This edition of the #APP brings an enlightening conversation with Chris Badgett, CEO of LifterLMS. He shares the story of how he used high-profit margin productized services to create the cash flow to build a successful SaaS company out of his digital agency.
During the chat, he breaks down just some of the following:
- How he transitioned from big-budget websites with small margins to high-profit margin productized services
- The challenges of building a SaaS company out of your agency
- How to identify opportunities for productized services and if they’re a good fit for you
- How to save money on talent
By way of background; LifterLMS encompasses the needs of modern membership course creators, allowing you to create an integrated membership site.
Chances are, you have a productized service option lurking within your current agency resources; this could be launched quickly, thus opening up a new, easier revenue source.
A natural and authentic teacher, Chris uses his innate ability to hone every business he’s started or mentored.
Creating a Learning Management System for WordPress, he helps online course creators launch, and scale. The LifterLMS community includes agencies who build learning management systems, membership sites, and courses for clients.
When he’s not working in his cabin, or homeschooling his kids, you can find Chris on his organic farm spending time in nature, and wowing his family with magic tricks.
Points of Interest…
Maintaining cash-flow to fund products 3:35
Sustaining your product over time 6:34
Deciding when to start productizing services 10:04
Measuring the impact 11:38
Tips for agencies transitioning to productized services 12:07
Definition of Productized Services
Productized services are a new trend in the world of business where companies offer standardized products that can be customized. The goal is to make it easier for customers to buy without having to worry about all of the details, and also making it easy on businesses so they don’t have to manage as many customer requests.
Maintaining Cash-flow to Fund a Productized Service
Once you’ve built out your SaaS product, complete with making the often necessary concessions on profit, there are other ways to maintain cash-flow.
For example, Chris has a knack at talent scouting; investing in someone who may be less experienced, but has the potential to become a leader if given the opportunity to grow while making mistakes. This is the foundation of an economical team engine.
Additional ways to maintain cash-flow as discussed by Chris include…
- Move up-market, ensuring good payment terms
- Get used to pre-selling and receiving cash upfront
- Live below your means where possible, ensuring you survive any dips
Side note: our Agency Profit Toolkit is a one stop shop for you to be able to outline some of these crucial profitability numbers to a potential buyer. Spreadsheets, templates and training videos, you name it, it’s all in the toolkit. Grab yours free at the link below:
Sustaining Your Product
It’s one thing transitioning from an agency to a software company, but – once there – how can you (frankly) survive that transition and ease some of the cash-flow constraints?
In short, it’s worth reminding yourself (often) that moving to productizing services is a “process not an event”. As it happens, this is a mantra Chris uses frequently…
“I say that about a lot of different things, but transitioning from an agency to a software company was definitely a multi-year process, not an event – like, it happened on Tuesday on this date…”
Therefore, it’s necessary to get good at scoping projects and forecasting cash-flow.
Based on his experience in delivering high-end, custom web dev solutions for membership sites, Chris also challenged himself to create and productize, while “using mostly our tool, plus some templated sites, with limited customization”, that still delivered ALL the value and a medium price point.
Deciding When to Start Productizing Services
Given price points vary across the board, your productized service is likely going to be the customer. Bear in mind, the ideal customer or client is going to have different attributes than your custom high-end work.
Five years ago, Chris’s process included some of the below…
- Firstly, he considered how to improve upon scope control, plus drive-up margins
- Then, he experimented for a year
- He learned that clients for productized services are going to be very different to high-end clients, with “productized services, sort of a halfway point between agency and product”
- He also referenced the work of Brian Castle (generally considered a leader in terms of creating productized services out of an agency) and Mandi Ellefson, the mind behind the Hands-Off CEO programme
Measuring The Impact of Productizing Your Service
Realizing he was a product person and packaging services that way made sense, it aided a shift in thinking from services to the product – on the way to SaaS.
“When you really get clear on productized service offerings, you don’t have to put your best people on it.”
Indeed, productized services don’t tend to require a number of high-talent staff. You may need their help to develop the templates, processes and to brainstorm, but in a standard operating procedures way of implementation, resulting in value for the client that feels customized and bespoke.
Additionally, Chris was able to price on value and create great margins, plus he realised productized services brought far less stress.
Regarding the resulting data and reporting, plus profitability, gross margin, and PR from the product; there was a lot of iteration to get to Product/Market fit. Oh, and margins flipped from 20% to 80%… Result.
Tips for Transitioning to Productized Services
So, if you’re reading this at home – with a few ideas ruminating and therefore “product curious” – here are some points to consider if you’re pondering a similar move to productized services.
- Do a deep dive into your soul
- Get better at running a profitable agency so you can afford to invest in the product
- Figure out how you’re going to bridge that gap
- Be open to challenging your assumptions about what the product is, versus what it needs to be
That’s the key to unlocking value in a really good offer; don’t get too attached to your assumptions, instead help your clients and your customers uncover their own cause.
Want to see more of Chris? Follow him online @
Did you learn anything new from this episode? If so, let us know in the comments below – we value your feedback! Our next instalment of #APP, on May 13th, will see us chat with head of partnerships at DigitalMarketer.com, Marcus Murphy. To view our previous blog with Jennifer Kikkert, make your way here…
Agency Profitability Tool Kit
Like the idea of productizing your services? We can help. If you’re looking for more resources to help you improve your agency’s profitability, then check out the Agency Profitability Tool Kit – it’s full of the same templates and checklists we’ve used with consulting clients to help them improve their profitability by over 100% in under 60 days.