How we grew our high school hustle into an agency making over $1 million per month

Hello! What is your background and what are you working on?

My name is Matt, and I'm working on an interactive full-service digital agency called Happy Cog.

I founded the company in high school with a friend, so I'm about 20 years into it at this point. I grew up on Long Island in New York, and I went to college at NYU, and spent nights and weekends for many years working with this company.

What motivated you to get started with happy cog?

My co-founder, Lee Goldberg, and I are really close. We grew up together, and have been friends since elementry school.

We were both really into computers and in high school and middle school and we had a small business just fixing people's computers, just personal people, very small-scale. This is in the late '90s to early 2000s, and during that time the internet started becoming a more important thing for small businesses. And we started getting computer repair jobs for businesses, not just people. And our clients would often ask us about websites, you know, do they need a website? How do websites work?

Again, this is going back 20 years or more. It wasn't super clear that every small business would want a website back then. But we were there as IT guys, so we ended up being their main people to ask. And with the sheer volume of questions we realized that it was gonna become a big thing.

I was already pretty interested in computer programming; I'd been noodling around at home just with basic and some other kind of early languages. And we decided we were interested in doing more with websites and programming. And I mean, soon became very obvious that the web was the future and computer repair was less interesting to us.

I think at some point we kind of said, you know, we really have to explore this and try to understand what services we can be offering. And maybe this is a good way to make some money! Again, we were in high school, we weren't necessarily looking to do anything too big at the time. It was just how can we make some money and do something fun.

I was very interested in the technical side. He was very interested in the marketing side, so it worked out pretty well. I learned HTML and JavaScript at the time. It wasn't even really CSS at the time. It was more like tables and things like that. And and he really learned the very, very early internet marketing types of strategies. Once we did our first one or second one, it was very easy to go in and show that to other people, because very few people were doing that kind of work at the time. So we knew we had something, so we stopped the computer repair and network repair that our business was centered on and just focused exclusively on this.

How long did that take you from start to a workable business?

It took between a couple of months to a year or so just to understand what we were selling and how to price it. And I remember very specifically, we were remember were high school kids, so what we might not think of as a lot of money now was a lot of money for us then. We were charging a couple hundred dollars at the time for a website.

And I remember one of our clients referred us to his lawyer. And we were sitting in the lawyers lobby and it was really nice. So Lee and I look at each other like, "We've got to raise our price." So we said, "Why don't we go in with a ridiculous number?"

So we chose $2,000 we said, that is a ridiculous number. They'll say no, we'll just negotiate down to a thousand, and it's still an amazing rate for us. When they called us back the client said, so how do you price it? We said, well, it's $2,000. I remember very specifically he said, "Okay, let's get started."

We're like, alright, this is our model!

Since those days, how have you attracted users and how have you grown Happy Cog?

One thing I want to mention is when we first founded the company. We called ourselves Vector and Vector Media Group was kind of the name we operated under for many years. And then about three years ago we acquired another company called Happy Cog, and we decided to just rebrand. So now the whole company is Happy Cog.

Back when were were starting Vector we were two high school kids. As I said, we went to college, both worked during college, on nights and weekends and probably even beyond that, you know, working on it during classes and all. And then we both got different full time jobs out of college. But we still worked on this nights, our own company, nights and weekends.

We were building sites and marketing sites constantly. And at some point we said, wow, this is a lot. We're spending a lot of our time even during the day concentrating on this. So it's time to quit our jobs and really go for this.

At the beginning, I hate to say it, but we did a lot of free work for our clients. We worked a lot harder than we should have. We wanted to impress every single client, because we knew that the more customers we had, the more they would tell their friends. And the bigger portfolio we had, the easier it would be for us to get more projects. We wanted add logos to our website, and add items to our portfolio, and have everyone be really happy. I know that sounds simple and straight forward, but that's the truth.

The other thing we did was we tried speaking at conferences. So for example, I spoke at this one conference about e-commerce and integrating e-commerce into a specific content management system. And this was 10, 11 years ago or maybe more. And you know, following that, we got a ton of leads around exactly that because you gain authority, people immediately see you as an expert at this topic and it's something that you need to solve for. So that was a big part of our strategy to writing articles, speaking at conferences, anything to show that we were experts in certain topics.

That was about maybe nine years to a decade ago. And now we're a company of about 70 people. We've been profitable since day one. We've never taken any outside debt investments, anything like that; we're fully bootstrapped. We have an office in Manhattan, and one in Philadelphia. We've been on the Inc. 5,000 list of fastest growing companies for the last seven years. So it's definitely grown a lot since it was just two high school kids.

How would you describe your business model? And—beyond high-balling people in lawyer's offices—how have you grown your revenue?

We have three bands of revenue.

One is development; you might call it programming or engineering. That's all the coding, building a site, building an internal application, building a mobile app, creating integrations, whatever it might be to craft the site. That's the biggest part of our revenue - depending on the month, about 60 to 65% of our revenue. It's also our largest department in terms of staff.

We also have the digital marketing department. That's things like SEO, pay-per-click advertising, paid search, paid social analytics, consulting, conversion rate optimization, and those kinds of things. That's the second biggest part of our revenue. And our second biggest head count!

And then we have our design and branding and UX services. That's everything from UX consulting, to full site design, to branding and logos, to app design, and everything in between.

A lot of our clients hire us for all three, but a lot of our clients would hire us for one or two. Honestly, our business model is to provide more value to clients than we charged for. So again, end of the day, if we are asking them to invest in us and we're asking them to spend your money with us, we want to show them that that's positive ROI for them, that every dollar they give to us, they're going to get out. Whether that's directly, because we're doing advertising for them, or just making a website that helps them convert more or solve their business problems better. We've grown by trying to help with larger and more complex projects over time.

These days if you're looking for a two- or three-page, ultra-basic site I think there's really good services for that, like a Squarespace or WordPress. But that's not our model. And our average project these days is going to start in the six or seven figure range. So trying to do more, I'm trying to offer more value in more complex areas that we might have a special ability to solve, concentrate on specific technologies, and we're just trying to make our clients happy. Honestly.

If you make your clients happy, then they tell their friends about you because they look good to their friends, and they look good internally and you really help them make money from your work.

What are your goals for the future? Do you see any major roadblocks in the way of those goals?

It's interesting that we're talking now, right, with COVID-19? And not ten weeks ago or something?

I think I'll start our goals in the corporate world right now. Honestly, our biggest goal is to just maintain our team. One of the things about these kinds of economic environments is that our clients' advertising and marketing budgets usually cover even websites and things like that. Those are often the first things to get cut. So we have to be really careful. We're trying to still show value to our clients because we think we can still do a lot in this world for them. On the other hand, you know, what we've seen is a dramatic shift to e-commerce for a lot of industries.

And we know that there was already a big shift to e-commerce before this, but there industries that are less so about e-commerce, or had been moving slowly or kind of accelerating. So we want to find ways to offer value there as well and try to help our clients navigate that longer term. Our goals are to continue trying to do bigger projects and offering more value.

As I said, we've been on the Inc. 5,000 for a couple of years in a row now. Definitely want to continue that, but we are definitely not obsessed with revenue per se. We're obsessed with revenue in the sense that it helps us do work we want to do and helps us keep our employees happy and lets us treat them well. So we rank it like: client happiness, then employee happiness, then profit. So those will continue to be our goals.

What are some of the biggest challenges that you've faced and obstacles that you've overcome to this point?

We've had a couple!

It's one thing to walk into a person's house and do some tech support and help them figure out how to use their computer. It's another thing to walk into a business and say you're going to help them set up their whole internal server file storage system. When we started it wasn't easy to convince potential clients to trust us. We were two nerdy 16 year olds walking into their office. So we tried to get past that by just being experts.

And then came college and our jobs after college. It was challenging to know when to quit the safety of our jobs and do this full time. And I'll be honest with you: I think we did it a little bit too late. I mean, everything worked out, and it's great now. But we could have made that decision a little bit earlier. Looking back we didn't have to be so nervous about it, but I understand why we were.

And of course we've made some hiring mistakes. I think everybody made some hiring mistakes. Any time you have to let somebody go, even if it's their fault, ultimately as the manager or owner it's your fault. You shouldn't have hired that person or you should have done a better job onboarding them.

Finally, it's hard to imagine how quickly the bottom of the web design and web development market fell out of agencies laps and went to places like Squarespace and Wix and Weebly and GoDaddy and all of that. Because a lot of agencies, including us, they used to make a good living charging a couple thousand dollars doing a couple page site with a contact form in it. And you could have a really simple CMS and that was great. But these days it's harder and harder to do that kind of thing. And so we had to pivot pretty strongly into doing bigger, more complex projects and that was a good move. Looking back, it was a very good move and it's definitely better for us. But at the time I think it was very difficult to navigate that and to make sure that we weren't making a mistake.

Have you found anything particularly helpful or advantageous?

Definitely books. I'm not huge on business books. I know that a lot of them are great, but I tend to not have a ton of patience for some of the flowery language that a lot of them use. I just want the lessons distilled into a 20 minute quick overview. That said, many years ago I read a book called Getting to Yes, which is this really, really classic negotiation book. It talked a lot about, you know, negotiating, and having a best alternative to negotiate agreement, which is called a BATNA, and just kind of walking away from negotiations with everyone being as happy as they can be. That's been hugely influential for me.

There's another great book by Chris Voss called, Never Split The Difference, which is really interesting too. And he's got a couple of interesting things about negotiation there that's helped me a ton. We want to make sure that we're working with a client, that the client's getting what they need and getting a value from us for helping them accomplish their goals. But at the end of the day we have to have a business and we have to make sure that we can meet our business goals of being profitable and offering value.

I've also always liked reading the Indie Hackers site! It's always inspiring to see how different people started and run and think about their own businesses. So that's always great.

As far as habits, one of the things that I try to be very good at is keeping my promises. Which I know sounds ridiculous, but if I say I'm going to follow up with somebody, I take a note and I follow up with them. And if I say I'm going to give somebody something, I do it. And again, it sounds ridiculous, but there've been so many opportunities in the past that we have won just because we were the ones that did the followup, we were the ones that showed that we could be relied on.

At the end of the day, you're asking your clients to trust you with a significant amount of their money as well as their political capital inside of their business. And so they want to know that you're going to be reliable. Again, it sounds obvious, but I feel like not a lot of people do that.

We got very lucky. We were interested in starting a business just as the internet was taking off for small businesses. So it was very good timing for us as well. And I think luck has had a lot to do with it to be honest with you.

What advice do you have for indie hackers who are just starting out?

The first is what I just said: be reliable. Say you're going to do something and then do it. If people email you with opportunities, follow up with them. Time is the enemy of all deals.

I think you should understand what you're good at and what you're not good at. You hear this all the time. You read this all the time from people on Indie Hackers and it's true, which is if you're not good at something, you're spending a lot of opportunity cost on doing it. If there's a cheaper way to accomplish it or somebody else who's better at that particular task, that means delegating certain tasks or delegating certain responsibilities. It's very important to do that.

Also we've benefited a lot in the past from just hiring smart people. So sure we can hire people with certain technical skill sets. But in a lot of cases in the past, we've interviewed people that are super, super smart, clearly driven, know what they were doing, and we weren't exactly sure how they were going to fit, but we knew we needed to work with them and it's always worked out. So I just always want to hire A-level people. They'll always find a way to contribute to your organization and make your clients happier.

Where can we go to learn more?

You can learn more at our Website, our industry blog, Cognition, and our Twitter.

You can also reach out to me at my email or follow me on my twitter.

Feel free to ask any questions in the comments below!