Photo courtesy of Josh Christy
For the past eight years, I have owned and operated a successful software consultancy in Fargo called Codelation. We partner with startups and small businesses to help them grow and succeed through the intelligent use of technology. We have also launched product lines in the software-as-a-service space (SaaS). Between all companies, we have hundreds of customers ranging from small startups to Fortune 500 businesses.
Like anyone else, I’ve made some mistakes along the way. There is a lot of advice out there for people who are just getting started, but I found that taking the leap wasn’t as hard as keeping everything going after the first year. Because when you get to year two, the adrenaline rush has worn off, and suddenly you find yourself faced with the realities of being in business for yourself.
I’m going to share some mistakes I made early on and some tips for avoiding them. If you approach your business the right way, I have every confidence that you’ll do as well as I have.
I didn’t have the right conversations with people who could pay me.
I’m a software engineer. I don’t know many software engineers who love talking to potential customers. It’s not my favorite thing either.
As software consultants, sometimes it’s hard for us to get out and talk to potential customers, especially if we’re essentially cold-calling. Instead, we come up with product or service ideas without finding out whether anybody really wants or needs them. And then when those ideas fail to pan out, we wonder why. It’s almost always because we didn’t talk to potential customers before we took action.
It’s easy to spend your time doing the parts of the job you enjoy and ignoring the parts that you don’t. That is the path to failure.
Here is an example of the conversation you need to have with a potential client. Potential customer Sue says, “I need a website.” Your first instinct might be to say, “Sure, I can build you one. It will have these technical specs and be able to handle this much traffic.”
What you should do instead is ask, “Why?”
Does she need a standard five-page website for her small business? She can get that from Squarespace for $20 (and she probably should). Does she need a custom build to handle her quirky sales channel? That’s a different story and that’s where you can add real value.
Your business lives and dies by your reputation. If you earn a reputation as a problem-solver that helps your customers’ businesses make more money, you will have a much easier time getting the next project than if you only do what the customer thinks they need without digging deeper.
So next time you’re talking to a customer about what their needs are, ask them why.
I didn’t project a professional image from start to finish.
We live in a hidden gem of a city. However, Fargo is located in one of the flattest parts of the planet. When it rains, the water runs to the lowest place it can find. Sometimes that’s our basements. Imagine your basement has a foot of water in it, and you’re looking for a contractor to clean it up. That’s going to be an expensive job. Which of these two would you hire?
Option 1: Dave
When you call Dave, he doesn’t answer. You have to leave a message on his cell phone. His voicemail message is hard to understand and sounds like he recorded it while he was driving his truck down the street. Eventually, he calls you back to set up a time to take a look at the damage. He comes over in grubby street clothes, takes a quick look around, and texts you a dollar figure estimate with no information about when he can start or what that will cover.
Option 2: Phil
Next, you call Phil. He is also busy, so you have to leave him a message. Phil has a professional greeting with his business name. His voicemail message tells you what hours he works and when you can expect to hear back from him. When he comes over to take a look at your basement, his truck and shirt are branded with his business name. He takes a thorough look at your basement and then emails you a branded worksheet with a detailed assessment of what the problems are, along with a breakdown of what it will cost to fix it. He tells you what his schedule looks like but advises that he’s booking up quickly.
Even if Phil’s estimate is higher than Dave’s, wouldn’t you trust Phil to get the job done? He seems like someone who does this for a living.
Your best potential clients want to work with a professional.
- Have a polished website.
- That’s easy to do yourself, but ask your designer friend if it looks good. Check out Squarespace, buy a good theme from a marketplace or hire a designer if you can.
- Use the proper communication tools.
- These let you set up professional greetings, extensions, and call rules to route your calls to the right line or team member.
- Have a defined message.
- They can explain in a few words what they do and why you should hire them to do it.
Professional Projects Have:
- A contract
- Payment terms
- A cancellation policy
- Termination fees
- A defined beginning and end
The biggest benefit of behaving professionally is that clients will expect to pay you a professional-level fee. If they call you and hear your professional greeting, they’ll be less likely to experience sticker shock when they get your proposal.
“Always be closing” is a real thing.
The only people who like sales and marketing are salespeople and marketers, and I’m not even sure about them. This probably isn’t news to you by now, but you aren’t just in the software business. As soon as you started your consultancy, you also became a salesperson.
The part you may not know yet is that you don’t have to feel bad about sales. Don’t think of yourself as selling people something they don’t want or need. You don’t need to do that. You solve problems for people. No matter what you do, someone out there needs your help to do it. It’s up to you to find those people and let them know that you can do what they need to be done and why they should hire you instead of someone else.
Don’t wait until your current projects are wrapping up to start finding the next ones. This is the formula I recommend using for figuring out what sales metrics you need to reach. Let’s say you need to book $100,000 in revenue for the year. Here is my rough math to get there:
- Average project : ($100/hr. service) x (40 hrs. avg. project) = $4,000 per project
- Number of projects needed: $100,000 / $4,000 (avg. project) = 25 projects needed
- For every 5 calls = 1 meeting, for every 3 meetings = 1 proposal, for every 4 proposals = 1 booked project
- 60 phone calls for one booked project = 5 calls x 3 meetings x 4 proposals
By those numbers, if you need 25 projects to get to $100,000 in revenue and 60 phone calls for one booked project, you’d need to make 1,500 phone calls per year to hit your goal. That amounts to about six calls per workday.
You probably see these numbers as either daunting or doable. If they look doable, great! Go do that. If making all of those calls seems daunting, think about whether you can or should hire someone to do it for you. Will they understand what you do well enough to effectively make those calls? Will you spend so much time supervising that it’s not worth your time? Or will it feel liberating to have an unpleasant task off your plate?
Are you ready to hire?
Being a solopreneur can be exhausting. When you work for someone else, there’s somebody to answer the phone and somebody to pay the lease and somebody to buy the coffee and somebody to find new customers while you’re writing the code or doing the creative design. When you go out on your own, it’s all on you.
When you’re feeling flush or burned out, it’s tempting to hire someone to help you keep all the balls in the air. But I made the mistake of hiring too soon. In fact, it was three mistakes in one:
- I didn’t have enough work coming in to generate the revenue to support two people.
- I found out I wasn’t charging enough to cover the costs. I discovered that I couldn’t charge $50 an hour unless we could both bill more than 70 percent of our time, which is really hard to do.
- I hired someone with a skill set that overlapped with mine instead of finding someone to do what I couldn’t or didn’t want to do.
Not understanding the role I’m hiring for.
To be fair, I haven’t actually made this mistake yet, but it’s an easy and potentially very expensive one to make, so I wanted to add it to your list of things to watch out for.
I have a friend who used to work as an IT tech at a major employer in town. One of the guys she worked with made himself sound busy and indispensable by telling their boss he was hard at work doing things like “monitoring end-frame structures for intrusions” and “managing networked software solutions.” In reality, he spent his days in his office playing Halo. And he got away with it for a long time. Why? Because his boss had no idea what those words meant or what the IT guy should have been doing that wasn’t getting done.
We’ve reached a point in our business where we’re ready to hire a marketer. I need to know how to measure whether or not that person is doing a good job. How long should a particular task take? How will we measure success? I’m going to set some benchmarks by doing the job myself for a while. Then when we hire, I will know that when someone says they are evaluating the ROI on CPC vs. CPM, that’s a real thing. And they’re probably not playing Halo on my dime.
This article is part of a larger series and blog: Codelation.com/Blog