A Funny Thing Happened on the Way to Profitability
Earlier this year we set out to run a transformative iterative process on ourselves called L.A.B. We set goals, we started with brand, and we got deep into methods. And we’ve been making progress on that in stages. In April, we took a hard look at the work we’ve been doing over the past two years to figure out where to go next. Then, we stopped being formal on the process for a lot of reasons in mid-April because something crazy happened:
The process worked.
And it worked to a degree that we didn’t see coming and couldn’t have imagined.
During our deep dive into who we serve and how we work, we realized two things:
- Enterprise level web development isn’t profitable, fun, or what we should pursue
- We’re the best at strategy, prototyping, smaller builds, and UX.
So we made a big change – a pivot. We’re a very different organization than we were in January.
Here’s what has been going on for the last 2 months:
1. We took at look at the landscape and figured out we had to change to stay alive
Markets change, business changes. I wrote a post about an agile approach to client work a while back. If you’re in Illinois, you know it hasn’t been awesome for nonprofits, education, or really most people for a while. We looked at that historical client base and knew we needed to expand into corporate work, which we had been doing anyway.
Also, variable fee work based on time and materials is crazy because:
- Web development projects are almost impossible to predict a year ahead of time
- When you become more efficient and build expertise, you use less time and can bill less, which means you are penalized for getting better
- There is a lot of risk for clients and us in time and materials billing because there is a lot of uncertainty for everyone
2. The change demands saying no
We still get RFPs and requests for huge web development work. We handle it two ways: we either take on the work with a development partner (sans formal RFP process) or we refer it to someone who would be better suited.
We say no to work, we say no to projects and partnerships that don’t fit our focus, and we say no to anything we don’t have deep expertise in. Scary, right?
It’s been the best thing so far because we can confidently and expertly execute what we say YES to. And the work is more meaningful. People are happier. Everything is more efficient.
3. The change demands new products and staff
We’ve reconfigured all of our work to be flat fee and modular. We’re hired a new UX Research assistant and Project Manager and have concentrated on building development partnerships with bigger dev firms than staffing up our own.
I started out the year with a plan to grow to 29 people by 2019 and that plan is totally out the window. Our new focus is built on our existing core expertise, not on churning out work and billing loads of hours. I’ve never wanted to be a huge agency and we’re going to stay true to that vision.
4. The change is based in data and research
I’m a big fan of taking risks and creating change. I’m also a big fan of data and analysis. We had a hunch that these changes were needed and were the right decisions, but we needed a set of numbers and other measures to validate our assumptions. We advocate this approach (duh) for anyone making any change – from implementing a new volunteer management system to creating messaging to market to a new donor base. No assumptions without metrics and goals, people!
What’s happening now?
So far so good.
How are we doing on our goals? Well, we’re nowhere near where we had originally set our sights, because those goals weren’t based on this re-imagined business model. Year to date, we have increased revenue by 56.9% and net income by 700.6% when comparing 2016 to the same period financials in 2015.
YOU CAN DO THIS TOO: nonprofits, social enterprises, startups, do-good corporations, everyone. We can help you.
For a regular corporation, this means that everyone makes a bundle, but as a B Corporation, what does that mean for us? Well, it means we can invest. We have the room to over deliver on our work and do more research that helps everyone. We have the room to hire and bring in more experts in research, UX, and content strategy. It means we can do our own research projects and finish the book we’ve been working on for you. It means we can devote more hours to taking on pet projects that don’t meet our budget requirements. It means we can focus on some new internal projects like our Women Supporting Women conference, our other exciting social impact-focused event that will be announced later in the year, and our UX coaching at 2112 and 1871.
It means we made the right decision.
It means L.A.B. works.