The Rigged Search Game

Jun 5th
posted in

SEO was all about being clever. Still is, really. However, SEO used to reward the clever, too. The little guy could take on the big guys and munch their lunch by outsmarting them.

It was such an appealing idea.

The promise of the internet was that the old power structures would be swept aside, the playing field would be made level again, and those who played the smartest game would prosper.

Sadly, this promise didn’t last long.

Power

The names may have changed, but traditional power structures were soon reasserted. The old gatekeepers were replaced with the new gatekeepers. The new gatekeepers, like Google, grew fat, rich and powerful. They controlled the game and the game was, once again, rigged in favor of those with the most power. That's not a Google-specific criticism, it's just the way commerce works. You get big, you move markets simply by being big and present. In search, we see the power imbalance as a side-effect, namely the way big players are treated in the SERPs compared to small players.

SEO for big, established companies, in terms of strategy, is simple. Make sure the site is crawlable. Run PR campaigns that frequently mention the name of the big, established company - which PR campaigns do anyway - and ensure those mentions include a back link. Talk to a lof of friendly reporters. Publish content, do so often, and make sure the important content is somewhere near the top.

That’s it.

The market reputation of the entity does most of the grunt work when it comes to ranking. So long as their ship is pointed in the right direction, they’re golden.

The main aim of the SEO who works for a big, established entity is to stop the big, established entity doing something stupid. So long as the SEO can prevent the entity doing stupid things - often a difficult task, granted - the big, established entity will likely dominate their niche simply by virtue of established market power.

That didn’t used to be the case.

When SEO started, and for a number of years after, the little guy could dominate niches by being the most relevant. The little guy could become the most relevant by carefully deconstructing the algorithm and giving the search engine what the search engine wanted. If the search engines weren’t careful, they were in very real danger of getting exactly what they asked for!

That temporary inversion of the traditional power structure made SEO a lot of fun. You did some clever stuff. You rose to the top. You collected the rewards. I think it’s grown less fun now because being clever isn’t enough. SEO works, but not quite as well as it used to for small players as the cost/reward equation favors big players.

Do A Lot Of Clever SEO Stuff, Get Nowhere

These days, a glass ceiling exists. SEOBook members can read a detailed post by Aaron outlining the glass ceiling here.

Here’s how it often plays out...

About a 8 months ago we launched one of the most viral pieces of content that we have ever done (particulary for a small site that doesn't have a huge following) ... it was done so well that it was organically referenced/hardcoded into Wikipedia. In addition it was cited on news sites, dozens and dozens of blogs (likely north of 100), a number of colleges, etc. It got like a couple hundred unique linking domains....which effectively doubled the unique linking domains that linked into the parent site. What impact did that have on rankings? Nada.

For link building to work well, the right signals need to exist, too. There needs to have high levels of reach and engagement. Big companies tend to have high levels of reach and engagement due to their market position and wider PR and advertising campaigns. This creates search keyword volume, keyword associations, engagement, and frequent mentions in important places, and all this is difficult to compete with if you have a small budget. The exception appears to be in relatively new niches, and in the regions, where the underlying data concerning engagement, reach and interest is unlikely to be particularly deep and rich.

Yet.

So, the little guy is often fighting a losing battle when it comes to search. Even if they choose a new, fast growing niche, as soon as that niche becomes lucrative enough to attract big players, traditional power will reassert itself. The only long term option for the little guy is to become a big guy, or get bought up by one, or go work for one.

Slavery

Abraham Lincoln thought wage labour was a stage workers pass through, typically in their 20’s or early 30s. Eventually, they become self-employed and keep all the profits of their labour.

Adam Smith maintained markets only work as intended if everyone had enough to participate. They also must have sufficient control over their own means of production. Adam Smith, father of modern capitalism, was not a big fan of corporate capitalism:

Merchants and master manufacturers are . . . the two classes of people who commonly employ the largest capitals, and who by their wealth draw to themselves the greatest share of the public consideration.

A side-effect of big players is they can distort markets. They have more purchasing power and that purchasing power sends a signal about what’s important. To big companies. The result is less diversity.

It’s self evident that power changes the search game. The search results become more about whoever is the most powerful. It seems ironic that Google started as an upstart outsider. The search results are difficult to conquer if you’re an upstart outsider, but pretty easy to do if you’re already a major player. Adwords, quality score being equal, favours those with deep pockets.

What’s happening is the little guy is getting squeezed out of this landscape and many of them will become slaves.

Huh? “Slaves”? By Aristotle's and Lincoln's definition, quite possibly:

If we want to have markets, we have to give everybody an equal chance to get into them, or else they don’t work as a means of social liberation; they operate as a means of enslavement.

Enslavement in the sense that the people with enough power, who can get the market to work on their behalf…

Right — bribing politicians to set up the system so that they accumulate more, and other people end up spending all their time working for them. The difference between selling yourself into slavery and renting yourself into slavery in the ancient world was basically none at all, you know. If Aristotle were here, he’d think most people in a country like England or America were slaves.

What’s happening in search is a microcosm of what is happening elsewhere in society. Markets are dominated and distorted by corporations at the direct expense of the small players. Yes, it’s nothing new, but it hasn’t always been this way in search.

So what is my point?

My point is that if you’re not getting the same business benefits from search as you used to, and the game seems that much harder, then it’s not because you’re not clever. It’s because the game is rigged.

Of course, small companies can prosper. You’ll find many examples of them in the SERPs. But their path to getting there via the search channel is now much longer and doesn't pay as well as it used to. This means fewer SEOs will be hired by small companies because the cost of effective SEO is rising fast whilst the rewards are shrinking. Meanwhile, the big companies are increasing their digital budgets.

Knowing all this, the small operator can change their approach. The small operator has one advantage. They can be nimble, flexible, and change direction quickly. So, looking forward over the not-too-distant horizon, we either need a plan to take advantage of fast emerging markets before the big guys enter them, or we need a plan to scale, or we need to fight differently, such as taking brand/USP centric approaches.

Or go work for one of the big guys.

As a "slave". Dude :) (Just kidding)

What’s In A Name?

Jun 2nd
posted in

Many SEO love keyword-loaded domain names. The theory is that domains that feature a keyword will result in a boost in ranking. It’s still a contentious topic:

I've seen bloggers, webmasters and search aficionados argue the case around the death of EMDs time and time again, despite the evidence staring them in the face: EMDs are still all over the place. What's more, do a simple bulk backlink analysis via Majestic, and you will find tons which rank in the top 10 while surrounded by far more authoritative domains.

No matter what the truth of the matter as to the ranking value of EMDs, most would agree that finding the right language for describing and profiling our business is important.

Terminology Changes

Consider the term “startup”.

This term, which describes a new small business, feels like it has been around forever. Not so. Conduct a search on the time period 1995-1998 and you won’t find results for start-up:

It's a word that has grown up with the web and sounds sexier than just business. Just like the word "consultant" or "boutique" sounds better than "mom and pop" or "1 person business". (You must remember of course when "sanitation engineer" replaced "trash man".) oI just did a search to see the use of the word startup from the period 1995 to 1998 and came up with zilch in terms of relation to business

Start up does sound sexier than “mom n pop” or “one person business”, or “a few stoner mates avoiding getting a job”. A pitch to a VC that described the business as a “mom n pop” may not be taken seriously, whereas calling it a startup will.

If we want to be taken seriously by our audience, then finding the audience's language is important.

SEO or Digital Marketing Or…..?

Has SEO become a dirty word? Has it always been a dirty word?

SEO’s don’t tend to see it that way, even if they are aware of the negative connotations. They see SEO as a description of what they do. It’s always been a bit of a misnomer, as we don’t optimize search engines, but for whatever reason, it stuck.

The term SEO is often associated with spam. The ever-amiable Matt Cutts video's could be accompanied by a stern, animated wagging finger and a "tut tut tut" subtext. The search engines frown on a lot when it comes to SEO. SEO is permanent frown territory. Contrast this with PPC. PPC does not have that negative connotation. There is no reputation issue in saying you’re a PPC provider.

Over the years, this propaganda exercise that has resulted in the "SEO questionable/PPC credible" narrative has been pretty effective. The spammer label, borrowed from the world of email spam, has not been a term the SEO has managed to shrug off. The search engines have even managed to get SEOs to use the term “spammer” as a point of differentiation. “Spam is what the other SEOs do. Not me, of course.” This just goes to show how effective the propaganda has been. Once SEOs used spam to describe their own industry, the fate of the term SEO was sealed. After all, you seldom hear doctors, lawyers and retailers defining what they do against the bad actors in their sector.

As traffic acquisition gets broader, encompassing PR and social media, new titles like Digital Marketer have emerged. These terms have the advantage of not being weighed down by historical baggage. I’m not suggesting people should name themselves one thing or the other. Rather, consider these terms in a strategic sense. What terms best describe who you are and what you do, and cast you in the best possible light to those you wish to serve, at this point in time?

The language moves.

Generic Name Or Brandable?

Keyword loaded names, like business.com, are both valuable and costly. The downside of such names, besides being costly, is they severely limit branding opportunities. The better search engines get, and the more people use social media and other referral channels, the less these generic names will matter.

What matters most in crowded markets is being memorable.

A memorable, unique name is a valuable search commodity. If that name is always associated with you and no one else, then you’ll always be found in the search results. SEMRush, MajesticSEO, and Mo are unlikely to be confused with other companies. “Search Engine Tools”, not so much.

Will the generic name become less valuable because generic names are perhaps only useful at the start of an industry? How mature is your industry? How can you best get differentiation in a crowded market through language alone?

The Strategy Behind Naming

Here are a few points to consider.

1. Start Early

Names are often an afterthought. People construct business plans. They think about how their website looks. They think about their target market. They don’t yet have a name. Try starting with a name and designing everything else around it. The name can set the tone of every other decision you make.

2. Positioning

In mature markets, differentiation is strategically important. Is your proposed name similar to other competitors names? Is it unique enough? If you’re in at the start of a new industry, would a generic, keyword loaded name work best? Is it time for a name change because you’ve got lost in the crowd? Has your business focus changed?

Does your name go beyond mere description and create an emotional connection with your audience? Names that take on their own meaning, like Amazon, are more likely to grow with the business, rather than have the business outgrow the name. Imagine if Amazon.com had called itself Books.com.

3. What Are You All About?

Are you a high-touch consultative company? Or a product based, functional company? Are you on the cutting edge? Or are you catering to a market who like things just the way they are?

Writing down a short paragraph about how you see yourself, how the customers see you, and your position in the market, will help you come up with suitable names. Better yet, write a story.

4. Descriptive Vs Differentiation

Descriptive can be safe. “Internet Search Engine” or “Web Crawler”. There’s no confusing what those businesses do. Compare them with the name Google. Google gives you no idea what the company does, but it’s more iconic, quirky and memorable. There’s no doubt it has grown with the company and become a natural part of their identity in ways that “Internet Search Engine” never could.

Sometimes, mixing descriptions to create something quirky works well. Airbnb is a good example. The juxtaposition of those two words creates something new, whilst at the same time having a ring of the familiar. It’s also nice to know if the domain name is available, and if the name can be trademarked. The more generic the name, the harder it is to trademark, and the less likely the domain name is available.

5. Does Your Name Travel Well?

Hopefully, your name isn’t a swear word in another culture. Nor have negative connotations. Here are a few comical examples where it went wrong:

Nokia’s new smartphone translates in Spanish slang to prostitute, which is unfortunate, but at least the cell phone giant is in good company. The name of international car manufacturer Peugeot translates in southern China to Biao zhi, which means the same thing.

This is not such an issue if your market is local, but if you plan to expand into other markets in future, then it pays to consider this angle.

6. There’s No Right Answer

There is probably no universally good name. At least, when you first come up with a name, you can be assured some people will hate it, some will be indifferent, and some will like it - no matter what name you choose.

This is why it’s important to ground the subjective name-choosing process in something concrete, like your business strategy, or positioning in the market. You name could have come before the business plan. Or it could reflect it. You then test your name with people who will likely buy your product or service. It doesn’t matter what your Mom or your friends think of the name, it’s what you think of the name and what your potential customers think of the name that counts.

7. Diluting Your Name

Does each service line and product in your company need a distinctive name? Maybe, but the risk is that it could dilute the brand. Consider Virgin. They put the exact same name on completely different service lines. That same brand name carries the values and spirit of Virgin to whatever new enterprise they undertake. This also reduces the potential for customer confusion.

Creating a different name for some of your offerings might be a good idea, Say, if you’re predominantly a service-based company, yet you also have one product that you may spin off at some point in future. You may want to clearly differentiate the product from the service so as not to dilute the focus of the service side. Again, this is where strategy comes in. If you’re clear about what your company does, and your position in the market, then it becomes easier to decide how to name new aspects of your business. Or whether you should give them a name at all.

7. Is your name still relevant?

Brands evolve. They can appear outdated if the market moves on. On the other hand, they can built equity through longevity. It seems especially difficult to change internet company names as the inbound linking might be compromised as a result. Transferring the equity of a brand is typically expensive and difficult. All the more reason to place sufficient importance on naming to begin with.

8. More Than A Name

The branding process is more than just a name and identity. It's the language of your company. It’s the language of your customers. It becomes a keyword on which people search. Your customers have got to remember it. You, and your employees, need to be proud of it. It sets you apart.

The language is important. And strategic.

Measure For Business Benefit

Jan 28th
posted in

Matt Cutts is just toying with SEO’s these days.

Going by some comments, many SEOs still miss the big picture. Google is not in the business of enabling SEOs. So he may as well have a little fun - Matt has “called it” on guest posting.

Okay, I’m calling it: if you’re using guest blogging as a way to gain links in 2014, you should probably stop. Why? Because over time it’s become a more and more spammy practice, and if you’re doing a lot of guest blogging then you’re hanging out with really bad company.

The hen-house erupted.

The hens should know better by now. If a guest post is good for the audience and site, then do it. If it’s being done for no other reason than to boost rank in Google, then that’s a sign a publishing strategy is weak, high risk, and vulnerable to Google's whims. Change the publishing strategy.

Measuring What Is Important

Although far from perfect, Google is geared towards recognizing utility. If Google doesn’t recognize utility, then Google will become weaker and someone else will take their place. Only a few people remember Alta Vista. They didn’t provide much in the way of utility, and Google ate their lunch.

Which brings me onto the importance of measurement.

It’s important we measure the right things. If people get upset because guest posting is called out, are they upset because they are counting the number of inbound links as if that were the only benefit? Why are they counting inbound links? To get a ranking boost? So, why are some people getting upset? They know Google doesn’t like marketing practices that serve no other purpose than to boost rank. Or are people concerned Google might confuse a post of genuine utility with link spam?

A publishing strategy based on nothing more than Google rankings is not a publishing strategy, it’s a tactic. Given the changes Google has made recently, it’s not a good tactic, because if they can isolate and eliminate SEO tactics, they will. Those who guest post on other sites, and offer guest post placement in order to provide utility, should continue to do so. They are unlikely to eliminate genuine utility, regardless of links, and at worst, they'll likely ignore the site it appears on.

Interesting

To prosper, we need to be more interesting that the next guy. We need to focus on delivering “interestingness”.

The buzzword term is “visitor engagement”, but that really means “be interesting”. If we provide interesting material, people will read it, and if we provide it on a regular basis, they might come back, or remember our brand name, and then search on that brand name, and then they might link to it, and that this activity combined helps us rank. Ranking is a side effect of being genuinely interesting.

This is not to say measuring links, or page views, are unimportant. But they can be an oversimplification when taken in isolation.

Demand Media's eHow focused on pageviews rather than engagement. Which is a big part of the reason why the guys who sold them eHow were able to beat them with wikiHow.

Success depends on achieving the underlying business goal. Perhaps high page views are not important if a site is targeting a very specific audience. Perhaps rankings aren't all that important if most of the audience is on social media or repeat business. Sometimes, focusing on the wrong metrics leads to the wrong marketing tactics.

What else can we measure? Some common stuff....

  • Page views
  • Subscriptions
  • Comments
  • Quality of comments
  • Syndication
  • Time on site
  • Videos watched
  • Unique visitors
  • Traffic sent to partner sites
  • Bookmarking activity
  • Search engine exposure
  • Brand searches
  • Offline mentions
  • Online mentions
  • Customer satisfaction
  • Conversion rates
  • Number of inquiries
  • Relationships
  • Sales
  • Reduced costs

The choice of what we measure depends on what we’re trying to achieve. The SEO may say they are trying to achieve a high rank, but why? To get more traffic, perhaps. Why do we want more traffic? In the hope more people will buy our widget.

So, if buying more widgets is the goal, then perhaps more energy needs to be placed into converting the traffic we already have, as opposed to spending the same energy getting more? Perhaps more time needs to be spent on conversion optimization. Perhaps more time needs to be spent refining the offer. Or listening to customers. Hearing their objections. Writing Q&A that addresses those objections. Guest posting somewhere else and addressing industry wide objections. Thinking up products to sell to previous customers. Making them aware of changes via an email list. Optimizing the interest factor of your site to make it more interesting than your competitors, then treat the rankings as a bonus. Link building starts with "being interesting".

When it comes to the guest post, if you’re only doing it to get a link, then you’re almost certainly selling yourself short. A guest post should serve a number of functions, such as building awareness, increasing reach, building brand, and be based on serving your underlying marketing objective. Pick where you post carefully. Deliver real value. If you do guest post, always try and extract way more benefit than just the link.

There was a time when people could put low-quality posts on low-quality sites and enjoy a benefit. But that practice is really just selling a serious web business short.

How Do We Know If We're Interesting?

There are a couple of different types of measurement marketers use. One is an emotional response, where the visitor becomes “positively interested”. This is measured by recall studies, association techniques, customers surveys and questionnaires. However, the type of response on-line marketers focus on, which is somewhat easier to measure, is behavioural interest. When people are really interested, they do something in response.

So, to measure the effectiveness of a guest posting, we might look for increased name or brand searches. More linkedin views. We might look at how many people travel down the links. We look at what they do when they land on the site, and - the most important bit - whether they do whatever that thing is that translates to the bottom line. Was it subscribing? Commenting? Downloading a white paper? Watching a video? Getting in contact? Tweeting? Bookmarking? What was that thing you wanted them to do in order to serve your bottom line?

Measurement should be flexible and will be geared towards achieving business goals. SEOs may worry that if they don’t show rankings and links, then the customer will be dissatisfied. I’d wager the customer will be a lot more dissatisfied if they do get a lot of links and a rankings boost, yet no improvement in the bottom line. We could liken this to companies that have a lot of meetings. There is an air of busyness, but are they achieving anything worthwhile? Maybe. Maybe not. We should be careful not to mistake frenzy for productivity.

Measuring links, like measuring the number of meetings, is reductive. So is measuring engagement just by looking at clicks. The picture needs to be broad and strategic. So, if guest posts help you build your business, measured by business metrics, keep doing them. Don’t worry about what Google may or may not do, because it’s beyond your control, regardless.

Control what you can. Control the quality of information you provide.

Quickly Reversing the Fat Webmaster Curse

Jan 1st

Long story short, -38 pounds in about 2 months or so. Felt great the entire time and felt way more focused day to day. Maybe you don’t have a lot of weight to lose but this whole approach can significantly help you cognitively.

In fact, the diet piece was originally formed for cognitive enhancements rather than weight loss.

Before I get into this post I just want to explicitly state that I am not a doctor, medical professional, medical researcher, or any type of medical/health anything. This is not advice, I am just sharing my experience.

You should consult a healthcare professional before doing any of this stuff.

Unhealthy Work Habits

The work habits associated with being an online marketer lend themselves to packing on some weight. Many of us are in front of a screen for large chunks of the day while also being able to take breaks whenever and wherever we want.

Sometimes those two things add up to a rather sedentary lifestyle with poor eating habits (I’m leaving travel out at the moment but that doesn’t help either).

In addition to the mechanics of our jobs being an issue we also tend to work longer/odd hours because all we really need to get a chunk of our work done is a computer or simply access to the internet. If you take all of those things and add them into the large amount of opportunity that exists on the web you have the perfect recipe for unhealthy, stressful work habits.

These habits tend to carry over into offline areas as well. Think about the things we touch or access every day:

  • Computers
  • Tablets
  • Smartphones
  • Search Engines
  • Online Tools
  • Email
  • Instant Messaging
  • Social Networks

What do many of these have in common? Instant “something”. Instant communication, results, gratification, and on and on. This is what we live in every day. We expect and probably prefer fast, instant, and quick. With that mindset, who has time to cook a healthy meal 3x per day on a regular basis? Some do, for sure. However, much like the office work environment this environment can be one that translates into lots of unhealthy habits and poor health.

I got to the point where I was about 40 pounds overweight with poor physicals and lackluster lipid profiles (high cholesterol, blood pressure, etc). I tried many things, many times but what ultimately turned the corner for me were 3 different investments.

Investment #1 - Standup/Sitdown Desk

Sitting down all day is no bueno. I bought a really high quality standup desk with an electrical motor so I can periodically sit down for a few minutes in between longer periods of standing.

It has a nice, wide table component and is quite sturdy. It also allows for different height adjustments via a simple up and down control:

A couple of tips here:

  • Wear comfy shoes
  • Take periodic breaks (I do so hourly) to go walk around the house or office or yard
  • I also like to look away from the CPU every 20-30 minutes or so, sometimes I get eyestrain but I bought these glasses from Gunnar and it’s relieved those symptoms

Investment #2 - Treaddesk

The reason I didn’t buy the full-on treadmill desk is because I wanted a bigger desk with more options. I bought the Treaddesk, which is essentially the bottom part of the treadmill, and I move it around during the week based on my workflow needs:

They have packages available as well (see the above referenced link).

I have a second, much cheaper standup desk that I hacked together from IKEA:

This desk acts as a holder for my coffee stuff but also allows me to put my laptop on it (which is paired with an external keyboard and trackpad) in case I want to do some lighter work (I have a hard time doing deeper work when doing the treadmill part while working).

I move the Treaddesk back and forth sometimes, but mostly it stays with this IKEA desk. If I have a week where the work is not as deeply analytical and more administrative then I’ll walk at a lower speed on the main computer for a longer period of time.

I tend to walk about 5-7 miles a day on this thing, usually in a block of time where I do that lighter-type work (Quickbooks, cobbling reports together, email triage, very light research/writing, reading, and so on).

Investment #3 - Bulletproof Coffee and the Bulletproof Diet

I’m a big fan of Joe Rogan in general, and I enjoy his podcast. I heard about Dave Asprey on the JRE podcast so I eventually ended up on his site, bulletproofexec.com. I purchased some private coaching with the relevant products and I was off to the races.

I did my own research on some of the stuff and came away confident that “good” fat had been erroneously hated on for years. I highly encourage you to conduct your own research based on your own personal situation, again this is not advice.

I really wanted to drop about 50 pounds so I went all in with Bulletproof Intermittent Fasting. A few quick points:

  • I felt great the entire time
  • In rare moments where I was hungry at night I just had a tablespoon of organic honey
  • I certainly felt a cognitive benefit
  • I was never hungry
  • I was much more patient with things 
  • I felt way more focused

So yeah, butter in the coffee and a mostly meat/veggie diet. I cheated from time to time, certainly over the holiday. I lost 38 pounds in slightly over 60 days. Here’s a before and after:

Fat Eric

Not So Fat Eric

I kept this post kind of short and to the point because my desire is not to argue or fight about whether carbs are good or bad, whether fat is good or bad, whether X is right, or whether Y is wrong. This is what worked for me and I was amazed by it, totally amazed by the outcome.

I also do things like cycling and martial arts but I’ve been doing those for awhile, along with running, and while I’ve lost weight I’ve never had it melt away like this.

I’ve stopped the fasting portion and none of the weight has piled back on. Lipid tests have been very positive as well, best in years.

Even if you don’t have a ton of weight to lose, seriously think about the standup desk and treadmill. 

Happy New Year!

Productizing Your SEO Business

Oct 11th

If you service clients, it’s quite likely that you’ve faced some of the same pain points I have when trying to design a “product” out of your “service”. The words product and service in our industry tend to be interchangeable as our products are digital products.

Pricing for SEO, or any type of digital marketing service, has been written about quite a few times and there’s never been a real clear answer as to what the sweet spot is for pricing.

I actually do not believe there is a clear or semi-clear answer to pricing but what I do believe is that there is a clear path you can set for your company which makes many aspects of your business easier to automate and easier to manage. I refer to it here as “productizing” the business.

Where to Start

Some products can be priced more easily than others. If you are selling just your time (consulting) then you can do it by hour, obviously. I think the “future” of the SEO consultant has been here for awhile anyways. Many have already evolved into the broader areas of digital marketing like:

  • Technical SEO
  • CRO
  • Competitive Research
  • Analytics
  • Broader Online Marketing Strategy and Execution

There are other areas like paid search, email marketing, and so on but the above covers a good chunk of what many of us having been doing on our own properties for awhile and client sites as well. As more and more of us service clients and perhaps start agencies it’s important to start from the beginning.

This will differ in analysis if you have a much larger agency, but here we are focusing on the more common freelancer and small agency. The steps I would recommend are as follows (this is in relation to pricing/products only, I’m assuming you’ve already identified your market, brand messaging, etc):

  • Determine a sustainable net profit. What do I want to earn as a baseline number?
  • Determine acceptable margins based on desired size of staff and potential cost of contractor work.
  • Determine the required gross revenue needed to achieve your net profit.

Why Do it This Way?

I do it this way because net margin is very important to me. I don’t want to become the Walmart of digital marketing where our margins become paper thin as volume goes up.

Here is an example of what I mean. Consider the following scenario:

I’m leaving my job as a dairy farmer here in rural Rhode Island and I want to make $1,500,000 per year.

So, you’re going to pay a little bit more assuming you are a single member LLC versus a traditional W-2 "employee" (again, keeping it very simple) because of the self-employment tax. Your CPA can go over the different options based on your business set up and such but the base calculations are the same as far as determining the core numbers go.

If you just look at just “earnings” you are missing the bigger picture. What you should want to achieve for short, mid, and long term viability are healthy margins. Here’s an example:

Jack’s SEO Shop had a net income of $1,000,000 dollars in 2011. Their overall sales were $5,000,000. In 2012 they had $1,500,000 in net income with $10,000,000 in sales.

Jill’s SEO Shop had net income of $500,000 dollars in 2011. Their overall sales were $2,000,000. In 2012 they had $1,500,000 in net income with $4,000,000 in sales.

In this case we look at a basic calculation of profit margin (net income/gross sales) and see that:

  • Jacks’ 2011 profit margin was 20%
  • Jack’s 2012 profit margin 15%
  • Jill’s 2011 profit margin 25%
  • Jill’s 2012 profit margin 38% (same net income as Jack)

Certainly 15% on 10 million isn’t something to necessarily sneeze at but I’d much rather be Jill in the current state of web marketing. A 38% profit margin does so much more for your overall viability as a company when you take into account being able to respond to competition, algorithmic changes, increased cost of quality labor, and so on.

In this example a conversation about simply “making” 1.5 million per year is quite misleading. Once we have these numbers figured out we can begin to “design” our “products and/or services” to somewhat fit a pricing model by backdooring it via preferred margins.

Setting Up Your Products

Many folks in the industry have had exposure and direct experience with a number of disciplines. At the very least, a lot of us know enough about “how” to execute a particular type of service without maybe the specific knowledge of how to go in and “push the buttons”.

There’s a tendency to do all types of service but a good way to start is to look at your core competencies and determine what makes the most sense to offer as a product. If you are just starting out you can start this from a blank slate, there’s not a big difference either way.

You will run across a couple different types of costs, direct and indirect. Let’s assume for the sake of simplicity you are a freelancer or just a solo operation. In terms of selling a service you will have 2 core types of cost:

  • Direct (utilization of outside contractors to accomplish a task)
  • Indirect (your time and any other overhead like office costs, insurance, tools, marketing costs)

There’s some debate as to whether you should include the estimated cost of your marketing as part of a per project cost to accurately determine your margins. I say why not, using it only makes it more accurate in terms of hard numbers.

Perhaps you whittled down your offerings to:

  • Technical SEO Audits
  • SEO Competitive Analysis Audits
  • Conversion Optimization
  • Content Marketing

We can assume that you might have the following tools in your toolbelt:

  • Screaming Frog SEO Spider (roughly 158$ per year if you are in the US)
  • Majestic SEO subscription (roughly $588 per year for the Silver plan)
  • Ahrefs subscription (roughly $948 per year for the Pro subscription)
  • Visual Website Optimizer subscription ($588 per year for the Small Business Plan)
  • Raven SEO Tools for competitive research, content marketing strategy and execution, SEO audit work ($1,188 per year)
  • Buzzstream for outreach and additional link prospecting ($1,188 per year)

There are more tools we could add but at a baseline level you would be able to produce quality products with these tools. Total cost is $4,658 per year or $389 (rounded up, per month).

The same formula (annual and monthly amounts) would be used for any other overhead you deem necessary but for the sake of simplicity let’s say you are spending $389 per month on “stuff”.

Knowledge + Tools = Win

Tools are only 1 part of a 2 part equation. Tools without knowledge are useless. There are a variety of costs one could associate with knowledge acquisition:

  • Building your own test sites
  • Going to conferences
  • Participating in online membership sites

The costs for knowledge acquisition can vary from person to person. You might be at a point where all three make sense or at a level where only 1 or 2 make sense. I would recommend looking at these options relative to your skill set and determining the cost, annually, of what makes sense for you. Take that number and just add it to the example cost I gave for tools I recommended earlier.

Breaking Out a Product List

The next step would be to look at each type of service you are offering and productize it. The first 2 areas are more likely to be your time only versus your time + outside contractor help. Conversion Optimization and Content Marketing will probably incur additional costs outside of your time for things like:

  • User testing
  • Content writing
  • Content design
  • Promotion help
  • Programming for interactive content

When setting up products I use this:

  • GI is Gross Income
  • Tax is GI * (whatever your total tax percentage is)
  • NI is Net Income
  • GM is Gross Margin (E2/B2)
  • NM is Net Margin (G2/B2)

In that example I used $150 as my hourly rate and assumed 40 hours for an audit. Now I can play around with the direct cost and price to arrive at the margins I am looking for.

One thing to keep in mind with indirect cost is usually it’s something that can be divided amongst your current projects.

So I might revisit my pricing table from time to time to revamp the indirect cost based on my current client list. In this example I assume no clients are currently onboard and no income for my own properties so this audit eats up all the indirect cost against its margins.

You can design your products however it works for you but I usually try to find some type of baseline that works for me. In the areas I assumed earlier I would try to make sub-products out of each section:

  • Audit based on size and scope of site (total pages, ecommerce, dynamic, etc)
  • Conversion Rate Optimization based on total hours for ongoing work and a few different prices for the initial audit and feedback
  • Content Marketing based on the scale needed broken out into different asset types for easier pricing (videos, interactive content, infographics, whitepapers, and so on
  • SEO Competitive Analysis based on total hours needed for ongoing work and different prices based on the scope of the initial research (or just a one-off overview)

There are so many variables to each service that it is impossible to list them here but the general ideas remain the same. Start with a market and break them out into “things” that can be sold which cover “most” of your target market.

Manage Your Workloads More Efficiently

One of the reasons I mentioned direct cost as being your hourly rate is so you can set a baseline of how many hours you want to work per month to achieve the amount you'd like to earn. Combining what you want to earn with the hours you want to work will help you work out a minimum hourly rate which you can adjust up or down, along with desired revenue, to hit your pricing sweet spot.

Using your hourly rate in conjunction with designing specific products makes it pretty easy to assign hours required to a specific product. When you assign hours to each product you can do a few things that will help in managing your workload:

  • When a new project is being quoted you can quickly gauge whether, based on current projects in process, you have availability for the project
  • If you know ahead of time you are stretched out a bit and need to bring in outside help you can add those additional costs to your proposal and get outside help ready ahead of time
  • If you take on projects and you find your assumed hours are over or under the amount really necessary you can adjust that for future projects

Assigning your required hours to each product you sell will help you manage your workload better and give you more fluidity during peak times. Inevitably there will be periods of peaks and valleys in the demand for your service so if you are able to manage the peaks in a less stressful and more profitable manner the valleys might not be as deep for your financially.

Other Areas Where Productizing Helps

Custom quoting everything that comes through the door is a pain point for me.

Post-quoting you have things like contracts that have to get signed, billing that has to get set up, and task processes that have to get accomplished.

When you have specific products you are selling, it becomes much easier to automate:

  • Proposal templates that get sent out
  • Contract documents
  • Billing setup
  • New client onboarding into a CRM/PM system
  • Tasks that need to be completed and assigned
  • Setting up classes and jobs in Quickbooks to track financials per client or per job

It can be a pretty lengthy process but making your services into products really helps your business in a number of areas

Pandas And Loyalty

Jul 25th
posted in

SEOs debate ranking metrics over and over, but if there’s one thing for sure, it’s that Google no longer works the same way it used to.

The fundamental shift in the past couple of years has been more emphasis on what could be characterized as engagement factors.

I became convinced that Panda is really the public face of a much deeper switch towards user engagement. While the Panda score is sitewide the engagement "penalty" or weighting effect on also occurs at the individual page. The pages or content areas that were hurt less by Panda seem to be the ones that were not also being hurt by the engagement issue.

Inbound links to a page still count, as inbound links are engagement factors. How about a keyword in the title tag? On-page text? They are certainly basic requirements, but of low importance when it comes to determining ranking. This is because the web is not short of content, so there will always likely to be on-topic content to serve against a query. Rather, Google refines in order to deliver the most relevant content.

Google does so by checking a range of metrics to see what people really think about the content Google is serving, and the oldest form of this check is an inbound link, which is a form of vote by users. Engagement metrics are just a logical extension of the same idea.

Brands appear to have an advantage, not because they fit into an arbitrary category marked “brand,” but because of signals that define them as being more relevant i.e. a brand keyword search likely results in a high number of click-thrus, and few click-backs. This factor, when combined with other metrics, such as their name in the backlink, helps define relevance.

Social signals are also playing a part, and likely measured in the same way as brands. If enough people talk about something, associate terms with it, and point to it, and users don’t click-back in sufficient number, then it’s plausible that activity results in higher relevance scores.

We don’t know for sure, of course. We can only speculate based on limited blackbox testing which will always be incomplete. However, even if some SEOs don’t accept the ranking boost that comes from engagement metrics, there’s still a sound business reason to pay attention to the main difference between brand and non-brand sites.

Loyalty

Investing In The Return

Typically, internet marketers place a lot of emphasis, and spend, on getting a new visitor to a site. They may also place emphasis on converting the buyer, using conversion optimization and other persuasion techniques.

But how much effort are they investing to ensure the visitor comes back?

Some may say ensuring the visitor comes back isn't SEO, but in a post-Panda environment, SEO is about a lot more than the first click. As you build up brand searches, bookmarking, and word-of-mouth metrics, you’ll likely create the type of signals Google favours.

Focusing on the returning visitor also makes sense from a business point of view. Selling to existing customers - whether you’re selling a physical thing or a point of view - is cheaper than selling to a new customer.

Acquiring new customers is expensive (five to ten times the cost of retaining an existing one), and the average spend of a repeat customer is a whopping 67 percent more than a new one

So, customer loyalty pays off on a number of levels.

Techniques To Foster Loyalty

Return purchasers, repeat purchasers and repeat visitors can often be missed in analytics, or their importance not well understood. According to the Q2 2012 Adobe analysis, “8% of site visitors, they generated a disproportionately high 41% of site sales. What’s more, return and repeat purchasers had higher average order values and conversion rates than shoppers with no previous purchase history

One obvious technique, if you’re selling products, is to use loyalty programs. Offer points, discounts and other monetary rewards. One drawback of this approach is is that giving rewards and pricing discounts is essentially purchasing loyalty. Customers will only be “loyal” so long as they think they’re getting a bargain, so this approach works best if you’re in a position to be price competitive. Contrast this with the deeper loyalty that can be achieved through an emotional loyalty to a brand, by the likes of Apple, Google and Coke.

Fostering deeper loyalty, then, is about finding out what really matters to people, hopefully something other than price.

Take a look at Zappos. What makes customers loyal to Zappos? Customers may get better prices elsewhere, but Zappos is mostly about service. Zappos is about ease of use. Zappos is about lowering the risk of purchase by offering free returns. Zappos have identified and provided what their market really wants - high service levels and reasonable pricing - so people keep coming back.

Does anyone think the engagement metrics of Zappos would be overlooked by Google? If Zappos were not seen as relevant by Google, then there would be something badly wrong - with Google. Zappos have high brand awareness in the shoe sector, built on solving a genuine problem for visitors. They offer high service levels, which keeps people coming back, and keeps customers talking about them.

Sure, they’re a well-funded, outlier internet success, but the metrics will still apply to all verticals. The brands who engage customers the most, and continue to do so, are, by definition, most relevant.

Another thing to consider, especially if you’re a small operator competing against big players, is closely related to service. Try going over-the-top in you attentiveness to customers. Paul Graham, of Y Combinator, talks about how start-ups should go well beyond what big companies do, and the payback is increased loyalty:

But perhaps the biggest thing preventing founders from realizing how attentive they could be to their users is that they've never experienced such attention themselves. Their standards for customer service have been set by the companies they've been customers of, which are mostly big ones. Tim Cook doesn't send you a hand-written note after you buy a laptop. He can't. But you can. That's one advantage of being small: you can provide a level of service no big company can

That strategy syncs with Seth Godin’s Purple Cow notion of “being remarkable” i.e do something different - good different - so people remark upon it. These days, and in the context of SEO, that translates into social media mentions and links, and brand searches, all of which will help keep the Google Gods smiling, too.

The feedback loop of high engagement will also help you refine your relevance:

Over-engaging with early users is not just a permissible technique for getting growth rolling. For most successful startups it's a necessary part of the feedback loop that makes the product good. Making a better mousetrap is not an atomic operation. Even if you start the way most successful startups have, by building something you yourself need, the first thing you build is never quite right.....

Gamification

Gamification has got a lot of press in the last few years as a means of fostering higher levels of engagement and return visits.

The concept is called gamification - that is, implementing design concepts from games, loyalty programs, and behavioral economics, to drive user engagement”. M2 research expects that US companies alone will be spending $3b per year on gamification technologies and services before the end of the decade

People have natural desires to be competitive, to achieve, to gain status, closure and feel altruistic. Incorporating game features helps fulfil these desires.

And games aren’t just for kids. According to The Gamification Revolution, by Zichermann and Linder - a great read on gamification strategy, BTW - the average “gamer” in the US is a 43 year old female. Gaming is one of the few channels where levels of attention are increasing. Contrast this with content-based advertising, which is often rendered invisible by repetition.

This is not to say everything must be turned into a game. Rather, pay attention to the desires that games fulfil, and try to incorporate those aspects into your site, where appropriate. Central to the idea of gamification is orienting around the deep desires of a visitor for some form of reward and status.

The user may want to buy product X, but if they can feel a sense of achievement in doing so, they’ll be engaging at a deeper level, which could then lead to brand loyalty.

eBay, a pure web e-commerce play dealing in stuff, have a “chief engagement officer”, someone who’s job it is to tweak eBay so it becomes more-gamelike. This, in turn, drives customer engagement and loyalty. If your selling history becomes a marker of achievement and status, then how likely are you to start anew at the competition?

This is one of the reasons eBay has remained so entrenched.

Gamification has also been used as a tool for customer engagement, and for encouraging desirable website usage behaviour. Additionally, gamification is readily applicable to increasing engagement on sites built on social network services. For example, in August 2010, one site, DevHub, announced that they have increased the number of users who completed their online tasks from 10% to 80% after adding gamification elements. On the programming question-and-answer site Stack Overflow users receive points and/or badges for performing a variety of actions, including spreading links to questions and answers via Facebook and Twitter. A large number of different badges are available, and when a user's reputation points exceed various thresholds, he or she gains additional privileges, including at the higher end, the privilege of helping to moderate the site

Gamification, in terms of the web, is relatively new. It didn’t even appear in Google Trends until 2010. But it’s not just some buzzword, it has practical application, and it can help improve ranking by boosting engagement metrics through loyalty and referrals. Loyalty marketing guru Fredrick Reichheld has claimed a strong link between customer loyalty marketing and customer referral.

Obviously, this approach is highly user-centric. Google orient around this principle, too. “Focus on the user and all else will follow.”

Google has always had the mantra of 'focus on the user and all else will follow,' so the company puts a significant amount of effort into researching its users. In fact, Au estimates that 30 to 40 per cent of her 200-strong worldwide user experience team is compromised of user researchers

Google fosters return visits and loyalty by giving the user what they want, and they use a lot of testing to ensure that happens. Websites that focus on keywords, but don’t give the user what they want, either due to a lack of focus, lack of depth, or by using deliberate bait-and-switch, are going against Google’s defining principles and will likely ultimately lose the SEO game.

The focus on the needs and desires of the user, both before their first click, to their return visits, should be stronger than ever.

Attention

According to Microsoft research, the average new visitor gives your site 10 seconds or less. Personally, I think ten seconds sounds somewhat generous! If a visitor makes it past 30 seconds, you’re lucky to get two minutes of their attention, in total. What does this do to your engagement metrics if Google is counting click backs, and clicks to other pages in the same domain?

And these metrics are even worse for mobile.

There’s been a lot of diversification in terms of platforms, and many users are stuck in gamified silo environments, like Facebook, so it’s getting harder and harder to attract people out of their comfort zone and to your brand.

So it’s no longer just about building brand, we also need to think about more ways to foster ongoing engagement and attention. We’ve seen that people are spending a lot of attention on games. In so doing, they have been conditioned to expect heightened rewards, stimulation and feedback as a reward for that attention.

Do you reward visitors for their attention?

If not, think about ways you can build reward and status for visitors into your site.

Sites like 99 Designs use a game to solicit engagement from suppliers as a point of differentiation for buyers. Challenges, such as “win the design” competition, delivers dozens of solutions at no extra cost to the user. The winners also receive a form of status, which is also a form of “payment” for their efforts. We could argue that this type of gamification is weighed heavily against the supplier, but there’s no doubting the heightened level of engagement and attraction for the buyer. Not only do they get multiple web design ideas for the price of one, they get to be the judge in a design version of the X-Factor.

Summary

Hopefully, this article has provided some food for thought. If we were going to measure success of loyalty and engagement campaigns, we might look at recency i.e. how long ago did the users last visit, frequency i.e. how often do they visit in a period of time, and duration i.e. when do they come, and how long do they stay. We could then map these metrics back against rankings, and look for patterns.

But even if we’re overestimating the effect of engagement on rankings, it still makes good sense from a business point of view. It costs a lot to get the first visit, but a whole lot less to keep happy visitors coming back, particularly on brand searches.

Think about ways to reward visitors for doing so.

Buying A Business

Jul 11th
posted in

As Google makes life more difficult for SEOs, pure-play SEO business models, such as affiliate and Adsense, can start to lose their shine. Google can remove you from Adsense without warning, and the affiliate model has always had hooks.

One of the problems with affiliate and Adsense has always been that it is difficult to lock in and build value using these models. If the customer is “owned” by someone else, then a lot of the value of the affiliate/Adsense middle-man lies in the SERP placement. When it comes time to sell, apart from possible type-in domain value, how much intrinsic value does such a site have? Rankings are by no means assured.

So, if these areas are no longer earning you what they once did, it makes sense to explore other options, including vertical integration. Valuable online marketing skills can be readily bolted onto an existing business, preferably to a business operating in an area that hasn’t taken full advantage of search marketing in the past.

Even if you plan on building a business as opposed to buying, looking at businesses for sale in the market you intend to build can supply you with great information. You can gauge potential income, level of competition, and undertaking a thorough business analysis can help you discover the hidden traps before you experience them yourself. If there are a lot of businesses for sale in the market you’re looking to enter, and their figures aren’t that flash, then that’s obviously a warning sign.

Such analysis can also help you formulate your own exit strategy. What would make the business you’re building look attractive to a buyer further down the track? It can be useful to envision the criteria for a business you’d like to buy, and then analyse backwards to give you ideas on how to get there.

In this article, we’ll take the 3,000 ft view and look at the main considerations and the type of advice you’ll need. We’ll also take a look at the specifics of buying an existing SEO business.

Build Or Buy?

There are a number of pros and cons for either option and a lot depends on your current circumstances.

You might be an existing owner-operator who wants to scale up, or perhaps add another revenue stream. Can you get there faster and more profitably by taking over a competitor, rather than scaling up your own business?

If you’re an employee thinking of striking out on your own and becoming your own boss, can you afford the time it takes to build revenue from scratch, or would you prefer instant cashflow?

The Advantages Of Building From Scratch

Starting your own business is low cost. Many online businesses cost next to nothing to start. Register the business. Open a bank account. Fill out a few forms and get a business card. You’re in business.

You don’t need to pay for existing assets or a customer base, and you won’t get stuck with any of the negatives an existing business may have built up, like poor contracts, bad debts and a tainted reputation. You can design the business specifically for the market opportunity you’ve spotted. You won’t have legacy issues. It’s yours. It will reflect you and no one else, at least to start with. The decisions are yours. You don’t have to honor existing contracts, deal with clients or suppliers you had no part in being contractually obliged to in the first place.

In short, you don’t have legacy issues.

What’s not to like?

There is more risk. You don’t yet know if your business will work, so it’s going to require time and money to find out. There are no guarantees. It can be difficult to get funding, as banks like to see a trading history before they’ll lend. It can be very difficult to get the right employees, especially early on, as highly skilled employees don’t tend to favor uncertain startups, unless they’re getting equity share. You have to start a structure from scratch. Is the structure appropriate? How will you know? You need to make a myriad of decisions, from advertising, to accommodation, to wages, to pricing, and with little to go on, apart from well-meaning advice and a series of hunches and experiments. Getting the numbers right is typically arrived at via a lot of trial and error, usually error. You have no cashflow. You have no customers. No systems. No location.

Not that the downsides should stop anyone from starting their own business. If it was easy, everyone would do it, but ask anyone who has started a business, and they’ll likely tell you that sure, it’s hard, but also fun, and they wouldn’t go back to being an employee.

There is another option.

Buy It

On the plus side, you have cash flow from day one. The killer of any business is cash flow. You can have customers signed up. People may be saying great things about you. You may have a great idea, and other people see that it is, indeed, a great idea.

But if the cash flow doesn’t turn up on time, the lights go out.

If you buy an existing business with sound cashflow, you not only keep the lights on, you’re more likely to raise finance. In many cases, the seller can finance you. If that’s the case, then for a small deposit you get the cashflow you need, based on the total business value, from day one.

You’ve got a structure in place. If the business is profitable and running well, then you don’t need to experiment to find out what works. You know your costs, how much you need to spend, and how much to allocate to which areas. You can then optimize it. You have customers, likely assistance from the vendor, and the knowledge from existing suppliers and employees. There is a reduced risk of failure. Of course, you pay a price for such benefits.

To buy a business, you need money. Whatsmore, you’re betting that money on someone elses idea, not your own, and it can be difficult to spot the traps. You can, of course, reshape and respin the business in your own image. You can get stuck with a structure that wasn’t built to your specifications. You might not like some of the legacy issues, including suppliers, existing contracts or employees.

If you decide buying a business is the right thing for you, then you’ll need good advice.

Advice

According to a survey conducted by businessforsale.com, businesses can take an average of nine months to sell:

  • 28% of brokers said within 6 months
  • 31% of brokers said within 9 months
  • 21% of brokers said within 12 months
  • 10.5% of brokers said that more than 12 months was required to sell a business

Buying a business is more complicated than buying an asset, such as a website. You could buy only the assets of a business - more on that shortly - but often the businesses are sold as a going concern, which means you may take on all the potential liabilities of that business, too.

Hence the need for sound advice in three main areas. Assemble a team to cover legal, accounting and business advisory.

Legal

Buying is a business, like buying a house, is a legal transaction, consisting of a number of legal issues. They key issues are you want to know exactly what you’re buying and won’t be left with any unexpected liabilities. You also want to make sure the seller won’t compete with you by re-entering the market after you buy.

One of the first things I do with clients is make sure they understand what they are buying,....They need to be able to tell me if they are buying assets, such as customer list and equipment, or the business, with the warts and ugliness that come with it.

There are a number of potential traps:

Among the things to worry about when you buy an existing business: undisclosed debts, overstated earnings, poor employee relations, overvalued inventory and pending lawsuits, to name a few. Hidden liabilities can exist in all sorts of areas - from land contaminated with toxic chemicals, to accounts receivable that look solid but prove to be uncollectible, to inventory that's defective or dated

There’s an important distinction between buying the assets of a business and buying a business. Buyers typically want to buy the assets, such as a customer list, supply contracts, or plant. Sellers typically want to sell the entire business entity.

If you buy only a corporation's assets, you don't assume its liabilities, including taxes.
If you buy a corporation's shares of stock, however, you end up with both its assets and liabilities - including known and unknown taxes. An example of an unknown tax debt would be one that resulted from an IRS audit that has not yet begun. The seller of the corporate shares is released from all corporate debts unless he personally guarantees them or agrees to be liable for them after the transfer

Which is an important distinction. However, most smaller business sales are likely to be asset sales, as they are often sole proprietorships or partnerships.

There are also financial implications in terms of tax writeoffs.

Accountant

There are two main areas accountants look at when evaluating a business. The financial history, and the tax ramifications.

Advisors often recommend looking at more than just the last years books:

In order to know whether or not the asking price for the business is fair, it is very important that you look through the books of the company over a number of financial periods. Don't make the mistake of asking for just last year's accounts. You should have at least three and preferably five years of records for the business. If it is half way through the financial year, ask for an interim set of accounts for this year. You need to be assured that trading conditions have not deteriorated from the last financial year. If you are looking to put your hard-earned money (and other's equally hard-earned money) into a business, you want to make sure that the business is not going backwards. You need to look for evidence of year on year growth at acceptable margins. Remember, any company can show regular growth but it must be profitable. Fire sales can increase revenue with little or no impact on margin or worse, the revenue can be unprofitable

The other main area is tax.

Again, this is where the difference between assets and equity is important. There are tax advantages in buying assets, as you can depreciate based on the purchase price:

Property acquired by purchase. The depreciable basis is equal to the asset's purchase price, minus any discounts, and plus any sales taxes, delivery charges, and installation fees. For real estate, you can also include costs of legal and accounting fees, revenue stamps, recording fees, title abstracts/insurance, surveys, and real estate taxes assumed for the seller

We’ve barely scratched the surface, and your financial advice will be considerably more detailed, taking into account multipliers, profit and revenue, and more. Business valuation is a specialist area, and if you want to read more on this topic, I found The Small Business Valuation Book a good resource.

Business Advisor

After lawyers and accountants, the third member of your evaluation team should be a qualified business adviser who is familiar with businesses in your area of interest.

A thorough competitive analysis should be a first step. Where does this business sit in relation to existing competition? How easy is it for new competitors to enter the market? How much risk is involved?

Whenever you buy an existing business and look at its records, you're looking at the past. There's no guarantee things won't change going forward. If you're negotiating to buy a business and you think the seller is giving you a great deal, be very suspicious--there's probably something heading down the road at 90 miles an hour that will blow this business apart when it hits

That’s the same if you plan to build a business from scratch, the difference being you probably won’t have to risk as much up front.

It can also pay to go through a broker acting on your behalf, as opposed to the seller. ">Brokers can:

Prescreen businesses for you. Good brokers turn down many of the businesses they are asked to sell, whether because the seller won't provide full financial disclosures or because the business is overpriced. Going through a broker helps you avoid these bad risks.
Help you pinpoint your interest. A good broker starts by finding out about your skills and interests, then helps you select the right business for you. With the help of a broker, you may discover that an industry you had never considered is the ideal one for you.
NegotiateThe negotiating process is really when brokers earn their keep. They help both parties stay focused on the ultimate goal and smooth over any problems that may arise.
Assist with paperwork. Brokers know the latest laws and regulations affecting everything from licenses and permits to financing and escrow. They also know the most efficient ways to cut through red tape, which can slash months off the purchase process. Working with a broker reduces the risk that you'll neglect some crucial form, fee or step in the process.

Buy An Existing SEO Business

If you want to build an SEO business, here’s a good idea of what’s involved in building one up to scale:

When you are building your agency, you need to focus on getting clients that pay you 6 figures a year. It’s hard to build a profitable agency and provide great results when someone only pays you a few grand a month.

There’s a lot of competition in this market because there are no real barriers to entry. Anyone can call themselves an SEO and anyone can advertise such services. The result is that it can be pretty difficult to differentiate yourself.

The advantages of buying an SEO business are the same for buying any other type of business i.e. you get instant cashflow, a client list, and reputation. The standard analysis, as outlined in this article, applies. Evaluate financials, legal issues and position in the market, the same as any other business.

If you’re considering buying an SEO business you need to pay particular attention to reputation. It’s a market where, I think it’s fair to say, there is a significant level of hype. Customers are often oversold on benefits that don’t eventuate i.e. a focus on rankings that don’t result in leads or customers.

Reputable SEO businesses are unlikely to have a high level of customer churn. Look for customer lists where the customers has been with the agency for a good length of time, and are ordering more services. Look for locked in forward contracts. It’s pretty easy for other SEOs to poach other customers by offering them lower prices. Again, this is why reputation and evidence of high service levels are important.

One valuable aspect, as Neil alludes to in his article, is relationships:

In the short run you will lose money from business development, but in the long run you’ll be able to make it up. The quickest way for you to increase your revenue is to be the outsourced arm of bigger agencies. As an SEO company, look for ad agencies to partner with, as there are way bigger ad agencies than seo agencies. Feel free and cold call them, offer to help them for free with their own website, and if you do well they’ll drive a lot of clients to you

Look at how the agency gets work. If it comes from established, larger advertising agencies, then these relationships are valuable. They typically result in a steady flow of new work without the need for new advertising spend. Look at the promises that have been made to clients. For example, ongoing payment may rely on performance metrics, such as ongoing rankings.

Further Resources:

Hopefully this has article has given you some food for thought. If you're capital rich and time poor, then buying an established business can be an attractive proposition. Here are some of the sources used in this article, and further reading:

Why Webmasters Pass Their Margins Onto the Googleplex

Jun 19th
posted in

In previous articles, we’ve looked at the one-sided deal that has emerged when it comes to search engines and publishers. Whilst there is no question that search engines provide value to end users, it’s clear that the search engines are taking the lionshare of the value when it comes to web publishing.

That isn’t sustainable.

The more value stripped from publishing, the less money will be spent on publishing in future. In this respect, the search engines current business model undermines their own long-term value to end users.

In this ecosystem, the incentive is to publish content that is cheap to produce. Content might also be loss-leader content that serves as a funnel leading to a transaction. Some of the content might be advertorial, the result of direct sponsorship, and may well include paid links. Curiously, it has been suggested by a Google rep that "....you blur the lines between advertising and content. That’s really what we’ve been advocating our advertisers to do". Some of it might be "the right kind of native", courtesy of Google Doubleclick. Some of the higher value content tends to be a by-product of the education sector, however the education sector may be the next in line to suffer a commodification of value.

There is little return to be had in producing high value content and making it publicly available for free, with no strings attached, so naturally such content is disappearing behind paywalls and taking other forms.

YouTube

Some YouTube producers are rebelling.

In a recent post, Jason Calacanis outlines the problem for video content producers. He maintains that Google’s cut of the rewards amounts to 45%, and that this cut simply isn’t sustainable for video producers as their margins aren’t that high.

Successful media businesses today have margins in the 20% to 50% range--if they hit profitability. That means if you give a partner 45% off the top, you have no chance of breaking even (emphasis mine). In fact, this absurd revenue is so bad that people have made amazingly clever strategies to skirt them, like VICE producing the Snoop Lion documentary and Grace Helbig becoming the face of Lowe’s Hardware. A full 100% of that money goes to the content creator -- boxing out YouTube. More on this later.

Sure, it can *feel* like you’re making money, but when you look across the landscape of YouTube businesses -- and I won’t call anyone out here -- it’s very, very clear they are losing millions and millions of dollars a year.

YouTube doesn’t have to worry because they simply lop off 45% of the revenue from the top for providing video hosting. Hosting for them is, essentially, free since they have a huge -- and growing -- network of fiber (see ‘Google's Fiber Takeover Plan Expands: Will Kill Cable & Carriers’).

Since YouTube doesn’t have to create any content, just aggregate it, they don’t need to worry about the individual profitability of any one brand......With YouTube, as with their AdSense product, Google is trying to insert itself between publishers and advertisers and extract a massive tax. In the case of YouTube, it’s a 45% tax

In a subsequent post, Calacanis laments that whilst a lot of publishers got back to him in support of his views, he received no contact from YouTube, even though he is supposedly a high value “partner”.

And what do YouTube do for this 45% cut? Hosting? They’ve pretty much outsourced support and liability to the MCNs for no money down. I imagine running a video network is pretty expensive, although I wonder about the true costs for Google. Calacanis obviously doesn’t think they’re great enough to justify the cut.

PPC Not Immune

Paid search also extracts a high tax.

Let’s run the numbers. A site has an average order price of $100. The site converts at 1% i.e. a site makes a sale to one in every hundred visitors. Sales are $1 per visitor. If the total cost of providing the order is $50, then the profit is 50 cents per visitor. The site can pay the search engine up to 49 cents per click and make a profit.

Let’s say the site invested heavily in conversion optimization to raise the conversion rate. They redesign their site, they refine their offer to give users exactly what they want, they optimize the sales funnel, and they manage to double their conversion rate to 2%. Now, for every 100 visitors, they make $2 per visitor. They can now bid up to $1.99 and still make a profit.

Great, right.

But along comes the competition. They also invest heavily in conversion optimization, and copy, and process, and they double their conversion rates, too. These sites must then keep upping their bids to stay on top in the auction process. Who benefits?

The search engine does.

The search engine benefits from this content improvement in the form of higher bid prices. The producer improves the value of their sites to users, but whilst the competition is doing the same thing, the real winner is the search engine.

This is one reason the search engine spokespeople will advise you to focus on delivering value to customers. The more value you create, the more value you’re going to end up passing to a search engine. As publishing becomes easier, the more gets published, yet the amount of attention remains relatively static. The competition increases, and it is likely that those with the deepest pockets eventually win high value and/or mature verticals.

How To Deal With It

Whilst we’re waiting for a new paradigm to come along that swings the pendulum back in favor of publishers - and we may be waiting some time - we need to think about how to extract more value from each visitor. This is not meant as a beat-up on the search engines - I’m glad they exist and enjoy most of what they do - rather this is about trying to get a handle on the ecosystem as it stands and how to thrive in it, rather than be crushed by it. In long tail markets - and web content is a l-o-n-g tail market - most of the value flows to the person organizing the market.

The key to prospering in this environment - if you don’t have the deepest pockets and you don’t organize the market - is to build relationships.

SEO is built largely on the premise that a relationship doesn’t exist between searcher and publisher. If a relationship already existed, the searcher would go direct to the publisher site, or conduct a brand search. I’m sure that’s how most people reading this article arrived on SEOBook.

So, try to make the most of every search visitor by turning them into non-search visitors. The search engine gets to extract a lot of value on first visit, especially if they arrive via PPC, but if you can then establish an on-going relationship with that visitor, then you get to retain value.

1. Encourage Subscriptions

Subscriptions can be in the form of bookmarking, signing up to Twitter, on Facebook, email subscriptions, RSS, and forum subscriptions. Encourage users to find you, in future, via channels over which you have more control. If you’ve buried these subscription calls to action, make them overt.

2. Form Alliances

Share exit traffic with like-minded but non-competitive sites. Swap advertising. Make guest posts and allow others to do likewise. Interview each other. If appropriate, instigate affiliate programs. Invest in and grow your personal networks.

3. Invest In Brand

Define a unique brand. Push your URL and brand everywhere. Take it offline. Even down to the basics like business cards, pens, whatever, emblazoned with your logo and URL. If you don’t have a definitive brand in your space, pivot and build one. Own your brand search, at very least.

4. Widen Distribution Channels

Publish ebooks. Build apps. Publish white papers. Make videos. Think of every medium and channel in which you can replicate your web publishing efforts.

Once you establish a relationship, give people reasons to come back. Think of what you do in terms of a platform, destination or place. How would this change your current approach? Ensure your business is positioned correctly so that people perceive a unique value.

You can then treat search engine traffic as a bonus, as opposed to the be all and end all of your business.

Specialization Strategy

Jun 12th
posted in

Last week, I reviewed “Who Owns The Future?” by Jaron Lanier. It’s a book about the impact of technology on the middle class.

I think the reality Janier describes in that book is self-evident - that the middle class is being gouged out by large data aggregators - but it’s hard, having read it and accepted his thesis, not to feel the future of the web might be a little bleak. Laniers solution of distributing value back into the chain via reverse linking is elegant, but is probably unlikely to happen, and even if it does, unlikely to happen in a time frame that is of benefit to people in business now.

So, let’s take a look at what can be done.

There are two options open to someone who has recognized the problem. Either figure out how to jump ahead of it, or stay still and get flattened by it.

Getting Ahead Of The SEO Pack

If your business model relies on the whims of a large data aggregator - and I hope you realize it really, really shouldn't if at all humanly possible - then, you need to get a few steps ahead of it, or out of its path.

There's a lot of good advice in Matt Cutt's latest video:

It could be argued that video has a subtext of the taste of things to come, but even at face value, Cutts advice is sound. You should make something compelling, provide utility, and provide a good user experience. Make design a fundamental piece of your approach. In so doing, you’ll keep people coming back to your site. Too much focus on isolated SEO tactics, such as link building, may lead to a loss of focus on the bigger picture.

In the emerging environment, the big picture partly means “avoid getting crushed by a siren server”, although that's my characterization, and unlikely to be Cutts'! Remember, creating quality, relevant content didn’t prevent people from being stomped by Panda and Penguin. All the link building you’re doing today won’t help you when a search engine makes a significant change to the way they count and value links.

And that day is coming.

Are You Flying A Helicopter?

Johnon articulately poses part of the problem:

Fast forward and we’re all spending our days flying these things (computers). But are we doing any heavy lifting? Are we getting the job done, saving the day, enabling the team? Or are we just “flying around” like one of those toy indoor helicopters, putzing around the room dodging lamps and co-workers’ monitors until we run out of battery power and drop to the floor? And we call it work.”...More than ever, we have ways to keep “busy” with SEO. The old stand-byes “keyword research” and “competitive analysis” and “SERP analysis” can keep us busy day after day. With TRILLIONS of links in place on the world wide web, we could link analyze for weeks if left alone to our cockpits. And I suppose every one of you SEOs out there could rationalize and justify the effort and expense (and many of you agency types do just that.. for a living). The helicopter is now cheap, fast, and mobile. The fuel is cheap as well, but it turns out there are two kinds of fuel for SEO helicopters. The kind the machine needs to fly (basic software and electricity), and the kind we need to actually do any work with it (seo data sets, seo tools, and accurate and effective information). The latter fuel is not cheap at all. And it’s been getting more and more expensive. Knowing how to fly one of these things is not worth much any more. Knowing how to get the work done is

A lot of SEO work falls into this category.

There is a lot of busy-ness. A lot of people do things that appear to make a difference. Some people spend entire days appearing to make a difference. Then they appear to make a difference again tomorrow.

But the question should always be asked “are they achieving anything in business terms?”

It doesn't matter if we call it SEO, inbound marketing, social media marketing, or whatever the new name for it is next week, it is the business results that count. Is this activity growing a business and positioning it well for the future?

If it’s an activity that isn't getting results, then it’s a waste of time. In fact, it’s worse than a waste of time. It presents an opportunity cost. Those people could have been doing something productive. They could have helped solve real problems. They could have been building something that endures. All the linking building, content creation, keyword research and tweets with the sole intention of manipulating a search engine to produce higher rankings isn't going to mean much when the search engine shifts their algorithms significantly.

And that day is coming.

Pivot

To avoid getting crushed by a search engine, you could take one of two paths.

You could spread the risk. Reverse-engineer the shifting algorithms, with multiple sites, and hope to stay ahead of them that way. Become the gang of moles - actually, a "labour" of moles, in proppa Enlush - they can’t whack. Or, at least, a labour of moles they can't whack all at the same time! This is a war of attrition approach and it is best suited to aggressive, pure-play search marketing where the domains are disposable.

However, if you are building a web presence that must endure, and aggressive tactics don’t suit your model, then SEO, or inbound, or whatever it is called next week, should only ever be one tactic within a much wider business strategy. To rely on SEO means being vulnerable to the whims of a search engine, a provider over which you have no control. When a marketing tactic gets diminished, or no longer works, it pays to have a model that allows you to shrug it off as an inconvenience, not a major disaster.

The key is to foster durable and valuable relationships, as opposed to providing information that can be commodified.

There are a number of ways to achieve this, but one good way is to offer something unique, as opposed to being one provider among many very similar providers. Beyond very basic SEO, the value proposition of SEO is to rank higher than similar competitors, and thereby gain more visibility. This value proposition is highly dependent on a supplier over which we have no control. Another way of looking at it is to reduce the competition to none by focusing on specialization.

Specialize, Not Generalize

Specialization involves working in a singular, narrowly defined niche. It is sustainable because it involves maintaining a superior, unique position relative to competitors.

Specialization is a great strategy for the web, because the web has made markets global. Doing something highly niche can be done at scale by extending the market globally, a strategy that can be difficult to achieve at a local market level. Previously, generalists could prosper by virtue of geographic limits. Department stores, for example. These days, those departments stores need to belong to massive chains, and enjoy significant economies of scale, in order to prosper.

Specialization is also defensive. The more specialized you are, they less likely the large data aggregators will be interested in screwing you. Niche markets are too small for them to be bother with. If your niche is defined too widely, like travel, or education, or photography, for example, you may face threats from large aggregators, but this can be countered, in part, by design, which we’ll look at over the coming week.

If you don’t have a high degree of specialization, and your business relies solely on beating similar business by doing more/better SEO, then you’re vulnerable to the upstream traffic provider - the search engine. By solving a niche problem in a unique way, you change the supply/demand equation. The number of competing suppliers becomes “one” or “a few”. If you build up sufficient demand for your unique service, then the search engines must show you, else they look deficient.

Of course, it’s difficult to find a unique niche. If it’s profitable, then you can be sure you’ll soon have competition. However, consider than many big companies started out as niche offerings. Dell, for example. They were unique because they sold cheap PCs, built from components, and were made to order. Dell started in a campus dormitory room.

What’s the alternative? Entering a crowded market of me-too offerings? A lot of SEO falls into this category and it can be a flawed approach in terms of strategy if the underlying business isn't positioned correctly. When the search engines have shifted their algorithms in the past, many of these businesses have gone up in smoke as a direct result because the only thing differentiating them was their SERP position.

By taking a step back, focusing on relationships and specific, unique value propositions, business can avoid this problem.

Advantages Of Specialization

Specialization makes it easier to know and deeply understand a customers needs. The data you collect by doing so would be data a large data aggregator would have difficulty obtaining, as it is nuanced and specific. It’s less likely to be part of an easily identified big-data pattern, so the information is less likely to be commodified. This also helps foster a durable relationship.

Once you start finely segmenting markets, especially new and rising markets, you’ll gain unique insights and acquire unique data. You gain a high degree of focus. Check out “Business Lessons From Pumpkin Hackers”. You may be capable of doing a lot of different things, and many opportunities will come up that fall slightly outside your specialization, but there are considerable benefits in ignoring them and focusing on growing the one, significant opportunity.

Respin

Are you having trouble competing against other consultants? Consider respinning so you serve a specific niche. To specialize, an SEO might build a site all about dentistry and then offer leads and advertising to dentists, dental suppliers, dental schools, and so on. Such a site would build up a lot of unique and actionable data about the traffic in this niche. They might then use this platform as a springboard to offering SEO services to pre-qualified dentists in different regions, given dentistry is a location dependent activity, and therefore it is easy for the SEO to get around potential conflicts of interest. By specializing in this way, the SEO will likely understand their customer better than the generalist. By understanding the customer better, and gaining a track record with a specific type of customer, it gives the SEO an advantage when competing with other SEO firms for dentists SEO work. If you were a dentist wanting SEO services, who's pitch stands out? The generalist SEO agency, or the SEO who specializes in web marketing for dentists?

Similarly, you could be a generalist web developer, or you could be the guy who specializes in payment gateways for mobile. Instead of being a web designer, how about being someone who specializes in themes for Oxwall? And so on. Think about ways you can re-spin a general thing you do into a specific thing for which there is demand, but little supply.

One way of getting a feel for areas to specialize in is to use Adwords as a research tool. For example, “oxwall themes” has almost no Adwords competition and around 1,300 searches per month. Let’s say 10% of that figure are willing to pay for themes. That’s 130 potential customers. Let’s say a specialist designer converts 10% of those, that’s 13 projects per month. Let’s say those numbers are only half right. That’s still 6-7 projects per month.

Having decided to specialize in a clearly defined, narrow market segment, and having good product or service knowledge and clear focus, you are much more likely to be able to spot the emerging pain points of your customers. Having this information will help you stand out from the crowd. Your pitches, your website copy, and your problem identification and solutions will make it harder for more generalist competitors to sound like they don’t know what they are talking about. This is the unique selling proposition (USP), of course. It’s based on the notion of quality. Reputation then spreads. It’s difficult for a siren server to insert itself between word of mouth gained from good reputation.

Differentiation is the aim of all businesses, no matter what the size. So, if one of your problems is being too reliant on search results, take a step back and determine if your offer is specialized enough. If you’re offering the same as your competitors, then you’re highly vulnerable to algorithm shifts. It’s hard to “own” generalist keyword terms, and a weak strategic position if your entire business success is reliant upon doing so.

Specialization lowers the cost of doing business. An obvious example can be seen in PPC/SEO. If you target a general term, it can be expensive to maintain position. In some cases, it’s simply impossible unless you’re already a major player. If you specialize, your marketing focus can be narrower, which means your marketing cost is lower. You also gain supply-side advantages, as you don’t need to source a wide range of goods, or hire as many people with different skillsets, as the generalist must do.

Once you’re delivering clear and unique value, you can justify higher prices. It’s difficult for buyers to make direct comparisons, because, if you have a high degree of specialization, there should be few available to them. If you are delivering that much more value, you deserve to be paid for it. The less direct competition you have, the less price sensitive your offering. If you offer the same price as other offerings, and your only advantage is SERP positioning, then that’s a vulnerable business positioning strategy.

If you properly execute a specialization strategy, you tend to become more lean and agile. You may be able to compete with larger competitors as you can react quicker than they can. Chances are, your processes are more streamlined as they are geared towards doing one specific thing. The small, specialized business is unlikely to have the chain of command and management structure that can slow decision making down in organizations that have a broader focus.

Specialized businesses tend to be more productive than their generalist counterparts as their detailed knowledge of a narrow range of processes and markets mean they can produce more with less. The more bases you cover, the more organisational aspects come into play, and the slower the process becomes.

In Summary

There are benefits in being a generalist, of course, however, if you’re a small operator and find yourself highly vulnerable to the whims of search engines, then it can pay to take a step back, tighten your focus, and try to dominate more specialist niches. The more general you go, the more competition you tend to encounter. The more competition you encounter in the SERPs, the harder you have to fight, and the more vulnerable you are to big data aggregators. The highly specialized are far more likely to fly under the radar, and are less vulnerable to big-brand bias in major verticals. The key to not being overly dependent on search engines is to develop enduring relationships, and specialization based on a strong, unique value proposition is one way of doing so.

Next article, we’ll look at differentiation by UX design and user experience.

Growing An SEO Business By Removing Constraints

May 31st
posted in

If you run an SEO business, or any service business, you’ll know how hard it can be to scale up operations. There are many constraints that need to be overcome in order to progress.

We’ll take a look at a way to remove barriers to growth and optimize service provision using the Theory Of Constraints. This approach proposes a method to identify the key constraints to performance which hinder growth and expansion.

The Theory Of Constraints has been long been used for optimizing manufacturing.....

We had no legs to stand on to maintain our current customer base let alone acquire and keep new business. This was not an ideal position to be in, particularly in a down economy when we couldn’t afford to have sales reduce further

... but more recently, it’s been applied to services, too.

The results were striking. The number of days to decide food stamp eligibility dropped from 15 to 11; phone wait times were reduced from 23 minutes to nine minutes. Budgetary savings have exceeded the $9 million originally cut

It’s one way of thinking about how to improve performance by focusing on bottlenecks. If you’re experiencing problems such as being overworked and not having enough time, it could offer a solution.

First we’ll take a look at the theory, then apply it to an SEO agency. It can be applied to any type of business, of course.

Theory Of Constraints

Any manageable system as being limited in achieving more of its goals by a very small number of constraints. There is always at least one constraint, and TOC uses a focusing process to identify the constraint and restructure the rest of the organization around it

If there weren’t constraints, you could grow your business as large and as fast as you wanted.

You can probably think of numerous constraints that prevent you from growing your business. However, the theory holds that most constraints are really side issues, and that organizations are constrained by only one constraint at any one time.

A constraint is characterized as the “weakest link”.

The weakest link holds everything else up. Once this constraint has been eliminated or managed, another “weakest link” may well emerge, so the process is repeated until the business is optimized. Constraints can be people, procedures, supplies, management, and systems.

In Dr. Eli Goldratt’s book, "The Goal", Golddratt identifies the five steps to identify and address the constraint:

  • Identify the constraint
  • Exploit the constraint
  • Subordinate everything else to the constraint
  • Elevate the constraint
  • Go back to step 1
  • 1. Identify The Constraint

    What is the biggest bottleneck that holds back company performance? What activity always seems to fall behind schedule, or take the most time? This activity might not be the main activity of the company. It could be administrative. It could be managerial.

    If you’re not sure, try the “Five Whys” technique to help determine the root cause:

    By repeatedly asking the question “Why” (five is a good rule of thumb), you can peel away the layers of symptoms which can lead to the root cause of a problem. Very often the ostensible reason for a problem will lead you to another question. Although this technique is called “5 Whys,” you may find that you will need to ask the question fewer or more times than five before you find the issue related to a problem

    2. Exploit The Constraint

    Once the constraint is identified, you then utilize the constraint to its fullest i.e. you try to make sure that constraint is working at maximum performance. What is preventing the constraint from working at maximum performance?

    If the constraint is staff, you might look at ways for people to produce more work, perhaps by automating some of their workload, or allocating less-essential work to someone else. It could involve more training. It could involve adopting different processes.

    3. Subordinate Everything Else To The Constraint

    Identify all the non-constraints that may prevent the constraint from working at maximum performance. These might be activities or processes the constraint has to undertake but aren’t directly related to the constraint.

    For example, a staff member who is identified as a constraint might have a billing task that could either by automated or allocated to someone else.

    The constraint should not be limited by anything outside their control. The constraint can’t do any more than it possibly can i.e. if your constraint is time, you can’t have someone work anymore than 24 hours in a day! More practically, 8 hours a day.

    Avoid focusing on non-constraints. Optimizing non-constraints might feel good, but they won’t do much to affect overall productivity.

    4. Elevate The Constraint

    Improve productivity of the constraint by lifting the performance of the constraint. Once you’ve identified the constraint, and what is limiting performance, then you typically find spare capacity emerges. You then increase the workload. The productivity of the entire company is now lifted. Only then would you hire an additional person, if necessary.

    5. Repeat

    The final step is to repeat the process.

    The process is repeated because the weakest link may now move to another area of the business. For example, if more key workers have been hired to maximize throughput, then the constraint may have shifted to a management level, because the supervisory workload has increased.

    If so, this new constraint gets addressed via the same process.

    Applying The Theory Of Constraints To An SEO Agency

    Imagine Acme SEO Inc.

    Acme SEO are steadily growing their client base and have been meeting their clients demands. However, they’ve noticed projects are taking longer and longer to finish. They’re reluctant to take on new work, as it appears they’re operating at full capacity.

    When they sit down to look at the business in terms of constraints, they find that they’re getting the work, they’re starting the work on time, but the projects slow down after that point. They frequently rush to meet deadlines, or miss them. SEO staff appear overworked. If the agency can’t get through more projects, then they can’t grow. Everything else in the business, from the reception to sales, depends on it. Do they just hire more people?

    They apply the five steps to define the bottleneck and figure out ways to optimize performance.

    Step One

    Identify the constraint. What is the weakest link? What limits the SEO business doing more work? Is it the employees? Are they skilled enough? How about the systems they are using? Is there anything getting in the way of them completing their job?

    Try asking the Five Whys to get to the root of the problem:

    1. Why is this process taking so long? Because there is a lot of work involved.
    2. Why is there a lot of work involved? Because it’s complex.
    3. Why is it complex? Because there is a lot of interaction with the client.
    4. Why is there a lot of interaction with the client? Because they keep changing their minds.
    5. Why do they keep changing their demands? Because they’re not clear about what they want.

    Step Two

    Exploiting the constraint. How can the SEO work at maximum load?

    If an SEO isn’t doing as much as they could be, is it due to project management and training issues? Do people need more direct management? More detailed processes? More training?

    It sounds a bit ruthless, especially when talking about people, but really it’s about constructively dealing with the identified bottlenecks, as opposed to apportioning blame.

    In our example, the SEOs have the skills necessary, and work hard, but the clients kept changing scope, which is leading to a lot of rework and administrative overhead.

    Once that constraint had been identified, changes were made to project management, eliminating the potential for scope creep after the project had been signed off, thus helping maximize the throughput of the worker.

    Step Three

    Subordinate the constraint. So, the process has been identified as the cause of a constraint. By redesigning the process to control scope creep before the SEO starts, say at a sales level, they free up more time. When the SEO works on the project, they’re not having to deal with administrative overhead that has a high time cost, therefore their utility is maximised.

    The SEO is now delivering more forward momentum.

    Step Four

    Elevate the performance of the constraint. They monitor the performance of the SEO. Does the SEO now have spare capacity? Is the throughput increasing? Have they done everything possible to maximize the output? Are there any other processes holding up the SEO? Should the SEO be handling billing when someone else could be doing that work? Is the SEO engaged in pre-sales when that work could be handled by sales people?

    Look for work being done that takes a long time, but doesn’t contribute to output. Can these tasks be handed to someone else - someone who isn’t a constraint?

    If the worker is working at maximum utility, then adding another worker might solve the bottleneck. Once the bottleneck is removed, performance improves.

    Adding bodies is the common way service based industry, like SEO, scales up. A consultancy bills hours, and the more bodies, the more hours they can ill. However, if the SEO role is optimized to start with, then they might find they have spare capacity opening up so don’t need as many new hires.

    Step Five

    Repeat.

    Goldratt stressed that using the Theory Of Constraints to optimize business is an on-going task. You identify the constraint - which may not necessarily be the most important aspect of the business i.e. it could be office space - which then likely shifts the weakest link to another point. You then optimize that point, and so on. Fixing the bottleneck is just the beginning of a process.

    It’s also about getting down to the root of the problem, which is why the Five Whys technique can be so useful. Eliminating a bottleneck sounds simple, and a quick fix, but the root of the problem might not be immediately obvious.

    In our example, it appeared as though the staff are the problem, so the root cause could be misdiagnosed as “we need more staff”. In reality, the root cause of the bottleneck was a process problem.

    Likewise some problems aligned with an employee on a specific project might be tied to the specific client rather than anything internal to your company. Some people are never happy & will never be satisfied no matter what you do. Probably the best way to deal with people who are never satisfied is to end those engagements early before they have much of an impact on your business. The best way to avoid such relationships in the first place is to have some friction upfront so that those who contact you are serious about working with you. It can also be beneficial to have some of your own internal sites to fall back on, such that when consulting inquiries are light you do not chase revenue at the expense of lower margins from clients who are not a good fit. These internal projects also give you flexibility to deal with large updates by being able to push some of your sites off into the background while putting out any fires that emerge from the update. And those sorts of sites give you a testing platform to further inform your strategy with client sites.

    How have you addressed business optimization problems? What techniques have you found useful, and how well did they work?

    Further Resources:

    I’ve skimmed across the surface, but there’s a lot more to it. Here’s some references used in the article, and further reading...

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