The Business Of Helping Build Businesses by Mason Pelt was first published in HackerNoon on January 12, 2020. While This article was published first on HackerNoon, the website’s editorial team deleted it following a copyright dispute. This article is updated with more context and published in MasonPelt.com on May 3, 2023.
This goes out to freelancers and those who run professional service companies. Are you building a business or helping others build theirs? It can be both. But that requires awareness, caution, and focus.
Every company I’ve founded has been a B2B service firm, meaning we make money providing services to other companies. Sometimes those services are tightly connected to the business with whom we work — for example, working as a fractional marketing team member for a startup yet to hire anyone to fill the role.
Working as a service provider (for example, offering PPC management), especially when tied tightly to a fledgling company, makes it easy to think you function like a founder. In some cases, I’ve even been told my role was that of a temporary founder. To serve as a generalist hand on deck, with the goal of growing the company.
At issue is that a contracted firm is not a founder or even an employee. If the startup goes big, there is no future liquidity event that makes the contracted agency money. If the startup fails, well, the contractor loses a client, and probably never possessed the clout to prevent the failure.
I love it when the founders of companies my agency works with are successful. But I learned the hard way that shorting my own company to help them is a bad idea. Just like any funded startup, if my agency has an investor, I owe them my best effort to create a return on their investment. It should be the same when I am the only investor.
I used to office in a startup accelerator. While there, I’d listen to pitches and watch teams work on developing ideas that were statistically doomed to fail. I thought it was cool. For a long time, I sought out working with startups, it was fun, and I am predisposed towards buying into “the vision”. I’d probably have worked for Fyre Festival at a deep discount if I’d met Billy McFarland.
I used to bend over backward, offering startups discounts because the idea that I could have even a small part in shaping the next unicorn was kind of exciting. Later I got jaded and stopped working with all pre-revenue startups for some time.
My disillusion with early-stage startups happened because I’ve worked with maybe 40 failed startups. In most cases, I’d start with a discounted offer and then listen as founders tried to negotiate the rates further. Typical reasons a startup would ask for a discount included not having closed an A-round and merely being a startup.
Of the startups that had little funding, most spent money foolishly, and as a service provider I had no control. Even when I was on the cap table or paid a percentage of the value I was creating, I was not a founder or investor; I never had a vote.
If I felt buying 10 Aeron Chairs from Herman Miller was a waste of money, that opinion did not matter. As a service provider or a minority shareholder, I had no real control over anything. But I had mistakenly tied the revenue of my business to the success of a startup that spends $12,000 on chairs, despite having only four employees and an insignificant $200k seed round.
Anyone who hires my agency will expect us to produce good work and follow what is laid out in our contracts. What I expect are my rates, paid according to our agreement. Clearly, if I fail to deliver, no one will work with me, so for my firm to succeed, I must be successful in helping other businesses. That lesson took me a long time to learn, and honestly, I’m still learning.
For those of you in the business of helping other businesses, don’t forget about your firm. It’s important to provide results for clients, and it’s paramount to live up to your contracts. That is all for nothing if your firm isn’t economically stable. This isn’t profound, but put on your oxygen mask first.