There was a great deal of interesting discussion last week based around a few blog posts. It started with a post on Medium entitled, The Myth of the Design Studio Turned Product Company written by Richard Banfield. Richard believes that the story of 37Signals, “unknowingly started the mythology that every design or development studio should become a product company” and concludes his article saying,
“As 37Signals releases yet another book and another great new product I’m reminded that I still haven’t got round to finishing my first book. They are truly productive and inspirational. Their business story is also a big distraction for firms like ours. I’ll continue to read their awesome books and use their thoughtful products but you can keep mythology.”
- The Myth of the Design Studio Turned Product Company
The best thing about that article however is the rebuttals that it inspired from experienced product people. In 37Signals isn’t mythical, you’re not paying attention Amy Hoy deconstructs the original post describing a history of the success of 37Signals far more closely aligned to my own memories of that time. I still remember the early work 37Signals were doing back when they were a client services business. Their clean style was in contrast to the chopped up images look of many of the sites of the time. Back then I still had some idea of being a web designer, and was inspired by their work.
I love the post from Allan Branch of Less Accounting There’s No Myth, Only Years Of Hard Work because it describes the long game that is launching a product, especially if you do it as part of an existing business. It is going to create conflicts of interest; it probably will mean working longer hours and needing to work on the product outside of your normal hours. Allan responds to the “myth” that It’s easy to go from client services to products by saying,
“It’s really really really hard. As you’re selling client services you’re also marketing and building a product, so you’re basically working two jobs. You’re promoting two company offerings, the product and the consultancy. In your brain you’re working through two problem spaces, juggling and assessing opportunities for two company, all without going insane or broke first.”
- There’s No Myth, Only Years Of Hard Work
As I’m currently writing a book about developing a product business as a side project, I obviously do believe it is possible to create successful product businesses alongside freelance or agency work. I also have personal experience of doing this, with our own product.
With Perch it took us four years to go from the point of being a consultancy to the point where we could state that we do not take on client work any more. During that time we slowly moved from Perch being a tiny part of our working week, and a tiny part of our income to it taking up more and more of our time – while at the same time representing more of our income. Perch was paying its way.
The hardest part was when we hit a 50/50 split between client work and Perch work. We were at a point where we had decided that we would really love to be purely a product business, yet we still had major projects in hand. These projects were enjoyable and profitable but they pulled our focus away from our own product. By this point we were also dealing with a lot of technical support for Perch, and as developers dealing with those interruptions was hard.
It is important that, if you want to go into the product business, you do so with your eyes open and understand the amount of work and timescales you can expect. However I believe that for us there were some major factors in being able to make the transition in a relatively straightforward way.
We started small
The initial version of Perch took about four weekends to build. It was new code, however it stood on the shoulders of a lot of experience in building custom CMS products. We spent about the same amount of time on infrastructure to actually deliver and support it. No distraction, or endless hours of work poured into the idea.
Our initial goal was to sell a copy a day. If that is all we had ever achieved Perch would have still been bringing in each year an amount of money equal to one of our decent sized client projects. We saw that as a realistic goal and one that would make a difference to our business.
We chose a realistic pricing model to enable the product to be a first class citizen alongside client work
Once Perch was making money we treated it like a client project. We knew what we had to bring in each month to survive as a business, and so if we were to spend a day a week on Perch, it needed to be bringing in that amount of profit. We had been very deliberate in selecting our pricing model for Perch to be sure that if it became a success it would make us money. With a self-hosted CMS, with a target market of designers who might be new to PHP, we knew we would be getting a reasonable amount of support.
Our ideal customers were already following us
The ideal customer we had in mind for Perch was a freelance designer or developer, or a small agency. Both Drew and I have been writing books and articles for web designers, and speaking at industry conferences for years. To market Perch initially we just had to tell people what we were doing. There was a level of trust already that if we were doing something, it would be of a certain quality.
As Allan wisely notes,
“Spend five hours on the HackerNews front page and get a few thousand uniques from the most cynical, judgmental visitors you can imagine.”
In comparison our early customers knew and trusted us. They were friendly and excited to help us improve the product, rather than judgmental and looking for problems. Those early customers helped us to validate the idea, come up with the next set of features and also spread the word. Marketing to your own tribe takes a lot less time and money.
It was useful in our existing business
As Amy points out, 37Signals were using Basecamp to enhance their business in the early days,
“Basecamp was a competitive advantage for 37signals: The Consultants. And they turned that into a product for other people in their audience.” –
Perch acted in the same way for us. The initial idea had come to us because clients were asking for something to use for their smaller projects, rather than the bigger CMS framework we had developed for the large, custom jobs. Even if Perch had not taken off as a product we would have still had it to enhance our business. No time would have been wasted in building it.
We set up systems
We had a helpdesk in place right from the start, rather than ending up with everything pouring into our email clients. We made great use of the APIs offered by PayPal and our accounting package Xero. We developed a process of trying to design support requests out of the product, instead of spending time helping people in support we thought it better to try and stop that issue occurring.
When I talk about this, people often assume creating process is just for big teams. However even if you are a team of one, having a process means you don’t waste any time deciding what to do. It also means you are ready to scale and add team members if things suddenly take off.
It will take work. It will take time.
Launching a product of any sort is going to involve work. It could become a dangerous distraction to your core business.However, if you are already running an agency or freelance business you have project management skills, you know how to work to a budget. Treat your product as a first class citizen in that mix and you can grow a successful product business as a consultancy.
- Have you always wanted to launch a product and supplement your freelance income or job with recurring revenue?
- Do you struggle to make decisions about pricing models, taking payments or providing technical support?
- Do you find that it is hard to make time to create a side project?
In my practical new book, I'll help you answer all of these questions and more as you work towards the launch of your own revenue generating side project.