Findings, insights

First and foremost, listen to your people - there is a reason you hired them.

Finance

Spending over a 100 million HUF on the office a year is a cost that is not really justifiable.
In a good year that’s cc 10% of the service business revenue - it is a heavy overhead cost
needed to be considered in every proposal. If possible to cancel the lease, finding a cheaper
location would be beneficial. With a similarly or better equipped office in a more affordable
location we could save up to 50 million a year.

Dashlane cost 1.7 million - is that a yearly expense? I’m not certain it’s justified if it’s
monthly.

Not sure what Recruitee … cost is - but it was 1.48 million in January - if this is monthly
recurrence it needs to be validated.

But more importantly, we do not know the breakeven point for our projects - don't know
from what price point we are profitable.
People keep on saying that if there are 17 or 18 people utilized on projects then the
company is breaking even - but at which price (2022, 2023, mid-price)?
There should be a calculation that aggregates all the costs that are relevant to the service
business and distributes it across people as fixed costs - on top of the wage costs
associated with the given person (or rather seniority level).

Then there would be a couple of calculations possible:

- calculating a gross margin (simple): customer price - wage cost (for junior, mid-level,
senior) = the difference between revenue and direct costs. At this point even if it’s
positive, we can generate losses on the engagement
- calculating a gross margin (operating): customer price - wage cost - minus fixed
costs allocated to each billable person = depending on what we include in the
overhead (e.g.: are taxes included?) we could get the net profit on an engagement.
This should be positive and we should have a target - e.g.: have 15% net profit.

This would help sales and finance understand at what gross margin a
junior/mid-level/senior consultant should be sold for (there should be a minimum or floor
price - below that we know we generate losses). Estimate is the simple gross margin should
be around 40% - it would give enough coverage for the overhead costs and a profit target.

This approach would help understand the implications of switching consultants on a project
(example: replacing a junior consultant with a senior one would lower the profit margin on
the project).
Estimates from sales are not really a good way to plan the business at the moment. As far
as I can see utilization estimates are working with the assumption that a person works full
time.

(Quick note it is utilization not utility. Utility rate means the price of e.g.: electricity vs
utilization rate means the percentage of billable people assigned to customer projects.)

So utilization in reality is never 100% - because there are vacation days, sick leaves, other
downtime. On average in the consultancy business it’s safer to calculate with 18.5 days a
month for longer projects - it would smooth forecast accuracy over time for longer
engagements.

Calculating utilization based on time (available working days vs actual working days) is
more accurate than calculating it based on the number of people available - as the latter
never actually considers holidays. I’m not sure if the current estimates are adjusted
whenever someone books a longer vacation - without having any sort of timesheets in place
I don’t think it’s possible.

There could also be a new category introduced: non-billable utilization. This could be used
to measure the time people spend on: pre-sales activities, marketing activities (content),
training, etc. These activities are useful for the company but not directly associated with
revenue generation. Those people without any sort of utilization should be given things to
work on. This would allow for calculating the actual cost of running the business (time spent
on marketing related activities for example).

Time based utilization planning would account for seasonal fluctuations: e.g.: July and
December are traditionally low with utilization due to holidays - revenue expectations are
generally lower.

Marketing

I think the most important first step would be to listen to Zsuzsi and Johanna. The marketing
strategy they put together looks well thought-out and reasonable.

I understand SEO used to be the way to generate leads, but by looking at the numbers 2023
was a really weak year for generating leads this way (compared to 2022 we could only
generate cc 50% of the leads in 2023). I also understand that there were changes/updates
from Google - but that should really serve as a warning that we simply can’t base our entire
marketing on one channel. SEO should be one of many channels.

I think Zsuzsi and Johanna summarized ideas really well. To reiterate and add my own
thoughts:

We need to have an idea about our ideal customer - who are they, company size, industry,
maturity, geography, budget, etc.
We need to have an idea about who we are - what is the image we want to project, the
services we want to offer, etc.

Once we know these and know who and how we want to work with - we can start targeting
them.

Targeted ads, PPC, email marketing, newsletter, content marketing, networking, building up
a thought leader are all important aspects to generate brand recognition and ultimately
leads.

I believe in forming partnerships with larger software companies, communities, businesses

to build on their networks too - traditional business development.

We should absolutely grab every lead farming opportunity - make certain content available
after giving at least an email address, only talking on events where we can get the list of
registered participants and reach out to them.

Track people on LinkedIn (and as the girls said, comment, engage with them…). Reach out
to former clients, etc.

Marketing (it can be sales too) qualification should be more thorough - checking LinkedIn
might not be enough, we need to be aware of where the business is really based, their
finances, their leaders, clients, industry, etc.

We might also try to reach out to companies with custom made proposals (re-worked design
of their website/app, etc) - already in progress.

Sales

Sales qualification (if it’s not included in marketing) should include the above, but to
reiterate: if the company is said to be headquartered in the US but we see 21 Chinese
employees and no one else, we should get suspicious. The latest example: VC from the UK
turns out to be a couple of former managers putting together some money (250k pounds)
that they distributed across cc 20 startups (looking at the startups they are not in an
advanced stage and might never be). This is not a company with a lot of capital and a lot of
good prospects - this research takes cc 10 minutes - far less than what we spend with the
first call and discussing it in the leads meeting. I’m not saying sales should do this exercise,
but someone should.
With very weak looking leads we might include an email qualification round. They sent a
message or booked a meeting (RR) but we are not sure we want to work with them, we can
send out an email to ask for a few details to “help us better prepare for the meeting”. If the
answers are unsatisfactory (job search) we should reject the invitation.

Sales might want to include a probability metric on the potential deal -

10%-30%-50%-70%-90% - or it can be simpler (fewer categories). It would help studio leads
understand what type of consultants they need to prepare to allocate. This % could change
over time as sales learns more about the client. It simply would help with planning - the
“warmth” feature in Hubspot might do the same.

We should reconnect with old clients either via LinkedIn or in email (preferred). It can be
done in a sneaky way: let’s say we only connect them to do a customer satisfaction survey.
Ask them to help us understand how they see us, how satisfied they are with our resourcing,
etc. This should lead to conversations about their current issues if there are any. Ask if they
would refer us to anyone - if yes, who (this can and probably will be within the company).

Sales should get the range of prices they can offer. They should have the ability to offer
different prices for different projects for different clients. If we know - from the finance section
- what our floor prices are, projects will still be profitable.

Sales should be ready to negotiate (see above) and actively ask if our prices are ok during
the proposal calls.

When there are no leads coming in, we might try prospecting - as per our ideal customer
profile - see if there are companies with executives we can connect with. Reaching out
proactively is not a pleasant or rewarding exercise, but yields roughly the same results as
our current lead conversion rate.

We should do account management. Select a few important clients, where we see growth
opportunities and connect with them. It can be under the same disguise - client satisfaction -
but can also be straightforward - we are reaching out to see if there are any other
opportunities for cooperation. Then check in with these clients at set periods (every month,
every two months…). Nurture a relationship and get introduced to other areas in the
company.
This could be coupled with project management - can even be used interchangeably. But
there should be a person from our end whose responsibility is to know the client, who can
map out stakeholders, decision makers (account map). This is of course not needed with all
clients, just a select few where we want to grow.

When utilization is this low, we should reach out to old leads where we had better
discussions - but lost for whatever reason. Of course, if they are a small company who were
looking for a simple website redesign, we shouldn’t bother. But bigger clients might have
new needs, we might try better prices (especially compared to 2023).

Round robin is not something I would pursue. If we can’t make it conditional on the
prospects writing at least a short message on what they want, we should not let people book
meetings. We should look at the experience of Klau and Nóri, but my understanding is that
there are a lot RRs with gmail addresses, people who are looking jobs or who are selling
services. We should not waste time on these. The minimum should be to have at least a
rough understanding of what they want before we sit down with them.

Are we satisfied with the current sales pitch - how does it measure up against the ones we
received during the catfish project? If we want to play in the big league, we should look like
the big league - I would not include team building pictures in the deck. It should include
services, references, numbers (how many projects, how many experts, successes, rewards,
recognitions, etc). Otherwise the process description is very neat.

Proposal - I looked at the KPMG proposal, it’s altogether too long, no pictures of the team
needed, no org chart needed, no information about brown bag lunches needed,
methodologies part should not be this much longer than the deliverables part, etc.
There should be assumptions from our end: they respond to questions in 3 days, etc,
project management is their responsibility (if it’s that kind of project), we work with the
assumption they have a style guide (if it’s important), etc etc - to cover our responsibilities.
There should be a sales@uxstudio… email to look more professional (besides the sales
rep’s email) - beneficial if someone is on holiday, leaves, etc.
I think Nóri and Klau are bringing this to the right direction at the moment.
(Also minor contradiction: in all our materials we emphasize two things - that our consultants
work 40 hours (no client ever believes that) and that we have a lot of internal knowledge
sharing and training events).

Consciously collect feedback from clients regarding services they are looking for - to
serve as input for the Service team. Might even conduct a second round of research to see
what type of technologies (besides Webflow…) clients are looking for, what type of services,
what kind of budget they could set aside for these services - with the help of the service
team. This might not be led by sales, it can also be run by the service team - the input is
important for them after all - but sales should at least be consulted.

Services - in general

Why do clients reach out to us? We need to understand what do our customers look for
when they contact us:
- Eastern Europe is perceived as a region where there is good work ethics, hard
working people delivering good quality services - but at an affordable price
- Good location time zone-wise
- Better language skills than true off-shore resources

Our competitive advantage over Western agencies is price - clients expect the same quality
but a more budget friendly contract. At present I don’t see other advantages for a Western
European client of working with UX Studio over other agencies.

If we want to raise prices we need to figure out how to:

- differentiate ourselves. A unique selling point, a niche services offering very few other
companies are doing - that are in demand at the moment
- or make ourselves become a very prestigious brand with exceptional references and
use cases
With either of these two (they can be combined) we can justify our prices - without them, we
only price ourselves out from most markets.
Raising prices without changing the services portfolio will kill our only competitive advantage.

Companies outsource if they:

 - don’t have in house capacity
- can’t afford local talent
- struggle with a specific problem they need expert help with

We need to find the right messaging and the right value proposition to resonate with the
above.

At present I think offering the current services from 350 to 450 EUR per day is reasonable,
with rich, established clients we might try prices around 500 EUR.

We need to provide some sort of project/account management to prominent clients -

personal connections inspire loyalty and that leads to repeat purchases.

We need to broaden our services portfolio - but we need to think about directions.
What can the current workforce pick up easily (my assumption):
- branding
- graphic design
- motion design
- project management
- product design and strategy
- design systems
- etc - whatever we have at least some overlapping experience with

We might also branch out to different service areas to ensure the consultancy business
survives - with a broader offering we can reach out to a bigger audience, can attract bigger
clients, can grow with clients (if we don’t only solve one type of problem). We might think
about offering:
- development (real capacity needed)
- data visualization
- QA testing
- AR/VR UX
- etc - whatever we see on the market that is feasible for us to retrain our people to or
to hire talent at reasonable costs.

What I don’t think we can reasonably offer any services around is AI. What competency do
we have in house for that? We should write content about it for sure, we should train our
people, collect use cases, and try fitting our proposed AI services into past projects for
practice. But I don’t think we are ready for doing AI consultancy.
Here we also should first identify who the target audience/market is for our services - and
fine tune them to the actual need.
We really need to introduce a different approach to pricing our services. Having different
daily rates for senior, mid-level and junior consultants would allow for some flexibility when
pricing proposals. Once we know our costs and we can calculate healthy rates, we will be
able to better compete with other agencies.

We should be ready to offer our services for higher prices to large enterprises from western
countries and apply discounts to smaller organizations from poorer regions - all within the
ranges established by finance (floor price, etc).
We might also approach pricing fixed-price projects differently. Generally fixed price projects
are more costly to clients - as compared to subscription (or time and material based)
projects, because the risk is on our end for delivery. We need to price the risk in - not a
higher daily rate.
A very simple website redesign project - even if it is fixed price, can go with a smaller buffer,
can be even below the subscription price. However, a complex project with a lot of unknown
variables should be priced for higher risk - might mean higher daily rates above our current
fixed price. Project management should be included in our pricing - as mentioned above, the
risk is on our end to deliver on time.

At present it seems there is weaker demand for research services. If we want to continue
offering this service, we might want to lower the price tag on it. We can offer it as a free or
low priced piece of a design project to prove usefulness and to drive upsell opportunities.

We seem to have some traction with startups - if we have the expertise, we might target
them directly and develop use cases relevant to them. How can we help?

How certain are we that the services we advertise as strategic are really what clients would
call strategic and not “merely” help with finding the proper methodology?

The rotation of strategic managerial roles are counterproductive. I understand the notion of
“everyone should get a chance” and the people with leadership experience will be better
consultants - these are nice and true things. But at the same time, a studio lead, a business
lead and especially a head of services lead actually have an impact on how we approach
clients, how we plan resources, how we organize training, how we develop services, how we
price proposals…these are strategic responsibilities.
People with no leadership experience will take cc 6 months to get comfortable with leading
people and getting a hang of how to deal with clients. We waste so much time every 12-18
months when we re-train a new, inexperienced person for these roles.
With a squad lead/team lead position I would fully support a rotational system, with strategic
positions it hinders the company's capacity to plan, innovate and grow.

The Head of Service Business should be an experienced leader with at least some business
experience. That position is part people management, part business strategy. They should
understand the basics of marketing, sales, pricing, reporting, financial performance - while
also being able to intervene and mediate personal conflicts and motivate people. They
should be able to lay down the foundations of cooperation and find a way to operationalize
the company strategy. This can’t be a rotational role.

Strategy

Raising prices - just because - is not strategy (and was not a financial necessity). There
needs to be some specific objectives, some milestones to reach, calculations/validations of
tactics working.
There should be some sort of revenue/profit target or growth expectations or market
penetration objectives - whatever it is, it needs to be broken down to specific steps.

It can be to have Berlin-prices and Berlin-wages - but the road there should be laid out for
the company.

What definitely needs to happen is to revise the services offering - broaden or deepen the
skillsets we work with (so either offer more things or go deeper into a few things - be a
generalist agency or be a specialized agency).

For that to happen there needs to be some research conducted to validate ideas - but
building a good portfolio, connections, references is a must.

Having more services to offer would lead to being able to deliver end-to-end projects.
Delivering end-to-end projects would lead to expertise in strategic engagements - so
strategic consultancy would be possible.

We would need to know our floor prices and work from there - generate a stable revenue
with profit. Set that profit aside for training and hiring talent as needed. Building new
capabilities and advertise them.

Try different marketing strategies with different channels - see what works and go in that
direction. Need to focus efforts to actually appeal to and engage with the desired audience.
We need to get back to a healthy amount of incoming leads - and improve the quality. That’s
not possible by solely concentrating on SEO.

We need to identify who we work best together with - which market segment do we have any
traction with. Is it startups, small businesses from the east? - what audience do we talk to
now? How do we want to change it? If our current audience is not that flush with cash, but
we can’t yet attract better paying customers - do we want to lower prices to serve our current
customer base?

Utilize sales and account management to build trusted partnerships - the easiest sales are
repeat customers.
With more projects, come better clients, come better use cases - thus better prospects.

Ask the services business to use Folio products to drum up some business to the products
team - and vise versa, if UX Folio could be developed into a real marketplace to justify a
monthly subscription pricing, advertise UX Studio there.

Build partnerships with organizations and use their network - if we could identify
markets/companies/communities.

Keep on validating prices and services offerings on the market. We don’t need to stick to
certain services if no one is interested in buying them. There is no shame in looking at the
competition to see what they are doing - the Catfish project was a wonderful initiative.
Recruitment should happen only when we can comfortably rely on estimating incoming
leads, with a stable lead conversion rate. When we see we have a strong pipeline, see the
sales cycle times, the skill sets needed on the market. So overall the demand that we project
we can’t fulfill with our current resources.

Marketing, sales, services should all support objectives - having different objectives or vague
ones like “stabilize” is simply not going to cut it. What are we working towards this year?
What objectives are realistic (e.g.: can we become an agency with a better service portfolio
where everything is connected to UX or can we become a strategic AI consultancy
business?). Daily work would not differ significantly but purpose would be shared.

There is for example some sort of animosity between sales and marketing and the services
team. Instead of actually knowing what we want to achieve, there is this panic mode, where
everyone is writing blog posts, experimenting with ppc and listening to all kinds of “leads”.

Marketing should communicate to sales about all the things they work on, so that sales
understands all the work that goes into getting even this many leads. Sales should share
insights from calls with these leads - and things they learn from them (to help marketing
adjust messaging, etc). Services team should consult sales and marketing to see what
skillsets are needed - and also share research and news from the market (new tools,
methodologies, etc). Instead of grudgingly working next to each other - these teams should
work together.
Concerns from marketing regarding the quality of the content should be listened to, and also,
marketing should listen to ideas from the service team - it really is not a competition.

This situation results from a mindset coming from the emergency mode - where we try to fix
everything at the same time, with quick and dirty solutions (doesn’t matter, it should just
generate business in the short run). How does this work out for the company? We do
everything all at once - write content, learn AI, a bit of PPC, redesigning the website, trying
new sales practices.
While admittedly all of these areas can and should improve - they are at present (as far as I
can see) are running in parallel to each other instead of helping each other. We design the
website and a lot of content and a new proposal template while we don’t have a clear
brand/style guide. That will result in reworking a lot of things. We are introducing new
services while marketing does not yet know necessarily what is needed to promote them and
sales is not convinced it would work with our current leads. And so on, and so on.

So essentially what should happen:

- CEO - plans a roadmap for the next year(s) - strategic perspective
- Head of Service Business - organizes workflows and ensures communication,
measures performance - coordination
- Business lead/Studio leads: break down objectives to tasks - operational perspective
- Team members: perform activities and suggest improvements - hands on perspective
- But everyone should be clear on what we do and for what purpose - despite all the
communication channels I’m not entirely convinced it’s happening now.