I Cut My Team in Half and Made MORE Profit

Hi ladies and gentlemen, James Blackwell here, founder of 3 7-figure companies I started from scratch. And in today's video, I'm going to be talking about how to scale to 7 figures with half the team. So we're going to be again heading out in my Range Rover here, we're going to be driving around London. And let's dive into it. I scaled to nearly 50 employees, then I cut my team in half and made more profit. Today I'm going to break down how to build a 7-figure business, ultra lean with the right people, systems and tools. So I went from lean to like a really bloated team. And one thing I realized was as you kept scaling, when you scale with more revenue, more ads, you add more people. And I've seen this with multiple 7-figure businesses, like a lot of my friends that run these companies as well. And we all found the same thing, which was you end up overhiring, and then that's like aggressive scale. So you're just scaling more ads, scaling more sales, more revenue, which means more team. But then what you realize is like, sometimes there's a way to optimize because when you do that, you sacrifice profit. And then you'll go into a profit stage where it's like, well, now I want to trim the fat, you'll end up overhiring. And there'll be people doing certain things in the business, you're like, you hired them because you liked them, or you thought they were good, or you didn't really have a need in that certain department anymore, but you didn't want to get rid of them. So you created roles for them. And I've been guilty of that as well. You end up keeping a hold of people that you like, that you think, well, we're making enough money so we can afford to keep them, but they weren't producing an ROI. And they didn't really have a dedicated role. When you do cut, and you keep your core people that are A players or good B players, they can take on way more tasks than you would realize. Now with cloud, AI and everything else, every employee in the business should be able to do the task of 2 or 3 employees. In the past. So yes, you can pay them a little bit more, but they should be leveraging AI way more. For example, I had a full-time copywriter, I had a guy that just ran my email campaigns, an agency that ran my ads, like, all of these things now can be pretty much done by AI or remote assistant, or one person in the team can do a lot of those tasks. So that was one thing that I realized was when you go in high growth stage and you're making more revenue, and you can afford the extra employees, there'll be a time where you need to sort of trim back and look at the business and think, because I always have a hygiene standard, like minimum in my companies has to be 50% profit margins at all times. Ideally, we always aim for 60%, but if we go below 50%, and I think one year in 2024, like we went, it was around about 40%, but yes, the profit margin was less, but my business is a service-based business as well. I'm not looking, they're not going to sell or exit. So at the end of the day, we needed to be really fine with the margins. Like I did not want to have a company that was below 50%, because that's when it gets a bit risky, you know, payment plans don't come in, cash flow doesn't come in. And you've got big bloated overheads. So I think at the time, our salaries were around about $150,000 a month. So maybe around about $2 million a year payroll. And that was just really fat, it didn't need to be that big. The signs you're going to see when you've got a bloated team? Well, the easiest way you do it is what revenue you produce per year, shared by your employees. Say for example, you've got a million dollars a year business, and you've got 10 employees, that's like $100,000 per head, you really need to be looking at around about a $200,000 per head unit. Now the caveat to that, it's not black and white, because if you've got some offshore remote team, which in theory are way cheaper, then I don't really class that as 1 ratio to $100,000. Because the pay might be only what, $18,000 to $20,000 a year. That ratio is normally on an employee making $50,000 to $100,000 a year. Take that with a pinch of salt. If you have got some of your team remote assistants, maybe tie them into 2 to 1 ratio. If you've got a team of 10, but 5 of them are remote assistants, then you should be looking at like a million dollars, maybe shared by 6. So then you've got a higher revenue per head, maybe 150, 160 per head, which could still be doable. But that's where you need to start to look at the bloat in the business. Revenue per head is one way. And I was doing this with my team, I would be asking like, what do they do every day? I want to know a step-by-step week. So then I would start to get my assistant to look at their calendars of what meetings they're doing, what the internal meetings are, what the tasks are doing, what the delivery is. And start to look at the hours needed for that role. Then I'd start to give them more tasks. So if they're in the marketing department, but I know they can do something else, I'll stack on another 10 hours a week of workload and start to see the breakage points in them. That's probably another thing is like actually looking at each individual role and breaking down what is important. We talked about on a previous video of you doing tasks that are maybe $10 or $20 an hour tasks. There will be tasks that they're doing that they don't even need to do in the business, but they're just busy being busy. Because they're not entrepreneurs, they're not business founders, they still care about your company. But at the end of the day, they're clocking in, clocking out, it's 40 hours a week for them. So you need to make sure that they are really dialed in on the actual 40 hours a week that actually matter in the business. So that's when I make sure I align with everyone in my company that they are revenue-producing assets. Even if their backend delivery team, I get them to upsell, or they are part of something where we actually going to increase the LTV of our clients, and they're going to be some way selling. So that way, you, if you analyse their units of time of what they're actually doing, you'll probably be able to cut in what they're doing 30 to 40% of activity. Because if you don't analyse that in the business every 6 months, some of your employees will be doing things that you'd be like, I never even told them to do that. You know, they just started adding tasks on their plate because they want to be busy, especially with AI now and how they can automate a lot of their activity or speed it up. I'd be looking to put more onto them instead of making additional hires. When I look back over my profit margins for the highest headcount, they were around about 46% to 47%. It fluctuated. But in that year when we had the most headcount, like I said, in the group of companies around about 50 employees, it was running around about 46%, which is still very, very healthy, by the way. But I just knew the team was bloated. And we were taking on more risks because we had to spend way more on advertising, we needed to generate way more leads. And when you have a front end that's depending on a sales team that performs, if they don't perform one month, which all sales teams, by the way, will have a shocking month sometime, that sets you back. That's where I was looking at the business of thinking, I think we are too fat here because we're getting bloated because we make a certain amount of revenue per year and we're making great profits that we need to just constantly hire people. That was where the profit margins were. When we trimmed back and cut the team in half, profit margins went up to 62 to 64%, which is where the business is set up now on average. It fluctuates a little bit depending on sales conversion on the front end. There's always ways to optimize your business, you know, but one of them is, is definitely bloat and team bloat, especially with leveraging AI now. You don't need a big team to do multi-millions a year. There's articles, Forbes was saying there's going to be the first billion-dollar company with a team of one. For sure, you can do a million dollars a year with a team of maybe one and maybe, when I say a team of one, you as a solopreneur founder, maybe one or two remote assistants and then AI, you could definitely leverage that. But as you're scaling and you want to get to multiple 7 figures, you for sure need a team. So I'm not going to be saying here, you just cut all of your team. No, you don't. The only way you're going to get free is by having a team and a great team for sure. But just keep the great employees and just give them more to do. You will be surprised what they can achieve and what they can add on to you in terms of business revenue and business profits. How do you decide who stays and who goes? We do like end of day reports in the Slack channel. I don't really check them. My team checks them, or my assistant will, but then I'll start just to look at every department. Every 6 months or so, I'll take a deep dive into the business, and I will look at who's performing, who's not, and who maybe we need to hire. There'll be positions that might open up that we need to hire and improve on. Looking at performance, trying to tie them back to revenue generators. I don't really care if they're working 40, 50 hours a week, if they're doing something in 30 hours a week, but they're delivering and they're making money, our clients are happy. So it'll be like, are the clients happy? They really like them in the business, they're delivering. And then also, are they generating revenue for the company? Front-end and back-end team all have revenue-producing targets. If those two metrics are good, then I'll leave them alone. But if they're not generating the revenue that they should be, they actually are a cost to the business. There is employees in the business that will be a cost, especially on operations. So the first thing would be that, and then it would be attitude. So am I seeing that they're off sick? Occasionally, are they putting in loads of holidays? I don't mind my team taking holidays, but I like people that are hungry. Are they sick a lot? Am I seeing that they're not online on Slack much? Because obviously most of the team work remotely. I'm not checking in on them all the time. So if they're not online on Slack, checking out on Netflix or YouTube or whatever, and not actually doing the work. Another thing is making sure that they turn up to team meetings. So I always say with all my remote team, we do a 9:30 AM meeting. Every single day, Monday to Friday, have to be on camera, not being late. I make it 9:30, so there's no excuse to be late. If they're taking kids to school or they're going to the gym before work, totally fine. But their goal is to show up at 9:30 and be on time. If I'm seeing persistent things of them being late or phoning sick, that's probably the next thing that I look at. Or if I have clients complaining about them, or they're not doing the tasks that they should be doing, those are all little signs. And you as a business founder, you should be on the pulse with that. You'll start to see the trends. The emotional side of letting people go, like if there's good people that have been all to you, but you have to let them go. It is tough, but you do have to sometimes be fair to them and be ruthless. There'll be people in your company that take you from A to B and other people from B to C and so on. So as you grow with the company, hopefully they can grow with you. But if they're not growing and leveling up, then there's going to be a time you need to cut them. So Felix Dennis talks about overheads walk on two legs, and he talks about that part where you hire potential first, so you're underpaying them and you're getting a lot of value Then they level up and they show their potential and they're overdelivering in the company and you start to pay them good because of everything in the past they've done and delivered. You pay them really well, but at some point it's going to tail off and you're paying them for the past experience and the past things they've done, but they're not actually helping you grow the business any longer. That's obviously when you need to cut. Most founders hate firing people, and I would say there's no logic with that apart from just going through the process. And I think especially businesses that are remote, it's way easier. It's on Zoom. Like most of the fires that I've made in terms of the first 20 people I've fired have all been in office, in person, which is way harder than just firing someone over Zoom. So you've just got to get used to that. Like I said, me having an in-person office and building a team out to run about 20 employees in a physical office gave me great experience to build a culture, build a team. Manage a team well and deal with everything that goes on in an office environment compared to remote? So in my group of companies, we have 30 employees, but none of them are managers. We just have leaders in divisions. I don't want to have a bloated team and have managerial layers. I'm the leader of the companies, and then I have many leaders within there, but none of them are managers. When I've hired managers in the past, I've never worked out they've really upset the team. Most of them aren't very good. Obviously homegrown management, I'm a big believer in that. Now obviously there's economies of scale. If you're a 50-person company, you have different managers, might have MBAs, like they might have processes. But for most businesses that are service-based agencies, for example, or online, there's no need for managers as such. You just need good leaders that can get the job done. You incentivize them in their department. You want to try and have different profit centers within your business. In different business units. So they are just responsible for that. And they get an upside off a certain amount of revenue or profit. And that way, you know, they're going to be looking after the rest of the team. Would do one-on-ones, progression plans. You tend to find like when you make certain hires, that they'll grow with you anyway, because as long as you're a good entrepreneur, and you're growing, you're making more money, you're building more offers, you've got a lot of growth, which I've been fortunate enough to like People that have been with me, I started off with one company, grew that to 7 figures, my recruitment agency. And then I grew the Agency Blueprint, our education program that then turned into Remote Assistance AI. So our VA service off in South Africa, all of those departments, people have moved across 3 different companies with me and grown. So that was like, instead of having management layers, like that's their progression as you grow, like depending on what your goals are. If you've got ambitious goals to get to 10 million, 50 million, 100 million, then people will stay with you and can progress. But they're just responsible for themselves, like to do the job, to deliver on the role. So the offshore versus onshore, my team structure is around about 50/50. I would say 50% are offshore in South Africa, 50% are onshore in a mix between the UK, Dubai, US, Portugal, all around the world really. The employees. So I would say the 50-50 split is where we are at. Having that 50-50 split gives me the profit margins. A hygiene standard above 50% is important. 60% for us is the reason why 50% is offshore. So if we had 100% onshore in UK or US on all big salaries, then our profit margins would probably be like 40%, maybe 45%. But I really think the biggest multiplier now is AI. So what I did with our AI expert in our company was build a Claude AI brain for me. Unpacking all of my IP in my head, every bit of logic, strategic decision-making, my knowledge base, and put that into an AI agent. So then my team have access to that. And I think bolting that with like your offshore remote assistance makes them a lot better to be able to do a lot of the tasks, but also just leveraging them with AI. Because you're only paying a remote assistant really like, what am I, $10 an hour? So say you're paying between $10 to $12 an hour. If you can get them to leverage AI, which is like copywriting, social media posts, automating a lot of tasks, delivering reports, there's so much they can do. You're getting so much more leverage now of AI. So like you using AI is great with Claude or whatever, but imagine your remote assistant doing the tasks with AI. That means for $10 an hour, you're getting probably $30, $40, $50 an hour of output because it's leveraging AI. So they're doing things quicker. So the $10 an hour you'd pay for 40 hours a week, you're probably getting 80 hours a week worth of work. So really for $5 an hour, there's never been a better time to build offshore with AI. There's no reason why your profit margins shouldn't be so high, like 50, 60%. I remember watching My First Million podcast with Sam Parr, and he talked about how Service-based agencies used to be a pain in the neck. No one wanted to run them because you'd run 30% profit margins because you had high overhead costs. People in the US, the UK, we had to pay the staff, team members, salespeople, the fulfillment, and it was very hard to exit. Private equity were acquiring SaaS companies, and this AI model has flipped the agency model on its head because one person can do the task of seven. And that AI is a multiplier, means that you can run 50%, 60%, 70% profit margins on an agency. And that's why private equity are getting more involved with this now, where you can actually sell your agency because you've got the leverage, you don't have high headcount costs. A great book, Built to Sell by John Warrillow, he talks about building the systems and processes, having repeatable processes so you can actually sell your agency. Imagine now bolting on AI with your offshore team and higher profit margins in an agency. This is also why you could have a great cash flowing agency that's spending around 50K a month easily with high profit margins. And you could work like 20 hours a week in that business and then build your second business, have that as a cash flow producing asset. So yeah, again, for those that are interested in hiring a remote assistant, there'll be a link down below where you can book a call. We'll map everything out. We'll walk you through the step-by-step process of where there's time that needs pulled back for you or in your business. We'll do a diagnostic on your business. And the team, and we can walk you through what can be put offshore and the actual money that you can save. So that's it for this video. I hope you enjoyed it, and I'll catch you on the next one.