The Business Context Fallacy

I recently listened to a great podcast where the guest Vince Nguyen explains the contrarian way he runs his Facebook ad agency.

He doesn’t hire. It’s just him.

There’s no retainer. He simply takes a percentage of the profit he generates.

And he only works with companies that are already doing well with their Facebook ads.

He also says that it’s not that much work for him and he isn’t even that good at what he does.

That almost sounds too good to be true.

Insane margins, easy sales process thanks to his no-brainer offer, no need to manage a team, and only work with clients that are already successful.

But I have no reason to doubt that everything he said is 100% true.

The problem is that none of it works outside the extremely specific context his business exists in.

How do I know?

Well, let’s just say I’ve tried hard to make the exact same strategies work.

And they didn’t.

Even though I’m also running an agency and the niche isn’t that different.

We both generate leads for businesses. I’m doing it with cold email, he’s doing it with Facebook ads.

And yet, the strategies that work for him did not work for me.

For example, the profit share model requires an clear way to attribute profits, short deal cycles, and significant volume.

Attribution is easy with Facebook ads. It’s not with cold email.

When you’re dealing with long deal cycles and low volume, you risk that you work for months without getting paid anything.

The feedback loop is too long.

Also when there is just one or two big deals closing, the temptation on the client side strong to simply not pay you.

But if you’re generating hundreds of leads, it doesn’t matter if a few fall through the cracks.

Somewhere midway the podcast Vince revealed that he’s only working with digital product businesses, primarly course sellers.

That’s an essential piece of the puzzle.

He tried and failed to make his model work, for example, for SaaS companies.

That perfectly illustrates why even changing a tiny piece of the equation can make the whole thing fall apart.

Also without the profit share model, none of the other parts of his business would work.

Currently he’s making a lot of money per client per month.

Client’s happily pay him that because as digital product sellers they have crazy margins too and it’s such a clear a win-win.

So he doesn’t need a lot of clients to make a nice living and hence doesn’t need to hire.

But if he’d be charging a regular retainer, the story would be very different.

Another similar example is Brett Williams who runs Designjoy.

He offers an “unlimited” design subscription for a fixed monthly fee.

Like Vince he says he doesn’t need to hire and he’s making a lot of money.

But then again, the problem is that this model doesn’t work outside the very specific context his business exists in.

He’s doing design work.

People like and are used to having a designer on call they can send work to whenever they need something done.

And he’s only doing design for well-funded software companies that have no problem paying a premium for a good designs.

Many people have tried to apply the same model to other types of services since Brett even teaches a course on how to do it.

But none of his advice makes sense unless you copy his exact business.

This is one of the hardest lessons to learn as an entrepreneur.

We all want advice, learn from others, and copy what works.

And people might have the best intentions and genuinely want to help you.

But they can’t because all the lessons they learned are so specific to their business that they’re not applicable to yours.

Most business advice is futile.

The faster you accept that and stop wasting time looking for advice that’s ultimately not applicable to your business, the better.

Written on February 6, 2024

PS: If you're interested in following my journey, sign up below: