How To Grow Million Dollar Businesses
Selling Services Online | Zen Notes
Yaro Starak in conversation with Gideon Shalwick
Services Arbitrage Model
Services arbitrage is a business model which taps into the services of other businesses.
Gideon wanted to create a business that was location independent, scalable, profitable and probably most important of all one that was an enjoyable outlet for creativity. The drawback was in order to work these businesses required his mental agility.
Making sure the business can function as a profitable entity independent of you is an important aspect many people overlook when they create an online business. If your goal is to create freedom in your life then what’s the point in creating a business that needs ever increasing amounts of your time.
How Splasheo Started
When Gideon started Flick Desk with Nick Macintosh the idea was to create a business very similar to Odesk (now Upwork) with a focus on video editing. It was much harder than they thought.
After several months of hard work a friend introduced Gideon to a book on how to productise your service. The idea was to take one basic component of your business and ask how you can systemize it.
They decided to focus on just one narrow aspect, video intros, instead of trying to do everything for everyone. The was the beginning of Splasheo.
Over time Gideon has learned to appreciate the value in simplifying things like the 80/20 rule, what 20% of activities can you do that will yield 80% of the results. Taken even further, what 4% of things can you do that will 16x your results.
How Was The Splasheo Service Put Together
In the beginning they offered custom animated intros called Splasheos that were 3 to 5 seconds long for US$500. The customer’s logo was sent to a video animator in the Philippines and it sold really well
As good as it was it still wasn’t time freedom because it required a lot of talking to customers. That’s when they decided to introduce templates that people could choose from freeing up their time.
One thing businesses try to do is minimize risk by reducing creativity. If you can systemise a process then it removes the creative component and almost anyone can come in off the street and learn how to do it, like McDonald’s.
Creativity is still required in the setup phase but once the system is running it is removed.
How Is Splasheo Thriving Among Big Competitors
Q. There are a lot of big companies like Fiverr and Upwork that offer these services so why does Splasheo still have a steady customer base?
Getting in at the right time with the right offer was certainly part of it. It’s not entirely luck as much as taking action in the early stages.
What happens to a lot of businesses when the competition gets crowded is they start looking for ways to differentiate themselves. Splasheo does this by offering every customer a unique experience which requires human interaction.
Completed jobs are looked at by a real person to make sure they are perfect.
Refund rates are near zero, margins are healthy and the intro now costs US$47. The business has been running on complete autopilot for the last 3 years.
One thing Gideon did was to get influencers like Pat Flynn to give an endorsement about the service. How people initially learn about your website and the level of trust they come with is really important.
Any business needs the right offer in front of the right customer but without trust there will be no transaction. The lesson here is to build trust which Splasheo does by offering a unique service.
Once Splasheo was set up it didn’t require much creativity so it became boring. While Gideon was investigating ways to automate processes he met JC who had a development team so they joined forces to create Veeroll.
As a video editor the biggest pain point for Gideon was how long it took to create a video, he just wanted to get them out. The dream is to have software create the videos without the need for any human editing.
Flick desk was the first phase in doing this using people. Splasheo automated a sliver of process and Veroll does the same thing just for ads.
How Veeroll Acquires Customers
Neither Splasheo nor Veeroll had a traditional product launch. An earlier business was called Rapid Video Blogging which had a decent following of people interested in blogging using video.
That existing audience was introduced to Splasheo which gave it a kickstart. There were YouTube videos and Influencers which brought in more organic traffic.
Veeroll was a much harder sell.
The subscribers were down a bit but it was a very different audience, people that want video intros do not necessarily run video ads. Usually video bloggers want videos for the free organic traffic, they don’t want to be paying for ads.
Because the existing audience did not respond different strategies were required to grow Veeroll. The first year they made a million dollars primarily from doing webinars with a special offer.
Initially a lifetime access plan with software updates was sold for a single payment of $1,000. It was a good deal and gave the cash flow required to build a team and pay for marketing and advertising.
It was a tough first year finding partners and doing promotional webinars over and over again. They averaged one per week but It would have helped to have a smooth process with someone else giving webinars as well.
The partners that you join and the people they send you are critical for your long-term success and happiness.
Sometimes the people that promote you turn around and copy your product. The other thing that happened was a lot of people that joined were not qualified and that placed a huge drain on the support team.
When people join that have no idea what a landing page is, how to create a video ad or how to use persuasive language, you still have to provide support. The video ad required 5 lines of text but it turned out to be a massive challenge.
This burns out your team.
When you do a joint venture with a partner there is always a feeling that you’ve got to do something for them. Often the commissions are 50%.
What if there was a better way to do a launch:
- to grow your business without JV partners;
- you keep 100% of the revenue;
- there’s no stress in finding JV partners and worrying about the reciprocity;
The model Veeroll uses now it’s much better.
The Veeroll Way To Grow A Business
Guest posting is working well for organic traffic but paid traffic is also used. Joint ventures with select influencers are also used but they’re much more strategic partnerships.
The goal is to create an ongoing relationship. Instead of doing a once-a-year webinar Gideon now asks how can Veeroll be integrated with their software and vice versa, also how can his marketing be integrated.
Minimum Viable Test
Q. If someone is looking to create a services arbitrage business, what would you recommend as a minimum viable test?
In the beginning don’t try to automate or even systemise things but make it a manual process to see where the sticking points are. The service arbitrage model is really the minimum viable product you can sell for a profit.
To make that work you need to ensure these 3 things:
- Make sure you’re talking to the right target audience;
- Make sure you’re targeting an urgent problem for people;
- Make sure you’re solving the problem;
Do you have a good audience to problem match?
Do you have a good problem to solution match?
Only after you have these three things in place should you think about automation and scaling.
The services arbitrage model doesn’t cost a lot to set up because you can do it all manually to begin with even if you have to do it yourself, do it as a learning experience. If it doesn’t work you can quickly tweak it until you have it perfected.
Then you can think about automation, systems and scaling.
When you’re just starting a services arbitrage business and considering where to get traffic from initially turn to friends and family that you already know, then you can look at paid ads and thirdly influencers.
You should have a clear CTA so they can go to your website, give you a call or send you an email. Then you can engage them in the sales funnel.
YT Gideon Shalwick: How To Grow Million Dollar Businesses Selling Services Online