What is Black Propeller?
Black Propeller is not a standard digital marketing agency. They are experts in PPC and have kept themselves laser-focused on paid search, paid social, and being the best at what they do since John Thornton started the company in his basement 9 years ago. The way John runs his agency is also anything but standard – because he runs it like a SaaS business.
Flipping the agency model on its head
After years of pricing by the traditional percentage-of-spend model, or basing a fee on how much a client spends on advertising, he decided it was time to make a change. Not to mention that he was calculating fees with spreadsheets, doing his accounting with Quickbooks, and using Stripe as a payment gateway. Even though most of his set up was automated, he realized that it could be simpler for his team and his customers (and more predictable in terms of revenue). That’s when he started looking at the agency retainer from a different perspective – this wasn’t just a fee for digital marketing services, it was a subscription to the Black Propeller product.
If you have a subscription business, you need a platform to manage it. John says, “When we made the switch to Recurly, we had to look at how our plans work. We had to refine our billing to make it into more of a subscription model.”
They decided to base their new pricing on brackets of advertising spend – or the tiered plans of a subscription business. John continues, “if a client is going to spend between 10 and 20 thousand on advertising, they’ll get the same services and experience from Black Propeller as someone who spends 50 thousand. But in that bracket there’s just so much more to do in terms of managing that level of spend.”
With years of historical data just sitting in spreadsheets, John knew he had to find a solution that could combine the history of his business and the future he’d have with Recurly. That’s how he found ChartMogul. He was able to import all of his revenue data from day one to paint a clear picture of where the company has been and where it’s headed.
“Once we got ChartMogul set up, it was overwhelming to uncover all these metrics.”John Thornton
Comparing billable hours with LTV and ARPA
Time-tracking has helped John and his team to better understand how much time they are spending on project work for specific clients and how much they’re spending on their own initiatives as an agency. Not only has this helped them to improve their own internal processes, but it’s led to a significant change in how they price their offering.
The team cross-references how much time they spend with each customer (or customer segment) with that customer’s LTV and ARPA in ChartMogul. What they found so far was that for clients who were smaller in terms of MRR or who had smaller budgets of advertising spend, they spent more time on their accounts, and were thus able to determine that these clients were less of a fit.
Consequently, they realized that clients that had more of an advertising budget had a higher LTV. John says, “the results were overwhelming, we had to change our approach, we realized we were undercharging.” So they decided to raise their minimum retainer. The results were two-fold – a higher base fee better covers the costs associated with managing these accounts, and it weeds out prospects that were potentially incompatible.
The analysis has also allowed them to recognize which clients are a great fit early on, so they know with whom to invest more time in order to build good relationships long term. It sounds like the old adage about sales – you shouldn’t be selling your prospects a product they don’t need, only evaluating their needs to determine if your product is a good fit. John discovered that clients with larger ad budgets and internal marketing teams better understand the value of digital marketing and the benefits of partnering with a PPC agency like Black Propeller. From a relationship and goals perspective these clients are a better match for their skillset.
Beating the sharks
When John and the team realized which clients were bringing in the most MRR and had the highest LTV, they hit the gas by spending their marketing budget on the channels that had the best ROI. They were able to determine which channels yielded the highest MRR by tagging each customer with the associated ‘lead_source’ from their CRM, Hubspot.
“Tagging the lead source has been huge for us. Being able to see the growth of these segments over time has been the biggest value we’ve gotten from ChartMogul so far.”John Thornton
Seeing how lead source segments trend over time is how John and the team decide where to spend their efforts. “Digital advertising as a PPC agency is very competitive,” says John, “it’s like the sharks versus the sharks.” Naturally, Black Propeller has a strong presence in paid search, but ChartMogul has helped them understand that organic search is the channel that results in the highest MRR. They’ve significantly invested in their SEO and have been consistently putting out solid content – and it’s paid off. John goes on, “we may not be experts in SEO, but we know enough to be dangerous. It’s all about great content and building relationships, and that’s what we’ve focused on over the last year and a half.” Reaching out to vendors that have audiences that overlap with those of Black Propeller and collaborating on a story is a large part of their strategy. It’s a mutually beneficial relationship that drives both traffic and leads.
“ChartMogul gives me the confidence to know that I’m investing in the right places.”John Thornton
The future of Black Propeller
John intends to use more custom attributes in ChartMogul. He has the hunch that some account managers are more adept at handling certain types of accounts. Black Propeller doesn’t specialize in a specific vertical, but services clients of all kinds – from B2B SaaS, to Ecommerce, and more. It’s helpful to track which clients are served by which reps in ChartMogul – to better understand employee performance for one – and to anticipate and mitigate churn before it occurs.
John has turned traditional agency-thinking on its head by running his business like a SaaS business. He’s switched to tiered plans instead of the percentage-of-spend model, knows which customers have the best LTV and potential for growth, and tracks lead source to MRR in order to double down on marketing spend. John says, “we’ve had the best 6 months we’ve ever had. We know where to invest in growth, and it’s been huge.”