The Recursive ISV

If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!

You may well consider it a cliche, but there is no doubting the truth of it.  Most software developers and want to be ISV’s approach business development from the wrong angle.  In fact they fall into it.  They fall into because they start with the product and not the business.

Business Bubbles

As startups we have to make absolutely certain we burst every single one of these bubbles.  The bubbles are the “programming is cool and business development and marketing suck”.

If you, me or anybody else insists upon adhering to these then we might as well get out of the game now.  In fact we must do so, else we litter the landscape with even more abandonware,  more unhappy customers, more negative comments about startup ISV’s from the public and media and more heartache - the heartache of failure - for ourselves.  It’s OK to not succeed - that’s not failure - but it’s not OK to stumble and bumble making the same mistakes, fail to learn from those mistakes and from the mistakes of the infinite failures before us.

The U.S. Small Business Administration claims stat’s of 50% of small businesses failing in the first five years.  Similar statistics (actually a tad higher) are reported here in Australia.  Check your local business associations for your local figures.

But they’re small businesses, right?  Bricks and mortar, crafty BS needlework or office typing or brick laying and stuff right?

Sure, keep throwing up the justifications via exceptions and you too can become a participant in the stat’s quoted.

While the reasons we fail as ISV’s might be different in some respects to those of more traditional businesses the methods of resolving the problems are pretty much the same.

It’s true we are lucky.  It does take less to capitalize.  You can indeed get by with less, it’s easier to boot strap in software.  As I stated in this blog I sold my car and cut back on things I felt I could do without to bootstrap the development of our company.  My “happy cloner” of MixAction has another strategy - he’s stealing his tools and ideas.  But what I’ve not revealed is that I’ve gone into debt to do this.  Not mega bucks to be sure, but none the less debt.  I’ve increased my exposure to risk beyond paying for a server for hosting domains and the basic stuff, right into carrying debt to have the latest compiler/IDE for full Vista support without pain, the best widgets in my budget to avoid reinventing the wheel, the fastest broadband connection available in my area (we are still on copper wire here so it is actually faster than the physical delivery mechanism), the best graphics, web site templates, icons and so on - and I’m still running short of cash. at times  Improvising plays a role throughout to compensate as necessary.

But why indeed would I do this?

Well, I’m not telling you or anybody to go into debt.  I’m one of those folks who refuses to have a credit card, I use debit cards online.  My wife and I have a mortgage certainly, but this is Australia and that’s par for the course, more home owners than renters.

The reason is simple.  I’ve boot strapped on nothing at all before - and it’s miserable.  It’s no fun.  In comes a competitor and leaves you behind trying to improvise and reinventing the wheel in a feeble attempt to compete “with the latest”.  The decisions I’ve made this time give me such an array of options for adding features to our first product that even I’m mind boggled.

In short I lacked sufficient capital and past experience taught me that zero capital is a lose/lose situation.  So I’ve raised the capital I need.  It’s no walk in the park, it does raise the risks involved, I do a lot more walking and train catching, but nothing ventured nothing gained and the risk is manageable and relatively easy to get a return on quickly or at worst mitigate.

Next to failing to plan, discussed below, is a lack of capital.  Capital gives you the push start you need, it gives you the opportunity to meet threats (potentially) and it reduces the need to do everything the hard way.  In my case I’ve not gotten a second mortgage, taken a “business loan” or gone whole hog on the capitalization as some folks do.  I’m simply not in a position to do that.  Rather I’ve weighed the relative risks, inline with the commitments of having a wife and two children and it is to be admitted no full time work, though I do earn money from other sources including public speaking, voice over work for company videos and answering services and so on.

The product is not the business.

What you read regularly here on this blog about what I’m doing is what most developers consider the “cool” side.  The coding and design side.  But for me there’s another “cool” side.  The business development side.  It’s the reason I’ve gone into debt in this instance.  It’s calculated.  It’s the result of learning through pain.  It’s the result of planning and planning to change the plan.

Developing the major product right off the bat for our new business would have been a stupid decision.  I needed a catalyst product to get the ball moving in the right directions. To lay the groundwork.   This doesn’t make MixAction any less important  Indeed it makes it vital as, as I’ve said before, it provides the basis for what will become our core product - Mixerlicious  - and MixAction it’s got an important life of it’s own as a product in our small stable.  No hints here on what Mixerlicious actually is or fills in terms of market segment… 

Over the next few posts I’m going to outline some of the business decisions we have made (my wife and I) and why, to some extent how - though for obvious reasons I won’t provide specific information as I don’t want to steer the wrong people into the right direction.  A generic discussion if you will.

mISV’s and their Businesses Are A Bit Like Socks.  We Never Seem To End Up With A Matching Pair

You know the old adage that you wash your socks and they never match up afterwards as a pair?  Could it be a plot of the unfolding universe designed to frustrate us in our mere mortal existence?  Or is it just a lack of planning and attention to detail?

When most ISV’s start a business they are full of the technology.  .Net or Win32, Delphi, VB, C#, Java, C++, Objective C, RealBugs RealBasic, Revolution to name but a few.

But how often do we read about ISV’s doing business planning?  Do you have a business plan?  I wish I had 10 cents for every time an  mISV has said “Business Plans are Bull Sh%$t!!”

As I tell my kids regarding their homework.  Failing to plan is planning to fail.

As ISV’s we are focused on the software.    The software is everything.  There is nothing else.  Got a business problem?  “Must be the technology!”  Customers not buying?  “Must be pirates!”  Not getting clicks from Adwords? “It’s Google’s fault!”   Making plenty of sales but little profit?  “It’s impossible to make any money as an mISV!” 

It’s like we throw a bunch of technology into a tumble dryer and hope what comes out has a semblance to what we actually intended, even though we don’t have a clue what that intention really was beyond ethereal statements like “make money” or “cool profit” or even more ludicrous “next Google”.  We throw around terms like “killer app” but never once consider what it is to have a “killer business.”

ISV Tumble Dryers Incorporated

When was the last time you carried a humble notebook and a piece of paper and sketched out your ideas for your business - not software - business?

Once? Twice? Last Year?  Never…? 

If you’re like most mISV’s and you answer honestly to yourself then all to often the correct answer actually is never.

You plan your software right?  (I hope you do).  You document your software?  (I hope you do).  You backup your source code and use a repository or even better source control, right?  So why not give the business the same attention to detail?

I’m probably giving you a headache with all these rhetorical questions. 

As mISV’s we live and breathe our products, not our businesses.  We mistakenly believe they are one and the same.  They are not.

Look at any successful business owner, they live and breathe the business.  Sure, they’ll wax lyrical about their cool product.  But the product is what they sell.  You don’t drive your product, you drive your business.

What are you driving?  Think about it for a moment.  When somebody asks you what you do for a living, do you say “computer programmer”, “software developer” or do you say “I’m the owner of a software company that creates…”

Which sounds better? 

If you think the last answer sounded better then you’re right.  It does to most people and it’s succinct.  It tells folks exactly what you do.  They’ll probably ask you about product details later, but your company is more important, your business is where it’s at.  What’s more important - Kellogg’s Cornflakes or Kellogg’s?

If you just code then you are an employee of the business you are supposed to own and control, not an owner making decisions and navigating the best course.

That’s really what it is too, navigating.  If you don’t have a plan how do you know where you are going?  When we’re kids we might like to take camping trips or holidays and leave planning to the fraidy cat “oldies”.  But as we get older we learn that an itinerary actually improves the experience and helps us avoid the traps.

Now, I’m going to be up front, I love business plans.  You know, those documents so beloved of bankers and financiers.  I used to teach startups (only a few were IT based) and those with a solid business plan were the ones that went on to form successful businesses.  Those with weak plans either failed or stumbled from one disaster to another.  It’s not empirical evidence, basing this on my own observations alone, but when viewed at a national level (as this was a national scheme, still running, I got to see and analyze those figures - a decades worth) the trend was identical. 

I’m certainly not suggesting you sit down for six weeks and produce a traditional business plan.  But I am suggesting you at least have an Executive Summary, a SWOT analysis, a Competitor Analysis and two years of approximate financial’s - your best estimate - not your best wishes.

I also believe in Marketing plans. 

Both of these documents give you an outlook, a focus and a grounding.  They’ll change, they’ll probably change drastically over time.  Sometimes in weeks, sometimes months and sometimes you end up in a whole new direction.  But at least you know where you started and have an idea of where you want to end up.  Once you have the base document, and in this age of cut, copy and paste, it’s a breeze to update them.  The “what if” potential of spreadsheets make the financial’s data a powerful tool beyond just seeing if you’re making a profit yet or not.

If you spend a week on the task of building a business and marketing plan, a few hours a day at the least, you are probably in a better position than your most successful competitor.

I’ve never understood how mISV’s can spend so much time trying to analyze conversion clicks, asking “how many downloads before a sale” and so on, yet completely overlook - no  - completely resist emphatically, this simple process that is the skeletal structure of their business.  Except of course that I expect they aren’t doing it because this stuff is not cool in their estimation.  But the reality is simple, going for a pee is not cool, but if you don’t do it you’ll probably die…

Before I wind up this first part, I’m going to state that the second part will contain some information on getting an idea on how to get financial estimations for your business and marketing plan(s).  Generically it’s not so hard, you have to be prepared to adjust the basics to fit your specific position.  I’ll also try and expand on some market research techniques.  Nothing exhaustive, I’m not writing a book here, but something for those who don’t know how to start to at least make a start if they should want to do so.  If you’re already running your mISV or indeed ISV you may pick up a point or two you can use, or at least spark something you already knew into operation.

Scott Kane

Quote of the day:
She had an unequalled gift… of squeezing big mistakes into small opportunities. - Henry James

Related posts brought to you by Yet Another Related Posts Plugin.