

Ask HN: Making money is really hard. Help  - j2bax

Hello HN. Does anyone have any bright ideas on how to bring a company with significant design and development resources to a higher profit margin? Currently we work primarily for larger corps designing and developing websites and games for them. It seems like it&#x27;s getting more and more difficult to build our cash reserves even though we seem to be getting more and more work every year. Our number one expense is our work force, which we love and wouldn&#x27;t want to downsize if at all possible. Would we be better creating our own product rather than working for other companies all the time? Should we bootstrap as best we can while continuing to pay the bills by working for other companies or should we go after VC? Any books anyone would recommend? Is there a particular industry we should go after for better margins?
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tptacek
Raise your rates. Stop billing hourly; set a 1 day billing increment for
normal clients and a week-long minimum for all but preferred clients. Offer
retainer agreements to every new client and to every client you have a strong
relationship with. Get better at recruiting, which will ultimately reduce your
overhead.

Except for the last one, those are things you can do immediately, without
thinking hard, for an investment no larger than a couple hundred words of
sales copy.

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helen842000
Could you productize some of the work you do? So, perhaps you create a
software solution that eliminates some repetitive work for you, or something
the customer pays for monthly - like a white label option.

It sounds like you start from scratch with each client. Your hours of work,
work force & expenses are growing but is your revenue per head growing at the
same rate? You could easily have a concerted effort for your team to produce
something once & sell it many times. Perhaps a less bespoke product that may
appeal to a wider business audience - then you may get clients you can upsell
at a later date.

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petervandijck
Here's a trick that many companies use successfully.

Step 1. If you do the same type of job repeatedly, create a "platform" (a
bunch of re-usable code). Don't actually spend too much time on this.

Step 2. Create a great marketing section on your site for this platform.
Create sales materials. You will be telling clients: our "whatever-we-do-all-
the-time platform" will save you tons of time and money.

Step 3. Apart from the normal hourly development cost, you charge clients a
licensing fee for the platform too. And: PROFIT.

Now let's be clear: your platform doesn't have to be highly polished. It
doesn't need to actually save you development time. It's a sales tool to
increase your profitability. Pick something hot, like a "mobile platform" or a
"social platform" or something like that. And make some pretty graphs for it.

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rfnslyr
My friend, who was nearly broke and strapped for cash started a web design
agency solely based on Wordpress.

Started at Wordpress themes online. Built 10 custom theme frameworks, for
every client he just picks the one that best suits the job, adds a logo,
changes colours, does a bit more tweaking and deploys at 5k/pop.

In his first month he did 5 sites. A month later he opened his own agency with
a few employees under him. All on Wordpress.

+1 on reusable platform. So much time saved.

The way he brought in clients was mainly via twitter and running searches. He
searched for any tweets within his locale geared towards the web and hunted
clients down, mostly through convincing them that they NEED a new website. For
example, if someone or a few people tweeted about a small businesses shitty
website "omg I wish xy pizza had order options on their site -_-", he would
archive these tweets, compile a listing and other market research and pitch it
to the company and score himself a new job.

I hope this is at least of some use to OP. Social media + platform +
hustle/hounding = $.

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kellros
tptacek makes some valid points in regards to securing revenue.

You must have heard of The Lean Startup and like most people get confused
about what a MVP really is. The vision behind building a MVP is to identify
the most valuable prospects (that make you money) and to get that to the
market earliest.

As soon as the MVP starts generating revenue, any further development requires
less out-of-pocket investment because the revenue generated will be
substituting the cost. This allows for more breathing room to automate,
improve, reduce waste, innovate and grow the product.

The biggest secret regarding business is possibly the concept of perceived
value. Perceived value is not about 'faking' value, instead it is about
defining it.

Example being, instead of charging $ x per hour for web development; break it
up into different tasks and charge accordingly: website design, graphic
design, copywriting, SEO, marketing (social media, ppc/ppv), system design,
consultation (ex. to determine best path forward), training, support,
analytics, business analysis etc.

Once you have defined the tasks involved, you can be honest with your client
in terms of your strengths and every task will be judged according to its
merits (what defines success?). Most clients would prefer paying a qualified
copywriter the same amount (or less) than he would be paying a non-qualified
web dev.

Defining what you do will allow you to reduce waste and distribute work more
easily on your team.

The real trick behind successful software development/consultation is the
focus on building systems instead of services. Systems being defined workflows
concerning components and participants, focused on re-use. Because lets be
honest, real software design reuse either require building generic systems
that allow for all scenarios (or can be extended) or defining interactions and
components (ea. a design 'pattern').

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oz
You'll want to read everything written tptacek and patio11 on consulting. I'm
off to bed, but I'll dig up some links tomorrow.

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meerita
Maybe your rates are lower than expected. Also, once you have a team, it's
always better to start a project while doing client work and turn it in an own
product, then switch to that to make it bigger.

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j2bax
I think our rates are fairly industry standard. A lot of times it comes down
to what the clients budget is though. Admittedly we do have an awful time
staying on budget.

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simantel
Set rates and stick to them. And when the a project starts to grow beyond its
original scope, stop work and renegotiate.

