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From $40k/mo to $70k in debt - Why this advertising agency shut down

Derric Haynie is an entrepreneur based in Oakland, California who, years ago, launched Vulpine Interactive, a social media and advertising agency. Peaking at 10 clients, $40k/mo and 5 employees, things were expected to keep going well. However, they ended up shutting the business and walked away with $70k in debt. Learn what happened!

United States
Agency
People Management

Derric Haynie

November 11, 2020

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Hi Derric! Who are you and what are you currently working on?

I’m Derric Haynie, 35 years old, based out of Oakland California. I’m now running Ecommercetech.io, a media and events company connecting Ecommerce merchants with the right Ecommerce tech tools.

Just a couple years ago, while I was based in San Diego, California, I was running Vulpine Interactive, a social media and advertising agency focused on Facebook and Instagram advertising, creative marketing, and social listening and engagement.

I ran the company with my wife and business partner for 4-5 years. We had around 10 clients at peak, and 5 employees underneath us. We did everything from overseeing major campaigns, working with video teams to shoot quality footage we could then use for ads, to creating strategies for responding to rude comments.

What’s your background and how did you come with Vulpine’s idea?

Before Vulpine, I was a high stakes poker player, from there I created an educational tech app for a card game and, combined with my degree in Business Management Economics, that is where I learned the ins and outs of digital marketing. The card game app was very niche and never going to be a big success, and while I was doing that, a lot of people started asking me to help them with their website and marketing. Thus the agency was born. I always like to tell people that I started two companies and had a child in the same year, only the child survived...

How did you go from idea to product?

It came from getting our first client. They needed a new website and some local SEO work. We didn’t know exactly what we were doing, to be honest, but we knew we could learn as we went. Some Google searches (thanks Moz) and we were able to really drive a lot of business for them. That started to shape our product offering at the start, but it took a long time to really get it right...

We knew early on that we needed to “find a niche.” But knowing this doesn’t make it any easier to actually gain traction in a specific area. Originally we thought we’d do small ad campaigns for local small businesses. Turns out they are really tough to deal with and have small budgets… We originally called the company “Splash - Online Presence Management.” Or SplashOPM for short… But OPM means to many people “Other People’s Money” and that wasn’t really a good name for us. At one point we had this grand vision of opening a brick and mortar “store” where people could walk in, order digital marketing services, and walk out… That never happened and would have been a huge mistake, luckily some early feedback shot that down.

From there, we pivoted and rebranding to Vulpine Interactive. We called ourselves a growth marketing agency and we wanted to work with early-stage startups. The problem there is that they often don’t have great product-market fit and everything you are doing for them is a test. And that’s a lot of risk…

Finally we honed in on the channels we felt we were best at - social and social ads - and the market we thought we could benefit the most - largely Ecommerce although we never officially niched down all the way into Ecommerce. We stripped away our product offering - we removed Google ads, SEO, and website design/development. In fact, we removed all creative services from being in-house and would rely on additional partners for video and image creatives, only doing the lightest amount of adjusting the content for our dimensions/platforms.

One thing we always knew we had to do was provide and prove immense value with all of our clients. We never wanted to be priced overly aggressively, simultaneously, we didn’t always know how much our services were going to cost us internally - ad campaigns are very scalable, but social media customer service is not. It took a while to realize that it wasn’t that we were priced too low, but that we were working with clients that were too small, so we started to increase our minimum monthly rate to $3,000 and then $5,000. Each client has a lot of naturally occurring cost - reporting, meetings, overhead - and you need a healthy minimum retainer to really scale an agency.

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Which were the strategies to grow your business?

Our main growth channel was actually speaking and hosting events. We were able to acquire and grow a Meetup collective to over 12,000 members, and use that to send people to marketing events. We would do in-kind sponsorships of marketing events, handling all social media and advertising, in exchange we would get a booth at the event, and that would often result in business.

Other than that, we had 2nd order business. A few of our clients ended up leaving certain companies, which ironically typically meant our arrangement was going to come to an end as well. And when they would land at another company, they would bring us in. So it wasn’t so much referral, like in other agencies, but actually 2nd order business.

And the 3rd and most unique to us way we secured business was talking about our competitors and pricing transparently on our website. We ranked #1 for “Digital Marketing Agency San Diego” back when we were nothing and the big companies honestly should have been able to hold that spot. But because we compared our competitors to us, we outranked them. They all shared our content and loved that we sent them leads, and that was fine for us, because every agency works with different types of businesses, and we highlighted when to go to Internet Marketing Inc, or IDEA, or any other agency that would have honestly been a better fit. In that way, we got the right leads for us, and automatically sent out the ones that weren’t a good fit.

Now, that being said, we had lots of content fails, like when we thought we should use an online course to get new clients - so I created a course on setting up a Wordpress site, maybe got 4 people to buy it, no clients, and wasted a good 2-3 weeks of my time on that one. And of course, there were some partnerships and events that never really panned out. One event in particular cost us a lot of work and when all was said and done, no one in the audience seemed to be a good fit target client for us, you could tell right at the start of the day too, so 80 hours of work to get the sponsorship and one whole day of “tabling” wasted. The one learning from all this is really understanding who you want to engage with (from a target audience perspective) and making sure you really understand why they would want to engage with you, where they hang out, what problems they have. Of course, this is something a marketing agency is supposed to know really well, but even the best will make mistakes or overlook something.

When did things start to go in the wrong direction?

The challenge with an agency is scaling out the services. How do you hire someone to do what you’ve been training yourself to do for years? And then once I have to pay someone to do it, I don’t make nearly as much money as I used to. But I still have to oversee the account, and the employees work, and now I have payroll, and my own internal HR to deal with. We have meetings to discuss things that I just used to do on my own. A 30 minute meeting to get someone to do 1 hour of work… I could just basically do it myself, right? That was the basic problem, actually scaling. Combining that with juggling the execution of services and marketing/sales and getting new business/pipeline. It was quite the nightmare.

I remember some months where paying my employees meant I didn’t make any money. And you can only go so long doing that until you go broke. We brought in massive debt, at least $70k, maybe closer to $125k when you include an investment that we took in.

And while I think my employees were good at their job and accomplished, the #1 reason we failed was because we didn’t hire the right people. And ironically, I’m not even sure if we could afford to hire the person we needed - which would have been essentially another “me” that could take the accounts completely off my plate from day 1, manage and retain them, and perhaps even work on a largely commission basis. So maybe taking it a step further, we could also say the problem was that we wanted to grow to be a large agency, but we hadn’t really saved the budget and established ourselves as just a 2 person consultancy. Growth as an agency really does require an investment - you hire the employee, train them, can now get more business than before, and then you start to reap the rewards 4-8 months out.

All of these issues speak to the fact that we were first time employers, learning the ropes of small business, and even though over the 5 years the company ran, we had a really good grasp on the values of digital marketing and social ads, we were never very keen on business to business relationships, professionalism, and some of the corporate values that we never got having come from a background in poker, and my wife not having much corporate experience either.

Which were the causes of Vulpine’s failure?

Finally, at the end, we had an extremely successful campaign for one of our clients, and yet again, for maybe the 12th time in my career at this point, they were about to pull the cord on the relationship. I flew to Miami to meet with them, and I remember the CEO being very busy, he barely wanted to meet at all. We sat down, he was distracted, which was not unusual, I knew, and he said, “But we can’t tell if this is making us any money.” And I said, “No, we can, and it’s making us a lot,” and I turned my laptop around and showed him the numbers. The numbers from the report I sent him and my point of contact weeks ago said “Hey we are printing money, can we ramp this up?” He had never looked at them… This is certainly a common theme working with clients, sadly.

When he saw them, I told him that he may one day want to hire internally for this role and we’d be happy to scale and set that up. He said he wanted me for that job, I threw out a number that I thought was insane, he said yes, and we knew we’d have to move to Miami and shut down the agency to take the job.

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Which were your expenses? Did you achieve any revenue? In the end, how much money did you lose?

Vulpine's revenue

You can check out our quarterly transparency report here.

The company peaked at about $40k/month in revenue, with maybe $30k/month or more in expenses, but we walked away over $70k in debt. We made money, just not enough to support a new family in San Diego. We’re just now finishing off the last repayments to my father for a personal loan he gave us to ward off credit card interest fees. I would highly recommend to anyone reading this to never go that far in debt for your business, it is just too risky and takes a long time to climb out of, many people wouldn’t climb out of it, honestly, ever. We’re lucky to have a strong support system - family, friends, and investors - and I always knew I could make money in other areas of my life, so for me, I was leveraging as much as I could to pursue this, and because it didn’t work out the way we expected, it slowed our growth (financial wealth as a family) to this day.

If you had to start over, what would you do differently?

I’m an entrepreneur through and through, I can’t work for someone else, but most likely, you can. Start by being the apprentice of someone with more experience than you, learn what they do, learn from their mistakes, maybe get them to pay you money, be their employee. If I had seen inside another agency for 2 years prior to starting my own, I would have been in a much stronger position in so many ways.

I did a lot of things right: I read ~150 books in 4 years, attended over 70 events where I both learned and networked, and I listened to all the feedback from those around me. I grew very fast, but started with too little knowledge to really turn it around in time. I do also think I spread myself thin with various side projects, clients that didn’t pay enough, or sponsoring or hosting so many events. A laser focus is more powerful, and being patient with your growth. Instead of aiming for millions, start with thousands, and be happy when you get any tiny victory.

Which are your favorite entrepreneurial resources?

Firstly, the number one mistake I see people make when learning, is that they aren’t learning what they need to know right now. So what is your biggest problem or weakness? Be sure you know.

Secondly, the second biggest mistake is: Not learning from the best. The best information is worth 10x more than second best. It really is a logarithmic scale, so be sure to learn from the best.

A couple of other resources that are invaluable:

Where can we go to learn more?

You can check out the agency here.

Here’s our current business, which is a culmination of everything I learned from running an agency and working in Ecommerce and technology.

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