Our Business Model

During the last couple of days I was reading over at the Business of Software forum discussions about keeping your day job or not and other strategies to start your mISV. I thought you might be interested in the way we did it. I admit I made mistakes which could have been avoided had I known the business side of a mISV better. Before I started in April 2005 I was employed with a big german consulting company. I very much liked the team I was in and mostly liked my projects. I came to know that bad management can really destroy a yelling team and that most of the upper management do not know Fred Brooks book ”The mythical man month” (which says it doesn’t help to add people to a late project). Anyway this was my situation when I started my venture. I already posted about believing that this is my calling, you can jump there if you are interested. First I started to negotiate with my employer about working part time for him and part time for my own business. They didn’t let me. So I quit. In the end I didn’t want to test it or try out this new life- I wanted to go for it faithfully. About this time a friend of mine who owns an electronic company approached me and we talked about the idea of writing a monitoring and controlling application which would work with his electronic. This electronic is already introduced in the market and people like it pretty much so I thought it would give me a good start. Ha! The software is rather complex (Client, Server, Database, connectors to Jabber service and SMS etc.). A year ago (no, actually it was more than a year) we introduced the software to a prospective customer. After some meetings and a lot of talking they decided they want the software (also because I offered it at a very competitive price in the hope to get a first reference). First time they wanted it was October last year. They still want it but they had a few more concerns. Anyway, we are now going into the final stage of the sales process. But I learned it is not really wise to sell to laggards first :) The problem in this market domain (public water supply) is that there are probably no early adopters which would help to introduce the product. Lesson: Please look carefully at the domain for which you develop a solution. Get to know their mentality. Now the other thing I did very naively was to hire two employees half a year after starting. I never had a lot of patience anyway, but you should not do this! I thought selling or software would start faster but I was wrong. So if you employ, do this after you have a strong need. Carefully decide if you want to hire some other company to do work which you cannot do (web design, graphics, for instance) or if you employ someone. Now I don’t say the guys I hired are bad in there jobs, the opposite is true. But still I have to pay them every month. How? Well, now we come to the point, how we do business: I didn’t have much savings. It might have lasted for 3 month to support my family of four. Not much of a backup strategy :) My old company approached me a few month after I quit and asked if I could work as a freelancer for them. I accepted gladly and since May last year there is a steady flow of work from this company to me. Alternatively I let my employees reach out into new territory. We develop web sites, web shops, marketing material, or do hardware maintanance contracts. This is a great way to learn about the specific needs of customers from different domains, traveling agencies, lawyer, health care, etc. I feel it is very important to have a very close relationship to your customers or potential customers. If your customers tell you about their problems they have done a great deal of market research for you! We have also tried many different ways in the past before finding our identity (or at least, coming near it). We did Linux consulting, VoIP, Media Center PC, very different kinds of stuff. We wasted a lot of time trying things and finding that they are not ours. I simply didn’t believe in them too strongly. But I guess one has to go some wrong ways to see the right one. Our true identity is as a software development company. We also want to keep a very close relationship to the multitude of small companies around us. Have an open ear for their problems and find ways to help them with our software writing skills. So that’s us. When I look back I would not want to miss this time although it was and still is very hard. It is a very unique way of life. It is like having another child :) Lesson: Please read a bit of business theory before you stumble in. It surely will not hurt! Torsten.