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Moving from consulting to a products-based business


#1

I’ve spoken to more than a few software founders of the years. Many of them have started their path by doing consulting, hoping to eventually drop that part of the business in favor of selling products exclusively.

Along the way, some have managed to build quite a sizable consultancy for themselves, making it that much more difficult to make the transition into products.

If you’ve taken this path, and managed to make the transition into products, how did you do it? Did you drop consulting cold-turkey, or gradually? How big of a hit was it financially? Do you have any strategies, tips, or advice for others who may feel “stuck” in the consulting cycle?


#2

I started my company as a consultancy and our move to being a product business happened gradually. We’ve essentially turned over around the same amount for the last 3 years however the split between consultancy income has moved from about 80% consultancy, 20% products to now being 95% product based income. So it wasn’t a hit financially because of the gradual way in which we converted the company.

I think we had got to a point where it really wasn’t making sense for us to write code for other people, which is what we were doing. It makes more financial sense to put that time into a product. I think even if I were to get back into consulting it wouldn’t involve writing code for other people, that way madness lies!

The toughest point was when we were about 50/50. We were still being pulled around by client demands, yet looking after our Perch customers and the product was increasingly what we wanted to do and we could see the potential in doing it full time by that point.


#3

Hi guys. I transitioned from running a team of 11 employees to focusing 100% on products.

Here’s what I did:

  • Started Planscope from my corner office. Bills were paid by my employees, but I was still VERY distracted.
  • Promoted somebody internally (biz dev guy) to run the company.
  • Began working from home, went heads down on Planscope
  • Siphoned off one of the contracts from the consultancy to work on part-time while I built Planscope (it made sense: Planscope is a PM app for consultants; I was working as a consultant. Eat your own dogfood, right?

What I would recommend if you’re consulting now — especially if your overhead is just yourself — would be to build up streams of recurring revenue that you can taper off / hand off as your product revenue grows. Retainers are the best way to do this. This way, you have 1) predictable income (like you will when you grow your future SaaS) and 2) you really learn how to position a product, sell its benefits, price it, and close the deal… you aren’t just selling your time.

Both of the above will help you tremendously when you decide to sell a replicatable product (ebooks, SaaS, etc.) versus a transactional product (a retainer or productized consulting gig.)


#4

My story is a bit weird:

2004: joined the workforce as a Japanese salaryman (full-time employee, and more wage slavish than any wage slave you’ve ever met).
2006: started Bingo Card Creator (downloadable software sold on the shareware model) on the side
2007: switched jobs in Japan from cushy translating gig to being a salaryman engineer. HoursPerWeek *= 3.
2008-2009: I didn’t die. Bingo Card Creator grew substantially (particularly after switching to web application in, hmm, '08?), to the point where it was routinely outpacing salary, and I made the decision to quit.
2010: I quit day job with intention to go full time on products, but also started consulting. Also, launched second software product, Appointment Reminder (sold on SaaS model).
2011-2012: Appointment Reminder grows fairly slowly. Consulting business explodes. Launch productized consulting offering (my most common consulting engagement, with my personal time refactored out of it, available as a downloadable video course) in October.
2013: Quit consulting, full-time on products again for first time since April 2010.

I eventually quit consulting because Appointment Reminder, the SaaS business which I sort of wish was my business center of gravity, was feeling neglected but giving off strong signals that it would work much better if I actually put more effort into it. (For example, by growing substantially even though neglected.)

Quitting consulting was not an easy decision, largely because I was pretty successful doing it. By the end of my consulting career I was putting $30k~$50k a week on proposals and still winning them, and creating incredible value for clients at the same time. Unfortunately, continued growth required changes to the business that I was loathe to make – either going full-time on consulting, making lifestyle compromises in terms of time spent away from Ruriko (we got married in 2012), or taking on clients closer to the Fortune 500 than to the small savvy software firms which had been my bread and butter.

What I miss most about consulting:

  • Consulting has a magic cash flow wand, particularly at the type of rates I was getting. Work two weeks, bill $60k. This makes it very easy to afford things like e.g. wedding or sustained foreign travel. These are less easy to sustain on product income.
  • Consulting gave me the opportunity to work directly with other smart people. I miss that alot when I’m banging out things in the PatCave.

How I got/get around these:

  • Growth in recurring SaaS revenue will, eventually, make almost any money problem less pressing than it previously seemed to be. :wink:
  • Failing that, productized consulting tends to be frontloaded both in terms of effort and in terms of payment, much like consulting is, rather than frontloaded with a substantial tail in terms of effort and heavily backloaded i nterms of payment, like SaaS is. The course I released last October did something like $50k in sales within a ~2 week launch period and has non-trivial residual sales ($1k to $2k per month), in return for about 3 to 4 weeks of frontloaded work. Even if that doesn’t match my peak consulting rates, it does give me an option to get out of almost any cash crunch (business or personal): spend another month doing a new course, launch it, pay off the credit cards, repeat as required.
  • I joined a BaseCamp room frequented by a bunch of other software people who I know from the Internets/conferences/etc and whose company I enjoy. This helps replace the feeling of camraderie, and opportunity to speak to smart people about mutually interesting things, which I msis from having coworkers.

#5

I’ll be watching this discussion closely, as I’m in the process of trying to transition into product.

In 2006 I almost managed to pull off the transition: I had the right team in place at my consulting firm, I had partnered up with an outside dev to produce a Saas app, and we had about a dozen paying beta customers. We were ready to start really pushing, but 2 things happened that scuttled it all:

  1. I came to loggerheads with my partner on what direction to take the product; one of us wanted to keep it focused on a vertical, the other wanted to try selling it horizontally. Without agreement, we were unable to move forward.

  2. My consulting firm took a big hit when a client went under, owing us a lot of money.

I’ve been trying since then to get the conditions back in place to take another shot at a Saas app, but haven’t quite been able to get it to happen. My #1 concern is how to keep my consulting biz running smoothly AND develop the product at the same time.

So far I’ve been hiring out the product development work, but I feel uncomfortably far removed from the code this way. Perhaps I just need to embrace the discomfort?

That last point may open the door to a tangential discussion - does launching a product necessarily mean that at some point you need to make a choice between being an engineer and being a businessperson? Speaking for myself, it certainly feels that way. I find my business guy instincts and my developer instincts battling one another, and if I’m being completely honest, it’s really slowing me down.


#6

I’ve battled a bit with this. There are two of us in our company and @drewm has control of the core product and increasingly develops the apps, as someone has to deal with the business stuff and it falls more within my skillset. I still code however increasingly it is on the supporting stuff.

I do find the business side of things interesting, especially when it comes to data we can collect and analyze. However there is a definite tension between me as a coder and me as a business person. It’s still pretty early days for us in terms of the product being all we do however so I think I’m still in some ways finding my feet.


#7

I think I’m in a bit of a different situation from many of the consultants here, as I deal with IT & networking (with some bespoke software development) rather than web work. (I more or less fell into consulting - I had a Math / CS degree, a family, and experience in operations, network administration, and programming. For various reasons I couldn’t move from my small city, and in the early 90s remote work wasn’t feasible for me, so here I am.) As I mentioned in my Introductions post, I did sell a couple of desktop apps a while back that made decent money, but not enough to justify the time I spent on them vs the money I could make consulting, so I got rid of them - probably shortsighted on my part, but that’s where I was at the time.

I’ve been wanting to get back into some sort of product business for a while, but I haven’t managed to make significant headway. Don’t get me wrong, consulting has been good to me, and in many ways it’s been a busman’s holiday, but I have a quote taped to my desk that feels appropriate:
“Failure is hard, but success is far more dangerous. If you’re successful at the wrong thing, the mix of praise and money and opportunity can lock you in forever.”

So I’m watching the experiences of the other consultants here closely, hoping to achieve escape velocity this time!
:smiley: