Why Compliance is the Achilles Heel that Could Kill Growing Businesses – Interview with Mario Peshev
Mario Peshev [00:00:00]:
If you lose a client, you fire people, right? I don’t think it’s a brilliant business model myself that just don’t enjoy that. Like you have no relation to these people. Like they’re just people working for a client that’s paying you and you’re paying them. You’re like a broker.
Hey everyone, it’s good to have you here. We’re glad you decided to tune in for this episode of the Osom to Know podcast.
Maciej Nowak [00:00:32]:
Hi Mario, how is it going?
Mario Peshev [00:00:34]:
Going well, thank you. How about you?
Maciej Nowak [00:00:37]:
It’s great. We are starting recording hours after Silicon Valley Bank was taken care of, let’s say. So this is very new situation. Let’s start with this because this exploded very fast and we will be probably seeing aftermath for quite a bit time in the future. But what’s your hot take on this? Because this happened like less than seven days.
Mario Peshev [00:01:06]:
Yeah, definitely. I do agree. Bank runs aren’t really common. Again, the last one was around the previous financial recession. It’s kind of weird because first off, SVB has been a recommended bank for me, for US entities since forever. It’s the first go to recommended bank by Stripe Atlas and that’s the most popular solution for setting up an LLC for funded startups from Europe. Especially if you Stripe and other services as well, like different kind of LLC incorporation services. They recommend SV funded startups VCs work with SB almost exclusively. So it’s a pretty popular I believe it’s the 16th it was the 16th largest US bank. It’s kind of interesting because first off, bank runs are something that could happen to every single bank out there. Second, it tells a lot about diversification, about investment habits for the banking institution itself. So back to my first point in terms of it could happen everywhere. Banks, by law, banks are only obliged to retain up to at least 10% of their deposits in cash or like any form of quick liquidity type of cash. So if you have $100 billion by law, if you’re a bank you need to retain $10 billion and everything else could be invested and distributed elsewhere. It’s very important because a bank run essentially means a ton of people trying to withdraw money at the same time. So if you think about it, it could literally happen to every single bank out there. So it’s important because sub is not super different than other banks out there. It’s more about how liquid their cash is or what investment pattern habits they have and how sustainable it is to do whatever they’re doing. And the second thing is actually them investing in treasury bonds yielding 1.5% return when compared to government bonds right now, yielding 4% or 5% on average. Meaning that lots of people investing with SVB would rather withdraw and go elsewhere. But again, I don’t think that’s necessarily the most important reason, but it also facilitates, hey, why should we keep money here? We can point them there and then leading to all that kind of VCs alerting and alarming of their startups to just start withdrawing cash immediately over the course of like 48 hours. So definitely a weird situation, but more importantly, it’s more or less fairly easy to organize that against almost every other bank. And I think that for the most part that kind of happened with Crypto last year with Celsius and FTX and some of the other banks as well.
Maciej Nowak [00:03:57]:
Yeah, but what do you think about the future? Because I’m looking at this from the perspective that this was designated bank for a lot of startups technology companies, purely like B, two B organization instead of holding cities and assets like regular people. So the impact is directed very narrowly for the technology companies centered around Silicon Valley and technology. Now we know that the depositors will be able to withdraw their funds so they are safe, but someone else will pay for it. And this is probably us. Exactly, US taxpayer. But do you think this will affect technology globally on a bigger scale?
Mario Peshev [00:04:51]:
I definitely think that securing deposits from the US government was definitely probably the way to go. I don’t think that well, it’s going to have a toll on US taxpayers for sure. But at the same time, they do have some form of liquidity, right? They do have bonds that they can cash out and they’re going to lose some money and maybe there’s some lenders and insurance companies that they were. So according to people who know more than me and kind of experts, over 95% of the deposits can actually be retrieved over the course of several months without any repercussions. So we’re probably talking about like a couple of billion dollars or so that are somewhere in the dark, which isn’t the end of the world for an entire nation with like trillions of GDP. So that’s kind of one thing STD the broader community. Part of the crisis happened due to the fact that SGB’s finances grew from like 60 billion to 180,000,000,000 over the course of two years. So this bank has existed for I think, 40 years or so and tripling deposits in two years is not natural. Right. This means that the VC world went crazy. Lots of people had tons of savings and then COVID stimulus and lots of other things happening so that tons of funds got pumped into the economy in no time. What will happen after? I think that VCs in particular and businesses at least over the next few years are going to become more careful towards distributing their funds. Liquidity is something that isn’t super helpful in all cases at least it’s not the thing that yields the best return. On the other hand, it’s been a very turbulent year with fewer opportunities to generate proper return. To be honest, most of my investments have been in the red or slightly cross break even. So whether you’re investing in currencies inflation and just exchange rates are going wild. SP is down, Nasdaq is down. Real estate is just going down with mortgages going through the roof, gold oil, you can’t really predict what’s happening. Like, Saudi Aram could just reported like 160,000,000,000 in profits or so just from crazy old sales. So it’s kind of hard to predict what exactly is going to happen kind of in the near future. However, the danger of keeping money in a bank is real and it’s definitely concerning. And at the very least, I believe that more companies and more visas are going to support diversification. Personally, I’ve always been a fan of diversification and risk management. I own accounts in several personal banks. I own several company, first off, several banks and different payment services, like PayPal, Stripe for my main company, we have Wise, we deposited cash there and began PayPal and Stripe. I have several companies distributing cash in different places. I have cash in different brokers, like investment bankers, investment brokers. Diversification is important. Everything could happen. I’ve personally suffered, let’s say, PayPal blocking my account for 25 days. And that sucks when you have six figures there and you’re supposed to be doing any sort of transactions, right? So, yeah, I read different stories on Twitter and LinkedIn and read it and some people with, like, net worth of, let’s say, 45 to 6 million or more saying, well, we only have one bank where our personal savings are kept.
Maciej Nowak [00:08:48]:
That’s crazy because this is the how do you call it? This is the vibe I’m reading from Twitter as well, that there is no other option for those people. Let’s discuss what bank should we switch to in this situation? But also, Tabilutka shared that Shopify is using 13 banks spread out across US and Canada. So this is like a safe net a little bit. And also they were using SBV. And I cannot because maybe this is like a very dry joke, but the phonetic resemblance with SBF is not lost on me.
Mario Peshev [00:09:31]:
I know it was too soon. SBF was too soon. Like, people should know better.
Maciej Nowak [00:09:40]:
It’s too close.
Mario Peshev [00:09:42]:
Yeah. And again, FDX happened just a few months ago. Again, because I believe that part of the mistakes are due to the fact that most people have forgotten the greater session or weren’t around at the greater recession. After all, it was 14 to 15 years ago, right? But FTX happened like, eight months ago or even sooner. So people should know better. People should know how to diversify better. And they should have been ready for that early on. You mentioned Shopify, I believe I use Mercury for one of my companies. And Mercury has FDIC insurance of a million dollars instead of 250, because they’re also spreading across, I think, JPMorgan and like, a few other banks. Right, so they do that, diversification themselves by just using several banks for the same thing. And I think it’s a pretty straightforward thing to do. Doula and doula banking, which I’m also using, they’re also kind of using a network sweep network I think of different banks to accommodate that. So just relying on one network and getting lost in translation is kind of troubling as an idea. And the other thing for SVB in particular is long term treasury bonds. Startups have very liquid needs, right? They acquire companies. So when it comes to as we be into the liquidity of startups, I believe most startups have very unique needs and they pivot really quickly. Meaning it’s not like signing a government or enterprise contract like five years, getting the same paycheck, like doing the same thing or doing one investment, then forget about it. Startups do a lot of crazy stuff, right? They find a niche and they ten x their marketing or sales investment or PPC or they decide to acquire five different companies and merge or do something else. So I believe that for that startup tech community liquidity is pretty important. Additionally, we do have lots of VC funds being pumped in there. Like we are talking like serious a investments of like 1015, 20, $30 million just pumped into one account and then startups have to allocate them one way or another, right? So I’m pretty surprised by investing in ten year treasury bonds when your bank probably needs a lot more liquidity than you think. So that’s also another troubling fact, I guess.
Maciej Nowak [00:12:16]:
Yeah. Do you think there are another? Because I think bank is not number one thing you worry about when you start business or when you are growing business or scaling up business. So at some point you worry about a trillion other things out there, not bank. So what are the other options that might be problematic or worrisome and you think about them only once they happen, not before. Yeah. On a side note, I hear you cannot have an accountant good enough. There is like always need for even better accountant. So we came through this. So I also tell from my own experience about this.
Mario Peshev [00:13:03]:
Well, first off, I’ve been kind of teaching business courses here and there and kind of some of my resource including my blog has been taught at over 40 different universities and I’ve been trying to research more on kind of the broadest business challenges out there. Again, as a business advisor as well, I’ve been working with over 400 different clients on solving different problems and trying to identify and assess kind of what are the commonalities among them. So for the most part I actually have a list. Currently it’s the 38 top business challenges broken in different categories, namely management, recruitment, sales, marketing, technology, operations and different forms of compliance and operations being business strategy as a whole. So compliance, the last one is the more you grow, the more compliance becomes the weakling kind of the Achilles heel. Meaning that what happens with companies like Meta or Alphabet or kind of the other broad companies, they are undestrable. You can’t kill a company unless they really screw up with accounting and billing and taxes and stuff or any class law action that’s really going to ruin them. So it’s finances or legal that could kill a growing business. So with that in mind, again, for starters you have looking for product, market fit, sales, marketing, product, meaning technology, recruitment, management, building a kind of legit team. But the more you grow, like whenever you have some form of monthly recurring revenue or arr on top of that, then things are moving in the right direction. It’s all about velocity, like is it going to be slower or faster, but you need to have your back cover. And I think that in SVB’s case, 97% of all deposits were not insured, meaning that 97% of the accounts had over that minimum of 250. So I would expect that we are talking about larger businesses, to put it mildly, that have to spend more time thinking about diversification and legal risk and GDPR, CCPA, taxes, anything across that line.
Maciej Nowak [00:15:25]:
All right, what about, let’s say a small aspiring agency, let’s say from WordPress. WordPress, word. What is number one thing that people get wrong in terms of building business? Because let’s dig into this path, let’s move this way about thinking about hypothetical organization centered around WordPress that is having some traction already, maybe a couple of employees and building websites. So what can go wrong apart from not having clients? But what would that person running the agency should do in order to not to follow and learn from their own mistakes, but rather from the wisdom of others and failed others as well.
Mario Peshev [00:16:17]:
So within the WordPress ecosystem, both services and products, I would say that there are a couple of different thoughts I have in terms of business strategy or diversification or whatever it is. So the first one in terms of strategy, in terms of scaling or like in terms of just making sure that it works, is recurring revenue. Most companies and that’s why at DevriX we invented WordPress retainers. We coined them in 2015 or so. And that’s the strategy. That’s the business model that we believe is the most successful one. We’ve seen that working. Like the entire legal industry is working through retainers. Lots of marketing companies are doing retainers. So I don’t see a reason why tech and business are not kind of spending more time on that. On the one hand, it’s thinking more about retainers and recurring revenue simply because ending up with the feast and famine cycle is pretty dangerous. It’s really troubling if you just chase sales and you’re always underworked or overworked, you can’t cope up with all the work or there’s a two month gap when there’s no sales happening and you’re really in the red. So escaping from that, particularly for service based businesses, is one of the most important things that I would say. As to the other risk once you hit some level of scale. First off, I don’t think that most companies are dealing with that level kind of scrutiny because it’s more existent. Most websites are small, it’s not like we’re talking serving banks, something that really needs to be super insured because you’re talking about money, personal information and create cards and stuff. So it’s less risky. But I think the biggest risk is actually trying to project growth that’s not sustainable. Meaning that there are very few large companies, large, if at all large in the WordPress ecosystem. So I would say that most of the problems that other businesses have outside of WordPress are real simply because the scale of a regular company outside of the WordPress bubble is a lot higher, larger, bigger than what we see in WordPress. If you think about the largest agencies, I would say probably, I don’t know, ten up web, dev studios, human Made or so. Ten up I think are like 200 something people. Webdef are 40. Human Made are against 70 or so. They had layoffs recently. So that’s also a problem. So we’re talking the largest agency is 217 people. If you go to India, the average agency is like 300 people because they’re doing outsourcing, right? So the largest WordPress agencies are smaller than the average dev firms in India. One very specific example, right? And same for product companies outside of let’s say Automotive by say at Bow Key and maybe Gravity Forms, yoast got sold by the way. So like there are five or six companies WooCommerce if you count them even on their automatic. So there are like five product companies making maybe over five or if at all they do like 10 million in revenue. That’s nothing compared to most business outside of the WordPress bubble. So I would say just think of the total addressable marketing WordPress and just either calibrate to kind of what’s achievable or try to diversify like plan for like five or ten different companies so that each one can achieve some status or something like that.
Maciej Nowak [00:19:54]:
But is it a feature not a problem. Is it a feature of WordPress technology or is it a feature because WordPress started as a blogging platform so it naturally grew from tiny, tiny little pieces, tiny little use cases of building software for a blog page. But is it a feature of a technology or is it a feature of agency model? Because when you look at the corporate technology integrators they are big, they have a couple of hundred people, they have revenues in tens if not hundreds of million euro I wanted to say per.
Mario Peshev [00:20:38]:
Hour, per year, per employee would be nice. Yeah.
Maciej Nowak [00:20:45]:
Not that feature. Yeah. So what’s your take on this?
Mario Peshev [00:20:50]:
No, it’s not that technology as in code base but it’s about the perception and about the ability to serve different markets and about the possibility to launch a product in no time like just building an MVP. So it’s a combination of all these things. So the main problem, I think it’s branding and just the race to the bottom, right? The main problem is that when you look up WordPress or when you look up, like, WordPress themes, you’re going to find like, free discount, like monthly club or like, annual club paying $49 and you have limited access to a bunch of different teams or so that predominant field like sites that come up and look for WordPress is that will be beginner or how to do whatever you want yourself with following three steps. So it really looks easy and it really makes it appear as everyone can do that. Meaning that lots of people start doing that without having the necessary qualification or experience or whatever you want to call it. So that’s kind of one of sorry.
Maciej Nowak [00:21:57]:
If I may rudely interrupt you, but this is what you are referring to. This is what I understand as the technology, like the direction that the technology comes from, coming from something very easy to start doing fiddling with and then being able to build something relatively easy because this was the way it meant to be, to be able to create stuff very easily. But then at some level you have to be a developer actually. You have to understand algorithms and integrate third party tools and APIs and everything and suddenly there is no longer a plugin for that or you end up with 64 plugins. And we had clients like this with 64 plugins up and running there and then you have no enterprise level of implementation because it’s perceived as a bigger blog. It’s not like WordPress for enterprise. So there is that huge CASM between 99% of the market for bloggers being able to do this out of the box with a readymade, free or $549 team. And then suddenly you have huge publishers with 100 200 people, strong development teams, teams, not the themes, but teams of people building their platform. And there is like huge discrepancy between this and enterprise level and this is all the same technology. So this is what I’m referring to as the technology that is so easy to start doing something not necessarily very useful, that you have so small agencies because it’s so easy to start something. Sorry for the long run. I’m told I can’t ask such long questions, but I hope you remember the beginning still.
Mario Peshev [00:23:57]:
No, I do, and I agree with you on the premise I’m not sure it’s the technology. And I’m going to tell you why. This isn’t a problem that we’ve ever seen in well, maybe in Joomla, but that’s not a problem we’ve seen in Drupal. Drupal is also an open source PHP framework. CMS framework? Yeah. Again, PHP developers can work with either and they’re building websites. You can still spin up a website with Drupal in a day, but it’s not branded as such. It’s not marketed as a search. Right. So that’s why they mostly work with large communities and governments and other large projects. The average cost of a Drupal project is maybe three or four or five times more expensive than a WordPress project, right? You can also build themes with Drupal too. So I think that that’s where branding kind of comes in. You can still start with Drupal. It’s not as intuitive, it’s not as easy to feel like you have it all. It’s more like, yeah, you see that there’s something, but you know, you need professional help because Drupal hasn’t really branded itself for that. And I can also give other examples with kind of companies like webflow, like site builders, they also do it yourself and kind of no code. But it’s actually expensive to hire a webflow company like most that we’ve seen and worked with charge as much if not more than most WordPress companies, even though they mostly connect zapier to other plugins and they do design work, right? You know what I’m saying? So it’s branding and no code too, that doesn’t even require that level of skills and charging more than what WordPress does just because of the race to the bottom. And then again to WordPress. Like if we compare WordPress with Drupal, drupal is owned by Aquia, which is the Drupal version of Automatic. But Automatic is all about freedom of speech and democratized publishing. And we are going to give you WordPress.com sites for free and Jetpack for free and Acismet almost for free and stuff. And they themselves are trying to reverse that trend. They’re trying to do the freemium product like hey Acismet, you still need to pay something. Hey Jetpack by the way, you need security, you need DDoS, you need that. So they’re trying to reverse that trend because it’s not sustainable. But it’s so entrenched in what WordPress does and like free, free, free everything. And everything is turnkey WordPress being popularized with the famous 5 minutes in Stow that it’s really hard to get away from that brand. So that’s why I think it’s not technology as in the code or the software, it’s about that ecosystem and everything.
Maciej Nowak [00:26:44]:
Else like marketing, how is it marketed to the developers and businesses. On the same note, I was talking about this with one of Drupal agencies in Austria and they said that for example, Drupal is selected by big organizations and it’s white listed as the technology. That the only technology from the open source, let’s say, world that can be used on certain projects and for whatever the reason. And you cannot fight with it once it is whitelisted. And to do something in Drupal, you have to spend much more time than on WordPress because for example, you have to make Drupal accessible, whereas WordPress, you don’t have it’s easy on WordPress as well. Whereas in Drupal you have to do stuff from scratch over and over again, nearly. And I don’t get this as the idea that it’s better solution if it takes five times more as it could be possible on WordPress. So that’s strange for me, but always you mentioned that Drupal is bigger in terms of the project size. I have this feeling that Drupal is extremely heavy in terms of you want to do something, and then I feel tired from thinking about what you have to do with Drupal, but this is my subjective thing about it, so I’m biased.
Mario Peshev [00:28:19]:
First off, I run WordPress agency and have done for like 30 years, so it’s kind of hard to relate to that. But what I can say is I actually come from enterprise grade development, so I’m a certified Java developer, for example, and among other things, I’ve done net development. So I come from enterprise and I came to WordPress through PHP by just getting tired from building nine month project, well, building six week projects in nine months. So that’s why I transitioned to PHP. And then I got tired by building tired of building admin panels and ad edit and access control lists and user levels. So I decided to just use WordPress for all of that and only focus on the business logic. Right. So for me, this was the natural transition of starting with stuff that makes sense and works and just building on top of that instead of reinventing the wheel or spending ten times more, which is kind of what you said. But it’s true that Ecommerce project in Java normally costs 500,000 and more, while WordPress project in WordPress starts from, like, $500. So it’s clear that just setting up WooCommerce is 1000 times more competitive and then there’s still enough demand for Java. So it’s just interesting, I see that in other ecosystems, microsoft have SharePoint or they’re also ServiceNow and some of the other kind of enterprise Gradish ecosystems, and they’re doing pretty good because every single client is qualified. Every single client comes with at least, let’s say 20 grand or 30 grand or 50 grand or more, just because they know it’s an expensive implementation and it’s kind of easier. They may have fewer clients, but it’s not the race to the bottom. So every now and then I’m thinking, isn’t that a better thing? Right?
Maciej Nowak [00:30:17]:
Yeah. Thanks for this, and thanks for moving around, because for our listeners there were some technical problems. But I wanted to dig deeper into this development of the agency because with so many small site projects and tiny projects and little concentration, which is a good and a bad thing, but I wonder how that average size agency, what that agency should do in order to be bigger, grow bigger, and probably also professionalize itself. So what would be the good? Some tips for the aspiring Care agency.
Mario Peshev [00:31:08]:
Yeah, so I think there are kind of two ways to really improve that. The first one is specializing just either niching down or just being the best kind of what you do. The second thing is really making sure that recurring revenue and kind of passive revenue as well are a priority for you. So I think it’s extremely hard to keep growing and getting better at what you do if you invest the vast majority of your time effort into outbound sales. Right? Meaning that it’s not a super sustainable way to grow a company in a sustainable way. Now, again, I know companies that do that. They kind of have a pipeline of several months ahead and they can afford to just say, yeah, of course we’re going to start a project in like four months. Right? But it’s really hard. Again, honestly, sometimes you have leads just saying, can you start today? Right, of course it’s not realistic, but maybe starting in a week is something that’s pretty well demanded and if you say, yeah, we can start in three months, honestly, we’re just not going to work with anyone. So it’s possible to do that. I know that some of our kind of agency partners do that, but I don’t think it’s super sustainable. So the other option is just really being the race to the bottom. So you’re just setting up websites for a day and you have 200 people installing WordPress with a premium theme and like five plugins and then customizing. So those are two ways to make it work unless you have recurring revenue in mind. And the other thing again is specializing the only way to not end up with a race to the bottom is not competing with anyone who’s just generating well or charging $20 per hour. And in order to do that, you need to prove expertise. One example is we have scaled maybe over a dozen publishers with hundreds of millions of pages per month, several over 500 million pages per month and so forth. So if you think of like BBC generates, I don’t know, 1.5 billion or so, we have several generating 900 million pages per month. So when you think about that, it’s like if you want the BBC experience, we can deliver that, but you simply cannot pay $20 per hour or $40 per hour for that matter. Right. You just need to pay a five figure retainer and then it would be possible in a few months as we keep scaling and growing and set up the right infrastructure tooling, profiling benchmarking stuff. And we know how to do that. And on top of that, we’ve done that with adopts expertise in place. Meaning that we have worked with lots of different ad vendors. I won’t name many names because it’s a long list. We have built custom prebit wrappers from scratch, we can optimize and yield better revenue for you and so on and so on and so on. Right, so that’s kind of one context. We built our very first WordPress SaaS back in 2013 and they have only been two or three other agencies ever building WordPress SaaS back then. If you look at. WordPress SaaS in Google, we are in the top three results in Google SERP. We’ve done that forever. We’ve scaled SaaS networks with over 100,000 subsides in a network, built bias and scaled bias for businesses, generating tens of millions in revenue. So that’s kind of one narrative that we use. For example, right? We have a few more for kind of different companies. Like when someone says, hey, WordPress cannot scale, like WooCommerce cannot scale and say, well, we have like three ecommerce websites building over 60 million in revenue right, through WooCommerce. So that’s kind of one way to kind of ensure that we know how to scale WooCommerce. We can make that happen and WooCommerce can scale as much. And we know from experience. Right. So I can kind of keep listing some success stories of sorts, but that’s one example of how to really gain that level of experience in order to ensure that it’s something that you’re worth getting paid for at least a fair price. Yeah.
Maciej Nowak [00:35:20]:
And this is amazing. I mean, the scale is amazing. With the scale you did, how big is your agency?
Mario Peshev [00:35:30]:
About 50 people. 45, 50 or so.
Maciej Nowak [00:35:33]:
All right, so I guess with the big marketing agencies as a comparison, this is like still a boutique agency, right? So it’s not huge, right? It’s very significant, but it’s not huge, right?
Mario Peshev [00:35:47]:
Yeah, definitely. Yes. It’s a pretty mid sized, I would say, if not on the small end agency compared to other businesses.
Maciej Nowak [00:35:59]:
Yeah, but with the scale, working with such businesses isn’t like I would expect a bigger size of the organizations. And don’t take it as a positive question. It’s not a negative question. I want to understand from your also perspective because I treat this as a huge success, this kind of corporations. Again, don’t take me as aggressive question, but what I’m trying to understand, why do you think you should be bigger? Or is it like, this is perfect sweet spot for the services you are providing? Because I have this from software houses in Poland. There is a ton of organizations that provide services, development services, and of course, during the pandemics, because of the pandemic, stimulus and so on, they onboarded a ton of employees. They scaled from being 200 people to 400. If they were 800 people, they are now 1400. So this is the landscape for me. And we have like 20 people, nearly 20 people. You have roughly 50 people. And you are working with the huge organizations that are using WordPress. So compared to those other vendors, I would expect a bit more organization, which not necessarily is a good thing to have. Right. So I’m not judging. Right. I’m just thinking about the scale here.
Mario Peshev [00:37:34]:
Yeah, no worries though. And again, I’m not like Igno Manak or something, just expecting to have like a gazillion different people. That’s definitely not the case. Yeah, that’s kind of what I’m saying. We’ve been consistently ranked as a top 20 WordPress agency for the past maybe six or seven years, right? And we are just 50 people, right. That’s abnormal. Again, not that I’m not using that in sales because it’s great to see that in lists and whatnot, but it’s troubling for the industry. It means that you cannot scale a large organization on top of WordPress, which is kind of what I alluded to earlier today in terms of manpower. It kind of also comes from the same concept that things take five times longer on Drupal or 50 times longer on Java, for example, right. Meaning that for the same problem, you normally use like five to ten times more people to solve the same problem. And when you don’t have that need in WordPress, that just makes it harder to scale if you want to do that. Right. So that’s kind of one of the challenges here. The other thing is that most companies, like most professional agencies, like Devrigs, but again, like Ten App or Web Dev or Humanmate or whomever want to name kind of from top list or Crowd favorite, most agencies are acting as consultancies, right? And that is a big difference. Now, most of the companies that you’re referring to in Poland, for example, same for Ukraine, romania, like the larger hubs, are outsourced, meaning that someone has to dictate what they do and they’re kind of leasing people who happen to know PHP. Exactly. Body Leading, Her, Body Shop, whatever you want to call it, and it’s a different model, right? So it’s everyone who needs people elsewhere can rent three or four or five or ten people for specific things and they can kind of distribute what they do. Now, it’s different when working with an agency where that’s not an outsource, it’s an agency. The agency solves specific problems, performance, security, speed, stability, maintenance, design, like content management, whatever it is. So it’s specific problems. It’s a higher hourly rate. You can just hire five people because at these rates it’s going to be unsustainable. Meaning that most projects are anywhere between, let’s say 60 to 300 hours a month per client on average, right? We have some as low as I think 30, we have some as high as 500. But that’s kind of an exception for the most part. So with that in mind, it’s hard to just offload ten or 15 people to a client. You actually have to manage the process and manage the teams and build teams and backfill people and to ensure that there is a quality assurance person behind the team and there’s a project manager leading that team, and that everything is following the same process and you’re maintaining quality across the board. That’s why it’s a consultancy, that’s why it costs more. But that’s also why it’s harder to scale because it’s more expensive. Your ROI per client is lower, or at least your LTV is lower, or kind of monthly recurring revenue per client is lower and you only have so many people who can help you scale that portfolio of recurring clients. Yeah. So I guess that’s kind of what it boils down to. Now, if it’s a good or bad thing, I don’t know. With an outsourcing company, yes, for sure. It’s easier. Like, you know that you always hire someone you just charge twice or 2.5 times to compensate for profit on a desk and internet, on a laptop, whatever it is. If you lose a client, you fire people. Right. I don’t think it’s a brilliant business model myself that just don’t enjoy that. Like you have no relation to these people. Like they’re just people working for a client that’s paying you and you’re paying them. You’re like a broker.
Maciej Nowak [00:41:41]:
Mario Peshev [00:41:42]:
I don’t get it. Exactly. So I personally cannot relate to that. I don’t enjoy it. It’s almost like a salesperson on a commission, right? Like they work on a project that I deliver them and I’m charging a commission paying them a portion of that. Sure, yeah.
Maciej Nowak [00:42:07]:
Because I wanted to circle back to what you said previously about advising different businesses. Do you see any differences between Europe based and US based organizations you help? Or is it like at some level the problems are very similar, revolving around technology, sales, marketing, or is it differentiated between geographies?
Mario Peshev [00:42:39]:
In terms of payment potential, I would say that the US. Generally pays more. In my experience, it also stems from the average development salaries. Right. If you take a look at Europe, I think the highest salaries for developers are Switzerland, Norway, Sweden, maybe Denmark. Like even the UK is pretty low in the kind of WordPress list. We’ve had conversations with WordPress leads and we just pitch a proposal or whatever it is and say, well, I can hire someone for like $2,500 monthly salary. And I’m like, dude, if you can find people for that, refer them back to me.
Maciej Nowak [00:43:23]:
I will hire them.
Mario Peshev [00:43:24]:
I hire all of them. I hire all of them, no questions asked. That’s just not developers earning that much. Right. So that perspective, that level of misunderstanding of kind of what you get for what you pay and kind of what level kind of the skills gap and the expertise gap, that’s kind of one of the challenge. So when you compare that with normally low six level salaries in kind of most of the states, honestly, google Interns and Meta and stuff, like in the Bay Area, they started something like 170 thousand annual salary and then there’s some stocks or options. Right. So you’re talking 15 grand for someone with zero days of working experience. It’s surreal. Most people would dream like people with over ten years of experience in Europe would dream of that salary in Europe, even as senior consultants and professionals. And that’s an internal level salary in the Bay Area just because it’s that expensive. That’s why the states are the preferred destination. That’s why 65, 70% of our business is in North America. There are exceptions, I think, just in terms of price rates and stuff. In Europe, it’s hard unless it is an international organization that’s normally headquartered in the states or it’s a well funded startup or it’s a really kind of large established institution like an old legal firm or one of the popular publications or anything like that. It’s just the scale, the costs and also the scale, especially if you have a local publication. If you think of the Guardian or New York Times, New York Post, any website in English has a total audience of possibly 2 billion people or 3 billion people that can read that website. And if it’s a local website in Swedish or in Polish for example, you just have a very limited maximum total address on market. Which makes it really hard to hit that level of problems and generate that level of revenue simply due to the fact that it’s limited by location, language area or whatever it is.
Maciej Nowak [00:45:33]:
All right, and what about problems that the organization face? And I’m not referring to the agencies, but is it like you help many other agencies of different sort or other end clients?
Mario Peshev [00:45:46]:
Agencies don’t agencies are already working on thin margins. So normally if you’re more than four or five or six or eight or ten people, your hourly rate is quickly becoming prohibitive and it’s getting trickier to adapt to an agency workflow. That’s at least my experience. Again, there are exceptions, especially with body leading. There are exceptions, but we have agencies reaching out to us, charging less than what we do. And there are five people teams trying to outsource. And I’m like, well, that’s why you’re five people. You’re just undercharging. And yes, that’s why you’re closing clients. But also, that’s why you’re having problems, because you’re working with cheap clients, not paying you enough for expensive problems. So there’s a mismatch.
Maciej Nowak [00:46:34]:
Right, and I wanted also to ask about this business course you mentioned. Can you tell me a little bit more about this because this is also an interesting stuff you do.
Mario Peshev [00:46:47]:
Yeah, so I’ve been again, my parallel life in addition to the agency route is I also have other companies. One of them is an advisory firm. So I work as a business advisor for different companies. Like some of them are hourly, some are kind of retainer based or fractional C level and things like that. Right. So in some case I lead internal courses or I speak at universities and I just teach business concepts and I manage most of my content and kind of lessons and learnings in my own blog or social media. So myrepesture.com is my own website and I publish mostly everything about anything that I stumble upon structured in a way of, again, those kind of pillars business strategy, recruitment, management, sales, marketing, technology and compliance of sorts. And there’s also kind of a leadership section. There’s also a self development section, which is discipline, motivation, time management, productivity, all these things, right? So I’m working on these guides. I teach some of them at courses and seminars and webinars or so. For universities, I work with organizations, teaching them and they also have kind of a community that I started. One can sign up, get access to most of my resource and some of my time and so on. Again on my own website. The reason I’m doing that is, first off, it’s a great way for me to structure my own data and my information. I’ve done management guides four years ago. I don’t remember exactly what I do. If I hire a new major, I can actually hand them that. And that’s what we do. That’s how we treat people. This is conflict resolution, this negotiations. So it’s great. And I come in and update every now and then. Great for sales. Again, great testimony of how we think, how we work, what we do. And I also am currently working on an alternative MBA book that I just want to hand over with some of these tips. So yeah, it’s kind of my I’m really passionate about education and in an ideal world I would probably keep teaching at universities or boot camps or startup communities or whatever it is.
Maciej Nowak [00:48:51]:
Yeah, that’s great stuff. Now and then I read about if you really want to learn something, write about this, or if you want to be better, think, start writing and know if publishing this is a perfect medium to be smarter person.
Mario Peshev [00:49:11]:
Yeah, well, again, for me, good karma is important and I don’t think it’s fair to be in a position of advantage like being born in a first world country of some sort, or at least not a third world country. Getting access to food, shelter, then electricity, clothing and all that. Getting early access to technology and the internet, to some more or less decent education, to some career opportunities and so forth, like getting all that and achieving something and being healthy. For me, giving back is mandatory. Again, you can’t ask people to do something, you can make them do something, but for me it’s mandatory. One of the reasons why I joined the WordPress community is that community aspect, helping one another, the ability to use WordPress for students. I’ve taught different WordPress courses and seminars and workshops, even to kids. Right. Because you can set up WordPress for a kid and help them learn how to design WordPress themes or just design through a premium theme or whatever it is. Or just write start writing their own blog or take a photo of their own pictures and start a gallery, right? It’s so inspiring and exciting. For me, if you’re in a third world country and you still have access to a computer of sorts, you can still start building WordPress websites. It provides opportunities. So again, it’s kind of a blessing and a curse, right? WordPress gives the opportunities that make it the reason I’m there, but also makes it so hard to run an actual business, which is, again, kind of the other end of the spectrum. But yeah, that’s why I’m passionate about education. For me, once again, if you have that opportunity, if you’re fortunate enough, it’s an obligation as a human being to do that and seeing how people do philanthropy or like Bill Gates doing the Melissa and Bill kind of foundation and all that. How would you evolve the world unless you do that kind of stuff?
Maciej Nowak [00:51:18]:
We are entering ground that is very charged. But in the US. This is very popular to be a donor of different sorts like charities written into the I think I recently learned that, for example, Mormons in the US. Are donating 10% of their salary to the church. That then different stuff happens to the money. But this is like integrated into sharing and so on. But also this is so very little benefit in the US. For example, for young manders, for me, this is a land of contrast where you have very little protection for the employee and at the same time you are expected to share for the philanthropy. And this is like it’s not like you want to do this because you think you like in your case, right? Because there is no systemic pressure to give to the charity. Whereas there it’s so popular that this is Natural University asks you to make a donation as a present. Hi, Mario, would you like to make a little gift to our university here and now? I think what you are doing is much more true than even with the larger sums because you can deduct everywhere, you can deduct this from the income. But there it’s like I think it might in some cases be cold blood still, you don’t have to share your wealth. But I have mixed feelings about charity in the US. For example.
Mario Peshev [00:53:12]:
Well, see, as most other things you can do either money laundering or tax evasion or some other shady stuff with good or bad things, right? One example is one of our clients is an organization in the gun industry, right? So we don’t support terrorism or some other crazy stuff. But guns are legal in the States and there are communities around guns and like, people who are exchanging tips on how to store them, clean them, protect them for kids, like protect their own households or deal with animal attacks or things like that. So as with everything, they’re kind of good or bad things. Same with religion, same with politics, right? It depends on kind of what side of the spectrum you are. So I wouldn’t condemn a specific thing. When we first started chatting several weeks ago with you, like I told you, I’m not into the web three necessarily and kind of that crypto blockchain. The reason is, again, I like the technology. I like the innovation. I like the concept, I like the ledger, I like decentralized finance and stuff. I like the concept. But there are lots of implementations that are wrong. I don’t think that the current direction is mostly positive and that’s why I’m not backing up the idea because I don’t think it’s cleared out and regulated enough yet to make sense. Right. But with everything else there are pros and cons. It’s kind of a double edged sword. So I just see charity more or less the same thing. Lots of people use it for tax reasons or just passing money to different ends.
Maciej Nowak [00:54:55]:
Mario Peshev [00:54:57]:
Yeah. But honestly, I’d rather have them do that for charities that at least do something than wire them to offshore accounts and then buy islands. Right. So what I’m saying is it could be worse than that as long as the charities yeah, that’s true.
Maciej Nowak [00:55:14]:
Yeah. I’m just comparing this to what you can do in Europe because this is I think in Europe it’s a little bit different than in States, but I’m not living in States, so I probably know nothing about this but sharing an opinion about this as well.
Mario Peshev [00:55:30]:
Maciej Nowak [00:55:32]:
Mario, thank you very much for the very nice conversation. I enjoyed this very much. Maybe you’d like to share something at the very end because we have also slowly wrapped this up. Is there anything you would like our listeners to share at the very end?
Mario Peshev [00:55:54]:
For starters, I want to apologize for the noise and be having to switch places due to the construction. We’re going across the entire building from different sites. It was just crazy. So apologies for that and yeah, kind of. The main thing is, I think that just being creative in life is pretty important. Because being creative means that you can adjust and you’re perceptive and you’re listening to trends, you’re exploring opportunities, you’re questioning assumptions. You’re not sticking to old habits that probably don’t make a lot of sense anymore. You explore opportunities. It’s going to make you more successful in business and as an individual and career. And hopefully the more you achieve higher levels, higher degrees of success, you are going to start giving back more and more to great initiatives. That’s kind of my todr.
Maciej Nowak [00:56:47]:
Thank you very much. Beautiful. So hopefully till the next time. Thank you very much, Mario.
Mario Peshev [00:56:55]:
Thanks for the invite. Talk soon. Bye bye.
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