
37signals Earns Millions Each Year. Its CEO’s Model? His Cleaning Lady - endtwist
http://www.fastcompany.com/3000852/37signals-earns-millions-each-year-its-ceo%E2%80%99s-model-his-cleaning-lady
======
whalesalad
"I won’t name names. I used to name names. But I think all you have to do is
read TechCrunch. Look at what the top stories are, and they’re all about
raising money, how many employees they have, and these are metrics that don’t
matter. What matters is: Are you profitable? Are you building something great?
Are you taking care of your people? Are you treating your customers well? In
the coverage of our industry as a whole, you’ll rarely see stories about
treating customers well, about people building a sustainable business.
TechCrunch to me is the great place to look to see the sickness in our
industry right now."

I love this quote. It reflects my sentiments to a T.

~~~
pg
The reason the press writes about funding rather than revenues is not some
kind of conspiracy to focus on the wrong things, but simply because reporters
know about funding rounds and not about revenues.

It's clear that the press would write about revenues if they could, because
they write a lot about the revenues of public companies. They're able to do
that because public companies have to disclose their revenues.

Private companies never publish their revenues. Including 37signals. So if
Jason really believes this is a terrible problem and wants to set things on
the right course, he should set an example and start publishing 37signals'
revenue numbers.

~~~
dlss
This is unusually straw-mannish of you pg.

From the article: "What matters is: Are you profitable? Are you building
something great? Are you taking care of your people? Are you treating your
customers well?"

All of those questions can be answered without needing access to a companies
ledger. Jason answers those questions himself in the article.

I think his point was that stories about those questions don't get as much
readership per unit of reporter effort, hence they aren't being written.

Posting 37signals' revenue numbers would have zero impact on that.

~~~
pg
Anyone who proposes that the discussion should focus on profitability rather
than funding rounds is presumably not proposing that we simply talk about it
as one bit of information: profitable or not. That would make pretty short
articles. It also wouldn't be very interesting; there are hundreds of plumbers
and barbers and cafes within a few miles of me who are profitable.

And plenty of these plumbers and barbers and cafes probably do great work and
treat their employees well. Do you really want to read articles about all of
them? I don't. What makes a company newsworthy (unless it's as a case study)
is its size, or potential size.

~~~
dlss
It sounds like you might not be familiar with the author Jason referred to
right before his critique of the current focus on size: Ricardo Semler.

In his books he develops a very humanistic look at the role of businesses in
our lives. As entrepreneurs, employees, and as customers. I won't be able to
do the ideas justice here, but I will try:

A business obsessed with revenue and growth is like a person obsessed with how
many breaths they have taken, or how much food is in their pantry -- these are
means to an end, not ends in themselves. Food is required for life but it's
not the purpose of living. Businesses as conceived by Semler and Fried aren't
designed to maximize revenue so much as make the world a better place
(#include your essay about google being almost a nonprofit).

It may be that stories of plumbers, barbers, and cafes wouldn't be interesting
to you. I like to hear about people living enjoyable lives, delighting their
customers, and making their corner of the universe a better place. It's a lot
more psychically healthy than reading about people trying to gain the most
while providing the least (the tech crunch articles Jason refers to)

So many people seem obsessed with getting a large quantity of money, and only
then trying their hand at building a fulfilling life. I have always thought of
Semler as running things in reverse: how do we design a seven day weekend that
is cash positive?

(Semler's book, The Seven Day Weekend, is highly recommended to anyone who
wants to hear more)

~~~
pg
I understand quite well the idea of company that isn't focused simply on
revenue growth. I've been running one for the past 7 years. And I'm interested
in reading about others. But articles of that type are case studies, not news,
which is why I explicitly distinguished between them.

~~~
dlss
first "What makes a company newsworthy (unless it's as a case study) is its
size, or potential size."

then "But articles of that type are case studies, not news"

first "Do you really want to read articles about all of them? I don't."

then "I've been running one for the past 7 years. And I'm interested in
reading about others."

I think what you want is for Jason to have said "I wish the technical
community were focused on case studies of awesome companies rather than news
stories about funding and growth." Which I think he would agree with, and
would remove your points.

(Not that case study vs news is a real dichotomy -- what's stopping someone
from calling news about a round of funding a "case study about getting
funding"? Why can't there be news stories about how awesome the customer
experience at X has gotten?)

~~~
danmaz74
News is, by definition, about current events. Case studies are about past
events. So, in general, they can't be the same thing (even if, of course, the
publication of an interesting case study can be interesting - and current -
news).

"Why can't there be news stories about how awesome the customer experience at
X has gotten?": If you really want to know, I advise you to read
"Storytelling: Branding in practice".

~~~
fakeer
_News is, by definition, about current events. Case studies are about past
events._

You are logically incorrect. Well, by your own logic. How can you publish news
about a _current_ event? To be written as _news_ it has to be happened in the
past.

~~~
danmaz74
It all depends how you define "current".

------
davidw
> Actually, my cleaning lady, for example, she’s great.

There's something a bit... I don't know quite how to put it. Let's just say
that I bet she'd willingly trade places with him, cash out, and go enjoy
herself instead of _cleaning up after other people_ day in and day out. (
_Edit_ to change the wording just a bit)

> The other interesting thing about restaurants is you could have a dozen
> Italian restaurants in the city and they can all be successful. It’s not
> like in the tech world, where everyone wants to beat each other up, and
> there’s one winner.

That's because the economics of a highly local business are very different
from one that can have customers all over the world.

Also: restaurants fail all the time - it's a stressful business to be in, and
not generally the sort of relaxed, easy-going picture he makes it sound like.
You can bet that _most_ restaurants do not have the option of doing 4 days a
week, unless they have big margins the other days, which means they probably
have something very special about them.

I admire and respect those guys, but there's something too glib about some of
their communications that turns my cynic sense on.

 _Edit_ : furthermore... live and let live, no? I'm more interested in a 37
signals style business myself, but let the people in Silicon Valley do their
thing even if it doesn't float your boat. It'll all work out. As one example,
I think the world is better off with PG running Y Combinator instead of having
slogged on with Viaweb.

~~~
saraid216
> There's something a bit... I don't know quite how to put it. Let's just say
> that I bet she'd willingly trade places with him, cash out, and go enjoy
> herself instead of cleaning up after other people day in and day out.

See, the typical problem with claims like Fried made is that they're
idealizing lives they don't know much about. But Fried didn't walk into that
trap.

He doesn't remark on her home life. He doesn't remark on her happiness. He
doesn't remark on her hopes and dreams. He says she's "respectful, nice, and
awesome". His point is that her business is sustainable, adds value, and does
good. He doesn't say, "I wish I was a cleaning lady." All he says is that her
_business model_ is a good business model, and he's inspired by it.

~~~
larrys
"All he says is that her business model is a good business model, and he's
inspired by it."

He says:

"She’s been doing it some twenty-odd years, and that’s just an incredible
success story. To me that’s far more interesting"

I have absolutely no idea why he feels that someone who has cleaned homes for
20 years is an incredible success story. It's almost as patronizing as it is
naive.

What would be at least somewhat interesting is if she figured out a way to get
paid 2x the hourly rate and/or get houses cleaned in 1/2 the time. Her station
in life is to be happy cleaning homes. So she's a happy person. Great. What
I'm not hearing is that he's living in her neighborhood or having her over for
dinner etc. I hate this "I'm just a simple person let me go visit an ashram
and live in nature" crap.

~~~
anamax
> I have absolutely no idea why he feels that someone who has cleaned homes
> for 20 years is an incredible success story. It's almost as patronizing as
> it is naive.

Project much?

> What would be at least somewhat interesting is if she figured out a way to
> get paid 2x the hourly rate and/or get houses cleaned in 1/2 the time.

How do you know that she hasn't?

He says that she's happy. He doesn't know much about how it makes happy or how
it has developed. You think that you do and you think that she's doing it
wrong....

~~~
davidw
I don't really think we can get anywhere with speculation: he might see her
happy because people are pretty good at putting on a mask in professional
situations. Or maybe she just really is happy.

However, in the aggregate, I'd be willing to bet on most cleaning people
preferring the income, and freedom that 37 signals have. With that kind of
money, you have a lot of options that someone making cleaning wages just
doesn't have.

~~~
larrys
"Or maybe she just really is happy."

Not speaking about this person (who neither of us know) but strictly about
people in general by using an example of cows in a field.

A cow in a field can stand there all day and just graze on grass. Our cat can
sit there all day and just do nothing. Could you do that? All day, every day?

People with brains are more complex. In general if she is happy doing cleaning
work we can presume she doesn't have the same brain or needs, of, say someone
with higher intelligence. People are different in what their needs are.

"he might see her happy because people are pretty good at putting on a mask in
professional situations."

True.

~~~
saraid216
> People with brains are more complex. In general if she is happy doing
> cleaning work we can presume she doesn't have the same brain or needs, of,
> say someone with higher intelligence. People are different in what their
> needs are.

That's almost as patronizing as it is naive.

~~~
larrys
Well ok then what are you basing your thoughts on? I'm basing mine on a
lifetime of meeting thousands of people from all walks of life and the story
as presented by the OP.

I stand behind what I have said.

Would you be happy doing the simple tasks of cleaning houses everyday? Or do
you prefer something more challenging like what you are doing (software
development it appears). Or at least managing others doing the drudge work?

From the OP it doesn't appear that we are talking about someone making their
way to something greater by cleaning houses but somebody who's station in life
is cleaning houses.

Regardless of whether she was forced to clean houses because, for example, she
was an immigrant or needed to feed a family she could have, with greater
intelligence, risen to employ others to do the work for her at the very least.
(My cleaning lady, from Brazil, has about 5 people working for her and I've
seen examples of this with all sorts of people who start doing a task and rise
to employ at least a few people to help out).

~~~
saraid216
> From the OP it doesn't appear that we are talking about someone making their
> way to something greater by cleaning houses but somebody who's station in
> life is cleaning houses.

Why do you have this mindless obsession with ranking things in some arbitrary
manner and then requiring that people climb your ladder?

------
Jd
"To me that’s far more interesting than a tech company that’s hiring a bunch
of people, just got their fourth round of financing for 12 million dollars,
and they’re still losing money. That’s what everyone talks about as being
exciting, but I think that’s an absolutely disgusting scenario when it comes
to business."

Hilarious given that Jason Fried was on the board of directors of Groupon (his
comments on this "disgusting scenario" here:
<http://news.ycombinator.com/item?id=2617160>).

~~~
spitfire
Do as I say, not as I do.

Ego has this astonishing effect of completely bending[1] the space-time-
reality fabric of the universe.

1\. Or ripping it apart, depending on how well off you've become and how many
sports cars you've bought.

~~~
tptacek
37signals does not reap millions of dollars of VC investment to staff up huge
numbers of people while running their business in the red. But a reader of
your comment would be left to wonder whether they do, because you wrote it
carelessly.

------
jamwt
I've read a lot of Jason's stuff and he has a lot of insightful things to say
about running a successful small technology business. He probably understands
it about as well as anyone on earth.

The part of the rhetoric I'm not as fond of is this false dichotomy that he
often raises of "either small business is right or big-startups are right".
Both can be right--they just have different goals. And there are strong
relationships and dependencies between each type that make it particularly
disingenuous to slander each other.

It reminds me a bit of the "you didn't build that" hubbub happening in
American politics lately. There seems to be a "I did this" hubris, as you
create high-quality web services catering to small teams.

Let's get real: you are building web services consumed by a browser (Netscape)
on someone's Macbook Pro (Apple); your data found its way there over some
serious switching infrastructure (Cisco); you stock your offices with goods
from the best online retailers--oh yeah, and they host a bunch of your bulk
data too (Amazon); your site is indexed by the major search engines and you
expose your brand to potential customers via sophisticated advertising
networks (Google); your keep your friends and fans in the loop on what your
business is up to via massive social networks (Twitter).

Many of these companies were ambitious, they had low probabilities of success,
they had much higher capital needs and a tighter window to hit the market..
than a slightly better product management system for small teams. But these
VC-powered longshots--the lucky few winners--now form the beating heart of our
industry. They provide good jobs to hundreds of thousands of people. And..
would 37 signals even exist without them?

Jason wants to make great money and have a good business and take Friday off.
That is fine, that is seriously great. I'm not sure why the tone is so
defensive, b/c, really, who's attacking that? That's a damn good way to go.

But some people want to "make a dent in the world". They need some money to do
that! And they might fail! And rich guys are willing to gamble on the outcome!
Who cares? It's audacious fucking fun to try to change the world, and
sometimes it works. Afterwards, we can take a shower and feel clean and
wholesome about the birth of 38 signals.

~~~
zizee
_I'm not sure why the tone is so defensive, b/c, really, who's attacking
that?_

My guess it is in response to some quarters not respecting "lifestyle
business" startups. There ARE (or were) people attacking that.

------
nicholassmith
When my Dad decided to start his own business his goal was to work for himself
and make enough money to live comfortably. He's achieved that, he could push
and try stretch it to the next level and make even more money and become more
successful but he realised he's happy with the money he's got and not having
to deal with anything extra.

When anyone starts a business you can shoot for living a nice comfortable life
(and lets be honest if you're running a business making millions per year,
you've nailed it), or you can push and push to become _the_ business. Both
have chance of failure, both require devotion. I'd take the same route as
37signals. Having enough money to live comfortably and enjoy life sound much
better than the constant grind to get to the next boss level.

------
andrewhillman
Why does this say: 'Its CEO's Model' when it should be 'Its CEO's Role Model'?
Seems like the writer is baiting for clicks. It's a little misleading to me.

~~~
ForrestN
You can use "model" to mean an example to follow. For example, "37 signals was
the model for my software business" or "she was a model employee."

------
zupreme
Wow. It almost sounds like he runs his tech startup like a "real" company.
Imagine that. ;-)

~~~
flyosity
I think that 37signals has been in business since the late 90s, so I'm not
sure I'd qualify a business that's been in business for 13+ years as a
startup.

~~~
loumf
I like Steve Blank's definition of a Startup -- it's an enterprise set up to
search for a profitable business model. 37signals is long past that.

~~~
sabat
It was never that to begin with. Fried wasn't trying to create an enterprise.
He just wanted to own a small business. That's what he has.

~~~
saraid216
An enterprise is not necessarily enterprisey.

Some enterprises are fictional starships.

------
apetkov
So nice there are more and more companies which understand that keeping their
employees in comfort is so essential for the long-term success. Giving more
freedom and spare time, makes people more productive during work time. No
stress, no pressure = more job done. I also admire companies, that have
understood that a 6-hour working day, would be more productive than the
8-hour, since time for distraction is reduced to significantly.

------
neeleshs
I am in line with the thought process. Also, "There’s a great quote by a guy
named Ricardo Semler, author of the book Maverick. He said that only two
things grow for the sake of growth: businesses and tumors." funny and apt. I
am striving to build a sustainable business, without going to VCs, providing
tangible benefits to my customers, and without huge ambitions to become a
billion dollar company (or even high millions)

------
dr_
Profits are without question important. Bootstrapping I'm not so sure about.
There are many profitable companies today that were never bootstrapped, like
Apple and Google and tons of others. I'd be concerned that bootstrapping in
this day and age might limit how big a company you actually do become, esp
since you are competing against entrenched players.

------
phatbyte
I can totally subscribe what Jason said here. One time someone said that I
wasn't "startup" material because I wasn't open to work 80 hours per week.
They said that like it was a bad thing :), fast forward a few years and their
company is now dead and I'm now doing my own thing steady and profitable.

------
stanfordkid
lifestyle businesses are great. but to make real money you need to scale -- I
think this stuff is okay for the size of business they are aiming for but if
you want to build something that can be acquired for 500m+ or IPO then you
need to do some more strategic thinking.

~~~
aswanson
Several million a year isn't 'real' money?

------
xenen
Absolutely amazing and a rare voice of reason in our industry. If only more
companies would adopt this kind of mentality of building sustainable
businesses.

------
Acne_Researcher
This guy could have built the next Salesforce / google. but he eschewed hiring
a sales team. He didn't want that, but still. Failing to achieve your true
potential is not something to be bragging about all over the web.

~~~
timsally
The company brings in several millions dollars a year [1]. They have one of
the nicest offices in Chicago [2]. One of the partners had a super car
commissioned a few years ago which on a technical level is more sophisticated
than the machinery available to your average military [3]. So how aren't they
"living up to their true potential"?

[1] From the article.

[2] [http://37signals.com/svn/posts/2593-official-pictures-of-
our...](http://37signals.com/svn/posts/2593-official-pictures-of-our-new-
office)

[3] <http://en.wikipedia.org/wiki/Pagani_Zonda#HH>

~~~
Acne_Researcher
Their true potential was to be a 50 billion dollar public company, in my
opinion. I could be wrong. There are more important things in life than money,
of course. But I felt they chose to leave too many chips on the table.

------
medinismo
love the term "we are reaching Peak Talent". It think we are already there

------
taphangum
Awesome

------
paulhauggis
The long hours mostly has to do with the startup community. They get funding
and VC wants to make a profit within a year and get out, at the expense of any
long-term goals of the company.

The result is 70 or 80 hour work weeks and burnout. The VC don't care because
they will be done in the short-term anyway.

It's the reason why I refuse to work for startups.

~~~
sabat
This company is not a startup; it's merely a successful small business.

 _the startup community ... get funding and VC wants to make a profit within a
year and get out, at the expense of any long-term goals_

This is not unheard of, but certainly not the norm. Successful VC firms invest
of big growth, but over a longer term. Look at the huge VC-backed successes in
SV (obvious examples like Google, LinkedIn) and you'll see anything but a
build-it-and-flip-it mentality.

~~~
timjahn
"merely a successful small business."

Really? That small business is financially more successful than most crazy ass
VC backed startups with the latest photo sharing solution will ever be.

</rant>

~~~
ceejayoz
In fairness, that still doesn't make it a startup.

~~~
nanijoe
Pray tell, what would make it a startup?

~~~
petercooper
I know this'll be a controversial stance but IMHO.. _needing_ to work 5 or 6
days a week to prove the business case, make the business stick, and to scale
the business to a point where you have multiple employees and processes that
_allow_ you to only work 4 day weeks if you want.

Of course, some businesses can run on fewer hours from the start, but many
require a lot of sweat and long hours to get the engine running.

