49:7 From kitchen table to agency exit

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Lee:

Welcome to the Trailblazer FM podcast. This is your host Lee, Slightly High, off the fumes that the builders are using. We don't know what's going to happen during this interview. We are joined today with the one and only Mr. Simon Penson. He is the founder of Scaled and he's coming to share with us a fascinating story of how he built his agency from the kitchen table. I'm going to give nothing else away. First, Simon, welcome. Thank you for bearing with me, especially over the last few days as I've been having fumes around my house as we deal with the damp issue. Thank you, sir. Could you please let folks know who you are and a little bit of interesting fact about yourself? You can go with favourite colour or maybe something else like maybe you're an international man of mystery. Over to you.

Simon:

I wish that was the case, but no, thank you for having me on, Lee. No, I completely understand the challenges that you've had over the last few days. I'm looking forward to having my first ever podcast interview, but with somebody that's high. I've not been on the set for open ones, so maybe that's next. But no, thank you for having me on. I'm Simon Penson. I am, I guess, an agency founder of an agency business, and I'm now running a consultancy that helps those type of businesses grow. We got quite a long way as we'll talk about, which was a very privileged experience. I really enjoy sharing the learnings and challenges that we had along the road there. In terms of something interesting about me, I started life actually as a reporter. I used to cover everything from people that had been at public fates to houses that had been on fire and everything in between. I actually edited Max Powers, for those that remember that, so Scantily Clad Girls and terrible cars. That was an interesting period in my life.

Lee:

Blimey, I'm not sure I can top that, so I'm not even going to try. Now, when you and I were chatting before we started the recording, you mentioned that you started out your agency from the kitchen table. I'd like us to go even further before that. Can you share with us what the stepping stones or what your life experiences were before you finally took the jump to start your marketing agency?

Simon:

The process started. Originally, I was a journalist, so I left school at 18 and did some vocational training in journalism because I was always fascinated by content, basically. I did my training on the job there, worked for some different local papers, ended up a national magazine company, but could see quite clearly that the writing was not on the wall, but the audiences were clearly migrating somewhere else. This was late '90s, basically. I would always been fascinated as well with systems and how they work and all of those things. Between those two spaces, I could see that audiences were interested in the internet and I was fiddling with it badly. I'm certainly not a developer, that's for sure. I'm playing with their websites and that stuff. I could see that they were growing despite the fact that they were fairly rubbish at the time. That started to tell me something and ultimately resulted in stepping away from my first career as a writer.

Lee:

What led you to thinking, you know what I'm going to do? Because this isn't a very common thing. I am going to go ahead and start a digital agency. You've got the content experience, you've got the journalism experience. What was the thought process to that big leap?

Simon:

That thought process basically played out between, I would say, about end of 2008 when we eventually launched the agency proper. So quite a period of time. But to compress it, as I said, it was a bit of budgeting mind shaft, really, being on these big magazines at the time. Max Bell was one of them and others. Their audiences were declining shortly, despite the fact that the product was probably better than it had been the year before. That told me something about the behaviors that were changing. But my belief was always that content is the only thing that's ever... It's the only conduit, basically, that creates audience and the only thing of value to any business, certainly, but anybody, a human being is finding like minded people and audience. The combination of those two things made me realize that there was this transitional shift happening that felt really important. Then alongside that, I've been playing around with really early iterations of websites. Very early 2000s, obviously, the internet, you have to catch your mind back, but very different Facebook, etc. Didn't exist, certainly not commercially. A really different place and the only thing you could do was build fairly terrible looking websites and then start filling them with content.

Simon:

But when you did, you started getting audience. And so that very organic process led me ultimately into thinking, Right, well, perhaps I can leave the day job. Because a couple of those websites would gave me a little bit of runway, basically, to be able to pay the bills. Between that and selling some stuff on eBay, we did manage to do that. And ultimately create what was really initially, like you said, consultancy from the proverbial kitchen table.

Lee:

That's awesome. I do remember the days of building websites. We used Frontpage by... I think it was Microsoft. Was Frontpage or Firstpage by Microsoft creating awful looking websites. But we had a great time in developing those. It sounds like a common story or a common journey story that we have of guests. They'll be in a particular industry for you as content. They will have some experience of building websites either as a hobby or as part of the work that they've done. They've then finally taken that leap to say, You know what? I think I might be able to do this full-time. Now you shared, you'd done two or three sites before taking the big leap. What was it like when you finally took that leap? Okay, I'm now at the kitchen table. I've got to pay my mortgage doing this. How did you go about in those early days finding new customers?

Simon:

It was really difficult actually, because you're right, those first sites were money through simple display ads, ad sense at the time as it was, and a little bit of early affiliate stuff. But I felt like the world was missing this opportunity to build audience online, and they were going to have to. I started off looking for clients that got that view and that vision. It was really hard work at the beginning because we had to do a lot of education. I say we, I had to do a lot of education work to get people to understand that the shift was happening, why I had this unique view of the world because in my experience and the fact that they could get ahead if they acted now. For the majority, they didn't get it, but the few did. We started off with a couple of 150 quid a month clients and built out from there, really. Interestingly, I think what it did do, and it wasn't by design, it was by necessity, is that... I see this the other way around now, which I think is really interesting, that it taught us, let's say, out of necessity to become sales first agency organization.

Simon:

I think I see a lot of agencies now that are run by really fantastic practitioners that have developed great ways of working and can really deliver performance with clients and have a network of so many people that they know. And so they can build an agency to a certain size, but then they'd never have to think about marketing sales before. And we were the other way around, you see. And I think in the end, although it was really hard and slow at the beginning, we then started to accelerate and it helped us get, I guess, further than most.

Lee:

So you mentioned we and then said, well, it was you at the beginning. At what point did it become we?

Simon:

We, that's an interesting question. I would say we were about... We launched back in the early 2009, and employee number one came along. I was working from literally from... It was actually the bay window of my lounge that I put a little desk into and then realized if I was going to employ somebody, it might be a little bit strange. So it's converted the back half of my garage into a two desk operation. So you have to come in the back gate, walk through the garden in the morning and come and join me in the garage. I think we were probably six months in, I would say, before we hired employee number one. The growth then was still, as I said, it was quite slow because of the education challenge. We grew between 2009 and let's call it in 2012, we only got to about 10 people. It was quite a slow low to give you some context. But then I think a combination of us refining and defining what it is that we were doing because we were helping to define what content marketing was that you and I would know now. We were the first, arguably, to really do that.

Simon:

And so we're on the quest for the Wave. There's just no Wave at the beginning. But we worked hard, refined and defined what it was that we did and offered. And eventually because of that, we established a bit of a reputation and then started to grow quite quickly.

Lee:

That's phenomenal. Were there any particular growing pains that you can remember?

Simon:

Lots. We certainly didn't make a beautiful journey of it. Fell down every pothole I could probably find along the way. Learn through your mistakes was definitely the order of the day because the challenges also that I had, although I did have a couple of mentors along the way, and we wouldn't have got so far. Certainly without the second mentor, never have got so far as we did to have that external support and focus on rather than in. But nobody had been on that journey before when we started. Nobody built. There wasn't a 50, 60 year old that I could speak to that built digital agency so that they could talk with real specialism about what it is that we were trying to do. We felt that every hole imaginable and it was very painful. I talk a lot now about the importance of resilience and the ability to consistently be able to do the stuff that hurts, not for days and weeks, but months and years is seemingly the only thing that gets you there in the end.

Lee:

Of course, that is the unsexy stuff, isn't it? Because so often we'll see on social media that there are gurus that are selling us on the get rich quick, the agency in a box, we've got the entire process so you don't have to. This is an easy rinse and repeat model. You can be working from the beach in a matter of weeks, etc. Unfortunately, that's not real life. From your journey as well, you're at an early stage where there isn't a whole lot of people who've gone ahead. Just like you drive on the UK roads here, there's potholes everywhere. I can definitely relate there. You've had to go through all of those potholes, and thankfully, you've gotten through the other side with a lot of hard graph. But also things are changing all the time, aren't they? We've now got this new dawn of AI. I keep joking that I say that for every single episode just so that... ChatGPT, random AI messages. Sorry. Just so that Google will pick up this podcast. But it's true, isn't it? It's almost like we're at another new dawn, aren't we, of hopefully not Skynet, but the world's changing yet again.

Lee:

And the world of content is probably going to change significantly. So it's really important that we do have mentors either who have gone ahead or just are wise in business. You mentioned the second mentor was really helpful for you guys. How did you go about finding them?

Simon:

Introduced. Actually, lived near me was one part of the journey. But then I was introduced to them through the fact that he ran a large consultancy business that wasn't in the agency space. Consultancies are a million miles away from agency business, but they are quite different. It was a much bigger business. It was a global multi thousand employee business. So really helpful from a enterprise thinking. This is how you build value and back office and all of those important things. But there wasn't really the support around the everyday. I've got this very specific problem about how do we scale sales and marketing? What should org design look like for 50 people? That stuff. That was very specific to the agency challenge was missing. But as I said, I think I would definitely recommend to everybody listening that if you're trying to build a business, having somebody, a non executive or advisor, mentor, whether it's formal or informal is invaluable if you have any ambition to get very far because otherwise you just end up working in the business and chasing your tail all the time and you need somebody on the outside. Even bosses need accountability.

Simon:

That's the key bit, isn't it?

Lee:

Do you remember any one particular thing that they said to you that maybe got your back up or made you realise that you were going about things all wrong? For me, just as a simple example, it was the fact that we didn't have a P&L. I didn't even know what a profit and loss sheet was.

Simon:

Yeah, not unusual. Amazingly. But yeah, interestingly, on the finance thing, I too was also I fought for quite a while about bringing in somebody on finance internally because I was like, I don't want finance people running this business. This is an agency business, it needs creativity. Then eventually, obviously, that happened. My life changed. Then I became literally Mr. P&l and could see the error of my ways very quickly. Now, I live my life looking at that. If you look at P&L properly, you can tell within about 10 minutes how well or badly a business is running and probably have these problems. I definitely missed that to begin with. That was another error. I learned the error of our ways. Obviously, in the end, we had a quite significant finance team in the house.

Lee:

I can imagine because you did actually scale from our conversation to 280 people, I think, and you had 20 million, I think, in billable hours going on. Was it at this point that the merger began or could you share a little bit of information on what happened there?

Simon:

Yeah, that was earlier. Very long story, very short. In 2015, we'd grown to about 50 people. We'd come across a really challenging glass ceiling, which isn't probably a case now, but because it was relatively early in big business investing big money in the internet digital marketing. We'd come across this problem where we'd win the marketeers hands down. They were like, When can we start? Then procurement would get involved and it was like, Who's this 30 year old CEO trying to sell us IT stuff? Don't we work with IBM for that? We just couldn't solve that problem. At the time, we'd had a few inbound offers for acquisition because as you can imagine, we were growing quite quickly and doing some new stuff too early for us. Long story short, we ended up merging with a business in Leeds called Sticky Eyes. It was a big decision at the time because obviously I lost control. They were 75, 80 people. We were 50 people. But we merged the two businesses in May 15 and actually the news of that went out and by August 16, we'd been jointly acquired. At that point, we were still much smaller than the numbers that you talked about.

Simon:

But then we had a three and a half year run out to the end of 2020. It grew quite quickly through that period.

Lee:

That's incredible. Then was it 2020 that you finally exited?

Simon:

I left a year early for all the right reasons, actually. Our earn out less until the end of 2020, but didn't have to stay around. By that point, we could see the trajectory of the business was really good. We built a really good management incentive scheme that meant that the majority of the upside from the earn out was at that point was then going to go to the senior team. They were really incentivised. I was just getting in the way, I'll be really honest. We had a fantastic senior team that were much smarter and more intelligent than I. They were doing great things and they wanted to build careers. I stepped out of business, obviously kept board seat, so to speak, and an eye on what was happening. But otherwise, they were running it day to day. Thinking I'd have a year off and travel the world and tick all the boxes. Then obviously COVID happened. That ruined that dream. I spent a lot of time staring at walls thinking, Right, okay, what do I do next?

Lee:

Covid has a lot to answer for, I'm afraid. So much. In fact, you wouldn't be aware, we had an event that was scheduled for 2020 in, I think it was the March. That was just slap bang when lockdown happened, and it was utterly gutting. We did manage to do it online and we've since been able to meet again in person. But just those few years of COVID, like I said, staring at the walls was no fun. In fact, that was a really good opportunity for us to stare at the damp problem that we had at the time in our home and find some good people to come and help us get that one sorted out. Definitely front of center of mind because I've just gotten the whiff as you were talking of the stuff that they're using. But anyway, well, that's an incredible journey. Now you've now founded Scaled. What are your plans really for the future? What are you looking to do?

Simon:

Yeah, so Scaled is the majority of my time and it formed very organically actually. And ironically, it's not particularly scalable and was never really designed to exist in real terms because I think I came out of that period of obviously running at 1,000 miles an hour in an agency and went, Right, I'm going to take a few years off and not do this huge amount then. But then started missing it and missing agency people as well, which was a really interesting piece of insight for me personally. I didn't think that I would, but I really did. As you can imagine, agency people started coming to me saying, Right, we know your story. Sounded really great. I'm sure you could help us. Could you help us grow? I didn't have any and still don't particularly have any ambition to grow a big consultancy to help agencies grow. But I think over the past few years, I've realized that I genuinely get a lot out of that and I really enjoy doing it. The purpose box is really tick there, which is really important for all of us, of course. It's helped scale to happen very organically in that sense.

Simon:

We've picked up the right Because we're not looking for loads and loads of agency partners to help grow the right ton of partners for the long term, really, and go on that longer term journey. That I really enjoy doing and takes up probably 75 % of my week. Then we've also in a similar vein, actually, because I started angel investing in 2016 in early stage tech businesses because of my fascination with tinkering. That organically has become actually a small venture capital business for early stage startups. And so we've got about 60 now investments. We've got 35 million assets in the management, I think. And so that business is now run by some, again, much smarter people than I am. I'm one of four founding partners, basically. And so I spend my time probably day a week or so in that business, really supporting tech and SaaS founders solve the same challenges, basically the growth challenges. But of course, there's a run accelerated because they get loads of money at the start. Got to make sure that they spend it right as well as don't fall down those holes. So yeah, between us, that's how I spend my time.

Simon:

And yeah, so it's great to be able to spend it, helping other people not make as many painful mistakes as I did.

Lee:

So for the folks then that want to try and avoid some of those potholes, what is the best way for people to connect with you, mate?

Simon:

Linkedin is always a good one. Obviously, Simon Penson there. Or you can email me at simon@scaled.co.uk. That's always good and always up for a coffee chat, virtual or otherwise, because it's good to try and stay close to the realities of the world of agencies.

Lee:

I also read on your LinkedIn that you aren't that far from me. Based on the fact that we've been struggling this entire podcast episode with the awful internet connection, are you up for a real live coffee soon? I'm not will come and meet you. That'd be amazing.

Simon:

Perhaps not in your room while you're high on fumes, perhaps. We'll go somewhere else. But yeah, that sounds very.

Lee:

That would make for an Elon Musk style podcast when he was having weed that time with his name. That's what I'm talking about. I've forgotten the guy. But anyway, well, anyway, Simon, thank you so much for your time. Thanks for bearing with me. And with that, we will say goodbye and I'll see you soon over coffee.

Simon:

Yeah, thanks. Cheers.