Phil Lockwood started Creation Chamber in 2001. At one time he built his business up to a 70-person, brick-and-mortar agency. Creation Chamber, today, consists of two full time staff and about a dozen key contractors. Currently, Phil has over 240 recurring clients and manages them all through his virtual agency made up of senior level contractors.

Phil showed us around the office space of Creation Chamber, located on the grounds of Denver’s old airport in Stapleton, Colorado.

You can find more information by visiting Creation Chamber’s website, and following him on Twitter.

Video Transcript

Brent: I’m Brent Weaver, and you’re watching uGurus, the most watched web series to become a more profitable and in-demand web professional. I’m here today at Creation Chamber, and we’ll talking to Phil Lockwood about the different web projects he’s working on, so welcome to the program.

Phil: Thanks.

Brent: So, tell us a little bit about Creation Chamber, when you started that originally, and what the genesis of that company is.

Phil: Well, I started it 12 years ago, and it’s gone through a number of different iterations in that period of time. We’ve operated under different names, certainly had different aspects of the company in terms of staff size, and what we focus on in terms of service offering, and that kind of thing. We’re at a relatively small size for an agency today, but we’ve been as large as about 70 people in the past.

Brent: Wow. So you said you’ve kind of gone through some changes in the brand and the name. Tell us a little bit about how that’s worked, I think a lot of people kind of obsessed about their own brand name, and kind of getting it right. How has that worked for you guys in changing your name and your identity over that 12 year tenure?

Phil: Well it’s not something that I would recommend doing, we didn’t actually go into any of our name changes or iteration thinking this is a good plan for the company, until the most recent one, when we switched back to Creation Chamber. But everything else was due to some sort of a change in corporate makeup, you know, a merger, a reverse merger, an acquisition, that kind of thing. So we started off as Creation Chamber, we were that way for about six years until we merged. Changed the name for the merger, did a reverse merger, ended up being Distill, then acquisition as you know, of Hotpress web, and operated until a kind of combined name there. So a lot of times it’s just about setting expectations with the client; making things understandable. At the end of the day, we switched back to Creation Chamber because it does simplify that story. You know, it’s very difficult to kind of explain to people that we were Creation Chamber, then we’re Distill, then Hotpress too, so at the end of the day we basically just wanted to take it all the way back to the very beginning, and then we can say Creation Chamber started 12 years ago, done.

Brent: Gotcha. So who’s an ideal customer for Creation Chamber?

Phil: There’s no particular industry that we focus on these days, no particular size of client these days, but we do try to focus on a particular type of product offering, which is website design and development, built on a content management system, that’s going to support some ongoing marketing efforts. Whether it’s email marketing, search engine optimization, and so on.

Brent: When it comes to acquiring new clients, how do you guys get new customers? It seems like you kind of have a very broad range of who your ideal customer is, but how do you actually get in front of those people? How do you find new clients?

Phil: I think one of the positive sides to being a 12 year old company, is you’re pretty well networked. We don’t have to any true cold calling or real outbound sales at this point. We have 240 websites finished that are under our control, under our management right now. And that’s a really good resource for being able to just nurture new business with existing clients. Obviously, you’re already at a comfort level with those people, so that makes it really easy. Aside from that, we have some good referral partners, that do sends leads our way, and that makes up probably 20 percent of our business today. But again, it’s all really just stuff that’s coming in to us that are some kind of a referral channel, so we’re not having to do any kind of real outbound stuff.

Brent: So with referrals, obviously you have to deliver and delight your existing customer base in order for people to actually refer you, how do you guys go about doing that, I mean is that something where you really just focus on your existing customers, instead of trying to acquire new customers, and kind of have that good will work itself out?

Phil: Well I think one of the benefits to having this, in a sense, a cookie cutter business model, where we’re trying to do very similar things for clients over time, is that you get really good at it. So we are able to iron out a lot of the kinks that you might have in doing a lot of the custom projects over and over. And then we never really treat the end of a project as the end of a relationship. We have a very formal, ongoing support program, and that kind of thing, I think, makes it a whole lot easier to maintain good expectations with the client, be able to provide good ongoing service. I think some of the most positive feedback that we get is not really during a project, but after a project. So when you’re pleasing clients on an ongoing basis, it’s a whole lot easier to really set them as brand evangelists.

Brent: So do you reach out to them and just say hey, what’s going on in your business, or do you have a specific kind of roadmap that you try to prescribe to help those businesses after watch?

Phil: It’s kind of varied. For the most part, we have an on demand kind of support offering. So, a lot of times it’s actually the client who’s bringing up the needs that they have. I think we do a really good job of keeping in an open line of communication with clients, you know month to month even. So it’s really easy for us to see opportunities and say, hey, based on this little change request that you have, we might also recommend going in this direction. Anytime they come up with a support need, we can look at that and see how that might be affecting other aspects of their business. Clearly this isn’t working for you, so maybe we should look in this direction for some of your ongoing marketing.

Brent: Gotcha. When it comes to your team size and structure, you said you’ve gone to 75ish people, and then you’ve kind of gone the opposite direction, where it’s just been down to you. What’s your current team makeup, who’s your first hire when you start to scale back up, and what do you guys look like right now?

Phil: Right now we’re at about nine people, and the majority of those are actually contract resources, and they’re around the world. And it’s kind of the way I prefer to do it at this point, because when we had 70 people, you’re talking about hundreds of thousands of dollars going out every month, in payroll. SO if you’re not really efficient with your use of that staff, it can become a real hindrance for profitability. So we really like being able to use those on demand services as we need them. Staying small also means that we never really have to work with people without having a good relationship with them. Having worked with them before, we stay small so we can basically pick the best resources that we’ve ever worked with over the years, and work solely with those people, and we know that we’re going to get quality work. As far as who we would add to our team right now to continue to grow, there always is a constant need for that, so we’re planning ahead as far as what that next hire needs to be. And for us, at this point, it’s part of the developer side to continue to support our core offerings, which would be kind of front end developers. We also from a vision standpoint, thinking bigger picture, we want to expand the second half of our business. Right now we’re putting a whole lot of effort, time and money into designing and building websites, and what we want to build up more is what we do with those websites post launch. So more of the stuff on the marketing side, whether it be a search marketing, social marketing, email marketing, and so on.

Brent: On the contractors side, one of our gurus asked a question [Devin Reel] about how you currently manage contractors. You’re kind of going the virtual agency approach, where you’re not doing the traditional brick and mortar salaries, you’ve got a very flexible work force, sounds like you guys have done a lot of remote work, which is a very popular topic out there. But how do you actually manage that contract workforce?

Phil: I think that the most important aspect to it is just finding the right resources to begin with. You know, the resources who can self manage. If we were working with freelancers who needed to be babysat, it would be a real issue for us, but we don’t. We work with senior level people, we develop those good ongoing relationships, so that we’re working with them consistently, and you really understand the nature of the personality. But you need people who are professional and reliable. Beyond that, I think we do a really good job of collaborating electronically, so we’re big into Google hangouts, Skype video calls, whatever the case is. We try to be on some sort of instant messenger throughout the day. But I think that it works really well, just being able to communicate on a daily basis and not let anything get out of hand.

Brent: You said that you find senior people that have more experience, where do you go about finding those people? Is it a network thing, or is it Elance thing? Where do you typically find people as you need to bring on more resources?

Phil: It kind of depends. I mean historically, again, as a 12 year old company, we’ve been able to have a lot of good luck just leveraging the network that we already have. We’ve employed probably 150 people over the past 12 years. so again, being able to just cherry pick the ones that would be the best fit for what we are today, and with whom we’ve had the best experiences, that provides a really good pool of talent right there. Aside from that, I think that we just continue to expand that network on a very slow basis. Maybe it’s people who used to work for companies very similar to ours, and recently went out on their own as contractors or freelancers. We try to nurture those relationships. We never use any kind of a website, you know, to round up people for us. We don’t work with recruiters much these days, well at all these days, we didn’t work much with recruiters even before.

Brent: Do you work with people remotely here in Denver, or are you guys all across the US, or do you have experience going overseas and trying to use, you know, maybe some cheaper labor that’s not in the US?

Phil: Yeah, a third of our team today is actually overseas. So we have a Vietnamese based group, and they tend to focus on a particular piece of our business, I mean it’s really easy to pass those types of tasks off to them. I think that one of the keys to success in that scenario, is that we have a resource locally. A Vietnamese resource locally, he’s here in Denver, and he manages that team. So we never have to work with anyone directly overseas, all of our stuff goes through our guy here, and then as far as communications, challenges, and that kind of thing, it’s not an issue.

Brent: Gotcha. Well I guess let’s switch to a topic around money. When it comes to cash flowing the business, you’ve got a lot of experience, you’ve got a pretty long history and background. Have you ever had to go out and find financing, or how do you manage that money part of the business in particular?

Phil: We never had to go out and get money for anything, when I created Creation Chamber years ago. It basically took about 10 grand of my own money put in an account that was available, we never even had to dip into it. So it certainly meant that at the very beginning, we didn’t collect much, if anything, in the way of salaries. But we basically let the revenue catch up to what we needed, and we’ve gone through periods of high profitability, and periods of negative profitability over the years. But I’ve never found it particularly challenging to just cut expenses to the point where you can become profitable. And this is definitely one of our more profitable periods, and that’s not just due to all of the lessons that I’ve learned over the years, but also to the tools and systems that are available that make pretty much every aspect of our jobs easier and faster to do.

Brent: Gotcha. Do you see with things becoming really profitable, and faster, and easier, do you find that you’re seeing more competition out in the web space, or do you just find that there’s so much demand for every business basically needing a website that it doesn’t really matter?

Phil: I think it’s not terribly noticeable in terms of competition. Obviously there are more agencies out there, there are more professionals out there, but I think we’ve always focused on being a higher end provider, not a budget provider. And you’re always going to be limited in who those higher end providers can be, because it takes more than a desire to be a high end provider, you have to have the talent. You have to have the skills to do it. So, in that regard, I’d say, and I feel like we still have just as much luck going into projects today as we ever did, regardless of the amount of competition.

Brent: You’ve done content in the past with us regarding profitability for your agency. Is there any tips or tricks that you’re currently using to track profitability and how you’re currently managing that with your expense and projects coming in?

Phil: In terms of software, that kind of thing, we don’t do a whole lot to track profitability on a client level, or a project level, but that’s because so much of what we do is just very easy to track, you know at the micro level, the macro level anyway. We’re doing most of our hourly billing just as time and materials, we know what that rate is, we know that as long as we’re providing that service, we’re making 150 bucks an hour off of doing it. When it comes to all of our fixed bid stuff, there’s so much consistency from project to project, client to client, in that we know our profitability is essentially the same just based on the amount of time it’s taking us to fulfill those projects. Obviously, we’re also looking at things in QuickBooks, to be able to determine what our true profit margin is, but you know on the client level, the project level, I think we’re pretty consistent across the board.

Brent: In terms of project management, how many projects does Creation Chamber totally manage at any given time? I mean 240 clients, I mean obviously you’ve got the support aspect, where you’ve got a lot of inquiries coming in constantly, but we have our new builds, sizable projects, what are you guys typically managing at any given time?

Phil: We’re probably have about a dozen projects going at any given time, and we don’t see a huge difference necessarily between the full life cycle projects, and any of those core projects. Because for us, it’s just one big spectrum. We have tasks that take 15 minutes, we have tasks that’ll take us half a day, and of course, we have tasks which are building websites, which are going to take a whole lot longer. We really treat them all the same way, from a technology perspective. So, over the years, we’ve worked with every kind of project management system you can imagine. And currently, we’re using Zendesk, which is obviously a very good ticketing system for handling helpdesk needs, but we found that it actually gives us the flexibility to handle full life cycle projects just as well. The important thing to keep in mind is that you need to be flexible, you need to be willing to change directions, and we do that. We actually were using Zendesk a year ago, when we acquired your company and then we shut that down and we went through two or three other systems in the meantime, just trying to find one that was a good fit, because at the time, Zendesk wasn’t really meeting our particular company makeup or workflow. But then we got back to the point where we’re like, you know, what we need right now is Zendesk, so we switched back. It’s giving us what we need right now, but we’ve always got our eye on the next thing too. And we’ve already got one or two systems out there that we know are going to be a better fit for us, as soon as a few additional things change on the team. You know in relation to our workflow. So, even though it’s kind of a pain in the butt to change, I think it’s, again, a good idea to keep an open mind, and be willing to change with the times, because few things change faster than technology, and locking yourself into one thing, and trying to stick that workflow no matter what, I think would hinder you in the long run.

Brent: So how much of your time do you spend implementing these different types of processes, kind of managing the overhead of your business? And I’m curious about how you spend the rest of your time, like within production or sales or marketing and that kind of stuff.

Phil: I actually don’t spend a whole lot of my time doing any of the implementation kind of stuff, you know what I mean? I’ll certainly participate in the research, the selection, because I think I do have probably the best idea of what our workflow is, and what we need to accommodate. But, people on my team, you know, I’ve got a great operations manager who’s really good at doing these types of things, so I really try to delegate as much of that as possible to him. We don’t spend a ton of time on it, I mean, it’s not like we’re changing these systems quarterly, per say, and every time we do, it’s not like it takes months to integrate, like it could with some systems for sure. But I mean as far as my time, I try to remain as billable as possible these days, and that’s something that has really changed over the years. When I started Creation Chamber, i was the guy, it was just me. As we hired people, I tried to move out of that, and into more of a sales support role. It got to the point where I was doing no delivery related tasks whatsoever, you know, I wasn’t designing, I wasn’t developing, none of that stuff. And that was also the period of time when I was least happy in my agency. I don’t like being a manager, I actually love working on websites. So when I did that reverse merger and formed Distill, it’s really a time where I said I am going to be that micro manager, I am going to be involved in every project, and I’m going to kind of build the company around that. And you know, for me to go into a 70 person organization and say, hey guess what, I’ve decided I’m going to start micro managing everything, that wouldn’t fly. But it may look to hire and to build based on that now, and it works really well.

Brent: Gotcha. So that’s kind of cool that you’re still maintaining a billable [time]. I know, at least within Hotpress, I’d pretty much gone to more or less full time manager slash sales. And speaking of that, when you are just starting out, and you’re just the lone wolf, I’d love to talk a little bit about your thoughts on that transition from employee zero to the first employee. Who is the best first hire, who is the person that you can bring on to help you grow the business, and is that a web designer, is that a developer, is it a marketer; is it some other position?

Phil: I think the biggest question there is, what can you already do on your own? We’re talking about some other people here today already who, I think, really are focused on that biz dev side, so when they need to grow, obviously, I would think that some of the low hanging fruit there is going to be designer, developer, somebody who can augment that skill. With me, on the other hand, I have a strong background in everything from information architecture to creative design, to development. So, I kind of needed something outside of that, I mean, for me, something typically would be maybe looking for somebody in sales. Although again, maybe this time around, not an issue. Not project management, because you really should be able to self manage at a company of this size. Having somebody in my case who could take some of those operational responsibilities off of my plate, so that I could focus more on the billable stuff, was extremely important. So that’s the direction that I went with my first full time hire, was finding somebody who could do some of the client communication, do some of the financial stuff, do anything that was not billable, really.

Brent: Gotcha. In the past, so for you now, the operations person has been keystone kind of first hire to scale up. In the past, you have brought on salespeople. It’s something that I think we’ve even gone back and forth on some comments from ugurus. How do you hire that first salesperson? And it sounds like you’ve also had some successes and failures, I’d love to hear more about that.

Phil: Yeah, the first time around, when we were hiring sales, we were a smaller company, didn’t really know what we were doing, especially from the sales perspective, and I think that we mistakenly thought that maybe we could go after some senior level people and have the best results that way. Somebody who, again, maybe thinking this is going to be a self managing person, because they really know the sales game. And these people would show up in the 3 piece suits, and I’m like, I don’t think you really understand our culture, and sure enough, you know, they’re worried about a very big sale and concerned with long sales cycles, and the numbers game, and that kind of thing. I think that when you are a small lean organization, you need salespeople who can match that. So, we found somebody who was essentially jut doing it part time for us, had never really been a salesperson per say, but kind of understood our business, was very good at cold calling, and had really good charisma. I mean I think that’s a huge one, and it’s one that I’ve mentioned on your website before. The other sales hires that we’ve had that resulted in the best luck, were people that we basically stole from competitors. Anybody who’s having success doing it for someone else, bring them over, because it’s kind of a no-brainer.

Brent: And I’m curious how that…what is that workflow, is it like a LinkedIn, I’m going to poke you on a social network, and say, hey I’d like you to come work for my company?

Phil: Honestly, we’ve never intentionally tried to steal anyone from a different organization, and I would say that if I think about that particular group, they were all people who either called us and made the switch, or people who had recently left one of those positions. So it’s not like they were really even leaving that company just for us.

Brent: Gotcha. When it comes to the web industry, what are the things that you’re keeping your eye on right now, that you think are potentially changing. Where’s puck moving towards?

Phil: I think that, in a sense, this would correspond to the things that keep me up at night, too, because it’s not just where is it going, but how is that going to affect our success, right? And one of those things is just how much easier it gets for non-technical people to create managed websites on their own. Ten years ago, very little in the way of content management systems. And then along the way there were content management systems, but they definitely had to be built out, integrated, by a professional. And then you came up with all these self publishing systems like WordPress. I’m wondering how much longer it’s going to be before you can literally just, as a non-technical person, whether it’s dragging widgets, or voice activation, anything, to where the web developer per say becomes kind of a non-issue.

Brent: Do you think that as the more of that stuff that comes out, also, there’s still this other more complicated layer that gets created on top of that? I look at some screenshots of the web 1.0 from 2000, 2001, etcetera, and yes, web design, I think it’s gotten a lot easier, but at the same time, it’s gotten more complex. I’m not trying to be philosophical here, but I feel like every chance that maybe something gets a little simpler, all of a sudden there’s more opportunities for different types of ecommerce. Like mobile phones would probably be a good example. Desktop was maybe starting to get easy, and then all of a sudden we have mobile and multi-device. Do you find that there’s sort of this ying and yang around that, or there’s really potential issues with the web industry?

Phil: I think that there’s always going to be this custom aspect, that would require real technical expertise, but as we come out with more and more use cases for any kind of scenario, I think we’re also seeing more and more niche solutions based on those. So we could say originally it was ecommerce, and guess what, we have a platform here that allows you to create your own online store. But then there were particular industries maybe, who had special needs for their ecommerce. But now we see dozens, if not hundreds, of robust ecommerce platforms, some that really focus on a particular industry, a particular type of product, whatever. So you get additional layers of customization that you can achieve, just through configuration, by somebody who’s non-technical. You know whether it’s wizard based, or whatever, to be able to say, these are my products, these are my attributes, these are the specific rules that I need. So I think that every time a new area of complexity pops up that would need or require strong technical expertise, you also see people jumping on that, and creating self-help, self-manageable solutions to those complexities. Am I worried about waking up next year and people not needing anybody to help them with their website? No. I mean I think it’s slow going, but I do think that ultimately that’s the direction that things seem to be moving. So what that means
to me is, we just need to think longer term about not focusing so much on that particular product offering, but what are the other things that people need, beyond the design and development of a website. You know, promoting that site.

Brent: Gotcha. You mentioned earlier working on that part of the business, when it comes to marketing the actual website, once it’s live and looking at that as a big opportunity area.

Phil: Yeah, and it’s something that we’re trying to kind of grow into relatively slowly right now. I mean we already offer these, we have expertise to do it, it’s just I think on the demand side right now, a lot of the clients that we currently work with, maybe are dedicating more of their budgets to the up front design, development, and that kind of thing. And in a lot of cases, just aren’t willing to bite of that additional, ongoing kind of expense. But, like I said, we have clients across the board in terms of size and industries, and we certainly have a lot clients that are doing bridge marketing, social marketing, even email marketing. Our goal is just to continue to nurture that side of the business, and grow it.

Brent: Very cool. So what’s next for Creation Chamber, anything big on the horizon?

Phil: If there’s anything really big, I probably wouldn’t be talking about it, but the big difference this time around verses seven years ago, is I do want to keep that growth really slow. We literally went from a 25 person agency, to a 75 person agency in the course of about 12 months, and you can’t do that without having some problems. So this time, I want to overcompensate in the opposite direction. It’s more fun to do it this way, like I said I get to stay more involved with these kind of things, so it’s really about refining all of the things that we’re already doing. Making sure that we don’t drop the ball as we grow, and just slowly adding on additional services.

Brent: Is this a company that you’re planning to keep as your primary focus for the next 10 or 15 years, or is Creation Chamber the slow growth, I’m going to build a great company kind of approach?

Phil: About two years after I started Creation Chamber, I decided I wanted to sell it, and I spent the next several years just trying to build it into something that could be sold. And we came really close a number of times, it just never happened. About 5 years ago, when we had our first rebirth, I said this is about a company that I’m going to want to work with a long time. I’m not even going to consider the option of selling it in any point in time. And it’s really made a big difference in terms of the quality that we offer clients, you know. It’s not just about profitability. It’s not just about coming up with an investment model that’s going to be appealing to somebody who would want to acquire it. Instead, it’s about doing the best job that we can do for clients. Interestingly, in doing you end up with a product that’s so much more valuable that it makes that acquisition target concept somewhat more appealing to the investor anyway. It’s still not something that’s on our radar at this point, but you never know. It would probably be years away.

Brent: Gotcha. Well Phil, we appreciate you taking the time for us today on Ugurus, and hopefully we’ll have you back again soon.

Phil: Looking forward to it, thanks.

Brent: Alright. Stay tuned for more unique content from Ugurus.com.