August 21, 2010

Building & Selling An SEO Company – 5 Keys To Success

(Read in entirety at Search Engine Land. Published 2010)

I’ve spent the last decade in the search optimization business as a principal, entrepreneur, expert and executive—building the Netconcepts search business, selling the company to Covario, and the past 7 months leading the integration of these businesses into a powerful new entity. I came into this business knowing very little about SEO. I have learned so much from so many brilliant people over these years. As a bit of homage, I want to share five lessons I believe led directly our business success.

Focus ruthlessly

Most importantly, articulate the one single problem you can solve better than anyone else, and that a market segment will reward you for solving. In the early 2000s, I admired Google’s focus on providing superior search engine results, amid competition that had really sold out for ads. Netconcepts was a small boutique web design agency at the time with a particular skill at building search-engine optimal websites. In our own small way, I believed the market would similarly reward a strategy that focused around going deep on solving the natural search problems for retail brands, while the competition focused on broader agency-type strategies—providing SEO and paid search service, for instance.

Achieving this level of strategic focus was a very contentious point internally, but ultimately became a strong differentiator for us in the market. We decided to build a team of ex-retail and SEO specialists. We aimed to position ourselves as the experts in the space. We found that, indeed, the big brands with the most complex problems did search us out for that “specialist” insight. With search marketing, you can focus on SEO or paid search; I think you can do either, but you can’t do both well in the eyes of the market. Either compete as a generalist for a segment of the market, or compete as a specialist. It just depends on your exit strategy.

By “ruthless” I’m not trying to empower your inner Gordon Gecko, but rather acknowledging that focus is hard, and Darwinian by definition. It is uninclusive on-purpose, and is supposed to frame what you will do by defining what you will not do. This is so important in today’s market where there is constant change and an ever-increasing supply of ideas, experts and opportunities, all clamoring for consideration. Deciding which of these is most likely to achieve, or distance you from your objective is the entrepreneurial and/or executive challenge.

This is what makes focus so demanding—and so prerequisite to success! In our case, this meant exiting well-vested lines of business, and fighting with each other over how to direct eccentric and diverse energies among the founders. It is hard, but anything less will kill you operationally. Ultimately, the reward for focusing on solving unique problem(s) of a specific segment is that your business will become more attractive to strategic buyers who may need either your solutions, domain expertise or market segment to complement their own. Focus is the key principle to success in this market.

Achieve profitability

This is a broad statement dealing with many issues, including how to sell your products/services based on value vs. cost (something SEOs have struggled with forever). But by mastering a niche you can invent systems (processes and technology) that let you craft and deliver a value proposition at greater margin. In our case, we exited the custom website development business and focused energy on premium SEO consulting services. Providing these services to the high-end retail market uncovered a common market need for executing the recommendations.

We created a SaaS SEO solution for which the margin from consulting services largely funded development. The SaaS solution line of business created greater revenue and margin, quickly outpacing the consulting service’s business contribution. Having a technological solution solidly entrenched in a market segment along with a profitable business model is interesting to strategic acquirers no matter what business you are in—SEO or other. On the sell-side of the equation, knowing Covario had a history of profitability gave me greater confidence that our clients, teams and solutions would continue to be invested in as well.

Value diversity

As a specialist business, it’s in your best interest to hire people smarter than you with vastly different experiences and points of view. I think this is good advice for any business, but felt it was quite critical for us to compete successfully in the this field, since SEO is really more of an inductive than deductive discipline (where the rules have to be observed to be known). We were selling white-hat SEO for a premium price, so we needed people with data-driven experience and theories about where the lines were—but we also had to be open to new theories based on data. Being focused on the retail segment, we needed a team familiar with retail and catalog brands, systems, challenges and requirements.

The executive challenge was to channel these often conflicting points of view towards constructive business progress without devaluing the diversity itself. This is an important balancing act, but ultimately we believed it was our people that made the business successful. Naturally this was also important when considering acquisition paths. We felt it was important the merged organization clearly honor that diversity—both in team composition and the manner in which business decisions are made.

Challenge authority

By “authority” I mean conventional wisdom, prevailing assumptions, and sometimes even Google’s guidelines. At Netconcepts, I heard all the reasons why we would fail. There was no future in using SaaS software to optimize SEO. No business would use newly developed software in the hopes of getting better results. There’s not enough talent to build a strong business from Madison, Wisconsin. SEO is going to be obsolete by 2005… To the contrary, these past 5 years our search technology and services have connected over a quarter of a billion organic searchers around the globe with many of the best retail brands online. I’m not saying skeptics are always wrong. You do need to consider alternate points of view. But my point is this: If you’re solving an important problem, think big and honor that vision. When others tell you it can’t be done, that’s usually a sign you’re on the right track.

Keep your integrity

This is tough to do in any business, any climate, and obviously touches all areas of business. We all know liars and cheaters win at the expense of the honest. What’s always struck me about SEO is that it is not only complicated technically, but on some philosophical level as well. Marketers may spend more money on SEO than ever before, but SEO still carries this ignoble stigma that even using white-hat tactics feels “wrong;” that you’re ultimately aiming to change the engine results either by fiendishly “cheating” the algorithm—or benevolently “helping” it with a given tactic.

So you have to decide what lines you won’t cross. What do you do when you have unhappy clients that expect better performance than you delivered? How do you respond when the competition falsely claims your coveted client brands as their own, or lies about their own product as well as yours? Do you inflate your spend under management or “confuse” gross billings with revenues to make it onto the self-reported league tables? How do you treat employees when the economy goes south and you need to cut back? How do you treat them when times are good? SEO (and SEM) are competitive and complicated. It is tempting to over-promise, easy to under-deliver, and challenging to build a sustainable business. My point is this: you may not do it perfectly, but if you handle business with integrity, the market—clients, partners, employees—will honor that decision with their loyalty for many years.

One of the lessons you learn growing up on a farm is that ultimately, you can only reap what you sow. So honor your people. Focus on what matters. Blaze a new trail. Hold your head high. One day you too will likely go out on top with success I guarantee you will be proud of.

Brian S. Klais

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