A few weeks back, I spoke to Sam Shepler for The Lean B2B Podcast. We talked about entrepreneurship, customer development, service vs product businesses, and how to go about scaling a service business.
You can watch the full interview below, or access it on iTunes, Google, or Spotify.
Etienne Garbugli: My guest today is Sam Shepler. Sam is the founder of Testimonial Hero, a service company helping businesses create video testimonials to build trust and accelerate the buyer’s journey.
Before Testimonial Hero, Sam built a video production agency called Skyscope that was acquired in 2016. Since the acquisition, Sam’s also been involved as a venture partner at NextGen Venture.
Sam, welcome to the podcast.
Sam Shepler: Thanks, Etienne. It’s great to be here.
Etienne Garbugli: Good. So, first question: why video? What got you interested in video? What made you decide to start two different businesses around video production?
Sam Shepler: The real answer is I’ve always had a natural affinity for video so kind of just playing to my strengths. As a kid, at 10 years old, I was making videos with my friends, back in the day; making snowboarding films and all these things.
Eventually, I got the entrepreneurship bug. I was like, “What valuable skills do I have to apply?” The most valuable skill that I had to apply was video.
And for people starting out, that’s always a good thing. Step one is to get some rare and valuable skills and then figure out how to apply them. For me, that skill was definitely video. So that has been the unifying theme for all my companies so far.
Etienne Garbugli: You were based around Boston and I know you’re now in Connecticut. There’s certainly a lot of great successes and models as product organizations in the ecosystem in Boston. What made you decide to build a service company?
Sam Shepler: It was kind of accidental. Basically, I started my first company while I was finishing up college. This was Skyscope. I didn’t really know much about anything. People started paying me to make videos for them and that took off.
That was a pretty traditional agency business. After, we had the opportunity to sell that to a PR company that was looking to bolt on a video production arm, I had the opportunity to pause and take a step back.
Actually, I never wanted to start a services company, and I tried to start a software company after that. That didn’t take off. So a year after I sold my first company, I was like, “Well, I’m tired of getting excited for a month and invalidating these ideas. I just want to do something that will drive revenue that I know works.”
Then I basically said to myself, “What would it look like if I took what I knew, which was video, picked a very specific niche of it, which was customer testimonials, and then try to layer and innovate on that to make it easier, and do it in a completely different and better way?”
The prompt was if I was trying to solve the problem that B2B marketers have around video testimonial creation, how would I do it, regardless of the technology or the services element?
At Testimonial Hero, our vision is to be a tech-enabled service. We’re trying to take the best parts of human touch as well as technology layered on that to increase the customer experience and obviously make it more scalable because that’s the key, I think, with scaling a service business. You have to see a pathway to scalability in one shape or form.
I’m sure we can talk more about that but the one answer to that is it is as tech-enabled services. Companies like rev.com is a great example where it fundamentally is a transcription service, but they’ve layered on proprietary first-party technology to handle 100X the volume of transcripts with the same amount of people.
There are other examples of that; some of them successful, some of them not. Like Atrium, the legal firm. It’s a big example of tech-enabled services for law that didn’t end up panning out.
I’m super excited about tech-enabled services. It’s a big opportunity. pilot.com, bench.co; those are some good examples. I’m super excited right now about taking the best of what can only come with a service and human touch and then asking, how can we layer technology on top of that to both increase the scalability and make it a really attractive business for us, but just as importantly, really improve the customer experience and the value for the customer.
Etienne Garbugli: We skipped over a little bit. How did you actually lock in on testimonials? There’s a bunch of different things you could have done. Why that specifically?
Sam Shepler: Good question. I think there’s a part in your book where you mentioned that 50% of founders got their idea for their company at their previous job. For me, I got it at my previous job, but really just my previous company that I was running.
And what the insight was was that the projects that Skyscope had the biggest success with were testimonials and they were also something that we could put a process behind. The willingness to pay was there as well. Then also there was founder-market fit, too. I personally loved them. I believed in them.
I really deeply believe that the best way to communicate value is through the voice of the customer. It’s something that I’m really passionate about as compared to an advertisement, which is an advertisement. Buyers are going to be skeptical of that, but communicating through the voice of the customer is extremely effective and actually is what buyers want.
It was something I was personally passionate about, the willingness to pay was there, the scalability was there. It’s something we could put a process behind. Those were all things that I looked at and I continue to look at it as I think about other services that could be tech-enabled and scaled.
It’s really, is this valuable to the customer? Is this scalable for me in terms of the process we’d have to put behind it?
Etienne Garbugli: That’s great. So you locked in on a “sub need” or a “subproblem” that the customers that you had before had and you tried to find a way to scale that. What do you feel makes customer development different for service companies versus maybe product companies, or versus tech-enabled service companies?
Sam Shepler: That’s a great question. It’s something that I am still figuring out and I’m trying to learn more about every day. I’d love to get your take on it too.
I think for us, in my experience, it is slightly easier and in some respects because you’re delivering the service and you can really get feedback every time and every new customer you can just quickly adapt.
Because it’s so hands-on, you don’t have to spend time writing a new feature or launching a new feature that could take a couple of months. You can say, “Okay, I learned something in this service experience, let’s apply it immediately in the next call that I have with the new customer.”
That’s one of the benefits of services, and again, I think you underscore this in the book so well. Working as a service gives you visibility into the business problems and building the proximity with customers and then you get that domain expertise. So I think it’s easier in a lot of respects.
That being said, I think you still need to do it because customers, even if they’re happy, they’re not raising their hand to tell you what they want. You still have to read between the lines.
For example, with us, the big thing I thought about is video testimonials are incredibly important, but they’re complex. There’s a lot of friction. You might have to find a local partner or fly a videographer across the country. What would the dream situation be for marketers? How could we just remove the complexity from that?
What we ended up doing with our first iteration of Testimonial Hero before COVID was we built a global network of videographers all around the world, trained them, onboarded them such that, previously, customers would pay us to fly around the world. And that wasn’t effective for anyone.
So we were like we’re going to figure out a more modern way to do it. Customers never asked us to do that, but they were thrilled when we did. So it’s a mix between asking them and then paying attention to friction in the process that’s sort of implied.
Etienne Garbugli: There’s a lot of service organizations out there. Why do you feel some organizations never make the transition into tech-enabled services and/or product itself?
Sam Shepler: Obviously, some of them may not need to. It just depends. There’s nothing inherently good or bad about scaling a service business further. If you want to do it, which I do, I think the first step for any founder is getting clear on what you want and then working from there.
Personally, I enjoy the intellectual challenge of seeing how far we can scale this. Then technology becomes essential. In terms of why it doesn’t happen, I would say it’s a lot of things. If you have a working business on the services front, it’s easy to just let the status quo continue. Also, it’s not something that a lot of services founders are familiar with—technology.
I think that’s changing. I think no-code is going to be super exciting as a movement to make it easy for more service businesses to become more tech-enabled. That is super exciting because now, with Zapier, Airtable, and Webflow, you can learn it yourself or you can pay someone for a lot less cost than having a first-party software built. And you can add a lot of scalability.
I think it’s been harder. Luckily, it’s getting easier and easier. I think we’re going to see much more things changing from pure services to tech-enabled services. Also, I think things are changing in terms of how buyers want to buy. Productized services as well, I think, are important.
Before, people were happy to hop on a call and get pricing or sit through a demo, but everyone’s so busy now. Now the expectation is to make it super clear for me, productize it, help me buy, or else I’m probably not going to engage. Those are two big macro trends that I see as it pertains to that.
Etienne Garbugli: It’s interesting because, clearly, one, you’re thinking about building maybe a product beforehand, so you definitely have that mindset. You’re also always looking at it as, how can I remove the inefficiencies? How can I improve this?
Maybe it’s a mindset thing or maybe it’s just the models that you’re looking at it. You’re definitely not the only person looking into this for sure. A lot of people that bought my book, surprisingly, own a customer development firm or marketing agencies.
There seems to be a lot of people looking at or interested in doing some kind of transition like that or some addition to their business. I’m wondering, what’s keeping these people from doing this specifically? There are clear advantages that you mentioned like combining technology with services that are unique.
How would you advise another service business to look at this specifically? Say an existing company that has been around for five years or something like that. It’s successful in their sector. How would you advise them to start looking at opportunities for them to tack on more technology or product based…?
Sam Shepler: It’s a great question. The first tactical tip would be to have someone who’s really familiar with Zapier to just start to automate everything. That’s not me at all, but my head of ops, he love’s Zapier. There are other tools out there—Integromat, same idea.
The point being, think about what we can optimize, automate, or eliminate. It’s just easier than ever to automate a lot of stuff. That’s one thing I would say.
The other thing and this is something that I’m still learning about as the tech-enabled services space matures, but to some extent, it’s a strategy decision on pricing. A lot of tech-enabled service services to date that we’ve seen, it’s not necessarily a premium service in a lot of ways. It’s premium, but it’s not like ultra-premium.
There’s a reason why the best advertising agencies who charge a million dollar a year, their website is an artsy little thing and you submit a form and talk to their rep or their creative directors. I think it’s getting clear what game you want to play?
To some extent, I think the promise of tech-enabled services is exceptional quality at a disruptive price point and that’s relative.
When I say the disruptive price point is relative, it doesn’t mean it’s cheap. For us at Testimonial Hero, we’re a fraction of the cost of a big agency to produce your customer testimonial videos—a fraction of the cost with most of the quality or if not more quality. But we’re still not cheap. So it is relative.
Frankly, I don’t think tech-enabled services are for everyone. If you’re just trying to be super boutique, super hands-on, absolutely charge as much as you can in your services business, that’s not yet the method where tech-enabled services are heading.
On the other hand, if you want to have amazing margins, have a super scalable service, and deliver incredible quality at an extremely disruptive price point, relatively speaking, and really be able to, as a founder/owner, step back from everything to the day today, that’s my personal goal—to get the business to be owner-independent.
I’ll pause there, but those are a couple of my thoughts on all things technical services.
Etienne Garbugli: That’s super interesting. There’s also a pricing component. If you want to be perceived as a boutique agency, that might not be the right path because people might be looking for that handholding and working closely with an agency. Yeah, that does make sense.
In that case, you guys recently acquired a company called Applause Lab. Congrats. Why did you decide to go down that path and what made this a good fit for you?
Sam Shepler: Well, thank you and it’s a great question. I think it’s important to give a little context on what we do and then I’ll tell you why it fits in.
At Testimonial Hero, our main product offering at the moment—we’re obviously recording this in COVID 19 times—is remote customer testimonial creation. We help B2B software marketers at over100 different companies: UiPath, Google, Medallia, InsightSquared, and many others to create remote customer testimonial videos.
The current process that we have is fairly hands-on and a human touch to get an exceptionally high-quality result. That’s really why our customers choose us. If you want absolutely the highest quality remote testimonials, you’re going to work with Testimonial Hero.
The opportunity that we saw with Applause Lab was more scalability and still good quality but eliminating a very human part of the process, which was a one-on-one interview. With Applause Lab, the way that their technology and platform is set up, it’s asynchronous. It’s capturing the testimonial asynchronous, so you can just blast out a link.
I see that especially being super attractive for different markets that we’re not currently serving, specifically, e-commerce companies. E-commerce companies, it’s different from B2B. You don’t have that close relationship with every customer but you have a massive email list of customers.
Our vision with their technology is a slightly different market and way more scalable and less expensive than our current situation for customers who want to go down that route that is okay with something good, and just want it to be more scalable. They want to blast out a link to their email list and capture 50 testimonials that day.
Etienne Garbugli: I was setting you up a little bit with the question. You mentioned before that you got to get really good at Zapier. There are different ways to spot the inefficiency. How do acquisitions play into this?
You acquired a technology company that was in the sector that you guys were in. How does that fit in as a solution to be able to tack that on to a service business or maybe integrate that in your service stack for your company?
Sam Shepler: It’s always a decision in terms of build versus buy. There are so many variables and it’s different in every situation. That being said, if you get a chance and the price is right, it’s awesome.
With Applause, we got an existing customer list on top of the technology. Not all of their technology was first-party technology and that’s the case with most tech-enabled companies. I think that’s good.
Development is expensive: wait as long as possible to build custom software. If you can glue some stuff together with third-party tools, that’s great. It’s always a good opportunity and then you just got to weigh the build versus buy pros and cons and, of course, the overall pricing in terms of the deal.
Then other strategic things. For us, that was a good competitive acquisition too because they were a potential competitor in a lot of respects or could be. So just understanding how you value all those things, at least that’s how I think about it.
Etienne Garbugli: Well, I think one big part there as well is the acceleration. One great thing about a service business is that you have money coming in as well. If you can use that as a way to speed up your process towards being tech-enabled, that could be a great thing.
I have a contact; they have an agency in email marketing. They actually built a platform over three years, spent $50,000 building an email marketing platform that never actually launched. And you look at the approximate cost of acquiring maybe a lower-end version of that and then starting from that, that could have been much faster to market. Then at least see the response and/or maybe scale that afterwards. Definitely a lot of value there.
Sam Shepler: 100% yeah. I think we’re seeing more acquisition entrepreneurship, and generally speaking, I think I’m a really big fan of it. Especially if you can do a seller side financing, where the seller uses the business as collateral. Seller side financing is super great if you can get a deal like that.
We did just pay cash for Applause Lab but they were about a year into it. It really was something we could afford because, like you said, we have great cash flows because of our services—which is another benefit to services businesses.
Testimonial Hero is kind of an infinite runway, God-willing. Knock on wood there. If we’ve survived the pandemic, we can survive just about anything. It’s great to have a services business be the bedrock of what you can build a product business around later on. I think that’s underappreciated in some respects in the general entrepreneurship community.
If you’re not trying to build something venture scale especially, and even if you are, services are a great way to get proximity to the customer and just have that profitable business, cash flowing, infinite runway to then take some great moonshot swings off of.
Etienne Garbugli: How would you advise an agency owner or the owner of a service organization to look for these opportunities?
You mentioned that Applause Lab was one year old so they were probably not that visible on the market at that stage. How would you advise to be able to spot those before they become either too valuable to buy or too competitive or any other variation of that?
Sam Shepler: Well, I can tell you how it happened for me. Basically, I had developed a relationship with their founder, Tyler, because he was aware of Testimonial Hero. We just hit it off from the early days.
Initially, we made a small investment in his company. How it worked was someone introduced him to me because I was known in the testimonial space. We hit it off. I was like, “Cool, this is neat. Let’s make an investment.” So we made a small angel investment in his company and over time, I was just like, “You know what, let’s just acquire this. Well, what would he say?”
I don’t know what other people can learn from that other than maybe just keep an open mind, be helpful, and you never know where it will go. I was basically working with him in the early days of the business to just advise him. I was an advisor.
Having a personal brand helps. I don’t have a big personal brand, personally. It’s not something I’ve focused on too much, but I guess I had enough of one where someone heard that he was building a testimonial company and they thought they should talk with me. That’s how it all connected. I think at least in this instance, those are potentially some things to take away from it.
Etienne Garbugli: It does sound like there’s an interesting pattern as well how you found the niche for testimonials from your first company and how you found that maybe e-commerce might be an interesting way to go. It’s always staying close to the customer and understanding what are the solutions that they’re using and the opportunities out there. That’s interesting.
Maybe as a more general question, how would you advise a new entrepreneur to think about business opportunities?
Sam Shepler: That’s a great question. A couple of things come to mind. One of them is thinking about a Venn diagram. You have three overlapping circles of what you are personally really good at, what’s your rare or valuable skill, and then what the market needs. Really, there could be a lot of circles. Timing is a huge one. Timing is everything, frankly.
It’s just the overlapping of a bunch of different factors and also the willingness to pay quite a bit. In your target market, does the customer have the willingness to pay?
You can have the best opportunity or idea, but if the customer doesn’t have any willingness to pay for it or they love it at this price point but you need a different price point for the economics to work out, then that’s something to think about early as well.
Another thing I think about is, especially with services businesses, how can we make this way easier and apply a more modern approach to it? Like this process of doing things hasn’t been updated in a couple of years. New technology has come out. If we were looking at this with fresh eyes, what’s our hypothesis on how we should do it?
Those are all things. Then circling back, having some unique insight is super key. And there’s a couple of different schools of thought. There’s one school of thought that says pioneers get arrows in their back. Don’t be innovative necessarily because it’s risky. You’ll probably fail, blah, blah, blah. Just copy an existing business that’s working and put your own spin on it. And that’s totally fine. There are a lot of businesses that have been built that way.
The other thing is that innovation is also cheaper than competition. I think there’s probably a middle ground and that’s what we found with Testimonial Hero.
The first thing that we did with Testimonial Hero was we’re broadly in the video production space. We’re going to innovate by saying we’re going to make it completely effortless to produce B2B customer testimonial videos. They’re going to be fixed price; no travel fees anywhere in the world. It doesn’t matter if it’s in London or Los Angeles or whatever. It’s all going to be the same price and it’s all going to be super easy.
So take a concept that you believe in, with a market that it’s a real need for, put just enough innovation on it that it’s pretty different, and in my experience, that works pretty well. And obviously, niching down. There’s always power in niching down, especially getting your message out there early.
If you try to appeal to everyone in your messaging, you’re just going to appeal to no one. I’m a big fan of just niching down, especially early on.
Etienne Garbugli: Along those lines, where do you think B2B entrepreneurship is going? How is it evolving?
Sam Shepler: A couple of things. Socially and culturally, I think it’s getting cooler, for lack of a better term. It used to be consumer was all the rage and now B2B is getting a lot more attractive. Culturally, I think it’s coming into its own there.
We’re always going to see a cascading effect of what was current or popular or effective in consumer is always going to, in a couple of years, make its way to B2B. We’re seeing that now and we haven’t seen it for the past couple of years with design.
It’s crazy. Design was something that wasn’t even a consideration for a long time in B2B and now it’s a core thesis. Then the question is, well, where is it heading? What can we derive from consumer behavior for B2B?
One example I think is B2B marketplaces. There haven’t been quite so many B2B marketplaces, but consumer marketplaces have been a massive explosion. I think that’s one example. I think we’ll see a lot more B2B marketplaces being built at scale and in the next one, three, five years, for sure.
Etienne Garbugli: That’s an interesting point. If you look at, specifically, design, you mentioned mobile was one as well. Looking at these things a little bit gives you a sense of the momentum of where things are going.
Thanks a lot for taking the time, Sam. That’s really appreciated. Where can people go to learn more about your work, your company, what you’re focused on?
Sam Shepler: It’s absolutely my pleasure. It’s always great to chat. If anyone wants to learn more, testimonialhero.com or just search Testimonial Hero will pop up. Then on Twitter, I am just @SamShepler. That’s usually the easiest way to contact me.
Etienne Garbugli: Great. We’ll point those out. Thanks for taking the time. We appreciate it.
Sam Shepler: Absolutely.
More on Scaling a Service Business
- B2B Consulting: Can Consulting Help You Build and Validate a Business Faster?
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- How Cobrainer Used Consulting to Bootstrap and Validate an Enterprise Product
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