Welcome back to the Launch Key 🚀

Last week I asked what content you’d like more of. More than half of you picked the same answer: turning experience into income — consulting, fractional work, services.

So that's where we start. From a discussion I had at the CEO Convergence about service business margins and some small examples from my own costs.

It’s never been this inexpensive to build a service business.

Let's get into it.

Greenfield Robotics has built 82 bots, learned from real-world deployment, and is advancing its product roadmap. Explore the investment opportunity as the company moves into its next phase.

Now is the Time

In the early 2000s, a 10–12% margin in my web development agency was a good year. And it was hard to get there.

We aimed for $100,000 in revenue per employee (today’s AI-native software companies generate $2-$4 million per). We hit the target about half the time. The best years were carried by a few larger jobs, the $200,000+ type, which covered more costs. A lot of $25,000-$50,000 jobs filled in the cash flow between them.

And I was always selling. While running operations. Hiring, firing, founder stuff.

Look at who was on that payroll: developers, designers, project managers, writers, one office staff person. Accounting and legal were outsourced. Every one of those was a monthly number I had to sell against before the business made a dime.

Today, most of those roles wouldn't be a payroll spot at all.

A recent article on ad agency profit margins lays out the benchmarks: agencies net 15–20%, labor eats 50–70% of revenue, and early adopters say AI is adding 5–10% to margins.

I think that number is way too small. Not because anyone's fudging it, but because it measures AI bolted onto the old model. Same headcount. Same office. Same hourly billing.

The big holding companies prove the point. Publicis credits AI with "margin expansion," and its operating margin went from 18.0% to 18.2% last year — while it added 5,800 people. Big firms take the hours AI saves and spend them on more people.

Now do the math the way a solo operator would.

Labor is the biggest line, and AI cuts it hard. In an MIT study published in Science, professionals finished writing tasks 40% faster — and the work was graded better. Production costs are falling even faster: one agency made a 26-model campaign with AI for about a quarter of what live shoots would have cost (Digiday below).

Back-of-the-napkin version: take $100 of agency revenue. $60 goes to labor, $20 to overhead, $20 is profit. Cut the labor on each job by 40% and hold your price, and profit is about $44. Drop the office and the management layer — which a one-person shop doesn't have — and you're in the $50s.

That's a lot more than a 10% bump.

Here's the actual stack I use to run my little one-person newsletter:

What used to be my profit on one $25,000 web job now pays for my entire operation for the year.

Beehiiv runs this newsletter. But the tools I'd use for client work — Notion, Claude, Grok — come to $56 a month. My junior positions in development, design, research, drafting, data entry, content planning, SEO all work for that $56 a month. That is all the payroll needed for your solopreneur venture.

Margin percentage is the headline. Breakeven is the story.

Back then, payroll set a number I had to hit every month. That's why I lived on outlier jobs and was always selling. A slow quarter wasn't disappointing. It was dangerous.

Now, a handful of $5,000-$10,000 projects can carry your whole business. If you can sell larger consulting jobs, you’re off to the races.

You still have to sell — nobody's automated the handshake. But you sell from calm instead of payroll panic, and that changes which clients you say yes to.

The wave is just starting to form on the future of services businesses - and they’re far more profitable than before.

If you bill by the hour, the AI savings go to your client, not you. Do the job in six hours instead of ten and you just gave yourself a 40% pay cut.

Clients know it, too. "Clients are expecting [savings] now," one agency consultant told Digiday.

The fix is old: price the project or the outcome, not the hours. That's where the margin lives. And you've probably sat on the buyer's side of that conversation for decades.

Three questions, ten minutes:

Whatever's left is your service — and you're the only payroll it needs. I wrote the starter version of this in Your agency of one. This is the math behind it.

Hit reply and tell me the service you'd sell.

Now go launch something 🚀

I keep coming back to David Maister's Managing the Professional Service Firm (1993). He didn’t know about AI, but his core leverage idea sure holds up today: senior people shouldn't do junior work, and the firm's margin depends on the ratio between them.

He sorted client work into three types:

Maister built the pyramid. AI flattened it. You're what's left at the top.

Here's what each piece of my $225 stack actually does:

If your service business will send a newsletter, start with Beehiiv — that link gets you 20% off your first 3 months of a paid plan after a free 30-day trial.

Two short, free essays from Paul Graham that pair well with this week:

📕 MGMT Playbook : Practical management insights straight to your inbox every Wednesday.

🏢 Retirepreneur : Your guide to turning decades of experience into profitable consulting, coaching, or course businesses, without risking your retirement security.

🗃 Dealroom Business Success Uncovered : Learn directly from billionaire entrepreneurs on how to grow a business. Join a community of 2,000+ innovators.

🧾 Redefining Retirement : Too Young to Retire, Too Old To Take Orders? Yeah, Me Too.