Breaking Past Your Agency's First $1 Million

Sei-Wook Kim (00:06.016) On today's episode, we're talking about breaking past one million dollars in revenue. It's a stage where agencies get stuck in a specific way — not enough opportunities coming in, and not enough capacity to handle the work if it did. We'll dig into why that trap happens, a math exercise every founder should run, and the five ways agencies actually get over the hump. Peter Kang (00:27.986) All right, Sei-Wook. This topic emanates from some recent convos we've had with over a dozen founders all working to break a million in revenue. And this episode is gonna be very different. Back in episode sixteen, which was scaling your agency beyond two million, that was more about where things break when growth shows up — especially as you have some degree of service and customer fit and you have these scaling challenges. But today's is a bit different. It's all about this one million dollar invisible ceiling, getting from zero to literally one, and how to break through that. Sei-Wook Kim (01:16.161) Yeah, and at this size you feel like you're trapped. You're hesitant to commit to any hires because you feel like you don't have enough money, but you also don't have the bandwidth yourself to go out and find freelancers or part-time people to help you with the execution. So you almost have this demand problem and capacity problem at the same time, and they're each blocking each other from moving forward. Peter Kang (01:40.764) Yeah. There is this psychological pressure at this stage where every hire feels like you're gonna bet the house and you get so nervous to make that move. And this is something we feel qualified to talk about because we did struggle through quite a bit to break that one million dollar ceiling. I think for Barrel, it took us about five years to reach that one million level in annual revenue. And those are just the classic pattern of taking any small jobs that came our way, all kinds of projects, and a lot of slow relationship building. Sei-Wook Kim (02:24.127) Yeah, we were young and probably not that smart, and in the current day we'd wanna break a million a lot sooner than five years into a business. So hopefully these tips will help people in that trap. Peter Kang (02:39.481) Yeah. So let's actually start with talking about what's happening at this zero to one million dollar stage. It's almost like you're in a little bit of a haze — a fog. Things are not as clear. Part of that starts with your service offering not being as developed, and there's this reactivity to what each client needs. From there, every proposal feels like it's done from scratch and the repeatability isn't quite there to get a machine going for your agency. Sei-Wook Kim (03:20.382) Yeah, and it feels like there are two things working against each other. You're probably not providing enough value for each client that you're serving, or you don't have enough volume of clients to serve — and one or the other really keeps you under that million dollar line. Peter Kang (03:41.134) Yeah, and by value you're simply saying also the ability to charge them an amount that makes sense, right? Sei-Wook Kim (03:44.987) Exactly. And when you talk to founders at this stage, you hear "we do everything for whoever shows up." It's an anything-for-anyone mode where you're really just trying to survive and grow and keep the lights on as much as you can. Peter Kang (04:04.417) Yeah, absolutely. One way to think through this fog is to embrace a little bit of math. This is an exercise that we do with all of our agencies — this idea of working backwards. If you were to try to achieve X dollars in revenue, how would you get there? What would that revenue be composed of in terms of number of clients and the types of engagements? So let's try to apply that for this very specific case. How would one million dollars actually be composed? What kind of engagements? Sei-Wook Kim (04:50.342) Yeah. One scenario is you have ten clients on an eight-and-a-half-K-a-month retainer. Consistently over the course of a year, if you maintain ten clients at that size, that's a million dollars. You could have projects mixed in — let's say five clients that do a hundred thousand dollar projects, so that captures five hundred thousand dollars a year, and then ten clients on smaller retainers, say four thousand a month. That gets you to that million dollar number. Or you can have a business where your monthly retainers are smaller — like three K a month — and you have thirty of those clients on three K a month; that also gets you to a million. These are all different agencies. What you're selling is different, your services are different, you have a different ICP, your team is probably different, and how you go about the BD motion is different because what you're selling is different in each of these scenarios. Peter Kang (05:53.692) Yeah. A good example might be taking a couple of our Barrel Holdings agencies. We have Vaulted Oak, which does a lot of web dev support and maintenance — so it's more volume for smaller ongoing maintenance clients — versus Barrel, which has fewer clients but they're doing some of these bigger projects and bigger retainers. Very different sales machines, very different processes and team construction. Sei-Wook Kim (06:26.457) Yeah. And you talked about working backwards. One way to get to that number is to figure out how much more business you need to add every month. In a hypothetical scenario, let's say you win one of every three deals and you need ten clients. You can work backwards and say, all right, I need thirty qualified opportunities, and that's two to three per month. You're gonna have churn throughout the year, so these numbers are probably a little bit higher — ten to fifty percent. But you can work backwards and try to figure out how you can give your BD team or BD person concrete targets on how to achieve that million dollars in revenue, versus an open-ended "do more outreach" type of thing. And at this size, that BD person is most likely yourself as the founder. Peter Kang (07:18.162) Yeah, in most cases yourself as the founder. So basically the question is how do you give yourself enough shots on goal? And it's interesting because you talked about two to three qualified opportunities per month, but we're not talking about pure leads — that's another level up, because qualified leads require figuring out the percentage that actually qualify. If you get ten leads, what percentage is actually qualified? That gives you yet another number to think about when working backwards. And you could go even further — this is where marketing comes into play, like what kind of ads or calls or activities drive those leads in the first place. You could keep going, but at the core, figuring out how you actually arrive at that million dollar number is a really helpful exercise. Sei-Wook Kim (08:17.811) The flip side of all this is thinking about org structure. Oftentimes you have that chicken-and-egg thing — you don't have the work, and you can't afford to hire the people. But the way to think about it is, what's a twelve-month version of your organization? Right now as the founder, you probably wear many hats. When you actually get the revenue, who are the first hires you're gonna make? What's the progression as your revenue increases — how do you scale the organization? Peter Kang (08:53.998) Yeah. When you think about org, you're really talking about your ability to deliver on the work — delivery capacity. And on the psychological side, when the pipeline feels dry, spending time planning the future of your org just feels like a big waste of time, because you're like, I don't have the opportunities, I don't have the revenue coming in, why would I think about the future of my team. But sure enough, you do sign a contract and then you're scrambling — cobbling together a team or in desperation finding somebody to help you out. It's counterintuitive to how it feels at the time. You gotta do the thing that doesn't feel that pressing, because it sure will. Sei-Wook Kim (09:46.036) Yeah, that's an important point. Do the planning now and you'll hopefully feel the impact of it when you do need to make those hires and you're not prepared for it. Peter Kang (09:59.552) Yep. So we've talked about the revenue math side and the delivery side. One thing we need to underscore with all of this is that at this early stage, you're in a bit of a survival mode. You gotta build enough momentum to get out of living at this very subsistence level type of business. We talk a lot on this podcast about positioning — being very disciplined about the type of work you take on, how you position things, and being very specific about what you do for who. But at sub million, you can make the case that for some folks, you want to start a little bit broader. Maybe not a pure generalist, but you wanna at least broaden — maybe you don't zero in on your vertical focus so quickly, or if you have a broader capability like design or branding, you keep it a little bit loose so you can capture a bit more business in the early days. Sei-Wook Kim (11:21.619) Yeah. It feels like we're contradicting ourselves a little bit. But one thing we've talked about in the past is that in terms of your outbound and outward-facing marketing, you could take a stronger stance in your positioning, but that doesn't mean you have to reject any lead that doesn't match that exact positioning. Let's say you get warm intros to people that you know and they're great engagements you can deliver on well — sometimes you should take that work. And over time those people could lead to more work, and ultimately that could shape your positioning. What you thought your positioning should be could be shaped by a lot of the work that you get outside of that. So just be open-minded at this stage on everything that comes in. Peter Kang (12:15.401) Yeah, exactly. At the end of the day, you can be a generalist about who you actually serve if you have to, but you do wanna think about positioning in the long run and not be a generalist about how the business runs. Sei-Wook Kim (12:37.053) All right, so we've identified five paths to get over this hump. If you think about how most agencies get over a million dollars, it's not like one or two of these — it's a combination, and oftentimes it could be a slow grind. But let's go through each and we'll talk more about it. Peter Kang (13:04.008) Okay. Let's start with the first one. We call it the whale client. It could be more than one, but the whale client is this anchor client that really helps a budding agency turbocharge the revenue. There's enough money coming in that there's cushion to make that first key hire. And a lot of times these happen because the founder or founders have some kind of preexisting relationship. A common one might be someone who used to work at a brand, decides to start their own agency, and that brand becomes their first anchor client. That work is enough to help them make their first hires and before you know it they're doing over a million dollars in the first year. It could also be some of those early clients you get in your first six months — just one of them, for whatever reason, gets product-market fit on their side or gets some kind of funding and they need your help in a big way and they trust you. That could also turbocharge your growth. Sei-Wook Kim (14:25.294) Yeah. And obviously this leads to the risk of client concentration — if that client leaves, it could be a majority of your revenue suddenly gone. But it goes without saying, delivery is important here. You deliver well so that you can expand your work with this client, grow, and they become a good referral source for you. The next path is a channel that catches fire. Examples of this could be a tech platform, a complementary agency, an investor network, or a PR moment that you really captured that lets you ride that wave to get a lot of business. One example in our portfolio is BX Studio. They really planted a flag early on in the Webflow ecosystem when it was early and growing fast and a less crowded ecosystem at that stage, and they were really able to use that platform to grow pretty quickly. Peter Kang (15:41.155) Yeah. Another good one — and this is an example I've seen across a few different agencies — they end up working for a portfolio company that's under a private equity backing. They do such a good job for that portfolio company that they get shared up to the PE firm, which then brings those agencies into the other portfolio companies. Before you know it, you went from having one client to maybe six or seven, and you go from very much under a million to over a million in a hurry. The channels are super important. Okay, path three is what we're calling retention that stacks. In the past we talked about net revenue retention — taking your revenue from your prior cohort of clients and seeing what percent you actually retain the next year. If you did half a million with a cohort in the previous year and then the next year you did two-fifty, that's 50% net revenue retention. But if you're able to flip that and make it over 100% — you did 500K with your cohort in year one and then year two you did 750K, a 50% increase — that just makes it that much easier to get to the million dollar level because the pressure to add new logos to replace clients isn't really there, and any new client is basically gravy on top in terms of revenue growth. It's slow in many cases because you gotta work through and build those relationships and get those results. But it's one of the ways to get to a million. Sei-Wook Kim (17:37.73) And this path feels like it's almost a baseline for everything else. Having that retention and executing well for your clients definitely sets the foundation so that you're not scrambling to win work every single year to replenish that million dollars — you can feel the growth over time. And we also talk about the idea of engagement yield. When you do well for clients, that throws off case studies and proof you can share for the next engagement you're trying to win, that client can give you referrals to other people in their networks, and you can expand within that existing client itself. There's a lot you get from executing well for that one client. We go into depth on this topic in episode twenty-five, so if you're interested in engagement yield, listen to that episode. Peter Kang (18:38.815) Awesome. Okay. Path four. This one is maybe more narrowly focused, which is cold outbound for the right model. Cold outbound gets a bad rep because some agencies that maybe shouldn't be leveraging cold outbound at all, or maybe are doing it too early, feel like it doesn't work at all. But there are agencies that do lean heavily into cold outbound. These are typically what we call productized services with a client buying motion that's a bit faster than some of these other agencies that require longer trust building. Examples might be lead gen for SMBs, a package of video testimonials, a set of landing pages, or an ad creative subscription. These are easy-to-explain, deliverables-based services, often targeting one decision maker who has the authority to give the green light and make that purchase. From there you can really leverage the different channels on the outbound side — whether that's cold email, personalized LinkedIn messages, cold dialing, or even a conversation ad on LinkedIn with a free gift offer just for taking a meeting. There are a lot of ways to go into the outbound stuff. It really does work if it's a numbers game — you have to have that target, hammer with the offer, and just get them on that phone call. Sei-Wook Kim (20:35.046) Yeah, and to your point, it works really well when the offer is really clear and the decision can be made pretty quickly thereafter. All right. Path five: key hires that unlock the founder. This is really thinking about how to help the founder have more leverage — helping on the delivery side, whether that's a low-cost offshore team member that can free up time, or other people that can supplement what the founder does well. The point is so that the founder can dedicate more time to selling and closing deals. At this stage you delegate delivery first and keep sales yourself, because you're probably the best at selling at that point in the business. Peter Kang (21:36.648) Yeah. If I recall in Barrel's history, a key hire — I remember we brought in our friend Andy back in the day. He used to be an Accenture consultant, and then he quit his corporate job to pursue golf seriously but had to make some money on the side, and we said, hey, why don't you work part-time for us at Barrel? We got him at a discount versus what we would pay for someone of his caliber, and we were able to delegate a lot of the project management and client comms side to him. That freed us up in a big way to focus on delivery — actually making the stuff — and also doing BD. Even small steps like that make a difference. It doesn't have to be a big hire. You can get smart folks from your network and use that as a way to inch towards that. There are many different hires throughout our history that made a big difference. Sei-Wook Kim (22:44.386) Yeah, for sure. You talked about how it took us five years to break that million dollar barrier. Reflecting through the lens of these multiple paths — which paths did we actually take? It feels like it was a combination of path one, the whale client, and path three, retention that stacks. There were a couple of clients that we really grew with, starting with one engagement that led to more and more as we expanded our service offering to serve them. That really helped grow our initial team base. Then subsequent years of that client sticking around, and then you add a couple more, and suddenly your base keeps growing and you inch towards that million dollars. It took a while, but it was a combination of all this that got us there. Peter Kang (23:44.773) Yeah. It wasn't always linear — it was definitely lumpy along the way. To our credit, we stuck in there long enough for things to click into place and get us over that million dollar hump. Sei-Wook Kim (24:04.951) Yeah. One more thing I remember from the early days: some of the initial clients we worked with were mostly on the design side. So we ended up hiring a bunch of designers at the beginning. And then we landed a large client that had a lot of website development needs, so we had to hire a bunch of developers and engineers, and suddenly our team makeup changed — we had designers at first, but then we had designers and developers. What that allowed us to do was sell larger engagements combining the full team, which previously had been more segmented in terms of the work. We never could have planned it that way, but it just happened from getting the clients and going organically and making the most of it. Peter Kang (24:53.037) Yeah. There are so many lessons from there that we could probably spend a whole episode on, because part of that makes me think, my goodness, we lucked out in some ways, and some of these hires in hindsight were a little bit premature — but all good, things worked out. So, we talked about the five paths. Just to summarize: the whale client, the channel that catches on fire, retention that stacks, cold outbound for the right model, and the key hires that unlock the founder. Those are some of the common ways we've seen agencies break that one million dollar ceiling, and like we said, it might be two or three of these that combine to get you there. And just like we've always talked about, it's never too early to think about positioning, even if you're gonna take on a lot of random work in the beginning — just continue to think about it. Check out our Foundation app at foundation.agencyhabits.com. Think about the future of your agency, how to work backwards from that one million dollars, and design the agency that you really want. Thank you for tuning in. Till next time, have a good one. Sei-Wook Kim (26:15.517) Thanks.