Strategy Rules!

Avi Kumar is Founder and CEO of Kuware, an almost 14-year-old business that bills itself "as a full-service agency, but a little bit more focused on strategy than actual implementation."

The shift away from "traditional marketing services and taking customers as they came" started 5 years ago. Today, the agency works with clients who want to put some strategy behind their efforts and are less concerned about the agency providing implementation. Avi says it was very difficult when the agency first made that transition to, while it was trying to grow the business, turn away customers that did not have a strategy focus. Current clients not only need be willing to work with Kuware's fractional CMO to develop a strategy . . . they also have to be ambitious about "big growth," have funding or be ready to move to the next level, or to be invested in brick-and-mortar with a solid, fixed budget. When all the pieces are In place, the agency can say, "Get the whole package. We can really move you to the next level."

If a prospective client is not yet serious about their business, they are not ready for Kuware.

The planning process takes a few months. Although written for a longer period of time, the agency contract allows a client to fire the agency within the first month. This tasks the agency to provide enough proof within that first month to gain a client's trust that the value that will come.

In this interview, Avi describes the challenge for a growing agency of deciding "who to turn away." The agency does not "fire" its small, established clients . . . but once a new monthly billing threshold Is set (based on its 50% billing "midpoint"), it will not take on new customers that fall below that threshold. The agency keeps developing processes to meet client needs and raising that threshold as more clients come onboard. Avi addresses in detail the impacts of hiring in changing an agency, managing its expenses, and determining people's perceptions of an agency's capabilities.

Avi started his career as an engineer, a microprocessor architect. On sabbatical from Intel, Avi decided to try ecommerce, did very well at it, and used it as an "on-ramp" to marketing. To ensure controllable costs and fast client service, the agency maintains a salaried development team in Avi's home-country, India. He pays everyone 20% over the market, so that in the 11 years the company has been in India, "nobody has quit."

The agency recently acquired a white-label PPC service which helps small agencies provide reasonably priced PPC for small niches in local markets. The PPC service is separate from Kuware's agency operations, but the agencies which use it are the same small agencies to which Kuware refers clients that don't fit its criteria.

Avi can be found on LinkedIn, on his agency's website at: https://kuware.com/, or at: Avi@kuware.com.

ROB: Welcome to the Marketing Agency Leadership Podcast. I'm your host, Rob Kischuk, and I am joined today by Avi Kumar, Founder and CEO at Kuware based in Austin, Texas. Welcome to the podcast, Avi.

AVI: Thank you, Rob. Thank you for inviting me to this.

ROB: It's good to have you on. You're from one of those popular cities where everybody's moving to in Austin, Texas, but let's focus on Kuware for a moment here. Why don't you tell us about the firm and where you specialize?

AVI: Certainly. Kuware is now coming up on its 14th year as a business. We right now bill ourselves as a full-service agency, but a little bit more focused on strategy than actual implementation. We do do the implementation, but what we found is what was lacking for a lot of businesses is they needed to figure out what kind of marketing they should do because just saying, "Just do Facebook ads" or "Just do this or that." So we added that layer five years back, and we service it through a fractional CMO or a part-time CMO who comes on board and helps guide the strategy, and then go to the implementation.

That's what, in five years, we have evolved to. Before that, we were more traditional, just taking on business as it came in a sense. If somebody wants ads, okay, we'll do it. Need websites, being full-service, we'll do that. But now we only take clients who want the strategy as part of it and who want to spend time figuring things out before implementing it. So that's what we have evolved and started specializing that way.

ROB: That can be a pretty difficult transition. Lots of people start an agency as the order-takers, the people who can say, "What's your budget? We'll do our darndest with it. What are you trying to do? You want clicks, here's your clicks." How do you take someone who comes to you and they think they know what they want – there is this challenger sale moment where you're like, "Hey, wait a minute, let's take a step back. What do you really want?" Sometimes they're like, "No, I just want this ad. I just want to spend this budget. That's my job."

AVI: That's an excellent point. For us, I discovered this process along the way. We had some clients that had a few people in-house who were doing social media. We did their website and we managed the ecommerce and we were trying to do that. Then slowly, as I got to know the client for a while – and this client was with us for almost 10 years – after a few years, I said to them, "You know that person you keep hiring for social media and they keep quitting after six months? Why don't you give us that, too?" They said, "Okay, you got it. Makes sense."

Then I said, "Who's planning your marketing?" They hired somebody, a new person, young, assuming that they knew what they're doing, and in a year and a half they quit. So, I said, "What if we manage the whole thing for a fixed price for you? We'll do the strategy." So that's how we started. This was a company, a brand of sunglasses, prescription glasses. They created the category.

In this case, being a single owner business, but a pretty good-sized business, we fine-tuned this, and then we convinced them, "Hey, you should sell direct. Don't just sell through opticians only. Why don't you sell direct also?" They said, "No way. Our retailers would be mad." So, we figured out a strategy, convinced them, and they almost doubled their sales without losing any retailers.

Then I learned that this is what they needed – a little bit of the business side, but marketing-centric. If I go and build myself as a business consultant, it'll be hard to explain that. Most marketers do give some business advice for free and some marketing strategy for free. So, I said, "Well, this client was willing to pay, and he sold." They sold the company to Hilco. Much larger, $300 million company. They kept us around for a year because they were actually amazed at what we could do with our team. And they had a 50-people marketing team. They let us run this, and then eventually they absorbed it in-house.

That was the time I said, "Okay, we can do this for other clients and start selling it." The hardest point was what you did identify: if somebody comes to us, "We've just got $2,000" – turning down that $2,000 was hard, because you're still building the agency. They're willing to give you $2,000 per month for a few months. We had to tell them, "Sorry, we don't do that anymore. You should really spend money to figure out what you need and then plan."

The other thing we started realizing is that this only works for companies who really think they want to double, triple, or who are brick-and-mortar who have fixed money already and they have a fixed budget. It doesn't work for somebody who's just trying and playing and not serious about the business. They need to be somebody who's also ambitious. Either they've got funding, or they have decided now to really move to the next stage. Only then can we tell them, "Get the whole package. We can really move you to the next level."

The other challenge is this stuff takes time, a few months. We sign them up for longer, but we have a deal that you can fire us within the first month. So, we've got to do enough in the first month to buy in their trust that, "These guys are not just planning. They're actually saying things which make sense." It took us a while, but we do have a system now where we are able to show them within a month the value that will come. Even if actual sales might not happen, they will see enough plans to say, "This will work" and continue on a longer term contract.

As a small agency, that's the thing you've got to decide at some point, who to turn away. We keep increasing the threshold – "This much, no, this much, no, this much, no," and then we moved on from there. It was a transition, for sure.

ROB: What size metric would you use to describe that you were at when you felt like you needed to start cutting off this low-end, very transactional customer?

AVI: Basically, in size metrics, what we said is that when we switched to more than 50% who we were billing at least $5k a month, then we said we might lose some – we didn't fire any client if they were small ones. But we said, "We won't take anymore, because we have proven that more than 50% of our revenue comes from these bigger clients who are willing to" – so that was our criteria. Once we get more than 50% of clients paying $5,000 a month and they are going for strategy – and usually the average client ends up at 20 to 25. So, we said, "Don't take anymore. Just existing ones." We do have some for now, 12 years, existing clients working. We're still doing their social media. But it's a lot fewer of them.

ROB: That also makes sense, how you're able to then incubate this capability within the firm. It's hard to go from not having an offering to having an offering, but when 50% of your clients need the service, you're able to start building the processes, building the people. You're not trying to go from nothing to something. You're saying, "Here's the offering. Now we know how to maybe repeat it a little bit."

AVI: Absolutely. By the way, the building process part – even though we've been doing this overall 13 years and the last 5 years, this – it's an ongoing process. It's never set as a cookie-cutter, ever. Things change and the business changes. What we have said is just agree to the fact that the process itself will be changing, but we need a process. That's what we've been doing.

ROB: Processes are all about enablement. They're not about restrictions, they're not about tying hands. They create freedom. It's hard to feel that, because I'm not a process kind myself, but it's necessary, or else you go crazy.

AVI: Yeah, absolutely.

ROB: Avi, what led you into this business in the first place? What led you to start an agency and originally start taking some ad budgets and then continue figuring out what the business needed to be?

AVI: I worked for a major corporation. I was a microprocessor architect. I worked on Pentium 4. I worked on some low power processors for Intel and going into Apple. It was a very different area. So, when I wanted to do something, I realized it's impossible, almost, to start a hardware business. You want to do chip design? It's very expensive. And I did try that for about a year. I had some funding from the Chinese government, but it didn't go very far.

Then I had to pivot and say, okay, I want to do my own thing. My sabbatical came up; I left Intel. I wanted to start something different. I had enough money from Intel, from stock options, so I said, let's play the stock market and do things on the side. That's when I started looking at ecommerce and started doing and selling things from my connections in China online. This was 14 years back or so. I was not expecting to do well. Everybody knows so much SEO, they're talking about techniques, and I'm a hardware guy. And marketing – I mean, yeah, I did have an MBS somewhere along the line, but they don't teach you marketing there. It was more management. So, I was thinking this would never work.

But soon I found I became the number one seller of Windows XP online, and an Adobe reseller, by just doing a few things online. That's what got me thinking, okay, if I can do this in three to four months, then I think I can help others too and create a business out of it. It seems like it's not as – the system, everybody's not exploited it yet. I used to assume that marketing guys knew everything; "How will I learn this?"

That's where we just kept on doing ecommerce. First a lot more ecommerce. We were doing Zen Cart, if you can remember that. Then moved on to Drupal Commerce and Magento. Did a lot more ecommerce initially. The thing was, ecommerce people have money. They're selling something, always. So that's what we did a lot more, and then we moved on to B2B. So it was more of a slow process, and I didn't trust myself in marketing for the first five years. I kept telling people, "I know slightly more than the customers but not much more." That was a learning process also, just to try to figure that out.

ROB: Right, but ecommerce is a pretty good on-ramp for a lot of mathematical minds. It adds up. You can put some money in, you can get some money out, get some feedback on whether or not you're doing a good job. This is one of these funny episodes we have from time to time where you're a computer engineer from UT Austin, got your MBA, I'm a computer engineer from Georgia Tech, I have my MBA, and we get to hang out and talk marketing. [laughs] We have these episodes every year or so. We have engineers who have made their way into the marketing world.

AVI: The phrase I use is ecommerce is the closest you can get to engineering in marketing. If you're used to engineering, ecommerce is the closest thing you can touch which looks/feels a little bit like engineering.

ROB: As you've had to grow the capabilities, grow the firm, sometimes you think about those key hires that have come at a moment where you needed a little something different in the business or it was really an inflection point. What are some of the people or roles that have made a difference in Kuware?

AVI: Early days, the first hire which people talk about, it should be done earlier than later, before contracting. I'm talking about beyond contracting. Of course, contracting and outsourcing still works, and we all have done that and we still do some of it. But your first full-time hire I think should be done as soon as possible. It really changes the game because you have to think about two people. You have to make enough money for two people now. You start thinking more seriously than just playing it as a game at that point. You're responsible for people's salaries at that point. I think that was a key. And that person was great. She was not a great marketer, but she was a great person to work with.

Then as I moved on, into the CMO world, I needed people with credentials beyond me so when I took them to clients, they'd say, "Oh yeah, they have experience. They can handle our CMO." So those became our key employees later because their credentials they had from other places got us to easily sell that service – which we already knew how to do, but people still want to know who will be the CMO. Those became key people for us.

I think the next key thing for me was stop outsourcing. We used to do development outsourcing to India. Being of Indian origin, I said, "I'm just going to go to India and set up shop," because I learned my first outsourcing team were outsourcing to somebody else. Being an Indian, I thought, "They will not fool me because I'm Indian origin, right?" But that happened to me. So, then I said, "I want my actual salaried team in India." If you have a system, if you are doing it for low cost, I would say start owning the piece of it somehow.

To me, that building of the business that way gave us the stability that I never had to think – I mean, I can give a quote on any website without spending too much time now. I don't have to depend on a freelancer or somebody telling me how much it'll be so I can pad it and add my expense and do it because it's all in-house. I think that changed the game for us, and for our customers, because now when customers say something needs to be fixed, it'll be fixed overnight. And if it's a small thing, we don't even worry about billing it. It's not worth the time to bill it. And they're happy. Customers are happy that this happened so quickly.

ROB: Right, it's a strategy to overserve. It makes a ton of sense. For people who find that idea, though, of salaried employees outside of their country intimidating, how did you get over that hill? I think about setting up a legal entity. What's the local compliance, what's all that look like? I would be scared a little bit. How do you think about it?

AVI: It was a hassle, for sure, absolutely. I would rather do business, I used to say those days, in China than India. I spent a lot of time in China with Intel. In India, in many places, things are not as clear. So, it was just a question of, I'm going to risk getting two to three people, and how much is it? It's money which will go away. As long as I can afford that money, worst case, this will fail. That's how I started. I start all situations by saying, "Can I afford this failure, this much money, pragmatically?" And that's what I did with it. It worked. Great. We had to make some changes there. Another thing I did for outsourcing is I said I'm going to pay everybody over 20% the market. As a result, in our 11 years of company in India, nobody has quit.

ROB: Wow.

AVI: We have fired people because they didn't work out, but they don't quit because they're going to another job. And India is like Silicon Valley of 2000, where people quit every three months for more money. We have managed to do that by keeping the salary slightly higher and not getting too greedy on how we pay them and compensate them in India.

ROB: Yeah, this past year we have a partner who's very much in that outsourcing space in India, and I feel like they had to do about 25% bumps across the board to stop the bleeding from people. They had really good retention and then they got hit by the COVID compensation wave over there.

AVI: Yeah. I was concerned. My being of Indian origin didn't help that part, because that was definitely the same worry, a U.S. company dealing with these entities in India.

ROB: One thing that you shared with us as we were booking is that you've recently undertaken an acquisition, which is a different sort of adventure in another entity. Talk about that process, how you figured out who you wanted to acquire, how you closed that transaction.

AVI: Sure. For a year and a half, I was saying, "I need to grow faster; should I invest?" This opportunity – this is a white label PPC service. The reason I was very intrigued by this is we do PPC for our clients. Our clients' ad spends are in hundreds of thousands of dollars per month, so these are big, and they allow us to experiment. I thought, we do this and our clients let us do whatever; are we really good? There must be somebody who does only PPC. If anybody does only PPC and nothing else, they must be good because that's all they do. So, I used to keep hiring consultants from other companies to audit us. But anything they told us was not eye-opening. Some good ideas.

When I ran into this opportunity, Rob Warner's company InvisiblePPC – he's out of the UK – I said, "Oh, you guys do just PPC ads, and you do it for agencies, and you are not working with a $100,000 budget. Most of your clients are spending $5,000-$10,000 a month, which means these small clients, if they don't see the results, are going to fire you. You've got to figure this out very quickly on $5,000, so you must be really good, right? I'm very intrigued just understanding how you do this." I had a technical interest in seeing how he does it. As I talked to Rob more, I realized they really know.

And by the way, the secret sauce, which I'm happy to give away, is simple: if you do the same kind of ads again and again, and once you spend hundreds of millions of dollars doing it for those sectors, you become really good. What the white label service does – it only works for smaller agencies who cannot do their ads, and we take only what we call smart niches. If it is a local business – plumber, HVAC – those we have figured out exactly, so we can tell you for $1,000, you'll get so many leads, guaranteed. Because we have been doing it for so long.

It's unlike our main agency business. There, every client is special, is different. We have to figure out and tell them in advance the cost per acquisition, work together. Here, we are able to actually tell our clients that "This is what it'll be." It's an amazing business that way. If it fits the right kind of client and right agency, it's like a no-brainer. You will not lose money. How often can a marketer go to a client and say, "Yes, I'll get you a lead for this much, guaranteed, don't worry, and first month you'll have it. You won't have to wait for two months for me to do planning"?

That's what this white label business does. Once I saw inside, doing this again and again and spending that much money and becoming a Google Premier Partner and having access to all that is amazing. That's where I felt great – it's a technology kind of business, and I understand this stuff, and Rob had built a lot of tools which are proprietary tools that others don't have. I can tell who is advertising in the local market. I can use that. Even SEMrush don't do that. So we can really target that kind of thing.

As a growth strategy, I think if it matches and you understand the business, then acquire. That's what I learned. If we were taking on something else which we didn't do at all, then we'd have to figure it out. At least the systems we follow there, but we know PPC. We have done it. We understand the business in general. And we can keep it separate in a sense and not mess with it. We are a big agency. Our clients are not the clients of agencies who come there, because it's a very different business.

Also, as I was telling you, those $2,000 a month ones who we don't want to take on, now we can pass on to those agencies and say, "Hey, we don't deal with that. Here are some clients for you. You guys do their social, because unfortunately we don't take them on."

ROB: The predictability of it certainly makes sense. If you're a plumber, there's lots of places you can get leads, and you're going to pay for them. You're going to pay for Yelp, you're going to pay for Angie's List. If your PPC partner can't be in that ballpark or better – there's a price tag. They know what the expected price is, and you have to match it. But I guess those platforms also know what the going rate is for a PPC lead and they probably reprice a little bit according to the market rate as well.

AVI: Exactly. It's just the volume and having done the same thing. HVAC in Boston to Austin will not be that different. It will be very similar pricing. We have data on both cities, so we can tell you exactly. I'm amazed at the fact that you can have this predictable marketing and still saying, "Let's figure it out together."

ROB: Some agencies are probably glad for the business, they're glad for the backend help. I can see some of them being a little bit apprehensive about working with a white label PPC partner that's also owned by somebody who could arguably steal the business if the client grows up. How do you calm those fears?

AVI: In some ways, if they don't know the details, it's a legitimate fear. If I was an agency, I'd worry about that. Two things. There are different people running those two companies. I just own it, and I kept that team intact. My team is not talking to them. I mean, they're talking in the sense – our business, we transition to them the smaller ones. But otherwise, keep it separate. That's one.

The other one is we have looked at the market. We don't take on local clients who need local SEO. These are exactly that. So those ones, that is never our market. Unless they are a nationwide company, they're not our client. It becomes a very different story. That's what we tell them.

And here's the other part. I teach our company – we have started presenting to our company the details of how to build an agency. Exactly how to build an agency. That's available to our agency partners. We're teaching those as courses. "Go and build your agency like this if you want. This is what we did." That's the added value we are giving to them. We'll tell you how we do it so you can compete with us and grow if you want to. That's open.

Just to be fair, there's no doubt we will add more white label services. Right now it's pure PPC, but I do foresee – why not Facebook ads too? But we will keep that always focused on a special market, not for everybody because it just does not make sense.

ROB: It helps to think about that all in abundance. There really is no shortage of business out there for most people in services firms; it's just about earning that business, being known, liked, and trusted, all of that sort of thing.

If we rewind a little bit, Avi, and look at the big picture of Kuware, we look at the journey, what are some key things you've learned along the way that you might go back and tell yourself to do a little bit differently if you had to start fresh?

AVI: One thing which it took me a long time to learn, because I came from salaried employee, very well compensated options and things – I was not used to this concept – even if the bank was willing to give me a loan, I would not take it. I said, "It needs to be bootstrapped or it needs to be VC funding." So one of the things I would tell myself is, hey, if it is a business, you want to grow it? Get that capital. Not as equity capital if possible. That's the only way you'll grow, and it's okay. Be comfortable with it.

The other part I've learned is that things will break. Get used to it. This took a while. Initially, "What are we going to do now?" When we acquired this business, things happened, and I realized that I'm so calm about it. It's okay. I would be surprised if things didn't break. That means something is hidden, something is not working right. That is the advice I would give everybody. Stay calm. You'll figure it out. Things will go wrong. It's a business. Things will not run smoothly, ever. In fact, if they're running too smoothly, then you're not aggressive enough. You're not growing. Things will have to break, and then they break, you'll figure it out. That's the advice I would give myself if I went back when I used to get very worried and unable to sleep. Now I can handle it.

ROB: There are so many ways to respond to that breaking. There is sleeplessness, there is frustration. Some people take it out on people, and I think that's something people dread when they're going to work for a smaller, privately held business. Sometimes somebody needs to be fired, and the rest of the time you just go figure it out together. It's usually not the first one. It's usually not that somebody needs to be fired because it's usually my fault in the business anyhow.

AVI: Correct. I tell people in my team, don't do the same mistake again and again. I learned this at Intel. You're allowed to every day do a mistake, but don't do the mistake you did yesterday. In a smaller business it's harder, but I said, "It's okay. It'll happen."

The other thing is a rule – we came up with this – a lot of times it's clients. At that time, I've got all the way down through the hierarchy that any of our associates can fire a client because it's not working. They don't have to go all the way to ask us because it's a big client. Some clients say "Eff this, eff that." I don't have a problem if they talk to me in a friendly manner and they're friendly and they do that. But if they do that with meanness, then the f-word is a problem at that point. Then we don't take it. As simple as that.

So, our employees feel very empowered, and as a result they go to bat for us. They will do extra work because they know they have the right to decide if somebody is not working right with them. Those are the kinds of things – that took a while. Earlier, it was always this worry about what'll happen. One client goes and what happens? But slowly – it's a journey, for sure.

ROB: It sounds like you have your mind and your eyes already a little bit on what else might be viable as a white label service to add on. What comes to mind? Is it Instagram in a box? Is it SEO? What scales similarly?

AVI: The local SEO will scale. Facebook ads is very similar and will scale. TikTok ads will scale. They are very specialized services, and Facebook and all is harder, but it's getting very specialized. Anything which is specialized and localized will scale and can be added as a service, and it's harder for people to learn. Those will scale.

But at the same time, I'm not of the mindset, like some other white label agencies, "We'll do everything for you." If you're running a marketing agency, there's a part of it you've got to do. You cannot just be a manager outsourcing everything to somebody. You've got to find some areas where you're good, especially if you want to grow. You've got to start owning a few of those pieces. That's what I tell the agency owners. You don't do PPC right now, but if you find that's the area eventually you want, you've got to take it on. There are some things you've got to start keeping in-house. Otherwise you're becoming a manager and you will not learn the marketing aspects to grow to the next level.

I'm not envisioning building a white label agency which does "Just give it to us, we'll take care of it for you. Just talk to the clients." I want to keep it specific services which you handle here, and we will do it for you kind of thing.

ROB: Got it. That's really interesting. It'll be interesting to hear as you evolve in that direction, as you consider more acquisitions. There's all sorts of mechanics to get into in acquisitions that we won't deal with in the moment, but are fascinating in and of themselves.

Avi, when people want to find and connect with you and with Kuware, where should they go to find you?

AVI: I am most active on LinkedIn. That's the best way to find me. Kuware also. I'm just Avi at Kuware. That will work. Also direct email will absolutely work. LinkedIn message will always work. Of course, LinkedIn has become a little bit – everybody's trying to prospect so much, and we offer a service too, so we are in the same game in some ways. But for sure, any message which has something substantial gets through fine. That's not a problem. LinkedIn will be the best way to find me. Avi at kuware.com would be the other great way to do it. I do hardly any Twitter at all.

ROB: [laughs] Sometimes it's safer that way. Avi, thank you so much for taking the time to come on the podcast, to share with the audience. We will be glad to keep an eye on your journey, and certainly wish you the best. Maybe we'll all get out to Austin next year. We'll see.

AVI: Yeah, that would be great, Rob. Thank you. It was very natural talking to you. That part was absolutely great. I'm looking forward to staying connected and chatting more.

ROB: Sounds good. Thank you so much, Avi. Be well.

AVI: All right.

ROB: Thank you for listening. The Marketing Agency Leadership Podcast is presented by Converge. Converge helps digital marketing agencies and brands automate their reporting so they can be more profitable, accurate, and responsive. To learn more about how Converge can automate your marketing reporting, email info@convergehq.com, or visit us on the web at convergehq.com.