Changes and Choices: My Third 2 Years in Business
The ups and downs of Topdown Charts
Topdown Charts turned 6 years old in September, here’s some updates and insights I wanted to share as my journey continues.
In this article I cover my progress over the past 2 years as usual (I’ve fallen into the habit of writing an update every 2 years!), but this time I also wanted to focus-in on 2 special topics of particular interest…
First one is to provide a bit more color on a small yet big change: launching an entry-level service (for reference, Topdown Charts provides asset allocation insights to institutional investors).
Second one is to address those who say: “I want to do what you do; how do I get started? what advice would you give me?” It’s a chance for me to provide some answers to a question that I get on a semi-regular basis – while also shedding some light onto this business, what it takes to be successful, and even exploring some big philosophical issues in choosing your path (in life!).
But first, in case you were curious, here’s the previous 2 instalments:
“My First 2 Years in Business”
“My Second 2 Years in Business”
What happened since last time? (the ups and downs of Topdown)
After a very interesting start, the final months of 2020 ended fairly smoothly for me: nothing major to report for Q4 of 2020. On the other hand, 2021 was a bit more chaotic, and in many ways a much harder year than 2020 for me personally. Among other things, we sold our family home, and then bought a lakeside apartment back in Queenstown …and that simple few words belies the frustrations, disappointments, distractions, and long-hard-slog that made 1-year feel like many – it also involved moving 4 times as we shuffled from place to place.
Aside from the personal and family side of things, on the business front I restructured roles, shook up and shook out a variety of aspects of the business, and most notably: launched an entry-level service (more on that below).
Clearly there was a lot going on, and a lot of distractions, so as you might guess it was the lightest year in terms of onboarding of new institutional clients since beginning (whereas 2020 was a very strong year – best year in fact). I also did zero business traveling (since late-2019, and still none at the time of writing!). Thankfully, the entry-level service launch meant that revenues still net-increased (intriguingly: by a similar amount as to what it might have been if I had put more effort into institutional sales).
But one thing I am proud of through all the chaos and turbulence, the trials and tribulations… I nailed-it where it counts. I kept service quality high and had a solid run in terms of the performance of my macro and asset allocation calls. The hit rate of my ideas, macro calls, and asset allocation tilts was over 70% through the past 2 years, and performance-wise was the best 2-year period since starting.
In the end, that’s the main thing: making sure the main thing stays the main thing and that you deliver excellence and your best possible work when it comes to your clients. If you can’t fulfil your main reason for being, then what’s the point. People won’t remember how busy or stressed you were, they will remember what you actually did for them.
Launching the Entry-Level Service (a simple, logical, and substantial shift)
Launching a new product or service is not something to take lightly. It takes time and energy, learning, trial and error, speaking with prospective customers, product design, systems and admin setup, and despite your best efforts it might not even work (and most likely won’t come close to your expectations!). Or worse it might see good initial take-up and then never really grow beyond a certain point (reaching some sort of natural or self-imposed ceiling).
WHY – let’s start with the why. A key prompt was repeated specific requests for an entry-level version. But added to that was implied-demand hiding in general feedback and objections from institutional sales efforts e.g. no budget, no authority, policy of no corporate payment for research, not the right timing, limited time, desire for a 1-pager summary… things of that nature, BUT all accompanied with clear interest in the insights and recognition of the quality of the core service.
So in that sense it became obvious that there was a gap in my offering and basically a lost opportunity for all of us if I didn’t do something.
And let’s not forget, as mentioned last time, I did have a sort of entry-level type product for a while back in 2019, the “Top 5 Charts of The Week report” – which I previously ended up shutting down because it was kind of subscale (grey zone) and run with clunky hotchpotch admin. So with that history, why go through with it again?
This time: I had clear indications of demand and price (consulted with a few people that had specifically requested it), I also had lessons from that previous attempt, I also had a captive audience to pitch it to (social medial/email lists), but perhaps most important: Substack. Substack made it *easy* to run. Took away the pain of having to setup most of the admin and ops, and let me focus on quality and service.
In hindsight, it’s probably also a good thing that I jumped on the Substack opportunity because the other thing that Substack did was lower the barriers to entry and increase the supply/competition in the investment research space. So in some respects you could argue that I benefitted from this new wave of research providers, by kind of becoming one myself… which is always a good thing: better to swim with the tide than against it.
Solution in hand, product 1.0 prepared, launch was good to go (May 2021). The folk I consulted with were the first subscribers during the soft-launch, they were happy with it, and so then I hit the launch button and a bunch more came. It would be a lie to say that I wasn’t excited. Business is hard, so you have to get a win every now and then, and it sure feels good when you do.
As time went on I slowly added reference articles explaining the service and my story, and slowly stacked up habits and systems to make growth nearly automatic. As of writing, the entry-level service is about 20% of Topdown’s total ARR, and that number will probably go higher (but of course that will depend on what I do with institutional sales!).
On that note, through this process I basically reallocated any time I was spending on sales for the institutional service (there’s only so many hours in a day/week), and as noted saw almost zero sales for that side of things (virtually to the point of ignoring new inquiries from the website).
That’s one thing people probably underestimate about this business, is that institutional sales is hard work, time consuming, and often -frankly- a bit annoying (emails get ignored, timeframes slip, corporate jungles ensnare, budgets/politics/priorities all seemingly work against you). Anyway through all that, and given the success of the entry-level service I de facto soft-closed the institutional service to new clients, making it effectively a private and exclusive club … and again more or less ignoring new inquiries ---- except for: referrals from existing clients and my close personal contacts (i.e. those where I had some form of existing relationship or where someone I know can personally vouch for them).
This has been a nice quality of life upgrade, it suits my priorities, it is good for my existing clients as it keeps the core service exclusive, but it is a luxury that I have earned from putting in a lot of time and hard work to establish a viable and respectable institutional client list in the first place.
[having said all this, I entirely reserve the right to change my mind on this and maybe at a later stage open it up again and actively expand the client list, but who knows, I might not even have to – maybe the entry-level as a gateway and personal vetted referrals will be enough, let’s see!]
As for the outlook or next steps on the entry-level service, it’s basically about making some incremental improvements to the offering, and slowly implementing the long list of ideas I have to grow the service (yes I am still enjoying the dual challenge of figuring out markets and macro as well as figuring out business!).
But as it stands, it is growing well, and going well. Subscriber feedback (from surveys and in general) is overwhelmingly very positive. The specific comments and testimonials I have received have been exactly what I want to hear (validating what I am trying to do with the service in terms of the quality and how it hits in relation to the niche and needs I aim to serve).
Naturally this is about the point where I tell you to go subscribe!!! (p.s. don’t worry, there is a free Chart Of The Week email if you are not ready to invest in a paid subscription – and yes that is what we call top of the funnel, and yes you will be gently prompted to sign up from time to time, this is business!!! 😊)
So you want to be (like) me?
The funny thing (or unexpected thing?) about setting out and doing something a little bit different in life (and maybe even achieving some level of success) ….without intending to: without even thinking about it, you end up inspiring people (if only they knew !!!). I suspect there is probably a mix of some people being like “yeah! I want to do that too!” and some people being like “pfft, that guy can do it? I could definitely do it!” (did I ever tell you this industry has an oversupply of ego and hubris? 😊)
It has become a semi-regular occurrence that people will ask me about the path I have taken, and how they might go about doing something similar. To be clear, it’s not like I get asked this every minute of every day, but it happens often enough that I thought, hey let’s dig into it a bit here. Aside from helping those who are curious (and saving me a little time typing the same thing!) it is probably also a good way to provide a little further insight into this business and choosing your path.
First: I would say forget the “how” — you need to be clear about your “why”.
The “how” is actually relatively simple in the scheme of things, it’s the “why” that will more likely trip you up and cause you to go down pathways that may look nice and shiny but may actually lead you personally to dead ends.
As they say, the grass is always greener on the other side – but that platitude masks the real insight, which is that in life there are only ever and always *tradeoffs*. I would encourage anyone looking at what I do to *not* view it as some kind of easy way out. In fairness though, whenever you make a big decision in life such as going out and starting your own thing, there are always going to be push and pull factors, but the key point is that most people will not make their life net-easier by trying to “escape” from the problems they perceive in their current place. They will simply trade those grievances for other issues.
Or perhaps said differently: it’s all hard — there is no easy (or safe) path. Whether you want to be a portfolio manager, a trader, work in a big corporate, work at a small hedge fund, run a newsletter business, get into consulting and advisory, or really whatever your path in markets, it’s hard. It’s not supposed to be easy, and it’s harder still to be consistently good and earn what you think you’re worth, or what the big outliers earn (p.s. most of those investment/hedge fund billionaires are not ultra wealthy because they are an awesome trader, it’s mostly because they actually built a business that is bigger than them). So I would say 2 things: don’t trash or deride one particular path, and don’t think one is easier or better, they are just different and really the key is that they will suit different people and different objectives.
So really the main piece of advice I can hope to give is to have massive conviction in your chosen path. You have to want to do it for as far as you can see into the future, it must be the only thing you want to do (with no plan B), you must want it to be your life’s obsession, your passion, you get out of bed and charge to your desk because you’re so excited to get to work. This is necessary. BECAUSE IT’S HARD. And if you are just a curious tourist or a fly-by-nighter, or just chasing a fad or get-rich-quick, you will probably spin yourself off the field when you run into the first difficulty. You probably will not last the distance required to really breakout or break through the inevitable barriers. Or worse you’ll end up with a crisis of meaning.
And on that note, DO NOT choose whatever path you take just for the money, do not do it if you actually have other true interests and passions, and you think oh you’re just going to go over and make some money and THEN go and do the thing you really want to do. No! Bad dog! Don’t do it. Finance (and probably a lot of jobs and industries for that matter) is littered with unhappy unfulfilled and trapped people living quiet lives of desperation who may never get a chance to live out that someday where they get to finally do what they really want to do. Live your life consciously, yes think long-term and with practicality and pragmatism, but choose your path for the right reasons.
This was probably a lot more philosophical vs practical than you might have expected, but the thing is — this is the most important part to get right. If you do try taking this path (starting your own (research) business) it will probably take you at least 2 years to get a decent income -- IF AT ALL: failure is always an option. And that highlights 2 key points: 1. it is better to fail at something you truly believe in; and 2. it is better to take on something hard if you have the fuel of passion and meaning-full determination to pull you through (where your probability of failure also goes down because of this).
Take the time to introspect and reflect and get this right, otherwise, forget the how-to or the tactics or the one secret. And anyway, if you have the right mindset then you’ll figure it out anyway, and probably even come up with better ideas than I can ever offer (and what the heck do I know anyway – I’m still just figuring it out!).
But at a high level [ALERT: THE PRACTICAL HOW-TO PART], to be successful in this business you need to develop the technical expertise + IP + experience and pair that with market testing + client context + innovation to craft a unique offering that is fit for purpose and is actually good (adds value, builds perspective, educates, provides resources/tools, etc)… actually solves problems for your intended target market (vs just adding to their workload!). And then you also need to market like your life depends on it, and learn to sell, and always be selling (even if you get a sales person you need to sell them!). And get your admin/ops/systems as simple and smooth and streamlined as possible. You also need to choose your value-price model(s), choose whether you aim for: bigger is better vs better is better. You also need to know that you are entering a very competitive space (I think of the research industry as very similar to the restaurant industry in many respects, especially these days with new entrants multiplying)… you ideally want to stack a bunch of perhaps small but meaningful differences across all of the things I just mentioned. You ideally want to be a little bit better at a little bit of everything in your business – that is, IF you want to earn a decent wage, or at least take money out of the equation so you can just focus on your craft and enjoy life.
Above all, and tying it all together: in my view you want to focus on longevity. Set up so that you can survive for years on minimal income at the start, set your mindset and financial set and life set up so that you can and will want to stay in business for as long as possible. You will solve a lot of problems this way, and take advantage of many logical and natural benefits of just simply sticking around for long enough (e.g. talent development, reputation development, compounding growth, more and more trial and error iterations, build your track record, grow with clients, generally be able to be more strategic, and so-on).
The end bit
So there you have it. That’s what I’ve been up to lately with Topdown Charts and how some of my thinking has changed and developed to date. Hopefully you found this interesting and maybe even helpful.
As for parting thoughts, I wanted to come up with something poignant and interesting and meaningful, but instead I’m just going to copy and paste the last paragraph from my first 2 years in business blog, because somehow I think I managed to nail it the first time!
“My next 2 years in business (or the next 20 years for that matter) will no doubt bring fresh new challenges and perspectives for me and my family. In the mean time I'll continue to enjoy coming up with new charts and constantly improving not only the way I do business but indeed my service and impact with clients. I want to take the chance again to thank my clients and those who have in any way knowingly or otherwise supported me.”
Thanks for reading, and thanks for your support
Sincerely,
Callum Thomas
Head of Research and Founder at Topdown Charts
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