Software and diminishing returns

It's tempting to believe that everything matters equally. That every detail is as important as the other. It's tempting because when everything matters equally, the difficult labor of making trade-offs doesn't need to happen.

But as with many things that are difficult, the rewards for getting good at making trade-offs, and making the right ones, can be huge.

Making trade-offs is particularly difficult though because the return you get for expending time/energy/resources on something is almost always greater than zero. Very rarely will the answer to the question: "If I spend ___ hours/dollars working on _____, can I make it better?" be a 'no' answer.

But that is the wrong question to ask.

The right question to ask is: "Given the current state of my product and the number of customers I have, is this the best place to spend my time/money?"

Not all returns are equal.

So the challenge is to make the right tradeoffs so that you maximize the return on the energy/time/money you spend on something. And the right trade-off will be different depending on the state of your own product.

What I've realized is that most decisions and disagreements aren't ones of details, timing, design, features, functionality or anything else.

They're all about trade-offs.

Lessons from being in business for 6 years

On December 6th, 2006 I filled out the paperwork to officially make Ideal Project Group a business in the State of Illinois. Ideal is different from what it was when I started, has had a few ups and downs, and while I feel I still know a fraction of what I'd like to know, I'm much smarter and more knowledgeable than I was a few years back. Here are a few things I've learned along the way.

Your spouse is your most important business partner

I often write about my wife Maile and my family on this blog. I worry sometimes that I come off a bit too sappy, but I strongly believe that our partners in life become our partners in business and that too many people forget this simple rule. When Ideal started, it was Maile and her job that provided the health insurance. When I hit lows and started questioning things, it was Maile who was there to encourage me. During the upswings it was Maile who let me know we weren't just lucky. When I wanted to take some bigger risks, it was Maile who believed in me most. There's a huge difference between swimming against the current and swimming with the current. I'm fortunate beyond words for all the ways Maile has supported this business.

Build a product

We've built some products that are respectable but only generate a small amount of revenue. We built a product that will support our entire team as long as we continue to execute well. And we've built other products that we ended up shuttering completely. In every case though, something especially positive came out of it. Making things for yourself that express who you are, and show what you can do, when your team is making every decision is so important that it deserves it's own post.

Good clients are worth far more than the money they pay you

Good clients trust you to do the work you're good at. They refer you to other people who need your services. They pay you on time. They are fun to be around. They challenge you to be better but not in a way that questions your abilities. They don't dictate, but they collaborate. We're fortunate that every one of our clients for some time now has been what I would consider a good client. And a good client is worth so much more than just the dollars they pay you with.

Bad clients are never worth what they pay you

We've been extremely fortunate to have worked with some amazing companies and entrepreneurs, and the vast majority of our clients have been what I would call 'good clients'. Over the course of six years though, you're going to run into some lemons. Bad clients suck the life and the creativity out of you. They dictate things they want done without being willing to collaborate. They miss deadlines. They micromanage everything. They pay their bills late. They lead to work that you're not proud of and don't want to put on your portfolio. Worst of all, they suck so much life out of you that they impact the work you're doing for your good clients. Here's a really important secret: you can always tell ahead of time when a client is going to be a bad client. You just need to be willing to trust your intuition.

Limiting your talent search to a geographic location is silly

Talented people are everywhere, and the internet allows us to collaborate across the world with anyone. If you can't clearly communicate with someone that lives in another state or another country, you aren't trying hard enough.

In person interaction is critical and important

As wonderful as remote collaboration and the freedom it provides is, you have to make it a priority to physically get together sometimes. Our team didn't do this enough this past year and we've felt the impact. Balance is important, and sometimes you just need to get in the same room together.

Word of mouth is everything

Clicks are a digital representation of something far more valuable: one human speaking with another human about your product or service. Nothing else even comes close.

You can listen too much

There are so many conferences, and there is so much advice out there now, that you can go crazy trying to listen to it all. At a certain point you need to decide who you are, what you believe in, and stop listening to everyone else for a while. In fact, it's entirely possible you should stop reading this right now and get back to work.

There is extreme value in cash-flow

Payment terms are just as important as the dollar amount you charge, and you should never feel bad about requiring clients to stick to their payment terms. If you charge someone $100/hour and they paid you $90 you would say something. Same holds true for payment terms. There is real value in cash-flow and payment terms should always impact the price you charge.

People matter most

Of all the wonderful things that running your own business can provide, nothing compares to the relationships you form with other human beings. If you look at business as the context through which we form meaningful relationships, it changes the way we define success. I'm fortunate to have met many of the people I now call friends through my business. Friends are way more valuable than money.

There is no finish line

This was the hardest but most important lesson for me to learn. I used to think there was some finish line that existed - where once it was reached you could stop marketing, selling, or having to try hard. There is no finish line. You have to constantly try hard and put in significant effort to build the business you want and make it succeed.

There are however milestones, and I'm pretty proud to be able to say we've been in business for 6 whole years.

To everyone who made it possible, thank you.

Fear always arrives in a disguise

'I've written before about fear, and I've spent time thinking about it thanks to some wonderful books - in particular Linchpin and The War of Art.

There's something particularly important I think I've learned about fear though - and that is that it seems to me fear never actually shows up as fear.  With the exception of genuine terror I suppose, it seems to always show up disguised as something else.

Fear arrives in the form of anger even when we aren't mad at anyone, but are instead worried about something related to our work - and so we lose our temper.

Fear shows up as insecurity when it comes to our lovers, not because we're actually jealous of any particular person, but simply because we're afraid of losing someone we love.

Fear arrives as worry when we know can't control the outcome of something. Instead of recognizing the thing we're afraid of and moving on, we remove the joy from the present by worrying about the future we can't control.

When we get a big break fear shows up as anxiety, because few things are as scary as success.

When we're afraid to show the world our creations, fear shows up as perfection, because it knows that if we don't ship it until it's perfect......we'll never ship it.

The most important thing I've learned about fear, is that fear is a coward. Afraid to show up as itself, it always arrives in a disguise.

It seems to me the only way to fight fear is to unmask it, call it out for what it is, recognize it's presence, and then observe how little power it actually has.

Fear isn't all that scary, but it's disguises are terrifying.

Game Changing

One year ago Derek Hopper joined Ideal Project Group as our Lead Engineer/Hacker.  

Adding Derek to our small team changed our company and our products for the better, and it's difficult to think about what the company would be like without him.

I always try to let the people that I work with know how important they are, but as with most things we can always do better.

When I heard Derek left the startup he was working with, I think about 12 minutes passed before I asked him if he wanted to work on a small project with us. About a month later he became a full time employee when he accepted my job offer.

The day he accepted, I came home and told my wife Maile how excited I was. 'You don't understand', I explained, 'Derek joining our team is completely game changing.'

Tula software had just launched, but there was a still a lot of work to do and much of it was pretty complicated. We had also landed some new clients and I needed someone I could trust completely to work with us.

I'm not right about everything, but I pretty much nailed the game changing part.

I suppose I could go on and on, but I'll just say that I try hard to give our people as much as they give the larger team, and I hope that always shows.

Thanks for such a great year Derek, we wouldn't be the same without you.

Not all users are your customer

Jack Dorsey, founder of Twitter and Square, for whom I have much respect, wrote an article the other day titled "Let's reconsider our users. In it, he argues that application developers should stop calling the people that use their products 'users', and instead recommends calling everyone a 'customer'.

The word “customer” is a much more active and bolder word. It’s honest and direct. It immediately suggests a relationship we must deliver on. And our customers think of their customers in the same way.

This article got a TON of coverage in the tech community. Many people properly pointed out, myself included, that with applications such as Twitter and Facebook, the users are not the customer, they're the product.  Writing about this reaction, John Gruber had this to say:  

I’m saying they should treat users as customers, too — customers paying not with dollars but with their precious and limited attention.

This is false.  A stranger walking down the street could hit me in the face and they would have my precious and limited attention.  That would not make me their customer.

It's true we pay for things with our attention and I've written about this before. But only when someone pays you with money are they your customer.  You cannot, and will not, keep the lights of your business on with attention. You must have revenue. The place that revenue comes from, that is who your customer is.

Twitter's problem isn't that they're not 'treating' their users like the customer.  It's that they're not *making* the users their customer.  And in fact, the needs of Twitter's customer are often in direct opposition to the desires of the users.  By it's very nature, Twitter cannot treat their users like the customer without ignoring their real customers - the advertisers.

In Dorsey's noble effort to humanize the word 'user', he muddies up the even more important notion of understanding of who your customer is.

Very rarely is every user of a web application the customer.

Our most popular product is a software for yoga studios and we have multiple kinds of users.  Instructors, students, desk people, and studio owners.

Of all these users, the only one that is our customer is the studio owner.  No one else.

I've discussed with my team many times the importance of understanding this, and it drives every one of our decisions.  Tradeoffs rarely come in the form of strict black and white decisions, they're made in small degrees.  And if you don't have a clear understanding of who your customer is, over time, you forget who you should be focusing on and who you should try to please.

Our main competitor is now so big that rumor is they make more money processing credit cards than they make on their software.  Guess what?  This is the kind of thing that gives our product an opening.

Because when every major product decision has to be made with the backdrop that a significant portion of your revenue comes from processing credit cards, it has an impact on who your customer really is, and what challenges you're going to tackle.

I'm all for having a more humanizing word for our users, but it would be a tragedy if we lost sight of who our customers are in the process.