* The Business of Software

A former community discussing the business of software, from the smallest shareware operation to Microsoft. A part of Joel on Software.

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Moderators:

Andy Brice
Successful Software

Doug Nebeker ("Doug")

Jonathan Matthews
Creator of DeepTrawl, CloudTrawl, and LeapDoc

Nicholas Hebb
BreezeTree Software

Bob Walsh
host, Startup Success Podcast author of The Web Startup Success Guide and Micro-ISV: From Vision To Reality

Patrick McKenzie
Bingo Card Creator

Notes on survivor bias

I found these two links that I thought you might find interesting

http://thedannorris.com/is-startup-validation-bullshit/#

http://storiesfailedentrepreneur.com/
codingreal Send private email
Tuesday, August 06, 2013
 
 
I liked the first link, the second is basically a link to the first, so you can easily skip it.

It's not just software (or recurring revenue software as the author defines his failed product) that doesn't produce the expected results when you follow all the expert advice.  Starting a new business is hard and most people who want to be entrepreneurs will not be successful, no matter how much effort they put into it. 

The problem isn't your business plan, or your methodology or a character flaw.  The problem is that most of the world is fine with using the mousetraps currently available, and most people are not easily persuaded to give up what is providing what they need today and put out time, energy and financial resources to acquire something new that is not 110% certain to provide all of that and more starting tomorrow and going on forever.

So, if you can't bear the thought of not having your own business, and you expect that business to provide your livelihood, you have two potential strategies.  One, displace an existing business with the capability to provide what you need, or two, keep trying with new business ideas.  Neither option is a sure thing, and the entrepreneurs selling you tools to implement option two are really doing option one themselves, and have no more idea of how to make option two work than you do.  Don't give those people any of your money, and always make sure you have enough money in reserve to provide for your own personal needs AND finance your entrepreneurial addiction.
Howard Ness Send private email
Tuesday, August 06, 2013
 
 
I found success only by going many many years. Like 10 before things got OK, and during that 10 living in a low income area and living as a pauper off of savings. I've mentioned this before, and usually people then talk about how they "need" to be making replacement salary from their corporate job within 6 months, or sometimes 18.  Or they want to do it part time on weekends while they keep that job.

I don't know how often that works. The BingoGuy said he coded it in a weekend and was profitable almost immediately, though he didn't include paying himself a salary and quitting his job for a few years if I recall, and when he did I'm not sure if his real income is from bingo or if it is rather from using his immense success of barely meeting expenses from bingo to rent himself out as a consultant? Not sure.

Most products seem to take 10 years to get good enough that they are a standard and have a fan base and are bringing in a significant income.

If you can't eat ramen for 10 years, maybe entrepreneurship is not a great idea.
Scott Send private email
Tuesday, August 06, 2013
 
 
There was a media identity down here in Australia who used to say "it took me 20 years to become an overnight success".  Perhaps he stole that from someone else but I suspect is sums up the vast majority of successful businesses, software based or otherwise.

I for one have done more than OK in the mISV game but it's taken a long time.  4 years from first line of code to quitting my job and 6 years later growth continues at largely the same rate it always has.  I read the stories of blazing overnight successes with slightly envious eyes but I've been doing this long enough now to know there's no "magic trick", it's just a lot of hard work.  Most of that hard work has no perceptible benefit, but sometimes, just sometimes, you find something that works and gives you that next incremental jump.
Mark Nemtsas Send private email
Tuesday, August 06, 2013
 
 
"entrepreneurial addiction"
Perhaps it is time for me to enter into a 12 step program.
codingreal Send private email
Wednesday, August 07, 2013
 
 
I find spotting real demand to be the biggest challenge. For instance,
Scott: Did you spot the demand correctly and then took 10 years to meet the demand or rather it took you 10 years to really isolate the demand?
codingreal Send private email
Wednesday, August 07, 2013
 
 
Mark Nemtsas:
Did you change time tracking from desktop to web as a response to demand or got tired of supporting desktop apps? Did it increase your sales or was it mostly a cost saver.
codingreal Send private email
Wednesday, August 07, 2013
 
 
Howard:
"One, displace an existing business with the capability to provide what you need, or two, keep trying with new business ideas.  Neither option is a sure thing"

But surely each strategy has different risks. Which one would you say is most suited to one or two man operations? Wouldn't displacing an existing business be harder? Assuming customers are happy with what they are getting which is what you said was the root of difficulty in the first place?
codingreal Send private email
Wednesday, August 07, 2013
 
 
"The BingoGuy"
I'm trying to find Patrick's 2012 review where he made the most he ever has from a consulting gig and all he would say about Appointment Reminder is that it is covering costs.  Unfortunately, it seems to be offline.  Maybe I'm hallucinating or maybe that narrative is too incongruent with his blog posts so it has been delayed indefinitely.

I envy people who can change horses two, three times a year, who don't worry about their finances 6 months forward and who get to do what they truly love doing all the time.  So kudos to the BingoGuy.  Just don't expect the same result for yourself by following his meandering guided path to software business success, since as far as I can tell, that isn't how he got to where he is right now.
Howard Ness Send private email
Wednesday, August 07, 2013
 
 
" Just don't expect the same result for yourself by following his meandering guided path to software business success"

I won't.
codingreal Send private email
Wednesday, August 07, 2013
 
 
"Wouldn't displacing an existing business be harder?"
From what I've seen, it's much easier (mainly because option two is really hard).  Businesses are like fruit trees, they take several years to grow into productive assets, they become less productive as they get older and sometimes they get diseases and need to be replaced.  There is always a market for fruit, so if you start producing fruit, you can sell what you produce, but you don't get to set the price.  You have to accept what the market is paying.  If you operate your orchard more efficiently than your competitor, you will make more than them, but it could be that neither one of you is getting rich.  If you happen to get rich selling fruit one year, it won't last, because high prices will attract new competitors.  On the other hand, you don't have to worry that no one will buy your fruit. 

In the end, if you don't like growing fruit, you won't last because you will bail out when the market is glutted and you start losing money.  But if you like growing fruit, you are good at it and you keep some money in reserve, you will survive the bad years and really appreciate the good years.
Howard Ness Send private email
Wednesday, August 07, 2013
 
 
"On the other hand, you don't have to worry that no one will buy your fruit"
And that is the key i guess. Many of software products that I see don't sell at all or very little which I guess means they are not "fruits". Or used a lot but are free which I guess makes them like water or air, rather than fruit.
codingreal Send private email
Wednesday, August 07, 2013
 
 
**Did you change time tracking from desktop to web as a response to demand or got tired of supporting desktop apps? Did it increase your sales or was it mostly a cost saver.**

There were enough people asking for a web-app that it seemed worth the effort to build one.  It's been moderately successful in terms of sales, representing a significant minority of my sales right now. 

But in terms of hours of work per dollar of revenue I think it's at least an order of magnitude better than the desktop product.  I've got just under 200 subscribers right now and (I kid you not) technical support for that would be < 1 hour per month.  And most months there's no technical support at all.  I've automated the heck out of the online product and the automation is working very nicely. 

Technical support for the desktop product is at least an hour a day, seven days a week. But given the large number of users even that isn't that much.

It's worth adding that I don't see myself dropping the desktop product any time soon.  I still get a a number of new companies purchasing the desktop product each day and despite my best efforts I just cannot get my established user base to move across to the web product.  I am still trying to get to the bottom of why this is but I believe it's simply because my software just works, it's inexpensive, and they cannot see the benefit of moving from that to an online solution.  My users tend to be small businesses, not particularly technically literate, and fairly conservative.

If anyone has any suggestions how I might get a decent sized user base moved from a desktop product to an online product I'd love to hear them.
Mark Nemtsas Send private email
Wednesday, August 07, 2013
 
 
How about introducing features in web version not available in the desktop version? I would design those features carefully to come across as a natural advantage of being web based not as a blatant punishment of desktop. Incidentally, why such a big difference in support requirements between the versions ?
codingreal Send private email
Wednesday, August 07, 2013
 
 
Creating a business takes time and grind. And 10 years is actually pretty good. Here's our recent revenue graph over the last 10 years: https://www.followsteph.com/2013/08/07/landlordmax-2012-2013-fiscal-year-10-year-anniversary-and-a-10th-record-year/

Notice the first 3 years, they weren't that exciting. Yes revenues more than doubled during the first 3 years, but compared to today that's nothing. In fact we make more in a month now than I did my first full year when it was just me!!

There's lots of stories about overnight successes, but like it was mentioned above, in many cases it took years to be an overnight success. Especially if you're bootstrapping. Also, the other thing to remember is that this is not the norm but rather the outliers.

It's very much like the loto. How many businesses are there and how many can cash out gazillionaires within 1-2 years? Almost the same odds as winning the loto ;) The truth is that it takes time, and 2-3 years is not enough 99.999...% of the time.

Also remember that coding is just a small part of the business. Too many programmers focus on building the software but do almost nothing on the business side. The business side should account for at least half of your time. If you build a great product but no one knows about it, then no one will buy it.
Stephane Grenier Send private email
Wednesday, August 07, 2013
 
 
That graph shows steady growth which is awesome. That is a sign you have a viable business assuming we are talking real numbers (doubling from 1 client to 2 isn't as impressive as going from 100 to 200) but you can be successful long before growth tapers off.  If you define success as making more out of the business than you would have as an employee, what year would that be?

I can think of few products that took 10 years that became successes. There are some that become bigger over time (Word was decent for close to a decade and then became dominant when windows came out) but they are decent along the way. And there are companies that crank out products for 10 years before having a hit (see Rovio).  But a product that was in the market for 10 years and got no traction which later became a success? I can't think of one of the top of my head.  Windows might be close but I am guessing that was pretty profitable all along the way.

--
Creating a business takes time and grind. And 10 years is actually pretty good. Here's our recent revenue graph over the last 10 years: https://www.followsteph.com/2013/08/07/landlordmax-2012-2013-fiscal-year-10-year-anniversary-and-a-10th-record-year/

Notice the first 3 years, they weren't that exciting. Yes revenues more than doubled during the first 3 years, but compared to today that's nothing. In fact we make more in a month now than I did my first full year when it was just me!!
Foobar Send private email
Wednesday, August 07, 2013
 
 
"means they are not "fruits". Or used a lot but are free which I guess makes them like water or air, rather than fruit. "
It's not a perfect analogy, but people still buy security software, word processors, spreadsheet programs, presentation programs, graphic design programs, PDF authoring programs, computer games and so on, so if you grow the fruit people want to eat, you can sell it.  The free "like water or air" software is more like "have a free coffee and doughnut while I talk to you about buying this nice piece of hardware" or "watch some ads before I give you a free bottle of water."  And there are lots of examples of bad business decisions, so just because someone is giving away software, doesn't mean they are smart business people.  There is no such thing as public service software, provided at no charge because every human being has a right to it.

In the end, successful businesses provide more perceived value to customers than the alternatives.  And that value is what the customer perceives, not what the business likes to think it really is.  That's extremely vague and over-generalized, but if you can be creative in providing perceived value, there are lots of business opportunities out there.
Howard Ness Send private email
Wednesday, August 07, 2013
 
 
Watch out who you take advice from. In software biz forums people who barely make a few hundred bucks a month with their software and get their main income from doing consulting like to give advice that sounds like they were running Oracle or Microsoft.

That's why Mr. BingoGuy is so dangerous. He's hyped as some sort of guru though he barely makes a salary with his products. The rest are consulting gigs. But of course he doesn't mention this too often in his 'software business' blog posts.

I tend to ignore advice unless I know the numbers behind the person who's talking.
Jeremy Morassi Send private email
Saturday, August 24, 2013
 
 
*
Did you change time tracking from desktop to web as a response to demand or got tired of supporting desktop apps? Did it increase your sales or was it mostly a cost saver.
*
It was done out of demand.  It's increased sales and saved costs.  That being said I am constantly amazed by the number of people who have absolutely no interest in taking their employee time clock online.  I don't see the desktop market in my niche declining at all.
Mark Nemtsas Send private email
Monday, August 26, 2013
 
 

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