Wednesday, March 28, 2007

That about sums it up for the Lessons Learned Series.

I could think of lots of other little lessons learned, but nothing worth writing a full post about. Some of those are:

Provide a Demo of your software!

You might as well put your prices in the open, it will save everyone some time.

Don't count on anything any customers, vendors, etc... say until it's actually delivered upon.

Hold off on forming the corporate structure until the absolute last minute (right before you put your product on the market). People have an irrational fear of getting sued. No one wants to sue someone who has zero revenues.

You probably won't know what your software really needs to do, or who your target audience is until your software actually hits the markets. We assumed middle aged males (95% of chimney sweeps) would be our primary customer. It turns out their wives/office managers are the people that understand software. Some of the features we thought would be the most killer (chimney scanning integration, mapping, route planning) ended up being the least used.

If you just ask potential customers if they want such and such, they will always say "yes". Ask what their problem is, and create a solution around that.

When it doubt keep it simple. If you think it's simple, ask three people; your significant other, one of your parents, and a teenager to try the function. If all three can figure it out without any help, it's probably simple enough.

Speaking of... no one reads the manual. Ever. Frankly I wouldn't bother to even write one, except that people expect it. We had a giant manual and help file at first, but what worked better in the end are lots of Wink demos.

Thats all I can think of. If you have any questions about the experience, I wouldn't mind answering them. If you don't want to post a comment, feel free to email: phila at

Sunday, March 25, 2007

Lessons Learned #4

Paul Graham says he will not fund startups that don't have a partnership. His argument is that if you can't convince at least one other person about your idea, then it's no good. I think Paul Graham may live in a different world then myself. For some reason, if you have technical skills, people are falling over themselves to partner with you. At my Christmas party for friends and family this year, I looked around at everyone at one point and realized every single (male) person at the party had either approached me with a business idea, or I had approached them. Maybe it's just my friends?

Anyways, there was a time where I was flattered by this, and would almost always indulge someone in their business idea. My business ideas are often somewhat narrow in focus, so when someone comes up with a crazy idea in an area I don't know, it sounds like it could be genius. So if I'm not working on something else at the time, what would it hurt?

The problem is, while many people dream about their business ideas and picture themselves getting rich over it, most people really don't want to dedicate the time it takes to getting a business going. Even when I do 98% of the work, and just ask them to approve or brainstorm with what's there, most people I've worked with found that too much to handle.

Now, the above paragraph doesn't necessarily describe the partnership I had with SearTech. Going into this partnership, we had a total of three people, me, my friend and the chimney sweep (who is also kind of a family friend). People tell you that you shouldn't go into business with family and friends, and that is not necessarily true. There is just a trade off that has to occur. There are always going to be conflicts in a business, where with a stranger you can supposedly just yell at them or "fire" them, but with friends and family you'd have to make a choice between the business or the friendship. Honestly, I think this is a benefit. It makes you evaluate how serious the conflict is, and forces compromise. I would never pick a business over a friendship, but if your the kind of person who might, you may want to stay away from this route.

So first, let me emphasize the good things about this partnership, and partners in general.

1) You have help! One thing that really sucks about being a one man show is that you can't really take a break or have a vacation. How liberating is having your own business if you have to check email while in the Caribbean? With partners, someone else can mind the store.

2) You have someone else to motivate you. Often I would get down on things when I was pounding away by myself, but whenever we would meet I would be renergized and full of vigor. Having someone else in it with you helps a lot.

3) Shared expenses. You don't have to output as much of your own money if you have others helping. Of course you don't make as much either...

4) The company. I imagine working all by yourself can get quite lonely. Being able to go to conventions with my partners was great, we had a blast wherever we went, and it's nice having someone to sound off with.

Of course there are trade-offs. The negatives I see with partnerships are:

1) The most obvious is that you share the profits equally. Which means every extra person equals less money for you. This wasn't a big deal for me, because although it sounds cliched I'm not really in it for the money. But it's almost impossible to guarantee everyone works as much as their share, so this causes friction with many startups. Make sure when you are taking on partners that they are really adding something to the mix.

2) Many early startups I see on the mISV boards are obsessed with the idea of "the sales guy". That illusive person that can sell sand to the Arabs, and ice to the eskimos. One thing I've learned is that there is nothing magical about the sales guy. Some of the best give a hard sell that results in more support for you to provide. I found I could sell as good if not better then others. The key to sales is confidence and building personal relationships. My chimney sweep partner was able to build quick bonds with other sweeps that gives you an "in".

3) If someone hasn't started a business by the time they are in their late 20s, they are not the business type in my opinion. I started by first business when I was 15. Most other people that work out well in startups have that entrepreneurial spirit that causes them to work until all hours.

So whats the overall lesson learned? I think it's good to have partners, but not strictly necessary. Any future ventures involving partners, the partner must have technical skills as well and hopefully complement me and vice versa, so the contribution is clear. They also must have had their own reasonably successful business in the past, and have a very clear dedication to the idea at hand.

Thursday, March 22, 2007

Lessons Learned #3

This lesson is about marketing. While all the other lessons so far have been about what I have done wrong, this one is actually something I did right for the most part, but it's still an important lesson for any other new mISV's out there.

The big thing these days in the ISV community is to throw a product together and market it with almost no money spent. Just some Google ads, SEO, and splogging. But what if your audience isn't looking for you? Or what if they don't read blogs or discussion forums? I knew from the start that I wouldn't be able to just sell ChimSoft via Google AdWords or email spam.

I of course did use AdWords and SEO. My AdWords expenses are usually under $10 a month though. This is partly because of the low number of sweeps, partly because of the low competition for my keywords, and partly that I'm the number one organic hit for almost anything "chimney sweep software" related. That said, almost none of my business has came through Google.

First, I started out by contacting Chimney Sweep suppliers. In the industry there is one huge supplier that has maybe 80% of the marketshare. Then there are maybe 5 or 6 other decent sized ones that pick up the rest. I contacted all of them to see if we could carry their parts catalog in our program (hey free advertising!), and if they were interested in reselling ChimSoft. Only one company, which I'm proud to plug, Lindemann Chimney Supply was cutting edge enough to see the value in this. When I contacted Lindemann, immediately they provided me with a digital catalog, and discussed some other options. Unfortunately all of the other companies were less forthcoming. Many of them wanted an exclusive arrangement, or would just blow me off. Some promised they would deliver a catalog, only to never follow up. Reseller agreements were discussed with some of the companies, but nothing ever came to fruition.

Next, we scheduled ourselves for the two biggest sweep conventions. These were absolutely invaluable in terms of publicity. This is where most of our sales came from. Don't expect them on the showroom floor (although that did happen), but make sure to take business cards from people and give them yours.

Finally, word of mouth was another great way to market to this community. Many people would call us because they heard about us from someone else (often the suppliers would finally return our calls when a customer mentions us). All of the above are examples of how you must step beyond the comforts of the online word to sell a product sometimes. Is it a lot more expensive and time consuming? Yes. But if we had not done these other things, I doubt a single sale would have occurred.

For my next project though, I really don't want to go after this audience. I want to work with customers who check their email at least once a week if not daily (half the people on our email list would return with a "quota full" error). I want customers who understand the web and are comfortable making a purchase without a phone call. Make sure you figure out which type most of your customers are when you begin to market.

Lessons Learned #2

The next biggest thing I got out of this product experience is, be careful with market research/pricing.

Originally the plan was to make software that could be sold to all "service industries", you know, those guys in the white vans that do all the dirty stuff we can't do. I mean, they all basically do the same thing? That was the thinking at least. First we would use chimney sweeps as our test market, have them give us all the feedback early before we start dealing with plumbers and electricians.

People talk a lot about market research, but I have yet to really find a good guide on what you should do. I think because a lot of it is just intuition and experience. This is where working on something you know well comes in handy. For example, Ian worked a lot with Help Desks, and Patrick was a teacher. I on the otherhand, have never been a chimney sweep, or any other type of service professional. In fact, I just paid someone to fix some drywall in my house, which could quite possibly be the easiest home improvement project out there, that's how far removed from the service industry I am. But, remember I started this with two partners!

The big partner with me was the guy that had the original idea, and was a chimney sweep. I'll go into Partner lessons learned another day, but for now I'll just say that how I did my market research was based a lot on him. My experience in the retail end of the software industry had been with two companies, one sold software for court reporters (which would seem like an even more obscure niche) and the other sold web apps to enterprises. The court reporting software sold for around $4500. The enterprise software sold for an average of $30,000 a year. So thinking of selling software for $19.95 is frankly depressing to me. Of course there is no good reason for this thinking, because if you sell 2 copies an hour, your making some decent scratch, but I was definitely used to the big sale.

I knew from the start ChimSoft couldn't sell for $19.95. At that rate if every single Chimney Sweep in the world bought a copy, that might pay my mortgage for a month or two. So here is my super secret market research technique:

1) I asked my partner how many chimney sweeps he thought there were in the USA. He said his certified sweep number was 5 thousand something, and he knew they were consecutive and that they started issuing them in the 70s, therefore there must be around 6,000 certified sweeps out there.

2) If there are 6,000 sweeps who received certifications, you have to figure at least half are dead, retired, or gave up, leaving 3,000 active certified sweeps.

3) Most sweeps are not going to get certified. It's expensive, and time consuming. We'll assume 1 out of every 4 sweeps is certified. This gives us 12,000 chimney sweeps in America.

4) Now, some people will take that number there, multiply it by $100 and start shopping for a retirement villa. But this wasn't my first business. I knew at BEST I'd ever sell to 2% of the entire chimney sweep market in a given year. So best case scenario we are talking 240 sweeps a year.

5) Now we pick a price. I started this way. "How much will this need to make a year in gross sales to make it a worthwhile business?" I'll say $300,000. So in the absolute best of times the business should be making $300,000 a year. (Keep in mind that I was not in the mISV community at this time, and also that I have two partners, and no huge desire to quit my job, so a low ball $25k wasn't going to cut it for this).

6) So when you put all that together, assuming you have the best scenario of 240 sales a year, to make $300k, each unit must be $1250

7) Ask the customer if they will pay $1250 for the software

What? $1250 for a stinking piece of software? From chimney sweeps? Well, the thinking wasn't that crazy. We debating the price a lot, but the chimney sweep partner continued to point out that we were not selling to individuals, but in fact businesses that can deduct on their taxes, etc.. Chimney sweeps also have been proven to pay big bucks to help their business as most own $4,000 chimney scanning cameras. Heck, our software can replace most of the functionality of that camera and it's only half of the price.

It's hard to say that this price point was bad. We went to our first convention with a price tag of $2000 for the software. There were a few sales at this price point, and LOTS of interest. We talked at great lengths with people who hemmed and hawed about the price, and continued to keep in contact with us through email, phone calls, etc... Could we have gotten triple the number of sales if we priced at $300? Probably, but we would have ended up with less money. In hindsight, I think I would have rather had more users spreading the word of the program then the actual cash.

So what was the problem with all this thinking? Sounds like it was priced about right (amazingly, considering my "numbers out of my ass" market research method). The problem was that the number of sweeps was VASTLY overestimated, despite my huge cuts. A year or so into the project I was talking to the sweep partner again, and he mentioned something about there being 2,000 certified sweeps. Somehow we had gotten confused or miscommunicated or something, but that original 6,000 number I was working with was actually 3 times the reality.

Now that I've been in the chimney sweep world for a while, I think the true estimate of active sweeps in the country is somewhere around 2,500. Again, that number is basically coming from intuition and estimates. And while they will spend $4,000 on a camera, they do this because they can charge $400 more per sweep to use a camera. And the camera can find $3000 of work to be done. There is a direct link to them between profit made and money spent. Most service industry folks still do not see software this way. Unfortunately most chimney sweep businesses also do not have a lot to spend. I heard a lot of comments at conventions about how the whole industry is suffering, so I had a lot of sweeps asking me for financing plans. I just could not do this, if you've seen my BudgetSimple philosophy, you know I hate debt. So at $2k, the price was too much for a poor chimney sweep, and the big chimney sweeps didn't want to pay $2k X 8 vans + 3 office computers. Once dropped to $300, sales increased, but alas, based on the number of sweeps out there, it's just not enough money to motivate me.

Why not continue the original plan though? Sell to plumbers, etc? Well, ServiceCEO is doing just that, but the program becomes too complicated for most of the end users. I started to do it with ServiceGadget. Unfortunately, you really have to learn and market to each of those industries differently. Not being able to use the product myself, I didn't have a great deal of interest in this prospect after spending 2 years on ChimSoft. I have too many other ideas that I am really excited about.

Also, don't let anyone tell you that as a one man business you can just keep adding products and make more money. Every time you work on a new product, you take your "eye off the ball". As a one man show, you can only physically (and more important mentally!) dedicate to one product at a time. So when I'm working on ChimSoft, my other businesses and ideas languish. That's part of the reason I had to have a clean break here, just to free up some mental focus.

Tuesday, March 20, 2007

End of a mISV: Lessons Learned #1

Stick with what you know. I've been working on the web and web applications since the beginning. Almost all of my professional development jobs have involved web applications or their backend interactions, and that is where 95% of my experience lies. So when I started ChimSoft, what made me choose to make a desktop app? Well, as I mentioned before, ChimSoft was originally an application for Automotive shop management. I started the autoshop program as a desktop application because I thought I really needed to learn WinForms to strengthen my skill set. And I had a customer in mind for that app, for whom a web application definitely would not work. Winforms did end up being the right tool for this job. At one point last year, I surveyed our customers about having a web version of ChimSoft. There was unanimous confusion and dislike.

If I had to give a primary reason for ending the development of ChimSoft, it would be the fact that it is a desktop app. For any new mISV's out there, if at all possible, make a web app! Desktop apps allow much more functionality and speed, but they are an absolute nightmare for support. Even with our relatively small customer base, there was always something that was not working on someone's computer. In my "lab" I had virtual machines that ran Win 98, ME, 2000, XP, and Vista with various configurations. I always ran through a battery of tests on those machines before deploying. But still there would be random issues with one person's computer. Norton is a problem. Novell gives a certain problem. Having a certain resolution made a problem. For some reason a 3rd party library breaks on 1/10th of the installs. The installer has a problem. Even though I tested on all of my friends, family's, and virtual PCs, there still were random problems that would pop up that require hours of support, troubleshooting and development. Sometimes after all that, you find out it's another program that's breaking yours. This is extremely frustrating as a developer, because it makes your quality look shoddy, yet a through test really was performed. Next, theres the problem of 50 people having 36 different versions. I had a built in "Check for Updates" feature, but few people explored this on their own, and I did not have it running by default. Since ChimSoft uses a database, keeping this schema updated was also a pain.

The next issue with desktop apps is that I had never done one before! So when I started adding advanced features such as DVR capabilities (To record chimney scanning video), or I was working on the interface, I had no original code to draw on, or interface experience. The result is that the ChimSoft interface has been rewritten several times to be the most usable. One positive of this is that because I did not have a "real windows" app to draw on, most of the reason people buy ChimSoft is that it is so much easier to use then the competition, who look very much like your typical programmer-design Windows app.

BTW this is not meant as a volley in the Web app vs Desktop app debate. I still think for this specific type of software, it MUST be a desktop app. All I am saying here is that I am not the best person to be working on such a thing, and I wouldn't doubt a "real" Windows app developer would enjoy working on this a lot more.

Monday, March 19, 2007

Death of a mISV

So often we see the launch of MicroISV's in our little community, only to never hear from them again. Sometimes they will post some numbers about slow sales, or they just disappear. Well, this post is to announce the end of development (for me at least) on what was originally the primary focus of this blog, ChimSoft - software for Chimney Sweeps, my first "official" venture into the world of mISV.

There are many reasons why I am ending development on ChimSoft after two and a half years, and I hope to make an informative series of blogs on some of the lessons learned during the process.

Because the above is just a super tease by itself, I'll summarize the reason for ending development at this time, with a little backstory. If you've been reading this blog, you know I have other ventures outside of SearTech/ChimSoft. The longest and most successful being my used car classified site, Used Cars On-Line.

I created Used Cars On-Line, it was in 1995, when web apps were definitely NOT the thing (to most non-geeks). Since I live in opposite land, ten years later as 2005 started, and right when Web 2.0 was it's hottest, I decided to take on my first desktop application: ChimSoft. It originally started out as management software for Automotive Repair shops, because I couldn't believe in the 21st century I still received hand written (or dot matrix printed) invoices from 90% of the shops I went to. My friend saw this app, and realized it was just what he needed for his Chimney Sweep business, and I believed that with little effort, it could serve both markets (and the entire service industry).

I really enjoyed working on ChimSoft, partly because of the reactions I received when I told people I was making software for chimney sweeps. You would think by their reaction I said I was making software for cats to do word processing, and that I was crazy because chimney sweeps don't need software, after all, they have Mary Poppins.

Ironically, that has little to do with why I am ending development. There is a demand for good chimney sweep software. Sure, I don't receive the number of downloads that Andy does, but being the only chimney sweep software out there is filling a much needed hole. Conversion rates were close to 80% when I went to a cheaper price model in January. The only problem is I feel guilty selling software that I can't dedicate 100% to. I don't use ChimSoft, and can't really, in the same way my customers do. Potential customers, and real customers continually ask for new features that somehow have been completely missed after two years of talking to hundreds of sweeps. There is definitely money to be made selling ChimSoft. The problem is that the amount of time it takes to support and develop ChimSoft in comparison to the money/time for my other ventures is far out of proportion. And I don't believe there is enough money in ChimSoft for me to dedicate fulltime to it.

As I mentioned, I hope to do a lot more posts on this topic in the coming week exploring lessons learned, but in the meantime I need some advice. Do I continue selling the software, but just "CityDesk" it (stop active development). Or, do I simply close down shop and attempt to sell it? I would prefer the latter in the hopes that someone else would pick up the torch for chimney sweeps.

Monday, March 12, 2007

My Bracket

This time of year is the most exciting time for me sportswise, so forgive the temporary distraction from mISV/technology discussion.

Ok, so I might be a little biased when in comes to college basketball... See my bracket in PDF form here. Battle for Washington DC? Not likely, but it could happen.

For you Europeans/World Soccer (Football) fans, my picks for the winners of the Champions League are: Bayern beats Milan, PSV beats Liverpool, Man U beats Roma, and Chelsea beats Valencia.

Thursday, March 01, 2007

Thanks to Web 2.0

We now have the technology to "stand in line" on the Internet!

(Still waiting for my Eurocup application to come up...)

Why I Love Google

Google's announcement of their free hosted apps is great. Not for the apps as much as the email. SearTech has been a part of the Google Email for Domains beta since around this time last year, and it's hard to think of using anything else now. For the previous 6 years before Google, I had hosted my own email, as well as email for people who needed websites in previous years. This was a nightmare. Although my web and database servers have had more or less 99% uptime (knock on blog), I was always having some sort of problems with email. And the various PHP web mail suites have nothing on GMail. The fact that Google is now giving all this away for free... well it will probably kill a few more small hosting businesses, but it's exciting for the rest of us.

Google needs to up their game though

The Web 2.0 Calendar game has gotten quiet since the sale of Kiko. I would love to just use Google's Calendar, it does pretty much everything I need. But here's the thing. Set an alarm or two in Google Calendar. Now, just open Gmail every day, but not the calendar. You'll never get the reminder! I have to go actually into the Calendar to get the reminder (at least it was this way the last time I messed with it). Open Google Docs And Spreadsheets, and it opens another window. Open a spreadsheet and ANOTHER window opens! To use the Google Office suite I have to have almost double the number of windows of MS Office. Google really needs to make it into a Suite, and not just add links to discontinuous programs in the email.