Jeremy Kunz via Compfight

There are countless web consultancies out there. Major cities may have dozens of high-quality shops and even the smallest of towns will likely have at least one consultancy. A common sentiment that I hear from those in the consulting business is that they wish they were in a product business. They don’t like the endless cycle of finding new clients -> proposals -> contracts -> project management -> finishing up -> starting again. They want to transition from the “find new clients” cycle to building their own web products and working solely for themselves. It’s a noble goal, but not necessarily right for everyone. This article is all about the considerations you have to make when thinking about moving to a products business.

Definition Time

Companies can categorize themselves many different ways, so I want to define what I mean by consultancies and product shops. A consultancy is a company that earns revenue through client work. Client work can be anything from design and development to marketing. The defining factor is that a consultancy needs clients to exist, not customers.

A product company has ideas for web apps, services, or mobile apps and then acts on those ideas. Rovio (the Angry Birds maker), for example, is a product company. The key characteristic of a product company is that it relies on customers for revenue, not clients.

No Guarantees

Successfully building web products and apps for others, even great ones, doesn’t necessarily mean that you’ll be able to have that same success in executing your own ideas. When you’re consulting for another company you don’t have a real stake in how well the end product performs. Sure, you’d like for all of your clients to be successful and come back to you with new business, but that’s not crucial to the success of your consultancy.

When you start relying on a products business to pay the bills the stakes get much higher. Graphic cues, copy, user interactions, and, most importantly, the concept, all have to blend together well for you to have any shot at success. If your consulting background hasn’t prepared you well for those additional responsibilities then you’re gonna have a bad time.

Your Team Might Not Fit

The consultancy-to-products transition will have a tremendous effect on your entire team, and that needs to be seriously considered before making any such decisions. You may have a team of individuals who enjoy working on completely new projects… something that won’t happen as often in a products business. You may also have skills in the consultancy arena that don’t translate to products, or you may have a shortage of skills. Examples:

• Your consultancy may not have the marketing skills or product development knowledge to get rolling immediately.
• You may not need a sales team in the products business.

Every situation (and team) is different, but it’s important to understand how your team maps from one business type to the other.

My Advice To You

If having a products business is truly your desired evolution for your consultancy then that’s what I want for you as well. I just want you to be successful. Think through these questions to give yourself a better shot at success.

1. Give an honest evaluation of what your daily life would look like once you’ve started working on products full time. Sure, you’ll spend less time dealing with clients, but you’ll just replace them with customers that need even more attention. Does this still appeal to you?

2. Decide how to fund your products business. Are you still going to do consulting while growing products revenue? If so, how do you staff both ventures without doing a disservice to either? This is where having a larger team makes the transition much easier.

3. Do you want to operate the products business as a completely new entity? If you’ve grown your consultancy to the point that you can afford to split off a product team into a new company then that should be considered. That’s how we do it here. MediaLeaf is the product company, and Deep Field is the consulting company.

4. Start small. This applies to everyone looking to start a products business, not just those moving from consulting. I whole-heartedly recommend starting with a small product first, just to get your feet wet. This will minimize the chances of you spending 6 months building a product that absolutely no one wants. Baby steps.

A Different Approach

I took the opposite approach when growing my companies. MediaLeaf started in 2002-ish and has been a products business from Day 1. I bootstrapped MediaLeaf, did a ton of development work, outsourced design work, and grew revenues to the point I could start hiring team members. After years of growing MediaLeaf I had contacts at other many companies that started asking me for advice, so it was a no-brainer to eventually start a full-fledged consultancy. I haven’t finalized how to grow and operate the consultancy going forward, but I feel strongly that it will be successful because of all the experience we have building products. The bottom line: Starting a consultancy is a easier after running a products business. The opposite isn’t true. 

Finishing Up, Finally…

I didn’t intend for this post to be so long, and I probably could have split it up into 2 separate posts. There are many more items that I could add to this point, but I won’t. The length here just helps reinforce the idea that there’s a lot to consider before making the transition to products from consulting.

What’s your take? I’d love to hear from anyone considering making the transition. What advice do you have for consultancies looking to evolve?