
On Starting a Software Business - ingve
http://stephaniehurlburt.com/blog/2017/6/24/on-starting-a-software-business
======
siliconc0w
Consulting doesn't scale, software does.

One pragmatic strategy to find product/customers:

    
    
        1) Pick an industry
        2) Ask someone in that industry what they use spreadsheets for
        3) Build something better
    

There is a lot of 'cybernetic' processes that are a mix of humans with domain
knowledge and machines with spreadsheets for schemaless storage and querying.
Generally the move is to encode the domain knowledge into code and standardize
the storage (i.e excel -> RDMS) to make it more useful.

~~~
sethev
Accenture revenue in 2016, $32.9 billion. Consulting definitely scales.

~~~
ridruejo
The point is scaling without increasing linearly the number of employees.
Accenture has approx. 400K employees

~~~
JamesNK
A succinct way of putting it is there is a finite profit margin on consulting.

~~~
dgacmu
Agreeing: [https://priceonomics.com/which-companies-have-the-highest-
re...](https://priceonomics.com/which-companies-have-the-highest-revenue-per/)

Accenture is #493 of the S&P500, at $101k of revenue per employee. (!) They're
doing a bit better than McDonalds (#497). The scalability argument holds --
compare to Netflix, which scales quite well (#23, $1.9M/employee).

------
walkingolof
\- "We can make a decent salary out of this" \- 36 months - 48 months

I started and 10 years later made a successfully exit from my company, we
never raised any money, the above figure is what it took us to go from
financing our development our self (by having two jobs), to having enough
customers to break even.

I think everyone should, bootstrap one company to get a feel for how it is,
will make you a better entrepreneur.

~~~
simonswords82
Exactly the same setup as you, although I've not sold my company as I'm a
happy owner ([https://www.atlascode.com](https://www.atlascode.com)).

I launched Atlas in 2007, just one year prior to the economic crisis that
followed. Nothing ensures that you keep an eye on every bill that is paid and
focus ruthlessly on efficiency gains more than a global financial catastrophe.
Getting through that taught me I was capable of running an already tough
business under pretty much any circumstances, and gave me an incredible
confidence boost.

Not that I'd recommend it, definitely some of the toughest years of my working
career.

~~~
zerr
Does the website help with getting new clients? I mean completely foreign
clientele, outside your reference circle.

------
shubhamjain
There is a bit of detail missing that I would like to understand. How to just
'talk' and give help? Do you approach people/businesses and ask if they are
having any problems? Or, your aim is to just get the conversation ball
rolling, hoping that it leads to the problem part without deliberation?

~~~
chii
i have a friend who is a construction contractor, and one of the tasks they
needed to do is inspection of a property, and take pictures of problematic
areas with notes.

Currently, this is a manual process, paper driven with digital photos, and
after wards, somebody back in the office would transcribe the hand written
notes into an excel spreadsheet along with pics.

This process could be made easier with an automated app on the phone. I had
thought about making such an app, but haven't yet.

I guess when you talk to someone, you naturally gravitate towards issues they
have.

~~~
rompic
you might like [https://www.planradar.com/](https://www.planradar.com/)

disclaimer: I met the founder once at a party.

~~~
tootie
You shouldn't let the existence of a competitor stop you. The business model
of Lyft/Gett/Juno is basically to carbon copy Uber and get piece of their pie.
Just being a deliberate copycat isn't a terrible strategy. Trying to one-up
something that already exists is also plausible, if not easier because their
is already a trailblazer that has made the market and you can just piggyback.
Facebook succeeded because of MySpace, not in spite of it.

~~~
rlayton2
You could argue Uber copied Lyft (although it might be more convergence than
anything), which I suppose just highlights your point even further.

------
skybrian
I'm wondering about how they draw the line between "give first, take later"
and "don't do work unless you're getting paid for it."

~~~
bluedino
I'd like to hear more specific experiences on switching from working for free
to $CONSULTING_RATE for the same client

I helped a local business group with their website, their previous host shut
down and all they had was an archive on CD, they had some quotes for 10-20
hours to get it back up and running (and then everyone wanted to charge them
hosting/domain registration).

I did the work for free. A couple hours importing databases and site files,
configuring WP/Joomla (I forgot which), some testing... My hope was that I'd
get a few leads from the 50-60 companies in the business group.

I was contacted by a few but once they found out I wouldn't do the work for
free...

~~~
Silhouette
This is an example of a more general problem with undercharging (or doing spec
work) in any creative industry. If you don't charge what you're worth, perhaps
because you're trying to be helpful or offering "mate's rates", then you may
get one happy client but you'll also get underpaid. Then that client will
happily recommend your (excellent value!) services to their friends and
colleagues who are also looking for (excellent value!) services and will be
happy to similarly underpay you. And so it goes on.

In my experience, there are really only two levels of pricing that work. You
_can_ work literally for free, or for some token payment so someone is an
official client of your business. This is sometimes helpful very early in a
business to start some sort of portfolio and establish a bit of credibility,
but otherwise I think it should be reserved for genuine charity work where
it's clear that it's a gift and not your normal working practice. Everything
else should be charged at decent professional rates immediately, both so you
don't undersell yourself and to dissuade potential clients who can't or won't
pay decent professional rates and all the other similar potential clients in
their network.

~~~
jaggederest
I phrase it as "Standing problems I solve for free, sitting problems are my
usual hourly rate."

Which is to say, if I can solve your problem for you before I get tired of
standing up, I'm not going to bother to charge you. In my case that's usually
a half hour or so.

People seem to respond well to that, in general. I think it's in line with how
most people view the value of their own time.

It's also a one off, as well. Just because it only takes me 15 minutes a week
doesn't mean it's free.

------
scandox
This is a person who obviously has a lot of talent and a lot of specialised
knowledge. I doubt most people can get properly paid consulting work or get to
product stage as fast as she clearly could.

~~~
tertius
I'd like to see some responses to this from some gurus. I have the same
problem. I have a bunch of generalized skill but I feel not enough to make
large $ with consulting.

I don't attribute this to impostor syndrome.

~~~
theparanoid
Specialize. It doesn't have to be an esoteric domain. Something like Go server
apps or Docker is enough.

~~~
ClassyJacket
With an industry that moves so ridiculously fast, how do you know what'll be
in use in the few years it'll take to become good at something?

I feel like if I'd learned web development five years ago I wouldn't know
anything about it today.

~~~
samsonradu
> I feel like if I'd learned web development five years ago I wouldn't know
> anything about it today.

This is a wrong assumption. Web development just gives the feeling of moving
fast, it's not really the case. The foundation of web development is roughly
the same as 5y ago. Most things from the http protocol, web servers, data
storage, authentication, websockets etc. still works the same. Give or take a
few UX and state-management tools and we're not that far into the future.

Also due to the huge investments in the web during the past decade(s) things
should get slower because of legacy issues. Think fe. how long it's taking
browser vendors to dump Flash or to adopt WebRTC.

------
mobitar
Related piece: Starting a Business as a Developer in 2017
[https://journal.standardnotes.org/starting-a-business-as-
a-d...](https://journal.standardnotes.org/starting-a-business-as-a-developer-
in-2017-4f4a2a0b1922)

------
ivanbakel
OT, but referring to the article: why are so many websites allergic to serving
basic HTML these days? You get a lovely white page with a Javascript blocker
if you try to open this article. What's particularly offensive about this one
is that all the raw data is loaded in correctly anyways - the JS appears to
just fiddle with making it look right, and there's no default style for if
that doesn't happen.

~~~
btown
I feel like this comment is the equivalent of posting a meme on Reddit.

------
EGreg
Observe what people are doing inefficiently that you can fix.

Test whether they'd buy it with google adwords or facebook ads and conversion
rate to filling out the form and putting in credit card. Refund everyone.

Imagine how it would be viral and test your hypothesis as well. So your
customer acquisitin cost goes down exponentially!

~~~
itwy
Do you mean before building the actual product?

~~~
EGreg
Yes

------
k__
So basically she got much skills and happened to meet someone who was a well
known player in the game industry.

Most people have neither or just the first one.

~~~
jwildeboer
So basically she worked hard on her skills and invested a lot of time and
effort to talk to a lot of people to meet the persons that allowed her to grow
her business. Most people don't do that and complain. ;-)

~~~
k__
For me the point here was, that the meeting of that person the most crucial
step and also pure luck.

Writing about "Starting a Software Business" which boils down to "just know
the right people" is a bit demotivating :\

~~~
pyrrhic
Did you miss the part where they intentionally spoke to lots and lots of
people?

~~~
k__
I read it that the "talk to lots of people" part was independent of her
knowing Rich in the first place.

------
westoque
Interesting about the 50-50 split. If you talk to most people in the valley,
they would probably tell you this is the worst thing you can do. That is, if
you're looking from the perspective of a VC.

~~~
dahart
YCombinator advises equal splits. [https://blog.ycombinator.com/splitting-
equity-among-founders...](https://blog.ycombinator.com/splitting-equity-among-
founders/)

I've also read a bunch of articles that suggest unequal splits, and the
reasons they cite seem to boil down to the idea that the split should reflect
the proportional risk taken, and not much else. There are times when founders
truly take the same amount of risk, and an even split is justified under the
common VC thinking.

In my limited experience pitching to VCs, as someone in an even-split startup,
I believe VCs do prefer to have a primary person responsible who is in the CEO
seat and has authority to make unilateral decisions. I can imagine an uneven
split makes it clear when that's the case. I'm certain many of them have seen
cases where even split partnerships were made more difficult and ended up
being unfair largely because of the even split. I'm also sure that there are
cases where it's harder for them to communicate and negotiate with multiple
founders rather than one.

Those reasons don't matter if you're not taking funding, so even split in a
contracting partnership (even split effort), turned profitable product startup
that doesn't deal with VCs makes a lot of sense.

~~~
katzgrau
I've done both equal and non-equal, but I've yet to have or observe a business
where both the risk, contribution, and effort put in by the founders is
actually equal.

Sometimes it's just a conversation founders want to avoid having because it's
uncomfortable, but that in itself is a bit of a red flag.

~~~
dahart
I have no doubt you're right that it's frequently a red flag, and that
founders often go equal to avoid ranking themselves.

I've also watched and been part of lots of partnerships where the expectation
before hand was equal contribution, and the reality after the fact was
lopsided. I feel fairly lucky that my most recent experience truly was equal
risk and equal effort; my even split experience has been truly reflective of
what's happened, and truly fair for both of us.

The big mistake I have made is giving people besides my co-founder too much
equity. Nobody else who's contributed to my company so far other than my co-
founder have lived up to what they said they'd do, and we gave out too much
equity in advance of them doing it.

Considering that, and considering both the issue you brought up and the
reasons YCombinator gives for pushing toward equality rather than away from
it, I think the main thing founders need to do is have a mechanism for not
committing equity in advance of the effort. It's important for founders to be
on a vesting schedule so that when one stops contributing or contributes less
for a long period of time, you can shut it off. And it's important to
communicate that things are going off the rails, and then actually take the
action to shut it off.

That's really basic and somewhat stating the obvious, but if you are diligent
about cutting off people who don't contribute, then there's no reason to shy
away from equal split plans in advance. My experience has been that people
I've partnered with for equity aren't avoiding contribution maliciously, they
simply and honestly didn't realize in advance that they don't have the time &
energy they thought they did.

------
quadcore
I have a question regarding startup growth so I apologise in advance if its
irrelevant here (haven't read the article to be honest).

1) I get that to get the first users, you have to go out and recruit them.
That's the advertisement part. So yeah, I get how you get users by
advertising.

2) I get that when you have a million customers, they become the advertisement
and they are the ones who are bringing you new customers. Your product "ad
surface" is _way_ bigger than simple banners through them.

Now what I have a hard time to understand is how 300 users procures the same
effect as 2) (or even 3000). I get that they gonna get you 30 more customers
by talking about your product to their "friends" who, if everything goes fine,
at their turn gonna bring you 3 more customers who gonna bring you 1 more
customers, for a grand total of 34 more customers. And that's the end of it.
That wont grow much bigger. So basically, you would have to go back to 1) to
get new users.

What am I missing? Does a user have to bring you n more new customers, n > 1?
How many customers do you need via advertising so that the compound growth
effect kicks in?

edit: I can see actually 2 types of compound growth effects: a) a user
explicitly recruit another user (ex: "hey my friend, come play to this game"),
b) a non user "see" other people using the product and he tells himself that
might be a good idea to try it. Anyway, so basically, what I see is that,
early on, you can rely only on a) so, in average, your customers have to get
you n more new customers, n > 1, by explicitly recruiting them for you. Which,
if Im correct here, would give an idea how badass the product must be.

~~~
rmah
The short answer is: it depends.

The long answer...

New customers come from two primary sources: 1) marketing and 2) referrals.
Marketing is things like events (trade shows, media hits, advertising,
reviews, etc). None of those things happen without outreach on your part.
Referrals are when (as you described) existing customers tell other people and
a few of them try your product. This will not be constant, right after a
customer buys your product/service, they may be excited and tell some friends.
Best to model referrals over time with cohort analysis.

At the same time, you will lose existing customers. Like referrals, this is
best modeled as cohort analysis. After a customer signs up, after 1 month, x%
will leave, next month, a different %, next month yet another %. Typically the
churn rate declines for a given customer cohort over time (though there may be
bumps along the way).

So, you have customer inflow and outflow. It would be nice if there was a
simple formula, but the marketing efficiency, the referral rates and churn
rates will all be constantly changing. So, there is no way to know in advance
if or when compound growth kicks in until you have solid data. It will vary by
market, company and product.

~~~
quadcore
Thank you, that gives some meat.

Ultimately, I was focusing on the fact that if a customer brings you n new
customers, n < 1 (and real number), it means you get new customers _only_ via
marketing. If n > 1, you get new customers with something else than marketing
- so to speak.

~~~
IanCal
Actually anything n > 0 will mean you get customers by more than just
marketing by definition. n > 1 for a static n is exponential growth.

Edit - though under 1 you can see a limit. For example, if n = 0.5 then you
would expect to grow to twice the size. In reality it's much more complicated,
but on a purely mathematical basis this should be right.

~~~
jaggederest
N is literally the percentage of your steady state customer base that comes
from referral.

So it's the divisor on your marketing expenditure for any given customer
quantity.

N > 1 never reaches a steady state, those are "viral" businesses.

------
gt2
Is this for the company Binomial, mentioned on the author's home page?

~~~
RMacy
Yes

------
jbchoo
Could totally relate to author's personal experience because this is what my
biz partner and I are going through right now. Great article by the author.

------
jmnicolas
Am I the only one getting a blank page on Firefox, Chromium and Opera included
the google cache and archive.org versions ?

------
Kiro
> legal fees

What is this referring to exactly? Administration fees for starting a company?

~~~
jwildeboer
Legal help in drafting contracts with customers, license agreements for the
product etc.

------
draw_down
I was fortunate to see the author speak at a conference not too long ago, I
really enjoyed it. Like her, I have had several bad experiences at tech
companies and would just like to not ever work in one again. So I am very
envious of her story and it's really cool to see how it has worked out for her
and partner. (Unlike her, I don't really have contacts and I don't think I
would be very good at the sales side of being a contractor.) Anyway, very
inspiring stuff!

~~~
dkersten
Yeah, I agree!

I like the people I'm working with, am paid well, have a good work environment
and have interesting work to do, but for some reason I'm not happy and feel on
the verge of burnout (if it hadn't happened already). I've done startups in
the not too distant past and while they were a lot more stressful (and paid
very little - we had some funding and had revenues but we never broke even), I
was definitely happier working in my own thing. My problem is similar to
yours. My personal network is good for changing jobs, but I have no idea how
to make it work for consulting work or a startup and I'm really terrible at
networking and find it difficult to talk to people (or at least, I find it
difficult to strike up conversations - after that I'm not too bad). I also
feel like my skills aren't very useful broadly speaking. Maybe it's imposter
syndrome because I am good at my day to day work (which can be quite complex).

I enjoyed the article though. It gives me hope that perhaps I can push myself
and improve to the point where I can make something work. The thought of going
out selling is a scary one to me though.

------
goingbananas
I stopped reading after the "lol". I tend to do not get advice from lols lmaos
& company...

~~~
nathan_f77
That might be a decent quality filter if you're reading comments on YouTube or
Disqus, but you shouldn't apply it to articles on the front page of Hacker
News.

