Does that even register for you? Is it something that’s prevalent, and how have you managed it as it’s come up?

Sam: It’s a great question. I would say there really haven’t been that many, and I’ll tell you why in a second. Sure, there have been a couple, but a lot fewer than you’d think, because there are a couple of things that are really hard about what we do. They suck for us too, but they suck for everyone. So it’s not an easy game to get into.

For one, it’s not really conducive to recurring revenue at all. We don’t focus on recurring revenue. We don’t care about it, frankly. But we’ve been able to grow pretty quickly, up above 5 million in annual revenue, without any need for recurring revenue. A lot of people start productized services because they’re chasing what they think will be a panacea of recurring revenue. So when they see that there’s not a lot of easy recurring revenue in testimonial services, they’re usually not interested. They want to play an easier game. That’s one.

Then there are other nuances that make it quite challenging to do our business. To have a successful project, not only do we have to sell our client, then we have to help our client sell their client on appearing in the testimonial. We have so many leads who would love to work with us, but they’re not ready to sign until they line up a few testimonials. So there are major dependency issues there, on our customer’s customer. That’s the last thing you want to be dealing with, honestly. You want to have complete control over whether you can do a project successfully.

Those are two very challenging things about our business that we have figured out how to live with. A lot of people don’t want to figure them out, or haven’t been able to.

Buying the biggest competitor (20:38)

Alex: OK, good learnings. So, going back to the milestones. There are a couple you’ve knocked off. You went into COVID and, frankly, pivoted a little to figure out a service offering that could work, which sounds like a lot of scratching around and trying stuff and eventually getting that process. Talk me through from that point onwards. What were some other milestones you were able to hit that stand out for you?

Sam: Great question. I should also add something to the last question. Our biggest competitor, from a revenue size and client perspective, was a company called Case Study Buddy, who built a really nice, great company. We ended up acquiring them at the end of Q1 2024. They were probably one good example of a company that did some really great stuff in the space, and then we were able to acquire them. A win for them and a win for us.

From my perspective, competitors also make the best partners and the best acquisition targets. Sometimes I wish we had a few more competitors, so we could grow by acquisition more easily. So there are pros and cons there. We can talk about acquisition stuff a bit later.

From $800K to $3.4 million in one year (22:30)

Sam: Coming back to other milestones. Breaking a million dollars in revenue was a big milestone. We almost broke it in 2020. We did maybe 800 or 850K. And then in 2021 we just exploded.

This was the zero interest rate era. 2021, post-COVID stimulus checks, zero interest rates, a massive amount of VC funding. We sell to SaaS, so we were able to ride that wave, and we grew to a little over 3 million in revenue in 2021, from about 800K. That’s serious growth.

Then we spent a couple of years integrating that growth. Going from 800K to 3.4 million in a year is a crazy amount of revenue growth for a professional services business. It’s a lot of growth to integrate. We were able to absorb it, but we stayed around that level for 2022 and 2023. Those were two pretty flat years for us. Then 2024 saw some awesome growth, getting us to a little over 5 million in revenue now. And we’re also growing this year.

Making the Inc. 500 (24:22)

Sam: Oh, and we also made the Inc. 500 list in 2021, I guess. That was cool. I think it’s back there. You can see the plaque back there. As someone who grew up reading that magazine, I thought it was cool to make the list.

In reality, the main thing that changed was that now we got so many sales calls. You make one of those lists and you end up getting prospected by everyone. How did your life change? People try to sell to you constantly. It’s exhausting. So it was more of a vanity metric, but it was cool to achieve.

And the other big one is making our first acquisitions, which we made in 2024. Restarting growth in 2024 was massive.

Alex: Love it. With the Inc. list, I would argue that a lot of entrepreneurs have these milestones, or even metrics, that are meaningful. They do mean something personally, and I don’t think there’s anything wrong with that. It’s just being honest with yourself about why it matters to you. If you have an emotional connection to it, like, “That’s my definition of legit.” For some people that’s getting to 10K a month, and then it’s 50K and 83K, and then double, double, double, and then 10 mil in ARR, which is a pattern I see a lot. But yeah, congrats. Inc. 500, let’s go.

Sam: Yeah. I think we were number 342. It’s actually 5,000 now, so they let quite a lot of people on it. But it was nice to be within the actual top hundreds.

What the boom felt like (26:20)

Alex: So talk to me about that period of growth, from 800K to, I think you said, 3.4 mil, in the heady days of the ZIRP era. What did that look like for you as a founder?

Sam: Honestly, we felt unstoppable. But in reality there were a lot of things we were doing wrong, and a lot of mistakes we’d learn from in the future.

The demand just seemed… it was a very frothy time. I’m sure it was unprecedented. I don’t think there’ll ever be a time like that again. It was insanity. You didn’t know it at the time, but the marketing budgets for software were absolutely insane.

In hindsight, we thought we were amazing geniuses at the time. There were certainly some things we did right, and we took advantage of a good situation. But a lot of it was the market driving that.

So I’m just grateful that we integrated the growth, ultimately, and we didn’t die from indigestion. There’s that saying. You can kill your startup or your agency just as easily from indigestion as starvation. Thankfully we were able to absorb that growth. It took us a couple of years to actually catch up and grow beyond it.

But I think it was a good thing, and I’m grateful we went through it. Two-ish million in revenue is a really tough zone. You’re big enough to need more people, and some more expensive investments in leadership, but you’re not quite big enough to be able to afford them. So part of me thinks maybe it helped us fast-forward through that period as fast as possible. Although it’s not that different at 3 million, honestly. It’s still some of the same issues.

I do think, broadly speaking, the faster you can get from one to five, or one to four, the better. That one to three can be a bit of a messy middle, a zone of death.

So mostly I’m just grateful. It gave me a healthy respect for the fact that you can’t control everything. You can control a lot, but a lot of your success comes from timing in the market and the macro situation. You’ve got to make hay while the sun shines, though. When things are good, when the economy’s good, you’ve got to make hay.

What broke was the accounting (29:42)

Alex: Hell yeah. That’s actually one of my favourite sayings. And it’s sometimes hard to see it when you’re in it. I could see it in the timing we had for WP Curve. The platform was growing, and there was a compound annual growth rate that was obvious. There wasn’t a Webflow or anything around. Squarespace and Wix were OK, but not great, and still kind of expensive for what you got.

When there is that window of opportunity, it’s hard to have the conviction to just run full tilt. But I think that’s when you’re early. If you’ve been at it for a few years, you’re committed to the market and committed to the product, and you know, OK, people are spending now, we’ve got to capture demand. We’ve just inverted our problem. We don’t have to create it, we’ve got to capture it. Where did things break? What were the break points during that time?

Sam: I will say, actually not that many things broke. We just didn’t have a full understanding of cash versus accrual accounting at the time. So we thought we were doing way better than we were on an accrual basis.

In reality, we weren’t fully earning the revenue, even though we were getting paid cash. A lot of times people would pay us money and then they’d be like, “Oh yeah, sorry, we’re doing this other project.” We’d take the money and we’d spend it. But that wasn’t actually earned revenue.

We thought we had the most amazing business in the world. We had a great business, but it wasn’t as good as we thought it was, once we started doing our books in accrual. That was the big learning. We were like, oh wow, you mean we haven’t technically earned the revenue we spent last month, because we haven’t delivered the work for it? We have to have a revenue recognition policy? So it was more of an “oh shit, cash and accrual are very different when you get paid a lot up front”, which is what was happening.

Alex: Not the first time I’ve heard that.

Sam: Yeah. The good news is that we didn’t break things on the client delivery side. It was more of a business learning, around the nuances of cash versus accrual, and transitioning from running your business on a cash basis to an accrual basis.

When you have a subscription productized service, cash and accrual look pretty similar. If you’re getting monthly payments from customers, and the revenues align with your expenses on a monthly basis, cash and accrual aren’t that different.

The problem for us at the time, and for any productized service running a similar model, is this. Say you get paid 20K up front for a couple of projects. Then you do the projects in months three and four, and your revenues and your expenses are misaligned. To see the true performance of the business, you need to figure out a way, with accrual accounting, to follow best practices and follow GAAP, ideally, if you’re in the US. You’re not legally mandated to, but it’s good practice.

So it was a lot of accounting stuff we learned. We were like, oh, we have to do this correctly if we want to see how we’re really doing.

But the fact that we were doing projects and packages turned out to be a godsend in a lot of ways too, because we were able to staff up and absorb all that demand on a project basis. If we’d had retainers, and for every two new clients we had to hire one person, and we grew from 800K to 3.4, that would have been incredibly hard to resource from a hiring and headcount perspective.

I have a few favourite things about this model, and that’s on the list: how much easier it is to resource project-based businesses compared to retainer, monthly recurring businesses, where you always need to resource full-time staff to that account.

Collect the cash up front (34:56)

Alex: Some good learnings in there. A couple of points I’ll add, and I think this is true for most bootstrapped productized services. If your service allows you to go semi-annual or annual, and there is demand to do that, and you can capture that revenue up front and customers will pay, even if it’s only going to be 5 to 10% of customers, I tell people to go for it. It creates a mental buffer. When you’re starting out and you’ve got an extra five or 10 grand of cash in the bank, it creates so much breathing room. It feels so much better than watching your monthly recurring revenue subscriptions tick over and thinking, all right, we need to get a hundred more subscriptions and then we can finally hire that next person.

The other thing I was going to say is about the GoDaddy days, post-acquisition. One thing they did aggressively, which was at the very far end of the spectrum from a bootstrapper mentality, I’d argue, was this. At the time I was there, I think it was roughly 20% private equity owned. Everything was about the dollars. Everything was focused on ARPU. Everything was focused on LTV. So products by default would be offered on one, two and three-year terms. To me it was mind-blowing to be able to offer a WordPress support package for two and three years.

I’d set up alerts to know when these would go off, and I’d literally be partying at my desk, so excited. You’re talking about thousands of dollars up front for a product where the rack rate is maybe a hundred bucks a month, and you’re capturing all of that up front.

It sounds like what you experienced and learned was that when you capture that revenue up front, you start to see the gap and distance between getting the revenue in and actually fulfilling it. And you start to forecast off that inflated buffer. To me, that’s a good problem to have. That’s a nice position to be in.

The illusion of recurring revenue (37:02)

Sam: It’s a good problem to have, for sure. At the end of the day, as founders, we pay our bills in cash, and more cash is always a good thing. It gives you optionality. It lets you invest in marketing. All of our growth has been driven by the fact that we’ve always had a ton of cash on hand, because we’ve always been driving sales aggressively and reinvesting in the business. When you collect up front, like you said, you’re able to pull that revenue forward and redeploy it.

And there’s this thing, and this is just my opinion. A lot of people think monthly recurring revenue and they’re like, “Phew, I won’t have to sell the customer next month. What a relief. I’ll just get three customers, and when I get five customers, I’ll be good.” But they find out very quickly that it’s not that recurring, because churn is quite high, especially in marketing services.

Arguably they’re not even doing recurring services. They’re putting customers on a project payment plan. If you only keep a customer for five months, and that’s your average, you’d be better off charging them up front, or in two chunks, and doing a two-quarter project with them or something. Unless you’re keeping customers for 12-plus months, how recurring is that revenue, really?

I’m curious if you agree with me on this. Especially in marketing services, which are very fickle. People change what they want. A campaign doesn’t work one month. The economy shifts. There’s a big illusion of predictability that’s not really there when it comes to MRR for a lot of productized services.

Churn and frequency of use (39:38)

Alex: I couldn’t agree with you more. I’m going to riff on this a little, because I still see it at some level. It’s very hard, when you’re super close to it, to admit that it’s not a recurring need.

I think Russ from Design Pickle got this really early on, because he’d come from an agency background. He recognized the value of maximizing revenue capture, the same kind of GoDaddy mentality. Grab as much cash as you can up front, get someone to the highest tier of plan, get them locked in for as long as you can. That’s kind of your insurance policy.

There is such a romantic notion of recurring. But frankly, if you’ve got monthly churn over 5%, you really have to have an honest conversation with yourself about whether you’ve actually got a recurring business. I remember in the early days of WP Curve it was like 20, 22, and the business would still be growing. And at the same time as you’re seeing people sign up, every cancellation that comes through is like a stab in the guts.

So you start to ask yourself: what can we do to position ourselves less as a reactive service provider who’s on call when you need it? How do we actually steer the relationship, grab someone’s hand and walk them through all the things they need to know? Set that tone up front, and explain that over the course of this amount of time, we’re going to take your site from this to this.

That took us some time to learn. We implemented things around proactivity, almost like automatic updates, opt-out updates. Just trying to figure out how you can win that business on an ongoing basis. You have to spend a bunch of time on that. If you don’t, you’re just a line item on an expense sheet. Most people have some kind of budget sensitivity, and they say, “We like that product and we like that team, but we haven’t used it for two months.” It’s the “love you guys, but we don’t get much value out of you”. It’s still a cancellation. It’s still shit.

So I’d see a lot of that: people trying to shoehorn a particular service into a monthly package. I’d start by asking, what’s the frequency of use?

Even at Canva. If you look at the expansion of the Canva product line, Canva as a design tool is best in class. So good, so intuitive to use, easy, just fun. But unless you’re a power user, the frequency of use for that product is maybe once a week, a couple of times a week. You’re not in there every single day. Now Canva has come out with Canva Docs, as you’ve probably seen recently, and Notion has come out with Notion Mail. You’re looking at a way of becoming part of a user’s plumbing, part of a frequent use case.

If the frequency of use isn’t there for a product or a service, you absolutely have to figure out how you can maximize that frequency, and steer it if you can. Be honest with yourself about what that frequency is, which is hard to do sometimes. And then figure out how to capture all that revenue up front. Is that true to your experience? Are those the sorts of things that came to bear for you as well?

Lifetime value over MRR (43:17)

Sam: Yeah, they are. The other thing I would say is that customers who formally churn very rarely come back. When someone churns through a formal cancellation, it’s unlikely they’ll ever sign up again. But if you were selling them a package, and it’s a consumption model, they will come back.

It’s the way a lot of the consumer packaged goods we use in our lives work. We buy some toothpaste, we use it, and when we’re done with the toothpaste, we buy some more. We don’t feel the need to get on a toothpaste subscription, even though I’m sure people have tried to do that. Sometimes it’s just easier to use it and then buy it again when we need it.

So I think about lifetime value. Every decision I make is: how can we maximize lifetime value for the customer? To me, lifetime value is more important than monthly recurring revenue, because that’s not important to me at all.

I’m focused on lifetime value because if I tried to optimize for monthly recurring revenue, for our particular service (and there are other services out there that this is also true for), we would be trying to shove a square peg into a round hole, as you said, and we would actually be hurting our LTV. I would much rather stomach what some people would refer to as unpredictability and have a much better LTV.

I don’t subscribe to the theory that unpredictability is something we have to try to banish and manage. Unpredictability, in and of itself, is just what it is. I don’t think it’s inherently bad in a lot of ways.

And if you really don’t like unpredictability, there are other ways to make things predictable. A really good quote I’ve heard before is: if you don’t have predictability in your revenue, have predictability thanks to your marketing. That’s honestly what we try to do. We’re always able to forecast what we’re going to do for the next month, sometimes the next two months, but usually not a lot more than that. We’re able to forecast because we know what our pipeline looks like. We’re not caught off guard.

So there are other ways you can create predictability, by actually doing a good job at marketing. But it’s harder. It’s a lot easier to just look at your Stripe dashboard and be like, “Here’s what my MRR is,” and tell yourself what you think it’ll be next month, even though you really don’t have any idea, depending on what happens. But if you want to grow, it is important to figure out that marketing engine.

Mr LTV (47:02)

Alex: There’s some gold in there. Two things came to mind as you were talking about LTV. I just love nicknames. I’ve always loved nicknames. And the nickname that came to mind for you was Mr LTV. That would be a fitting nickname.

Another fun fact is that the LLC we had for WP Curve was actually called Lifetime Value LLC. I knew that every time I was looking at the paperwork and dealing with all the tax and bookkeeping and nonsense like that, I needed that reminder in my face all of the time. So it was funny, going through and signing the acquisition papers. Lifetime Value, Lifetime Value, handing it over. This is your lifetime value, now you can have it. It’s a hard thing to let go of.

Sam: That’s awesome.

Cash reserves and the no back-to-back rule (47:58)

Alex: So, predictability and marketing. That’s a really good thread, and I agree with you. There’s a control element. The thing I take away from what you just said is controlling the controllables. You can control your output, your effort, the campaigns, your go-to-market. And you’re going to have variability on the back end, in how much interest you get and how many people sign up. Where else do you apply that mindset of riding the unpredictability? Because to me, that sounds quite calming and quiet. It gives me a sense of peace. Cool, I can control what I can control, and everything beyond that is going to be what it is.

Sam: Having ample cash reserves, or access to liquidity like a good line of credit, helps a lot. Over the history of the business, if we look at a 12-month period, we’re wildly profitable some months, we break even some months, and we lose a little bit of money some months. Most of the time we’re profitable. Maybe there are one or two months where we’re not. I’m speaking on a cash basis here, by the way, in terms of positive cash flow.

But it’s never a big deal to us, because we always have that cash reserve from the majority of the months, which are good months. This is kind of common sense, but it bears repeating: when you’re embracing unpredictability, you want that margin for error.

Our mantra over the years was that it’s OK to have one month that’s not great. We just don’t do back-to-back negative cash flow months. I think we’ve stuck to that for the most part.

So having that cash on hand and that line of credit helps a lot, in terms of helping me sleep at night and also just making the business easier to run. It’s not like, “Oh, that month was tough.” We can easily absorb that. Not a problem.

Alex: Yeah, that makes it easier to play a longer game.

Two acquisitions in 2024 (50:52)

Alex: All right. We’ve gone down memory lane a little, but let’s talk about now and the future. As you mentioned earlier, you’ve become… I like the word acquisitive. When you say “I’m acquiring companies”, you’ve become acquisitive. Do you want to talk me through the acquisition strategy and what you look for? Take me through how you’re thinking about acquiring. It sounds like you’re acquiring to help with growth, but I’m making assumptions there.

Sam: Yeah. We made two acquisitions in 2024. They were both strategic in nature, in that they helped us unlock a new capability, which was our written case study unit.

Prior to those acquisitions we were solely focused on video testimonials. Video is my background, so that’s something I felt very comfortable in, and all of our revenue, really, was video. But we had the opportunity to acquire two companies who specialized in written. Case Study Buddy did video and written, but they leaned a little more toward written, and their roots were in really high quality written content.

The second company was called Upshot. They were actually a division of a larger company, and their division was called Upshot. We acquired them, and they were fully focused on written. Post-acquisition, we merged those two companies into our written customer story division.

So very quickly after the acquisitions we were doing 40 to 50 thousand dollars a month in written case studies, with a team that was immediately producing them. We skipped a ton of time by doing that. We could have figured out how to do it and built it up piece by piece. But in that case we were able to compress some time and make those acquisitions.

Now, we structured those acquisitions in really favourable ways. They weren’t huge acquisitions for us. We were able to do them off our balance sheet. If they had blown up, it would have been OK. It wouldn’t have been a huge negative.

I want to be clear that that’s something that’s important to me. I like things that have a pretty capped downside and a pretty high upside if they work out. There are some asymmetries there, some asymmetric rewards. Both of those acquisitions fit that.

There are also acquisitions we have not done, and probably won’t do. We looked at them and we were like, this could be great, but if it blows up, my house is personally on the hook, because we’re going to need to raise debt to do this, from the SBA or whatever. With those, not working out is not an option. We probably aren’t going to do any of those.

So we look at small acquisitions with deal structures where they’re asymmetric bets. Limited downside. If everything goes wrong, it’s not that big a deal and we can absorb it. If it goes well, the upside is really big.

The exclusive on Product Hype (55:00)

Sam: We’re also looking at incubation. We’re actually incubating a new brand, our first new brand other than Testimonial Hero. It’s going to be launching later this month. When is this podcast going to come out, do you think?

Alex: Well, I was going to say, can we get an exclusive? I love it. This would be our first exclusive.

Sam: Yeah, we can. What’s the release date on this?

Alex: I can time it with what you need.

Sam: Perfect. Let’s do an exclusive. So this is the exclusive, folks. We’re launching our first new brand after focusing just on Testimonial Hero for seven years. It’s a brand called Product Hype. We got the domain, producthype.com. That’s hype as in excitement.

It’s focused on product videos, scroll-stopping product videos for SaaS and cybersecurity companies. Think product demos, but on steroids, because they’re actually exciting. We’re going to make good products look incredible and great products look absolutely stunning on video, with motion design and animation and all these things. It’s out now, if you’re hearing the podcast.

With this one, we tried to acquire. We weren’t able to get an interested seller, and we couldn’t come to terms. So we were like, all right, we’ll build it ourselves. We’ll put probably, I don’t know, maybe almost six figures into it and build it out ourselves. Hire the team, do the brand, acquire the website, which cost us a little bit, to get the dot-com.

So that’s our strategy. We’ll either acquire things that are asymmetric, or we’ll incubate them and build them ourselves, and put $100,000 in to incubate a new business unit. Again, at our company size, if it doesn’t work out, it’s not going to kill us. And if it does work out, the upside is really big.

Why Sam won’t sign a personal guarantee (57:36)

Alex: A couple of things jump out for me from that. The first is that you’re not romanticizing SBA loans and personal guarantees. I don’t think people who are early fully recognize what a personal guarantee can mean for your overall sense of mental health. Can you expand on that a little? Obviously this is not financial advice. But if someone is thinking about funding through debt, or getting a loan, what are they usually signing up for?

Sam: Yeah, for sure. I would caveat this by saying that a lot of the debt out there, and the SBA programs, are tailored to giving someone who’s leaving a W-2 job a way to buy a business.

My core point, and what I realized when I took a look at going down that road, is that I’m not that person. I have a business. It’s spitting off excess cash flow. I also have a large team behind me that I can operationalize to spin up these new business units or integrate acquisitions. So I’m playing a bit of a different game, and I don’t need to go the traditional route.

For that purpose, the SBA can make a lot of sense, if you don’t have any other options. But it’s personally guaranteed. It’s on you if it doesn’t work out. So you’ve got to make it work out.

Another reason I’m personally not so interested is that, at this stage in my career, I’m not super in the day-to-day of any of my businesses. I’m not super in the day-to-day of Testimonial Hero. I have a general manager who, pretty soon after this comes out, is also going to be promoted to president, to run the entire business.

I worked hard to remove myself from the day-to-day, and I have a pretty awesome lifestyle in a lot of ways. I still work every day, and I work hard, but I work on the things I want to work on. I want that to continue. I don’t want to have to force something just because I’ve got a loan on it.

So there’s a lifestyle aspect I want to preserve. Sure, could I technically go bigger in some ways if I juiced the returns? Yeah, but leverage cuts both ways. I’ve come to the conclusion that I’m really happy where I’m at. I’m really ambitious about what I’m going to build, but I think I’ll get to my goals without using a lot of leverage, and I’ll have a great lifestyle on the way. That’s what my motivations are at this stage.

You can’t cherry-pick someone else’s life (1:01:31)

Alex: I love hearing that. In the early days, when folks are starting out, it’s really easy to let the tail wag the dog. “I need to raise a bunch of cash and run as fast as I can for as long as I can.” Then you potentially burn yourself out after a couple of years and have to deal with those issues later on.

What I hear from you is that you’re thinking about how your business fits your life, your motivations and the things you’re interested in. It can be a vehicle to support that, rather than you being thrown from pillar to post by it. There’s some real wisdom in that, and I think it takes some time to get there. It’s very easy to see what other people are doing and think, that business is going great guns. What you don’t see is that the person is working a hundred hours a week and they’re on the verge of a mental breakdown. Or the counter can be true as well.

On revenue milestones, tracking forward. It sounds like you’re at roughly five-ish mil in annual revenue. Talk me through what you want the next five years to look like. Which direction are you heading in?

Sam: Yeah, for sure. Just one other thought on that point you made about ambition, comparing yourself to other people and not knowing the full story. The one thing I always think about is that you’re not allowed to cherry-pick parts of other people’s lives. “I want this person’s revenue, but my lifestyle and my relationship with my kids and wife.” If you trade places with someone, in theory you trade places a hundred percent.

A lot of times we’re not seeing the full picture. I might want some of what that person has, but I also might really like parts of what I have that they may not have. That’s something I always try to remember, even though it’s easier said than done.

The multi-brand plan to eight figures (1:03:58)

Sam: In terms of the next couple of years, we’re focused on this multi-brand strategy. We’re launching a number of video-first productized agencies that we can cross-sell to our core customers.

We have hundreds of customers for Testimonial Hero. Most of them need more than testimonials. We spent seven years perfecting testimonials. Then we asked ourselves: all right, what else would these customers buy from us? How else can we help them? How else can we create and capture more value for them?

That’s Product Hype. The SaaS companies need video testimonials. They also need really good product videos. So we’re increasing LTV. Share of wallet is the business phrase for that. And frankly, we’re also making their lives better and easier, because they can go to one group of companies, with the same project manager, and get a lot more of the videos they want and need, instead of juggling multiple vendors.

Obviously 10 million, eight figures, is the next big milestone for us. Whether we hit that in two years, three years or four years, I don’t know, but that’s what we’re pushing towards. We think multiple different brands and this cross-sell, share-of-wallet strategy is going to be a really key part of that. Both for creating and capturing more value, and for retention, continuing to work with the customers.

And we’re sticking with the niche brands. Product Hype, Testimonial Hero. Still super niche, but more of a family of brands.

Partner, buy or build (1:06:30)

Alex: Talk to me about your methodology for uncovering these opportunities. You have an existing customer. You know they’ve got a level of marketing spend, or problems they need to solve. Are you looking at other purchases they’re making? Are you thinking about things like doing an audit of what you’re seeing from them on a marketing platform, and where the gaps are? How do you think about filling in those gaps, or creating some demand for something they maybe don’t know they’re deficient in?

Sam: It’s a great question. It’s a few different things. One is that they’ll usually ask us, “Hey, can you guys do this type of video? And if not, who can?” Once multiple people have asked us that a few times, that’s a pretty good data point.

I’m also staying abreast of industry trends and seeing cool work that’s being done in the industry. If we see major trends coming out, we’re like, oh, this is cool, this is definitely a thing. More people are doing this. We’re seeing clients in our industry doing it, or leaders in the industry doing it.

Then it just becomes: is this a partner, is this an acquisition, or is it an incubation? Partner, buy or build. It doesn’t necessarily mean we’re going to incubate all these things. Some of them might be too far afield strategically, so then we might try to partner with someone on that.

We only really want to build a brand around something where we can be in the top one or two, maximum three. Can we be a category leader in the space? If we don’t think we can be a category leader, we’re not really that interested. We’re only going to compete in places we think we can win.

I always ask myself: if the buyer, the prospect, had perfect information, why are they going to choose us? We can’t just rely on, “Oh, they hadn’t heard about this other company who’s going to be way better than us, and that’s why they chose us.” That’s not a really good strategy, because eventually they will hear about the other companies.

So let’s assume the buyers have perfect information. They’re omniscient, and they know all the companies in whatever segment we’re getting into. Why do we have any business being in that segment, and why would we win the deal? Can we be in that small consideration set in that situation? If the answer is yes, we can, and we have a good hypothesis there, then we’ll consider moving forward with it.

Alex: You just distilled what were probably the top five lessons I learned in my time at Canva. A lot of the questions I tried to help people solve before were: how do we go to market? How do we expand? How do we do this, how do we do that? And there’s a part of me that says, from the WP Curve time, you just have to be the best in market. You have to figure out a way to be the best.

I got to see that at scale, and what it really means when you’ve got a lot of cash to spend on growth, a lot of cash to spend on hiring great people, all those sorts of things. The return on investment, the return on everything, is so much greater when you’re not hacking together parts of your product. It seems so obvious, but it’s so often missed. You’ve got a slightly deficient product and you’re trying to plug the gap with more spend on acquisition or whatever other thing. In some ways you’re trying to put lipstick on a pig. So I’m fully with you on that.

Out-of-scope work and the quality of the team (1:11:16)

Alex: Now, last question for the day, because we’re coming up on time, and I’ve got a couple of ideas I want to throw your way once we get off this call. I try to come with some sort of value-add for everyone I’m catching up with from back in the day.

You mentioned that you’ve done, and I think of it as a bit of a bow tie, where you went highly productized and then started to expand out a little. You’re talking about getting back out into something with potentially more breadth, or more customization, or agency flavour to what you’re doing. How does that play into the future? Does that mean you’ll take on those bigger projects? Have you thought about that extra revenue, the stuff that doesn’t quite fit within each of those brands? Is that something you’ll look at supporting, or do you say, “We’ve got these particular categories in these particular brands, and that’s the only scope we play in”?

Sam: It’s a good question. Just to confirm: if a client comes to us and asks, “Can you do this too?”, how do we consider answering that? How do we evaluate these potentially out-of-scope opportunities? Is that the question?

Alex: Yeah.

Sam: The most exciting thing to me is always whether it makes sense from an R&D perspective. Is this something we don’t do now, but might want to do eventually? Assuming we think we can still do a really good job with it, can this be a research project for us, to learn more about our hypothesis around this new area? That, to me, is the most interesting thing.

Of course we’ll always look at it from the other side too. Can we do this profitably? Can we do a good job? Can we do it in a way that makes the client highly satisfied, and that isn’t going to break too many processes? But the R&D thing is the most exciting.

The other thing I’ll say, which is related to this. I think a lot of the aversion to going outside the system in some productized services is because the quality of the team is quite average, perhaps. And that can be a strategy. You highly systemize things, and you bring in more entry-level talent with really good SOPs, and that’s the business. When you do that, things do break, because you’re not set up to go beyond that system.

Personally, and we’ve always been like this, the biggest reason for our success is the quality of the people we’ve been able to attract and retain. By far. There are no secrets. We’re in a people business. We’re in a services business. None of this works without the incredible team members on the Testimonial Hero team and the Product Hype team. When you have that quality of talent, you can do a lot more. You can deviate, and you can do whatever you want, because smart people just figure it out. It’s so much easier.

I think there is a misconception, or maybe there was historically, for many years, that you just create a system and hire a bunch of entry-level people offshore to run it at really low prices. That can work. But today, and especially in the creative field we’re in, it’s not different from an agency, in the sense that your product is your people. You still need to figure out ways to attract and retain really, really good talent.

There are a lot of things that go into that. But a big part of it is that you have to have enough to pay them. That means you have to charge enough. And to charge enough, you have to get really good at what you’re doing in the first place.

Since this is the last question, I want to tie a bow on it. To me, that’s what it’s all about. You have to get genuinely really, really good to charge really good rates. When you have really good rates, you have profitability, and you can reinvest in the business and bring in great people. But none of that works if you don’t actually get really good first, and also bring a differentiated approach, because it’s not good enough to just be good. Being different in many cases is better than just being good.

Where to find Sam (1:17:08)

Alex: Perfect. Thank you, Mr LTV. If anyone’s looking to follow along with what you’re doing, where do they go? Twitter or X, I suppose, a website? Where can they find out more about you and the companies you’re working on?

Sam: Yeah, for sure. A great place to get in touch with me is LinkedIn or X. Sam Shepler on X, Sam Shepler on LinkedIn. You can check out more about Testimonial Hero at testimonialhero.com, and more about Product Hype at producthype.com. If you’re a productized service founder or an agency founder, I’d love to meet people and talk shop. So feel free to reach out to me on LinkedIn or X. Happy to chat and answer any questions.

Alex: Right on. Thank you so much, Sam. So good to see where you are now. I appreciate you sharing all of the lessons. Sincerely, thank you.

Sam: Appreciate it, man. Thanks, Alex. This was super fun, and I’m glad we got the opportunity to do it.

Alex: Right on, thanks.