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Transitioning From A Web Consultancy to a Products Company

May 14, 2012 by · Leave a Comment

Morning Kiss 120/365: Grass
 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?

Filed Under: Bootstrapping, CEO, Entrepreneur, Features · Tagged With: , , , , , , , , ,

7 Tips For Marketing With A $0 Budget

May 1, 2012 by · Leave a Comment

Injured Piggy Bank WIth Crutches
Photo Credit: Ken Teegardin via Compfight

Marketing is hard. It’s hard when you have a large budget – but it’s simply daunting when you have a small budget, or no budget at all. There are things that you can do right now to market your product even if you have no budget.. all it takes is time, commitment, and a willingness to hustle.

1. Blogging

Blogging is still cool. It’s the best way I know of to provide quality content to your customers. Consistently posting high-quality articles to your blog, that are highly targeted to your particular industry, will lead to long-term gains. A blog is playing for long-term success… no overnight miracles here unless you hit a grand slam with an article that happens to go viral.

2. Videos & Screencasts

Videos are similar to blogs in the way that they provide high-value content to users. Again, this is a long-term plan for success. Screencasts are good idea if you have a product that lends itself to that type of instruction.

3. Social Media

Social media is somewhat different from blogging and screencasts in that it connects you directly with your target audience. Blogging mostly requires waiting for your audience to find you (although there are ways to speed up the process). Social media is more proactive and leads to quicker results. The downside to social is that every day the noise increases just a little. More and more companies are using social to push their brand, which means it’s getting easier for your message to get lost in the shuffle.

4. Leverage Your Existing Network

I would imagine that anyone who has been in business for any decent amount of time has a large network of contacts. You should absolutely  leverage your contacts for marketing purposes. Let them know that you would appreciate any referrals or leads that they can give you and they will, usually, gladly keep you in mind. The better your relationship with them the more likely they are to send referrals, so it’s always important to cultivate relationships and build strong bonds.

5. Hustle Relentlessly

It’s all about the hustle. Success in marketing is pretty similar to success in just about any other area of your life. The more you work, the harder you work, and the harder you hustle will bring you more success more quickly. Never pass on an opportunity to market yourself or your product. Relentlessly follow up with new contacts and leads. Constantly strive to get you or your product’s name out there in front of your audience.

6. Utilize Your Biggest Fans

Your fans are your most potent weapon for free marketing. They are already sold on you, so get them to help you spread your message. A true fan’s value can’t be measured. They are willing, and even anxious at times, to promote your products for you. They believe in you so much that they feel compelled to help. Identify your biggest fans and give them the tools that they need to succeed.

7. Forums

I consider forums and message boards to be a different animal than social media. Forums are an older type of community and require a different strategy for success. No matter what industry you’re in there’s going to be a forum that servers your desired audience. Spend some time identifying those forums and start participating in the discussion. Be sure to pay attention to the forum’s rules and make sure that you don’t come across as spammy.

What other strategies for low-budget marketing have you used successfully?

Filed Under: Bootstrapping, CEO, Features, Marketing · Tagged With: , , , , , , ,

The Continuing Evolution of Facebook

March 5, 2012 by · Leave a Comment

Pinterest

The evolution of social continues to march forward, unabated. Facebook is evolving (even though I suggested that Facebook was in decline a while back), but upstart niche networks could start pulling traffic away soon. How is Facebook handling some of the new social media paradigms?

The Growth of Asymmetrical Following

Google+ was hot for about 10 minutes last year. Now it’s largely faded away. If it wasn’t baked into Gmail I don’t think we’d ever see anything from G+. However, the one feature that Google+ really got right was the concept of Circles, which is Google’s implementation of asymmetrical following.

Asymmetrical following, made popular by Twitter, is a key feature in Facebook’s evolution too. Last year Facebook introduced subscriptions, which has allowed mainstream users access to celebrities and high-profile users. Subscriptions allows a user to see all of the public posts by an individual and have added a new twist to the stream.

Pinterest and the Rise of Sharing

Pinterest has quickly become the hottest startup in the social media world. The concept is quite simple… just share the things that interest you. I’ve heard from a few sources that Pinterest itself has a user-base of about 98% women, which means that male counterparts will be coming soon. GentleMint is the first male-oriented pinboard to hit the market and is currently in invite mode.

It appears that sharing is the next wave of social media. First, we had personal status updates. Now we’re moving toward users sharing their hobbies and creations a little more. Less personal, more useful.

Facebook and Sharing

It will be interesting to see how Facebook responds to the sharing phenomenon. Will they allow networks like Pinterest and GentleMint to continue to grow without reacting, or will they try to replicate some of the most popular features as they did with Google+?

What’s your take? What does the future look like 1 year from now in regards to Facebook and Pinterest? More importantly, what’s the next evolution of social?

Filed Under: Features, Social · Tagged With: , , , , , , ,

BS50 Part 7: Do You Need A Cofounder? – The Cons

February 10, 2012 by · Leave a Comment

Bootstrapped Startup 50This post is part of the Bootstrapped Startup 50 series. The goal for the BS50 series is to cover everything that matters when bootstrapping a new startup. The posts are sequential, so it wouldn’t hurt to read from the beginning if you’re just joining in. 

In the last installment of the BS50 we talked about why having a cofounder could be a good idea. This time we’re going to take the alternate side and point out a few things that could be detrimental to your startup.

Personality Conflicts

Startups and small companies truly are like families. Everyone has to spend a great deal of time around each other and everyone has to rely on each other for success. There are no inconsequential team members when a team has only 2 or even 5 employees. Everyone has to work well together or the quality of product shipped will suffer. Personal conflicts between team members can upset the delicate balance in small teams.

This risk is heightened significantly when you’re considering a cofounder. A cofounder is going to bear a significant portion of the decision making responsibility, so trust and understanding are absolute requirements. To be successful you’re going to have to implicitly trust your cofounder, letting them handle their area of expertise without your input. If you don’t get along with your cofounder then the startup will necessarily feel that discord.

Financial Considerations

A cofounder, depending on your specific stock and financial agreements, will necessitate a large portion of income generated. This is somewhat less important if the company gets off the ground quickly and starts earning enough revenue to cover expenses. But what happens if the fledgling company struggles along for a year or so and there isn’t enough revenue coming in to pay either cofounder enough to keep them around?

Long-Term Stability

The long-term goals of your cofounder should matter when making decisions. Are they in the company for the long-term or are they just going to dabble in your startup for 2 years? A committed, long-term cofounder is significantly more valuable to your company than someone who’s just looking to help you out for a while or wanting to get out of their current job.

Your Take

What are your thoughts on bringing in cofounders? Have you had any experiences with a cofounder before? Please share in the comments.

Next up we’ll talk about the potential pitfalls of adding cofounders.

Filed Under: Boostrapped Startup 50, Features · Tagged With: , , , ,

BS50 Part 6: Do You Need A Cofounder? – The Pros

October 26, 2011 by · 1 Comment

Bootstrapped Startup 50This post is part of the Bootstrapped Startup 50 series. The goal for the BS50 series is to cover everything that matters when bootstrapping a new startup. The posts are sequential, so it wouldn’t hurt to read from the beginning if you’re just joining in. 

The decision whether or not to have a cofounder for your new venture is one of the most critical that you’ll make. It will affect everything from how the company is operated to how much money you personally make once you’ve built a successful business. There are many things to consider, and it’s not a decision that should be taken lightly.

I’m going to split this discussion into two parts because it may get a little lengthy. In this post I’ll hit on the advantages of bringing a cofounder in.

Cofounders Vs Employees

First, a quick note about when you should choose a cofounder instead of an employee. Early on you’re most likely not going to have any revenue, so hiring an employee immediately creates an expense that has to be paid. If you’re considering hiring someone who is extremely talented and that you trust implicitly then you should consider making them a cofounder (co-owner of the company) instead. If they’re passionate enough about your idea then they may forego some salary now for ownership considerations and deferred income a little further down the line. Cofounders are inherently more invested in the company’s success.

Complementing Your Skillset

Bringing in a cofounder whose skills complement yours, not mimics them, is a great way to round out your newly formed organization… they can be the yin to your yang. If your startup is a web company and you’re a designer then you’ll probably need to bring in a developer. Bizdev types will probably need someone technical, depending on the industry. Having founders with a combined skillset that covers the majority of the work needed to get a company off the ground is a luxury and probably gives you a better chance at success than going it alone or having to rely on contractors and new-hire employees.

Cofounders Are A Force Multiplier

The initial work required to get your product to an MVP state or an early alpha stage is daunting. Being able to split that workload will help you get your product out the door sooner and let you start the even longer process of building a profitable product earlier. This force multiplier allows you to more aggressively tackle opportunities and challenges, go after bigger clients, think bigger, etc.

Your Take

What are your thoughts on bringing in cofounders? Have you had any experiences with a cofounder before? Please share in the comments.

Next up we’ll talk about the potential pitfalls of adding cofounders.

Filed Under: Boostrapped Startup 50, Features · Tagged With: , , , ,

How To Stop Worrying About Building An Audience And Just Get Started

October 24, 2011 by · Leave a Comment

Descending the summit ridge

Have you ever thought about starting some sort of venture and found yourself wishing that you had done it five years earlier? I certainly have, and I’m willing to bet that you have too. That’s what I  was thinking when I was in the process of starting this blog. I knew that growth would be slow and that it would be discouraging at times. I thought that if I had just started this blog five years ago when I first entertained the idea then I could potentially have a huge following by now and have surefire international fame and notoriety.

The best motivation I’ve found to combat the five year remorse is to just get started. If you don’t get started now then you could regret it five years from now, wishing that you had finally acted upon your idea. Just do it. If it’s going to take years to get where you want to go then there’s never a better time to start than the present.

Your Homework

What have you been putting off doing because it seems daunting or because you know that success is years away? Go ahead and put that idea into motion. Get started by doing something concrete that will help push the idea to fruition. Start that blog, contact that lead, just do something. Let me know what you’ve done in the comments.

Image credit: mikep on Flickr

Filed Under: Blogging, CEO, Entrepreneur, Features, Tips and Tools · Tagged With: , , , ,

BS50 Part 5: Your Unique Skills and Why They Matter

October 20, 2011 by · Leave a Comment

Bootstrapped Startup 50This post is part of the Bootstrapped Startup 50 series. The goal for the BS50 series is to cover everything that matters when bootstrapping a new startup. The posts are sequential, so it wouldn’t hurt to read from the beginning if you’re just joining in. 

Would-be startup founders are typically a confident bunch, knowing what they want to do and having the confidence that they can be a success. They also typically have a skillset that allows them to think big.

The Things That Make You Special

Successful business owners, and particularly founders, have special qualities that allow them to deal with all of the issues that arise during the process of building a company. They may have tremendous leadership skills that allow them to rally teams together to pull off the impossible or an innate creativity that allows them to see things in ways that no one else ever has. Maybe it’s drive and a passion to succeed that helps you overcome the never-ending series of obstacles to success.

If you’re considering starting a company of your own then you have something special inside of you as well. You need to fully understand yourself and the special traits that you have. Building a company may be one of the toughest challenges that you’ll ever face, so you certainly want to make the most of your abilities. Don’t leave anything on the sideline. Identify your special skills and cultivate them; always be improving.

Be Careful – Don’t Let Your Talents Get Stale

Working in a small company means that you have innumerable tasks that need to be done. Having to focus on all of those disparate tasks can have the unintended effect of taking you away from what you’re really good at. Try to continually keep your skills sharp by focusing on tasks that require your particular skills or even creating small tasks that could be beneficial.

I personally have experience with this problem. I used to be particularly good at several software related things, Microsoft VBA, development, and the like. Now, I can barely even read the code. I wish I would have taken a little time over the last few years to keep a couple of those skills sharp.

Your Thoughts?

What are some skills that you make you particularly successful? What rare skills do you see in others that you think would make them good startup founders?

Next up we’ll talk about the pros and cons of cofounders.

Filed Under: Boostrapped Startup 50, Features · Tagged With: , , , , ,

Time is Your Most Precious Asset

September 19, 2011 by · Leave a Comment

Couldn't resist it!

Never has the title of this post bene more true than in the last few weeks. I’m juggling a lot of MediaLeaf projects and I’ve recently purchased a new home, so time has definitely been a diminishing resource lately.

Times like this are a good opportunity to take a step back and look at everything you’re doing. Is everything that you’re working on directly related to your bottom line? When you’re pressed for time, as all of us are, it’s hard to justify spending your work time on anything that isn’t directly related to your bottom line or charitable pursuits. Here are a few ways to make sure that you’re focusing your energy and time most effectively.

Record Everything

For a few days, or even a whole week, keep a notepad with you and record all of the tasks that you spend your time on. You don’t have to keep diligent records of how long you’re actually spending on a task, just record what the task is. At the end of your experiment look through the list and see what unnecessary items you’re doing. There’s bound to be a few things that can either be delegated or ignored altogether.

Delegate More

Many founder and CEO types have problems delegating, especially in smaller companies. You’re used to doing all of the work yourself and feel most comfortable that way. I used to have that same problem, but over the years I’ve realized that there just isn’t enough of my time to go around and that I have to delegate low level tasks.

Delegating also means not spinning your wheels trying to figure something out. If you’re working on a project and run into a problem then it’s OK to get someone else to help you. You don’t have to waste time just so that you can figure it out yourself.

Focus

This one goes without saying, but it’s particularly hard for me. I have a tremendously short attention span, so it’s hard for me to concentrate on one task for more than 3-4 minutes at a time. I’m constantly playing with new methods and tricks to lengthen my attention span. If you have focus and attention problems then keep trying to make improvements. I’d love to hear your suggestions in the comments.

Image credit: blinkingidiot on Flickr

Filed Under: CEO, Features, Misc, Tips and Tools · Tagged With: , , , ,

Building a Bootstrapped Empire

August 5, 2011 by · 1 Comment

London Landmarks Pattern

A bootstrapped company can definitely grow to the point where million dollar revenues are common, but that’s not for everyone. If you intentionally want to keep your team small while maximizing both revenue and profit then a simpler route may be what I call “Empire Building”.

Empire Building is growing your revenue (and therefore profit) by acquiring other small, bootstrapped companies. This requires already having a product with substantial profit, probably at least $125k/year. Taking some of that yearly profit and investing it in other bootstrapped companies allows you to diversify your product portfolio and decrease risks related to a decline in your primary business, while increasing revenue and eventually (after the payback on the profit multiple) growing profits.

What Types of Acquisitions to Target

The types of acquisitions that make sense will vary between companies, but the targeted acquisition should definitely be complimentary to the abilities of your team and your overall manpower. It doesn’t make sense for a company with 5 people to buy a business that’s heavy on the administrative workload. If, however, you operate an affiliate marketing company with a couple of employees then adding a few new affiliate sites through acquisitions isn’t likely to be a burden on your team.

Things to Consider Before Making an Acquisition

Each acquisition is going to bring with it a management cost. You need to have a good idea of all of the management time, expenses, marketing effort, SEO effort, etc. that’s required to reach the stated profit. Due diligence is critical to being able to reach the same profitability for the target as the current owners. It’s always a good idea to get the sellers to agree to work with you for a month or so to help you get the acquired company functional on your end and on the road to similar profitability.

A different mindset is required when running multiple companies (or business, brands, whatever you call it). Your attention will be necessarily split between the companies, making it slightly more difficult to make progress on any of them. If your team is large enough for you to be able to assign product managers to each business then that’s a great solution. It’s easier to be the CEO of a company with 1 product making $200k per year than it is to have 5 products each making $40k per year.

Your Thoughts?

Does your company plan to have multiple products, or do you focus on just one business? Is “Empire Building” a concept that makes sense to you? Would you be interested in a series about Empire Building?

Image credit: dimitratzanos on Flickr

Filed Under: Bootstrapping, CEO, Features · Tagged With: , , , , , ,

Interview With Dirk Stevens of Wondergraphs

July 28, 2011 by · 1 Comment

Dirk Stevens of Wondergraphs

This post is part of an ongoing series of interviews with successful entrepreneurs who have bootstrapped their companies to profitability. Read the other entries in our Inspiring Interviews series.

Wondergraphs is a beautiful, simple-to-use reporting and analysis service that has recently started to take off. Dirk Stevens is responsible for product design and business development for Wondergraphs. They are bootstrapped and successful; a great story. Here’s my interview with Dirk.

Me: Tell me about Wondergraphs and what you do.

Dirk Stevens: Wondergraphs is a Software-as-a-Service platform for business analytics and reporting. We want to help businesses get value from their data in spreadsheets and databases and help them to share reports with stakeholders in a simple, easy to use and efficient manner.

My role in Wondergraphs is focused on product design and business development. I am an all-round guy with a passion for technology and business so you could say this is my dream job. My colleagues Kim and Ruben are technology wizards and build our magic – from product to infrastructure it’s amazing what these guys pull off. In addition they do the day-to-day interaction with customers on everything related to technology.

Me: How has bootstrapping played a role in the growth and development of Wondergraphs?

DS: Bootstrapping has primarily meant working with a limited budget. I don’t think we would have done things differently if we’d have had an investor on board; we’d for sure would have moved a lot faster.

Bootstrapping keeps us focused on cash, keeps us lean and keeps us on the customer development path in a natural manner.  Those are the fundamentals for a sound business. But bootstrapping can be miserable too. When you know you could move faster if you had just a little more cash or when the team is so small that you have to do things you are not that good at or don’t like doing. In a funded company the roles in the team are more specialist and focused and probably more efficient.

It’s said that with outside financing entrepreneurs are less hungry. I am not too sure about that and I am not sure if that’s so relevant. A good entrepreneur certainly wont be less hungry! And with more people and money on board from the start, it could be that some people have a lessened sense of urgency, but from a pure business progress perspective 10 people giving it “just 90% is still twice as fast than 3 people giving it 150%…

Now that we’re through the tough parts of building the business and we’re at the point of scale, I am happy about the great things we learned and achieved. I recently met with a fellow entrepreneur who has been funded with several $million and he is jealous of our independence, while we are jealous of his resources.

Me: What marketing advice do you have for other startups on a bootstrapper’s budget?

DS: Ooh…I believe marketing is something we could have done better so here’s some thoughts on principles that I believe set the tone for how we market and sell.

Build a beautiful product that eases a real pain of real customers. We’re down to earth guys who believe in classic economics: offer clear value and charge fair money for it.

Be real and love what you do. If you take pride in building your business and making a difference in your market then people feel that and like to be associated with you and tell their friends and colleagues.

Take things step by step. Our first marketing campaign was sending a video of our beta version to a few potential customers.  We didn’t want to bite more than we could chew. We have a complex product and in the beginning our technology was too immature to handle many customers at once. Our TechCrunch article last week was our first large scale marketing and was planned a long time ago because we wanted to make sure that we’d be able to support many customers.

I’d ask all fellow entrepreneurs to please keep your marketing environment friendly and limit the useless plastic marketing crap. We can do without all that polluting crap we receive in the mail or when visiting a conference. (How many bottle openers, bags, mini-mouses and whatnots do we need?!)

Me: What advice do you have for new entrepreneurs when it comes to choosing between bootstrapping and seeking outside funding?

DS: Rather than spending time on courting people with money by running spreadsheets and predictions of the future, I believe you should build your minimum viable product and start selling as soon as possible so you get money from customers and learn from your customers. Your customers are really your investors – they’re as vested in your success as you, they give you money, quality time and feedback, and they certainly don’t want to run your company!

Maybe along the way, you’ll find an investor who shares your passion for your product or market and can afford to fund you based on your dreams (because you probably have little facts to prove it’s more than dreams) and that would be great, but don’t count on it.

Software development freelance work is in general easy to find and well paid, so we started Wondergraphs with a few months consulting projects to get some cash in.  That cash gave us about a one-year runway.

Me: What financial advice do you have for other bootstrappers out there?

DS: I have got a question on scaling growth that maybe on other bootstrappers’ minds also? At what point would you consider attracting outside funding and what form would you prefer? Or would you rather fuel your growth by giving out more stock options to hire talent? Have you ever thought of asking partners for some form of investment?

Your Turn

How would you respond to Dirk’s questions? I’ll post my own response in the comments.

Please take a few minutes to look at the Wondergraphs blog and follow Dirk on  Twitter. Thanks again to Dirk for the great interview.

Filed Under: Bootstrapping, Features, Interviews, LeanStartup · Tagged With: , , , , , , ,
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