It was just two short months ago that I announced on my blog that I’m co-hosting a conference called MicroConf. Well, we’ve gone through the pre-sales process, and gone through the regular sales process. Now it’s time for the final push. If you’re interested in going to MicroConf, you still have time to get there. Go to http://www.microconf.com and register.

So far, the conference has really started to come together. We’ve got a great lineup of a dozen speakers who are generally well regarded in the startup community. We’ve got a solid set of sponsors who I can’t possibly thank enough for their generous support. They are, in the order listed on the website:

• Microsoft
• AppSumo
• EditMe
• Bidsketch
• The Micropreneur Academy
• Red Gate Software
• Balsamiq
• bvSoftware

Most of these sponsors are giving away stuff, and in some cases that stuff reaches into the thousands of dollars of stuff. The conference is relatively small (as conferences go) so you stand a reasonably decent chance at winning something. Don’t expect a TV or anything like that though. We’re giving away stuff that’s going to help your business to either launch a product, or to become better situated to find more customers or serve the existing ones better. Some of them are giving away developer tools *woot*

So register today and we can have a few drinks at the Queen Victoria Pub in the Riviera.

Wait, you don’t want to pay for it? Hmmm, well I do have a couple of tickets that I can give away. So I’ll tell you what I’m going to do. Send me an email to mike at micropreneur dot com and tell me your story. Tell me who you are, what you do, and why you should get a free ticket to come to MicroConf . I’ll read all of the submissions and award the tickets I have based on those submissions. I’m not looking for sob stories. What I’m looking for is genuine interest in either launching a product or furthering your business, why you need to attend this conference, what you expect to get out of it, and whether you’ve already registered or not.

In a nutshell, that’s it. And for those of you who want to go but are afraid to register in the hopes that you might win, go ahead and register. If you win and are already registered, I’ll refund your money. I haven’t decided yet, but I may look more favorably on people who have already registered, since I’ll know that you’re serious about going.

That’s about it. Good luck everyone!

One of the pieces of advice that I’ve heard doled out. Over the years is this. “Don’t build a product that goes head to head against a company like X.”, where X is usually Microsoft, Oracle, Google or some other large, public company with billions of dollars sitting on pallets in a dark bunker somewhere. Increasingly, the names mentioned are companies who are much smaller, but tend to have extremely large networks of users, such as Facebook or Twitter.

The reason these upstart companies have become so “dangerous” to startups is that with their substantial networks of users, they can institute changes such that your user base can be sucked away virtually overnight by little more than a press release and a beta version.

Regardless of the opposing company or the type of power it may wield, the situation is very similar and can generally be described as follow:. Your startup is “David” and their company is “Goliath”. In some circles, this is referred to as a death sentence. When your startup stands in the way of a powerhouse who has resources that it can bring to bear on defeating you, there is often little you can do.

Something to keep in mind is that “often” does not mean “always”. There are a few very important strategies that you can use to compete effectively against a larger competitor. Many of these strategies will remain valid whether you are each going after the same market, or if you have decided that you are going to go on the offensive because the product “Y” from company “X” is so abysmal, that its users can’t possibly withstand the pain much longer.

Strategy 1: Fly under their radar

This is a short term strategy that you can use to survive for a while. It’s not perfect, and it does have some flaws. For example, it won’t work very effectively if your opponent sees this market as critical to their success. Trying to tackle Google and build a better search engine is almost doomed to failure. Just ask the Bing team at Microsoft. They have billions of dollars at their disposal and to date, have still come up short.

It’s also not going to work well if you are both new to the market with your product, because you can bet your favorite de-motivational poster that they’re already on the lookout for competitors. When they find you, they will actively seek to copy the features of your product and beat you in the market.

If your competitor knows who you are and you know that they know, look for another strategy because it’s too late.

However, if you’re the upstart in the industry and it’s a relatively mature industry with several enterprise level vendors selling into it, this will probably work quite well. In Enterprise sales, mature products are handed off to teams of people to sell who consistently don’t get any real work done. This is not to say that they don’t make sales, because they do. Their problem is that they become so entrenched in the status quo, that eventually they lose all respect for their existing competitors and don’t realize that an upstart like you might have a shot in the market, especially if you address their shortcomings.

It’s not until you start taking multiple sales per quarter from the same regional sales reps that someone is going to notice anything is wrong. It could be months before this happens, or even years, depending on the regional sales rep churn rate at your competitor. The time that this can buy you is crucial. An enterprise company will put out a new release, on average, once or twice per year. Occasionally they will do a quarterly release, but as a startup, you can beat them at the release game. You are more readily able to churn out a new release for each customer, as new demands come to the table and it takes more code to land each customer.

Strategy 2: Be where they aren’t

If you’ve never heard of the technology marketing pyramid, don’t worry about it for two reasons. First, I’m about to explain it to you, and second, I’m remembering it from a conversation I had with the VP of Sales from a company I worked for a long time ago. There’s probably an official name for this, and if you know it, please drop me a line to fill me in. Otherwise, bear with me for a few minutes.

Any market for a high technology product can be divided into a few different segments within a pyramid. At the very top of the pyramid, you have the people who want or need the bleeding edge stuff, for whatever reason. The definition of what is considered to be bleeding edge is going to change based on the type of product. However it may make it easier to understand if we use a more concrete example.

Let’s look at the database software market for a few minutes. When it comes to bleeding edge performance, whose name leaps to mind first: Microsoft or Oracle? Most people will think of Oracle first. Remember that we are discussing impressions of performance, not actual performance, nor are we discussing usability or pricing.

Oracle created their database software with the intent to run it on as many different platforms as they possibly could and wanted to do so with rock solid performance. Most people would agree that Oracle licenses are way overpriced and the way they sell their software is little better than the tactics employed by a used car salesman.

Customer: “How much for 4 Oracle licenses?”

Oracle: “Well, there are a lot of things that factor into it, including number of processors, types of processors, modules, software maintenance, how close I am to my quarterly bonus, etc. What’s your budget for this project?”

It’s probably little consolation that every single Enterprise vendor operates this way. But Microsoft did something smart here. Microsoft looked at how Oracle had positioned itself in the market as the elite database engine with the best performance you could possibly buy and on as many platforms as you could ever imagine. So what did Microsoft do? They shipped Microsoft Access. Many would argue it’s not a true database, but then again, neither is Excel and people use it extensively as if it were. Hell, Microsoft even shipped an ODBC driver interface to get at the data inside of Excel.

But the point is that Microsoft chose to go where Oracle wasn’t. Oracle was well known at the high end, but they were also known for being expensive. You get what you pay for, right?

Microsoft decided that if there was a small segment of the market at the top of the pyramid that were willing to pay Oracle for bleeding edge performance, then Oracle could have them. And Microsoft was going to take everything else. And so Microsoft did.

Microsoft Access went on to become one of the most prevalent desktop databases, a market position that it still dominates. Indirectly, they leveraged that success to assist with the establishment of SQL Server in the small to mid-level enterprise. But they still have issues pushing their database into markets where extreme performance or scalability is required. It’s not that SQL Server doesn’t work in these environments. There’s simply the conception that it doesn’t work well and is going to be a hassle to implement or somewhat unstable.

Over time, this strategy can also fall apart. As you can see in today’s market for databases, there’s a lot of ambiguity. Oracle has nowhere to go but down market, so they’ve offered free versions of Oracle to help attract developers and get into deals they otherwise wouldn’t. MySQL started at the bottom of the pyramid and is working its way up, pushing into Microsoft along the way.

Microsoft rests in the middle. It is attempting to push higher by releasing high end versions of SQL Server to compete with Oracle while at the same time trying to fend off MySQL with free offerings on the low end.

It may be a long way of saying it, but the point is that regardless of facts, you can choose how to position your product in the market and you must differentiate yourself from your competitor, even if the differences are minimal.

This means that if they are pitching performance, you pitch reliability, or scalability, or something else. You can’t also pitch performance after they have started that marketing effort. It just doesn’t work and customers will be skeptical of your claims. Market positioning has little to do with facts and more to do with perception. Use that to establish where you want to be, rather than to emphasize where you are.

Strategy 3: Exploit their weaknesses

Are you going to compete with a desktop application? Build a web app. Are you competing with a web app? Build a desktop app. Do you hear their customers complaining about something relatively major? Pick that as one of your marketing points and start taking away their customers.

The idea here is to find chinks in their armor and begin exploiting them for your own gains. Large companies often don’t realize that things are going terribly wrong until it’s too late. Then they simply buy out their competitor to regain the lead. Sounds great, doesn’t it? See? I knew you were in this for the money.

Strategy 4: Find the users who are pissed off

This strategy plays with fire a little bit. It’s usually pretty easy to find where people hang out who hate the product of your competitor. Just add “sucks” to the end of their company or product name and do a search. You’re almost certain to find a forum that tells you exactly why they suck. Or a URL redirection back to the company website because they were smart enough to buy it first.

Finding these communities does a few things for you. First of all, it serves as valuable market research. These people are more than happy to share why that product or company sucks and how things “should” be done. Take the good, and leave the bad because let’s face it. Customers don’t always know what they’re talking about.

Second, it gives you a place to market your ideas. If these people really hate the other product or company so much, chances are good they would be willing to defect and use yours instead, especially if it addresses their issues.

And finally, people who a pissed off tend to vent online… A lot. And they’re more than happy to tell all their buddies about this great new product from a competitor of their old vendor that is ten times better and here are all the reasons why. Basically you have a built in evangelist network you can tap into.

But there is also fire to contend with. As I already mentioned, these vocal customers have a tendency to believe they know how a product should be built and what it should do. Sometimes, they are in the distinct minority. Worse still, sometimes they don’t even know it. So before you go pitching your product to these people, make sure you can meet their demands and that they are at least reasonably justified in their requirements.

Just be cautions. The fact of the matter is that they are going to be a fickle bunch. They’ll give you a lot of slack in the beginning. As your product matures, they will expect your product to match all of their needs. When it doesn’t, you will have to leave them behind and accept that they may very well be on another forum denouncing your product. Chances are it won’t be nearly as loud or nearly as vocal because they tend to feel like large companies deserve their full wrath and they should save that wrath for them… As if they can’t simply create more.

Strategy 5: Integrate with third party software or develop a plug-in API

Enterprise companies don’t tend to play well with others, especially when it doesn’t suit them to do so. However, building integration points with other products can be the bread and butter of your business strategy. When an Enterprise company starts losing deals because they don’t have a good story to tell around a type of product such as help desk software, they’ll do the only thing they know how to do: go out and buy a company that sells help desk software.

They won’t build their own. When is the last time you saw an Enterprise company release a new product? I know there are a few examples, but they are the exception rather than the rule. The reason for this is that is time consuming and expensive to build a new product from scratch. Even worse, from the standpoint of the Enterprise Company, building a new product is exceptionally risky.

What if they build something that customers don’t actually want because they misread the market? What if they find it too difficult to establish solid market penetration because of the entrenched players? What if they launch a minimally functional product and they tarnish their reputation as producing bad software? Anything involving a tarnished reputation takes a long time to overcome. More often that tarnished reputation hangs like an albatross around their necks which is difficult, if not impossible to shed.

So instead, they trade money for the time it would take to get a foothold into the market. In doing so, they get the code, the market penetration, complete rights, all the future benefits of the product, and a new source of potential customers to peddle their existing product line to. You obviously don’t have that option.

Instead, by providing integration points between your software and the products of other, preferably larger vendors, you can gain a steady stream of customers from those other products who are looking for integration points with products that they already use today. As this third party product grows, the potential for your revenue to increase grows as well. Building integration points into multiple products can compound this growth.

The disadvantage to this is that there must be a valid reason that users of this third party product would use it in conjunction with yours. Not all third party products will be a good fit. In addition, you have little to no control over those products. If they decide to go in a different direction, change their API, or eliminate it altogether, there is little you can do about it.

Finally, you must provide solid value to the customers via the integration points you provide because the customers must now pay for multiple products. Depending on the price point, this could be a difficult pill for customers to swallow.

Final Thoughts

Finding companies who have successfully employed one or more of these strategies isn’t terribly difficult. Certain open source products such as Linux and MySQL have certainly carved out rather large portions of the market. On the commercial side, you don’t have to look any further than companies like Mint.com, Skype (which took on traditional phone providers), and Netflix. For smaller, self-funded companies you can look to Red Gate, 37signals, Source Gear, and Atlassian.

To people like us, these companies are financially doing quite well today. But they all had to start at the bottom and cut their way through the competition before they got to where they are today. That takes time, effort, and a lot of hard work. Any questions? Leave them in the comments below.

In early October, I had the pleasure of meeting Harry and Ted from Moraware Software at the Business of Software Conference in Boston. They’re apparently big fans of the Startups for the Rest of Us podcast that Rob Walling and I run. We had more than a couple of discussions at various points in the conference, but this one sticks out the most.

I’ll credit Ted for this particular blog post, since he brought up the topic. Over the past year or so, Moraware Software has transformed its pricing model from that of selling software outright to Software as a Service(SaaS). Their rationale? Mostly it had to do with interesting quirks associated with how accounting is done.

You see Moraware, like the vast majority of software companies on the planet, was stealing from its customers. And before you go off the deep end, let me state plainly that this is a common and widely accepted practice which is completely legal. The details are in the accounting.

Let me explain how it works so that you can steal from your customers too. Trust me. They’ll love you for it.

The Dirty Secret to Downloadable Software

Selling downloadable software certainly has its pros and cons. More specifically, for downloadable applications the price points tend to be higher in the short term and the cash injection is more than welcome for most companies just starting out.

But here’s the dirty little secret that nobody ever talks about. The vast majority of software applications offer support for some period of time after the purchase. Many offer a money back guarantee as well, because lets face it. There’s very little to lose by doing so if you’re offering a genuinely good product.

But guess what? Until that support period and money back guarantee have expired, that money isn’t yours. It’s what’s called “deferred income”. Straight from Wikipedia, the source of all truth in the universe:

Deferred income (also known as deferred revenue, unearned revenue, or unearned income) is, in accrual accounting, money received for goods or services which have not yet been delivered. According to the revenue recognition principle, it is recorded as a liability until delivery is made, at which time it is converted into revenue.

Thanks Mike. What the hell does that mean?

The basic concept is simple. Assume your support period is 1 year. Every time you make a sale, only 1/12 of that income should be applied to your revenues on any given month throughout that year. What you should technically do is set that money aside until the month in question, at which point you can access it and spend it. Otherwise, you’re spending money you’ve received from the customer before you’ve delivered what you promised.

An Example

Suppose that you’re selling two different products:

1. “Spin, Spin, Spin”(SSS) is a downloadable software application built for people who are into the indoor cycling sport known as “spinning”. It tracks your physical statistics and compares them to stats from your training buddies. It costs $120 up front and comes with 12 months of support.
2. “Shake Your Moneymaker”(SYM) is an iPhone app built to measure how well the phone (and most likely other parts of you) move in your pocket while you’re dancing. It’s a social phenomenon sweeping across the island nation of Elbonia and for a mere $10/month, you can compare your “moneymaking skillz” against those of your friends and enemies.

Scenario 1:

Assume that you sell SSS to Customer A in January. Chances are pretty good that you’ll get that $120 and spend most of it before the month is out. You’ll plow that hard earned cash back into the company to do additional software development, provide additional enhancements or simply pay for additional business expenses.

Guess what? If you spend more than $10 of that money in January, you’ve just stolen money from your customer. They’re probably not going to care or even notice unless they ask for their money back, but it still happened. And the reason is because you didn’t set that money aside and account for it properly.

Scenario 2:

Assume that you sell SYM to Customer B in January. This customer is paying you $10/month for each month of service. You provide the service for a month, and then the customer pays you for another month of service. No harm, no foul.

In Scenario 2, we’re spending money as we provide a service. In Scenario 1, we’re spending money prior to delivering a service, which in a way is theft.

What the hell are you talking about? That’s not stealing!

You’re right, it’s not. But you still spent money that isn’t yours. At least not yet it isn’t. So you borrowed without permission, which in most cases is stealing. But this is a socially and legally accepted way of doing business, so from now on, I’ll call it borrowing from you customers. At the end of the day, what’s wrong with doing this?

The fundamental problem with spending money you’ve received before you provide the service isn’t so much that you’re stealing. The underlying problem is that you’re operating your company on credit that has been extended to you unknowingly by your customer. Your customers have credited you with that revenue, but you’re still on the hook to deliver services for the next 12 months.

This means that when you look at the monthly bank statement, it says you have loads of money. But when you look at your accounting statements, they’re going to show that even double digit growth doesn’t make you significantly better off than you were before the sale because you are carrying a liability that is equal to the sale price, minus 1/12 for each month that passes.

Is this really a problem?

Yes. The problem with downloadable software is that it’s much more difficult to identify sales trends. When you are selling downloadable software, you basically start from $0 every month.  So every month becomes a new sales cycle. An off-month can easily derail many of your sales projections and make it difficult to determine definitively whether you simply had an off-month, or if your business is in the middle of a mild (or severe) downturn. It can take months for you to find out the answer and those months can make or break your company.

With SaaS, you have a base of customers and each month it’s extremely easy to tell if you are doing better than you were in the past by looking at your customer base. If you have more customers at the end of the month than at the beginning of the month, then your business is growing. If you lost more customers than you acquired, then your business is shrinking.

When you sell downloadable software, the picture isn’t nearly as clear.

When is Selling Downloadable Software a Good Idea?

I’m glad you asked. One-time fees for software are a great idea when you’re just getting started with your product. This assumes that the cost of your product is in a reasonable range that most of your customers are going to be able to buy without too much trouble. Generally that means less than $2,500 or so per purchase. Beyond that, the sales cycle tends to be a bit longer and therefore becomes more difficult to close the sale.

But in the beginning of your fledgling company, the cash injections you get from those initial sales will do something for your company that a SaaS offering won’t do.

These early sales will provide you with the capital needed to help develop your product.

And that right there is generally reason enough to license your software per sale rather than as a subscription based service. Just keep in mind that when you do this, you’re building your business on a line of credit offered by your customers.

Here’s a date you probably won’t remember. November 9th, 2004. That’s the day that the Mozilla Foundation unleashed Firefox 1.0 to the world. Sure, there were more than two years of releases before that which were affectionally labeled as “beta releases”. Don’t blame Mozilla for that. Google’s the one that made it fashionable to do so with their ridiculously long “beta” products.

At the time, Firefox was a great browser. Sure, it had its problems as all browsers do. In fact, all major software has problems. Yes, even software written by NASA that’s gone through 300 bazillion code reviews per line. Remember that itsy bitsy little crash? If you don’t, I’m sure that at a pricetag of $125 million, NASA does.

Regardless of little bugs here and there, Firefox was a dandy little browser for a time. Then things started to go wrong. Way wrong.

Wikipedia, the source of “all that is true” on the Internet, points out as one of the reasons for the creation of Firefox as the following:

“The Firefox project began as an experimental branch of the Mozilla project by Dave Hyatt, Joe Hewitt and Blake Ross. They believed the commercial requirements of Netscape’s sponsorship and developer-driven feature creep compromised the utility of the Mozilla browser. To combat what they saw as the Mozilla Suite’s software bloat, they created a stand-alone browser, with which they intended to replace the Mozilla Suite. On April 3, 2003, the Mozilla Organization announced that they planned to change their focus from the Mozilla Suite to Firefox and Thunderbird.”

Well, it worked out pretty well initially. Today, Firefox sports a market share of between 20%-30% of the market, which isn’t all that bad considering how dominant Internet Explorer had been. Remember IE? Of course you do. It shipped on pretty much every computer on the planet for the last 14 years. Sure, those Linux fans wiped their fancy Dell computers and installed Linux. And of course there was a Mac version of IE out there for a while.

But let’s call a spade a spade here. Internet Explorer has sucked for oh… I don’t know. 8 years now? Is that right? Probably not exactly, but nobody really cares. IE sucks. It’s on the Internet, so it must be true. It started out decent, and then it became a memory hog. It became bloated and slow. Then with those damned ActiveX controls, it became the transportation delivery device of choice for every cockroach on the Internet, aka: viruses, malware, spyware, popup maker, etc.

So the bottom line is that Firefox didn’t really need to be that great in order to be better than IE. It just needed to be average. However when you’re average in a field of suckiness, you look like a start. Yay Firefox!

But Firefox started to suck quickly… and I mean REALLY suck and REALLY quickly. Even back in 2005, which is 5 years ago and a lifetime in Internet time, I pointed out glaring performance shortcomings of Firefox. It was getting bad then, and it’s gone to hell in a handbasket since. And I wasn’t the only one to notice back in 2005… or in 2006…  or in 2007… or in 2008… or in 2009… do you see a trend here?

When did Firefox become the new IE?

That’s a crappy way to label any browser. It’s like calling your boss the PHB, even if he is. Unfortunately the answer is just as obvious as the question. It happened between 2004 and 2005. Yes, less than 12 months from the release of version 1.0.

How did it happen?

I’m not really sure to be honest. Wikipedia isn’t much help here I’m afraid. But that’s not really the point of this long winded rambling of an old programming codger.

What is your point you old programming codger?

The real point is this. If you’re fed up with crappy browsers, you don’t have to live with it. I did, and you can do it too. Here’s how.

I ran a 24 hour experiment about 3 weeks ago. I’d had Firefox crash my machine one time too many and I just got fed up, subsequently venting my frustrations on Facebook. One of my old evil minions piped up and told me to try Google Chrome. I had. It sucked. He assured me things had changed a lot and I should try it again.

Well, what did I have to lose other than about a days’ worth of work and an Internet Explorer-esque browser. So to give it a fair shake, I deleted my Firefox shortcut, replaced it with Google Chrome and gave it a whirl.

I had it installed in all of 2 minutes, including the download. That’s not just because the download is small, mind you. The 25Mbps fiber optic connection certainly doesn’t hurt. But it installed painlessly and I fired it up right away. Immediately it asked me if I wanted to import all of my cookies and passwords from Firefox.

What? Seriously?

I really had expected this part of the transition to be a painful one. Anyone who has used a browser for long enough just saves passwords to the browser left and right to make surfing the net a lot easier. I figured what the heck and did the import.

… and it worked. The only “flaw” (if you could call it that) was that every page I normally visited asked me for my password again. But with the cookie import, all the passwords were already entered and all I needed to do was click the checkbox to save it for the future. Then off I went as if nothing was different.

After a mere 24 hours on my desktop, I stopped using Firefox entirely. It’s been nearly a month and I haven’t looked back. Even my virtual assistant has given it a whirl based on the recommendation I made on my podcast.

What about your Bookmarks?

For all my bookmarks, I’ve been using the Firefox plug-in called XMarks for several years, which is a cross browser, cross platform book mark synchronization software. This plug in has been one of the primary reasons that this transition was so simple and painless because XMarks is available for IE, Firefox, Chrome and Safari.

To be fair, I never gave Opera an honest shot. But at this point, I don’t feel like I need to. Opera may very well be a great browser. Kudos to them for doing such a great job of creating rabid fans. But until I get fed up with Google Chrome, I’m not about to go looking again. The experience of switching to Chrome was such a profound improvement that I really can’t even begin to adequately describe how it has affected my productivity.

For all of you who thought that the choice between Internet Explorer and Firefox was a choice between the lesser of two evils, there’s hope. If you’re fed up and irritated with the speed, memory usage, crappiness, bad rendering, poor experience, (insert profanity here) browser, give one of the two below a try. I think you’ll be pleasantly surprised.

Google Chrome Browser
Opera Browser

A colleague referred to me as Mariano Rivera this week. If you’re not a baseball buff, Mariano Rivera is the closer for the New York Yankees. Like most closers in baseball, Rivera usually comes into the game when it’s almost over and the Yankees are winning by only a couple of runs. It’s his job to make sure the other team doesn’t score so the team holds on and wins the game. If he does it, he gets a “Save” in his statistics. If he doesn’t, he usually ends up with a loss. He’s widely regarded as one of the best closers in baseball.

As I thought about this comparison, I realized that while flattering, it wasn’t remotely true. The people I work with don’t send me in to close a deal. I’m not there to “seal the deal” because I’m not that kind of person.

I’m the guy they call when all hell has broken loose. I’m the guy they call when someone screwed up, someone else got pissed, and tens of thousands of dollars of products, services, and future productivity are on the line. I’m the firefighter.

This week, I felt the urge to change my business card to Winston Wolfe or at least put a quote from him on there. If you remember the movie Pulp Fiction, he’s the guy who shows up to clean up the body after John Travolta’s character accidentally shoots “Marvin” in the face. When he arrives he says:

“I’m Winston Wolfe. I solve problems.”

In a nutshell, that’s generally what I do. I solve problems. And when I’m sent in to rescue a dying project, I look like an All-Star for a couple of reasons.
1) I know how to manage a project and set expectations
2) I have a deep and diverse set of skills
3) The customer expectations are based on the guy who went in before me.

How many of these projects fail?
A study by Gartner suggested that as many as 75% of IT projects fail and an informal poll by CNet in 2008 suggested that 62% of IT projects fail. Neither specifically calls out consulting projects, but personal experience from cleaning up some of these messes seems to indicate that it’s at least 20%. In the past 30 days, I’ve saved two different projects from completely falling apart after the customer lost confidence in both the consultant and in the vendor.

There are varying degrees of failure, but when the customer asks for a consultant to be replaced before the project is over, that’s a pretty good sign that they failed. I came in after one consultant who claimed to know how to use a software package that he had merely installed and used once or twice. When he started working on the project, the customer asked a bunch of questions he didn’t know the answers to, so the consultant went to the product documentation. After four days of reading the documentation, he’d found the answers. But by that time, the customer lost all faith in his ability to deliver and threw the company out. I delivered on the next several weeks of services and heard the story mid-way through the project. I’d be pretty irritated too if I paid $12,000 for a consultant to read documentation for a week. I knew what the customer was thinking and he didn’t hesitate to offer it up. “Hell, I could have read the documentation myself.”

Yes, you read that right. The customer paid $12,000 for a week of consulting services. Some consulting companies charge exorbitant rates is because they guarantee their work. If a project fails, they’ll throw another consultant on it for no charge. Usually they come out a little ahead or a lot ahead.

The problem for the customer is that they waste valuable employee time with the consultant doing things that end up being thrown out anyway. Failed projects cost them even more money. So how do you go about making sure that a project succeeds?

The obvious answer is to use great consultants in the first place. But finding a great consultant is a lot like hiring great employees. The difference is that you have less data and interaction with the consultant to make a decision. More interaction isn’t necessarily going to help because a consultant is generally taken at his word that he knows what he’s doing. It’s simply not cost effective to give a battery of proficiency tests to a consultant who is only going to be there to do a short term project.

When you hire a consulting company to come in and do work for you, you’re relying on the professional services manager to provide you with someone who knows what he is doing. You can stress how important that is, but at the end of the day, the company you hire is going to give you whomever happens to be free at the time unless there’s a very specific skill set needed for the job that nobody else has.

Basically that means it’s a total crap shoot. You can easily get stuck with a consultant who just doesn’t know what he’s doing. Guess what though?

It’s almost never his fault!

I generally feel bad for these guys, because if you hire a company to come in and deliver consulting services and end up with a consultant who really shouldn’t be there, it’s not his fault. It’s his boss’ fault for putting him there. Consultants don’t get to choose what projects they work on. They go where they’re told. And if that means they are put on a project they have no business working on, then so be it. But he didn’t choose to be there. Someone else did. His choice was “Give it a try, or find a new job.” If it works out, then great. He’s got some new skills they can peddle to the next customer. If not, there’s usually enough profit margin built in for the vendor to replace him with someone else who is more qualified and still at least break even. In either case, it reflects poorly on the consultant, even though it’s not his fault.

What’s the formula for being a great consultant?
If you think that a great consultant is someone who knows their products cold, then you’d be wrong. A great consultant is many things, but mostly is someone who is a good teacher. Customers don’t want to have to hire you every time they need something. They want you to come in and teach them to be self sufficient. If you can’t do that, then you’ve failed to do your job. I worked with a guy about 10 years ago who was a brilliant programmer. He could write C code in his sleep and was very good at it. But his abilities, much like the dark side of the Force, made him arrogant. As if he could do no wrong. His code was poorly documented and difficult to read. The few bugs that were in his code were notoriously difficult to find because of his programming style. Eventually, management fired him because he wasn’t willing to be a team player.

A great consultant has to straddle the line between being that kind of Lone Wolf who can accomplish a set of tasks without any supervision, but at the same time, fit well into a team. As a consultant you’re working with the customers employees and need to teach them the things they need to know to be successful. At the same time, you have to be something of a good project manager. If you’ve only got a week to finish a project, then wasting 3 days chasing down a “nice to have” isn’t going to help you finish the project on time, let alone give you time to do any sort of knowledge transfer with the customer employees.

Finally, dial up your Humility Meter a bit. So you’re a consultant. You’ve worked on multi-million dollar software deals. You’ve installed software on tens of thousands of computers in a globally distributed environment. Your customers are all over the Fortune 100 list. Big fat hairy deal.

Customers might be a little impressed by that, but at the end of the day they just don’t care. They want to know that you’re going to do the job in a professional and competent manner. If you do a competent job, they’ll want your company to come back. If you do an outstanding job, they’ll want you back and won’t take anyone else. Which is great for you as a consultant, but bad for the consulting company you work for. This puts their consultant in high demand, rather than the company’s services. Don’t get me wrong, it’s great for repeat business, but if a consultant is good at what he does, most of his customers don’t want to take a chance on another consultant who might have a different style or a lower level set of skills.

How do I become a great consultant?
Like being successful, there’s no one secret to success. A great consultant is a combination of a lot of different things. Usually, you have to branch out a bit to be more successful. I’ve seen both ends of the spectrum and there’s a world of difference between a great consultant and a mediocre one, let alone a bad one. If you want to go from mediocre to great, here’s what you need to do.

1) Learn to be a great presenter
This isn’t just about public speaking, although that’s definitely a big part of it. I’ll give a follow-up blog post in the next couple of weeks to address this specifically because it’s a pretty big topic. Suffice to say that building a good presentation is key, as is being a good public speaker. If you have an opportunity to take a course on how to be an effective instructor, then do it. It will help you. Courses that teach how to be an effective instructor are generally technology or product agnostic. They teach you how to hone your delivery.

2) Become well versed in a lot of different technologies
It’s fine to be a Windows or Unix guru. It’s great if you can build PL/SQL queries in your sleep. But if you can’t relate your skills to problems across multiple technologies and business processes, this is going to hold you back. The ability to at least be aware of the pros and cons of various technologies allows you to relate those technologies to one another to solve larger business problems. It also gives you an effective position from which to offer suggestions on how to approach problems differently. It also helps to provide insight into how things work (or how they should work) when you run into technical difficulties. I’ve been able to pinpoint bugs in a product by knowing how the technology itself is supposed to work, without ever having looked at the code.

This is why developers who turn into IT consultants are so good. They tend to have an innate sense of how things would have been put together that they can troubleshoot things that they think are wrong. It’s like a sixth… or even a seventh sense. A good consultant doesn’t always know why he does the things he does.

3) Be professional
This sounds easier than it is and there are more things that you shouldn’t do than anything else. Don’t badmouth your product, your competitor, your competitors’ product, your boss, your ex-girlfriend, your employer, your ex-employer, the guy who was there before, etc. Airing your personal dirty laundry is simply not appropriate when you’re at a customer. It’s ok to tell stories of when someone did X, which was really stupid. But make sure that you do two things. First, don’t say names. The customer doesn’t need to know who the idiot was. Second, make sure the story serves a purpose.

For example, one of the best practices that I tell people when using a specific product is to always drag the computer onto the job, rather than the job onto the computer. It technically works both ways, but in the list of computers is a node called “All Computers”. If the mouse skips, or there’s a UI glitch in a remote desktop session, it would be very easy to accidentally install a new OS on every computer in the company. The story I tell is of someone who actually did that. It illustrates a point which is the potential consequences of doing it against best practices even though it works. And it illustrates that point without being demeaning.

Don’t brag either. Nobody likes the guy who brags about all of his past successes or the massively complex things he’s done in the past. On the other hand, you have to bring up some things you’ve done in the past to help make the customer comfortable that you’ve done this before. Using past experiences is a great example and an effective way to do this. You get to stroke your own ego a bit by telling a short story of a successful project you’ve done in the past, and at the same time answer their question.

“Mike, how do other companies do this.” “Well, there was another health care company I worked with that had a similar problem. Here’s what we did and it took us this long to do it. I know you’re a much smaller company than them, but it still takes about that much time to get it done. The issue isn’t the number of machines. It’s the setup time for all of the potential configurations. And the thing to keep in mind is that you’re using this technology instead of that one. So it’s a bit different, but the basic process is still the same. Here’s what I think you should do…” As you can see, part of this goes back to #2.

Finally, don’t look like a scumbag. Iron your shirt and pants. If your pants are worn out and threads are coming loose, throw them away and buy new ones. Customers are paying for a professional. The least you could do is look the part. Coming into work wearing jeans and sneakers isn’t going to endear you to the customer, although you can get away with it if there are extenuating circumstances.

I had a customer in Indianapolis who wanted me to deliver training to a class of 12 people for 3 days. I flew out on Sunday night, arriving there shortly before midnight. Unfortunately, the airline lost my luggage with all of my dress clothes. All I had to wear to the training facility the next day was the jeans and t-shirt I’d worn the previous day. The class started at 8:30am and since most stores weren’t open until 9am, it wasn’t as if I could go buy new ones. So I showed up in jeans and a blue t-shirt. I’d spent some time thinking about how to explain it, as I’d never met some of these people before.

I got a lot of funny looks as they walked in the door, but I started the class promptly at 8:30am with no nonsense. I told them that I was wearing blue because I was still upset that my Patriots had lost to the Indianapolis Colts several weeks before and that the reason I was wearing jeans and a t-shirt had absolutely nothing to do with the airline losing my luggage. They laughed at the terrible joke because all of them could relate to the situation. My professional, instructor-like demeanor carried me through noon when I was able to get back to the hotel where my luggage had thankfully arrived. Feedback at the end of the sessions included comments about how some of them were initially skeptical based on how I was dressed, but that I had handled the situation very professionally and they were very pleased with the course.

The way you look and present yourself in business as a first impression is very important and it can go a long way. But if you act like a douche-bag or don’t know what you’re talking about, your value as a qualified professional decreases dramatically and in very short order.

4) Shut up and listen
Customers and people in general like to talk. They want to tell you what’s going on and if you let them, they’re not going to be shy about telling you more than they probably should. You need to let them talk. I’ve been told of goings on which are considered illegal by simply keeping quiet. If you have ideas of how to solve their problems, ask if they’ve considered them. Don’t tell them what they should do before you find out if it’s something they considered. Otherwise, they will tell you why they already tried or considered that option and knew that wouldn’t work in their environment. Eventually they stop listening because you haven’t actually contributed anything.

The point of the first day at any customer is not to solve their problem. It’s to get the lay of the land and figure out what needs to be done. If the first thing you do is jump right into the middle of things without taking the time to find out the background story and what’s really important to the customer, you’re simply setting yourself up for failure.

Listen first. Ask questions. And don’t offer suggestions unless directly asked what to do. Even if that happens, talk about a few different options and then ask more questions. Trust me, you’ll seem smarter and sounds like you know exactly what you’re doing, even if you don’t. Making decisions without all of the information simply leads to poor decisions. Let the customer tell you everything. In fact, ask them to. Then filter out what isn’t important. Don’t let the customer tell you what’s important and what isn’t. You need to make that decision. By all means they should decide what is important to them in terms of goals and accomplishments because that will help guide how your solution is implemented. But you need to decide what information is relevant to the success of the project. That’s part of why you’re there.

5) Manage the project and your time well
Arrive on time, especially the first day. Most customers tend to be a bit lax about the exact hours when they’re paying for X weeks of assistance. So long as you get the job done, they don’t care about the hours you spend unless they are far lower than the amount they paid for. Unless you make some major mistakes, there should not be an expectation placed on you to work late unless that was a commitment made as part of the project. I’ve had customers start at 7am every day. Others have said that 10am is fine. The customer generally dictates the hours. It’s up to you to make sure that the project gets done during that time frame.

As the project progresses, your role should change from that of an information gatherer to that of a project lead. You need to drive the engagement, as opposed to letting the customer tell you what should be done. The presumption is that you’ve been a consultant for a while and have done a job like this before. You know the process and what should be done next. The customer doesn’t. Show them why they hired you. Unless you’re truly at a standstill and there’s nothing else you could be doing, then you should be working and moving towards your goal.

I’m not a consultant. Why should I care about how to be a great consultant?
The skills that make a great consultant translate very well into being a great employee. These skills translate into being a solid and well rounded business owner.  If that’s not something you’re interested in, then there’s somewhere else they come in handy. These are the same skills you need to be a great manager and I’m sure we can all agree that the world needs better managers.

These skills really aren’t for making a great consultant. They will help turn you into a trained and polished professional. Being a polished technical professional will translate very well into any career path you choose. I’ve never heard of anyone who was called “too professional” for a job in the technology industry.

In 2006, I had been self-employed for less than a year. I knew a decent amount about business and a whole lot about technology, but wasn’t quite sure what I wanted to do. I had been involved in a startup called “Pedestal Software” for the previous few years and it was sold to Altiris to the tune of $75 million in March of 2005. I thought it was something that I wanted to be part of again, but having spoken with other founders who’d received angel and venture capital investment, the politics of it all made me queasy. I wanted to build software. Not cater to people who’d never actually done it before.

Then along came game Paul Graham, a former software founder who was offering people a chance at building their own startup via Y Combinator. Initially, it seemed like a great deal for an entrepreneurial founder but as I read the fine print, I realized that Y Combinator was not designed for someone like me in mind. It spawned a blog post called “Startups for the Rest of Us” that has since gone viral twice.

My biggest problem with Y Combinator wasn’t so much that you had to move, give up part of your company, or that you had to be selected. It was the fact that they were offering a paltry $2,000/month for three months to build a product and for that “privilege”, they would charge you 6% of your company.

Seriously?

Umm… This is Massachusetts. My mortgage alone is more than that. And their expectation would be that I would move to Cambridge, rent a house, and build something reasonably good in 3 months that people would be willing to pay for. In addition to paying my mortgage of course. Again, I don’t have a problem with the timetable, but the money is a deal breaker. For someone like me who is married with kids, a mortgage and the sole breadwinner for the family couldn’t possibly make ends meet for three months to do that. My only hope would be to use personal savings to help bridge the gap and if I’m taking that kind of risk, why should I bother giving up part of my company to do it? Feel free to read what I wrote back then, as I’m not going to rehash it here.

A tiny bit more background…

About 9 months ago, I reconnected with Rob Walling, who runs a blog called Software by Rob. Together, the two of us have been building a community of developers as part of the Micropreneur Academy to help people who want to be self employed but don’t know where to start. We came to the realization that we wanted to take things a step further. We wanted to provide even more information to developers who were interested in building and launching their own products. Not everyone who comes to our site is going to join the community, but that’s no reason to deny them valuable information to help them on their way.

The Actual Announcement

So today, it is with great fanfare and gusto that Rob and I are launching our new podcast, named “Startups for the Rest of Us“. If you’re looking for practical advice from experienced entrepreneurs who have been in your shoes, then our podcast is the place to get it.

The Details
We will release a new episode every Tuesday. The first episode is live at the podcast website and you can listen to it in your browser or download the MP3. We’re also providing full written transcripts of each episode in the show notes.

Episodes will be concise and run 20-30 minutes so you can listen to them during a jog, a short commute or part of a lunch hour.

We think that this is something you’ll want to check out. We’ve never done a podcast before and the first couple of episodes are a little bit rough, but we get better at it pretty quickly. Tune in and subscribe using any of the links below. Enjoy!

Subscribe Now:

• iTunes (this link opens iTunes)
• RSS
• Email

About 6 weeks ago, I had dinner at a pizza place near Boston with some fellow developers. We were generally discussing various aspects of business, things to do, things not to do, etc. One of the guys asked me a question that I feel like I get quite frequently:

“What’s the most important thing you need to do to be successful as a single founder?”

I immediately came up with three different things, but settled on explaining the importance of setting goals and having a plan for meeting those goals. We talked about how to go about setting goals for a few minutes and then went on to discuss other things.

This isn’t a new question to me, but I was uncomfortable with the answer. I seem to answer it differently every time I’m asked and not usually the same way twice. This past Friday, as I sat white-knuckled in a small turbo-prop plane that was being buffeted violently by winds over the mountains of West Virginia, it dawned on me why I had been uncomfortable with my answer.

I was wrong.

If you ask 100 successful people what the secret of their success is, every last one of them is going to be more than happy to tell you because successful people like to tell you their story. In listening to 100 stories, you will probably end up with at least 50 different answers. You will also get a mix of things to do, and things not to do. This is a problem because after listening to all of the answers, you are still left wondering what the secret is because everything they said will make sense and for each of them, it was probably true.

As my plane was buffeted by high winds and we dropped another 20 meters in a very short timespan, it dawned on me that being successful with your business is a lot like flying a plane. There are a lot of things that have to be done right in order to keep it going. There’s no single factor that makes a business successful and in fact, most of the time it takes many things done right to be successful.

It also isn’t so much about being great at any of them as it is about being competent at most of them. I had an interesting conversation one day with a pilot who was on his way to an assignment and he explained that he flew the big jumbo jets out of Minneapolis to Shanghai. I explained that I had a great deal of difficulty driving a 26 foot truck with a car trailer hitched to the back through the Berkshire Mountains in the middle of the night through rain and fog. I couldn’t begin to imagine how hard it would be to land a Boeing 747.

He explained: “Landing a jumbo jet really isn’t that difficult. It’s all about systems management. You are just making small adjustments based on what the instruments tell you is happening and where you need to be.” I’m certain that he was oversimplifying the issue, but I also realize that my answer of setting goals and having a plan for meeting those goals is an oversimplification as well.

Running a small business is like flying an airplane. There’s not a single thing that keeps you in the air. It’s doing a lot of things right. But the truth is that whether it’s landing a plane or running your business, you can screw some things up and still be successful. You can recover from most mistakes, while others are going to be catastrophic. Forgot to refuel the plane before heading overseas? Probably catastrophic. Didn’t do the best SEO for your website? It will probably cost you more to acquire customers by using AdWords, but ultimately is probably not going to kill your business unless you screw that up as well.

If you compound your mistakes, your chances of failure increase dramatically. But each success will reduce the consequences of the mistakes. This is why large companies can have such a shoddy product and still make money off of it. They have so many things going on that the law of averages ultimately weighs in their favor. Does the product manager suck? No big deal. The engineering team will probably pull his weight. The code is riddled with bugs? No problem. The support team is there to help with workarounds.

So the secret to success is to realize that there isn’t a secret. Everywhere you look, you will find something that needs to be done competently. For everything you do that doesn’t measure up, you will have to make up ground in other places, keeping in mind that one success is less than or equal to one failure and that the sum of your successes must be greater than or equal to the sum of your failures.

If it’s not, then you probably just crash landed.

I published a popular article named “The Single Founder Myth” a few years back. In this article, I contended that contrary to popular opinion, it was not impossible to go it alone with a software startup and be successful. To clarify up front, what I mean by “going it alone” is that you build up the company without handing over equity to someone else, be it either investors or other co-founders.

In this article, I gave several reasons why companies have multiple founders and countered the necessity of each for a single founder company. I came to a sudden realization the other day why most technology companies have two founders.

It’s because one of them is a builder, and the other is a salesman.

The Builder is the person who is doing the bulk of the work building whatever it is that you’re trying to sell. The Builder is most likely the better of the two at development or engineering than the other and it is internally agreed that the Builder is going to make the major design decisions.

The Salesman is the person who spends most, if not all of his time trying to find customers and sell the product. It’s quite possible that this person will be the person searching for investors for the company as well and in essence, is “selling” the company as a viable investment.

Responsibilities other than building the product or finding customers are likely to be divided between them to some degree, but these primary roles will remain steady for quite some time until the company either starts hiring employees or falls apart. Things like creating marketing collateral, business negotiations, financial planning, etc. All of these things can be done by either co-founder.

But the ability to sell technology products and the ability to build technology products are two entirely different skill sets. There are very few people who possess both skills and even if you do possess them both, there are only so many hours in the day. The problem with trying to build up a product while you’re also acting as the salesman is that at the beginning, both of these tasks are extremely time consuming and tend to be mutually exclusive.

I know from experience that developing software or designing hardware is something of an art and it helps if you’re “in the zone”. It takes time to get into that zone and once you’re there, if you’re interrupted it can take a long time to get back, assuming you can get back that day at all.

I also know from experience that sales is very much an interrupt driven process. It takes several minutes to prepare for any “major” sales calls and when you’re leaving messages, people can reply at any time which is very disruptive to whatever schedule you were trying to keep. With a co-founder, it would be a lot easier to have one person field all of the calls while the other concentrates on building whatever it is that you need to build.

Does that mean I’ve changed my tune? Do I now want to run out and find a co-founder for my company? Not a chance.

You see, the Builder and the Salesman model works great for companies where you really do need a sales force, be it for customers, angel investors, VC’s, or distributors. While one person is working hard in a back room somewhere, the other can be on the phones or hitting the pavement trying to land sales and close deals.

However a lot of software companies these days don’t hold themselves to that model. In fact, many shun it like the plague because the cost to acquire a customer on the internet is exponentially lower than it is if you require a sales rep to call on each of your prospective customers. It’s more efficient to use Google AdWords to solicit 1,000 visitors to a website and sell to 1,000 people at the same time than it is to have a sales rep call 1,000 people in succession and ask if they’d be interested in what you have.

“Hi, this is so-and-so from Acme Widgets and we’d like to sell you some software.” *click*
“Hi, this is so-and-so from Acme Widgets and we’d like to sell you some software.” *click*
“Hi, this is so-and-so from Acme Widgets and we’d like to sell you some software.” *click*
“Hi, do you have a minute?” *click*
“Hi, do you have 30 seconds?” *click*
“Hi, I am in contact with you to disperse a sum of $30 million US dollars from a bank in Nigeria that is no longer being claimed.” *click*

This sort of thing gets old quick. You can hone your story as good as you want, but at the end of the day it’s still difficult to make sales one on one. A lot of large companies are still very successful these days doing it because they have price points that are so high you absolutely need to have a sales rep.

Do I need a Salesman as a Cofounder to be successful?

Absolutely not. There are millions of products being sold online today which don’t require or use a sales rep at all. Don’t get me wrong, the price points are a lot lower, but let’s be honest. What price point do you expect to be putting on your software?

The reality is that in many organizations, the role of the salesman can be eliminated, especially if you’re selling your products online. In that case, what you really need is a marketer. Building a better mousetrap doesn’t do the job like it used to. When two products go to war, the one that wins is going to be the one that has better marketing, not the better product.

Now here’s the best part about this arrangement. Because you’ve eliminated the salesman in favor of a marketer, guess what time is the best time of day to do business on the internet?

The answer is that it doesn’t matter. Whether it’s 2pm or 2am, you can make changes to your website, update your marketing collateral, review website visitors and statistics, etc.  No matter what time of day it is, you’re not actually interfacing directly with customers. You’re setting things up so that customers will see what you want them to see, and when you want them to see it. There’s never a time when a customer comes to your website, you size him up and say “No, come back tomorrow.” It just doesn’t happen. Sales reps on the other hand are required to work within the schedules of their customers and try to convince them to allot time to speak with you.

What this means is that you can be both a builder and a marketer and so long as you’re selling your products online and don’t require a sales channel, you don’t need that salesman. Hence, you don’t absolutely need a cofounder.

A Word of Caution

To be a successful single founder business, you need to be really really good at two things: Building software, and marketing it. Without both of those, you’re basically sunk. If you’re a great builder, then you’ll have a wonderful product that nobody is ever going to hear about. If you’re a great marketer but a lousy builder, you’re going to find that you can put lipstick on a pig, but it’s still a pig and everybody knows it.

Several weeks ago, someone pointed me to an article on a blog I’d never read before. It was very profound it its simplicity. It was called Smart People should do Stupid Stuff. The basic concept of this blog post was that there are millions of dollars to be made doing things on the internet that anyone is capable of doing. I mean quite literally, anyone can do these things, regardless of how smart or how dumb you are. Here’s a very short excerpt, because I know you’re not going to go actually read the entire article.

I once met a man that made over $1,000,000/year selling bowling balls on the Internet.  I asked him how he had built such a fantastic business. I was looking for this guy’s secret sauce. Was he a marketing guru, a tenacious entrepreneur that didn’t give up, saw an opportunity earlier than most? None of the above. He was an average guy, with below average technical skills. He hired 2 kids to work out of his garage to build his website.

When I hear about ideas like the Million Dollar Homepage, Santa Mail or Antenna Balls that easily rake in more than a million dollars, I almost want to puke. Or at least I used to. Let’s face it. These are stupid ideas that border on absurd. But they work. And do you know why?

Because the people behind them found a niche market that nobody else was looking at. Each of these people did something that any of us would have the skill or lack thereof to do. Making money online isn’t always about technical ability. Nor is it about being in the right place at the right time.

The key to success for these people finding a niche market that nobody else was in and dominating that market. Once you’ve dominated a niche market, you’ve done something that makes you virtually untouchable because you’ve done two things. First, you’ve identified a niche that nobody else had the time or energy to go into. Second, you have created a barrier to entry which virtually assures you of owning that market for years to come.

The next time someone tells you that they have an idea for an online business, think twice before spouting off about how dumb the idea is. I’d bet money that if you told someone more than a few years ago that you were going to make a 9 figure business out of sending 140 character messages to a website, a lot of people would have laughed at you. Guess who’s laughing today?

I remember the day very clearly, although it was not apparent to me at the time. It was the day that the Micro-ISV movement died.

A Brief History

For those of you who aren’t familiar with the history of the Micro-ISV, I’ll provide it for you here. Eric Sink is widely credited with the creation of the term “MicroISV”. As far back as May 8, 2003,  Eric was talking about what he referred to as “Small ISV’s“. The concept is rather simple in nature. An “ISV” is an independent software vendor, a phrase which is derived primarily from the Microsoft ecosystem and refers to software companies that are not Microsoft. As for the “Small” part, they’re small companies with anywhere from 3-100 employees. It’s a pretty simple definition, but definitive as well.

In September of 2004, Eric Sink published this article on his blog, which had appeared on MSDN a little bit earlier. His intent was to focus on what he called the “MicroISV”. It seems to have occurred to Eric that companies of only one or two employees were out there, producing software and doing rather well for themselves as single founder companies. This thought intrigued Eric. So much, in fact, that as part of his MSDN series of articles he decided to undertake the process of building a MicroISV himself to provide him additional content and experience to draw new articles from.

So it was, that Eric Sink, CEO of Source Gear and self-proclaimed .NET Redneck undertook a 16 month journey in which he built a product in his spare time and sold it online. Over the course of those 16 months, he chronicled his progress on both his blog and in his MSDN column titled “The Business of Software“. Developers and geeks around the world rallied to the battle cry raised by Eric. Large numbers of new MicroISV’s were founded, forums were started, and journalists latched on to write books about the topic and ride the wave of popularity to success.

“He can show us the way!” some thought.

“He has unfair advantages like his MSDN column and a massive blog following. This isn’t going to show us anything!” said others.

How much money would he make? How do I follow in his footsteps? The world of Geeks held its collective breath and watched as Eric raced down the path laid before him. Behind him followed a crowd of geeks, waving flags and pom-poms, watching intently to see which way the story turned. So for 16 months, we followed Eric to see the conclusion of the story.

And Then Eric Killed the MicroISV

Abruptly, one day Eric announced that his journey had ended. He sold his MicroISV to Dennis Cronin for an undisclosed 4 figure sum, which implies a maximum sale price of $9,999. With sales reaching a mere $215 over the course of 16 months (including September of 2004), we can surmise that the actual amount was probably a lot closer to $1,000 due to the multiples at which products are typically acquired. The “profits” were donated to charity.

What did this mean for the MicroISV movement? A giant kick to the crotch. That’s what it meant. And it accomplished virtually the same thing.

I’ve seen the statistics for one such website that marketed directly at MicroISV’s starting in 2004. Website traffic has approximately halved every single year since Eric’s announcement. Websites are supposed to grow. You add content, you build out the site, more  visitors come, and website traffic grows. That hasn’t happened. In fact, the reverse has happened. Traffic for this particular site shows that the current traffic levels are a mere 6.25% of what they were at the end of 2005. That’s not just bad. That’s appalling. I did some in-depth research and found that traffic started dropping quickly immediately after Eric’s announcement, after showing month over month growth the prior year. Other sites have disappeared from the internet entirely.

Therefore, I submit to you that it was on December 26th, 2005 with not much more than a keyboard and a blog entry, that Eric Sink effectively killed the MicroISV movement.

This Is NOT Eric’s Fault. It’s Ours.

I’m going to be blunt here. Eric was not trying to start a movement, nor was he out to kill it once it started. He started his MicroISV for two reasons, and only two reasons: He was curious about what it took to run a MicroISV and he wanted to help generate content for his Business of Software column on MSDN’s website. That’s it. He didn’t do it for you, he didn’t do it for me, and he certainly didn’t do it to build a new revenue stream for himself. I’m fairly certain that he is well compensated as the CEO of SourceGear.

Far too many people are under the impression that if Eric Sink couldn’t make it work, then what chance do they have to make it work? This is the wrong way to look at it. Instead, as I’ve said in the past: “If at first, you’re not successful, take a good hard look at what went wrong.” Unfortunately nobody seems to have done that and when the appointed figurehead of a movement falls, people lose interest.

Everyone has honed in on the fact that Eric failed. Thank you, but I beg to differ. Let’s get one thing straight. Eric accomplished what he set out to do. He never intended for it to turn his MicroISV into something bigger. In fact, Eric intentionally stacked the deck against himself.

Eric’s (Self-Admitted) Mistakes

Lack of Motivation- Eric was simply not committed to building his MicroISV into a solid revenue stream. He built the product to write articles and once that had run its course, he had little use for the product or the MicroISV that was built from it. To quote him directly:

But I must admit that my situation is unusual. Most people start a micro-ISV because they are attracted to the idea of being an entrepreneur. A sense of dissatisfaction with their current job is a source of motivation.

I’ve been there, but right now I don’t have that particular set of problems. I am already an entrepreneur, and I am quite happy with my situation. Here at SourceGear we actually like building developer tools, and we’re having some very nice success doing it.

So with Winnable Solitaire confined to my copious spare time, it may proceed slowly. But I do have some ideas for what I want to do next with this project. I will close with a few remarks about my next iteration through the cycle that Pavlina describes.

Choosing the Game Industry - Speaking from experience, I can tell you that the game industry is brutal. Either you have a hit or you don’t. And if you don’t, you need to dedicate significant resources to finding out how to make it more appealing. Selling games is different than selling business software because you’re not solving a pain point. You’re providing entertainment, which although it is technically a pain point for the consumer, there are millions of competitors.

If you’re selling source control products, you have maybe 20 competitors tops. When you sell games, you’re competing not only with other games, but all other types of entertainment mediums, such as tv, movies, newspapers, comic strips, not to mention all of the other computer games out there. I’m not saying this is impossible, just a lot harder than selling business software that solves a definitive need. Eric basically admits that he would likely be more successful in a different market, almost from day one in his First MicroISV report.

Competing with Free Products - Solitaire is included with every copy of Windows. I’m not sure I see the point in competing against Microsoft in what is arguably the smallest niche market I’ve ever seen. ie: Solitaire games that are guaranteed to be winnable. Thomas Warfield seems to do pretty well in the broader Solitaire niche.

Ignoring Common Sense – Eric openly admits in the Bottom Line of his initial blog entry that “Common sense would say that my product is doomed.” This is putting it lightly in my opinion, but is true nonetheless.

The bottom line is that if you know the mistakes that you’re making before you’ve even started, you’re going to wind up flat on your back like Charlie Brown. Letting Lucy hold the ball doesn’t excuse you from being the source of blame anymore than Charlie Brown’s faith that, just this once, Lucy will let him kick the ball.

Wait… How Is This Our Fault?

Eric killed the MicroISV movement because we let him. Eric never asked to be the poster child for the MicroISV movement. Neither did Joel Spolsky for that matter. But they have been for nearly a decade because we appointed them to those positions. The MicroISV concept struck a chord with a lot of developers and micropreneurs who wanted to start their own companies and quit their day jobs. The expectations that were placed on Eric to do well with Winnable Solitaire were unrealistic and quite frankly, not in line with what Eric was trying to do.

When Eric’s product failed to produce anything remotely close to a full-time income, scores of developers abandoned their MicroISV’s and started looking for another way out of their 9-5′s. They found what they were looking for in Paul Graham’s Y Combinator program. Paul launched Y Combinator with in early 2005 and quickly produced success with companies like Reddit and Loopt. The dynamic quickly shifted and as the MicroISV movement slowly withered away, the future for micropreneur hopefuls shifted to startup companies which leverage Angel and VC funding.

Let me be honest for a minute. In no way, shape or form would I claim that starting your own software company is for everyone. But the Angel and VC funding route is a lot harder to swing for most of us and living in the geographically blessed startup hubs is merely one of those reasons. Back in 2006, I wrote an article called “Startups for the Rest Of Us” and posed the question: What about me?

At the time, I had mixed feelings about Eric’s “failed” experiment. On one hand, I felt like he didn’t really follow through with it the way he could have. On the other, I had recently left the fold of Pedestal Software which was acquired for $65 million and the lure of doing a startup and cashing out after two or three years for millions was pretty high. I knew I could build products, but didn’t feel like I had any ideas at the time which were worthy of millions of dollars of investment. I had been offered $50k as an initial investment, but ultimately turned it down. Instead,  I decided to take it slow and build my own company.

The Landscape Today

Amazingly enough, the landscape of building an internet business today is not much different than it was five years ago. All you need is a computer, an internet connection, and knowledge of how to develop software and you can crank out a product. There are thousands of resources available to help you get started. There are countless blogs, startup schools, online academies, free or reduced cost software packages for startups, and a host of other advantages that didn’t exist several years ago.

It doesn’t matter how old you are today, where you live, or what you do for your full time job. If you have a computer, an internet connection, know how to write software, and most importantly, the drive to succeed, then you can sell products on the internet and make money from them.

Eric didn’t make a lot of money with his MicroISV. Big deal. Does one failed attempt from an internet legend define a movement? I think not.

Besides, just because you start out small, doesn’t mean you have to stay small.