Ep 157 – How Sam Shepler Grew StorysSnap Through Acquisitions Instead of Retainers
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Featuring: Sam Shepler, Storysnap
In episode 157, I sit down with Sam Shepler, founder and CEO of Storysnap, the holding company behind Testimonial Hero and Product Hype. Sam has spent over a decade building B2B video agencies, growing largely through strong operations and strategic acquisitions to a team of more than 50.
We get into why Sam has never chased retainers, even though the B2B video world often pressures agencies to convert project work into recurring revenue. He walks through the real math behind lifetime value versus monthly billing, why unpredictability isn't something to be cured, and how his acquisition strategy is built around adding capability rather than just adding revenue. Sam also breaks down the gross margin mistakes he sees in nearly every agency P&L he reviews, and why he considers 60% the new 50% in an AI-driven world.
Agency owners will walk away rethinking how they calculate gross margin, why cash accounting hides the truth about project-based businesses, and why pulling revenue forward matters more than the comfort of predictable monthly billing.
Key Bytes
• Sam doesn't chase retainers in video production because he believes lifetime value, not billing predictability, is the metric that matters.
• Unpredictability isn't a problem to solve. For Sam, feast or famine is usually a symptom of insufficient lead flow, which is a marketing problem, not a billing problem.
• Sam's best acquisitions have added new capabilities, not just new revenue. Storysnap acquired case study specialists to expand from video into written testimonials.
• He calls it "co-opetition": your competitors are often your best referral partners, your best acquisition targets, or your eventual buyers.
• A healthy agency needs at least 50% gross margin, calculated in a vacuum. Sam says 60% is the new 50% in the AI era.
• In 16-plus agency P&Ls he's reviewed, not one had gross margin calculated correctly. Most owners confuse it with net margin.
• Sam pulls revenue forward whenever possible, even quarterly in advance, because liquidating customer acquisition cost quickly lets him keep reinvesting in marketing.
• Cash accounting tells you nothing about how a project-based agency is actually performing. Sam runs Storysnap on accrual to see the real picture.
Chapters
00:00 Welcome and introducing Sam Shepler
01:07 From film school to first agency: the 2012 origin story
03:53 Turning an acquihire into an acquisition strategy
08:03 Why Sam never forced video production into a retainer model
12:11 Why founders get stuck at the $1-3M plateau, and how Sam got out of the day-to-day
18:03 The 50% gross margin rule, and why 60 is the new 50
20:30 What Storysnap looks for when vetting acquisitions
28:34 The gross margin mistake almost every agency P&L gets wrong
35:24 Cash vs. accrual accounting, and pulling revenue forward
39:42 Rapid fire: books, watches, and Sam's best business advice
Sam Shepler is the founder and CEO of Storysnap.com, a holding company that owns Testimonial Hero and Product Hype. A longtime agency entrepreneur, Sam has been building and operating agencies since 2012, with deep expertise in the B2B video marketing space.
He has grown primarily through a combination of strong operations and strategic M&A, acquiring multiple agencies to scale Testimonial Hero before launching his second agency, Product Hype, and bringing both under the Storysnap umbrella.
Today, Sam leads a team of 50+ and is focused on starting, scaling, and acquiring agencies in the B2B content and creative space. He’s passionate about entrepreneurship, B2B marketing, and helping agency founders build businesses that are both highly profitable and operationally independent — with strong leadership teams that don’t rely entirely on the founder.
Contact Sam on the StorySnap website, the Testimonial Hero website, or on LinkedIn.
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Steve Guberman (00:02.193)
Welcome to Agency Bites. I'm your host, Steve Guberman from Agency Outsite, where I help agency owners build the business of their dreams. On this episode of Agency Bites, my guest is Sam Schepler. Sam is the founder and CEO of StorySnap, a holding company that owns Testimonial Hero and Product Type. He's been building agencies in the B2B video space since 2012, growing largely through strong operations and strategic acquisitions. Today, he leads a team of more than 50 and is focused on starting, scaling, and buying agencies.
helping founders build businesses that are profitable and don't depend on entirely on them to run. Sam, I'm super excited to dig into what you are doing at Story Snap and in the &A space. So thanks for joining me.
Sam Shepler (00:47.512)
Thanks, Steve. Yeah, it's a pleasure to be here and really excited to chat today.
Steve Guberman (00:51.261)
Yeah, give kind of the backstories. 2012, you jumped into the agency space bold and courageous and going to do it better than the rest of us and quickly learned a lot of lessons along the way. Give us kind of the quick story on what you've been up to.
Sam Shepler (01:07.374)
Absolutely. yeah, 2012, I was finishing up my master's in communications and I had gone done undergrad in film. So I had some video chops, the, you know, read the four hour work week, got the entrepreneurship bug from reading that book. And I was like, okay, what, what sort of
skills do I have that I can apply? And the only one I could come up with that was really feasible was my video background. So started I've extremely laborious and unscalable generalist video agency doing any type of video for anyone who would pay us essentially, with a couple of good friends out of our college apartment initially and
You know, built up a decent sized, um, you know, generalist B2B, mostly B2B video agency, uh, from 2012 to, well, yeah, 2012 to 2016. Was able to get that aqua hired in on April 1st of 2016 by a national PR company, uh, spent, um, a little under a year there then, um, took a year off.
from 20, took 2017 off, swore I would never do anything in the agency world again, because I was frankly like a little burned out, just like a lot of people. But, know, none of my other non-agency ideas were working out. So I was like, I'll productize something. That was what was hot in 2018, was the productized services. So was like, will productize one of our best performing products at my first agency.
Steve Guberman (02:35.133)
Mm-hmm.
Sam Shepler (02:56.844)
which was customer testimonial videos. So that was the genesis of Testimonial Hero. Started Testimonial Hero in 2018. Have grown that over the years. Launched product type last year. Now cumulatively we should hit, you know, 8 million in top line revenue in the group this year. Got a team of 50 plus. And yeah, really, really happy that I didn't give up.
on the agency life because I've come full circle and now I am a huge proponent of it, you know, when done correctly and with the right team to support you.
Steve Guberman (03:37.415)
Yeah, I love that. at what point did you, so you did the aqua hire, which was kind of your first foray into &A. At what point did you realize that you can flip that into, I can be growing through strategic acquisitions.
Sam Shepler (03:53.688)
So it's a good question. So I think for us, our strategic acquisitions have been
Sam Shepler (04:06.284)
just as much around adding capabilities as they have been around adding revenue. And I think the line blurs because you add capabilities that drives revenue. But I do think there's a lot of ways to add revenue. You can spend more on marketing dollars and grow like that too. I think the really exciting acquisitions, and I would put the two of the ones that we've done publicly so far in this category.
is that when you can add a new capability and expand your arc of services. we were. You know, we only did video testimonials and then we acquired two companies who specialize in written case studies. you know, PDF case studies, long form, you know, articles around the customer story. so we were able to add that capability super quickly. Those deals specifically came from just long-term relationship building and,
Steve Guberman (04:42.397)
Mm-hmm.
Sam Shepler (05:04.578)
having a good relationship with the founders for years, I think before, you know, they ever wanted to sell. and yeah, I think that, that it was, was definitely something, you know, it's one of those things where, yeah, I, I, I try not to like think of it as like competition. think I try to think of it as like co-op petition, like portmanteau of collaboration and competition, co-op petition. it's like big, big,
Steve Guberman (05:11.441)
Mm-hmm.
Sam Shepler (05:31.222)
proponent of like having those building those real relationships with your competitors because your competitors per se are often your best partners your best referral partners your best acquisition targets or your best people that if you want to sell your agency to They might want to acquire you. So I think that's you know important important thing to think about for sure
Steve Guberman (05:42.589)
Mm-hmm.
Steve Guberman (05:56.251)
Yeah, there are a lot of different ways. So video production, think is a tough, I guess, deal flow nut to crack as far as most of the clients that I've worked with and peers that I've had in the space and even partners that I worked with when I had my agency were very feast or famine. They were very project-based. It was very hard to convert into retainer, which is what they thought they needed to move into for the perceived security of retainer.
relationships and things like that. And I think a lot of that is, you know, they look at typical ad agencies and AOR deals and they're like, why can't I get that for the video world? It doesn't exist in the B2C space, obviously, you know, getting retainers for weddings and nonsense like that. But certainly in the B2B space, when you're selling video production and video services and subscription based stuff, you went into the productization verse trying to get into how do we
convert this into AOR or retainer based work. What was the mindset behind that?
Sam Shepler (06:58.094)
The short mindset was initially, it was so challenging that we're like, just like, screw it. We're just going to make it work regardless. You we certainly wanted to, um, you know, but I think over time in hindsight, my now kind of, you know, understanding of the situation is, and again, this is just my two senses, but I think that more, um, that, that
Steve Guberman (07:06.503)
Mm-hmm.
Sam Shepler (07:24.64)
lifetime value and more specifically lifetime gross profit is the metric to optimize for. And if you actually are increasing your lifetime value of a customer by selling them, you you might be able to sell them, you know, four $50,000 packages over, you know, two to four years, and have that, you 200 K LTV. Whereas if you force them into, sort of retainer model,
And it's really questionable if the service really demands a true retainer relationship. like, cause that's, that's what a lot of people try to do with video production. So they're trying to kind of shove a square peg it around whole, right? Like you might do a 10 K retainer that churns after five months. That's a 50 K lifetime value. Right. So, and so for me, you know, I just think of it as look like we're trying to, we're okay with like short-term volatility.
and we're maximizing for lifetime value in the long term. Furthermore, I actually think this is more of a philosophical take, but I actually think that unpredictability is the spice of life. So it's like, don't personally agree with trying to cure a business of its unpredictability. that's kind of, and I especially don't think it makes sense to do that.
Steve Guberman (08:27.463)
Mm-hmm.
Sam Shepler (08:50.542)
with a billing mechanism. think, you if you want to solve, you said it yourself before, it like the feast or famine. It's like, that is a, to me, that's a symptom of insufficient lead flow. And that is a marketing problem. So I think it's like the, I think there are a lot of priorities are getting inverted and people are trying to solve a lack of
marketing effectiveness with the billing mechanism, when you really just need to generate so many leads that you're never going to be in famine mode, you're always going to be able to, you know, effectively feast or feast a little bit less or more, but like you're always going to have enough leads that, you know, it's volatility, but it's all uptrending to the right direction.
Steve Guberman (09:40.381)
I don't think most founders look at the sense of security or volatility the way that you just kind of, I don't want to say reverse engineered it, but pointed it to the true symptom of the problem as opposed to, we don't have enough cash in the bank or cash on hand or projection out for the next whatever, six, nine, 12 months. And they're quick to say, yeah, it's just how a billing structure works, like you said, or we don't have enough closed business, but.
the true symptom of the problem, like you said, is top of funnel or mid funnel or what stages of the deal flow you have. So many founders just don't look at it from that lens, which is just mind boggling to me. So yeah, points to marketing. I love that.
Sam Shepler (10:23.872)
It's true. Yeah, it's true. And the thing is, it requires like original thinking and lived experience. you know, original thinking is rare. everyone, you know, not a lot of people think for themselves. They can't be all, and I've been there. And like, it took a lot of lived experience for me to kind of come to my own, you know, conclusion here over, you know, going on eight years of running.
Steve Guberman (10:32.391)
Mm-hmm.
Sam Shepler (10:53.014)
a project based business that's blasted through the two to $3 million plateau that most agencies get stuck at. So yeah, I I think, yeah, just kind of, I felt the same way until like, I realized, wait, you know, this is kind of working. Why is this working? wait, we're getting really good at marketing, you know? So like, that's kind of how I, you know, had to kind of learn it on my own.
Steve Guberman (11:18.525)
Yeah. And like you said, you know, they'll get stuck at a, I even see it way before the two, three million, like one to 2 million is where they get stuck on project based. and if they're growing into a retainer, they're most likely growing responsibly, not strategically. And so it's, and it was my story. We're to bid on this, this, AOR account. if we win it, we're going to need to onboard a dozen people and double our size overnight. And now we're in balanced and.
we're growing very responsibly, not strategically. Whereas when you grow project-based or small client, small scale over large scale, you can do it responsibly. You don't need to add volume of people and resources that might not be utilized to their fullest capacity yet. So at the scale that you're at, eight million, you're basically hands off in the day to day.
Sam Shepler (12:11.682)
That's, that's a hundred percent correct. Yeah. I'm a hundred percent focused on, you know, the whole co level, you know, things, you're figuring out what's the next acquisition that we might want to make. What's the next incubation that we might want to make. Cause if we see that we want to, if there's a space that we want to compete in and we can't get any deals closed in that space, we will start.
Steve Guberman (12:27.026)
Mm-hmm.
Sam Shepler (12:39.03)
an agency in that space as a fallback option after exploring all other options for acquisition. yeah, that's, and I think also I would note like, don't think it's, I don't think my way is the best way necessarily. Like I think it just works for my personal proclivities and temperament and how I...
really like that zero to one phase of starting new things. I know a lot of, I know a couple of agency owners who are running $20 million agencies and they're very in the details. They're still hopping on sales calls. And like, I think there's a lot to be said for that. And that's probably why they're running a $20 million agency and I'm running an $8 million agency. But I'm just like, to me, like that just.
Feels a bit, you know, feels a lot heavier energetically to me and I just want to be kind of helping in that zero to one phase and if I am, you know, gonna take longer to get to where they are or not get to where they are like that's okay. Like I'm kind of on my own journey and that's like I basically like I think there's trade-offs I've made to be as like there's you know, there's trade-offs on both sides.
But for me, it's like, got to be true to myself and like, gives me energy provided I can still like, you know, make the company hit the metrics and year over year growth and margin targets that we need to hit.
Steve Guberman (14:11.345)
Can you talk about some of the things that you had to do or put in place or let go of in order to be out of the day to day? Because I think even at a quarter of your size, the one to 2 million, there's so many founders, 3 million, there's so many founders that are just deeply embedded in the day to day beyond being on sales calls. They're writing code, they're moving designs around in Figma, like doing things that they definitely shouldn't be doing.
And so you've gotten to a point where your hands off on almost all things. What was that process like?
Sam Shepler (14:43.904)
Yeah. So, I think, you know, so I want to talk about like the, you know, some root cause stuff and then some more like tactical stuff, but like, like, at a very high level, 10,000 foot level, it's, it's all about, you know, obviously, you know, no surprise, like getting the right team in place and getting the right functional leaders in place. And I think everyone sort of knows that, but then when, you know, they're at two to $3 million and they
look at their P and L such that it is, and they were like, I need to replace myself from sales. where in the P and L is, is a sales rep who's going to be 80 % as good as we got to come with come from, like that's going to make me unprofitable. Right? So like, it's, it's really quite simple in this, in the sense that it's all about getting the right people on the bus in the right, in the right seats.
But a lot of times the business isn't healthy enough to support those investments, frankly. So without the founder taking a huge pay cut, that's the caveat.
Like I think a lot of people, and again, I've kind of been in this position. So like, this is me speaking from experience until I, you know, fix the financial health of our P and L and our balance sheet. me and my team, like, once you realize this, but it's like, yeah, like, you know, if you don't have a good enough gross margin to begin with,
You you sit so, I think that everyone should have a minimum 50 % gross margin. And that includes like, you know, every cost that goes into.
Sam Shepler (16:29.752)
delivering your service, like even your software that's related to delivering the service. Obviously the in-house team, even yourself as the founder, if you're doing, you know, 25 % of your time in account management, should, 25 % of your salary should be in cost of good soul. So it basically like, it starts with, with people, in my opinion, in my experience, after looking at a lot of agency P and Ls and for deal flow, it's like,
people aren't calculating their gross margin correctly. It's much lower than it should be. They should be at at least 50%, really like closer to 60 % plus, but they're at like 30 to 40%. And they don't know it because they're...
CPA is doing their books and CPA does their books for tax purposes. What does the IRS care about? They only care about net margin. CPA doesn't care about gross margin. They're not incentivized to care or know about your gross margin at all. So basically you find yourself in a situation where you can invest in the talent you need or and lose money or not be profitable or not invest in the talent you need and continue to be stuck in your business.
So I can go on, that's, think a lot of it comes to like, people don't have the cash on hand in the margin to make the investments that are going to get them to the next level because they don't realize how unprofitable they are at the project delivery level.
Steve Guberman (18:03.025)
So 50, I like to push to 55 % on the gross profit margin being defined as healthy. In your mind, that's what allowed you to get out of the day to day to put the resources in place so that you can be hands off to invest in people. And maybe that dips your gross margin, but it'll rebound when you put the right resources and right people in place so that you can be hands off. And that was for you a strategic and very intentional process.
Sam Shepler (18:30.222)
Correct.
Steve Guberman (18:30.223)
So you can focus on &A and the whole coast side of things. Yeah.
Sam Shepler (18:33.23)
Yeah, correct. And I also like 55 plus. I say 50 is the minimum because it's so easy to do mental math with 50. It's just like, okay, you're delivering a project for your 10 grand a month retainer or your 10 grand project. Don't let it cost more than $5,000. But yes, think with AI, think 60 is the new 50, right? 65%.
But yes, so I think like, and I think a lot of times the investments that people need to make in their team are actually gonna fall in that operational expenses and that OPEC segment of the P &L. And so it might be like, for example, I have a...
Steve Guberman (19:22.237)
Mm-hmm.
Sam Shepler (19:27.182)
you know, a president, he previously was a, you know, a general manager and now he's the president. And before that, who's the VP of operations, you know, big investment to get me out of the day to day of the operations. He's a hundred percent in, in categorized as OPEX. So, you know, if, if, if I didn't have that, you know, that
high enough gross margin to start with, I couldn't make big OpEx investments. I can't hire salespeople because then all of sudden I'm not profitable. I can't spend 10 % of revenue on marketing and 10 % of revenue on sales talent. So it's like, that's the other thing is like, think we've just, we can afford, know, if you set your P &L up correctly, you can afford to take big swings at marketing experiments that not, they're not all going to hit.
Right? But they, you you can take, you know, 10, 20, 40, 100 grand, you know, swings and they don't all have to work out as long as you have that margin of safety.
Steve Guberman (20:30.013)
Yeah, healthy P &L, healthy balance sheet is vital for making the investment back in and talk about how that impacts when you're looking at companies to vet for an acquisition and you see maybe there's dip because there's an investment dip in their gross margin or that trajectory pauses or stalls out and then dips again or talk about how that impacts what you're looking at when you're vetting agencies.
Sam Shepler (20:58.136)
For sure. So I think for us in particular, we don't mind rough, we don't mind helping to polish rough diamonds. So we, like that stuff doesn't bother us personally at all because of our sort of operating model where we.
are looking to like our core target is like other specialty, you know, specialist video agencies essentially. So like we have so much operational and like shared services and you know, finance and ops admin that we can deploy once we acquire these companies that like we see that as like kind of value creation. So it like doesn't scare us away compared to like another, you know, acquire who's like, like this company has to be really in good shape because I'm just going to like
let someone run it and like, so we're very hands on and supportive. So we'll fix all that stuff. think for us, like the biggest, and I think that's like a lot of our value prop as a, as a buyer is like, we're able to help founders who are stuck kind of, you know, blast through that sticking point, get access to the support and finance help and marketing help that they, you know, they weren't able to, you know, have.
and let them kind of focus on what they love to do, what gives them energy, what's their highest and best use, their superpower, right? And take away, abstract away all the other kind of day-to-day minutia stuff. So yeah, think for me, I don't mind at all if I see that stuff. I think what I do like to see is
Um, I mean, I think there's some specific stuff around like, does this fit in our portfolio? Or is it like a specific thing we haven't done yet that we think we can cross sell to our customer base? Um, I think, but at the end of the day, it's like all about the people and like the culture fit. And that's like, this founder someone who would, would be a good culture fit with us? Um, obviously. You know, good clients that they hopefully can bring lack of major client concentration issues is a, is a big one. Like.
Steve Guberman (23:12.839)
Mm-hmm.
Sam Shepler (23:12.926)
If you know, if, know, significant, if, like a third of the revenue was from one client and that client leaves, mean, they've just, you know, dropped significantly. Right. So like just the tip, I think the typical stuff, but yeah, I think we're, we're very, we're very, we get excited when we see something that, that needs a little bit of work. Cause we know we can help them and, and, you know, add value and create value.
Steve Guberman (23:37.469)
One thing you said I love that's just an indicator of cultural alignment where you said earlier in the recording, you want to do things that you know kind of speak to your passion points, your value. You want to spend time doing that. And you just said that you want to find people to acquire who are also looking for that opportunity. And I don't, that's not something I hear too often. Like, sure, we want cultural alignment so integration works, but for you to want to identify founders who you can help lift them up.
polish what they've been working on that's having some problems and give them an opportunity to run with it. mean, that is just, think one of the best intentionality is about &A.
Sam Shepler (24:16.942)
100%. And I think that's, hard to find because, yeah, a lot of times, you know, a lot of buyers don't have a deep bench of operational experience in the same industry or in that they can apply. But yeah, we're fortunate to be able to have that and we can do turnarounds, we can do, you know,
In many cases, like I said, we're more excited about a slight turnaround or a rough diamond than we are about a perfect company who frankly might not need us. They're doing great. Keep doing you.
Steve Guberman (24:54.119)
Nope. You mentioned AI has kind of shifted what you want to see in a gross profit from, you know, 60s and new 50 kind of thing. And so I do think there's a lot of impact that AI is having, but I'm curious if you think those numbers are different in video versus web dev or design or branding or strategy, you know, the different like delivery modalities that an agency might have, or do you think that that's kind of in your mind a hard and fast rule, no matter what the delivery is?
Sam Shepler (25:25.516)
Yeah, it's a really good question. I guess I'll give my best answer because I don't have a lot of experience in design and whatnot. I think for us, but let's just say like any project, project based work essentially, right? Cause I think that transfers over. So we first, we calculate, you know, the gross margin in a vacuum. Like
Steve Guberman (25:41.917)
Mm-hmm.
Sam Shepler (25:50.286)
is at the project level. So we're like, you know, what are, what's every single resource that's going to be on this project and how many hours and what's the hourly rate and everything. It's like, so in a vacuum with like, which isn't how projects work in reality, but like, we'll start, we'll start at a vacuum. We like like that vacuum gross margin to be like well above 70. Cause we're, we're expecting like at least, at least 10%.
you know, uh, decay on that gross margin in real life on the, on a P and L like in a, on a monthly situation because no one's a hundred percent utilized and full-time resources are still costing your money full-time. Right. So, um, so basically, um, yeah. And of course, if you're in a, in in a smaller scale and a lot of your, um,
Steve Guberman (26:22.621)
Mm-hmm.
Sam Shepler (26:49.326)
delivery people or contractors, then maybe you won't have that much decay because you're able to just pay like, okay, the price is the price and they're not full time. But like, as soon as you have people full time, you can't and don't want to fully utilize them that they will burn out. So you have to plan for that decay. for us, we try to...
start at like 70 % plus, you know, gross margin on a, in a vacuum and then expect it to drop, you know, 10 to sometimes a little bit more like when it actually hits the monthly PNL. And then of course we're especially focused on the quarterly goals. And that's kind of the waterfall in like, you know, I
incentivize my president to hit, you know, a lot of a significant portion of his comp is based on, or of his bonus comp is based on hitting gross margin targets on the quarter. So like that's ultimately like, that's how we like evaluated at the end of the day is like the month in the quarter, just starting at a good place. So, cause we know it's going to go down in the messy real life world.
Steve Guberman (27:58.365)
you.
Yeah. You talked about three different areas of an agency, the poor gross margins being most important part of P &L for you, or not poor, like, know, gross margins being the most important part. And we touched on briefly cashflow as it pertains to project-based or retainer-based. But the third is that lack of specialization and talk about kind of in your mindset, what these trifecta of, what'd you call them, agency mediocrities, how they...
work together or don't work together in the ecosystem.
Sam Shepler (28:34.72)
Yeah, for sure. And before I talk about specialization, I would say last thing on gross margin, like it is actually like, I'd say it's baffling, but like I've been there too. So, you many years ago, so like I get it, but it's baffling to me that like, like you, you ask people your gross, like your gross, their gross, like what's your gross margin. They will give you your net margin. They're like, you're so
Steve Guberman (28:57.693)
Yeah, they don't know the difference.
Sam Shepler (28:59.8)
for such an important part of the health of your agency, which is it's literally your unit economics. It's like, this is what you make. These are your fundamental unit economics. The lack of conceptual understanding of it is an existential risk to your agency if you don't understand it. Because it's like, to tie the ball on it, it's like, you know,
Like on the net margin side, you can flex a lot of stuff. Like you can decide that you don't want to attend Dreamforce this year, or you can decide that you don't want to spend, you know.
10K on that flashy like marketing expense. Like everything in OPEX is like fungible, but like your gross margin, you can't drastically adjust it. You know, your gross margin is going to be affected by charging, raising your prices, which is a really good thing to do. And that's the best, easiest way to increase your gross margin. But as we all know, you can't just raise your prices 20 % out of nowhere and, you know, expect all your customers to go along with it. Right. So, um,
Or drastically cutting your cross. it's like both of those things are not easy to do out of denare. So like that's why to me it's like it's so important to get that right because like if you don't get it right, you're fighting a uphill battle the whole way. So hopefully that you know, hopefully that.
helps people like if they're not fully like, I don't know, like maybe I don't need to, you know, get no micro gross purchase. Like, no, it's really important. So it's really important if you want to scale and grow. Like I'll say that, like if you want to stay and like run an awesome, you know, sub, you know, $2 million, million dollar lifestyle business and like you're okay to do the work. Like that's, that's fine. You can, that's, you can have a great income like that. But if you want to like scale and truly remove yourself, you do have to figure it out.
Sam Shepler (30:58.638)
And I've, I kid you not, like I've probably looked at 15, 16 agency PNLs for the last year. If not a single one of them was doing their gross margin correctly. I have yet to see an agency PNL that integrate. I look at a lot of video production things. like, and they're all like, you know, mostly sub, you know,
million dollar to sub 2 million well actually something larger and they're not correct either but so maybe it's a video production thing, know specifically but But yeah, I've never I've never seen someone track the other gross margin correctly Yeah in an agency deal ever
Steve Guberman (31:37.849)
Interesting. I don't know that I've looked at as many video shops, maybe only, I don't know, a handful in my career, maybe eight or nine. And I wonder if it's the model of so many subcontractors that they're not doing it properly or something specific to their delivery mechanism that they're not doing. Cause on the web and software and creative side, I've seen it closer to better, but still not perfect.
Sam Shepler (32:07.83)
Yeah, yeah. It's a really interesting, interesting thing. My theory is that there's this huge misconception, which may be spread by CPAs. I think because this, feel like this is what my CPA told me at one time. And this is what I see is that all the variable labor that should be cogs, like all the freelancers and contractors are put into cogs correctly.
Steve Guberman (32:08.039)
So interesting.
Sam Shepler (32:37.678)
But all the in-house labor related to that should be in cogs, like their in-house customer client project managers or in-house video editors, anything to do with delivering the work. For some reason, there's this misconception that the only variable labor is cogs. That seems to the misconception I've run into. people who are in delivery, they're putting them in OPEX.
But again, they're related to delivery. They should be in cost of goods sold. So that's for whatever reason, if that's the misconception you have, all you need to do is Google what goes in cost of goods sold under GAAP accounting principles. You have the answer. It's very black and white. So hopefully that helps people.
Steve Guberman (33:24.253)
But before you dig into the next, you just said something vital. You said gap accounting principles and most agencies are running on a cash accounting model. So they're not even thinking about anything beyond that. They're not working with a CFO sub 5 million. So yeah, there's our issue.
Sam Shepler (33:41.614)
Yeah. Yeah. And that's a, that's a really good point. guess that that's a, a good point. And I think, and again, I've been there too. like, I think the secondary point is like, just people need to understand that, like, if you're running a project based business, you, and you want to grow and actually know what your business is doing, you need to transition to a cruel, because you're,
P &L on a cash basis is a really good cash flow statement, but tells you absolutely nothing about the performance of your business on a project business if you're doing cash flow. It's incredibly important for understanding your cash flow, but it doesn't actually tell you anything about your business performance. That's where...
we need to switch to accrual to actually truly align revenue and expenses. Like most, to your point exactly, like most people are like, wow, wow, March was a great month. then they're wildly profitable in March. A client just like prepaid them for like six months in March, but like none of the work was delivered, you know? So it's like, you didn't actually earn that revenue. So like now, like maybe we should do another episode talking about accrual and all that, but yeah, that's such a good point. And I know you said that
cash flow thing, I don't want to forget that.
Steve Guberman (35:03.208)
Yeah. Yeah. I mean, I wanted to kind of dig into that trifecta that you were talking about, but yeah, I might need to pull in another agency CFO to demystify the P and Ls and different accounting practices and, you know, how to really track cashflow beyond, you know, the giant check you just received. Cause that's a lie. Yeah. Yeah.
Sam Shepler (35:24.014)
100%. It's great. And I'm a big proponent of it. And this is a, I know we're coming up on time, but to kind of put the bow on the cashflow. So like there's this funny paradox where like the best way to create cashflow is the worst way to have accurate books unless you switch to accrual. So it's like, I'm a huge proponent for
getting that huge check, and that's what I would 100 % advise, like pull that revenue forward, do whatever you can to pull that revenue forward. Monthly billing is always going to be worse than getting billed quarterly in advance. And I'm not anti-retainers, I'm not anti-thing, I think like LTV, whatever maximizes for that, but I would always rather get paid
in advance so I can redeploy that money. Especially when I think about my customer acquisition cost payback period. So like we do probably a lot more marketing than most agencies do. you know, maybe we can get into that. like when it comes to scaling our marketing, it's all about like our CAC payback period.
where so it's as long as you can like liquidate your marketing costs quickly, you just keep feeding the machine, keep reinvesting in marketing. like, you know, if we're talking retainers of 10 K a month, I'd rather get paid 30 K on month one, because it's going to cost me, you know, maybe it cost me, you know, 20 K to acquire that customer.
And I want to get out of that hole as soon as possible, put another 20 K in the sales and marketing machine, repeat, rinse and repeat. So it's like, if it costs me 20 K to acquire that customer, then I'm not even going to be breaking even until two months into the container. like I'm, yeah. So that's the thing is like, but I've seen firsthand like people
Sam Shepler (37:39.936)
turn down clients wanting to pay them in advance because they like the P &L view of money coming in every month. They don't like to look at their forecast and say, there's no money coming in this month. I get it emotionally, but like logically, if we put our logic hat on and we think about the time value of money, no way. You got to pull that revenue forward.
Steve Guberman (38:03.323)
And also when you get a large infusion like that, it's an opportunity. So you're not realizing that revenue until you actually do the work on the books, but you're realizing this is an infusion to invest in a thing that I need to invest in. It's rare that you're going to get that cash infusion, 50, 100 K all at once. And when you get it to your point, 10 K a month, the margins are going to be so lean that you're not going to have any bubble to invest in. So yeah, we can dig into the mechanics and metrics of marketing and the investment there.
and all that stuff, but let's not open that can of worms today.
Sam Shepler (38:37.27)
Yeah. Yeah, we'll save that for the next one. But yeah, that's exactly right. like, and then, you know, just, just so people don't claim that we never told them about deferred revenue, that's an, that's another really, really important part when we're talking about pulling revenue forward is that you do need to track, your deferred revenue. Like when you're on accrual, like all of this will be technically be debt on your balance sheet. And it's like a liability because you have to, that's like promises of work owed. like,
Steve Guberman (38:46.781)
Hahaha!
Sam Shepler (39:06.238)
you know, hopefully goes without saying, but we'll say it anyways. Like don't just go and spend all that money. Like that's, you know, that's, have to actually deliver that work. but like you can be smart about it and like, like make some big investments that maybe you couldn't otherwise made before. So it's like, it all comes down full circle around like that.
that need to, if you really wanna scale and you're doing projects, you have to be able to do both cash and accrual accounting. We do both. We still file our taxes on a cash basis, but for actual performance, business performance, accuracy, it's gotta be accrual.
Steve Guberman (39:42.791)
Yeah, oversight is a cruel and most tax filing will be cash. And I learned that bubble payment liability less than the hard way. So like most of us do. So Sam, I'm super grateful for all your insight that you shared and the experience that you have folks. If this P and L conversation is confusing, hit me up. I'll send you some really awesome CFOs to talk to that. That'll handle it for us, but let's wrap up with a couple of random rapid fire questions for you.
Sam Shepler (39:54.424)
Same.
Steve Guberman (40:11.165)
The first is what is a book or show or podcast or something that you are binging the heck out of it can't get enough of these days
Sam Shepler (40:19.758)
Oh, that's a good question. I've really liked David Senra's Founders podcast and also his new podcast. think it's just David Senra.
Steve Guberman (40:32.655)
Awesome. What is a gadget or something other than AI that you have recently integrated into your life that you look back and you're like, how the heck did I live without this thing?
Sam Shepler (40:43.4)
I got a good one here. So mechanical watches. So I used to be really big and mechanical watch enthusiasts earlier in my life. Then I went smartwatches during COVID when I didn't see anyone. now I'm back to mechanical watches. And I just really appreciate it's engineering, it's art. It's a philosophically different way to look at time compared to like a digital display.
Steve Guberman (41:04.989)
Hmm.
Sam Shepler (41:10.486)
you know, just seeing the sweep of the hands and I think everything is so digital. It's nice to have some analog in our lives.
Steve Guberman (41:18.651)
Love that. Yeah, big fan of that. And then finally, what's an invaluable piece of business advice that you look back and you're like, man, I wish I had this earlier in my career you can share with people.
Sam Shepler (41:30.434)
That's such a good one. I don't know if it's like the... Yeah, I'll say one that's standing out to me is like, there's a quote that I like, it's like, success isn't standing on top of hierarchies, it's like standing outside the hierarchy. Obviously it's like very subjective and like, but I think for me that means it's like, don't like, what motivates me is not necessarily trying to...
Steve Guberman (41:51.026)
Hmm.
Steve Guberman (41:54.589)
Mm-hmm.
Sam Shepler (42:00.726)
you know, climb the ladder of, you know, venture funded SaaS companies or whatever, or, cause that's initially like growing, especially growing up, started my career in Boston, like that was like the hierarchies, like you're an agency, like we're not even going to talk to you. Like you just get like poo pooed away. but I think it's like, yeah, just kind of finding your own place and like realizing like you don't have to like necessarily climb the prevailing, you know, hierarchy. you can kind of stand outside of it and try to carve your own path there.
Steve Guberman (42:28.977)
Yeah, I love that. And additionally, the way I see that landing for you is as you're putting leadership and people in place, you're helping them elevate with the resources you provide them. You're kind of standing off watching this thing happen based on resources you put in place. So love that for you, Sam. Thank you so much for joining us and sharing so much wisdom and experience with us today.
Sam Shepler (42:50.04)
Thanks, Steve. Yeah, this has been an absolute blast. I appreciate you having me on.
Steve Guberman (42:54.941)
Thank you.