

Why we gave up web design after 10 successful years to move to products - paulsilver
http://blog.silktide.com/2011/07/why-we-gave-up-web-design-after-10-successful-years/

======
dpcan
Web Design: The business where the more successful you get the more you want
to kill the business.

If you are in a services business, and you catch the products bug, it's all
over.

This is my own opinion of course, and based on my own experiences.

When you enter the Web Design business, you do so because you are both
technically capable AND creative (hopefully). The business honestly feels
perfect, like what you were MEANT to do.

Then the Client steps in.

You realize that your creativity is rather meaningless. You can be given "free
reign" to come up with a design, but at the end of the project, the Client
will probably murder it with no regard for your expertise. Your creativity is
stunted, and your soul dies as you have to start asking for permission to
implement every bit of genius you want to throw at a project.

Then there's products. You create them yourself, for who you believe the
customer may be, and your creativity and know-how form the product. When you
are done, it's your own masterpiece. Now you sell it. Some will buy it and
love it, others will buy it and hate it, others won't bother, others will tell
the world.

But it's all OK. You keep iterating. When your "customers" give you feedback,
you don't have to implement everything. And the things you do implement are
usually loved by yourself AND your customers.

Like I said. If you are a "services" person and you get a taste of the
"products" world, there's just no turning back.

~~~
chc
That's a little unfair. I think the eating-regularly aspect of the services
world appeals to a lot of people. That's more hit-or-miss with products, and
certainly more delayed in most cases. If you're good at what you do, you can
pretty reliably make decent cash on a contract. If you're selling a product,
you can make alarmingly close to zero dollars a month before it catches on
(which might be forever).

------
peteboyd
Dealing with clients is all about setting expectations. I really view our
contracts as just the expectations codified and hopefully never read again.
The key is what the clients actually expect you to deliver. If we ever have to
turn to the contract language, we have already lost something in translation.

I won’t go over all the articles points; I think it is well written. I am a
bit envious that they have a product to transition too. However, I will point
out two ways to help small agencies deal with clients. Specifically on how to
take payments and whether to accept certain clients. Both of these areas will
help alleviate stress in running the business.

1\. Not getting paid. To fix this issue simply demand more up front. We start
projects at 75% due. Have done this for 10 years now. Larger contracts, over
$15,000, we will start with a 50%, 25%, 25% split. We have never started a
project for less than 50% of the entire.

The key is that you never work on collection model. Never send an invoice for
work completed. You always are working from your funds you have, so you are
never at a loss.

Sure some clients balk at the higher up-front costs, but do you want those
clients? Stick to your guns. If a client likes you and your portfolio, they
probably will sign even if it means a bit more upfront costs.

2\. Owning your time. We get our fair share of "interesting" clients, but have
found a way to weed them out in the sales process. This way we only work with
clients that we like and want to help. Key tips that it will be a
"interesting" project and you may want to pass:

\- Wanting to change our standard contract. Our contract is a short 1-page
that is really fair to both sides. The more they change the harder the project
will be, always. Stick to your contract. \- The client needs to start, now,
now, now. Basically someone internally has dropped a ball in scheduling and
now it is your problem. Charge more to help them or pass on the project. \-
Disorganized email chains and hectic meetings. The client won't suddenly
become organized during the project, which means you are now their organizer.
Have fun with that project if you accept, but charge more for project
management.

Anyways, I think going the product route is great for web agencies. But you
can make a successful agency model work and have fun, we have for 10 years
now.

~~~
rahoulb
I'd love to know a bit more about what your contract looks like. I've had real
problems with getting clients to agree to pay 50% upfront in case I vanish
(I'm quite happy to admit mine is a tiny, 3 person, company) and I'm guessing
you must have clauses in there to put their mind at ease.

~~~
peteboyd
For the vanishing issue, I tell clients that:

a) Look at our portfolio and call our existing clients, b) that we do most of
our work in the first few weeks of the campaign so it is only fair to pay that
high of an amount, and c) I don't want to have to pause the campaign to wait
for a check, it just ruins the flow.

I have not really changed our contract in 10 years. It used to just be me and
now we have 13 full-time, a few part-time and a few freelancers. So I know it
can work and expand the business.

I really think that 50% is needed to start. It helps weed out clients that are
hoping to get funds, or get free ideas, once the project gets going. It shows
both sides are serious in committing their time and effort.

If you want, I can send you a sample contract. It is US law based, but the
ideas are the same for your law. Just fill out one of our contact forms with
your email and I can hit you back with the PDF.

~~~
rahoulb
Thank you - I appreciate it, that's really kind of you.

------
PaulHoule
Hell yeah.

I'd never do that kind of stuff on a fixed price contract. I'd rather wash
dishes or wait tables. Some of that work can be fun if you do it on a time &
materials basis, but there's certainly less of that around.

I've seen a few companies try to move from 'contracting' to 'product sales'
and it appears to be a difficult transition.

The problem is that web shops tend to be driven by success at sales and to be
undisciplined about business. They find it impossible to make a "to not do"
list and stick to it. There's always the old client who's got a crisis that
you need take care of, or the new client who's got deep pockets which (you
think) will pay for product development.

A few months later there's the inevitable meeting where it turns out that the
product is terminally late -- if the software developers have a backbone,
they'll point out that they've spent 60% of their time on "legacy" projects so
no wonder it's late.

------
justincormack
Charging by the hour kills the incentive for productivity gains, which
generally arise from building internal or external products that help you do
things better. It kind of works in fields like law where the delivery has not
changed much over the years, but delivering technical services like anything
else in the technology business changes very rapidly.

Clients somehow need to be sold the idea that they will get better and cheaper
delivery if they accept fixed costs, so that services can be productised, made
profitable and improved, rather than buying one off non repeatable time for
everything.

We are sort of seeing this as we get an increase in the number of product
businesses being started, and so more types of activity are being productised.

~~~
danoc
If anything, charging by the hour not only kills the incentive for
productivity gains, but also lowers a designer's productivity.

~~~
talkingquickly
Agree for very well specified projects where the amount of time a project will
take can be easily be predicted and so a suitable fixed fee identified.

In an ideal world all projects might look like that but in practice I think
there's a chunk which don't. Agreeing fixed fees for these can be a horrible
productivity killer because the estimates will tend to be way off and an "it's
impossible to do this in the time/ budget allocated so why both trying"
mindset can set in which de-motivates everyone working on it.

In this environment I think fixed fee can encourage corner cutting so for me
it's about taking projects on a case by case basis and deciding whether fixed
fee or time and materials is appropriate based on how predictable the scope
and workload will be.

------
prawn
Would love to know how many web design company owners are reading this article
and thinking "Could I?"

I've run a web design company for 13 years (currently a team of three) and
it's tough work. To your friends, you're the guy who can work anywhere and at
any time, charge a decent hourly rate, etc. Reality is you're juggling hosting
and domain invoices, maintaining decade-old sites, having your designs ruined
by weird requests and on it goes. For every gem of a client, there is a
difficult project that was tough to foresee or avoid for whatever reason.

My problems are never contract-related (I don't bother with them at all,
figuring that if a relationship ever needs to refer to the contract, it's as
good as lost) and rarely about being paid (the money gets there eventually). I
also don't worry about competition from smallfry (rarely unhappy to lose a job
because I'm too expensive). Yet even without such critical issues as legal,
billing and competition, it's still a difficult line of work.

Why don't I experiment with products more? Since I am the client, I can't give
myself a serious must-hit deadline and that final 10% never gets done. I also
get distracted by the next idea before I finish the last one.

------
Swannie
tl;dr: The work was varied and interesting. We were trading time for money. We
feared firing customers for lack of cash flow. There is too much competition,
and margins are thin. We failed to expand our market. We took almost any work,
so felt we could not control our wider contribution. We started to create a
product, but could not stay away from getting paid for our time. Eventually we
cut the web design work, as the margins were getting even tighter. Now we have
two products, which we are proud of, but don't know if they will make a
successful business.

Sounds a little to me like the story of Pyra Labs, and many others that I
can't recall.

~~~
krmmalik
Yeah we're currently trying to do a similar thing with our company except we
started in IT Support

------
jinushaun
As someone in the field, I can totally relate to this story. After a while,
web design starts to feel like a treadmill. You really have no control of your
own destiny and have to constantly rely on a consistent flow of new clients.
The better you get, the more expensive are your services. Unfortunately, web
design is a commodity so you're constantly being nipped away by cheaper
competitors. It feels like a bubble waiting to burst.

The only way out is to create a product that can be packaged and resold to
many different clients. This allows you to focus and develop one product,
instead of spreading your talent across multiple projects. More importantly,
it allows you to control your destiny because you schedule when and how
releases happen.

It's farming, versus hunting and gathering.

~~~
jordanlev
Just want to chime in here with my own experience. I'm sure what you said
holds true for you, but for me I find that the better I get, the _less_ I'm
being nipped away by cheaper competitors. Perhaps this is because of my
specific skillset (I'm a web developer, not a designer -- although it's
basically the same setup, same kinds of jobs, same kinds of clients), but I
find that as I get better at what I do I gravitate more towards clients that
appreciate high-end service and the quality I can provide (as they do me).
I've also found that focusing on a smaller technical niche has helped
tremendously (that is, getting really good at one platform -- in my case the
Concrete5 CMS, but same holds true for people specializing in Wordpress,
Drupal, etc.). Yes there are always people willing to do the work for cheap,
and a majority of potential clients don't know the difference and will go with
them. But finding someone who is good at what they do and communicates well
and delivers on what they promise is incredibly difficult, and there are a lot
of potential clients out there that understand this.

~~~
gexla
And as you become better in your niche you are likely more efficient than the
lower priced competition. I have seen plenty of cases where developers from
relatively poor countries are charging far more than I would (and I would
still be getting my target rate) for something because they likely have no
understanding of what the job requires. In these cases I would likely have to
raise my rate (and as a result make a killing) just so I don't look like the
crazy cheap guy.

------
tsotha
The real money in software comes from selling the same thing to as many people
as you can. The more customization you have to do, the lower your potential
profits are.

At one time I worked for a medium-sized software company in the process of
going public. One of the metrics analysts were keen on was the ratio of
license revenue to services revenue. The lower that ratio is, the less of a
product company you are and the lower your potential (and the crappier your
IPO).

If all of your work is custom you're no better off than guy who installs
kitchen cabinets for a living, in the sense that every new dollar comes in
only as a result of new work. If, for some reason, the customer doesn't pay up
you have very little to show for your effort.

------
jasonwong
I'm in the same boat. Started a web design and development firm 12 years ago,
became one of the first Rails shops, and now I'm (finally) doing a product
company.

About 6 months ago, I had an idea for a product, designed it, and put together
the final team in the last 6 weeks. I've leveraged old contacts for customer
development, and getting the demo done. Now we're pitching some of the largest
VCs and angels in the world. Exhilarating stuff.

Maybe I just needed to find out myself, but there's a whole new energy level
for myself, and those around me. I think the feeling of satisfaction has less
to do with dealing with insane clients, and more to do with creating something
that is my baby, rather than someone else's, though.

------
leftnode
With some of my clients, I negotiate dual-ownership of the end software in
exchange for a lower price. That way, if it is something that looks like it
could be monetized as a product, I have the ability to do that.

~~~
bergie
Our standard practice is that all software we build for clients is published
as Open Source. This leaves things like templates and configuration out, of
course, but still every project grows and improves our toolkit.

------
johnx123-up
> It’s not easy to make a lot of money in web design.

Agreed. Companies like <http://www.cssilize.com/> are difficult to compete.
They charge as low as $39 and have instant PMS.

On the other hand, there will be huge demand for mobile app themes.

~~~
jordanlev
Actually those companies only handle slicing a PSD into HTML/CSS -- this is a
very small portion of a "web design" job. There's still spec'ing and
estimating and implementing it in a CMS and adding custom functionality and
testing it and deploying it, and of course actually designing the thing in the
first place :)

~~~
eropple
Agreed. There's also the fundamental problem that directly sliced PSDs create
a terrible experience for the user; you can't build smart, responsive web
pages that way.

PSDs are good for specs, but not directly converting into the actual end
project.

------
cyphorous
It's better to work for yourself as compared to work for someone else. Good
choice.

------
rick888
I think every developer that wants to go out on their own has the idea to
start a consulting company (I did too). I will never do it again because of
the reasons listed.

I also had problems getting customers to pay me on time (and some at all).
Some realized we weren't a big company and figured we wouldn't have the money
to go after them in court.

Customers also loved to completely change the spec halfway through the project
and then get angry when we tried to charge them more money.

------
rglover
Don't blame these guys at all. I'm just starting out in the web design
business and I'm learning that it's quite a demoralizing set. There's little
motivation to do well when you essentially bend to the will of your clients.
Some are good, but most are not. The result? You lose faith in your work and
your trade. Glad to hear another company turned on the light and is working
toward doing their own thing. Here's hoping they're successful.

~~~
jamesteow
"There's little motivation to do well when you essentially bend to the will of
your clients."

The motivation is a killer site to put in your portfolio, potential future
projects from that client or friends of that client, and certainly tackling
new challenges.

And the trick is not to bend to every situation. There are plenty of big
companies that respect outside talent. HBO/Target/CNN off the top of my head.

------
skarayan
The problem for the web design community is that web design has become a
commodity.

------
jleyank
>Clients were my bosses, and we were at the mercy of their whim.

Not sure how I see the difference between this and the phrase you get by
substituting "Customers". It's all well and good deciding to be
entrepreneurial, but if the shmoes with the $$ don't play along, it's not
going to be fun. You're going to have to compromise your ideals to sell
product.

To me, a better way of describing the shift from consulting to product
development is that you can sell the same development effort multiple times
when it's a product. Thus, no matter how well the consultants work, there's an
upper limit on their income.

~~~
oliveremberton
Oliver here (I wrote the article, and run Silktide).

It's early days for us, so I can't speak from years of experience, but so far
there are marked differences for us:

1\. We have a lot more customers. Before one or two of our web designer
clients could hold us ransom over a big cheque - the sort of thing we needed
to make payroll. Now we'd need a mass exodus of customers for the same to
happen, and usually that would be because _we_ screwed something up (i.e. it's
fair).

2\. Customers now have clearer expectations. Web design customers can expect
all sort of things which they consider reasonable, and don't understand why
they're not (e.g. supporting a website 5 years after you built it, changing
their business fundamentally mid project, expecting 'as many designs as it
takes' to get right etc). I know you can and should educate your customers,
but essentially you're dissatisfying them. With products, generally people pay
a fixed amount to use a thing for a time. If it doesn't work, we refund them.
Simpler and happier all round.

I totally agree with your last point - if you can scale it pays better. So
far, the jury is out on that one for us, but let's see where it goes...

~~~
peteboyd
Number of customers is critical. When web design studios only have a few
customers and one makes up a large percentage of revenue (ex: 10% or more),
then you are definitely at the clients whim.

However, if an agency has a lot of customers, each with only a percent or less
of total revenue, then its a much more stable platform. You can decline
representation of certain clients and they do not effect the total revenue.

Of course, a product line might be better. All customers under one pricing
model, customization is limited, and it scales easier. Good stuff.

~~~
oliveremberton
We had a lot of web design customers (about 200) but you can only work on so
many projects at a time - we would typically have 30-40 in our pipeline, but
only 10 or so would finish each month. And those projects aren't even in size
- we'd normally have a couple big ones accounting for over half our income.

So even with 200 customers our income came mostly down to a handful of
customers each month.

~~~
peteboyd
Yeah, it's tough when a few make up a large percent of the business. You
definitely have to drop everything to help them. I think our top 50 clients
make up 25% of the business. Top 100 about 50% and the other 400 the rest. So
we are less beholden to one large client as maintenance, hosting, SEO, PPC,
and redesigns help balance all the new projects that we would need to sign.

------
ARolek
Client work is an excellent way to subsidized research costs. ;-)

------
kieranyo
This blog post sums up exactly why I wouldn't start a web agency.

------
Cyph0n
There's one point I don't entirely agree with. Do you have to meet with the
client face-to-face? I mean, wouldn't a video call on Skype serve a similar
purpose?

You probably would have been able to cater to clients from all over the world
through video chat. Or is there something about face-to-face meets that makes
your task easier?

~~~
prawn
Many, many clients expect face-to-face meetings. I have clients overseas and
interstate (including some I've never met or even spoken to on the phone) but
the majority are greatly comforted by meetings. Many have a strong preference
for going through things in person as opposed to writing down requirements in
an email.

(Have run a web design company for 13 years now.)

------
davidedicillo
I completely agree, that's why at 39, Inc. we try to split client work and
internal projects 50-50. Of course that eats big time in the potential profits
in the short turn but it also can also spin off in something good. SyncPad for
example was first a 39's project before we made it into a separate company
called Fifth Layer.

------
xxjaba
I particularly like the comment of how service based work is "decent
sustenance, but a poor investment".

------
OzzyB
Just to add, 37signals, and SkinnyCorp (Threadless), are two companies that
come to mind that started out working for Clients, then pivoted and made their
own products and destiny...

More power to them and all that do this.

------
poetjon
This is something i have wanted to do for sometime and i think after reading
this am finally getting some guts

------
SonicSoul
totally reminded me of <http://theoatmeal.com/comics/design_hell>

