How to transition from creating a job for yourself to building a real business

How do companies on the Inc. 5000 list grow so rapidly? We interview Inc. 5000 companies’ CEOs to break down what they do differently and find out as much as possible about their ‘secret sauce’. Today, we interview Aaron Lee, founder and CEO of Iluma Agency.

NXT: What is Iluma Agency?

We’re a full-service digitally-focused agency catering especially to franchises and multi-unit brands.  We understand how to help these types of companies with their corporate branding, we work with franchise sales teams to recruit franchisees, we have the systems in place to work with franchisees on local campaigns.

We were founded in 2001, branded ourselves as Illuminati Studios in 2004, but then the word “illuminati” increasingly took a pop culture meaning and we were getting the wrong type of attention.  Also, “studios” didn’t convey the breadth of our services.  In order to accurately reflect our positioning and identity, we rebranded again in 2017 to Iluma Agency.

NXT: What made you decide to start your own business?

Mine was actually an accidental entrepreneurship journey.  I was working for an internet startup in the late 90s that didn’t make it.  I came home one day, talked to my wife about it, and in my head was “get a new job” whereas in my heart was “I’m tired of working for other people”.  It was time to put my fate in my own hands.

I started “smiling and dialing” and in a couple of weeks started getting clients.  I didn’t have a grand plan at that point but I knew what I could do and that it was valuable.  So first I was looking for projects to keep me busy but that grew organically over time into a business.

NXT: And how were things early on, how did you kick things off and get started?

A lot of my initial growth was through relationships and that was how I got my first clients.  What really helped early on was a relationship with a successful PR firm in Miami.  I was able to sublease from them and I was their in-house creative agency.  It was a very good symbiotic relationship.

But I was doing everything by myself and soon got overwhelmed.  One of my best moves was to hire a business coach, Linda Hampton to help me get perspective.  She suggested hiring someone.

I was thinking of adding another creative person to help me with the workload.  But my business coach said “you need help with what you don’t want to do”, e.g., appointment setting, invoicing, and accounting.  I hired someone part-time and hiring that 1st employee was the most terrifying decision, but I’m very happy to say that she’s still with me and now she’s our COO.

Hiring that 1st employee was actually when I first rebranded from “alee Design”, which was referencing me personally.  In order to build a team, I felt that it had to not relate directly to me.

NXT: How did you evolve essentially from freelancer into a business?

Initially, your business plan is “don’t go out of business”.  Which is a fine plan for staying busy and getting an income.  But eventually you realize that you just own a job, you don’t own a company.

You’re still working as if you had a job because your focus is always on winning the next client, and you do the work you just brought on board.  It’s a nasty cycle you get into.  Early on it’s necessary, and it’s very difficult to break out of it.

NXT: And how did you break out of that cycle?

Two things happened for me in 2010.

First, I was introduced to the Entrepreneurs’ Organization, which helped me change my relationship to my business.  That’s when I realized I had created a job, and that’s when I saw what it took to build a business.

And two, I got the right motivation to build a business.  I was on a trip to Italy and realized that’s what I wanted from my business: to give me the ability to come back to Positano in 2020 and spend a month there, and at the end to spend another month there if I wanted to.  If my business provided that money and flexibility I would be very happy.

This was a dramatically different mindset than the one I had before, and what I think most entrepreneurs that go the “organic” growth route start with.

NXT: How did the Entrepreneurs’ Organization (EO) help?

It’s a worldwide group of founders/CEOs whose businesses generate >$1mm.  At the time, I hadn’t reached that million-dollar mark yet, so they put me on their mentorship accelerator program, where you’re paired up with a member of the organization along with other companies in your stage.

They help you implement the principles of a successful business to help you think strategically about the business.  The following year we crossed the million-dollar mark and I got accepted to the local chapter.  Then, you meet monthly with 6-8 entrepreneurs and share experiences.

You see, I can talk to my wife about a lot of things, but coming home every week saying “I don’t know if we can make payroll” isn’t a good conversation.  Within the EO network, you sit with peers who understand what daily cashflow problems mean.  Someone in your group has dealt with the same issues and can give very constructive feedback.

But overall it changes your mindset from being caught in the day-to-day business to thinking more strategically about the business.

NXT: I’ve been part of networks like this but many devolve into service providers soft-pitching their business to you… how does EO avoid that problem?

One of their core tenets is actually strict non-solicitation and confidentiality, so it’s very inviting and encouraging, and a very safe place to share.

Our chapter has 180 people.  We can put out a message to anyone in our chapter with what types of resources we’re looking for.  But you’re not allowed to promote your business to other members.

That said, you build a certain level of trust within the group that it makes sense to work with each other.  In fact, I’ve hired my accountant and lawyer directly from our members, and I’ve been hired by other members as well.

NXT: You also mentioned that you had a great experience with your business coach, which hasn’t been my experience with business coaches at all (unfortunately) – can you elaborate a bit?

I think most people’s limitations are in their minds.  We have an idea of what we’re capable of and we sometimes operate as if they’re very real.

I found that having someone that I spoke to on a regular basis, someone who eventually figured out where my self-imposed limitations are and could point them out helped.  She’d often say “you’re doing your thing again” and I would immediately put things in perspective.

Look at Olympic athletes.  They may have 3-4 coaches specializing in different areas.  Working with Linda – my business coach – was essential in keeping my head straight and on track, and not indulging in that sort of defeatist thinking we can all get trapped into (especially during periods when things aren’t working out so well).

NXT: Early on, your business coach suggested hiring someone on the operations instead of the production side… why did that make sense, and how did it work out?

I actually hired a production person as my 3rd employee.  But it was important to start putting systems and processes in place around me.

At the time, I was adding the most value with my creative skills but I was getting tied up and building up stress and frustration around more administrative tasks.

Entrepreneurs have a lot of ADD and the monotony of handling day-to-day tasks made me push them aside because they weren’t as exciting.  My business coach recognized that and she felt strongly that I should get help in that area first.

And she turned out to be the perfect counterpart for me.  There’s a great book “Traction” that lays out the path to create an Entrepreneurial “Operating” system.  A really healthy company has both a visionary AND an integrator, and that’s what I was missing.

NXT: Why did you focus on serving franchise companies?  It sounds like an interesting niche but not the first one you’d think of.

We had a relationship with a company that was doing lots of PR & strategy for franchises, and we helped them execute these programs.  After a number of years, we realized that we knew the franchise business quite well.  Then, we acquired another agency with complementary skillset and they had a number of franchise clients and case studies already, which cemented our direction and expertise.

We also realized a very interesting dynamic at play in the franchise industry.  When you have multi-unit operations, you need local marketing campaigns.  Naturally, many franchisees turn to local providers for help.  But with our systems and approach, we can build much more cost-effective and scalable programs.  We can actually service 100s of franchisee accounts with a team of 4-5 people.

So it was 1 part luck and 1 part the realization that we could build a great scalable business.

NXT: Why are clients working with you?  How are you different from competitors?

As a digital agency, we always struggled to differentiate ourselves.  It’s difficult to say “we’re the best at this” when you don’t have a particular focus.  You just do good work and rely on referrals.  But this way you don’t have much control over your growth.  Because you don’t know how many client referrals you’ll get and how qualified they’d be.  Making it very difficult to project your future that way.

Focusing on franchisees helped us become very focused.  We could build a brand and get a much better return on our marketing dollars.

Of course, we’re not the only ones who identified the “franchise” niche.  There are many agencies that work on franchise brands.  But they typically only work on one aspect: they either concentrate on the corporate side, recruiting new franchise investors, or they work with the franchisees.  Doing all three well requires different approaches and systems and it’s hard work.  But for us it’s a very meaningful differentiation.

NXT: Why does it make such a big difference to offer a complete “top-to-bottom service”?

Our strategy is to have a relationship with the corporate franchisor and be identified as a preferred or approved local agency partner.

If a local franchisee goes out and hires a local agency that doesn’t know the brand as well, they can do similar services but not as effectively.  The local agency can’t afford to invest the time that we’ve put into the brand.

We have the datasets on consumer behavior and the creative assets that we can leverage and apply across hundreds of franchisee locations.  It would be cost prohibitive for a local agency to do fully custom landing pages and analytics.  Whereas we have master landing pages and we’re testing hundreds of campaigns every month so we see what works and what doesn’t.

With our agency background, we also understand the need to great account relationship management. So we’ve made the investments in people and systems to make sure our franchise clients can always access our professional marketing staff.

NXT: How do you find and win over clients?

The adage that a shoemaker’s kids always wear the worst shoes is true!  We’re applying cutting edge techniques to help our clients, but we have been buried with work and inquiries to apply the same lessons to our own marketing.

For many years we were relying on relationships and reputation.  It was difficult to figure out where to spend marketing money for ourselves.  But with a franchise focus, I know there are 3-4 great franchise events and we focus on building relationships through them.

We also bring on people with relationships in the industry.  Because in B2B relationships are everything.  You need them to get your foot in the door, and then you can win with your value proposition.  But if you don’t have people with industry relationships on staff you’ll never have a chance to demonstrate what you can do for a client.

NXT: In your business, your corporate clients are essentially functioning also as your channel partners… Have you figured out the best way to develop these channel partners to push you downstream to franchisees?

Depending on their stage, it can be easier for the franchisors to have their franchisees work with us.  We launch the new website, set up all the social media accounts and marketing collateral… we make everything super easy.

But often when we work with more mature brands that have hundreds of  locations, it’s more about earning the trust of the franchise marketing team.  They need to know that we’re going to treat their brand with integrity.  We need to demonstrate that we understand the challenges of the local marketing team and have the resources to help team.

Many agencies know how to run an ad but don’t know how to support a team.  And the last thing that corporate marketing teams need is for disgruntled franchisees banging at their door.

NXT: So what do you think has been your secret sauce for growth?

If I can boil it down to anything I would say “focus”.  When I got very clear on the WHY, the purpose of what this business is all about vs just being in survival mode, that was the first major shift.  And it’s been a series of evolutionary steps to continue refining what we’re focused on.

Most businesses are either about volume (low margins, appeal to the masses, etc.) OR they become very focused on adding strategic value (something unique, you’re a specialist).  Yet many companies live in the vast sea in-between those two.  You have to understand which bucket you’re in, and then everything else falls into place.

Focus allows you to:

  • Get more out of your resources instead of spreading the butter all over a large slice of bread
  • Resonate with customers so they easily understand how you add value
  • Get your team on the same page, they understand what they have to do in order to be successful for the customer instead of fumbling in the dark

NXT: Can you share a couple of concrete examples as to how focus helped you?

First, it helped solidify our decision to acquire a company 3 years ago.  The catalyst for this was that it made sense to transition from a commoditized creative business where we started competing with 99designs and Upwork for logo design work.  We HAD to change our value prop, and the acquisition helped us achieve that.

Next, we were strategic about not just adding clients on the books.  Out of that acquisition we only kept 20% of the clients so 3 years later most of them are gone.  But the ones we kept are focused on franchising.

We committed to building a business that’s scalable.  That meant that I had to hire non-billable staff to build the systems and processes to scale over the long term.  My decisions went from “does this just pay the bills for the next 30 days” to “does this build a business that can take me to Positano”.

There’s always something shiny to spend money on rather than investing in a programmer, but if he or she is moving the needle on how we can demonstrate that we’re delivering something unique to the market, then that’s aligned with our focused strategic plan.

NXT: Since you’re providing digital marketing services, I thought it would be great to ask you what works best in digital marketing?

Having a creative background, you often build a bit of an ego around what works and what doesn’t.  One of the most humbling experiences was going from a creative to a marketing agency.  We stopped basing things on assumptions so now we test, test, retest, and optimize.

Many people want to come up with one campaign that works.  But we often find that when we’re so certain the data proves us wrong.  So we flipped our entire mindset.  We create new campaigns that are all talking to the right audience in many different ways, and test them until we understand what works best.

Also, we realized that there’s not one customer that fits neatly into a profile.  With digital, you can afford to get more segmented in terms of what’s motivating someone.  You have many types of customers with different motivations.  In the past, you’d send a postcard to people in an income bracket in a zip code.  But now I can track your behavior to niche down much more.

One of the most interesting trends is the convergence of mobile, data, and content.  You have to bring all 3 things together to understand how they relate to each other.

We’re in a great position to learn about these relationships because we’re running hundreds of campaigns at the same time.

NXT: And what channels would you say work better?

The big differentiator is whether you’re B2B or B2C.

On B2C, our advertising spends have shifted to Facebook.  Facebook’s ability to identify, segment, and target unique audiences is incredibly powerful.  That said, FB is a little higher up on the funnel, whereas Google is lower on the funnel because people searching have real intent.  In Facebook you have to interrupt what they’re doing because they weren’t necessarily thinking about going to a new gym, for example.  Google is about someone who’s already looking for an answer where you provide a solution.  Overall though FB has better ROI because we make sure that we show the right ads to the right people at the right time.

On the B2B side, Search is still strong, but LinkedIn is evolving constantly. It can be a costlier channel though, so it doesn’t always work.  And FB is getting better with their tools that allow us to target professionals and business owners.

NXT: So for a franchise owner, if you had $10K in monthly ad budget, how would you allocate it?

We split our budgets between paid and organic marketing activities, which are very much content driven.  Instead of having a social media or email strategy, have a content strategy which touches everything and you deliver it across all channels by repurposing it.

So if you’re a local retail business, I’d recommend putting:

  • $2-4K on local marketing
  • $5K+ on paid ads and local listings
  • The rest on content

NXT: What’s your biggest challenge?

People are everything when it comes to growing a B2B business.

So being able to find the right people and retain them is a big challenge.  Especially when you’re growing fast, you have to keep filling new and increasingly specialized positions.

It’s challenging because we often need someone now.  But over 16 years we’ve realized the dangers of hiring early and rushing through the process.  Yes, it can create additional stress to keep a position open until we find the right person.  But over the long run, hiring the wrong person is much more chaotic.

Our team is composed primarily of relationship experts who understand digital marketing (“DM”).  DM is something that can be learned but being a relationships expert is more difficult.  You’re either comfortable talking to people on the phone, or you’re not.

NXT: Any tips on finding relationship experts?

Frankly, the interview process is almost useless.  It doesn’t inform you very much.  It’s like an SAT score representing how a student will perform in college.  It’s a moment in time vs behavior and performance.  So, we’re using a skill and a personality test, and we have a multi-interview process.

In the interviews, we tell candidates “don’t come dressed up”.  Our culture is relaxed in an open and collaborative environment.  No one’s wearing a tie here.  We want to get to know who YOU are, not the “interview” version of you.

It’s definitely a job seeker’s market out there.  The economy is doing well, and in our space it’s very competitive because lots of people want to be in this space.

Iluma Agency

Kosta BoardStudios.com

Founder of Board Studios Inc, an animation production agency that helps B2B companies simplify and communicate more effectively. Specializing in B2B makes a big difference because we know what information your clients need, what works and what doesn’t. B2B communications can be very different than B2C, so if you get your video explainer from a B2C agency you may not get the results you deserve.

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