Transcription

@0:05 - Gabriel Flores (The Shades of Entrepreneurship)

Hello everyone and welcome to the shades of entrepreneurship. This is your host, Mr.

Flores. Today, I am here with Marcel Petitpas. Sorry, Marcel Petitpas. My apologies, Marcel. Marcel is actually calling from Canada. Marcel, how are we doing? 

@0:29 - Marcel Petitpas

I'm doing great, Gabriel. Thank you for having me today. 

@0:32 - Gabriel Flores (The Shades of Entrepreneurship)

No, I'm excited about this one because this is what you're doing is kind of unique.

In fact, when I was reading into it, I was like, oh, this is, I'm very interesting, but I'm not going to talk about it.

I'm going to let you talk about it. Marcel, before we get into what you're doing at Parakeeto, we're going to go ahead and let yourself introduce yourself.

@0:51 - Marcel Petitpas

Who is Marcel? Well, I am the founder of company called Parakeeto. And I'm just a, I'm just a normal guy.

I'm a human being just like, Everybody else and I happen to be addicted to entrepreneurship and have kind of been in this game for a little over a decade now I've tried to start a bunch of companies and really found my passion in what we're doing today I love fitness.

I love eating breakfast foods and I also am a part-time beekeeper. I own part of a honey business And so I get to hang out with bees in my spare time taking care of them Now that is interesting.

@1:27 - Gabriel Flores (The Shades of Entrepreneurship)

I got to admit do you like I'm afraid of bees deathly, but I do love honey So it's like it's like a catch 22 Yeah, I mean if you were allergic to bees I would be afraid of them too, but I'll tell you what I get stung a lot and it doesn't actually hurt that much Yeah, they're fair enough fair enough.

@1:46 - Marcel Petitpas

I've been stung one something. was like a kid and I've like reread it every I know So let's tell us a little bit about what you do perikido Well, we simply put we help digital and creative agencies measure and improve

their profitability. And in particular, we help them go beyond what they typically are looking at, which is financial statements, and getting more into the relationship between the operations of their business and a couple of simple numbers that connect the dots between what happens on a day-to-day basis, and operations, and the financial outcomes that they see retroactively on their P and L.

So really trying to help them gain mastery over the things in their business that actually influenced their success, how to measure those, how to manage against those, and how to get their whole team bought in around those numbers.

@2:30 - Gabriel Flores (The Shades of Entrepreneurship)

And you know, folks, the reason why I said this was very interesting in the beginning of this conversation is because I think a lot of times with companies, you know, this is mostly in-house things, you know, talking about profitability, talking about, you know, return on investment, talking about your strategy, things of that nature, and then what kind of happens is organizations begin to scale, of get larger in the revenue, you know, kind of coming in without having to do, you know, the marketing as much because they're now a known brand, they kind of stop focusing on the profitability.

or new lines of profitability, because they kind of just rest on their loins and they're like, we're good. We're continuing to move forward.

And this one's very interesting because I feel like it really does provide you an opportunity to not only continue to make profitability down the revenue stream that you're working on, but also identify new revenue streams, correct?

@3:21 - Marcel Petitpas

Well, yeah, you raise a really good point, which is I think a lot of people treat profitability like an event, but the reality is that it's a process.

And it's process because everything's always changing. Typically, the environment around an agency is changing. And I mean, if you run an agency the last five years, we had COVID, we had our, you know, the labor cost in North America skyrocket go up, you know, 30, 40%, especially in the steel drills that we hire for.

We had remote work push globalization forward by a decade. So we're now competing with agencies all over the planet.

So there's so much pricing pressure. And now AI is making it easier for people to do the things that used to require agencies to do before.

So our margins are under attack from everywhere. it's also true that most agencies are for changing internally, they're adding new service offerings, they're trying new things, they're restructuring their teams, they're changing tools.

And so all of that change means that whatever heuristic you use to determine how you were pricing things, whatever margins you might have had in past years, they're likely not still gonna be there as things move forward.

And so you have to have a deliberate process for keeping track of what's working, what's not working, and using that to guide decision making.

that's why we find it so important to build this muscle. And what we found is that because margin pressure is continuing to increase over time, the level of sophistication required for smaller and smaller agencies keeps going up.

so the things that you could get away with not doing until you were at 20, 30 people in the past, you now need to be thinking about at a much smaller scale in order to be sustainable.

@4:48 - Gabriel Flores (The Shades of Entrepreneurship)

And let's talk about how your system does that. Tell us, tell me a little bit about the agency of profitability fly.

@4:55 - Marcel Petitpas

I would love to hear about that for part like loop. Yeah. So at a high level, At level, we, again, see profitability as a process within the agency, and so to me, there are two critical feedback loops that should be in place in the agency, and this is a principle that you can apply to lot of different parts of the business, but in this case, we're going talk about it in the context of profitability.

The first feedback loop is a quantitative feedback loop, which is really looking at numbers to determine objectively, factually, what has happened, and there's two sides to this quantitative feedback loop.

The first is what are our assumptions about the business, and it's alarming how many firms have never sat down and just documented their assumptions about the business so that they know what they're expecting to get out of the business that they have designed.

And the way that this comes up, very often, is I ask them, hey, you know, if everything went perfectly, if your whole team was perfectly busy, took all of their time off, all of their holidays, if all of your projects were on time and on budget, what would the outcome be?

How much revenue would you make? How much profit would you have? And most people can't answer that question. And it's not a subjective question.

That's a mathematical question. You are limited by the capacity of your team. That's the principle of a service-based business model.

so that's the first step is we want to document our assumptions. What are we expecting from the business that we've designed when we sell work?

How much time are we expecting it to take? How profitable do we expect it to be? Over what time horizon do we expect it to take place?

And then the other side of that is actuals. So we know what we expect. We know what the plan is.

And then we want to measure what's actually happening. How much time actually went into projects? Where were we spending much more, much less time?

How busy were people? Who was much busier, much less busier than we expected? What was much more, much less profitable than we expected?

And that quantitative feedback loop starts to help us identify where there are outliers in terms of our expectations versus reality.

And we want to focus as much on the positives as we do on the negatives because we want to replicate the things that go better than planned.

And we want to hopefully address the underlying issues that are causing things to go worse than planned. that's the first part of the flywheel is this quantitative feedback loop.

And the important thing about this is The objective of that quantitative feedback loop is to facilitate the second feedback loop that we'll talk about here in moment Which is qualitative it is not to try to infer reasoning So this is really important as to trap that people fall into the data can only tell us what the data is but it can't tell us why the data is and That is a trap that is so easy to slip into where we try to get so precise so detailed so You know into the minutia around data that we can sit behind a spreadsheet and arrive at the reason why something is happening But that is often going to lead us to false negatives false positives and it tends to also be the reason that these systems become so complex And so expensive to manage that agency owners end up tracking everything but end up having no insight from that They have a mountain of data, but it's really messy.

It's not well-structured It's not thoughtful and in doing so they end up really not getting much insight or much action from that information So that's the first part of the flywheel is getting that quantitative feedback loop in place and only at the level where it informs the next right

@8:00 - Gabriel Flores (The Shades of Entrepreneurship)

conversation. Nice. And I like, I like, you know, it's kind of funny. You said about data. And this is something I actually tell people pretty consistently all the time about data.

Data will always give you what you want, but it'll never give you what you need, right? The data is there to kind of give you a direction.

It's not going to say this is why it's happening. This is, it's, it's truly as directional. And I, you know, I work in healthcare, focus on business development.

And so you're talking about, you know, operations and scaling and forecasting. It's a really important to understand what are your current revenue, revenue drivers.

then determining like, okay, operationally, if I want to scale this, what do I need currently? What do I have that's making this work?

And then operationally moving forward, do I need an employee? Do I need new tech? I need new software? Right?

these things that come into play. I think this is the, this is the hardest thing about scaling. I think the entrepreneurs don't really think about is the cost of scaling.

You know, you have to have that that pipeline to truly scale because lot of times what occurs is a small business will actually

scale too quickly and they'll actually, know, go under because of the financial costs.

@9:06 - Marcel Petitpas

So you're on that second file. What are those last two flywheels? Yeah, and just to just to reinforce what you're saying, a good mentor of mine once asked me a weird question, he said, Marcel, do you know what the sound of scaling is?

I said, it's a weird question. It goes, yeah, what does that what a scaling sound like? He said, it's the sound of cash being sucked out of your business at an alarming rate.

And it's true, right?

@9:27 - Gabriel Flores (The Shades of Entrepreneurship)

Because there's no true statement.

@9:30 - Marcel Petitpas

Because you have to buy capacity out ahead of where you are today. have to scale parts of the business that are going to be bottlenecks out ahead of where you are today.

the faster you want to grow, the further out you have to do that. so the cash required, but it can be really intense.

And especially in a service based business, where the cost basis of our service is not static, that could be a dangerous game because quantity of revenue and quality of revenue not the same.

so that to your point leads us into the second feedback loop, which is the qualitative feedback loop. So this is about now that we have the

data and we have an understanding of where we need to be focused as an organization. We now want to close the loop with the rest of our team.

so this is about getting the team, ideally the entire team involved in a series of meetings, looking at reports and having a curiosity-based conversation about, hey, team, here are six, you know, our website projects.

We're constantly coming in under budget. Clients are thrilled with the results. We're hyper-profitable on these projects. What can we learn from this?

Why is this happening? And is there something we can draw from this service line and apply to other things so we can replicate these results?

And conversely, hey, here's an area where things are constantly taking much longer than we expect them to. What can we learn from this?

Are we missing something in client intake that we need to be watching out for? Is there something about the scope of work that we're just not getting right?

Is there something in our process that's getting in our way? And the important thing here is we want to, as a management team, try to abstain from coming into those meetings with strong opinions and being prescriptive and instead create a collaborative conversation where the team starts to

come forward with ideas about how to solve these issues and close these gaps, and that leads to the second step in that qualitative feedback loop, is actions, right?

So that conversation should turn into whatever the steps we're going to take to adjust our process, whether that's in terms of how we deliver the work or how we estimate and scope the work.

So over time, the gaps between our expectations and reality start to close. And to the extent that we can tighten that up, we can scale more sustainably because the predictions that we make, the decisions that we make based on data are going to become more and more accurate over time.

And importantly, because the team is the one involved in that conversation and coming up with the ideas, it's more likely that they're going be bought in, that they're going to follow through on those things, that they're going to maintain those processes, and that they're actually going to be compliant on time tracking, which is the thing everybody seems to want to complain about, because they actually can see and understand how this information is being used to make their lives better at work.

So that's kind of the four steps, the flywheel, but really the two feedback loops in sequence.

@12:01 - Gabriel Flores (The Shades of Entrepreneurship)

So let's take a little bit of a step back. I would love to kind of hear, you know, you're talking about the business now, but what did you do previous to this?

you have other entrepreneurs and then how did you create the algorithm to help lead this business over?

@12:19 - Marcel Petitpas

So my first business, like a lot of people, was a service-based business. ran a small agency and we were doing virtual tours for real estate agents.

Back before you could do it with your iPhone and, you know, this Matterport technology had come to market. were doing this right when Matterport was just starting to be a thing.

And at that time, if you were familiar with this space, you'd know that it was very labor intensive. We'd have to go into a house with a tripod and this kind of gimbal type thing, put a wide angle lens on a DSLR camera, take something like 16 or it might have been even 30 shots in some cases per hotspot.

Do that for the entire house and then go load all those images into a software to create 3D images, and then load those 3D images into a software to create a model of the home.

so it would take, you know, 30, sometimes 40 hours to create a good virtual tour of a home. And this is at the time, you know, back in 2015, 2016, when houses were selling for, in my neck of the woods, 150, $200,000.

So a real estate agent that's making a two, 3% commission on that, they were not willing to pay a whole lot for that service, especially when in the buyers market, that house could fit for a year or two on the market, not be sold.

So I experienced firsthand in that agency what it meant to have tight margins and really be constrained in order to scale.

And so for that reason, I walked away from that business because I came to the realization very early on that this could never really be more than a lifestyle business for me, especially as I saw the technology pipeline coming down, that was going to basically make this really easy for real estate agents to just do on their own.

And so that's where I became familiar with the problem. I then got interested in software, mostly because I'm a sucker for punishment, tried to start a couple software companies.

And that's where I met my co-founder, Jared, who. Started this company parakeeto with me originally and it was his idea.

had already started working on it He ran a big software development agency any he was spending a couple days week in spreadsheets trying to answer You know these simple but complicated questions like are we making money on clients and projects is our team busy enough?

Who and when do we need to hire and he just called me up one day and he said dude This is such a pain in the butt There's got to be a better way to do this all my friends that run agency struggle with this and it just hasn't been solved yet And so that was almost six years ago now, and we've been focused on this problem ever since and it's been a really challenging ride to figure out a way to really solve this like fully solve this in a repeatable way and develop the framework, but we've kind of finally figured that Out the last two years and now we're finally starting to scale and grow and impact more firms.

@14:46 - Gabriel Flores (The Shades of Entrepreneurship)

I love it I love it and I would love to for you to kind of you know one of the things I think we've The most value we tend to get is you know the struggles because we learn quite a bit from the challenges Can you kind of elaborate on some of the challenges that your team?

@15:00 - Marcel Petitpas

you face when you're trying to scale this business? Yeah. Well, I think the first real challenge that we had was finding what we would describe as product market fit.

And that was essentially the first three years of the business. And I could talk for hours about all the things that we did wrong in those three years.

But if I could summarize it, I think the biggest thing that we did wrong in those three years was we were trying to build the business for ourselves and we were placing a lot of constraints that blinded us to opportunities to better serve our customers because of the interest that we had in the business as founders.

And in particular, we wanted to be software founders. We wanted to build a software company. And so we kept trying to solve customer problems strictly through software.

And if anyone, you know, listening has ever built software before, you know that software is really, really, really good at scaling something that works.

It's a terribly inefficient medium for figuring out what works. Oh, because it's very slow to change. It's very rigid, right?

But that was the biggest mistake for us. was like, we were trying to mold something that we should have been molding with clay, but we were using a chisel and working with granite.

And it wasn't until about three years in when we had learned a lot about the problem by just being in the space and interacting with customers for the better part of three years that I asked the question, if we burned everything to the ground, after, by the way, at this point, we had built and scrapped basically two full software products.

I said, look, if we were to start over, no something costs, knowing everything we know today, and we just built the ultimate solution for this problem, it didn't have to be profitable, it didn't have to be scalable, it didn't even have to be possible, just like, what would it look like?

And we brainstormed that, and at the end of that exercise, what we figured out was clients need more than just software, they also need consulting to help to walk them through how to really think about the design of their data system, how to clean their data up and make it actually valuable and useful, how to maintain the cleanliness of their data over time.

how to interpret and act on the information. so we decided to combine the tech that we were building with consulting and that completely changed our business.

It completely changed our client's business. And ironically, it actually put us on a faster path to building technology that is commercializable, which we're now starting to get back to today.

So yeah, I think that was our biggest struggle is finding product market fit. And the big insight there was we were so focused on what we wanted that we kind of ignored obvious opportunities to add more value to our clients.

@17:31 - Gabriel Flores (The Shades of Entrepreneurship)

You know, it's interesting that you mentioned, you know, when you're going through your product market fit kind of thesis, trying to determine like, who is this truly for?

understand we have a minimum bio product, we're putting it out there. Okay, now who's it actually for? one of the things you mentioned is, you know, what you realize was it wasn't just the software within the consultants as well, right?

need somebody to help them. And that's one thing I'm actually going to a conference next week and presenting on imposter syndrome.

And it's folks, if you want to look more about all of my stuff, check out the shades of E.com, please.

subscribe to the newsletter. We'll also have this recorded on there. But one of the things I was talking about to the, you know, organization development team is like, you know, we do a lot of leadership classes and then telling people how to lead.

But we don't have any classes on how to follow. You know, folks actually want to stay within that follow, you know, sphere and they don't want to lead.

Well, how do you follow? Right? is a good follower? I think that's kind of where the consultant piece comes in.

You know, it's like, Hey, we're teaching all these individuals how to lead. But are we teaching them how to also work with the followers?

Right? That maybe they don't, they don't want to be like, push that far. I like, I call them RIP employees.

They're the retired in place. They come to work, they get stuff done. But they just kind of want to do the bare minimum.

just want to kind of escape by it, which is fine. Right? And so it's interesting as you begin to, as you begin to like go through that process, you begin to identify, Oh, wait, you know what?

There's actually a different need over here or a different support that's needed. So it's really unique that you guys were able to find that.

Now, once you guys found... your minimal file product or your product market fit. So you found the people that want it.

How do you go through, like, how do you identify the right pricing model for a service base on value and risk?

@19:12 - Marcel Petitpas

Yeah, so this is really important. So now that we become a service-based business, the challenge is the cost basis, and this is true by anybody that sells services, the majority of the cost basis for a service offering is the amount of time and labor that goes into delivering it.

And as you know, in some cases, it's very hard to predict, in fact, it might even be impossible to predict how much time and labor is gonna be required to deliver the promise that you made to a client.

And this is where I start to take exception to, I think, some of the conversation that is happening in our industry around pricing, that I think, frankly, a little bit of nuance.

And it's, dare I say, dogmatic, in some cases, where you hear these blanket statements like, you can't possibly scale an agency building by the hour, or, you know, like, you can't be profitable.

selling hourly, and the only way to price is to productize or to do value-based, you know, and mathematically that's just not true.

And if you look around all the biggest consulting firms on the planet with tens of thousands employees, they're all selling time.

So it's obvious that that's not a true statement. What's important in any pricing model, from my perspective, is maximizing your margin, which is the delta between your cost basis and what you're getting paid by the client.

And there are situations where you can maximize your margin by taking on more risk, and that typically correlates to flat rate or value-based pricing models.

And there are situations where inherently there's a lot of risk in the engagement, and you're better off sharing that risk with a client, where you might not have as high of a ceiling for your margin, but you're going to limit the downside that could exist if it was to take a lot more time than you expected, and you ended up not getting paid for that time.

And in some cases, you actually up losing money and paying to work with the client. And those of you that have been in services for some time, you probably have a couple

@21:00 - Gabriel Flores (The Shades of Entrepreneurship)

full of stories of situations where that's happened to you.

@21:02 - Marcel Petitpas

It's not fun. So the way I typically think about pricing is you want to aim for a 70% delivery margin on anything that you sell.

That's the general rule of thumb without knowing more about your unique business model. And so what that means is for every dollar that you get paid from a client after you pull out, pass through expenses.

you know, for example, if someone hires you for Facebook ads, pull out the money that goes to Facebook. So what's left over, that's your agency gross income.

You want to spend no more than 30 cents on a dollar of agency gross income to get the promise delivered to a client.

So for example, if you had a $10,000 project, you want your labor costs to not exceed $3,000 to get that thing done.

That way on the profit and loss statement, after all the things that don't go as planned, you end up at roughly 50 cents on every dollar left.

You spend about 30% of that to run the business, and marketing, administration, facilities, founders, salaries, and hopefully you've got 20% leftover.

That's what we want to plan for. that's why we want to aim for 70%. And then the question is what's the right pricing model for you and to me there's kind of two main things We want to think about in that equation the first is value So if you let's imagine in your mind draw quadrant the vertical axis is value at the top of that you have high value Engagements at the bottom that you have low value engagements And when I talk about value if I mean what is the value to the client?

Right is this something that is going to create? Hundreds of thousands or millions of dollars worth of value for that client or is this something that's pretty?

Commodetized and it's just not a big needle mover for them. It's more of a More of you know kind of a pushing buttons type of engagement.

There's two things that typically drive value It's your positioning which determines how many options your client has to compare you to and so just a simple example of this if You're positioning is where a graphic design firm?

Well I default you're putting yourself in a very competitive environment because Canva is an alternative to you as is IDO and everything in between whereas if your positioning was we help I

Enterprise B2B software companies visually communicate complex systems using design well You're still telling graphic design, but that positioning puts you in a much smaller category and chances are they can't find a very big number of firms Specialized and solving that problem.

So positioning is big and then relative value is big as well. So Understanding that the same outcome from a relative perspective is not the same from an absolute perspective So if you increase the conversion rate of a website by ten percent Well, the value of that is different if that website does a billion dollars in sales per year versus a thousand dollars a year in sales So understand how valuable this engagement is that step one and then step two if you think about the horizontal axis is how risky is it and risk Comes down to how well can you predict what it's going to cost you to get the thing done?

If you have something that has a great process. It's very predictable. You've done a lot of times It's very low risk that's great if you have something that you've never done before Or that is inherently risky like for example custom software

poor development in sort of a white space on a new programming language that's not very well supported. That is inherently risky work and the error bars around your estimation are going to be quite high.

And in some cases, there might even be a methodology you're using to deliver for a client that is inherently iterative.

So for example, the agile methodology, the whole foundation of agile is we don't try to make too many assumptions.

We don't try to take waterfall approach to this. We do a little bit of work. We learn we adjust and we continue that cycle to deliver value as quickly as possible.

so a contract model that tries to create a scope of work up front that makes assumptions about the entire project to completion would actually work against the methodology that is best suited to solving that customer's problem.

And so that would be problematic. So that's the quadrant. We have value on the vertical axis. We have risk on the horizontal axis.

And I can talk through based on where you sit in that quadrant, but usually the best pricing model is for each type of engagement.

@24:57 - Gabriel Flores (The Shades of Entrepreneurship)

But I'm going to pause and have a Well, one of the things you kind of talked about in the front as far as profitability was time, right?

Because time erodes profit, right? So how do you track individuals, companies, how do you track time with those individuals that don't want to track without a time spread, like a timekeeper?

How do you actually track time to make sure you continuously be profitable?

@26:23 - Marcel Petitpas

Yeah, it's a great question. I want to come back to that. But first, I want to come back to erodes profit.

That's true in the context of a flat rate billing model. It's not actually true in the context of a time based billing model.

And therein lies the magic of understanding the contract model and how it relates to the situation that you're in.

So if we come back to the quadrant, when you have low risk work, that's when you want to do flat fees.

low risk, low value, that's typically flat fees, right? So if you came to me, said, Marcel, I want a website, and I said, great, problem Gabriel, the website is $5,000.

@26:56 - Gabriel Flores (The Shades of Entrepreneurship)

I saw some examples of the low and the high.

@27:00 - Marcel Petitpas

Yeah, yeah. So low value, low risk, that's when I'm going to say, hey, you come to me say, I want a website.

go, no problem, Gabriel, five grand, two weeks blazing fast, proven for your industry. What do you think about that?

might go five grand for a website. That sounds like a good deal. I might make $500 an hour on that website.

But it doesn't matter to you, because you got a good value. And I knew what the risk profile was, and I came in under budget.

And if I can price the risk inconsistently, that's great. I win. A high value low risk engagement is where you might say, Marcel, I want a website.

I'm still going to generally offer you a flat rate, but I'm going to anchor it to value. And so instead of saying the website is five grand, so deliverable price, I might say, well, Gabriel, tell me a little bit about your business.

How much revenue do you do through your website today? How much do you think a new website would improve your sales?

interesting. This would add a million dollars to your business. Well, you think it'd be fair to invest 10% of that for a very similar scope of work, because I'm arbitraging the high value nature of that conversation.

Now, that takes a lot of skill, it's very nuanced, but that is an example of a value-based price, and there's an extreme version of value-based, which is outcome-based, where I might say, hey, give me five grand plus x percent of every sale above and beyond what you got last year after we launched the website, right?

So we have low risk, and that's why we can do that, because we know to a pretty high degree of certainty what it's going to cost us to earn that revenue, whereas on the other side of the spectrum where we have high risk work, this is where we don't really know how much time it's going to take, or we know that the scope is going to change as we learn things, that's where it makes sense to sell time.

So low value, high risk, that's when hourly actually makes a lot of sense. So you might come and say, Marcel, I need a website, and I go, cool, no problem, it's $150 an hour, and based on what you're telling me today, I think this is between 100 and 200 hours worth of time, but as we work on this and learn and your ideas become more concrete, then we'll be able to close in on a final product and give you a better sense of what it's going to cost.

When we go up to high value, low. high risk, sorry, high value high risk, that's when we typically want to start doing abstracted time materials.

So what we mean by that is we're still selling time, but we're generally abstracting away from individuals and abstracting away from time units that are small to larger spots of people and larger units of time.

So an example of this would be agile firms that are selling, know, million dollar software development products. They're not going to sell you hours.

They're going to say, Hey, this cross functional development team that is comprised of like eight people is $20,000 per sprint per two weeks sprint.

We think that the backlog you've given us today is anywhere from 30 to 40 sprints. And then as you're building that and the requirements are changing, the stakeholders are changing, the clients asking for whole bunch of new things.

Because we know that's going to happen, the beautiful thing about that contract model is we don't have to stop and readjust the scope every time it happens.

We just go yes and do you want that stuff before or after the other things that are in the backlog.

But we're going to get paid for the time no matter what. And that's what insulates us on the high

a risk size we're selling time. So in that case, more time, actually, as long as we're managing the account properly and setting up right expectations, more time actually means more profit.

But it's because we've architected our contract model to account for the fact that it's likely to take more time or the scope is likely to increase over time.

that I want to wrap that one up and I love it. can talk about now your question about time tracking compliance, which is a good one.

@30:24 - Gabriel Flores (The Shades of Entrepreneurship)

Yeah. And you know what's interesting about that too is I'm starting to think of like my career, my role in things of that nature and then my wife.

She's very much like, hey, I have to build so many hours in a day for these clients and so on and so forth.

And maybe it's like I actually need to create value back to the organization, whether I work 40 hours, 10 hours or 100 hours week.

They just want the value, right? So it's interesting kind of seeing the nuances and I'm beginning to start to think of Salesforce.

Obviously, when you're talking about, you know, if you want this CRM, okay, it's this cost this much, you also get a, you get a consultant with that.

But if you also want this over here, it's also Salesforce is like an onion and every Okay.

@31:00 - Marcel Petitpas

time a little layers like cry more and more because it's like you're just like come out the news things like oh yeah you can have it but it's only you know $30,000 a year but I mean hey it's brand new you should totally get it so it's it kind of reminded me of sales for us little bit but yeah let's go back to you know how do you how do you get a team that to want to attract their time how do you get it to especially if they don't have a time sheet yeah okay so two things I want to talk about here the first is the conflation between tracking time and time sheets most people when they think time tracking they think time sheets and it's true that time sheets are one of the most popular most common ways to track time but it's not the only way to track time the act of tracking time is the act of creating a record of where time is going in the organization and generally the purpose of that is to create a feedback loop between our assumptions and reality so we can understand where our assumptions do not align to reality and that should be a good thing for everyone in the organization it means that things will be more predictable we're not setting unrealistic expectations we're consistently profitable we have a cash

offer. And so, especially when you have large time allocations going on. agile teams typically can do this really well.

of my favorite alternative ways to track time is called resource plan based time tracking. So, imagine, you know, you run a firm that builds big websites and you're allocating your developers to the same project for full day allocations over the course of several weeks.

Well, in that situation, a project manager that has a team of, let's say, can easily keep a directionally accurate sheet or a directionally accurate plan of where time is going from a resource planning document.

Because if through their daily stand-ups with their weekly check-ins with the team, all they do is capture material changes to that plan.

So, you know, Gabriel, you might say, hey, I got pulled into this fire on another team. So, these two days, I wasn't on this client, was on another client.

As long as those things get captured, that record of time, when you export it to a CSV, it's going to look exactly like a time sheet.

And it will probably be just as accurate. If you had bugged all of your developers to fill out a time sheet each week, you're going get the same outcome.

So that's the first thing I want to impress on people is that time sheets are not the only way to track time.

There are other ways to create that record. And at the end of the day, what's important is that you have a directionally accurate sense of where that time went.

And the larger your projects are, or the longer the timelines are, the less precision you need in order to have accuracy.

@33:24 - Gabriel Flores (The Shades of Entrepreneurship)

Does that make sense?

@33:25 - Marcel Petitpas

Yeah, precision and accuracy are not the same thing. They're often in conflict with one another.

@33:29 - Gabriel Flores (The Shades of Entrepreneurship)

That's interesting.

@33:31 - Marcel Petitpas

Yeah, that's point number one.

@33:33 - Gabriel Flores (The Shades of Entrepreneurship)

Yeah, me over here. my brain's kind of circling right now because that is a very unique kind of concept.

@33:39 - Marcel Petitpas

I don't think people really thought about before. Yeah, like if we think about precision, like you asked me, what's the weather today?

Can I say, oh, it's 71.6 degrees out? Well, that's a very precise answer. if the real answer is it's going to be between 68 and 79 degrees today, that's a more accurate answer despite being less precise.

And so remember that. come back to the original kind of framework, the flywheel, the objective of the data is to give us a directionally accurate sense of where to look.

It's supposed to help us make the right decisions, have the right conversations. Oftentimes, we don't need a whole lot precision to get that answer, and it's the pursuit of precision that makes things so complicated and so hard to follow, and so arduous that we end up not actually collecting the data in the first place, or we collect the data that's so messy and so all over the place, that we actually end up eroding the level of accuracy in our reporting system as a result.

Basically, we make stuff so complicated that we don't get any value out of it, so be careful not to conflate those two things, because more precision does not always lead to more accuracy.

Often, there's point of diminishing returns, and it's way earlier than you think it might be.

@34:44 - Gabriel Flores (The Shades of Entrepreneurship)

That's actually, as mentioned, folks, I'm presenting next week on a posture syndrome, and that's actually something that perfectionists actually go through.

If you suffer from an posture syndrome, might be a perfectionist, you really want to get things done perfectly every time, but that could also lead to procrastination.

Right where you're wanting to get things done so perfectly that you're actually procrastinate and you're not getting into it at all because it never is perfect and at the end of the day let's be honest nobody's perfect right so don't judge yourself on those perfectly curated social media accounts trust me folks.

Nobody's perfect last person that was perfect walked on water and the world didn't treat that individual too well so you maybe you don't want to be perfect but but again don't don't to your point I think sometimes you know getting things just that the I really like that precision versus not the analogy is phenomenal the time analogy is like yeah sure you can say it was 71.2 degrees or you can say it's going to be between this and that second one is more accurate even though the other one is more precise which is very interesting to kind of put that in kind of a concept and so we're we're let's talk about you know the team where where are you guys going to go forward who's you know one of the things you actually mentioned it was the minimal vile product.

Who is now your target audience and how do you brand and market to your target.

@35:59 - Marcel Petitpas

Yeah it's a great question. Gabriel, I want to tie a bow on the last question that you asked before I answer this one.

And just, I'm doing this because I know if there's people that are like me that are listening to this podcast, there's like an empty box.

Yeah, we opened and we haven't closed yet and they're just gonna have an aneurysm. Yes, we don't fill it in.

@36:13 - Gabriel Flores (The Shades of Entrepreneurship)

So I can get my email, you know, blown up by the way, the shades of you dot com for those interested.

@36:22 - Marcel Petitpas

Okay, so I see you, everyone. So the first thing we just talked about was way too much complexity based generally on the pursuit of precision.

And that makes filling out time sheets, maintaining whatever the record is that you're asking for from your team, harder than it needs to be.

That kills compliance. that's reason number one that lot of people will struggle with this. But reason number two, and this is the most profound reason, is the team often is not exposed to how this data is actually helping impact their lives.

And their jobs. And this comes back to the first thing we talked about in the flywheel closing the loop.

Most people's experience of track and time is I sit down, I fill in my time sheets. And it goes into a black hole and I have no idea who.

who's looking at it, what decisions they're making, what they're thinking when they look at it, how it influences me.

And so the most important thing that you can do is sit down with your team and have conversations around the data that they helped create with their time tracking and show them how a lack of accuracy or a lack of completeness in that data affects your ability to make decisions that are actually good for them, to give them the right amount of work, to sell things for the right amount of money, to be profitable, to resource plan, and make hiring decisions at the right time, to not be overstaffed so that their job is at risk, right?

These are all the kinds of things that you need to show them how this data is actually influencing your decision making.

And once they have that understanding, you'll find that the level of buying is significantly higher, and they'll start coming to you, asking for the more tactical things that we get focused on, like a better tool, some AI tracking, a better workflow, a calendar integration, like all of those bells and whistles, they'll start asking for them because they'll start to understand that this is important.

to actually start doing. So I wanted to close the loop on that and then happy to talk about, yeah, our customer and what we do.

@38:05 - Gabriel Flores (The Shades of Entrepreneurship)

Yeah, you know what I liked about that? I give you a great example of that, folks. So again, I'm working in the healthcare industry.

A lot of our front desk, folks, when the patient checks in, we have to capture quite bit of information, right?

Who is your primary care provider? Who referred you, what's your soul on and so forth? But if we do not capture that information at the beginning, on the onset of that patient appointment, and then I'm going back trying to actually scrub some data so I can create a business development plan to then forecast where we're going to go, well, if I don't have that data, then I'm kind of lost.

what we did is we went back to the front line staff and said, hey, why won't you bring you into this strategy conversations?

I want to talk about the importance of capturing this information because the value back to you is now you're not going to get a call in 20 minutes or an hour from an outside provider or an internal provider or for me kind of asking for that information.

So it allows you kind of more time to be more efficient and doing your own thing, right? Focusing on

your own work because you capture that information at the onset of the conversation. So that's just one example I'd have.

Now let's get back to your target audience and how do you market to them?

@39:09 - Marcel Petitpas

Yeah, so our target audience is creative and digital agencies. They typically start experiencing these problems to a level where they can't ignore them anymore around one often closer to two million dollars in revenue and then we're generally helping them you know up to 10 and in some cases you know 20 or 30 million dollars in revenue.

And the way that we've marketed to them, the primary way is exactly what we're doing today. I call this borrowing attention.

You go find incredibly charismatic, handsome, really good at plugging things people like Gabriel here who have an audience, a cast of you find these people that have authority that have an audience and we've just gone in and offered a perspective that we hope is valuable to their audience and borrowed the attention that you've worked so hard to create.

And you know we've done that on hundreds of podcasts. And then what tends to happen is a lot of the people that have great podcasts, they also have coaching businesses, events that they run, mastermind groups or businesses that sell complimentary services to a similar client that we could partner with.

And so that process of just going out and saying, Hey, how do I partner up with and add value to the audiences that other people have already gathered has really opened the door to a lot of opportunities to get in front of the right people.

And that paired with some SEO, because the nice thing about doing that is you get a lot of backlinks in a very organic way.

So you're halfway to having a lot of SEO juice, those two things is what is about our business to scale to over million dollars from the time that we've started with, know, very like we haven't had to run paid ads, we haven't had to do cold out bounce for a lot of the capital intensive channels are still kind of yet to come for us.

@40:49 - Gabriel Flores (The Shades of Entrepreneurship)

Nice. Now, do you guys do you guys primarily work with like for-profit organizations? Or do you guys also work with nonprofit organizations?

@40:57 - Marcel Petitpas

Or is it a bit of mix of bulls? We've worked with some nonprofit organizations, we've worked with a lot more social purpose organizations, so they're still, you know, for-profit businesses, but they have a social purpose elements to them, whether they're a B Corp or 1% for the planet, or they just, like, a certain amount of their profit is invested in maybe doing work for free or for under, you know, like, under-resourced groups.

you know, in the creative agency space, there are not really a lot of not-for-profits, and we stay pretty squarely focused on that industry at this time.

@41:31 - Gabriel Flores (The Shades of Entrepreneurship)

Now, what advice would you have either for an aspiring entrepreneur or an aspiring creator?

@41:38 - Marcel Petitpas

Oh, I think my biggest piece of advice would be that there is no business without a problem, and that's it.

value is the delta between the problem that someone is feeling and the solution. And that's the hardest thing about entrepreneurship, is finding these wedges of value.

value that often come with solving really hard complex problems that nobody has figured out how to solve before and finding wedges of value that have enough margin in them for you to actually build a business and you'd be amazed at how much margin is required to really build a business.

You know a lot of it and sustaining that margin over time is also really challenging and so become obsessed with the problem.

Every business that has failed for me when I look back has been the same pattern. I've had an idea and tried to back into a problem with it.

It's never worked for me. It always happened like the things that have worked for me happened the other way around where there was a problem and I went to solve it and that problem was the foundation that we could build business on top of.

So that's probably the most important thing I could articulate.

@42:44 - Gabriel Flores (The Shades of Entrepreneurship)

Yeah, that's a great point because you know an idea is not a problem. I really like that statement and folks you tend to sometimes if you solve a problem and you begin to take a step back and you look you begin to realize there's actually a lot of people that have this similar problem right and so then you kind of be.

Okay, now you have your minimal file product. Now you can kind of go out and see, okay, out of these people that have the similar problem who are willing to actually, you know, pay for me to solve that problem, right?

you got your product market fit, right? Now you kind of start to narrow it down and really start to identify, you know, who's really needing this service because sometimes with ideas, we like to share our ideas and our close friends will always say, like, that's a phenomenal idea.

should go, go, go, do it, right? getting out in the market and testing it, you know, one gentleman said, if, if you believe you're a thought leader, well, go put your thoughts out in the world and see what they think.

@43:33 - Marcel Petitpas

Right. So I want to build on this because I have this four X MVP framework that I've talked about to kind of younger entrepreneurs, entrepreneurship classes, and I think it's perfectly aligned to what you're saying is people always focus on the MVP, the minimum viable product as being kind of like the first milestone, but I actually think that's putting the cart before the horse.

In my experience, MVP, there's three MVPs that come before the product.

@43:57 - Gabriel Flores (The Shades of Entrepreneurship)

The first is a minimum viable problem, which we've just talked about.

@44:00 - Marcel Petitpas

Second is what you just express which is your thoughts right and we call that the minimum viable point of view What is your point of view on why that problem exists why it hasn't been solved?

What's wrong with all the existing solutions? How is the world changed and what is the new way of thinking about solving this problem because often?

That's the first sale that needs to be made is having someone understand that the status quo is Actually not going to work anymore and there's a new way to look at solving this problem Then this is the part we kept skipping over at parakeetos why it took us three years and two software products to finally forget What worked is minimum viable process, right?

talked about this earlier building a product is function of scaling a process that already works That was the mistake we kept making we kept building product But we didn't actually know what the process was that created repeatable results.

So oftentimes the first Version of the product is going to be some kind of a service where you're getting paid to figure out What is the set of steps that repeatably create the outcome that we're looking to make for clients and once you've figured those three things out then

And it's time to start building product, which is really a framework around that process to make it more efficient, more scalable, more predictable, more profitable, the case might be, so you can start to build a business.

so that framework has really served me and served a few other people. And hopefully it's helpful for folks that are thinking about getting into a new industry.

@45:18 - Gabriel Flores (The Shades of Entrepreneurship)

And you know what I liked about that, the second MVP, really what it allows you to do organically is it kind of allows you to identify one, what's your value proposition, right?

What is what makes your company valuable? And also your differentiator, right? You're essentially now identifying because you're doing, you know, market research or identifying who the competitors are.

What do they do? What do they don't do? What can you do better? What can improve? Or if it's a completely new, you know, solution, the problem that people couldn't like you mentioned, very difficult problems, nobody actually solved it before.

It's really is an opportunity for you to kind of begin to say, this is my true north. This is this is what I'm going for.

This is why I asked you that question. I'm really glad you answered it the way you did in regards to the profit versus non.

profit. And you said, you know, my focus is the creativity, whether your profit or nonprofit doesn't, I'm the creativity area.

That's where my niche is. You know, and I think a lot of times, some people go too broad on their market, on their network, right?

saying like, my target audience is everybody, you know, everybody in the world is like, well, lot of people are different, you know, you, you got, you know, cultures are different, you got ethnicities are different, you got their salaries are different, right?

So they'll all these demographics that come into coming to play when you're actually identifying key players. So I'm really glad you said that because it does that process allows you to kind of say, one, do I does does my idea make sense?

Because I'm taking it out and telling everybody to somebody already have that idea and they're doing it better or can I do it better, right?

And then you know, what do I have the processes in place to actually make this work? And because that will allow you from a from an entrepreneurial perspective to kind of save that investment fund and tell you truly find something that you know what, let's go, let's go balls the wall and do it.

I talked to an entrepreneur that day, individual wanted to buy a couple, like 20,000 units of a skin care product, like, hey, whoa, before you do that, why don't we buy three bottles, one of each of the skin care products you're going to try, let's go out to some farmer's markets and just have samples, give out those sorts of samples and see from there who engages with you, who likes them, ask them how it smells, how it touches, know, to have a couple of samples maybe you can give out instead of buying, you know, 20,000 units and maybe they never sell, you know, at least you're out there kind of getting a general feel of, you know what, this is that's kind of going back to like, if you think you're a thought leader, go ahead and put your thoughts out in the world and see what they say, right?

100%. So let's let's talk about in the next five years, where is where do you plan to go?

@47:43 - Marcel Petitpas

Where's where's Marcel plan to go the next five, 10 years? Well, it's funny, we're just coming off of a team off site, we floor hole team into Montreal last week, and I'm fresh off of kind of telling them about what that vision is and getting aligned with my co-founder about it and really what we're

we have figured out is that this problem of measuring and managing profitability in a service-based business, it's not an input problem and it's not an output problem.

There's two things that make it difficult. Number one, there isn't really a framework in our industry for exactly what are the numbers you should be paying attention to, exactly how do you calculate those numbers, right?

we could talk about a utilization rate, for example, but what exactly is someone's capacity? Does it include time off?

What about holidays? What about sick days? What about the internal time? What's a billable hour? Is it just the time that we build to the client or is it all the time we spent on the client project?

And those nuances exist across all the different metrics. So how exactly should you do it? That's the first thing we've spent the last six years building that framework and testing it with hundreds of agencies, testing all the edge cases.

So we have that. The framework so that if you install this, you know exactly if you press on this metric, how it's going to affect all the other metrics and it's all mathematically consistent.

So that's piece number one. the next piece now is the technology to. facilitate this. And here's what we know is that a lot of people right now are trying to solve this problem by taking all this raw input data, other time sheets, the project management data, their finance data, and trying to zap it straight into like a dashboard or a report.

The problem is this data is messy. It's created by humans, it's maintained by humans, it's changing all the time, the tools are changing all the time.

And so when we push that straight into a report, what we end up doing when we look at the report is spending our entire meeting going, why does this look off?

Why is this data not winding up to what we think reality looks like and tracing back to all the mistakes in the source?

The answer is not try to fix the inputs being perfect, because that'll never happen. We've never seen it happen.

The answer is design a reporting system that allows you to have mistakes in the data, that allows you to have things changing all the time, and still allows you to work with and handle those kinds of things over time.

And that technology exists at the enterprise level. They've been doing This for a long time, it's called building data pipelines.

It's called data operations. It's called extract transform and load. They have teams of data engineers. They have very expensive enterprise software licenses.

This problem is solved at the enterprise level. But now that small businesses are creating all of this data and need to get value out of it, there's no tools and processes to support it.

So that's our vision for the next five years is to create what we call the first service intelligence platform that is designed to help these smaller agencies and service businesses pull their data in from all these systems, get artificial intelligence assistance to clean it up, transform it, normalize it, fix the mistakes, stitch it together between all these different systems, and then load it into a framework that is designed to measure their business model that we can provide all of the education and content around so they understand what those numbers mean and how to react to them.

That's the mission that we're on and it's gonna be an interesting ride for us to go and pursue that.

@50:57 - Gabriel Flores (The Shades of Entrepreneurship)

I love it. And the reason I was actually earlier about the non-profit. So. We recently founded a nonprofit about a year and a half ago, 501c3LatinoFounder.com for those interested.

We're kind of going to that process right now. I literally had a board meeting this morning, the president co-founder of this organization, and we're going through the process of, okay, we have these events that we do.

Okay, what's the cost of event? How many hours is our executive director working on these events so we can actually put that into the request when if you want to do an event in your community, you want to do a pitch competition.

Okay, this is how much it costs. We're going to put this much money that's going to go towards the entrepreneurs that pitch because they're grant funded, and then this is how much we need for operations costs, but then also structurally getting the processes in place so it's consistent, right?

Okay, open up applications, close applications, review applications, gradum, get their coaching in, make sure you order catering, make sure you your drinks, get the look, like there's all these little nuances that go into this piece.

And to your point, there is nobody that really focuses on that small mom and pop independent entrepreneur. You kind of have, like I mentioned the Salesforce, you kind of have

to have those larger, larger institutes that kind of come in on the enterprise level that do it.

@52:06 - Marcel Petitpas

So I'm really glad it's very interesting that you guys are going to be focusing on a very, very small niche and still kind of being within the creative pipeline, correct?

Yeah, I mean, the thing is, I'm a fairly experienced market entrepreneur. So what I understand is that just because this framework works for anyone that sells time, so we could, know, people say this all the time, hey, you know, you could be working with lawyers and accountants and home services and even manufacturing businesses and architects, right?

I'm like, yeah, I'm aware of that. I'm aware that our framework works for all of those industries, but I'm also aware that if that was our positioning, no one would be paying attention to us and creative agencies wouldn't trust us, and our expertise would not be as deep.

We wouldn't be as good at serving that customer. And so we're going to stay focused on creative agencies until we get to a pretty high degree of scale.

But what is true is that once we start to reach a certain level of saturation, we will then have the resource.

And the underlying framework to then pivot to and take, know, do the bowling pin effect and go into other industries.

So there is a vision, you know, at some point in time where this kind of technology and framework is available to everyone, but I believe that we can build a very, very big business, just solving this for creative and digital agencies.

there's a lot of them out there and they're all struggling with this. I haven't talked to a single firm that isn't struggling with this problem.

@53:23 - Gabriel Flores (The Shades of Entrepreneurship)

Yeah. I love again, the riches are on the niches, folks. So when you, when you begin to like think of something, the riches are definitely the niches and I really like that, you're going to stay true to you really, your, your, your zone of genius, right?

Where you're, that's the creative side is your zone of, I'm, I have core competencies, a lot of different things, but I'm really a genius right here.

And that's where you're going focus on it and tell you become a master of that. And then we'll go somewhere else.

I really like that, that, that, uh, what your guys are doing now for folks that are listening and interested in maybe learning more about you or want to get in contact with you, how can they find you online?

What is the website for parakeeto? All right, it's my. It's my plug time, right? Yes, you plug then.

@54:02 - Marcel Petitpas

I'm not, I don't know if I'll be able to do it justice compared to you, I'll do my best.

If you've been listening to this, you run a service based business and you want to learn about how to measure and improve your profitability.

You put together a free toolkit, you can find it at parakeeto.com forward slash toolkit and it's got training videos, a bunch of free templates and spreadsheets and everything that you need to start measuring the basics in your business at no cost to you.

So I encourage everyone to go check that out if this is something that you're struggling with within your business.

If you want to learn more about me, you can find me on LinkedIn and I encourage you to reach out in my DMs.

I love chatting with people there and answering questions.

@54:37 - Gabriel Flores (The Shades of Entrepreneurship)

We also have a podcast, the agency profit podcast. You'll never guess what we talk about on the show.

@54:42 - Marcel Petitpas

So if you're a podcast person, go subscribe to that. And of course, parakeeto.com, we publish tons of free content and resources.

@54:48 - Gabriel Flores (The Shades of Entrepreneurship)

So be sure to check us out there as well. And folks, if you guys do not remember any of that or if you guys just want to say, you know what, I don't want to listen to Marcel Gait talk.

I'm gonna go ahead and just read the transcription. Go ahead and visit the shades of e.com. We'll have all this information.

You can subscribe. newsletter there. We'll let you know when the blog post and the episode airs. This episode will also be available on YouTube.

can find us on LinkedIn, Instagram, Facebook, and TikTok. So file means let us know how we're doing. We'd love to hear more about you guys.

And again, these folks are here providing free education for you listeners at home. You know, Marcel has been doing this for you know, some decades now in the amount of industry knowledge he has and he came here to share with you guys today is quite remarkable.

Again, and I really hope you guys take this to heart and utilize it to your own business. Because again, I started this podcast because I was going to Syracuse University paying over 100 grand a year, pandemic hits, right?

Everything's now virtual. Still paying the same amount of money just to read Harvard Business reviews on entrepreneurs that succeeded and failed.

Well, not just have a conversation about them? So again, Marcel, I appreciate you appreciate you coming on the show.

And then folks again, Marcel, feel free to reach out to him LinkedIn. He would love to hear from you.

Parakeeto to that information. will be on the newsletter. It's P-A-R-A-A-E-E-T-O. Go ahead and visit that. again, subscribe to the newsletter on theshadesofe.com.

Marcel, thank you again. I appreciate your time. Everybody else listening at home, thank you, and have a great night.

Thank you. Thank