From Agency To Software: Karl O'Brien, Storehero | Ep: 010

Connor: Hello and welcome to Exit Ready, the podcast for agency owners who want to build a successful agency, because a successful agency and one that’s ready for sale are parallel journeys. Today I’m talking to Karl O’Brien, founder of Storehero, the AI growth coach for ecom brands and agencies. I’m Connor McAuley, and today’s podcast has a slightly different spin on it because Karl is an ex-agency owner who pivoted into software, something I’m seeing a lot more frequently and a topic that’s very interesting to me. Karl, welcome to Exit Ready, welcome to the show.

Karl: Thanks very much. Appreciate it, Connor. Great to chat today.

Connor: Thank you very much for letting me use your office last week. I do appreciate that.

Karl: No problem at all. Office space, especially in the city centre, meeting rooms can be tough to come by. More than happy to help.

Connor: Tell me about Storehero. Who are you and what do you do?

Karl: In essence, Storehero is an AI growth coach for ecommerce brands and agencies. One thing I saw running a digital marketing agency based in Dublin for about eight years is that it’s never been easier to start an ecommerce business, but never been more difficult to grow that business profitably. The work of agencies that work with those ecommerce brands is increasingly more difficult as the years go on. Between the complex cost structure of ecommerce, the increasing Meta and Google tax these businesses are forced to pay. They’re able to grow, but to do so profitably is another challenge. At Storehero, we really focus on giving ecom brands and agencies a unified view of their true performance, all through the lens of profit. Traditionally that was by way of a dashboard, but now that’s no longer the case. An ecom brand or the agencies they work with will interact with Storehero. It’s kind of like a profit brain of the business to help everyone involved make more profit-oriented decisions.

Connor: You’re doing that through an MCP today. How does that work? Who is your ideal client? Is it the store owner? Is it the agency working with the store owner? Both?

Karl: It’s a really interesting dynamic, especially in ecommerce, because most ecommerce brands’ revenue will have a significant portion going directly into marketing, usually by way of paid advertising. There’s somebody responsible for making decisions that could be putting to use anywhere from 10 to 40% of that revenue. Sometimes that’s within the brand, and actually sometimes within the agency. It’s particularly challenging if you’re responsible for making decisions utilising spend that may represent 10 to 40% of revenue and you don’t have visibility on profit. You’re making decisions with a very disconnected picture. One thing we saw on the agency side is ecommerce brands often find a big disconnect between the marketing metrics in their business and the financial metrics. Oftentimes the marketing goals they would set for their agency are some sort of proxy for the real financial outcomes they want to drive. But they don’t understand the relationship between those two things, and can end up in a bit of a mixed relationship because there’s a translation that has to happen between those two sides of the house.

Connor: That sounds brilliant, but there has to be an education piece there for the ecom agency owner, because they sometimes don’t even see that disconnect. They’re just throwing everything at the wall and hoping something sticks. How do you get them to the point where they realise something has to change?

Karl: It’s a self-interested approach, I would say. Practically what can happen with many ecom agencies, and I’m sure anyone listening will have found this, is there’s increased pressure to deliver better and better results for the ads and fight what feels like the externalities of increasing customer acquisition costs for a brand. If the only conversation in the room is “you need to make our customer acquisition costs lower” and you don’t have the benefit of seeing the other sides of the coin, you’ve only one lever to work with. We’ve seen ecommerce agencies really own that profit narrative, not only to deliver better results because they have a much clearer view of how the business is performing, but it’s actually a massive opportunity to win new business. If you’re an ecommerce brand owner and you speak to an agency that’s profit-oriented, addressing the elephant in the room, it builds so much more confidence and clarity. It just starts on the right foot. Everyone has had the experience of talking to a client and getting lost in the attribution wars between channels, debating what metric is actually reliable. It’s something a lot of stakeholders can get around.

Connor: How you approach that is exactly how I sell. I’m not a designer. I’m a developer, but I’m not a developer. I speak like a business person. When I speak to an agency owner or a client, I speak about revenue, profit, commercial ambition. That’s exactly what you’re doing, bringing into this system and delivering front and centre to the clients, because that’s the language they speak. That’s all they really think about. They just don’t have that bridge across to attract it until this.

Karl: 100%. As an agency owner, you can build so much empathy with that brand founder. You know what it’s like to manage cashflow. You know what the reality is of running a business that actually has to account for itself in the form of profit metrics, not just ROAS. ROAS doesn’t pay the bills and doesn’t pay the tax man. You need to pull it back to realities.

Connor: I love it. You made a strategic pivot. You were previously an agency owner. You moved into software. This is something I am seeing so much more frequently. One of our biggest competitors in agency space actually closed up shop competing against us, and wasn’t very friendly with me for years, and recently has become a very good friend. He said the fact that we were just better meant he moved into software. He changed his life because of that. His business was acquired, he did very well from it. I’m seeing that more frequently today, where agency owners with the knowledge and experience we have see the wood for the trees. We see the success, we see objectively the opportunities, and with AI and the teams we have at our disposal, it’s never been more accessible for us to spot those gaps and move into those markets. Does that sound about right for you, or was it a completely different reason for going into Storehero?

Karl: 100%. The reason Storehero has worked today is because it was a deeper problem-oriented approach rather than just saying “the grass is greener, SaaS sounds cool, SaaS sounds easier”. Inevitably everyone knows as soon as you get into a business, you see this when you’re working with a client in a new industry, everyone has challenges and dynamics within their industry. What I saw was a big disconnect where we needed information to make reliable, responsible decisions on behalf of our ecommerce clients. Even the clients didn’t have visibility of this information. It was quite inevitable. I can create a Google Sheet to represent this. I could create some custom dashboard and view. A SaaS became a delivery mechanism for a problem we wanted to solve. That’s really important.

When we started coming up on three years ago now, that’s even more true now as the barrier to actually generate software is getting lower and lower. The distinction between agencies and SaaS is going to get more blended together. One piece most SaaS businesses don’t want to tell you is a lot of them are venture-backed agencies in the background, but instead of implementation teams doing web design, they have a massive bloat of customer success. Because ultimately what they’re trying to do is help the brand actually deliver value from the software. Probably the future of agencies is some actual mould between SaaS and agency, where you can use a software stack. Instead of trying to completely scale that to the extent that somebody has to use it on a self-serve basis, can you actually use a proprietary stack to scale your own agency? What I would have traditionally, when I was on the agency side, called a more productised service. This is the next logical conclusion to that.

Connor: What I’m saying more and more frequently is that we can sell the product. We can sell a microSaaS for a customer of one first and foremost. We can build that for our customer, get well paid for that, retain the IP, and then sell it many times over. We become multiple SaaS agencies in that instance. I love where we can put product-like features in our service, and ultimately scale up a retained model by just building out really bespoke softwares and re-utilising that for other agencies.

Karl: It’s the logical conclusion of really dialled-in processes as an agency. If you’re able to codify the work you’re doing and standardise it to an extent like a factory line, you obviously want to have your own approach and methodology and unique aspect as to why you can deliver versus the next person. But there are a lot of lessons to be learned about building that codified structure, especially in a world of AI. There’s a ton of practical opportunities people can build into their workflows.

Connor: You had your agency, you moved into SaaS. They’re very different but complementary businesses. What did you take from your agency life that has benefited you in the SaaS model?

Karl: Number one, understanding our customer. We would only ever have been in the position to look at that SaaS angle… if there’s a spectrum between pure service and SaaS, maybe that productised, specialised agency sits somewhere in the middle. We were only able to move across that spectrum because we understood a very painful problem ecommerce businesses are actually facing. That’s number one. Number two is any SaaS should ideally be the end degree of automation for stuff an agency would previously have done. That cycle of using agents and workflows to automate repeatable processes is just getting faster. There would be no Storehero without the agency side. It was such a good learning ground for having opportunity and scope to see so many different industries in such a constant traded period. It’s only once you do that you can actually test and learn and put yourself in a position that you know there’s a market for what you’re doing.

Connor: What is the primary sales and distribution method for Storehero today? How is that working? How will that change in the next 12 months?

Karl: Initially we definitely thought it was individual brands, whereby they would be the main focus. But over time we found that agencies are actually often a better fit. Whatever problems brands have around getting visibility to put their marketing spend to use, understanding what products are driving more or less margin, understanding what a customer is worth, agencies have that problem compounded by the number of clients they serve. The piece that’s been interesting from our perspective from an agency side is they have a vested interest in the success of the work. We find probably 60% of our customers are actually agencies, and another 10-15% are probably referrals through agencies. Agencies are really an important part of the ecosystem.

How that will evolve over time, the agency sector naturally has gone through so much disruption. In the context of ecommerce agencies, the likes of Meta and Google, to be blunt about it, are coming for that management cost. They would rather a brand invest that money directly with them rather than splitting it 30/70 or 50/50. We would see the future approach for agencies as either lower cost, maybe higher volume services that allow you to focus on a specialised component and do that at scale and use AI to improve efficiencies. Or the alternative is you can justify maintaining or increasing your management costs by way of a more specialised service. That’s giving people the levers to position themselves as a profit-focused agency and in turn win that business over the alternative, because they’re doing something AI isn’t going to be able to do itself. We feel like we can be really complimentary in that because we have the system to facilitate that shift.

Connor: Nobody really knows where the dice will lie when they fall at this time, because it’s moving so fast. AI and the utilisation and adoption of AI in agency is a big part of that right now. From looking at your posts over the last number of years, I’ve noticed Claude has been a big part of that journey for you. How do you see that being a part of the business going forward?

Karl: It’s incredibly interesting and such an exciting time. It’s like a renewed focus. We have an interesting road in front of us. One of the biggest blockers for Storehero over the last couple of years is the fact that we’re giving people better metrics, but they’re newer metrics that require training and enablement to understand this blend between marketing and finance. Claude has completely compressed that training down. Previously we were focused on upskilling agencies in order to make the most of the data available in Storehero. Now Claude is able to do that for us. Storehero is acting more like an AI growth coach to understand the complete spectrum of data for an individual business or across your client base, and giving you timely, action-oriented, profit-oriented suggestions. With that profit brain as the centrepiece, any of your workflows that require data can be powered by that.

I had a call with an agency yesterday checking in two weeks in as to how they’re getting on with our Claude Connector, and they’ve done really interesting stuff. They have a Monday morning marketing meeting where they assess all their clients. They’ve set up an automated health check. Before they even log in in the morning, Claude has used the Storehero connector to give a health status across each of their clients, so they can focus on the critical needs-attention performance right away. They’ve set up an automated agent on a schedule in Claude every morning to do anomaly detection. Which stores have seen big negative or positive shifts in spend efficiency, things I want to catch before my client catches them. And even using that for things like audits and pitches, winning new business by developing a really comprehensive workflow. The ability to take advantage of these tools is actually what skills have you set up in Claude, what projects, and what are you using in order to derive better value than someone else can. There’s such a big opportunity there, and it’s still so early.

Connor: I spent the last eight months in what I respectfully call AI psychosis, because I’ve been waking up in the middle of the night excited to get into a project. The speed at which we can do things we want to do, the skills I personally don’t have are now available to me. We can explore the opportunities we wanted to realise for years that we haven’t been able to do because of time.

Karl: 100%. It’s such an exciting time to be in my seat, because we’re getting a vantage point as to what some of the best agencies in the world are doing across 15, 16 countries. Especially in ecommerce, there’s a very common tech stack, which is great because there’s a lot of shared knowledge. Ecommerce brands are using the same platforms, the same tools. But the piece I need to watch out for is they might have junior team members utilising AI in their workflows, but they’re just dropping individual screenshots into ChatGPT to get very non-contextual, bland and generic reports. All these tools have raised the bar. It makes a lot of people find the average to a greater extent. If everyone has the opportunity to utilise these tools, then you still need to do more in order to differentiate yourself.

Connor: I actually recorded a video yesterday titled “AI Will Kill Your Agency”. That’s a respectful title. I agree and believe we’re in this gold rush period for agency because there is so much opportunity. But at the point where our juniors are just talking, their AI is talking to our AI, and there’s no understanding of the reasoning why they’re putting that screenshot into an LLM, the average might be here but the understanding is so shallow down here. If there’s nobody training or understanding or learning and they’re just using AI to do the work, a few years from now it will just compound and grow, and there will be no seniors because there’s no senior development path. That’s a massive risk for agencies across the world.

Karl: Definitely. There’s this weird in-between time at the moment whereby our costs are starting to compress in order to deliver a service, but we haven’t seen the margin compression yet. A lot of agencies are experiencing margin expansion, where they’re in contract with clients, the clients haven’t reset those agency relationships and expectations. There is a short-term gain, but that’s the nature of competition. The old Jeff Bezos quote: your margin is my opportunity. That’s going to continue to compress. If you want to maintain that margin you either need to make up for that in scale, or have a clear justification as to why you’re better than that next person using the same tools.

Connor: I got the exact same revelation yesterday. People are doing a strategy deck that used to take four days in 40 minutes. If you can spend those four days going deeper and deeper and justifying the work, that’s a far better use of your time to becoming a strategy-led agency and being more valuable to your customer. I fully believe that is the opportunity for those agencies that will do well in the next three years.

Karl: Definitely. One example of this is we actually have a skill within the Storehero Claude Connector called the Profit Scaler. It goes through your store performance, your profit performance, performance by product, lifetime value of your customers, Meta, Google, TikTok campaigns, Klaviyo campaigns, ad creative performance, and ultimately looks at what’s the lifetime value of customers based on what product they purchase first. All that analysis was technically available in Storehero, but it would have required a junior team member to spend a considerable amount of time, which practically they’re probably not going to take. That delivers a report in a couple of minutes that actually blows away a client. One comment I’ve heard a couple of times from agencies is oftentimes it comes back to those client meetings. You want to deliver an insight to a client they don’t know themselves. You don’t want to go into a client meeting having that awkward tension because you’re telling them something they already know. That sounds like a high bar considering they’re in their business all the time, but I’ve been shocked at how low that bar is. Practically those business owners and founders and ecom managers are so time-poor, balancing so many different hats. There’s actually such an opportunity to use these tools to deliver a perspective of a business in a deeper, more unique vantage point than they even have themselves. Previously there was a disconnect between that capacity versus margin a lot of agencies have often had, where in order to over-deliver for a client it required investing so much time that you actually have to watch those margins. That’s not the same disconnect anymore with these tools. That’s the cycle you need to try to break out of if you’re an agency owner.

Connor: Those tools, that data would have been there, but very rarely would have ever been explored because of time and resource. Some of that data, they didn’t even know was available. It’s all up in the centre now. So you guys in Storehero do quite a number of events. Tell me about your marketing plan. What is the purpose of those events? I think you did one recently in New York?

Karl: Yeah. We have a partnership with Shopify. Once a month we run an ecommerce community of about a thousand members based in New York. We do Dublin-based events and some in London and Manchester. To consider in that whole conversation we’ve just had about AI: while that stuff has been so helpful for processing improvements, there’s actually a heightened value people will place on in-person experience because it really breaks through. Anyone will find this from a business development or sales perspective: people are so hounded by cold calls and emails and outreach, they can tune it out to a certain extent. It’s actually the reason direct mail is having a resurgence. Events are part of that as well because it breaks from people. You zig when other people are zagging. That’s worked really well for us. We try to run events that are very value-focused. You can run a sales pitch, but you’ll get somebody once and won’t get them back. If you’re able to use your education as your marketing vehicle, have a unique perspective on your industry, on your service, on your specialty, on your niche and actually deliver that by way of events, I think it’s a massively underrated opportunity. Ireland in particular is so underserved when it comes to ecommerce events.

Connor: Big shout out to Kev Trainor of Ecom Live, a good friend of mine up here in Belfast. I fully agree. There is so much AI, so much activity online, that people are becoming overwhelmed. I can’t remember the last time I watched a TV channel that had ads, because I’m sick to death of them. I pay for YouTube Premium so I don’t have to get the ads. We all do that. Being in person, having real-life conversations, we are a very chatty bunch. We’re very conversational, the Irish in general. Being there, being in person, being able to educate, informs so that people actually know and trust us, goes so much further than picking up the phone a hundred times a day trying to sell.

Karl: Massively. It’s such a different dynamic. It’s also very cost effective. The investment you can make in putting on a dinner, having events with a simple enough setup, can be a great return. The piece we’re starting to run some events around now is AI workshops for agencies over the next couple of months across a couple of cities in the US and Europe. So we’re leaning into ourselves for the exact same reasons.

Connor: Where does Storehero go from here? Is it going to go deeper, or spread its wings in complementary markets?

Karl: We want to be the most intelligent data layer for ecommerce brands and agencies. We have a really big opportunity to be best in class because we’ve defined our focus and defined why our methodology is unique. Within Storehero we can already understand so much about an ecommerce business because we have that profit layer. But going deeper: inventory, cashflow, finance. Even from an agency’s perspective, client sentiment, understanding which clients are potential churn risks because we can see the internal/external communication and the account performance. That’s a senior strategist every agency would love to have to give everyone an additional layer of information, but potentially it was previously too cost prohibitive. We now have billions of dollars of revenue passing through the platform on an annual basis. That gives us such a vantage point of information as to what’s working, as well as the actual onboarding we do with agencies across 15 countries at this point. There’s a lot of work in it, but plenty to keep us busy over the next couple of years.

Connor: If you were advising somebody starting out today, in either an agency or a SaaS, what advice would you give them in that early phase?

Karl: Two parts. First and foremost, I wouldn’t skip the banal cliches. I won’t keep my answer at those around knowing your customer, knowing your audience, because I just did not listen to that stuff nearly as much as I should have. It seemed too common, but there’s a reason that advice hangs around and stands the test of time. The other piece I would really try to consider: are you solving an expensive problem for businesses? I see a lot of agencies and SaaS focusing on components of niches or service offerings that it can be hard to justify themselves and get into the conversation, because they’re maybe not high up enough on the totem pole or in the mindset. What is actually keeping somebody up at night? What are the problems they are willing to pay to solve? I would really challenge anyone listening to understand what are the components of your business that can actually deliver that value, because that’s the stuff that’s going to stand the test of time. It’s the stuff that isn’t going to be automated away because people need the guidance and are willing to pay for it.

Connor: If it’s costly and if it’s hard to change in a business, then there’s opportunity to build something around that.

Karl: Massively. Definitely.

Connor: Thank you so much for your time this morning, and thanks to everyone who has tuned into the Exit Ready podcast. If you like what you’ve heard, please subscribe wherever you’re picking this up. If you want to build the best version of your agency, check out moveatpace.com where I share a heap of resources, articles and my own Agency Valuation assessment. Thank you so much. Actually, this isn’t the last show of the series. After this I’ll do a little debrief for everybody, and I’ll then start season 2 in a few weeks’ time. Thank you.

Karl: Thanks, Connor. Appreciate it.